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CASE 22/94

Members:
DP Breen DP
KL Beddoe M
JD Horrigan M

Tribunal:
Administrative Appeals Tribunal

Decision date: 13 May 1994

DP Green (Presidential Member), KL Beddoe (Senior Member) and JD Horrigan (Member)

On the 25 June 1992 the applicant lodged with this Tribunal an application for review of a decision of the Deputy Commissioner of Taxation. The decision dated the 14 May 1992 disallowed an objection made by the applicant against an assessment for the year ended 30 June 1989. The application came before the Tribunal on 15 April 1993 at which time the matter was adjourned part-heard. The matter was later resumed on the 4 February 1994 and the Tribunal reserved its decision. At the hearing the applicant represented himself and the Respondent was represented by Mr McGill of Counsel instructed by the Australian Government Solicitor.

2. The applicant is a partner of a partnership which during the relevant period and at the present time is engaged in the business of cane farming. This matter concerns the assessability of assistance received by that partnership during the year of income ending 30 June 1988. The applicant lodged on the 3 March 1989 a return for the financial year ended 30 June 1988 and included in that return a request for a ruling as to the assessability of the assistance. In response the Deputy Commissioner altered the returned assessable income to include an amount of $16,655, which was the applicant's share of the assistance in question. This adjustment did not raise the applicant's taxable income to the taxable threshold and a notice was issued on the 21 November 1989 stating that no tax was payable. On 17 January 1990 the respondent received a notice of objection.

3. Section 185 of the Income Tax Assessment Act 1936 provides that for an objection to be valid there must be an ``assessment''. The applicant was informed by the Problem Resolution area of the Tax Office that there had been no such ``assessment'' in the year ended 30 June 1988 as no tax was payable. The applicant was subsequently advised to apply for an extension of time to lodge an objection for the year ended 30 June 1989 the assessment for which had been issued on the 23 March 1990. The applicant did so and the extension was granted and the objection considered on the 14 May 1992. The Deputy Commissioner disallowed the objection on that same day. A statement of reasons for that decision can be found in the ``T'' Documents at Folios 2-10. The ``T'' Documents were admitted as Exhibit 1 at the hearing.

4. At the hearing the respondent specifically requested that the Tribunal make findings in relation to particular issues. The Tribunal will

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endeavour to do so in the order in which they were raised.

5. Initially the Tribunal would like to set out the circumstances in which the assistance was obtained. On 1 October 1986 the partnership signed a contract for the purchase of an adjoining property, with a finance clause expiring on the 29 October 1986 and a settlement date of the 8 December 1986. Prior to the signing of the contract the partnership had been aware of assistance which was to be provided to the sugar industry by the Federal and State Governments.

6. Throughout October the partnership negotiated with the Queensland Industry Development Corporation (QIDC) in order to obtain finance. Their original application was refused on the 30 October 1986 on the basis that they had not demonstrated an ability to service the loan. They made enquiries about obtaining assistance under the Sugar Industry Assistance Scheme (the Scheme) and on 30 October 1986 it was indicated to the partnership that it would receive assistance under that Scheme. The partnership made a second application and finance was obtained from QIDC, the finance being approved on 12 November 1986.

7. On 17 November the partnership signed a facility letter (Document 22 of Exhibit 2 page 100 of the ``T'' Documents) in relation to the loan. The partnership was required to mortgage their property as security for the loan and the assistance (see Documents 48 and 49 of Exhibit 2). The purchase of the farm was settled on 11 December 1986. On the 11 April 1987 the partnership received a letter stating that their assistance would be in the amount of $33 310. However, the assistance was not credited to the partnership account until 6 August 1987. A more detailed sequence of events can be found in Document 47 of Exhibit 2.

8. Prior to the hearing the parties submitted to the Tribunal a Statement of Agreed Facts. We record that agreement in its entirety subject to editing to preserve confidentiality.

