TASMANIAN ELECTRONIC COMMERCE CENTRE PTY LTD v FC of T

Members:
SA Forgie DP

Tribunal:
Administrative Appeals Tribunal

MEDIA NEUTRAL CITATION: [2004] AATA 521

Decision date: 24 May 2004

SA Forgie (Deputy President)

On 10 June, 2003, the applicant, the Tasmanian Electronic Commerce Centre Pty Ltd (``TECC''), applied for review of an objection decision dated 2 June, 2003 and made by a delegate of the respondent, the Commissioner of Taxation (``Commissioner''). The objection decision disallowed in full TECC's objections to the Commissioner's earlier assessments in respect of the years ended 30 June, 1998. 1999 and 2000. In making that objection decision, the delegate decided that TECC is not a charitable institution pursuant to item 1.1 of s. 50-5 of the Income Tax Assessment Act 1997 (``ITAA 1997'') and so not exempt from income tax under Subdivision 50-A of that legislation.

2. At the hearing, TECC was represented by Mr Abbott of counsel and the Commissioner by Mr O'Farrell of counsel. The documents lodged pursuant to s. 37 of the Administrative Appeals Tribunal Act 1975 (``T documents'') were admitted in evidence. Also admitted on behalf of TECC were a book of supplementary documents, a chart illustrating the structure of TECC, a Directors' Report relating to EcEnable Limited (``EcEnable'') for the year ended 30 June, 2001, a Consolidated Financial Report for EC Enable for the year ended 30 June, 2002 and a document headed ``Amendment to Articles of Association Tasmanian Electronic Commerce Centre Pty Ltd''. Oral evidence was given in support of TECC by its Chief Executive Officer, Mr John McCann.

The issue

3. The issue in this case is whether, during the years ended 30 June, 1998, 1999 and 2000, TECC was a charitable institution within the meaning of item 1.1 of s. 50-5 and so exempt from income tax under Subdivision 50-A of the ITAA 1997.

Background

4. The parties were in agreement regarding most of the facts forming the background against which the issue must considered. Rather, their disagreement centred on the consequences of those facts when considered in the context of item 1.1 of s. 50-5. In light of that and on the basis of the evidence, both oral and written, I have made the findings of fact that I set out in the following paragraphs.

Regional Telecommunications Infrastructure Fund

5. As a result of the first partial sale of Telstra, the Federal Government established the Regional Telecommunications Infrastructure Fund (``RTIF''), which comprised $250 million and which it called ``Networking the Nation''. RTIF was administered by the Regional Telecommunications Infrastructure Fund Board (``RTIF Board'') and it was intended to provide ``... funding for regional, rural and remote

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communities to identify their communications needs and develop projects that meet those needs'' (T documents, page 101). The objectives of Networking the Nation are:

``... to assist the economic and social development of regional, rural and remote Australia by funding projects which:

• enhance telecommunications infra-structure and services in regional, rural and remote areas;

• increase access to, and promote use of, services available through tele- communications networks in regional, rural and remote areas; or

• reduce disparities in access to such services and facilities between Australians in regional, rural or remote areas and those in urban areas.''

(T documents, page 107)

Examples of projects that would be considered by the RTIF Board included funding to establish infrastructure to improve the quality of telecommunications, trials of innovative technology, identifying community needs, establishing Internet hubs or removing the STD charge for rural and remote access to the Internet, increasing awareness of, or creating demand for, online and related communications services and training (T documents, page 111).

6. The RTIF provided a total of $58 million to Tasmania over a five year period commencing in 1997. In April, 1997, the Federal Government prepared a document entitled ``Directions for Information Technology and Advanced Telecommunic- ations'', in which it described the directions as being to:

``• transform how Tasmanians work, live and learn;

• make Tasmania a demonstration site showcasing the potential of the new technologies to transform the economic and social life of regional and more isolated communities;

• expand trade in our high value products in new ways and to a much wider market;

• improve investment outcomes;

• build new service industries;

• enhance the delivery of services to the community; and

• increase education and training opportunities.''

(T documents, page 74)

Seeking funds from the RTIF for Tasmania

7. In May, 1997, a steering committee was established by the Tasmanian Government and the University of Tasmania (``University'') to coordinate the establishment of an electronic commerce centre in Tasmania. On 7 May, 1997, the Tasmanian Government made a submission to the RTIF Board for funds from the RTIF Fund for, among others, the establishment of that centre (T documents, pages 116-165). The objectives that the TECC was to pursue during a three year establishment period were set out as:

``• Assist Tasmanian industries to establish themselves in the international electronic marketplace;

• Research and develop information systems and business infrastructure to enable small to medium sized enterprises to enhance and transform business processes;

• Accelerate the adoption of electronic commerce by Tasmanian industry; and

• Become viable as a self-funding body.

Outputs will include:

• Business research and analysis;

• Education, training and advisory services to raise awareness of the potential of electronic commerce;

• System development; and

• Prototyping.''

(T documents, pages 147-8)

8. On 18 June, 1997, a Business Plan had been drafted for the TECC. It envisaged that TECC's role would be:

``• to assist industry sectors and enterprises to

- access new marketing, distribution and trading opportunities;

- understand how the nature of their business will change in the advanced technology global environment; and

- improve productivity and business agility; and

• to catalyse the formation of a viable, competitive electronic commerce service industry.''

(T documents, page 169)

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9. The Business Plan envisaged that there would be a three year establishment plan for the TECC but that there would then ``... be sufficient demand for the Centre to then continue as a self-funding body.'' (T documents, page 169) The Tasmanian Government and the University would sponsor the TECC and the Tasmanian Government would apply to the RTIF Board to finance its establishment. As for other funding required to establish the TECC, the Business Plan stated that:

``... Other establishment resources will be provided by the University of Tasmania, and possibly private sector contributors. The Centre will also generate an income, aiming to become self-sufficient by the end of the establishment phase.

The involvement of private sector enterprises will also be sought, particularly from the financial and telecommunications industries. Selected major companies from these sectors may be invited to become strategic investors in the Centre. Strategic investors would work with the Centre, sharing their industry knowledge and making a significant contribution to Centre costs.''

(T documents, pages 174-175)

10. Funding was dealt with later in the Business Plan. It was said that the early projects would be fully subsidised by the RTIF seed funding and untied contributions from strategic investors. As the Centre became more established, it was envisaged that project- specific funding would be obtained:

``• directly from industry sectors wishing to work with the Centre;

• indirectly from industry sectors through industry grants, for example from the Commonwealth Department of Industry and Technology; and

• from investors wishing to sponsor particular projects.''

(T documents, page 181)

The Corporate Report for 1999 and that for 2000 reveal very little, if any, private funding (T documents, pages 328-142)

11. The TECC would pursue four objectives during the establishment phase and described them as:

``• Assist Tasmanian industries to establish themselves in the international electronic marketplace;

• Research and develop information systems and business infrastructure to enable small to medium sized enterprises to enhance and transform business processes;

• Accelerate the adoption of electronic commerce in Tasmania; and

• Become viable as a self-funding body.''

(T documents, page 175)

12. The Business Plan envisaged that the TECC would engage in two kinds of activity:

``... Whole of industry activities will be aimed at increasing the awareness and understanding of electronic commerce possibilities, and building networks within industry.

Industry-sector specific activities will involve the Centre working with a particular industry group or enterprise to develop an electronic commerce system, marketing approach, or idea, to proof-of-concept stage only. These activities will demonstrate the achievable business benefits of adopting electronic commerce.

... If only individual projects are funded, the knowledge gained could be lost, not shared across the business community. Through the Centre, it will be possible to build on the knowledge gained in each activity sponsored.''

(T documents, page 195)

13. The outputs that the Business Plan expected would result from the pursuit of its objectives were:

``• prototypes of electronic trading systems, including marketing and electronic banking;

• business research and analysis;

• education, training and advisory services to raise awareness of the potential of electronic commerce; and

• development of electronic systems.''

(T documents, page 175)

14. The Business Plan also dealt with the intellectual property that would be generated in the course of the research activity associated with the TECC. As to the vesting of that intellectual property, the Business Plan saw it as vesting:

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``... either in the University, the Centre, or the research students who engage in the research, depending on the principle [sic] investigators in each research project, and on any agreements which are made prior to the research being undertaken. The TECC will not routinely use non-disclosure agreements to restrict the publication of such research. Rather, the intention is that as much as possible of the research done in association with the Centre will be able be publically [sic] released through the normal academic and other channels.

The third type of intellectual property will be the new knowledge gained from the development of electronic commerce systems. Some of this knowledge will be generic and will remain vested in the TECC, while some will be specific to individual projects and may be jointly owned with relevant industry groups. Agreements concerning ownership of intellectual property of this kind would be expected to from part of project agreements between stakeholders and the TECC, made at the beginning of projects.''

(T documents, page 180 and see also page 218)

15. In an application dated 7 July, 1997, the steering committee applied to the RTIF for funding to establish TECC. It applied for $1.5 million for each of three years beginning on 1 August, 1997 (T documents, pages 183-230, particularly page 188). The proposed objectives were:

``- To promote the use of telecommunications services through accelerated uptake of electronic commerce techniques across the region of Tasmania; and

- To reduce the disparity between Tasmania and metropolitan Australia in access to electronic commerce support and related telecommunications services and facilities.''

(T documents, page 191)

16. The role of the TECC would be:

``- to assist industry sectors and enterprises to

- access new marketing, distribution and trading opportunities;

- understand how the nature of their business will change in the advanced technology global environment; and

- improve productivity and business agility; and

- to catalyse the formation of a viable, competitive electronic commerce service industry.''

(T documents, page 190)

17. The steering committee identified a number of benefits of the TECC including:

``... it can support interstate and international export activity by dramatically enhancing enterprises' ability to operate remotely from their markets.

