Lau v. Federal Commissioner of Taxation.
Judges:Connolly J
Court:
Supreme Court of Queensland
Connolly J.
Late in 1980 the appellant Dr. Lau desirous, as he said in evidence, of making provision for the years when the income from his professional practice might be expected to diminish but not unmindful, as I find, of the advantage of having a substantial tax deduction for the year ended 30 June 1981, after consulting his accountant Mr. Ting, applied for a three year lease with a maximum of six three year renewals, together with a 15 year forest management (sic) for the purpose of establishing and maintaining a Pinus Caribeae Plantation. The addressee is not shown on the form of application (exhibit 9) but the project is described in the heading of the document as ``Tondara Plantation'' and cheques were to be made out to ``M.M.V.C. Pty. Ltd.''. A deposit of $320 was required and this was paid on 5 December through his accountant Mr. Ting. The scheme which Dr. Lau finally went into was not the Tondara Plantation but one known as Berejondo and he made no further application but his deposit was applied to his interest in the Berejondo scheme which is discussed below. Between 22 April 1981 and 11 June 1981 he paid a further $4,400 by three cheques.
The promoters of the Berejondo scheme were Mr. Aschman and Mr. Ray who had promoted a similar project at Stanthorpe in 1974. The land which they finally chose for the Berejondo project lay to the west of the north coast railway some 75 kilometres to the north-west of Bundaberg and four kilometres south of Lowmead. The area involved was some 2,193 hectares, part of it freehold, the purchaser of which was Paragon Nominees Pty. Ltd. (``Paragon'') and for which $76,550 was paid, and the balance grazing homestead freeholding leases bought by the promoters Mr. Aschman and Mr. Ray for $70,000. The purchase price of the land was thus $146,550. The purchases occurred in April 1981. The freehold land purchased by Paragon included portion 84 in the county of Flinders, parish of Rosedale and on 23 April 1981 Paragon entered into an agreement for lease to Dr. Lau for a term of three years commencing that day ``for pine tree growing purposes only''. The location of the area leased was described as being shown in an attached schedule ``under lot no. 16''. In truth the attached schedule does not show lot no. 16 and it is clear that throughout 1981 nothing occurred which could be described as an appropriation to the agreement for lease of any specific area. At a time which is completely uncertain a schematic layout of lots numbered 1 to 18 was drawn up on a photostat copy of the parish map and in 1982 corner pegs were placed, pegging out portion 84 into areas which corresponded in their approximate relationship to each other with what is shown on the schematic layout (exhibit 7). There was never any question of survey and in the circumstances the respondent, not unnaturally, questions whether there ever was a valid agreement for lease for want of any identification of the habendum. The rent was expressed as being $640 for the first year and $240 for the two subsequent years and there were recurring options for three years at $240 per year for a maximum term of 21 years.
The next day, 24 April 1981 Dr. Lau as ``the Forest Owner'' entered into what is described as
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a Management Agreement with Mount Sugarloaf Forest (N.Q.) Pty. Ltd. (``N.Q.'') (``the Manager'') which recited the desire of the Forest Owner to establish a pine forest plantation for commercial purposes on an area of land under the control of the Forest Owner as described in the lease to which I have just referred. The agreement was to run for 21 years from 23 June 1981 and Dr. Lau was to pay a ``management fee'' calculated at $3,920 per hectare to be prepared, planted and maintained. The area to be planted was described as ``not less than 10 hectares'' and the total cost was $39,200 payable on the execution of the agreement. N.Q. undertook to seed or plant so as to obtain an average density of not less than 1250 trees per hectare (or 12,500 in all). The agreement assured N.Q. of access to the land and the right to introduce livestock and machinery for the control of grasses and weeds. Dr. Lau retained the right to direct N.Q. to harvest from year 13, to appoint an independent harvester if he saw fit and to discontinue the management agreement. N.Q. was to retain 10% of the net proceeds.The management fee of $39,200, and similar fees payable by the other 80 odd participants in this scheme, required special arrangements. I find that Dr. Lau did not have the sum in cash and that to have borrowed it at a commercial rate of interest would have made the scheme wholly unworkable. A scheme was therefore devised which put him in possession, at least momentarily and by an agent, of the appropriate amount, that amount being immediately paid on his behalf to N.Q. The agent was a company known as Liberton Finance Pty. Ltd. (``Liberton'') from which he borrowed so much of the management fee as he had not already paid together with smaller amounts for rent and stamp duty. The amount thus borrowed from Liberton was $35,300. Liberton however had no funds to advance. It was put in funds by a cheque from N.Q. by way of an interest bearing advance and immediately paid back to that company a cheque of the same amount being the aggregate of the sums owing by the participants on account of management fees, rent and stamp duty. What occurred was as follows.