``1. The applicant was a partner in the partnership of (Applicant and his wife) during the years ended 30 June 1988 and 1989.

2. The said partnership carried on the business of cane farming in the years of income ended 30 June 1988 and 1989.

3. There was an agreement between the Queensland Industry Development Corporation (Q.I.D.C.) and (Applicant and his wife) that Q.I.D.C. would lend $293,000.00 to the (Applicant and his wife) in the manner and subject to the terms and conditions as evidenced in the agreement dated 17 November 1986. One of the special conditions stated that the `proceeds from the Commonwealth Queensland Sugar Industry Assistance Scheme to be paid in reduction of borrowings'.

4. There was a further agreement between the Q.I.D.C. and (Applicant and his wife) that the Q.I.D.C. would provide $33,310.00 in the manner and subject to the conditions evidenced in the agreement which was dated 22 June 1987 and signed on 24 June 1987.

5. A taxation ruling had been provided to the agent of the Applicant on 3 March 1988 advising of the Commission's position that the amount was assessable in accordance with either sub-section 25(1) of the Income Tax Assessment Act 1936 or alternatively under paragraph 26(g) thereof.

6. The partnership did not include the amount of $33,310.00 in the calculation of net income for the year ended 30 June 1988. The partnership return did provide an explanation of the receipt of $33,310.00 and requested a ruling under section 169A of the Income Tax Assessment Act 1936.

7. The Applicant's return of income for the year of income ended 30 June 1988 was adjusted to include a loss carried forward as recorded by the Commissioner and by his share of the net interest of the $33,310.00 received by the partnership. The assessable income of the Applicant after these adjustments was $4776.''

9. The first issue to be determined by the Tribunal is whether or not the payment made to the partnership should be properly characterised as a grant or a loan. It was submitted by the applicant that the assistance could only be properly described as a loan. The applicant based this contention on a number of factors which we will attempt to summarise in the following:

  • (1) QIDC recorded the amount of assistance as a debt.

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  • (2) the assistance was secured by first mortgage to QIDC. (Documents 24, 48 and 49 of Exhibit 2)
  • (3) the assistance was prima facie required to be repaid. (Document 61 of Exhibit 61)
  • (4) the assistance was recorded as a debt on the QIDC master file. (Document 27 of Exhibit 2)
  • (5) the applicants themselves considered the assistance to be a loan and they have always recorded it as such in their accounts. (Document 14 of Exhibit 2)

Essentially the applicant contended that the assistance had been heavily documented as a loan and therefore should be regarded as one. It was also the applicant's contention that on the loan being forgiven (that is, when the assistance was no longer repayable) the assistance was in the nature of a gift and therefore not taxable.

10. The applicant's Statement of Facts and Contentions was lengthy, somewhat verbose and in many instances irrelevant to the central issues. As a consequence it was not sensible to treat that document as a concise outline of the matters to be determined by the Tribunal. In structuring its decision the Tribunal made use of the respondent's Statement of Facts and Contentions and the following reasons will to a large extent address that statement.

11. The respondent contended that the assistance was in substance a grant which in some circumstances the grantee was liable to repay. The respondent made reference to T19 at page 74 of the ``T'' Documents. It is a document entitled ``Queensland Industry Development Corporation Adjustment Assistance to Sugar Cane Growers'' which was authored by the administrator of the scheme, QIDC. Specifically the respondent referred to a number of passages which summarise the basic purpose and structure of the scheme. The passages referred to are as follows:

``This assistance program is jointly funded by the Commonwealth and State Governments and has been introduced to assist sugar industry structural adjustment and to ease adjustment pressures through the provision of adjustment assistance to individual farmers who are considered to have the capacity to achieve and maintain a commercially viable farm business enterprise.

...

Growers will be eligible for interest subsidy assistance in the form of up-front grants (or alternatively annual interest subsidy for seven years) with the up-front grants to be used to reduce debt in appropriate circumstances.

