Tourapark Pty. Limited v. Federal Commissioner of Taxation.

Judges:
Gibbs CJ
Mason J
Murphy J
Aickin J
Wilson J

Court:
Full High Court

Judgment date: Judgment handed down 23 April 1982.

---

Gibbs C.J.

This appeal from the Full Court of the Federal Court raises for consideration a short question as to the construction of certain provisions of the Income Tax Assessment Act 1936 (Cth.) (``the Act'') as in force in respect of the income year ended 30th June 1977.

During that year of income, the appellant, the taxpayer, occupied land at Canberra on which it carried on a business described as that of a tourist caravan and camping park. On the land he provided accommodation in caravans and motel units. The caravans, which were specially made for use as stationary caravans in caravan parks, sat on concrete blocks, although their wheels remained attached, so that they were capable of being moved to other sites. They were connected to the electricity supply and the water supply. A customer requiring accommodation in a caravan would, on payment of the requisite amount, be given the key to a particular caravan, and a document in the form of a receipted account which bore at the foot the words ``This licence subject to conditions noted on back hereof'', and on the back a statement by the customer that he agreed that the money paid to the taxpayer conferred on the customer a licence to occupy the caravan, subject to the conditions set out. Those conditions are immaterial, and in any case it is unlikely that they were brought to the notice of most customers. However it is clear that each customer was granted a licence for a consideration, and that the licence carried with it a right to occupy the caravan and to

---

ATC 4106

make use of communal facilities, such as lavatories, laundries, a swimming pool and parking space. It is right to say, as the taxpayer's counsel submitted, that the business of the taxpayer could properly be characterized as that of conducting a caravan park, it was not a business of merely letting caravans or granting licences to use the caravans otherwise than as units of the caravan park.

The taxpayer claimed an investment allowance under Subdiv. B of Div. 3 of Pt. III of the Act in respect of the acquisition of certain of the caravans in the relevant year. Under sec. 82AB of the Act a taxpayer who incurred expenditure of a capital nature ``in respect of the acquisition or construction by him of a new unit of eligible property in relation to which this Subdivision applies'' was, subject to conditions immaterial for present purposes, entitled to be allowed as a deduction from his assessable income a percentage of the amount of that expenditure ascertained in accordance with that section. ``Eligible property'' is defined in sec. 82AQ(1) of the Act to mean (inter alia) ``plant or articles within the meaning of section 54'' and it is common ground that the caravans fell within this description, and that an allowance under sec. 82AB - the investment allowance - was payable if the caravans were eligible property in relation to which Subdiv. B applied. That question depends upon the proper construction of sec. 82AA and 82AG(1) which are in the following terms:

Section 82AA

``Subject to the following provisions of this Subdivision, this Subdivision applies in relation to a unit of eligible property acquired or constructed by the taxpayer that is -

• (a) in the case of any taxpayer, for use by the taxpayer wholly and exclusively -
  • (i) in Australia; and
  • (ii) for the purpose of producing assessable income otherwise than by -
    • (A) the leasing of the eligible property;
    • (B) the letting of the eligible property on hire under a hirepurchase agreement; or
    • (C) the granting to other persons of rights to use the eligible property; or
• (b) in the case of a taxpayer being a leasing company, for use wholly and exclusively -
  • (i) in Australia; and
  • (ii) for the purpose of producing assessable income,

by another person to whom the taxpayer has, on or after 1 January 1976, leased the eligible property under a long-term lease agreement that was entered into by the taxpayer in the course of carrying on business in Australia and was so entered into by the taxpayer and the other person at arm's length.''

Section 82AG(1)

``This Subdivision does not apply, and shall be deemed never to have applied, in relation to property acquired or constructed by a taxpayer, not being property that, in the case of a taxpayer being a leasing company, the taxpayer has leased to another person, if, before the expiration of 12 months after the property was first used, or installed ready for use, by the taxpayer -

• (a) the taxpayer disposed of the property or the property was lost or destroyed;
• (b) the taxpayer leased the property, let the property on hire under a hire-purchase agreement or otherwise granted a right to another person to use the property; or
• (c) the taxpayer used the property outside Australia or for a purpose other than the purpose of producing assessable income.''

