Lindsay v. Federal Commissioner of Taxation (14 December 1961)

(1961) 106 CLR 377

---

(Judgment by: Dixon CJ, McTiernan J, Taylor J)

Between: Lindsay
And: Federal Commissioner of Taxation

Court:

Judges:
Dixon CJ
McTiernan J
Taylor J

Subject References:
Income Tax (Cth)

Judgment date: 14 December 1961

---

Judgment by:
Dixon CJ
McTiernan J
Taylor J

The substantial question which arises in these two appeals from Kitto J. is whether certain expenditure incurred by a partnership of which the appellant was a member constituted expenditure for repairs, not being of a capital nature, to premises, or part of premises or plant held, occupied or used by the partnership for the purposes of producing assessable income, or in carrying on business for that purpose (Income Tax and Social Services Contribution Assessment Act 1936-1956 (Cth), s. 53). The expenditure was incurred, as to part, in the income year and, if it was of the description mentioned in s. 53 the partnership was entitled, in respect of each year, to a deduction from its assessable income of the amount expended during the year. Accordingly, if the expenditure is held to be properly allowable as a deduction the appellant's interest in the net income of the partnership in the relevant years will be diminished. (at p392)

The facts of the case are comparatively simple. The expenditure in question was incurred in and about extensive work done in connexion with a slipway at the premises of the partnership on the banks of the Brisbane River at Kangaroo Point. We so describe the work to avoid characterizing it at this stage either as repair work or as new work directed to improvement and reconstruction. But although the facts relating to the work are simple and within a small compass a full appreciation of the appellant's contentions requires some examination of the background against which the work was done. As Buckley L.J. said in Lurcott v. Wakely & Wheeler [1911] 1 KB 905 "'repair' and 'renewal' are not expressive of a clear contrast. Repair always involves renewal; renewal of a part; of a subordinate part" (1911) 1 KB, at p 923 . It is, therefore, necessary, in cases such as the present, that the work in respect of which the expenditure was incurred should be seen in its true perspective. (at p392)

Kitto J. has fully recited the relevant facts and circumstances and it is unnecessary for us to reiterate them. But it is of some importance to observe that his Honour found that, although most of the piles upon which the slipway was originally constructed were used in connexion with the new work, what the appellant obtained by its expenditure was, to all intents and purposes, a new slipway. Substantially the whole of the slipway was demolished, the new work was executed in concrete and the new slipway was substantially longer.

Each of these and other factors referred to by Kitto J. may not, singly, be thought to be decisive of the question before us and they would, of course, carry less weight if, as the appellant contended, what was done should properly be regarded as work done to restore part only of an entirety. The entirety, it is said, consisted, either, of the whole of the partnership's premises on which its business was conducted and in connexion with which the slipway was used or, alternatively, of a number of what were called components and which together were said to constitute the slipway. These components are identified as the slip, the cradle employed upon it, the hauling machinery by which the cradle is moved and the dolphins and warping winches by means of which vessels are manoeuvred onto the cradle. This method of approach to the problem was rejected by the learned judge of first instance and we have no doubt that he was right. It would be artificial in the extreme to approach the problem in either of the suggested ways for the slipway was, in itself, a very substantial erection and the real question for decision was whether the work which was done was done in the execution of repairs to it.

As we see the problem the answer to this question could not be affected by the fact that there were other buildings or erections on the appellant's premises or by the fact that, on the premises, there were appurtenances, such as those described, for use in connexion with the slipway. On this branch of the case the appellant relied strongly on cases such as Rhodesia Railways Ltd. v. Collector of Income Tax, Bechuanaland [1933] AC 368 and Morcom v. Campbell-Johnson [1956] 1 QB 106 , but in our view those cases are clearly distinguishable.

The question, of course, is one of fact and degree and the decision in the latter case proceeded on the basis that

"the renewals effected constituted no improvement; they merely made good the line so as to restore it to its original state".

Here the work which was undertaken was, we think, properly described by the contractors in their letter by which their estimate for the proposed work was confirmed - "reconstruction of your No. 1 slipway". As we see it the case rather resembles Lister v. Lane & Nesham [1893] 2 QB 212 ; Torrens v. Walker (1906) 2 Ch 166 ; and Lurcott v. Wakely & Wheeler [1911] 1 KB 905 and the observations of Buckley L.J. in the lastmentioned case are peculiarly appropriate:

"Repair is restoration by renewal or replacement of subsidiary parts of a whole. Renewal, as distinguished from repair, is reconstruction of the entirety, meaning by the entirety not necessarily the whole but substantially the whole subject matter under discussion" (1911) 1 KB, at p 924.

We have no doubt that the work in question was not the work of repair and we agree with Kitto J. in thinking that the expenditure was not of the character specified in s. 53.

The other question which arises is concerned with the appeal in relation to the earlier year. Originally the expenditure claimed as a deduction in respect of that year was allowed as such but an amended assessment was issued on 20th November 1957 and the effect of this assessment was to disallow the deduction. The appellant's contention is that prior to the original assessment in respect of this year there had been a full and true disclosure of all the material facts necessary for his assessment in respect of that year. This contention also failed before Kitto J. We agree with his Honour that, although there was no attempt to misrepresent or conceal facts, there was not a full and true disclosure within the meaning of s. 170 of the Act. In the circumstances we think it unnecessary to add anything to what his Honour said and the appeals should, therefore, be dismissed. (at p394)