The grants are to be calculated as the equivalent in present value terms to an interest subsidy of up to 50 percent of an agreed rate over a maximum seven year loan term.

...

... Applicants must be sugar cane farmers relying primarily on income from the growing of sugar cane...

Assistance will be made in the form of an approved interest subsidy or as a lump sum interest subsidy grant payment. The level of grant shall be the equivalent in present value terms to the amount of approved interest subsidy payable over a maximum period of 7 years.

In both cases, the interest subsidy or lump sum grant payment will be made to the grower's lender.

The lump sum interest subsidy grant payment shall be applied to:

  • (a) reduce the principal of the grower's loan; or
  • (b) provide an interest subsidy over the term of the loan

as agreed between the lender and the grower.''

12. It would appear that assistance was available to cane farmers who had an obligation to pay interest on a loan. The assistance could be either in the form of an interest subsidy or a lump sum interest subsidy grant. Consequently the assistance would in reality operate to reduce the principle or to reduce the interest payable. Where the assistance is in the form of a lump sum, it is paid directly to the lender in reduction of the borrowings.

13. The respondent also made reference to the actual agreement between the Commonwealth and the State submitting that this document (T21 page 81 of the ``T'' Documents) should be regarded as the primary source of the nature and operation of the Scheme. Of particular significance was the respondent's references to Clauses 6.1 and 12.2

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which outline the nature of the financial assistance to be provided. Clause 6.1 states:

``Subject to this Agreement, the financial assistance that is to be provided by the Commonwealth and the State under this Agreement shall be in the form of:

  • (a) an approved interest subsidy up to a maximum period of 7 years on borrowings by a person eligible under the Scheme, or
  • (b) a single lump sum grant payment equivalent to the present day value of an approved interest subsidy up to a maximum period of 7 years.''

14. Clause 12.2 dictates the circumstances under which the assistance must be refunded and provides:

``In cases where a lump sum grant is paid, a requirement of such assistance shall be that if the farmer ceases to work the property personally or the shareholdings in a company do not comply with General Principle (e) of Part I of the Schedule, or the farmer fails to observe the obligation and undertakings under the arrangements then, except in cases of financial hardship determined by the State, the farmer shall be required to agree to refund to the State the initial lump sum paid reduced by one seventh for each year, or part of a year, elapsed since the assistance was first provided...''

15. Finally the respondent made reference to the Schedule of the Agreement.

``(b)... Applicants must be sugar cane farmers relying primarily on income from the growing of sugar cane who are unable to obtain funds on reasonable terms and conditions from normal commercial sources.

(c) The over-riding objective is to assist sugar industry structural adjustment and to ease adjustment pressures through the provision of adjustment assistance to individual farmers who are considered to have the capacity to achieve and maintain a commercially viable farm business enterprise.''

16. In every instance the Agreement referred to the assistance as a ``grant''. The respondent contended that therefore the agreement provided for the payment of a grant which is paid on the condition that in certain circumstances the grant or part thereof becomes refundable. As will have been noted, where a part only becomes refundable, it is quantified according to a term-of-expired years formula.

17. Reference was made to T24 at page 110 of the ``T'' Documents. That document is entitled ``Facility Letter - Adjustment Assistance to Sugar Cane Growers Scheme''. In paragraph 3 it states:

``... Subject to the terms and conditions set out hereunder, the Corporation agrees to provide to the Recipient initially as a loan an advance of Thirty-Three Thousand Three Hundred and Ten Dollars ($33,310) (hereinafter called `the Principal Sum') or such other amount as may hereafter be agreed upon in writing between the Corporation and the...''

