Case: Commissioner of Taxes (SA) v Executor Trustee and Agency Co of South Australia Ltd [1938] HCA 69 ; (1938) 63 CLR 108
Outcome: referred to
These comments were made in the context of derivation of income on an accruals basis, a different though obviously cognate subject matter from the notion of incurring in s 51(1) or s 8-1. In the context of Carden's Case (Commissioner of Taxes (SA) v Executor Trustee and Agency Co of South Australia Ltd [1938] HCA 69 ; (1938) 63 CLR 108) and J Rowe and Son Pty Limited v Commissioner of Taxation (Cth) (1971) 124 CLR 421 and in the absence of evidence about business or accounting practice, von Doussa J said (at 79) that stress should be placed on the prominence given in both Carden and Rowe to there being a debt in existence . von Doussa J rejected the approach of the Administrative Appeals Tribunal which had seen no distinction between a sale and delivery and giving time to pay by way of credit, on the one hand, and a contract such as the one there to buy land to be paid for at settlement on the other. von Doussa J said at 79-80: With respect to the Tribunal, I am unable to agree that there is no difference in the present case from a Department store sale of articles on 30 days terms. In that example there has been a delivery of the articles sold. The contract of sale is no longer executory. A debt has accrued due; the debtor has become subject to an obligation to pay a sum certain in money even though the debt may not be payable forthwith: cf Carden at 127. [emphasis added] Notions of loss of dispositive power over the goods were also important: see Gasparin 50 FCR at 81. 72 At first instance, Lee J concluded that the obligation to pay the purchase price of all the wool on the forward contracts had been incurred in the year of income. The argument of the Commissioner was not that the estimate made of the sums meant that there was no incurrence. Rather, it was argued that the liability to pay had not "come home". Expert accounting evidence was led by both sides (something which did not occur here). The point of difference between the accountants was the truth and fairness of the accounts treating the payments as incurred or not. The expert called by the Commissioner relied heavily on the matching principle. Lee J put this evidence into context at 114 ALR at 653: Evidence from expert accountants does not supply the proper construction of s 51(1) of the Act but the evidence may assist the court to identify, and to understand the commercial significance of, the facts to which the subsection, duly construed, is to be applied: Commissioner of Taxes (SA) v Executor Trustee and Agency Co of South Australia Ltd (Carden's case) [1938] HCA 69 ; (1938) 63 CLR 108 per Dixon J at 153 4; QBE Insurance Group Ltd v Australian Securities Commission (1992) 110 ALR 301 ; 38 FCR 270 per Lockhart J at 289 ; Coles Myer Finance Ltd v FCT [1993] HCA 29 ; (1993) 112 ALR 322 ; 93 ATC 4 ,214 per Mason CJ, Brennan, Dawson, Toohey and Gaudron JJ at 4,221. The construction of s 51(1) is a jurisprudential analysis and not a construction assisted by the application of commercial principles (see Coles Myer per Mason CJ, Brennan, Toohey, Gaudron JJ at ATC 4,221, per McHugh J at ATC 4,227-8) but commercial and accountancy practice may assist in ascertaining the true nature and incidence of the item claimed as a loss or outgoing under s 51(1): see FCT v James Flood Pty Ltd [1953] HCA 65 ; (1953) 88 CLR 492 at 506 7; Carden's case per Dixon J at 152 3. Furthermore, the manner of application of s 51(1) will depend upon the particular facts of each case.