Case C20
Judges: FE Dubout ChG Thompson M
N Dempsey M
Court:
No. 3 Board of Review
N. Dempsey (Member): The taxpayer concerned in this reference is a member of a partnership carrying on business as graziers and breeders of stud cattle.
2. In the return of the partnership for the year ended 30 June 1967 a claim was made under sec. 62AB for a deduction in respect to the purchase of a Stud Bull the basis of the claim being that such animal answered the description as set out in sec. 62AB(2) ``as a unit of property being plant or articles owned by the taxpayer and for use by the taxpayer wholly or exclusively for the purpose of
ATC 95
carrying on in Australia a business of primary production''.3. It was not in dispute that for the purposes of sec. 62AB(4) the bull should be regarded as being ``new''.
4. The evidence was quite clear that the bull was to be used and was subsequently used solely for the purpose of breeding stud cattle to be sold by the partnership. There was no suggestion that at any time would his services be made available to outside interests either directly or by the sale of semen for artificial insemination purposes.
5. The main contention of the taxpayer as submitted by his counsel was that the partnership did not trade its stud sires and that at the end of their useful stud life they were sold for slaughter to the local abattoir to ensure that no other person could obtain the same blood lines. They were not traded in and should therefore notwithstanding the definitions of trading stock and live stock as contained in sec. 6 of the Act be treated somewhat differently.
6. The submission was that even though they may have to be accounted for per medium of the live stock accounts this did not debar them being treated also as an article subject to the investment allowance provided for in sec. 62AB.
7. The fact that the stud bulls are acquired solely for use as such and not for any purpose of trading in them does not have any bearing on the manner in which they must be treated for the purposes of the Income Tax Act.
8. Support for this view is very clearly found in the joint decision of
Dixon
and
Fullagar
J.J. in the appeal to the High Court in the case of
F.C. of T.
v.
Wade
84 C.L.R. 105
where at page 113 it was said
-
``In the present case the only difficulty in the application of the principle illustrated by these passages is that a dairy herd does not consist of animals in which the dairy farmer trafficks. The taxpayer's primary source of income was the production of milk. His return for the purposes of income tax in this case shows that his substantial income is set down as the sale of milk, cream, butter and cheese. The amount shown as obtained from the sale of his dairy cattle is comparatively insubstantial. The Federal Act, however, places all animals in the category of trading stock in the case of taxpayers carrying on a business. It requires the animals on hand at the beginning and end of the period to be taken into account and inferentially the purchase and sale of such animals.''
9. This clearly establishes that all live stock used in a business of primary production must be treated as trading stock and dealt with accordingly as set out in the Assessment Act, ``Part III Division 2 Subdivision B - Trading Stock''.
10. Coming now to the argument that notwithstanding the necessity to treat the bull as trading stock it is still competent to also treat it as ``an article'' for the purpose of applying section 62AB, I can do no better than to quote the remarks of my late learned colleague Mr. F.J. McCaffrey in his decision in
3 T.B.R.D.
Case
C106 page 626.
11. In his decision at page 627 dealing with a stud stallion he said - ``The stallion is either `live stock' under the Act or it is not: if live stock it is `trading stock' (Sec. 6(1)): if used as a beast of burden or working beast in a business other than primary production, it is not `live stock' or `trading stock' but is `plant' (sec. 54(2)(a)). As `trading stock' and `plant' are mutually exclusive categories under the Act the stallion could not be treated as both simultaneously''.
12. With these remarks I am in entire agreement and as it cannot be disputed in the light of the decision in Wade's case supra that the bull must be treated as trading stock then it must for all purposes of the Act remain such.
13. The claim for a deduction under sec. 62AB must therefore fail and the decision of the Commissioner to disallow the objection is upheld.
Claim disallowed
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