There is no doubt that the caravans were acquired by the taxpayer for use by the taxpayer wholly and exclusively in Australia, and for the purpose of producing assessable income. The taxpayer was not a ``leasing company'' (an expression defined in sec. 82AQ(1) to refer to certain banking and finance companies). Clearly the caravans were neither leased to the customers nor let on hire to them under a hire-purchase agreement. They were therefore property to which the subdivision applied unless they were acquired by the taxpayer for the purpose of producing assessable income by

---

ATC 4107

the granting to other persons of rights to use the eligible property (sec. 82AA(a)(ii)(C)) or unless, even if not so acquired, within twelve months after their first use or installation ready for use the taxpayer granted a right to other persons to use them (sec. 82AG(1)(b)). The questions that arise under sec. 82AA and sec. 82AG are the same - in the circumstances mentioned, did the taxpayer, by allowing a customer to occupy a caravan pursuant to a licence for reward, grant to the customer a right to use the caravan within the meaning of those sections?

On behalf of the taxpayer it was frankly conceded that the customer was given a right to use the caravan in one sense of the words. This concession is obviously correct. However it was submitted that the taxpayer nevertheless itself continued to use the caravans for the purpose of producing assessable income. This also is correct. ``A person who owns land may be said to use it for his own purposes notwithstanding that he permits someone else to occupy it, even under a lease'':
Ryde Municipal Council v. Macquarie University (1978) 139 C.L.R. 633 , at p. 638 ; although the owner does not put his land to ``active, personal use'', he may use it by making it available for use by others - ibid. at p. 647. In the present case the customer would put the caravan which he occupied to active, personal use, but the taxpayer still used the caravan as plant forming part of the caravan park for the purpose of producing assessable income. It was then submitted that the intention to be discerned from Subdiv. B is that ``rights to use'' under sec. 82AA(a)(ii)(C) are only such rights as exclude the use by the taxpayer of the property as plant. The intention, it was said, is that a taxpayer who himself uses the property as plant for the purpose of producing assessable income is entitled to the allowance, even if someone else is granted a right to use it, but a taxpayer who merely derives rental income from it is not. Put in another way, it was said that if the use made by the taxpayer of the property is for the purpose of producing assessable income by leasing the property, by letting it on hire under a hire-purchase agreement, or by granting to other persons rights to use it (in the ordinary sense of those words), that does not mean that the subdivision does not apply, unless the taxpayer is thereby deprived of the active use of the property. In other words, it was sought to read sec. 82AA(a)(ii) as though the words ``thus depriving the taxpayer of the active use of it'' were added to it. In the alternative, it was submitted that the words following the words ``otherwise than by'' in sec. 82AA(a)(ii) applied only to cases where the leasing, letting or granting of a right to use the property is the only use made by the taxpayer; that is to say, if, although the property was leased etc., the taxpayer uses it in some other way, the property remains property to which the subdivision applies.

However these submissions are put, they require a departure from the ordinary and natural meaning of the words of the sections. Although the taxpayer retains a right to use the caravans, and does in fact use them, it nevertheless grants to each customer a right to use them. Even if it were to be admitted that the provisions of sec. 82AA are rendered ambiguous by the use of the words ``wholly and exclusively'', the words of sec. 82AG(1) are perfectly plain; their effect is that if, within the time mentioned, the taxpayer has granted a right to another person to use the property, the subdivision does not apply in relation to the property. The argument of the taxpayer seeks to modify these words by adding to them words such as ``and has not himself at the same time used the property as plant''. There is no context that requires this departure from the ordinary meaning of the sections; on the contrary, the context suggests that no such gloss as is suggested on behalf of the taxpayer should be put upon them. By sec. 82AG the right to the investment allowance is lost not only if, within twelve months after the property was first used, or installed ready for use, by the taxpayer, the taxpayer leased the property, let it on hire under a hire-purchase agreement or otherwise granted a right to another person to use it, but also if the taxpayer disposed of the property, or the property was lost or destroyed, or the taxpayer used the property outside Australia or for a purpose other than the purpose of producing assessable income. The right to the allowance may also be lost if the taxpayer does any of those things after the expiration of the twelve months, if the Commissioner is satisfied that when the property was acquired or constructed the taxpayer intended to do any