...

... it can assist small industry groupings, and small enterprises, by enabling them to work cooperatively with counterparts elsewhere in the State or in other States and countries, and to create joint systems and marketing identities. This virtual clustering could be particularly valuable for enterprises operating as niche providers within larger industries, allowing Tasmanian firms to piggyback on the success of larger industry groups in other States and overseas. These benefits are in addition to the substantial gains in productivity, efficiency, and business agility which are possible when business processes are transformed using electronic commerce techniques.

...

... The uptake of electronic commerce will create a niche for a new technical support industry, increase education and training opportunities, and provide business with new opportunities in rural and isolated settings. Business, government, and community service organisations will be presented with an opportunity to significantly enhance service delivery and customer service, to the particular advantage of people and businesses which are located outside urban areas, and people with family responsibilities or limited mobility.''

(T documents, page 191)

``... the boost to regional economy will be reflected in substantial social benefits, in a region whose geographic isolation hinders community development and wealth, as well as business success.''

(T documents, page 192)

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Establishment of TECC

18. TECC was incorporated on 14 August, 1997 as a company limited by shares. Its founding shareholders were the Crown in right of the State of Tasmania and the University. Through nominees, each held one ordinary share. No further shares have been issued. TECC's principal objectives were set out in the Shareholders' Agreement dated 13 August, 1997 and subsequently in its Memorandum of Association:

``(a) to provide research and development facilities to help the Tasmanian business community to adopt electronic commerce and to compete in the international electronic marketplace;

(b) to liaise with Federal, State and local government and statutory bodies in relation to the promotion, research and development of electronic commerce;

(c) to collect, co-ordinate and disseminate information on the electronic commerce;

(d) to raise and manage the funds and other assets associated with the promotion, research and development of facilities to assist the Tasmanian business community to adopt electronic commerce and to compete in the electronic marketplace.''

(T documents, pages 237 and 277)

19. The Shareholders' Agreement provided that the University would provide certain facilities free of rent and free net work access to a specified level. In addition, it would contribute expertise in research, education and electronic commerce, in-kind support of TECC at its Launceston and Hobart campuses and encouragement of academic and research personnel to undertake works for, or in association with, TECC. The Tasmanian Government would contribute industry development links and expertise together with expertise in economic and business analysis. In addition, selected agencies would act as demonstration clients for TECC in order to demonstrate examples of potential benefits (T documents, page 284). As to funding, the Shareholders' Agreement provided that:

``10. The Crown will use its best endeavours to obtain financing from the Regional Telecommunications Infrastructure Fund Board to finance the establishment of the Company for the First three years.

10.2 Each Shareholder shall use their best endeavours to obtain private sector funding and participation in the Company.''

(T documents, page 283)

20. A Grant Deed was signed between the Commonwealth of Australia and TECC on 14 October, 1997 and $3 million was paid on that date.

21. Mr McCann was appointed as the Chief Executive Officer of TECC in December, 1997. At that stage, TECC had not commenced its operations as it did not do so until April, 1998. Its work is directed by a Board of Directors comprising shareholder and industry representatives and is supported by a Secretariat. The staffing levels have risen from one part time employee when Mr McCann was appointed to 14 permanent staff. Consultants are regularly engaged on various projects.

22. In its Corporate Report 1999, TECC made the following statement on the page preceding the title page:

``The TECC is the focal point for work to accelerate the effective use of electronic commerce by Tasmanian business and industry.

This is urgent and important work - the technology of commerce is undergoing its biggest change since the Industrial Revolution.

To take best advantage of this change, Tasmania must become a player in the information economy while it is in its initial growth phase.

The TECC is helping Tasmanian business and industry to take up the challenge NOW - so that Tasmania can gain long-term economic advantage by extending the strengths of traditional industries, and establishing new information based industries.

The TECC is ensuring that Tasmania enjoys the benefits of the global online economy.''

(T documents, page 330)

Establishment of Tasmanian Business Online

23. On 1 June, 1999, the RTIF Board announced that funding of $1.8 million had been allocated to the Tasmania Business Online project. That funding would provide a framework to support and encourage Tasmanian business operators to use the internet as a business resource tool. The TECC

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announced that Tasmanian Business Online (``TBO'') was:

``... designed to locate infrastructure to support the online trading capacity of Tasmanian businesses (e-commerce)....

The TBO `portal' will provide resources ranging from pre-trading information through to a directory of Tasmanian businesses, assistance for businesses to develop their own Web presence, product catalogues, and eventually trading capability.''

(T documents, page 512)

24. On 30 November, 1999, the Commonwealth of Australia and TECC signed a Grant Deed in relation to a grant for TECC and TBO (T documents, pages 442-465). The Grant Deed acknowledged that $3 million of the grant moneys had previously been paid for the TECC and stated that a further $1.5 million would be paid within 28 days of the date of the deed. The project fell into two parts: TECC and the TBO. A separate grant of $1.805 million was paid for TBO. Moneys paid had to be accounted for in Progress Reports. TBO's objectives were to:

``... develop a single electronic gateway or portal for Tasmanian business and industry, incorporating community-based infra- structure for managing trading opportunities and business communications support to overcome regional inequities in access to support services and information.''

(T documents, page 464)

25. TBO was subsequently incorporated as a fully owned entity of EcEnable although it began as a joint venture between EcEnable and TECC. EcEnable had the support of a consortium comprising Ariba, the m2m Corporation and KPMG Tasmania. Based on the chart showing the ownership of the various entities, I find that TECC had a 35.45% interest in EcEnable. The Corporate Report 2000 said that the alliance of these companies provided:

``... regional Australia with the opportunity to access world class e-commerce services cost-effectively, supported by the trading community development programs to assist in the task of enabling a business to move from a paper- based environment to online trading.''

(T documents, page 384)

TBO, it was said in the report, heralded ``... a breakthrough for Tasmanian business by providing assistance to market products and services globally and reducing costs through online processing of business transactions'' (T documents, page 386).

26. There were two components of TBO: the Trading Hub and the Business Community Centre. The Trading Hub would be used by suppliers to reduce the process costs associated with supply, improve customer serviced and to gain access to new markets in a cost effective manner. The Business Community Centre would provide links to various sources of government and industry information services relevant to Tasmanian businesses. TBO charges fees to businesses using its services. Those services are divided into its Web Portal, TBO eLogistics, eTrading, Enablement and Training and Consulting (Exhibit G).

Projects

27. On the basis of the evidence of Mr McCann, I find that the manner in which TECC has pursued its objectives include:

• designing a website to showcase TECC and to demonstrate a variety of features as part of the e-commerce awareness raising process;
• raising the awareness of business in relation to opportunities in e- commerce through media releases, speaking engagements, boardroom briefings and business publications;
• providing financial support and speakers at the Online Access Centre Association of Tasmania's annual conferences in 2000, 2001 and 2002;
• working with Mr Richard Harvey to assist online access centres in the southern region of Tasmania to become sustainable and to move towards commercialisation and to assist small businesses. Mr Harvey had received funding through the RTIF to achieve these objectives. TECC was a member of the formation management committee for the Burnie Online Access Centre;
• giving public presentations at Smithton, Devenport, Exeter and Ulverstone in 1999;
• chairing a committee in 2000 which prepared the Riana Online Access Centre application for funding;
• providing assistance in 2002 to the Online Gamers Club at the Burnie Online Access Centre;

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• providing assistance to students of the Riana Primary School on web presence and bandwidth requirements, project and general information to students of the University of Tasmania School of Information Systems and general material to HSC students at the Hutchins School;
• stimulating interaction between secondary and tertiary students and small and medium enterprises in relation to the adoption of e- commerce and the adoption of information communication technology tools and technologies. This has been a project conducted in conjunction with the University and Intellinc and is more broadly intended to stimulate business development in Tasmania while helping to secure jobs for school leavers and graduates. Stimulation is achieved by offering six Business Plan Awards, each worth $3,000;
• supporting, since July, 2002, the Community of Practice project launched by TAFE Tasmania and Dr Marcus Bowles and coordinating all vocational training in the north east of Tasmania to meet the needs of industry;
• making presentations to various RSL, sports and Rotary clubs as well as to other agricultural and special interest groups;
• making presentations at various public fora;
• sponsoring the design of the de Bono flag and emblem for the week and coordinating a number of introductions and functions during Thinking Week;
• chairing the business development panel of the joint venture between the Edward de Bono Institute in Melbourne and the Allen foundation; and
• chairing and providing resources to the Launceston Digital Development Forum which facilitates and coordinates the dissemination of e-commerce news to the community; and
• providing funds to particular projects as described in the following paragraph.

