Case M8

Judges:
HP Stevens Ch
CF Fairleigh QC
JR Harrowell M

Court:
No. 1 Board of Review

Judgment date: 12 March 1980.

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H.P. Stevens (Chairman); C.F. Fairleigh Q.C. and J.R. Harrowell (Members)

The Commissioner gave notice on 23 November 1977 that the taxable income of the taxpayer for the year ended 30 June 1976 was adjusted from a previous assessment dated 14 October 1976. That adjustment increased the taxable income by $3,342 being deduction for investment allowance then disallowed as the vehicle, the subject of the allowance, was sold within 12 months of purchase.

2. The taxpayer objected to the amended assessment of 23 November 1977. The Commissioner decided to disallow the objection. That decision was referred to this Board for review.

3. The substance of the taxpayer's case is that he did not claim the investment allowance in his return of income. Rather, the Commissioner of his own motion adjusted the return of income by reducing the taxable income by the grant of an unclaimed deduction of $3,342 as investment allowance for the vehicle. Understandably, the taxpayer did not lodge an objection against the assessment (14 October 1976) which gave the allowance of an unsolicited deduction. Nonetheless there was a notation in the return of income for the year ended 30 June 1976 thus: Endeavours to sell the vehicle in late June and early July 1976 indicate a further substantial loss will be incurred.

4. The original assessment was accompanied by an adjustment sheet and the two presently relevant entries thereon are (i) decrease of $3,342 in taxable income; and (ii) increase of $1,097 in taxable income, i.e., the claim (on the diminishing value basis) for depreciation was $1,880 and $783 was allowed. Although the taxpayer has regarded those two items as connected, it is not so. The second item arises from the Commissioner making a proportionate allowance with respect to the period for which the vehicle was owned. The question whether it is correct to apply apportionment in such circumstances (see Case L24,
79 ATC 118 appeal dismissed by Wallace J. 7 March 1980 [
F.C. of T. v. Cook 80 ATC 4093]) does not arise on the objection which is before this Board.

5. The circumstances are that the taxpayer bought the vehicle on 15 April 1976 with a view to his employment as the owner-driver of a courier-vehicle; there was a disagreement with the employer and the employment agreement came to an end in June 1976; the taxpayer continued to use the vehicle for minor business purposes until it was sold in December 1976, at a substantial loss.

6. After receipt of the original assessment the taxpayer being puzzled by the magnitude of an unsought deduction telephoned to the Department and received some information as to an investment allowance. Thereupon he visited the Department and the officer referred him to sections in a consolidation of the Act which was not a consolidation published by the Government Printer. This is mentioned because the taxpayer regarded that fact as significant, although it is not so as authorized copies (not consolidations) of Acts are readily available from the time of assent. Then there was correspondence between the parties and the taxpayer said therein that he was not made aware of the consequence if a sale of the vehicle should take place within a period of 12 months of purchase. However the Commissioner's letter of 8 May 1978 sets out: ``One of my officers contacted you on 22 September 1976 and informed you of the entitlement but stated the consequences should the vehicle be sold within 12 months of the date of purchase.'' The Commissioner's officer

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ATC 66

discussed with the taxpayer several items which arose in the course of the assessment.

7. The return (lodged on or about 10 August 1976) made the Commissioner aware of an impending sale within the 12 months period, and so one course open to the Commissioner would have been to delay the making of the original assessment beyond the time when it would normally issue. Such a course of action would again attract criticism.

8. Furthermore on the facts placed before the Commissioner - (i) the taxpayer was entitled (as at the date of issue of the original assessment) to the investment allowance; and (ii) a subsequent event as foreshadowed in the return (and not occurring until after the issue of the original assessment) could lead to the withdrawal of the investment allowance. In these circumstances the criticism of the Commissioner is ill-founded. The taxpayer has not suggested any entrapment.

9. The facts of the case come squarely within the provisions of sec. 82AG(1) of the Income Tax Assessment Act 1936, viz., a deduction for investment allowance was granted and before the expiration of the relevant period of 12 months the taxpayer sold the vehicle.

10. There is no estoppel arising from the facts (
Wade v. Burns (1967) 115 C.L.R. 537 at p. 555;
F.C. of T. v. Wade (1951) 84 C.L.R. 105 at p. 107;
Cudgen Rutile (No. 2) Ltd. v. (Sir Gordon) Chalk (1975) A.C. 520 at p. 533). Section 170(10) as amended by Act No. 50 of 1976 enables the Commissioner to amend an assessment to withdraw a deduction in a case where sec. 82AG applies. The taxpayer is not correct in saying that the Commissioner has corrected his own error; and clearly the Commissioner is empowered (in various circumstances) to correct his own error.

11. Section 82AG(1) of the Act (as distinct from sec. 82AG(2) which deals with disposal of part of an interest in the property) does not permit of an apportionment of the investment allowance on a disposal within the 12 months period.

12. The decision on the objection is upheld and the amended assessment is confirmed.

Claim disallowed