On 23 June 1981 Dr. Lau executed two further instruments. The first was a memorandum of indebtedness which recorded the terms of an advance to him by Liberton for 21 years of $35,300 for the purpose of entering into and financing an afforestation project as detailed in the management agreement to which I have already referred. The sum however was not to come into Dr. Lau's hands for on the same day he requested Liberton to pay over to N.Q. the same sum in connection with his afforestation management contract. Certain features of the memorandum of indebtedness should be noted. The interest on the sum advanced was to be 2.4% payable quarterly. Although the principal advanced was $35,300 Liberton agreed to accept in full satisfaction of both principal and interest the proceeds of harvests of timber. On default by Dr. Lau, Liberton was empowered to take over the lease agreement between Dr. Lau and Paragon and the management agreement with N.Q. and thereupon the obligations of Dr. Lau under both the memorandum of indebtedness, the lease and the management agreement were to cease except for $500 for the transfer, stamp duty and costs. Dr. Lau was required by cl. 10(b) to execute an assignment of those instruments immediately and there is in existence an instrument of assignment of 23 June 1981 conditioned on his default under the memorandum of indebtedness. By cl. 5 he was obliged to renew the lease so long as the loan agreement was in force. By cl. 6, if the manager ceased to perform its obligations, Liberton was obliged to take over the lease and management agreement and to discharge Dr. Lau.
The financial side of Dr. Lau's relations with N.Q. and Paragon may be summarised as follows. There was due from him:
$
Management fee 39,200
First year's rent 640
Stamp duty 180
------
40,020
------
He had paid $4,720 and this left $35,300 owing.
On 26 June 1981 there was an exchange of cheques between Liberton and N.Q. both cheques being in the sum of $2,559,620. On 30 June 1981 there was a further exchange of cheques in the respective sums of $96,500. The total of the sums exchanged was $2,656,120. This aggregate sum represented the aggregate amount due by the participants including Dr. Lau and the payment by Liberton was made pursuant to the authority of the participants, Dr. Lau's document of 23 June 1981 (exhibit 21)
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being an example. Both N.Q. and Liberton banked with the Commercial Bank of Australia Limited at its Sherwood Road, Toowong branch. N.Q.'s account was in credit $70,782.33 immediately before the exchange of cheques and Liberton's was in credit $50. It is not suggested that the bank would have permitted either transaction standing alone. The only conclusion to which one can come is that the bank gave credit to N.Q. in the sum of nearly one quarter of a million dollars for virtually an instant of time on the strict understanding that it would be immediately repaid.At the close of 26 June 1981 the position was as follows. The participants (including Dr. Lau) owed almost the whole of the management fees to Liberton, which in turn owed same amount to N.Q. The participants were under an obligation to pay interest to Liberton of a total in excess of $70,000, the latter paying it on to N.Q. less 10%, so that N.Q. was to receive an aggregate sum of well in excess of $60,000. This was considered to be sufficient to meet the annual costs of the scheme and indeed Mr. Aschman's evidence is that the interest rates were fixed with this in mind. The participants had a continuing debt to Liberton as did Liberton to N.Q. in the aggregate sum of $2,656,120 which was to be discharged from the proceeds of the harvests. Although Liberton's right to take over the management agreement and lease on default by a participant is not couched in terms of obligation, it is, I think, an inevitable inference that the participants were never intended to recoup the full amount of the loan by Liberton from which the management fee was paid to N.Q. if the proceeds proved to be less than the amount of the loan. Dr. Lau has been paying his interest commitment of $211.80 per quarter. On 30 June 1981 N.Q. paid over to Paragon the sum of $50,560 on behalf of the participants, this being the aggregate of their rent for the first year. The sum included Dr. Lau's $640.