28. Examples of projects that have been funded by TECC are:

• Blundstones Pty Ltd (``Blundstones'') is Australasia's largest manufacture of heavy duty work and protective safety footwear and services markets in Australia, New Zealand, South Pacific, Asia, Europe and North America. It manufactures some 5,000 pairs of footwear each day and employs some 300 employees. Blundstones has a website showing its products and contact details for its registered distributors, a secure online, interactive ordering and account facility for its distributors and a secure document management system for use by its staff.
TECC gave Blundstones $30,000 to assist it to develop its online interactive ordering and account facility for its distributors. That facility has been developed by ICS Multimedia. It benefits Blundstone by enabling orders to be received and entered directly into the manufacturing system 24 hours a day and, as a consequence, enabling the company to know the amount of raw material it requires in advance. Invoices are automatically generated when a distributor's order has been filled and despatched so that the risk of misdescribing the goods is eradicated. Distributors can pay for their goods electronically and so improve Blundstone's cash flow. Distributors are advantaged by being able to place and track the progress of their orders and manage their account details at any hour of the day. Details of their orders are maintained on Blundstone's database so enabling them, if they wish, to do away with the need to maintain their own files to keep track of stock to be introduced or replaced (T documents, pages 436-438).
• Botanical Resources Australia Pty Ltd (``BRA'') grows, processes, manufactures and exports pyrethrum products. It supplies world markets with natural pyrethrum products for use as the key ingredient of domestic and industrial pest control formulations. Approximately 200 mixed cropping agribusinesses are contracted to grow pyrethrum for BRA.
TECC provided funds to enable BRA and 75 participating growers to install computers and software together with modems and Internet access through Tasmanian Internet Service Providers for such things as email, electronic newsletters and product information. It did so because the project demonstrated how a network of rurally- based agribusiness operators could be formed and use electronic commerce in their businesses. The benefits to the growers has

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been an increase in their skills and an opportunity to source and order agricultural products over the Internet, use Internet banking and learn about the benefits of farm financial and management software. The benefits for BRA have included their having a more efficient grower base, improved communication between its staff and growers, improved computer skills of its field staff and a website to promote its products. (T documents, pages 418 to 429)
• Regal Craft Cards has been selling quality craft cards, quilling paper and other accessories for making gift cards for over 20 years. It is based in Launceston and has sold its craft products locally and throughout the world using a mail order catalogue for a number of years. It then began to market its products electronically by designing and publishing its own website.
Regal Craft Cards sought professional assistance to develop the software and infrastructure that would expand the market it could enter. TECC provided support towards the costs of the development. Regal Craft Cards online was launched in February, 2000. The benefit to its customers have included speedier access to its range of products and that access can be gained from all parts of the world. Those customers can see the product on the screen. They can submit their orders as soon as they have registered their details on the electronic order form at the website. The cost of those orders is shown in the local currency of the country from which the order was sent and the customers can track the progress of their orders using their own logins.

Regal Craft Cards is able to achieve cost efficiencies and to increase its direct sales throughout the world. Orders are paid for in advance by credit card and this alleviates cash flow problems. Using the internet, Regal Craft Cards has been able to target other businesses operating in the craft field and to search worldwide for new stock that it is then able to offer to its customers. The internet has improved its stock controls. Every item is bar coded so enabling the company to identify the products it sells quickly. There is a consequent reduction in labour and increase in cost efficiencies. (T documents, pages 431-433)

Profit or loss?

29. TECC's accounts showed a small profit in the 1998 and 1999 years and a small loss in the 2000 year. Since its incorporation, its operations have produced an income stream from some of its clients. It has continued to be reliant on RTIF funding.

Legislative background

30. Income tax is payable for each income year by each individual and company as well as by some other entities (s. 4-1). There is no question that TECC is a company. Income tax is worked out by reference to taxable income for that income year (s. 4-10(2)). Taxable income is assessable income less deductions (s. 4-15(1)). Assessable income consists of ordinary income and statutory income but does not include exempt income or non-assessable non-exempt income in the hands of a particular entity (s. 6-1). Income that would otherwise be ordinary income or statutory income is exempt income if it is made so by a provision of the ITAA 1997 or by another Commonwealth law (s. 6-20) and ordinary income is also exempt income to the extent that the ITAA excludes it expressly or by implication from being assessable income (s. 6-20(2)).

31. Section 11-1 divides ordinary income or statutory income that is exempt from income tax and so exempt income into three classes. Of relevance in this case are the first and third classes. The first is the ordinary or statutory income of entities that are exempt no matter what kind of ordinary or statutory income they have (s. 11-1(a)). The third is the ordinary or statutory income which is exempt only if it is derived by certain entities (s. 11-1(c)). In both cases, the entities are identified in s. 11-5, which refers to those entities set out in ss. 50-5 to 50-45. Of relevance in this case, is s. 50-5 which is headed ``Charity, education, science and religion'' and which specifies nine bodies:

• charitable institution;
• religious institution;
• scientific institution;
• public educational institution;
• fund established for public charitable purposes by will before 1 July 1997;
• trust covered by paragraph 50-80(1)(c);
• fund established in Australia for public charitable purposes by will or instrument of trust (and not covered by item 1.5 or 1.5A);

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• fund established to enable scientific research to be conducted by or in conjunction with a public university or public hospital; and
• society, association or club established for the encouragement of science.

Each is subject to the entity's fulfilling the special conditions that are also referred to in s. 50-5.

32. In so far as a ``charitable institution'' specified in Item 1.1 is concerned, its exemption is subject to its fulfilling the special conditions set out in ss. 50-50 and 50-52 (ss. 50-1 and 50-5). Of relevance in this case, is the condition set out in s. 50-50(a), which provides that:

``An entity covered by item 1.1 or 1.2 is not exempt from income tax unless the entity:

(a) has a physical presence in Australia and, to that extent, incurs its expenditure and pursues its objectives principally in Australia''

There has been no suggestion that TECC has not met this condition.

33. Since the years of income that I must consider, the ITAA 1997 has been amended to include Subdivision 50-B. It requires the endorsement of charitable institutions and trust funds for charitable purposes as exempt from income tax before they are so exempt. That Sub-division, however, has no application in this case as s. 50-52(1), which provides that an entity covered by item 1.1 of s. 5-50 is not exempt from income tax unless it has been endorsed under Subdivision 50-B and which comes within Subdivision 5-A, applies in relation to ordinary income and statutory income for a period starting on or after 1 July, 2000 (A New Tax System (Tax Administration) Act 1999, Schedule 8, clause 16).

Consideration

What is meant by the word ``charitable''?

34. As the parties agreed that the TECC is an ``institution'' for the purposes of the definition of ``charitable institution'', that is not an issue. They also agreed that the word ``charitable'' is used in its technical legal sense but did not precisely agree upon that sense or whether the facts brought TECC within that sense. Both Mr Abbott and Mr O'Farrell submitted that the starting point of the consideration is the preamble to the Charitable Uses Act 1601 (Imp) (``the Statute of Elizabeth''). That statute, which has since been repealed, was set out in the minority judgement of Lord Chancellor Halsbury in the House of Lords in
The Commissioners for Special Purposes of the Income Tax v Pemsel (1891) TC 58. It provided that allowances were to be made in respect of certain duties charged on certain entities in respect of certain buildings:

``Or on the rents and profits of lands, tenements, hereditaments, or heritages belonging to any hospital, public school, or almshouse, or vested in trustees for charitable purposes, so far as the same are applied to charitable purposes.''

(at 65)

35. Lord Macnaghten who, together with Lords Watson, Herschell and Morris, formed the majority, distinguished between the popular meaning of ``charity'' and its legal meaning and said:

``... `Charity' in its legal sense comprises four principal divisions: trusts for the relief of poverty, trusts for the advancement of education, trusts for the advancement of religion, and trusts for other purposes beneficial to the community not falling under any of the preceding heads. The trusts last referred to are not the less charitable in the eye of the law because incidentally they benefit the rich as well as the poor, as indeed every charity that deserves the name must do, either directly or indirectly....''

(at 96)

36. The High Court has held that the word ``charitable'' is to be understood in its technical legal sense. It did so in
Salvation Army (Victoria) Property Trust v President, Councillors and Rate-payers of the Shire of Fern Tree Gully (1952) 85 CLR 159 (Dixon, Williams, Webb and Fullagar JJ, McTiernan J dissenting). McTiernan J dissented on the basis that the word ``charitable'' had, in the legislation under consideration, been used in its popular sense. Its popular sense was not definite and it was:

``... by no means evident that it is restricted to the relief of poverty; this appears from the observations made by Lord Herschell in Commissioners for Special Purposes of Income Tax v Pemsel... A boy whose social condition warrants his committal to this institution excites Christian passion by reason of his moral and material needs; in most cases he would belong to the underprivileged class of society: but, even if

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he did not, I think it could not be right to say that it is beyond the popular conception of charity, to meet the need of moral and social betterment of such a youth and to save him from the social misery and the material and moral misfortune and ruin towards which he is tending....''

(pages 175-176)

37. Despite the difference between McTiernan J and the majority on this point, all were in agreement that the appellant's lands were used exclusively for charitable purposes. In view of that, one wonders whether the difference is more one of semantics than of substance. That it could be so is underlined by the later case of
Incorporated Council of Law Reporting of the State of Queensland v FC of T 71 ATC 4206; (1971) 125 CLR 659 (Barwick CJ and McTiernan and Windeyer JJ). The only substantial purpose of the Incorporated Council of Law Reporting of the State of Queensland was the production of law reports. Barwick CJ, with whom McTiernan J concurred, said that, having regard to the decision of the Privy Council in
Chesterman v FC of T (1925) 37 CLR 317, the indications contained in the preamble to the Statute of Elizabeth and the classifications set out by Lord Macnaghten in Commissioner for Special Purposes of Income Tax v Pemsel are to be observed in deciding whether or not an institution is charitable. His Honour continued:

``The reported cases may in some instances afford a guide by analogy to the decision whether a particular trust, or a particular purpose is charitable. In addition, the many dicta found in the reasons for judgment in such cases, though by no means of one accord, provide valuable assistance in resolving such a question. But in the long run, it seems to me, it is a matter of judgment whether the trust or purpose fairly falls within the equity, or as it sometimes said, `within the spirit and intendment' of the preamble to the... [Statute of Elizabeth]....

The instances given in that preamble are not exhaustive. Charity is not limited to activities eiusdem generis with those instances, if indeed a genus is really to be found in them. But the preamble does give an indication and, it would seem, a definitive indication, of what will be charitable, whether in point of trust or of purpose. Lord Macnaghten in Pemsel's Case [ 1891] A.C. 531 extracted from this indication four heads or categories of charity of which the first three heads or categories are capable of more certain application than the last category...''

