a'Beckett v Commissioner of Taxation [1959] HCA 57

High Court of Australia Windeyer J. a'Beckett v Commissioner of Taxation [1959] HCA 57

ORDER Appeal allowed with costs. Assessment set aside.

Cur. adv. vult.

The following written judgment was delivered:—

Oct. 30 Windeyer J.

This is an appeal against an assessment of income tax for the year ended 30th June 1954. The appellant taxpayers, Mrs. Gertrude a'Beckett and Mr. W. A. K. a'Beckett, are trustees of the estate of the late W. G. a'Beckett. The question arises in connexion with the income of the estate, and concerns the operation of s. 87 of the Income Tax and Social Services Contribution Assessment Act 1936-1953. The Commissioner claims that an amount of £7,756 is by that section to be included in the assessable income of the estate in respect of a lease granted by the trustees. As this does not represent any moneys actually received by the estate which are payable to any beneficiary, the Commissioner assessed the trustees in respect of this amount pursuant to s. 99 of the Act. The taxpayers' contention is that s. 87 has no application in this case. Alternatively they contend that, if it be applicable at all, it has been incorrectly applied, and that upon its proper application the amount to be brought in, as income of the year ended 30th June 1954, would be less than that claimed by the Commissioner.

The relevant facts, which were agreed upon, are as follows: The taxpayers are, and at the material times were, proprietors of an estate in fee simple of certain premises in Palmer Street, Jolimont, which formed part of the trust estate. By a lease dated 21st April 1952 they let these premises to a company, Cromwell Proprietary Limited (which I shall refer to as "the company") for a term of five years from 1st April 1952 at a yearly rental of £200 payable by equal monthly payments. Various members of the a'Beckett family hold shares in the company, among them Mr. W. A. K. a'Beckett; but the company was not at that date under the control of the trustees in any relevant sense. It was intended that the premises would be altered and improved by the lessee; and to this end plans and specifications had been prepared by an architect. By a document dated 22nd May 1952 the trustees consented to the company carrying out improvements of the leased premises in accordance with these plans and specifications, which were annexed to such consent. These improvements were not, and are not, subject to tenant rights within the meaning of s. 87 of the Act. On 22nd August 1952 the company made a contract with a firm of builders for the work to be done according to the plans and specifications. The work began in September 1952 and went on for nearly a year. The contract provided for the work to be done for its actual cost plus £500. The company expected the cost of the work when completed would be about £4,000; but by June 1953, while the work was still in progress, it had become apparent it would cost much more than that. At all material times prior to 17th June 1953 the issued capital of the company was £4,000, divided into 4,000 shares of £1 each, all fully paid up. On 17th June 1953, for the purpose of obtaining further capital for the completion of the work, the company allotted to the taxpayers 4,500 shares of £1 each in its capital, which were fully paid for in cash. On the same date one of the two directors of the company resigned his office, and Mr. W. A. K. a'Beckett, one of the trustees, was appointed a director and continued to be one. Since the issue of the new shares on 17th June 1953 the taxpayers have held 4,500 of the 8,500 issued shares in the capital of the company. None of the shares was issued upon any special terms as to voting, so that by the company's articles the members of the company upon a poll have one vote for every share held. In the result, therefore, as from 17th June 1953 the taxpayers, the lessors of the premises, controlled the voting power of their lessee, the company.