One asks oneself why the scheme took this form. Plainly enough N.Q. needed a substantial amount in cash to establish the afforestation project. Payment for the land called for nearly $150,000 and, in addition to this, substantial costs would obviously be required for the initial setting up of the scheme including clearing and planting in the first year. There were some 80 participants and Mr. Aschman gave a figure of $3,018,000 as the aggregate of their commitment. His evidence was that $362,560 was received in cash. If that sum be added to the continuing loan commitment of $2,656,120 it leads to virtually the precise figure given by Mr. Aschman namely $3,018,680. The immediate question which poses itself is why Liberton was inserted in the scheme. N.Q.'s commercial needs would have been satisfied if the cash payments to which I have already referred had been made and if the management fee had been owed by the participants to N.Q. for the same period of two years at the rate of interest which is payable under the scheme by Liberton to N.Q. Mr. Aschman's explanation was that he had been advised that it was desirable for N.Q. to be, as he put it, at arm's length from the participants. However he was perfectly frank in conceding that one of the attractions of the scheme was the tax advantage to those who participated in it. To my mind it is an inevitable inference that the object of interposing Liberton was to create a situation in which each of the participants made a large cash payment in the initial year, the whole of which he could claim as a deduction on the footing that it was a prepayment of the management fee charged by N.Q. for its management services over the next 21 years. In addition it was no doubt expected that the interest payments to Liberton and the rental payable to Paragon, a total in the case of Dr. Lau for years after the first year in excess of $1,000, would also be tax deductible.
The creation of these huge debts without any real movement of money encouraged the respondent to stigmatize the transactions as shams. However, if it be remembered that N.Q. proposed to charge the participants in the scheme a heavy management fee, and that the effect of the exchange of cheques in late June was to convert that obligation into corresponding obligations for the repayment of money lent, it is seen that while the transaction may be unusual, it cannot be stigmatized as non-existent. If it be right to say that all the parties to this transaction or series of transactions intended that the instruments in question should take effect and operate according to their tenor and that they should respectively have the rights and be bound by the obligations thereby created, then, whatever else may be said about the transaction it is not a sham. Compare
Scott v. F.C. of T. (No. 2) (1966) 40 A.L.J.R. 265 at p. 279. In
Snook v. London and West Riding Investments Ltd.
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(1967) 2 Q.B. 786 at p. 802 Diplock L.J. found it necessary to consider what, if any, legal concept is involved in the use of what he described as this popular and pejorative word. His Lordship went on:``I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the `sham' which are intended by them to give to third parties or to the Court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intended to create. But one thing, I think, is clear in legal principle, morality and the authorities... that for acts or documents to be a `sham', with whatever legal consequences flow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating.''
Far from this being the case, it seems to me that it was the common intention of the participants in this scheme, of Liberton and of N.Q., that the rights and obligations the subject of the various instruments should attach to the parties according to the tenor of those instruments.
The argument that a transaction, or a critical part of a transaction, is a mere sham is commonly set up by the Commissioner of Taxation as an alternative to reliance on sec. 260 of the Income Tax Assessment Act. It is commonplace that the effort to minimize income tax has led taxpayers into transactions which could by no means be described as ordinary family or business dealings and which were far from the type of transaction ordinarily entered into by taxpayers of the particular class. Many of them were explicable only by reference to a desire to attract taxation advantages under the Act. In my judgment, these considerations can no more lead to the characterization of a transaction as a nullity than they can lead to its being caught by sec. 260 if it otherwise satisfies the provision of the Income Tax Assessment Act, the operation of which it was designed to achieve. Compare the discussion of the latter topic by Mason J., delivering what was in effect the judgment of the Court in
Cridland v. F.C. of T. 77 ATC 4538 at pp. 4541-4542; (1977) 140 C.L.R. 330 at pp. 338-340.
I turn now to the circumstances of the appeal. In his income tax return for the year ended 30 June 1981 Dr. Lau disclosed a taxable income in the sum of $32,878, a figure which did not bring to account deductions relating to the afforestation scheme. However in notes which form part of the return he, in effect if not in form, claimed such deductions being the management fee ($39,200), the rental paid to Paragon ($640) and legal fees ($180) a total of $40,020. In assessing him to income tax in the sum of $11,417.30 the Commissioner allowed no deduction in relation to the afforestation scheme and, despite the form of the income tax return, the substance of Dr. Lau's contention in this appeal is that the expenses in question should have been brought to account as deductions under sec. 51 of the Act.