18. Relevantly, the facility letter also states in Item 1 of the Schedule at page 113 of the ``T'' Documents in a section entitled ``Repayment Details'':

``On demand, at the discretion of the Corporation. However, provided

  • (a) that you continue to personally work the property or
  • (b) your Company's shareholders continue to be sugar cane farmers relying primarily on the income of the company for their livelihood for a period of seven (7) years from the date on which the facility or the first instalment thereof shall have been made available and comply with all terms, conditions and provisions of the Scheme, the facility will be converted to a grant and repayment will not be required. The security described in the Second Schedule will then be discharged by the Corporation.
  • The amount to be repaid upon demand in writing by the Corporation shall be the principal sum. However, this amount shall be reduced by one seventh (1/7) for every year or part year elapsed since the principal sum or first instalment thereof shall have been made available to the recipient.''

19. The respondent then turned to Exhibit 2 which was a series of documents tendered by the applicant. The respondent referred to Documents 5 and 12 as evidence of the fact that the partnership was carrying on the business of cane farming on the cane farm purchased before

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the assistance was received. Document 5 is a working agreement dated 1 October 1986 made between the vendors of the second farm and the applicant's partnership. Document 12 is an income tax return of the partnership for the financial year ended 30 June 1987. Notably, the applicant had contended that the assistance received was a capital item as it had been used to purchase the second cane farm (see paragraphs 35-50 of the applicant's statement of facts and contentions). Document 17 of Exhibit 2 was also cited by the respondent as supporting its contention that the assistance was a grant. Document 17 is a Queensland Canegrowers' Association Circular and enclosure dated 22 October 1986.

20. The respondent then took the Tribunal to a number of documents which explained the method used to calculate the assistance. Documents 28-33, a series of letters between the applicant and QIDC during the period 16 December 1986 and 21 April 1987, were mentioned and collectively relate the sequence of events leading to the payment of the assistance to the partnership. Document 28 is a letter dated 26 December 1986 from the applicant to QIDC requesting information about the outcome of their application for assistance. Document 29 is the reply dated 20 January 1987 which the applicant's letter invoked. The applicant's letter made an enquiry as to the possibility of receiving the assistance as an up- front grant. Document 29, however, refers only to an ``interest subsidy of $9,375 per annum over a maximum period of seven years''.

21. The next document mentioned by the respondent was Document 31 which is a letter from QIDC to the partnership dated 25 March 1987. The letter refers to an up-front grant in the amount of $25,086 calculated in reference to a loan from the ANZ Bank. The letter also contained the following:

``The Commonwealth-State Agreement stipulates that the advance shall only be converted to a grant at the expiration of seven (7) years from the date that funds are advanced provided that you have not breached its terms.

However, breach of the terms of the agreement will cause the amount of the loan to become immediately repayable less one- seventh for each year or part year elapsed since its advancement.

Pursuant to the terms of the Agreement, the undertaking by you can be summarised as follows:

  • (a) That you shall continue to personally work the property.
  • or
  • (b) That your Company's Shareholders continue to be sugar cane farmers relying primarily on the income of the company for their livelihood.

To give effect to the terms of the Commonwealth-State Scheme it will be necessary for you to execute a Facility Letter and a registered Mortgage/s over your property/properties. The consent of any existing Mortgagee/s will be requested before the assistance can be made available. The Corporation will make direct approach to these prior Mortgagee/s.''

22. Document 32, a letter from QIDC dated 30 June 1992, advised the applicant of the following:

``We advise that the Interest Subsidy of $33,130 equated to a lump sum subsidy on your borrowings from the Queensland Industry Development Corporation. This lump sum subsidy was calculated as the present day value of a subsidy of 6.75% per annum of $125,000 for a term of seven (7) years. The subsidy of $33,130 was paid direct to your Queensland Industry Development Corporation Loan Account No 17073 in reduction of loan balance on 6 August 1987.''

23. In its deliberations the Tribunal noted the inconsistent terminology used throughout the documentation. However, merely because something is referred to in relevant documentation as a ``loan'' or a ``grant'' in no way irrevocably characterises it as such (see
Lincolnshire Sugar Company Limited v Smart (1937) AC 697). The terminology used may sometimes provide a guide as to the intention of the parties concerned but it is never conclusive of the true nature of a payment. It is always necessary to characterise the payment itself by reference to the substance of the transaction.

