Producers & Citizens' Co-operative Assurance Co Ltd v Commissioner of Taxation (Cth) [1971] HCA 32

High Court of Australia Menzies J. Producers & Citizens' Co-operative Assurance Co Ltd v Commissioner of Taxation (Cth) [1971] HCA 32

ORDER Appeal dismissed with costs. Usual order as to exhibits.

Cur. adv. vult.

Menzies J. delivered the following written judgment:—

July 30 Menzies J

The Commissioner has assessed the taxpayer to income tax for the year ended 31st August 1967 upon the footing that the deductions to which the taxpayer was entitled under s. 113 of the Income Tax Assessment Act 1936-1967 Cth were to be calculated as if $513,839, not $924,445, were the expenditure incurred in the year "in the general management of the business of the company". The difference, viz. $410,606, was, it was agreed, made up of the following payments:

Divisional Managers Salaries 48,823 Divisional Managers Expenses (includes Motor Vehicle Expenses & Travelling Allowance) 40,835 Inspectors' Salaries 185,395 Inspectors' Expenses (includes Motor Vehicle Expenses & Travelling Allowance) 135,553

The question is whether this sum of $410,606, or any part of it, was expended in the general management of the business of the company.

The taxpayer has, at all times material, been a life assurance company whose principal business is life assurance. It had not, for the year in question, made an election under s. 113 (1). The deduction to which it was entitled was therefore to be determined in accordance with s. 113 (2) and (3). These are as follows:

113

(2) In the case of a life assurance company the sole or principal business of which is life assurance, being a company that has not made an election that the last preceding subsection shall be applied in relation to the company, so much of the expenditure incurred in the year of income in the general management of the business of the company as bears to that expenditure the same proportion as the assessable income of the company bears to the total income of the company shall be an allowable deduction.