Case: Barratt v Federal Commissioner of Taxation [1992] FCA 271 ; (1992) 36 FCR 222 
Outcome: distinguished
A receipt will not come home where the amount received is affected by a legal or equitable restriction affecting the separate use, benefit or enjoyment of the recipient: Arthur Murray at 318; Barratt v Federal Commissioner of Taxation [1992] FCA 271 ; (1992) 36 FCR 222 at 231; RW Parsons, Income Taxation in Australia : Principles of Income, Deductibility and Tax Accounting , Law Book Company, Sydney (1985) at [11.49]. For example, where the receipt is affected by a constructive trust (see, MacFarlane v Federal Commissioner of Taxation (1986) 13 FCR 356) or where the recipient is not the beneficial object of the receipt (see The Countess of Bective v Federal Commissioner of Taxation (1932) 47 CLR 417 at 424). 89 In respect of an accruals basis taxpayer, the time of derivation will normally be the time when a recoverable debt arises: Barratt at 231.2; Henderson v Federal Commissioner of Taxation [1970] HCA 62 ; (1968) 119 CLR 612 at 650.6. 103 The Commissioner submitted that it is a fundamental defect in BARM's argument that it impermissibly seeks to make derivation of the income amount (the debt/payment in respect of management services) dependent upon the capacity to recover the capital asset arising from investment of the income (the debt owing by PGF). Apart from the illogicality of the contended dependence, it is relevant to note that even if there had been an impediment to recovery of the debt on income account, that would not lead to the result that it would not have been derived as income. In Barratt at 232, Gummow J (Northrop and Drummond JJ agreeing) drew attention to the distinction between: (a) the situation where a debt has not come into existence, with the result that income will not have been derived (an example of which was Federal Commissioner of Taxation v Australian Gas Light Co (1983) 74 FLR 13); and (b) the situation where a debt has come into existence, but there is an impediment to recovery. Accordingly, statutory prohibitions against recovery of fees for medical services pursuant to s 35(2) of the Medical Practitioners Act 1938 (NSW) were only impediments to enforcement that did not lead to the result that taxpayers assessable on an accruals basis had not derived the fees as income. 109 The argument for deferral to the time BARM receives payments of interest and repayments of principal on the deposit with PGF is said to '... look to realities' to use the words of Rich J in Prior at 13. What it effectively asserts is that BARM should be treated as a cash basis taxpayer in respect of such income and then only for the amount of money received. Reliance for this argument is placed on the process of reasoning in Arthur Murray , albeit for a very different principle, Prior and Barratt . I deal with each of these cases below. 124 Barratt was concerned with whether an accruals basis of tax accounting was appropriate for a partnership of medical practitioners carrying on a pathology practice where the partnership required the use of large and expensive equipment and laboratory, courier and clerical services which were provided by service entities associated with the partners. A Full Court of this Court held that it was and dismissed the taxpayer's appeal. The principal judgment was given by Gummow J with whom Northrop and Drummond JJ agreed but, with respect, it does not shine any light on the appropriateness of the principle put forward by BARM that is alternative (2).