Finance & Guarantee Co Ltd v Commissioner of Taxation (Cth)

High Court of Australia Owen, J Finance & Guarantee Co Ltd v Commissioner of Taxation (Cth)

ORDER Orders Nos 23, 24 and 25 of 1969: Appeals dismissed with costs. Usual orders with respect to exhibits. Owen, J

The first of these three appeals relates to the year ended 30 June 1964, the second to the year ended 30 June 1965 and the third to the year ended 30 June 1966. In the first of these years the taxpayer claims to have been entitled to be allowed a deduction of over £150,000 representing lossess sustained by it in connexion with the sale of a hotel—the Domino Hotel—which it had purchased in August 1960 and sold in November 1963 and on the sale of a large number of shares in R W Miller (Holdings) Ltd, a company which purchased the hotel and issued the shares to the taxpayer in satisfaction of the price. The Commissioner disallowed the claim. If the deduction claimed had been allowed the result would have been that the taxpayer would have shown a substantial loss in the 1964 tax year which it would have been entitled to have had taken into account in the following tax year and this is the basis of the second appeal.

In the third appeal the taxpayer claims to be entitled to a deduction of a loss of over $190,000 incurred by it on the sale of another hotel—the Seabreeze Hotel—which it had purchased in 1960 and sold during the year ended 30 June 1966.

The parties were in agreement that the issue to be determined on the appeals is whether these losses were trading losses or whether they were, as the Commissioner contended, losses of a capital nature. I should add that some other matters of a minor nature were raised by the appeals, but the parties agreed that these would be adjusted and that I need not concern myself with them.

The taxpayer was described as a finance company. It was incorporated in 1936 and for some years its business consisted in the main of financing hire-purchase transactions. Later it extended its business to the making of personal loans and lending money to persons who desired to purchase small businesses. Later again, it launched into other fields such as the buying and selling of land in subdivision and the sale of houses and flats erected by it on land purchased by it. Another venture was the purchase and later the resale of a hotel—the Tarro Hotel—a transaction which resulted in a loss of some £700. Profits and losses resulting from these activities (including the purchase and sale of the Tarro Hotel) were reflected each year in its profits and loss accounts and in each year, including the years to which these appeals relate, a substantial profit was shown.