---

ATC 4108

of those things after becoming entitled to a deduction: see sec. 82AH. No provision is made for any apportionment if, for example, the taxpayer granted to another a right to use the property for a short time only, or if for a short time only the taxpayer used the property for a purpose other than the purpose of producing assessable income. The provisions of these sections may be contrasted with those which in certain circumstances allow a leasing company to transfer the whole or part of a relevant deduction to a lessee, but only if the lessee used the property for the purpose of producing assessable income: see sec. 82AA(b), 82AD, 82AG(3)(b), 82AH(3), (4). All these provisions support the view that (except in the case of leasing companies) the Parliament intended that the allowance should not be payable unless the taxpayer kept both the property and the exclusive right to use it, and did use it only for the purpose of producing assessable income.

Counsel for the taxpayer in the course of argument gave a list of examples of property in respect of which it was said that if the Commissioner's construction of the Act is correct, a taxpayer would not be entitled to the investment allowance. The list included self-service petrol bowsers at service stations, automatic lockers at transport terminals, lifts and escalators and aircraft and buses. It is unnecessary to consider whether it would be correct to say that a taxpayer grants to another person a right to use property of the kind mentioned in the examples, and undesirable to do so since the question may fall for decision in other cases. However, if the conclusion is that the allowance is not payable in respect of property of that kind, the result is neither absurd nor unjust. It is apparent that the investment allowance is made available for the purpose of encouraging particular behaviour which the Parliament regarded as desirable, namely, the expenditure of money on certain plant which (except in the case of leasing companies) is intended to be used and is in fact used by the taxpayer himself wholly and exclusively for the production of assessable income and which others have no right to use. The Parliament attached conditions to the right to the allowance, no doubt with a view to preventing the right being used simply as a means of tax avoidance, and no reason appears why the words imposing the conditions should be given any other than their ordinary and natural meaning.

A final argument advanced on behalf of the taxpayer was that a limited meaning should be given to the words of sec. 82AA(a)(ii)(C) and to the corresponding words of sec. 82AG(1)(b), since if those words were given the widest meaning of which they are capable they would render the reference to leasing and letting on hire unnecessary. It is true that the words ``the granting to other persons of rights to use the eligible property'' would on one view be wide enough to include leasing and letting on hire. It is clear however that those words include other transactions as well and are not limited to the grant of a right to use which results from the grant of a lease or from a letting on hire. The words ``granting to other persons of rights to use the eligible property'' would not naturally be used to describe a lease or letting, and if the words of (A) and (B) had not appeared in sec. 82AA(a)(ii) it might well have been argued that the words of (C) were inapt to refer to a lease or letting on hire. However even if leases and letting on hire would fall within the ordinary meaning of the words of (C), that would not support the taxpayer's argument that the words which refer to the grant of a right to use the property should be restricted to a grant which deprives the taxpayer of the active use of the property or is made in circumstances where it is the only use which the taxpayer makes of the property. There is simply no other provision in the Act which suggests that words should be read into the Act in this way, and the suggested construction involves mere speculation as to the intention of the Parliament.

The relevant questions of law in the stated case, and the answers which the Federal Court gave to them, were as follows:

``(iii) Were the aforesaid caravans, units of property acquired by the taxpayer for use wholly and exclusively by the taxpayer for the purpose of providing assessable income otherwise than by -

• (a) the leasing of such units; or
• (b) the granting to other persons of rights to use such units

within the meaning of sec. 82AA(a)(ii)(A) and (C) respectively of the said Act?''

---

ATC 4109

• Answer - No

``(iv) Did the taxpayer lease the aforesaid caravans or otherwise grant a right to another person to use the caravans within the year of income after the caravans were first used by the taxpayer within the meaning of sec. 82AG(1)(b) of the said Act?''

• Answer - Yes, in that it granted to other persons rights to use the caravans.

These answers were correct and the appeal should be dismissed.