The Commissioner's first response is to deny that the expenses in question are allowable deductions under sec. 51 and this, in particular, in relation to the sum of $39,200. The first point which was made was that the payment of $39,200 was an outgoing of a capital nature. I was referred to the leading decision of the High Court in
Sun Newspapers Ltd. v. F.C. of T. (1938) 61 C.L.R. 337. One appreciates that this is a payment once for all and that the characteristic of recurrence is absent. If however it is properly to be regarded as a prepayment of the fee charged by N.Q. for recurring services over the period of 21 years, an arrangement which would have had considerable advantages from the point of view of the participants, as not exposing them to uncertain and doubtless constantly increasing demands for remuneration, I see no reason in principle why it should be treated as a capital outlay. I was referred to no authority which requires a lump sum prepayment for recurring services to be so treated. As Dixon J. observed in the Sun Newspapers case at p. 362, in commenting with apparent approval on a test propounded by Rowlatt J., expenditure is to be considered of a revenue nature if its purpose brings it within the very wide class of things which in the aggregate form the constant demand which must be answered out of the returns of a trade or its circulating capital and actual recurrence of the specific thing need not take place or be expected as likely. It is I think important to bear in mind that, as this scheme has been structured, no other remuneration is payable by the participants to N.Q. Then it is said that on a proper analysis of the scheme the
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appellant is not carrying on the business of afforestation but merely investing money in such a business conducted by N.Q. and reliance was placed onClowes v. F.C. of T. (1954) 91 C.L.R. 209 and
Milne v. F.C. of T. 76 ATC 4001; (1976) 133 C.L.R. 526. The Commissioner not unnaturally relies on the fact that the lease which purported to be granted by Paragon could not properly be described as a lease, the habendum being completely undefined. This is I think correct, at least so far as the 1981 tax year is concerned. This scheme is I think to be distinguished from that under consideration in these two cases in that the participants were intended to have, not merely a share of the profits of a business to be carried on by others but a block of some 12,500 trees to be identified as their own, each participant having, so far as the documentation reveals, a substantial degree of control over the designated manager. Many of the Commissioner's points are met by the decision of Street J. as he then was in
Playfair Development Corporation Pty. Ltd. v. Ryan (1969) 2 N.S.W.R. 661 at pp. 666-667. His Honour there held that it was not inconsistent with the existence of a partnership that its manager could not be interfered with so long as properly discharging the functions of management or that the partners did not have independent interests in the partnership property or that they were physically or personally remote from each other and no doubt the property. His Honour emphasized that overriding the manager's immunity from interference was the right of the partners by a simple majority resolution to terminate his appointment and he observed that the fact that each partner delegated to the manager his ordinary rights of running the partnership business and, in connection therewith, assented to the manager being deemed to be his attorney had obvious business attractions.
The respondent also makes the point that on present indications it is unlikely that after 20 years Dr. Lau will receive much if indeed anything from the proceeds of the harvesting of the trees bearing in mind that 10% is to go to N.Q. under the management agreement and the balance will go to Liberton to pay off its loan to Dr. Lau and to enable it in turn to pay off N.Q.'s advance to it. There is some substance in this argument. The evidence of Mr. Craney was that the harvest was unlikely to exceed, on current values, a figure of the order of $20,000. Whether one can make a direct comparison between that figure and the $33,500 which must be repaid in the currency of the year 2002, it is tolerably plain that this afforestation project is unlikely to make a major contribution to Dr. Lau's income in the years of his declining practice. I do not think however that a business is any the less a business because, on a more accurate analysis than has been carried out by the person undertaking it, its profits are unlikely to realize his expectations. In my opinion the three items concerned should be regarded as deductions within sec. 51 of the Income Tax Assessment Act.
Next the respondent relies on the provisions of Subdiv. D of Div. 3 of Pt. III of the Act which deals with losses and outgoings incurred under certain tax avoidance schemes. Section 82KL(1) which is part of that Subdivision reads:
``82KL(1) Application of section. Where the sum of the amount or value of the additional benefit in relation to an amount of eligible relevant expenditure incurred by a taxpayer and the expected tax saving in relation to that amount of eligible relevant expenditure is equal to or greater than the amount of the eligible relevant expenditure, notwithstanding any other provision of this Act but subject to this section, a tax benefit is not and shall be deemed never to have been, allowable in respect of any part of that amount of eligible relevant expenditure.''
