Case: Kidston Goldmines Ltd v Federal Commissioner of Taxation (1991) 30 FCR 77
Outcome: referred to
Given what is said later in these reasons, the only comment I should make here is to reiterate the warning of Hill J in Kidston Goldmines Ltd v Federal Commissioner of Taxation (1991) 30 FCR 77 at 85 that: "there is a danger in substituting for the words of ... subsection [51(1)] language which does not appear in it." 103 Put at its simplest, R &amp; D Holdings' case is that Chapel Road was entitled to claim deductions, pursuant to s 51(1) of the 1936 Act , in respect of interest due to MMLIC under the MMLIC loan on the basis that such interest was incurred in gaining or producing assessable income and, although it says it is unnecessary to show it, that it was also necessarily incurred in carrying on business for the purpose of gaining or producing assessable income. The basis of this claim is that: (a) in the years relevant to Chapel Road (1992 to 1997 income years inclusive) Chapel Road was the registered proprietor of the office building at 410 Chapel Road, Bankstown; (b) the building was a substantial multi level office building, parts of which were let to several different tenants; (c) throughout the 1992-1997 period Chapel Road was deriving rental income in respect of its ownership of the property; (d) that rental income was returned by it as assessable income for the purposes of its income tax returns; (e) Chapel Road continued to derive the rent as income notwithstanding that MMLIC had exercised its powers under the mortgage over the property to take possession in early 1991; (f) throughout the 1992-1997 period Chapel Road was incurring liabilities for interest due to MMLIC under the terms of the Loan Agreement dated 19 March 1990; (g) as legal liability for interest arose, such liabilities constituted outgoings incurred within the meaning of s 51(1) of the 1936 Act; (h) those outgoings were incurred in gaining or producing assessable income, and in carrying on business for the purpose of producing assessable income; (i) the interest liabilities of Chapel Road were (in the same way as for any other "negatively geared" property investment) deductible to Chapel Road pursuant to s 51(1) of the 1936 Act. (j) in the 1992 to 1997 income years the quantum of the deductions exceeded the rental income derived by Chapel Road as a consequence of which it incurred losses pursuant to s 79E of the 1936 Act ; and (k) in each of the 1997, 1998 and 1999 income years, Chapel Road transferred losses to the applicant in accordance with the requirements of s 80G of the 1936 Act (1997 year) or subdivision 170A of the 1997 Act (1998 and 1999 years). 104 In preparing and lodging its income tax returns in respect of the 1992 to 1997 years of income Chapel Road claimed other deductions arising in respect of its ownership of the office building. These were for: (a) repairs and maintenance pursuant to s 53 and s 51(1) of the 1936 Act ; (b) depreciation pursuant to s 54 of the 1936 Act ; (c) capital allowances pursuant to Div 10D of the 1936 Act ; (d) rates and taxes pursuant to s 72 of the 1936 Act ; and (e) other miscellaneous expenses pursuant to s 51(1) of the 1936 Act .