24. It is the Tribunal's opinion that when looking at the substance of the assistance payment it would appear that the assistance is in fact a conditional loan. Although the agreement refers to the assistance as being a lump sum interest subsidy, which would imply that it was

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in fact a grant and therefore income, the Tribunal considered that the practical administration and the reality of the scheme resulted in the assistance being a conditional loan. In that regard the Tribunal took particular note of the facility letter (Document T24) and Document T31 of Exhibit 2.

25. The Tribunal in its decision also took cognisance of the judgment of Lord MacMillan in the case of Lincolnshire Sugar Company Limited v Smart (supra) at page 704 which states:

``... but when `advances' are declared to be `repayable' (though only conditionally) they certainly lean to the side of loans.''

26. The Tribunal recognises that in that case Lord MacMillan found that it was decisive ```that these payments were made to the company in order that the money might be used in their business'. It was paid `with the very object of enabling them to meet their trading obligations'. They were `intended artificially to supplement their trading receipts so as to enable them to maintain their trading solvency'''. (See Case U7,
87 ATC 127 at 132)

27. However, as in the case of Case U7 (supra), the Tribunal finds that the Lincolnshire case can be distinguished on a factual basis. Case U7 concerned the prepayment of a grant. The Tribunal in that case found that it had to decide a substantially different issue. The Tribunal accepted, as we do, that it should regard a decision of the House of Lords to be effectively binding in instances where there is no corresponding decision of the High Court (see
Public Transport Commission of N.S.W. v J Murray-More (N.S.W.) Pty Ltd (1975) 49 ALJR 302). The Tribunal in Case U7 found that the Lincolnshire case could be distinguished on the basis that the prepaid grant in that case was not paid in order to enable the company to maintain its trading solvency.

28. Similarly, the monies paid to the applicant in this case were not paid so that the applicant could meet his trading obligations. No evidence was led by the respondent which indicated to the Tribunal that the applicant would not have been able to continue in the business of cane farming without the assistance. Indeed, all evidence presented to the Tribunal would seem to indicate that the assistance was for the sole purpose of enabling the applicant to purchase the second farm. Whilst it was not denied by the applicant that the purchase of the second farm resulted in a more productive and efficient operation, at no time was it indicated to the Tribunal that without the second farm the applicant could not remain solvent. Indeed the very purpose of the legislation, outlined in paragraph 11 above, was to assist cane farmers ``considered to have the capacity to achieve and maintain a commercially viable farm business enterprise''. It would seem therefore that the assistance was not to keep a recipient solvent but was in fact only for those farmers already viable.

29. As indicated above, the Tribunal accepts the reasoning of Lord MacMillan to the extent that the nature of a payment in question should not be determined solely by terminology. It is on that basis that the Tribunal finds that in this particular instance, the assistance, as a question of fact and as a matter of substance, was a loan. We make that finding notwithstanding the numerous documents referring to the assistance as a grant and by authority of the statement of principle in Lincolnshire Sugar (supra).

30. The Tribunal, however, accepts the respondent's contention that the assistance becomes in part a grant or subsidy year by year to the extent that it ceases to be repayable. That is, the Tribunal finds that on each anniversary when one-seventh of the assistance becomes non-repayable that one-seventh assumes the mantle of income by way of grant is derived at that point in time, and thus becomes assessable income. In so determining the Tribunal again adopted principle enunciated by with [sic] Lord MacMillan in the Lincolnshire case referred to above. Lord MacMillan stated:

``... in that year the contingency of possible repayment did not in fact arise. In my opinion the `advances' ought accordingly to be taken into account in computing the balance of the Company's profits and gains for that year.''

The passage appears at page 705 of the report.

31. In making this determination, the Tribunal notes that a similar line of reasoning was adopted by the Tribunal in Case U7.