Having regard to para. (p) of the definition of ``relevant expenditure'' in sec. 82KH(1) it is not disputed that the amounts which, in effect, the respondent has disallowed (viz. the $39,200, the $640 and the $180) are ``relevant expenditure''. By virtue of sec. 82KH(1F) they are also eligible relevant expenditure if they were incurred after 24 September 1978 and if -
``(b) by reason of, as a result of or as part of the tax avoidance agreement the taxpayer has obtained, in relation to that relevant expenditure being incurred, a benefit or benefits in addition to -
- (i) the benefit in respect of which the relevant expenditure was incurred; and
- (ii) any benefit that resulted directly or indirectly from the benefit in respect of which the relevant expenditure was incurred and is a benefit that, in the opinion of the Commissioner, might reasonably be expected to have resulted if
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the benefit in respect of which the relevant expenditure was incurred had been obtained otherwise than by reason of, as a result of or as part of a tax avoidance agreement...''
It is clear that Dr. Lau entered into all the agreements and in particular the memorandum of indebtedness and the management agreement for a purpose which at least included the reducing of his income tax liability. Collectively therefore they should be regarded as constituting a tax avoidance agreement, by virtue of the definition of that expression in sec. 82KH(1) and of sec. 82KH(3).
The next question in seeking to apply sec. 82KL(1) is whether Dr. Lau obtained, in relation to these items of expenditure, what may shortly be described as additional benefits as defined by sec. 82KH(1F)(b). The relevant expenditure incurred was $40,020 made up of the management fee, rent and stamp duty. The benefit in respect of which that expenditure was incurred is defined, for the purposes of this case to mean the growing, care or supervision of trees: sec. 82KH(1G)(p). In the year of tax the only benefit which could be said to have resulted from the benefit in respect of which the relevant expenditure was incurred was the prospect of a harvest. The additional benefits for the purposes of sec. 82KL(1) are benefits in addition to the two I have just mentioned and they are contended to be the prospect of Liberton not enforcing the debt and carrying any ultimate loss and the fact that the incurring of the relevant expenditure was made possible by a loan at a very low and non-commercial rate of interest. I deal with these in turn.
If the scheme runs its term, Liberton must accept the proceeds of harvests in full satisfaction up to the amount of the debt. To quantify the extent to which this benefit is additional to the prospects of a valuable harvest is conjectural. I pause to say that on the evidence before me there is no reason to suppose that the scheme will not run its course. Mr. Aschman and Mr. Ray promoted a similar scheme in the Stanthorpe area some ten years ago and on the evidence it is operating and presents external indications of success. If Dr. Lau were to default in payment of the rent or the interest this benefit would crystallize but at the expense of his participation in the surplus of harvests over the debt he owes to Liberton. The prospect of Dr. Lau's defaulting is not, in my opinion, high. If he does he will again lose whatever prospect he has of making something from the harvesting of the timber. His annual payments are around $1,000 tax deductible. It has not been demonstrated that it may reasonably be expected that Liberton will release, abandon or fail to demand repayment of its debt so as to bring into operation sec. 82KH(1J).
The application of sec. 82KL(1) requires the addition of the expected tax saving which, it is common ground, is to be treated as $11,417.30 and the additional benefits. If the sum of these two amounts is greater than the eligible relevant expenditure ($40,020) no deduction is allowed. To put it another way the additional benefits must, if the respondent is to succeed, aggregate more than $28,602.70. The value of the low interest loan may be estimated as follows. I was furnished by the appellant, without objection from the respondent with an actuarial certificate of the present value of the low interest loan of $35,300 which shows that, taking an interest rate of 11% as a realistic commercial rate in June 1981 the value of the loan on the market was then $10,786. The appellant must be regarded as having had the benefit of the difference, namely $24,514. I am not satisfied that the value of the possibility of Liberton's being in a position in which the loan will not be recovered is demonstrated to make up the difference. I hold therefore that sec. 82KL(1) does not operate to deny to the appellant the right to deductions in relation to the three amounts in question.
