Moruben Gardens Pty Ltd v Commissioner of Taxation (Cth)

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

ORDER Order Appeals dismissed with costs. Assessments confirmed. Mason, J

: The respondent Commissioner assessed the taxpayer to income tax for the three years ended 30 June 1963, 1964 and 1965 by including in its income the profit which it made on the sale of eighteen residential flats, each having a title under the Conveyancing (Strata Titles) Act 1961 (NSW), in a building known as Moruben Gardens and situated at 21 Moruben Road, Mosman, near Sydney. The Board of Review confirmed the assessment and the taxpayer has appealed to this Court.

The respondent has sought to justify the assessments on the basis that the profits in question, namely $52,726(1963), $45,618(1964) and $86(1965) were all profits which fell within the first and, alternatively, the second limb of s 26(a) of the Income Tax Assessment Act 1936-1965.

The taxpayer was incorporated on 14 December 1960. It was incorporated at the instance of Griffin Bros. Pty Ltd, a family company owned and controlled by Allan Stuart Griffin and his brother. At the relevant time the latter company carried on business as a speculative builder of residential flat buildings for sale as home units.

On 11 October 1960 it entered into a contract to purchase the property known as 21 Moruben Road for the sum of $30,000. There was then a dwelling-house on the land. Griffin Bros. Pty Ltd entered into the contract with the intention of demolishing the dwelling-house and erecting on the site a residential flat building in which the flats, or rights to occupy the flats as home units, would be sold. The taxpayer was incorporated with articles containing provisions whereby the holders of particular groups of shares would become entitled to the exclusive occupation of particular flats or home units in the building erected on the site. By a deed dated 11 January 1961 the taxpayer adopted the contract of purchase in lieu of Griffin Bros. Pty Ltd Thereafter the contract of purchase was completed.