32. The Tribunal in Case U7 referred to
C of T (SA) v Executor Trustee and Agency Co of South Australia Ltd (commonly referred to as Carden's Case) (1938) 5 ATD 98; (1938) 63 CLR 108 and to the judgement of Dixon J. In accordance with that judgment the Tribunal in that case observed at [87 ATC] pages 133-134:

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``... that in the assessment of income the object was `to discover what gains have during the period of account come home to the taxpayer in a realised or immediately realisable form'... It related to amounts which had not only been received but had `come home' to the taxpayer. That required not only that the amounts received were unaffected by legal restrictions, as for instance by a trust or charge, but that the situation had been reached in which they might properly be counted as gains completely made, so that there was neither legal nor business unsoundness in regarding them without qualification as income derived.''

33. Having found that the assistance once non-refundable is a grant, it is then necessary for the Tribunal to determine under which provision it regards the assistance as assessable. Essentially it was the applicant's contention that the assistance was not assessable income under any provision of the Income Tax Assessment Act 1936 because the assistance was a loan and then subsequently a gift. As we have outlined above the Tribunal accepts the first limb of contention but further finds the notion of gift as untenable. As the assistance part by part becomes non-repayable, then that non- repayable assistance is a grant and is assessable income.

34. It is now necessary for the Tribunal to determine the appropriate taxing provision to be applied in each relevant year of the altered- status process. It was the respondent's contention that the assistance, if characterised as a grant, was assessable under Section 25(1) of the Act. In the alternative, the respondent submitted that the assistance, if not income within ordinary concepts, was a subsidy or grant assessable under Section 26(g) of the Act. Finally, if it was found that the assistance was a capital item and not within either of the above the respondent contended that the assistance would be assessable under Section 160M(7) as a deemed capital gain.

35. Obviously, the remainder of this decision is in relation to the assessment of the assistance once non-repayable and a grant. As it will become evident, the Tribunal finds that the assistance once a grant is assessable under subsection 25(1) of the Act. It is the opinion of the Tribunal that having so found it is not required to address whether or not the assistance is assessable under Section 26(g) or under Section 160M(7). The result of any such exercise would be redundant.

36. In turning to the first of the respondent's submissions, namely the assessability of the assistance under Section 25(1), it is necessary for the Tribunal to determine ``the nature of the payment itself and the relationship of it to the activities, actual or potential, of the recipient.'' (see
Reckitt & Colman Pty Ltd v FC of T 74 ATC 4185 at 4186). The question is whether or not the payment can be regarded as being ordinarily incidental to or arising out of the carrying on of the applicant's cane farming business. It is the finding of this Tribunal that it is.

37. Money does not become capital merely because it is used to purchase a capital item. Consequently, merely because the assistance was used after its receipt to purchase a capital item; namely, the second farm, that does not characterise it as a capital. In order to characterise a particular amount derived it is necessary to look at that receipt in the context of the activities of the relevant business as a whole. The use to which the receipt is put is not determinative of its character as a receipt.

38. In this particular instance the payment was made by QIDC in order to enable the recipients to better service a loan held in relation to their cane farming business. Indeed the assistance was designed as an interest subsidy which could be paid either as a lump sum or as an annual payment and which was to be calculated in relation to the interest liable to be paid. It is a well established principle that where a subsidy is paid towards a particular expenditure of a revenue nature the subsidy assumes the character of the expenditure (see
Higgs v. Wrightson (1944) 1 All ER 488 per McNaughton J at 489).

39. In the case of
FC of T v Total Holdings (Aust) Pty Ltd 79 ATC 4279, Lockhart J found that interest paid on money borrowed for the purpose of deriving income is always a revenue item. His Honour said at page 4283:

``If a liability for interest is incurred for the purpose of introducing capital into an income gaining business, the payment of interest is allowable as a deduction...

