Commissioner of Taxation v Morgan [1961] HCA 64

High Court of Australia Dixon C.J. Fullagar, Kitto and Windeyer JJ. Commissioner of Taxation v Morgan [1961] HCA 64

ORDER Question 1 in the case stated answered No. Question 2 in the case stated answered Yes. The appellant to pay the costs of the case stated.

Cur. adv. vult.

The following written judgment was delivered:—

Oct. 26 Dixon C.J., Kitto and Windeyer JJ.

The question before us for decision is whether a sum of £172, which the taxpayer says represents municipal and water rates, should be allowed as a deduction from his assessable income, which includes rents from the premises upon which the rates were levied. Section 72 of the Income Tax and Social Services Contribution Assessment Act 1936-1958 Cth does not cover the case because the rates were not paid by the taxpayer himself nor was he personally liable for them. He was in fact a purchaser of the premises yielding the rents and the rates had been paid by the vendors before the sale. On the settlement of the transaction the rates were apportioned between vendors and purchaser in the usual manner and the taxpayer as purchaser was required to pay £172 to the vendors in respect of so much of the period covered by the rates paid as on the date of possession remained unexpired. The premises consisted of a block of flats in West Perth. The taxpayer entered into a contract on 30th September 1957 with the owners to purchase the flats for a price of £26,000. He paid a deposit of £1,000 and agreed to pay the balance of purchase money on or before 31st October 1957, when of course possession would be given. The contract provided that all rental in connexion with the property should be adjusted as at the date of possession being given and taken, and also all rates and taxes. Possession was in the event given on 7th October 1957 and an adjustment was made as from that date. The vendors had in fact paid water rates for the year ending 30th June 1958 and municipal rates for the year ending 31st October 1957. That meant that a sum for water rates covering on apportionment 266 days, and a sum for municipal rates covering on apportionment 24 days, were charged against the purchaser on the settlement, sums together amounting to £172, and this amount he paid to the vendors in addition to the balance of purchase money. The question is whether, under s. 51 of the Income Tax and Social Services Contribution Assessment Act 1936-1958, in these circumstances he should be allowed a deduction for the sum from his assessable income derived during the year ended 30th June 1958.