(ATC at 4210; CLR at 666-667)

``Other purposes beneficial to the community''

38. The fourth category identified by Lord Macnaghten was considered further by the Court of Appeal in
Commissioners of Inland Revenue v Yorkshire Agricultural Society [1928] 1 KB 611 in the context of s. 37(1)(b) of the Income Tax Act 1918 (UK). The Yorkshire Agricultural Society (``Society'') was formed in 1837 and its objects at the relevant time were:

``(1.) The holding of an annual show for the exhibition of live stock, poultry, farm produce, horticultural produce, also of machinery, implements, tools, appliances, utensils, etc., connected with or appertaining to agriculture; such annual show to be held successively in different parts of the county; (2.) the improvement of live stock, poultry, implements, machinery and appliances in connection with agriculture; (3.) the demonstration of methods and processes connected with, and the furthering of the interests of agriculture, horticulture, arboriculture, apiculture and allied industries; (4.) agricultural education; (5.) scientific research and experimental work; (6.) watching and advising on legislation affecting the agricultural industry.''

(at 612-613)

The Society derived its income from entry fees and gate receipts at its annual show, interest on investments and subscriptions of its members. It expended its money on its annual show, which was held in a different location each year, the publication of a Journal disseminating scientific knowledge of value to farmers and breeders and general administration. It invested any excess of receipts over expenditure and realised investments if there was a shortfall. The Society sought exemption from income tax on the basis that it was a body of persons established for charitable purposes only.

39. The Court of Appeal considered whether income that the Society derived from its investments formed part of the income of a body of persons established for charitable purposes only. Referring to the fourth category

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identified by Lord Macnaghten, Lord Hanworth MR made the following points:

``... What is a `purpose beneficial to the community'? It has long been established that a mere benevolent purpose is not necessarily a purpose beneficial to the community....

... it has been determined that where the purpose of the association is rather for the benefit of the members themselves, than a wider aim, then such institutions as are so established are not within the purview of purposes beneficial to the community....''

(at 622)

40. With regard to whether or not the Society was for a purpose beneficial to the community, Lord Hanworth found that it was for it was formed for the purpose of improving agriculture as a whole. It was not established for any confined purpose of benefiting its own members but rather for a purpose of bringing advancement and improvement to the benefit of the community at large (at 623) and was established for a charitable purpose and so ``only'' for purposes beneficial to the community. Lord Hanworth went on to consider the effect of profits gained by the Society and their implications in the particular legislative context. If the profits were applied solely to the purposes of the Society, they would be applied solely to the purposes of a charity. ``The question was one of degree'' (at 627).

41. The benefits derived by the Society's members were also the subject of the judgements delivered by Atkin and Lawrence LJJ, both of whom concurred with Lord Hanworth. Lord Atkin said:

``There can be no doubt that a society formed for the purpose merely of benefiting its own members, though it may be to the public advantage that its members should be benefited by being educated or having their aesthetic tastes improved or whatever the object may be, would not be for a charitable purpose, and if it were a substantial part of the object that it should benefit its members I should think that it would not be established for a charitable purpose only. But, on the other hand, if the benefit given to its members is only given to them with a view of giving encouragement and carrying out the main purpose which is a charitable purpose, then I think the mere fact that the members are benefited in the course of promoting the charitable purpose would not prevent the Society being established for charitable purposes only. That I imagine to be this case.''

(at 631)

Lawrence LJ said:

``In my judgment the crucial question in this appeal is whether the appellant Society was established for the promotion of agriculture generally or was what has been conveniently called a members' society, established for the promotion of the interests of its members in their respective businesses. If the former be the case I am clearly of opinion that the Society was established for charitable purposes only within the legal acceptation of that expression. Agriculture is an industry not merely beneficial to the community but vital to its welfare. The fact that the operations of the Society may be confined to Yorkshire - a matter upon which I desire to express no opinion - is, in my opinion, immaterial, as it is well settled that the benefit in point of local area need not extend to the public at large and that the benefit of the inhabitants of a particular district will suffice... It is plain to my mind that the general improvement of agriculture is a charitable purpose falling within the fourth class of Lord Macnaghten's well known classification of legal charities...''

(at 635-636)

42. This aspect was further considered in
Commissioners of Inland Revenue v Oldham Training and Enterprise Council (1996) 69 TC 231. The Oldham Training and Enterprise Council (``Oldham TEC'') was a company limited by guarantee and one of a number established following the publication of a White Paper by the British government regarding employment in the 1990s. It had a contract with the British government to attain objectives set out in that White Paper. To attain those objectives, it carried out three main areas of activities: provision of information and advice to business, diagnostic services and business skills training; free enterprise training for a person thinking of establishing a new business and a cash allowance; and training and retraining people for work. Its activities were largely sourced without cost but, if there were a cost, that cost was shared between Oldham TEC and the business that was receiving the service.

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Oldham TEC was funded by government grants.

43. Lightman J observed that:

``... So far as the object of Oldham TEC is to set up in trade or business the unemployed and enable them to stand on their own feet, that is charitable as a trust for the improvement of the conditions in life of those `going short' in respect of employment and providing a fresh start in life for those in need of it, and accordingly are for the relief of poverty... The activity of Oldham TEC in providing such benefits as business start-up services is accordingly, charitable....''

(at 249)

44. Lightman J focused on those of Oldham TEC's activities falling outside those that relieved poverty. Did they fall within Lord Macnaghten's fourth category? He observed:

``To fall within the fourth category, it is necessary (but not sufficient) that the object is of general public utility. The public to be benefited for this purpose may be a section of the public and this includes the inhabitants of an area such as Oldham (see e.g. In re Smith [1932] 1 Ch 153). The object must be to promote a purpose beneficial to the community, and not to the interests of individual members of the community. But an object may nonetheless be charitable as beneficial to the community though its fulfilment either directly or indirectly incidentally may benefit such individuals. Beyond such general public utility it is necessary that the object comes within the spirit and intendment, even if not within the words, of the Statute of Elizabeth. As an example, if the object of setting up the unemployed in trade or business was not charitable as being for the relief of poverty, it would fall within the fourth head of charity. It is a matter of general public utility that the unemployed should be found gainful activity and that the State should be relieved of the burden of providing them with unemployment and social security benefits, and this object is within the spirit, if not the words, of the Statute of Elizabeth, which includes amongst its list of charitable objects `the support, aid and help of young tradesmen and handicraftsmen'.''

(at 250)

45. Analysing the objects of the Oldham TEC, Lightman J concluded that it is an altruistic organisation, in the sense that no profit or benefit is conferred on its members and its very reason for being is to assist others in and around Oldham. It is substantially publicly funded and some of its objects were indisputably charitable. His Honour then went on to consider its second main object and said of it:

``... the second main object, namely promoting trade, commerce and enterprise, and the ancillary object, of providing support services and advice to and for new businesses, on any fair reading must extend to enabling Oldham TEC to promote the interests of individuals engaged in trade, commerce or enterprise and provide benefits or services to them....''

(at 251)

The facts that had been agreed between the parties showed that this was precisely the manner in which Oldham TEC had conducted itself and Lightman J said of its activities in this regard:

``... Such efforts on the part of Oldham TEC may be intended to make the recipients more profitable and thereby, or otherwise, to improve employment prospects in Oldham. But the existence of these objects, in so far as they confer freedom to provide such private benefits, regardless of the motive or the likely beneficial consequences for employment, must disqualify Oldham TEC from having charitable status. The benefits to the community conferred by such activities are too remote....''

(at 251)

46. Clearly, the fact that Oldham TEC's main object was promoting trade, commerce and enterprise did not take it outside Lord Macnaghten's fourth classification per se. So too in
Crystal Palace Trustees v Minister of Town and Country Planning [1950] 2 Ch D 857, Danckwerts J found that ``... the promotion of industry or commerce in general in such circumstances [as conducted by the Crystal Palace Trustees - see paragraph 66 below] is a public purpose of a charitable nature within the fourth class in the enumeration of charitable purposes contained in Income Tax Special Comrs. v Pemsel...'' (at 859)

47. These cases show that the fourth class is not confined to purposes that were considered ``beneficial to the community'' in 1891. Instead, the community and what is beneficial to it has been considered from time to time. Lord Wilberforce said in
Scottish Burial Reform and Cremation Society Ltd. v Glasgow

ATC 2105
Corporation [1968] AC 138 described how that consideration, the Statute of Elizabeth and the times dictate the meaning to be given to the word ``charity'' and ``charitable'':

``... The purposes in question, to be charitable, must be shown to be for the benefit of the public, or the community, in a sense or manner within the intendment of the preamble to the statute 43 Eliz. 1, c. 4. The latter requirement does not mean quite what it says; for it is now accepted that what must be regarded is not the wording of the preamble itself, but the effect of decisions given by the courts as to its scope, decisions which have endeavoured to keep the law as to charities moving according as new social needs arise or old ones become obsolete or satisfied. Lord Macnaghten's grouping of the heads of recognised charity in Pemsel's case [1891] A.C. 531, 583 is one that has proved to be of value and there are many problems which it solves. But three things may be said about it, which its author would surely not have denied: first that, since it is a classification of convenience, there may well be purposes which do not fit neatly into one or other of the headings; secondly, that the words used must not be given the force of a statute to be construed; and thirdly, that the law of charity is a moving subject which may well have evolved even since 1891.''

