Farnsworth v Commissioner of Taxation [1949] HCA 27

High Court of Australia Latham C.J. Rich, Dixon, McTiernan and Webb JJ. Farnsworth v Commissioner of Taxation [1949] HCA 27

ORDER Questions in case answered No. Costs of case to be costs in the appeal. Case remitted to Dixon J.

Cur. adv. vult.

The following written judgments were delivered:—

Aug. 4 Latham C.J.

This is a case stated in an appeal by Delina Wilhelmina Farnsworth under s. 196 of the Income Tax Assessment Act 1936-1943 from a decision of a Board of Review confirming an assessment of the appellant to income tax in respect of the income year ending on 30th June 1943. Mrs. Farnsworth was a member of the Australian Dried Fruits Association and, in accordance with the rules of the association, in 1943 before the month of June delivered fruit to be processed together with other fruit by a packing company and to be sold by one of the selling agents appointed by the association. Before 30th June 1943 she received cash payments for her fruit amounting to £340. In her income-tax return she claimed allowable deductions amounting to £350. The packing company informed the commissioner that in respect of Mrs. Farnsworth sales of fruit from 1st July 1942 to 30th June 1943 produced a sum of £340, and that "the value of fruit unsold at 30th June 1943" was £648. The commissioner included the sum of £648 in the assessable income of the appellant for the year.

The appellant became a fruit-grower in the course of the income year ending on 30th June 1943. She had no fruit on hand for sale on 1st July 1942. The commissioner applied s. 28 of the Act, which is in the following terms:—"(1) Where a taxpayer carries on any business, the value, ascertained under this subdivision, of all trading stock on hand at the beginning of the year of income, and of all trading stock on hand at the end of that year shall be taken into account in ascertaining whether or not the taxpayer has a taxable income. (2) Where the value of all trading stock on hand at the end of the year of income exceeds the value of all trading stock on hand at the beginning of that year, the assessable income of the taxpayer shall include the amount of the excess. (3) Where the value of all trading stock on hand at the beginning of the year of income exceeds the value of all trading stock on hand at the end of that year, the amount of the excess shall be an allowable deduction."