Admin Exploration Pty Ltd v Commissioner of Taxation (Cth)

High Court of Australia Mason, J. Admin Exploration Pty Ltd v Commissioner of Taxation (Cth)

ORDER Order Appeal allowed with costs. Assessment set aside. Direct the Commissioner to re-assess the tax payable by the taxpayer without including in the assessable income any part of the proceeds of the sale by the taxpayer of 55,000 options to subscribe for shares in North Flinders Mines NL Order that the Commissioner pay the taxpayer's costs. Usual order as to exhibits. Mason, J

: This is an appeal by the taxpayer against an assessment to income tax for the year ended 30 June 1970 by which the respondent included in the taxpayer's assessable income a sum of $298,267, being part of a sum of $313,267 which the taxpayer received as consideration for the sale in that year of 55,000 options to subscribe for the shares in North Flinders Mines NL The respondent's case was that the profit of $298,267 made on the sale was assessable income of the taxpayer by virtue of s 26(a) of the Income Tax Assessment Act 1936-1970. The taxpayer contended that it was a capital profit, that it did not fall within the ordinary concept of income, or within s 26(a). Alternatively, it claimed that the sum was exempt income under s 23(p) of the Act. Finally, in the event of the failure of its principal submissions the taxpayer submitted that the sum of $15,734 was deductible as expenditure on exploration and prospecting.

The taxpayer was incorporated with a nominal capital of 50,000 $1 shares on 13 June 1968. Its promoters were Norman Shierlaw, a sharebroker carrying on business under the name "N. C. Shierlaw and Associates" and formerly an experienced mining engineer and mine manager, Ross Grasso, a consulting geologist, and Graham John Robertson, a sharebroker who became an employee of Mr Shierlaw on 1 October 1968. They became directors of the company and were its principal shareholders.