(at 154)

48. This is also illustrated by a case such as that decided by the Federal Court of Appeal in Canada in
Vancouver Regional FreeNet Association v Minister of National Revenue (C.A.) [1996] 3 F.C. 880 (Hugessen and Pratte JJA, Décary JA dissenting). The Minister had refused to grant the Vancouver Regional FreeNet Association (``the Association'') registered charity status. The Association is a non-profit organisation whose main object was to develop, operate and own a free, publicly accessible community computer utility. Its other objects were collateral to its achieving its main object. The question for the Court of Appeal was whether the provision of free access to the internet is a charitable activity. Comparing it with the essential means of communication used at the time of the Statute of Elizabeth and referred to in it, Hugessen JA, with whom Pratte JA agreed, said:

``Information is the currency of modern life. This has properly been called the information age. The free exchange of information amongst members of society has long been recognized as a public good. It is indeed essential to the maintenance of democracy, and modern experience demonstrates more and more frequently that it, more than any force of arms, has the power to destroy authoritarianism. The recognition of freedom of speech as a core value in society is but one aspect of the importance of freedom of information.''

What is ``the public''?

49. Each of the cases recognises that the purpose must be beneficial to the community or the public, however it is described, and also recognises that the purpose will not lose that character merely because individuals benefit when the purpose is implemented. At the same time, if its purpose is to benefit individuals, its purpose cannot be charitable. Each case also recognises, explicitly or implicitly, that it is not necessary that the whole of the community or of the public benefit. It is enough that it is a part but, where is the line to be drawn?

50. Dixon CJ also reflected on the matter in his later judgement in
Thompson v FC of T (1959) 102 CLR 315 (Dixon CJ, Fullagar and Kitto JJ, McTiernan and Menzies JJ dissenting). The testatrix had bequeathed a part of her estate to a Masonic school in Sydney and the executors of her will claimed that it was exempt from estate duty on the ground that it was a bequest for public educational purposes in Australia within the meaning of s. 8(5) of the Estate Duty Assessment Act 1914. Dixon CJ, with whom Fullagar and Kitto JJ agreed, said:

``... But putting aside any marginal questions about the field of education... there is no reason to doubt that a trust which would be upheld as charitable solely on the ground that it was for the advancement of education would obtain the exemption given by s. 8 (5) to devises and bequests etc. for public educational purposes, that is of course provided that the purposes were in Australia. The tendency of the trust must be to benefit the public, a condition that is satisfied if it tends to the benefit of the public at large, or a class or section of the public. The trusts may be limited in their operations by reference to locality, to conditions of people, to their disabilities, defects or misfortunes and by reference to many other attributes of men and things, yet

ATC 2106
the trusts may retain their `public' character. Not a little difficulty has been felt in defining the conception of `public', `public charity' or `public benefit' which this involves but the contrast is, of course, to private advantage. It is not the occasion to enter upon the discussion of the difficulty; it is enough to refer to some of the leading modern cases dealing with it... In In re Scarisbrick; Cockshott v. Public Trustee [ [1951] Ch 622] Jenkins L.J. set out five general propositions upon this subject, in relation however to a case concerned with the relief of poverty. His Lordship in doing so said: `An aggregate of individuals ascertained by reference to some personal tie (e.g., of blood or contract, such as the relations of a particular individual, the members of a particular family, the employees of a particular firm, the members of a particular association, does not amount to the public or a section thereof for the purposes of the general rule' [at p. 649]. (The italics are mine.)

The words I have italicized apply to the facts here. Of course the foregoing considerations operate directly only upon the law of charity, not upon the application of s. 8 (5). But they do provide something more than an analogy. For it is obvious that the statutory exemption is in pari materia.

For myself I would reject the view that a trust in favour of the William Thompson Masonic Schools and Hostels is to be considered a charitable trust because it is for the advancement of education. I would reject it because such a trust would lack the `public' element, the element of public benefit or advantage that is necessary.... The same reasons as govern this view lead me to the further conclusion that the gift does not amount to a devise or bequest for public educational purposes so as to be exempt from estate duty under s. 8(5).

Large as is the membership of the masonic order in New South Wales it forms but a society of persons bound together as a voluntary association into which members are admitted by the election of the existing members as provided by the rules adopted contractually for the government of the society.

The size and importance of the order cannot give it any different character. It is true that the benefit of the William Thompson Masonic Schools and Hostels is enjoyed by the children of deceased or incapacitated brethren, not the brethren themselves. But as was remarked by Lord Normand in refusing to regard as material a similar distinction in Oppenheim's Case [(1951) AC 297 at 310] there is no public relationship between parent and child. On the same point Lord Simonds said in that case: `I can make no distinction between children of employees and the employees themselves. In both cases the common quality is found in employment by particular employers.' [at p. 306].

The fact is that it is part of the advantages which a member of the masonic order obtains in virtue of his membership that his child should become eligible thus to be provided with part of his education and upkeep.

In In re Income Tax Acts (No. 1) [(1930) VLR 211] the Full Court of Victoria decided that a benevolent asylum to which none other than freemasons and their wives or the widows of freemasons were eligible for admission was not a `public benevolent asylum' within a Victorian enactment giving a deduction from income tax in respect of gifts to a public benevolent asylum. This decision appears to be directly in point and is in my opinion correct. I refer in particular to the following passage in the judgment of Lowe J.: `It may not be easy or even possible to enumerate in advance the differentiae of a ``section of the public'' within this rule, but I illustrate along what lines a conclusion may be arrived at. Having regard to the composition of the public, certain large groups may readily be recognized, the members of which have a common calling or adhere to a particular faith or reside in a particular geographical area. There is no bar which admits some members of the public to those groups and rejects others. Any member of the public may, if he will, follow a particular calling, adhere to a particular faith, or reside within a particular area. Of the members of such a group it may be said in a real sense that they are primarily members of the public, and such a group may well constitute a section of the public. They stand on one side of the line. Each

ATC 2107
group, it is true, may consist of many individuals, but number alone is not the criterion by which to determine whether the group constitutes a section of the public. A club, a literary society, a trade union may all have numerous members, but I think that none of these could properly be called a section of the public. They stand on the other side of the line. The distinguishing feature of each of these latter bodies is that it is an association which takes power to itself to admit or exclude members of the public according to some arbitrary test which it sets up in its rules or otherwise. Each of them does oppose a bar to admission within it. It is not one of the groups into which the community as a matter of necessary organization or by convention is divided, but it is in a sense an artificial entity which exists for the benefit of its members as members thereof and not as members of the public.' [at pp. 222,223].''

(at 321-324)

51. Dixon CJ referred to a number of cases that had discussed the difficulty he faced in identifying the concept of ``public''. Among those was
Re Koettgen's Will Trusts [1954] 1 Ch 252 in which Upjohn J considered a trust established by a testatrix ``... for the promotion and further of commercial education''. Those eligible as beneficiaries were British born persons who desired to gain an education for a higher commercial career but whose means were insufficient to allow them to obtain it. The testatrix expressed the wish that, in selecting the beneficiaries, the trustees give preference to the employees of a certain company or any members of their families. It was conceded by the parties that commercial education was a proper charitable purpose. The charitable nature of the trust was not conceded because it was questioned whether or not it had the requisite degree of public benefit. Upjohn J said that the primary class of beneficiaries comprised those who were British born persons etc. That primary class was not defined by reference to their being employees or family members of employees of the company. It was only when it came to the selection of eligible persons from the primary class that their particular relationship to the company became relevant. In some years, there might be insufficient employees and the like to receive assistance and a portion would be given to members of the primary class. It might be that the company ceased to exist and all would be given to members of the primary class. It was not, on final analysis, a trust confined in its benefits to persons connected with the company.

52. Earlier, in
In re Income Tax Acts (No. 1) [1930] VLR 211 (Irvine CJ, Macfarlan and Lowe JJ) considered whether a gift had been given to a public benevolent institution. That institution was a benevolent asylum to which only Freemasons and their wives and widows were eligible for admission. Macfarlan J said:

``The authorities, I think, bring out what is after all merely a matter of English - that `the public' does not mean necessarily the whole community. `Public' may mean a section of the community, that is, a section of the `public' in the larger sense. What is meant by a section of the public? Now in one sense every considerable body or collection of persons in a community is a section of the public, a section of the community. But many of such bodies are neither public nor a section of the public in the sense intended by the authorities. The exact discrimen may be difficult to formulate, and is best brought out by an illustration. Seamen are a section of the public, whereas the Seamen's Union is not. Any member of the community who happens to have the necessary natural qualification may become a seaman, but before he can become a member of the Union he must obtain the consent of the Union.... It may be that the common characteristic of the sections of the community which can properly be described as `sections of the public' in the relevant sense is, roughly speaking, that the right to membership of, or inclusion in them depends only on the possession of natural attributes or attributes which any members of the community may acquire, and does not depend on the consent of other members of that section. What is clear is that, generally speaking, if admission to membership of a body or inclusion in a class depends on the consent of the other members or some of the members (e.g., a committee) of the body or class it is not `a section of the public' in the relevant sense of the term: and I prefer to express it in that negative form.''

(at 216-217)

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Need all of the entity's objects be charitable and may individuals benefit?

53. Authorities such as Commissioners of Inland Revenue v Yorkshire Agricultural Society suggest that an entity must be established for charitable purposes only but it should be noted that they did so in a particular statutory context requiring that. At the same time, it would seem clear from that case that the fact that individuals may benefit or their interests promoted is not an automatic bar to an entity's being found to be for charitable purposes.

54. On its face, it would seem to me to be the conclusion that was also reached by Lightman J in Commissioners of Inland Revenue v Oldham Training and Enterprise Council. In their written submission, however, Mr Abbott has stated that:

``... in order to find for the appellant, and to achieve for the respondent the result it wanted from the appeal, Lightman J was constrained to find that the derivation of any benefit to an individual disqualified the donor of the benefit from charitable status: p. 251 ll.eg.''

(paragraph 19(c)).