The Commissioner also relies on sec. 260. But the passages from Cridland's case to which I have already referred make it clear that deliberately to enter into a transaction because its tax consequences are advantageous and with a view to gaining that advantage will not bring sec. 260 into operation. Moreover, and this is important in relation to the next point with which I must deal, the test suggested by Lord Denning in
Newton v. F.C. of T. (1958) 98 C.L.R. 1 at p. 8 which, if pursued, might have confined immunity from sec. 260 to transactions capable of explanation by reference to ordinary business or family dealing has not in fact been adopted in this country as a universal or exclusive criterion. In my judgment sec. 260 does not avail the Commissioner in this case.
This brings me to a point of considerable interest and it is the last of the substantial
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arguments raised by the respondent. The submission is that what has been described by the House of Lords as a new approach to tax avoidance should be applied by the Courts of this country. The rationale of this new approach as explained by LordBrightman in Furniss v. Dawson (1984) 2 W.L.R. 226 at p. 242 is as follows. If, in a pre-ordained series of transactions (one which may fairly be described as a single composite transaction) steps are inserted which have no commercial (business) purpose apart from the avoidance of a liability to tax, the inserted steps are to be disregarded for fiscal purposes. The Court looks at the end result. The respondent submits that, applying this approach, one should disregard the advance by N.Q. to Liberton, the loan by Liberton to the appellant and the payment by Liberton to N.Q. of the sum of $33,500 on behalf of the appellant. The end result to which, the respondent contends, attention should be directed is one in which no management fee is paid to N.Q. and the initial and operating expenses of that company consists of the amounts in cash which find their way into its hands. The similarity between the annihilating operation of this approach and that of sec. 260 is immediately apparent. If this were a case for the operation of sec. 260 this is very much the approach which would be adopted. The notion that the Court may disregard, for fiscal purposes, any step which does not have a real business or commercial object, apart from the saving of income tax, has echoes of Lord Denning's proposition in Newton's case. The Finance Act of the United Kingdom has no provision analogous to sec. 260 and it may be that there is much wisdom in the view expressed by Lord Scarman in Furniss v. Dawson that the determination of what does, and what does not, constitute unacceptable tax evasion is a subject suited to development by judicial process and that, difficult though the task may be for Judges, it is one which is beyond the power of the blunt instrument of legislation. It is the blunt instrument which has been adopted in this country and, with respect to those who have come to a contrary opinion, it seems to me impossible to adopt an approach which would achieve a result without the statute which, it has been held, the statute does not achieve. It has been suggested that the doctrine of fiscal nullity, to use the current jargon, is not inconsistent either with sec. 260 or with the decisions of the High Court which have explored the limitations of that provision. This, it is said, is because the doctrine would operate at a point short of that at which sec. 260 in a proper case is brought into play. Thus it would operate to deny the existence of a deduction on the one hand and on the other the existence of intermediate steps which, if regarded, lend to a receipt of income the appearance of a receipt of capital. This however is precisely the operation of sec. 260. During the course of the hearing I indicated more than once that I should have great difficulty in applying, at the trial level, a doctrine, the application of which would have led to contrary decisions of many of the cases in the Commonwealth Law Reports. It was of some comfort therefore to be referred by counsel for the appellant to the view expressed by Gibbs J., as he then was, in
F.C. of T. v. Patcorp Investments Ltd. 76 ATC 4225 at p. 4232; (1976) 140 C.L.R. 247 at p. 292. In relation to English decisions which denied the quality of a loss in trade, where the losing feature of the transaction was inserted in order to avoid tax, his Honour said:
``However, the scheme of the English legislation is very different from that of the Australian Act. In particular the English legislation does not contain a provision like sec. 260 of the Act which is aimed generally at tax avoidance. The presence of sec. 260 makes it impossible to place upon other provisions of the Act a qualification which they do not express, for the purpose of inhibiting tax avoidance. In other words, it is not permissible to make an implication which does what sec. 260 fails to do in preventing the avoidance of tax. If it is suggested that a taxpayer has engaged in a device to secure a fiscal advantage, and the relevant provisions of the Act do not expressly deal with the matter, the case depends entirely upon sec. 260.''
The appeal will be allowed and the matter remitted to the respondent to amend the assessment by allowing the three deductions claimed.
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