In my opinion if a taxpayer incurs a recurrent liability for interest for the purpose of furthering his present or prospective

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income producing activities, whether those activities are properly characterised as the carrying on of a business or not, generally the payment by him of that interest will be an allowable deduction...''

40. His Honour also made a particular reference to the decision of
The Texas Co (A'sia) Ltd v. FC of T (1940) 5 ATD 298; (1940) 63 CLR 382 referring to the judgment of Latham CJ at ATD pages 327-328; CLR page 430 and the judgment of Dixon J at ATD 356; CLR 468 where His Honour said:

``Some kinds of recurrent expenditure made to secure capital or working capital are clearly deductible. Under the Australian system interest on money borrowed for the purpose forms a deduction. So does the rent of premises and the hire of plant.''

41. Clearly the assistance in this particular case is income under these ordinary principles. As previously referred to in paragraph 19 of these Reasons, an issue was raised at the hearing as to whether or not the payment was made in the course of carrying on a business. The applicant contended that the payment was made in order that a business might commence. Significantly Lockhart J also stated in the Total Holdings case (supra) at page 4283:

``... some qualification may be necessary in appropriate cases, for instance, where interest is paid by a taxpayer as a prelude to his being in a position whereby he may commence to derive income. In such cases the requirement that the expenditure be incidental and relevant to the derivation of income may not be satisfied. See
Lodge v. F.C. of T. 72 ATC 4174; (1972) 128 C.L.R. 171...''

42. It is the Tribunal's finding that the assistance was made in the course of carrying on the business of cane farming. The payment in question enabled the applicant to expand his existing business by purchasing an additional farm. In the Tribunal's opinion that purchase could not in any way be regarded as the commencement of a business. It was merely an expansion of an existing business.

43. For completeness, it is necessary for the Tribunal to address two further issues - firstly, the one-off nature of the payment of the assistance to the lender in the first instance and, secondly, the operation of Section 19.

44. Reference was made by the applicant to the one-off nature of the payment of the assistance as support for his contention that the assistance could not be regarded as income within ordinary income concepts. Obviously, in determining whether a particular payment is made in the course of carrying on a business several factors are relevant. It has long been recognised that where a receipt is of a periodical nature that would tend to suggest that the payment is income (see
Brisbane Amateur Turf Club v FC of T (1968) 15 ATD 104; (1968) 118 CLR 300). It is not necessary, however, that a payment be periodical in order for it to be income. As submitted by the respondent, a one-off payment can be regarded as being in the ordinary incidence of a business and thus be characterised as income. In the case of
FC of T v Cooling 90 ATC 4472 Hill J stated at page 4483:

``Nor does the fact that a profit or gain is made as the result of an isolated venture or a `one-off' transaction preclude it from being properly characterized as income (
F.C. of T. v. Whitfords Beach Pty. Ltd. 82 ATC 4031 at pp. 4036-4037, 4042; (1982) 150 C.L.R. 335 at pp. 366-367, 376).''

Lockhart and Gummow JJ appear to have agreed with Hill J on this point.

45. The Tribunal finds that in this particular instance the one-off nature of the payment of the assistance does not prevent it from being income. In turning now to the question of the effect of Section 19, it is relevant to note that the applicant had contended as relevant the fact that the assistance had been paid directly in the first instance to QIDC as the lender. The Tribunal, however, accepts the respondent's contention that the operation of Section 19 renders that fact irrelevant.

46. On the basis of the principles outlined above it is the Tribunal's finding that the assistance in this particular fact situation is income according to ordinary concepts. Consequently, the Tribunal accepts the respondent's contention outlined in paragraph 6 in its Statement of Facts and Contentions and finds that the assistance in the first instance is a loan, one-seventh of which year by year becomes non-refundable and a grant. Consequently that one-seventh on becoming a grant is assessable as income under Section 25(1).

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47. It is the Tribunal's decision that the objection be allowed in part and the matter be remitted to the respondent with the Tribunal's direction that the requisite recalculations be made in accordance with these reasons for decision.


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