55. To understand their submission, it is necessary to understand that the case had been conducted as a test case for 80 other Training and Enterprise Councils with objects clauses identical to those of Oldham TEC. Oldham TEC had merged with its local Chamber of Commerce as had a number of others. The Special Commissioners had found that Oldham TEC was established for charitable purposes. The Commissioners of Inland Revenue appealed against their decision and Oldham TEC subsequently weighed up the advantages and disadvantages of being regarded as having charitable status. It decided that charitable status was against its interests and so opposing the appeal was against its interests. Nevertheless, as it was a test case, it did not concede the appeal. It is clear from Lightman J's judgement that it presented full argument and that it made all submissions that could properly be made on its behalf in support of the decision.

56. On reading the whole of the judgement, it is also clear that Lightman J has considered the whole case with an open mind. He has not felt himself constrained to reach any result either for or against either the appellant or the respondent. As is apparent from paragraphs 42-46 above, I do not consider that Lightman J went so far as to ``... find that the derivation of any benefit to an individual disqualified the donor of the benefit of the charitable status...'' as has been submitted. Instead, he effectively regarded it as a matter of degree. The question that he asked himself was whether the direct or indirect benefit gained by individuals was incidental to the achievement of the object to benefit the community, or a part of it? In the context of that case, that required him to ask himself, in effect, whether the benefits were conferred upon individuals with or without regard to the likely beneficial consequences for employment. As he found that they conferred without such regard, he also found that the benefits to the community were too remote to be regarded as charitable.

57. The High Court has also considered this aspect in
Royal Australasian College of Surgeons v FC of T (1943) 7 ATD 289; (1943) 68 CLR 436 (Latham CJ, Rich, Starke, McTiernan and Williams JJ). It did so in the context of whether the Royal Australasian College of Surgeons (``College'') was a scientific institution within the meaning of s. 23(e) of the Income Tax Assessment Act 1936 (``ITAA 1936'') and so exempt from income tax on income received from its investments. There is no requirement that the scientific institution have been established only for the promotion of science or the like. The College was a limited company whose income and property were applied solely to their objects. Its objects were partly for the promotion of professional interests and partly for the promotion of surgical knowledge and practice. It conducted conferences to discuss surgical matters. A library was provided by the College for the use of its members and it published a surgical journal. It held examinations for admission to its membership and awarded scholarships to medical students but did not confer medical degrees.

58. Latham CJ said that ``Unless the promotion of surgical science is the main substantial or primary object of the College, it cannot be described as a scientific institution'' (at ATD 295; CLR 444). It had been submitted that the promotion of the professional interests of the College's members could not be regarded as subsidiary, secondary or auxiliary to the main object. Latham CJ reasoned that the mere fact that membership of the College was

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confined to those who had some eminence in surgical science did not militate against its object being for the advancement of that subject. They are, after all, the only persons who have the requisite knowledge and skill to promote it. Rich J concluded that:

``... the main or real object of the College is the promotion and advancement of surgery. By this I mean that its essential purpose is to enlarge and extend the boundaries or area of the science of surgery. Its other objects are not collateral or independent but merely concomitant and incidental to the main object. And the fact that some of these subsidiary or ancillary functions and purposes may indirectly and incidentally be of benefit to the members of the profession does not destroy the exemption claimed.''

(at ATD 296-297; CLR 447)

Starke J expressed a similar conclusion in this way:

``The activities of the College may benefit its fellows, but the facts related speaks for themselves and establish that the College is doing `something higher and larger' than the mere promotion of professional interests. It is actively engaged in the promotion and advancement of science, in the advancement of surgical knowledge and practice. And that, I think, is the main and prevailing and the characteristic nature of the activities of the College....''

(at ATD 298; CLR 449)

59. By way of contrast, the Cronulla Sutherland Leagues Club (``the Club'') in
Cronulla Sutherland Leagues Club Ltd v FC of T 90 ATC 4215 (Lockhart and Beaumont JJ, Foster J dissenting) was said to have two objects. Those objects were the encouragement and promotion of rugby league football and the provision of the amenities of a social club for its members. The encouragement or promotion of sport did not need to be the exclusive object or purpose of the Club if its trading income were to be exempt from income tax under s. 23(g) of the ITAA 1936 but it did need to be the main or predominant purpose or object (Beaumont J at 4243-4244 and see also Lockhart J at 4225 and 4227). It may:

``... have other objects or purposes which are merely incidental or ancillary thereto or which are secondary and even unrelated to the main object or purpose without disqualifying the body from the exemption. But if it has two co-ordinate objects, one of which is outside the exemption, the exemption cannot apply because it would be impossible to say that one object is the main or predominant object.''

(Lockhart J at 4225)

60. Neither of the Club's two objects could be correctly described as ancillary or incidental to the other or as necessarily independent of the other. They overlapped to some degree but the main object was the provision of social amenities (Lockhart J at 4227). Beaumont J summarised the position:

``It is unreal to regard the appellant's clubhouse and its social activities as being undertaken for the purpose of encouraging or promoting rugby league football and supporting the football club. This is a secondary purpose.''

(at 4227)

61. In
Congregational Union of New South Wales v Thistlethwayte (1952) 87 CLR 375 (Dixon CJ, McTiernan, Williams, Fullagar and Kitto JJ), the High Court considered a trust which had been established by will and whose trustees had been directed to pay annual sums to named charities and to divide the balance into three parts and to hold one part for each of three named bodies. One of those bodies was the Congregational Union of New South Wales (``Congregational Union''). Seven of its nine objects were agreed between the parties to be charitable purposes. Two were said not to be and they were: the creation, maintenance and improvement of educational, religious and philanthropic agencies; and the preservation of civil and religious liberty. The High Court said that a gift for philanthropic purposes is not a valid charitable gift and it assumed that nor would a gift for the preservation of civil liberty.

62. The question under consideration was whether the Congregational Union was a charitable institution and the High Court answered it in this way:

``... Such a body is a charity even if some of its incidental and ancillary objects, considered independently, are non- charitable. The main object of the Union is predominantly the advancement of religion. It is a religious institution composed of ministers and members of Congregational churches combining for certain religious purposes of common interest and a bequest to a religious institution is prima facie a bequest for a charitable purpose (In re White; White v. White (1893) 2 Ch. 41). In a

ATC 2110
recent case in this Court,
Salvation Army (Vict.) Property Trust v. Fern Tree Gully Corporation (1952) 85 C.L.R. 159, cases were cited in which it was held that an institution is a charitable institution if its main purpose is charitable although it may have other purposes which are merely concomitant and incidental to that purpose. The fundamental purpose of the Union is the advancement of religion. It can create, maintain and improve educational, religious and philanthropic agencies only to the extent to which such agencies are conducive to the achievement of this purpose. The same may be said, mutatis mutandis, of the other object, the preservation of civil and religious liberty. The object is to preserve civil liberty so that Congregationalists may worship according to their religious beliefs....''

(at 442)

63. The Supreme Court of Queensland was required to consider whether the Queensland Construction Training Fund was an institution exempt from stamp duty under the Stamp Act 1894 (Qld) (
Barclay & Ors v Treasurer of Queensland 95 ATC 4496; [1996] 2 Qd R 112). Section 59E of that Act exempted a body from stamp duty if it had been declared to be ``... an institution... the principal object and pursuit of which is the fulfilling of a charitable object or an object promoting the public good (not being an object or pursuit that is a sporting, recreational, leisure or social pursuit or object or an object or pursuit declared by order in council...''. Mackenzie J concluded that:

``Having considered all of these aspects of the matter and formed an impression of the way in which the body operates and is intended to operate, I am satisfied that it fits the statutory test. The underlying premise in the objects of the Fund is that the level of skills of those engaged in the building and construction industry will be enhanced by enhancing their level of education and training through the medium of facilities assisted by the Fund and that thereby the public would benefit from better and more efficient services and products. It is true that the industry as a whole may benefit by reason of its enhanced efficiency but what is the principal object and pursuit of the fund is to be determined by an overall view of its structure and operation. In my view, any benefit to any particular individual in the industry or the industry generally is incidental rather than the principal object and pursuit of the Fund.''

(at ATC 4500; Qd R 117)

64. The approach adopted by his Honour was consistent with that adopted in the previous authorities to which I have referred. In particular, it is clear from the passage that I have quoted that he considered the objects of the Queensland Construction Training Fund. Adopting the language of Lockhart J in Cronulla Sutherland Leagues Club Ltd v FC of T, he considered whether it had co-ordinate objects, one of which was benefiting individuals. Had he found that it had, he could not have found that its principal object and pursuit was fulfilling a charitable object or pursuit. As it was, he effectively found that it did not have co-ordinate objects. Rather, he found that any benefit to individuals was incidental to the main object, which he found to be a charitable object.

What is the relevance of profit-making?

65. From the context in which charitable purposes and charities have been considered, it is clear that a charitable entity, be it a trust, association or institution of some sort, may make a profit. As Dixon CJ said in Incorporated Council of Law Reporting of the State of Queensland v FC of T:

``... Indeed, the very fact that the [Income Tax] Act exempts the income of a charitable institution concedes that such an institution may derive profits from its activities.''

(at ATC 4211; CLR 670)

66. The issue also became relevant in Crystal Palace Trustees v Minister of Town and Country Planning, to which I have already referred. Danckwerts J considered a submission by the Minister to the effect that the promotion of industry or commerce amounted to no more than the promotion of the interests of those engaged in the manufacture and sale of their particular products. It was not in any way concerned with any benefit to the public at large. I set out in the following paragraph his Honour's view of the evidence to which he could have regard. He had already found that the promotion of art was a purpose for the benefit of the public at large and so was of a charitable nature. Having had regard to all of the circumstances, including the nature of the trustees who comprised representatives of all of the public authorities who had contributed to

ATC 2111

the moneys to acquire the property, the fact that the trustees would not distribute any profits and the constant theme in the legislation establishing the Crystal Palace and Park that it was to provide benefits to the public, Danckwerts J concluded:

``In those circumstances it seems to me that the intention of the Act in including in the objects the promotion of industry, commerce and art, is the benefit of the public, that is, the community, and is not the furtherance by the trustees of the interests of individuals engaging in trade or industry. It appears to me that the promotion of industry or commerce in general in such circumstances is a public purpose of a charitable nature within the fourth class in the enumeration of charitable purposes...''

