Ball v Commissioner of Taxation (Cth) [1984] HCA 71

High Court of Australia MASON,Wilson, Brennan, Deane and DAWSON JJ Ball v Commissioner of Taxation (Cth) [1984] HCA 71

Mason, Wilson, Brennan, Deane and Dawson JJ

The ground argued in support of this appeal from a judgment of the Full Court of the Federal Court in favour of the respondent Commissioner is that the Federal Court misapplied the decision of this Court in FCT v Lutovi Investments Pty Ltd (1978) 9 ATR 351; 140 CLR 434, it being a condition of the grant of special leave to appeal that the correctness of Lutovi should not be re-argued. Alternative submissions are put forward by the appellant: first, that all the material parts of the agreement or arrangement to which s 44(2D)(b) of the Income Tax Assessment Act 1936-1973 (Cth) (the Act) makes reference, including the issue of the shares, must have the purpose of enabling the company to make a payment, transfer or application by one of the stated means; and secondly, that shares of no greater value than the amount of any money etc paid etc to a taxpayer as a result of the agreement or arrangement should be deemed to be redeemable shares when the subsection is applied to an issue of bonus shares "in pursuance of, or as part of" any agreement or arrangement within the subsection.

The first submission finds no support in the language of s 44(2D)(b) of the Act, as Mr Merrals QC for the appellant frankly concedes. The subsection attaches the relevant purpose to the agreement or arrangement, rather than to each of the several steps adopted to carry the agreement or arrangement into effect. That is the interpretation which the majority gave to the subsection in Lutovi — see at (ATR) 357 and 361; ( CLR) 446 and 453, and, accordingly, the appellant's interpretation is inconsistent with the reasoning on which the decision in that case was explicitly based. The appellant made reference to comments made by the Treasurer in his second reading speech when, in 1965, the Act was amended so as to provide for the inclusion of the subsection. The comments then made, which seem to have been reflected in the explanatory memorandum issued at the same time, cannot, however, be relied upon to give a different operation to one aspect of the subsection which is plainly expressed, namely, that it is the purpose of the agreement or arrangement, not the purpose of the issue of the shares, that is the critical factor.