(at 858-859)

67. Hammond J of the High Court of New Zealand has also had occasion to consider the relevance of profit-making or potential profit- making in implementing objects that are said to be charitable. He did so in
Re Tennant [1996] 2 NZLR 633 when considering a deed by which Mr Chapman had, in 1924, settled some four acres of land on trustees. The purposes of the trust were fourfold: establish an Anglican Church; erect a public hall; establish a school; and erect a creamery. The first three objects were considered to be charitable but the fourth was more problematic. Hammond J referred to the way in which Danckwerts J had looked to the whole of the object of the venture in Crystal Palace Trustees v Minister of Town and Country Planning and continued:

``Obviously each case will turn on its own facts. I would not be prepared to say that there may not be cases which would fall on the other side of the line because of private profit making of some kind. But here the settlor was attempting to achieve for a small new rural community what would then have been central to the life of that community: a cluster complex of a school, public hall, church and creamery. In my view he was endeavouring to confer an economic and social benefit on that particular community for the public weal. To see the creamery in isolation from what was really an overall purpose of benefit to this locality - the complex - would be both unrealistic, and in my view wrong in principle.

But even if I were to be wrong in that approach I think, on a narrower footing, that this particular purpose was for the promotion of industry (dairying) in that particular locality. This settlement was made in the 1920s in the post-war expansion of dairying in the Waikato. Such an industry cannot come into being without a source of manufacture. Effectively this settlor was donating land to the overall good of the locality to help 'kick start' as it were, in an economic sense, dairying in a very fertile area. And with such an enterprise would necessarily have come the associated public benefits of furthering of employment; the training of young men and women in that sort of business; together with the social centre that such institutions were in the life of this country in that era.''

(at 640)

What is the evidentiary basis on which to assess the objects as charitable?

68. Whether an object is charitable is not determined simply by reference to the objects set out in the entity's documentation. As Mackenzie J indicated in Barclay v Treasurer of Queensland, it is necessary to look to all aspects of the matter and to form an impression of the way in which an entity operates (at ATC 4500; Qd R 117). ``It may very well be that a purpose which, on the face of it looks to be the real purpose, on close examination, is found not to be the real purpose'' (
Royal Choral Society v Commissioners of Inland Revenue [1943] 2 All ER 101, per Lord Greene MR at 106).

69. In determining whether objects are charitable, it may be necessary to have regard to the consequences and potential consequences of pursuing the entity's objects. ``What the body has done in pursuance of its objects may afford graphic evidence of the potential consequences of the pursuit of its objects'', Lightman J said in Commissioners of Inland Revenue v Oldham Training and Enterprise Council at 251. This aspect was further considered by Mason J in
Brookton Co-operative Society Limited v FC of T 81 ATC 4346; (1980-1981) 147 CLR 441 (Gibbs CJ, Mason, Murphy, Aickin and Wilson JJ). Mason J, with whom Murphy and Wilson JJ concurred, said:

``The Federal Court proceeded, in conformity with authority in this Court, according to the view that in ascertaining the purpose for which a company `is established' it is necessary to look, not only to circumstances existing at the time of incorporation, but also to the activities of the

ATC 2112
company at the time when its status as a co- operative company is to be determined. No doubt it was the presence of the words `is established' and the purpose of the section that led Fullagar J. in
A. & S. Ruffy Pty. Ltd. v FC of T (1958) 98 C.L.R. 637 at p. 656 and Menzies J. in
Renmark Fruitgrowers Co-operated Ltd. v FC of T 69 ATC 4135 at p 4137; (1969) 121 C.L.R. 501 at p. 506, to adopt this approach. To my mind it is evidently correct, allowing, as it does, that the purpose for which a company is established may change in the course of time and that with the change of purpose there may come a change in status as a co- operative company. Moreover, in Ruffy (1958) 98 C.L.R. 637 the Court explicitly rejected the suggestion that the objects of the business were to be gathered solely from the objects clause in the memorandum. In that case the Court, in characterising the object of the business, looked to the business activities of the company after its in corporation as well as to the purpose of its incorporation-see the joint judgment of Dixon C.J., Williams and Webb JJ. (1958) 98 C.L.R., at pp. 649-650; see also Gibbs J. in
Social Credit Savings and Loans Society Ltd. v FC of T 71 ATC 4232 at p 4236; (1971) 125 C.L.R. 560 at p. 567. In
Revesby Credit Union Co-operative Ltd. v FC of T (1965) 112 C.L.R. 564 at p. 576, McTiernan J. said:
- `The main test to be adopted in ascertaining the primary object is to ask what the actual activities of the appellant society indicate it to be.' ''(at ATC 4352; CLR 450-451)

70. The nature of the trustees may also be relevant. In Crystal Palace Trustees v Minister of Town and Country Planning, Danckwerts J said of the Crystal Palace Trustees, a body constituted by the Crystal Palace Act 1914 (UK):

``I am entitled, where the terms of the trusts are not clear, to have regard to the surrounding circumstances, including the nature of the trustees: see Farley v. Westminster Bank, Ltd. (5) [1938] Ch. 494, 495. I find, on perusing the provisions of the Crystal Palace Act, 1914, that the body of trustees constituted by the Act are, to a large extent, trustees representative of the public authorities who contributed to the moneys required for the acquisition of the property to be administered by the trustees as a concern which would not distribute any profits, and in the title and preamble of, and throughout, the Act, the note which is stressed is the provision of benefits to the public.''

(at 858)

There has, however, been a contrary view expressed by the Privy Council in
Brisbane City Council v Attorney-General (Queensland) (1978) 19 ALR 681 when it was said that the public nature of the trustee could not be relied upon to establish the charitable character of a stated purpose (at 687).

71. As to the relevance of subjective intentions, Mason J said in Brookton Co- operative Society Limited v FC of T:

``... in determining the purpose for which the taxpayer is established the Courts below were entitled to look not merely to the activities of the taxpayer and its directors, but also to the intention of the promoters. In general a distinction is to be drawn between purpose on the one hand and motives and intentions of the promoters on the other hand, but I do not see why the intentions of the promoters may not be relevant in determining what is the purpose for which a company is established.''

(at ATC 4353; CLR 453)

Aickin J took a slightly contrary position that the expression ``established'' indicated that the company and its activities must be looked at year by year (at ATC 4358; CLR 461). Therefore, the objects set out in its Memorandum of Association or other documents constituting it at its incorporation cannot be decisive and may only be of remote relevance (at 4243).

72. Noting that they may change over time and that the enquiry must be made in relation to a particular year of income under the ITAA 1936, Lockhart J succinctly stated that the:

``... material facts and circumstances which should be examined to characterise the main purpose of the relevant body include its constitution, its activities, its history and its control.... consideration must be given not only to the purpose for which the society was established but also the purpose for which it is currently conducted.''

(Cronulla Sutherland Leagues Club Ltd v FC of T at 4225).

ATC 2113

Is TECC a charitable institution in the 1998, 1999 and 2000 years of income?

73. On behalf of the Commissioner, Mr O'Farrell conceded that an institution whose objects are to promote commerce may be charitable. TECC's main purpose, however, Mr O'Farrell submitted is to assist individual enterprises and not the community. To the extent that there is a community benefit, it is secondary to TECC's main purpose. In any event, he submitted, TECC's main purpose or object is not capale of being charitable. On behalf of TECC, Mr Abbott submitted that TECC has, at all material times, conducted itself to achieve its primary objectives for the benefit of the whole of the Tasmanian community in general and for commerce and industry in Tasmania in particular. Counsel for both parties have analysed a considerable number of authorities.

74. TECC is not exempt from income tax under s. 50-50 unless it can be described as a ``charitable institution'' and unless it meets the other requirements in that section and which are not in dispute in this case. As I have said, the parties have agreed that TECC is an institution. The issue is whether TECC is a charitable institution. The cases establish that it is not relevant to fit it and its objects into a classification that has or have already been accepted as charitable. It is recognised that the community and its needs change over time. Objects having any association with the information highway would not have been dreamt of in the 1920s let alone be conceived of as being charitable just as the charitable character of establishing a dairy, even as part of a complex comprising a church, school and public hall, could be questioned more closely in the Australia some eighty years further on. Equally, the fact that an institution having a particular object has found to be a charitable institution or as having been established for a charitable object does not mean that another, or its object, will be regarded in the same way. What is important is whether the community or the public (however it is described) or a part of it, benefits, or is intended to benefit, from the activities carried out by the institution in accordance with its principal objects. The institution may benefit individuals but only if that benefit is ancillary to its principal object or objects which is that of benefiting the public. Provided it meets these criteria, it matters not whether the institution makes a profit for the very fact that s. 50-1 provides that its ordinary income and statutory income is exempt from income tax assumes that it will receive income that is otherwise taxable.

75. Although it is expressed in different ways throughout the documentary and oral evidence, I find that the main object of TECC is to assist Tasmanian business and industry to adopt electronic commerce and to compete in the electronic market place. The means by which this will be achieved will be by promoting the use of telecommunications services across Tasmania. This will have several outcomes. Among them, it will reduce the disparity between Tasmania and metropolitan mainland Australia. It will give Tasmanian business and industry the opportunity to gain access to new marketing, distribution and trading opportunities and so improve their productivity and their management processes. The need to support business and industry engaged in electronic commerce will lead to the formation of a service industry to support electronic commerce. Each of these is an object that is dependent upon TECC's achieving its main object.

76. There were several ways in which it was intended that TECC would achieve its object and so its outcomes. Among those was the collection, co-ordination and dissemination of information on electronic commerce and the raising of funds and acquisition of other assets associated with the promotion, research and development of facilities to assist the Tasmanian business community to adopt electronic commerce, are ancillary to that main object. Some of these activities, such as the development of prototypes of electronic trading systems, including marketing and electronic banking, would be directed at all businesses and industries. Others, such as the development of an individual project with a particular business, would be directed at a specific participant in Tasmanian business or industry.

77. An examination of the activities undertaken by TECC shows that it has conducted activities consistent with those that it foresaw in the documents leading to its establishment. It has been involved in assisting individual businesses and industries, speaking at public events and to community based organisations as well as schools reflect those

ATC 2114

objects and the balance between its main and ancillary objects.

78. Ownership by the University and the Tasmanian Government does not resolve the issue for not all activities engaged in by those bodies need necessarily be properly classified as charitable. The fact that it is intended to be self-funding does not assist one way or the other for the Incorporated Council of Law Reporting of the State of Queensland v FC of T case illustrated how a charitable object can be fulfilled by a self-funded body. Funding for TECC has come from the public purse in the form of the RTIF. I find that, after an initial three year establishment period when it would exist on funds from the RTIF, it was envisaged that there would be a sufficient demand for the Centre to then continue as a self- funding body. Public funding does not take resolution of whether TECC is a charitable institution further one way or the other. In saying this, I appreciate that the Full Court of the Supreme Court said in
Attorney-General v McCarthy (1886) 12 VLR 535 that public funding:

``... clearly shows that the public were the principal subscribers to the institution originally. That is in itself very strong evidence that this institution was regarded by Parliament, which granted the money, as an institution of public utility, not necessarily directly benefiting the whole of the public, but certainly benefiting it indirectly by means of a wise policy which would produce, or which was expected to produce beneficial public results; and the decisions appear to show conclusively that a public purpose constitutes an institution a charitable trust....''

(at 536)

It must be remembered, however, that the Full Court was considering whether or not an inebriates' retreat, to which inebriates were admitted but charged admission fees, was a charitable trust. The public funding was simply one of the factors. The admission fees and the nature of the retreat were others and the case shows that the object cannot be overlooked. It cannot be regarded as authority for a proposition that public funding is determinative of the issue for otherwise every publicly funded agency would be regarded as charitable.

79. TECC's part ownership of EcEnable and so its interest in TBO as EcEnable's wholly owned company must also be considered. Having regard to the Corporate Report 2000 and to the two components of TBO (the Trading Hub and the Business Community Centre), I find that EcEnable and TBO provided services support to assist business and industry to move from a paper-based environment to online trading. They were involved in supporting TECC to carry out its main object and in doing so were charging for its services. Its activities were not analogous to that of an agricultural show or to those of the trustees of the Crystal Palace and Park where it was said that agriculture in one and business and commerce in the other were promoted in a general way for the benefit of the community. TBO was not showcasing the available services as it were and so making them known to the community but rather providing, on payment of a fee determined by the level provided, a service to enable communication on the internet.

80. How does TECC's main object benefit the community or the public or a part of it? To be a public benefit, a ``mere benevolent purpose is not enough'', Lord Hanworth MR observed. It must be of ``general public utility'', Lightman J said. It may promote the private interests of individual members of the community but only if a public benefit is also conferred even if only indirectly. But not every benefit of general public utility is a benefit that is regarded as charitable. As Barwick CJ said in Incorporated Council of Law Reporting of the State of Queensland v FC of T, ``... in the long run,... it is a matter of judgment whether the trust or purpose fairly falls within the equity, or as it is sometimes said, `within the spirit and intendment' of the preamble to the... [Statute of Elizabeth]....'' (at ATC 4210; CLR 666).

81. I will look first to those whom I find are directly benefited by TECC and its activities. That is business and industry in Tasmania. The first question, then, is whether business and industry are a part of the community to which any member of the community may aspire to join if he or she has the natural talents to do so or may acquire those talents. Putting aside any need to meet regulatory requirements, for even a seaman must meet certain standards in the performance of his or her tasks (Navigation Act 1912, s. 47), every member of the community may aspire to become engaged in business or industry if that is his or her wish. Talent, natural or otherwise, will be necessary. There will be hurdles such as capital, a market and market share that will determine the scale of whether or

ATC 2115

not his or her aspirations are achieved or at least the extent to which they are achieved. These are hurdles that would face every would be participant but there are no ostensible hurdles that are set by existing members of the group and that must be jumped by would be members. Having regard to all of these matters, I find that the business or industry to which TECC's objects are directed is a reference to a group of individuals who are ascertained by reference to the particular activities they are engaged in. Those activities are open to all provided they overcome the obstacles that face them all. Therefore, I have concluded that business or industry and those engaged in it may be regarded as a part of the community in the sense in which that is understood in the authorities such as Commissioners of Inland Revenue v Oldham Training and Enterprise Council, Crystal Palace Trustees v Minister of Town and Country Planning and Thompson v FC of T. At the same time, they are individuals who are identifiable by reference to the activities that they carry on and who may benefit from TECC's activities.

82. I now need to consider whether benefiting that part is capable of being regarded as a public benefit such that TECC should be regarded as a charitable institution. Is assisting Tasmanian business and industry to adopt electronic commerce and to compete in the electronic market place such a public benefit? For the reasons that I give below, I do not consider that it can be in the circumstances of this case. It is not within the spirit and intendment of the Statute of Elizabeth.

83. Benefiting individuals in business and industry by assisting them to adopt electronic commerce and to compete in the electronic market place in business or industry interest may be regarded as benefiting the community or a part of it. That will be the case if it provides an indirect benefit to the community or a part of it. That was illustrated by Crystal Palace Trustees v Minister of Town and Country Planning and was also contemplated by Lightman J in Commissioners of Inland Revenue v Oldham Training and Enterprise Council even though he did not find any such benefit to have been provided in that case.

84. Where is the indirect benefit in this case? As I have said, the main object of TECC is directed to assisting business and industry in Tasmania to adopt electronic commerce and to compete in the electronic market place. How does this benefit the community or part of it? In its Corporate Report 1999, TECC said that it was important that Tasmania gain long-term economic advantage by extending the strengths of its traditional industries and establishing new information based industries. TECC wants Tasmania to enjoy the benefits of global online economy. That may bring benefits to Tasmania's economy but there is no evidence in this case that indicates how long-term economic advantage to Tasmania translates to a benefit to the public rather than simply to a benefit to the individuals who are engaged in the business or industry that enjoys the benefits of the global online economy.

85. There is no evidence, for example, that the assistance given by TECC is directed to achieving improved employment opportunities for members of the public or is directed to assisting members of the public to establish a business of some sort. Businesses and industries that will grow and provide employment opportunities are not treated favourably over those that will not. Indeed, at least one of the businesses who has benefited from TECC's activities, Regal Craft Cards, has used the benefit it has gained as ``the new technology has taken the labour out of... [the] process, resulting in cost efficiencies'' (T documents, page 432). In that example, the benefit has flowed to the business proprietor for his personal advantage. When measured against the benefit to the public and its members, there is on that example a very real question whether detriment has in fact flowed to the community in the form of reduced labour requirements. Any broadly based economic benefit to Tasmania is too remote to be felt by those who form its community. Some of TECC's activities have been directed to giving information to school students and others to giving it to community groups and service clubs. Among those students, groups and clubs may be people who will begin a business or in industry or better their position in life in some way. Having regard to TECC's objects and its activities, however, the fact that such people may do so is incidental to the betterment of business and industry for its own sake. It is not TECC's main purpose to seek out such people and not an integral part of its main aim.

86. Has there been any other benefit that could be described as being for the benefit of

ATC 2116

the public? Greater efficiencies and an extended market may lead to increased profits and so to an increased benefit for the individual proprietor. Increased profits may lead to the payment of increased taxes but that is too indirect to be regarded as a benefit to the public resulting from the activities of TECC. That is something that happens every time a person works hard to improve him or herself and gains additional income as a result. Assisting persons, be they corporate or otherwise, to improve their position without regard to their existing circumstances is too broad to be regarded as coming within the spirit and intendment of the Statute of Elizabeth.

87. Is there a benefit to the public in the development of intellectual property to which it may have access? On the basis of the Business Plan, I find that any intellectual property will be vested either in the University, TECC, research students or, if developed as a result of projects between TECC and an individual business or industry, jointly between TECC and that individual business or industry. With regard to that vesting in the University or research students, TECC saw itself as not generally preventing the publication of research. It would follow that the research, or so much of it as the University or research students chose to publish, could become available to the public but would not otherwise be available to the public. The public would have no access to that developed between TECC and an individual business or industry unless they chose to make it available either with or without payment.

88. Having regard to all of the evidence, I find that the activities of TECC are not directed to an object or objects that will benefit the public, or a part of it, in the sense that they come within the spirit and intendment of the preamble to the Statute of Elizabeth. I find, therefore, that TECC is not a charitable institution within the meaning of item 1.1 of s. 50-5 of the Income Tax Assessment Act 1997. In coming to this conclusion, I note that different conclusions were reached by the Tribunal in two further cases on which TECC relied:
Property Services Industry Training Advisory Board Ltd v FC of T 99 ATC 2076 and
The Triton Foundation v FC of T 2003 ATC 2107. A reading of those cases shows that, in the former, it was found that the taxpayer was an industry training advisory body whose activities benefited the public as it benefited from a well- trained workforce. In the latter, it was found that the taxpayer provided a structured information package in order to promote a culture of innovation and entrepreneurship in Australia by assisting people to render their ideas commercial. Both cases turned on their own facts as does the case I have had to decide.

89. For the reasons I have given, I affirm the objection decision made by the respondent on 2 June, 2003.

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