Swinford v. Federal Commissioner of Taxation.

Judges:
David Hunt J

Court:
Supreme Court of New South Wales

Judgment date: Judgment handed down 22 October 1984.

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David Hunt J.

The taxpayer, Miss Susan Swinford, appeals from the decision of No. 1 Taxation Board of Review upholding (by majority) the disallowance by the Commissioner of her claim for a deduction in relation to a proportion of rent paid by her for premises during the years ended 30 June 1978 to 1981 inclusive. That decision is reported as Case R33, 84 ATC 312.

The taxpayer (whose evidence I accept) has been since 1972 a self-employed scriptwriter of radio and television serials. During the relevant period, she worked full-time in this occupation. She initially wrote radio serials for the Australian Broadcasting Commission and later she wrote television serials for two companies which have been collectively referred to as the Grundy Organisation.

The taxpayer's case is that during the relevant period she carried out her writing activities in a room which was her place of business or, in the jargon adopted in the cases, a ``home office''. That proportion of her rent which was related to that home office is claimed as an outgoing, deductible pursuant to the Income Tax Assessment Act 1936, sec. 51(1). The amount of the claim is based upon the proportion of the total floor area of the unit which was occupied by that home office.

Prior to October 1977, the taxpayer lived in a one-bedroom unit, which she owned, at Elizabeth Bay. She carried out her writing activities in the lounge-dining room area, using the dining table as a desk. No claim for any deduction was made by the taxpayer in relation to those premises. By 1977, the taxpayer had accumulated a vast quantity of material relating to her writing. The storage space for this material available in this unit had become very cramped. The taxpayer also found it extremely awkward to use the dining table for her writing, as she had to move all of the material upon which she was working onto the floor or elsewhere whenever she had a meal.

In 1977, the taxpayer negotiated the sale of the unit in which she lived together with another unit in the same building which she owned and had leased out. She did this in order to accumulate capital for investment from which she would earn sufficient income to pay rent on a larger unit with two bedrooms, of which one was to be used as an area in which to carry out

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ATC 4805

her writing activites. The second bedroom was to be a home office. In the time available before the sale of these two units was completed, the taxpayer was unable to find a suitable two-bedroom unit, and eventually she took a six-months' lease of a three-bedroom unit in Darling Point. She carried out her writing activities in two of the bedrooms, moving from one to the other during the course of each day when the first became too cold. At the expiration of the six months, the taxpayer remained in occupation of this unit pursuant to a holding-over clause. She made no attempt to find alternative accommodation.

In 1978, a friend who was moving overseas for a lengthy period offered the taxpayer a lease of her two-bedroom unit once more in Elizabeth Bay. This unit was obviously more congenial than that in Darling Point, and the rental was lower. The taxpayer accepted her friend's offer. However, I am satisfied that, despite the attraction of the offer otherwise, the taxpayer would not have accepted it had this unit not provided a second bedroom to use as a home office. The taxpayer used the second bedroom for this purpose from 30 June 1978 to the end of the relevant period in question.

The second bedroom in the Elizabeth Bay unit had a floor area of 123 square feet. There were two entrances to the room: one through a doorway from the hall, and the other through an archway from the bedroom some two and a half feet wide. The room was furnished with a substantial desk (purchased when the taxpayer first moved to Darling Point), some office-type chairs and two storage chests. There was a telephone extension (equipped with an answering device) and a typewriter in this room. There was no bed, nor was there any lounge chair or similar furniture in the room.

The taxpayer has always carried out her writing activities in a very disciplined manner. She works at her desk from 10 a.m. to 6 p.m. on four days a week and from 10 a.m. to 1 p.m. on the fifth day. When she wrote for the A.B.C., an employee from that organisation attended at the taxpayer's unit on alternative Saturday mornings for a conference when future story lines were discussed and synopses were mapped out. That conference took place in the home office. When writing television serials, the taxpayer herself attended at the office of the Grundy Organisation once a fortnight in order to collect a synopsis of the current story line. In each case, the script written by the taxpayer was delivered to the producer in typed form by the taxpayer herself. She also attended rehearsals of the various episodes which she had written. These rehearsals took place at a studio about once a fortnight and lasted the whole morning and sometimes up to 3 p.m. Although she was not contractually obligated to attend these rehearsals, the taxpayer did so at the A.B.C. because she felt that she ought to, particularly when a new character was being introduced or a new story line was being developed, and at the Grundy Organisation she did so because such attendance was ``virtually compulsory'' if she wished to retain favour with that organisation.

The taxpayer owned a television set which was situated in the loungeroom. During the period in question she watched television nightly, principally for recreation. She regarded the time spent watching Australian television drama (then approximately three hours per week) as necessary for her work, in order to keep up to date with what was going on, in particular in terms of style, presentation and popular trends, and also to watch the episodes which she had written herself.

An unsuccessful attempt was made on behalf of the Commissioner to establish that the taxpayer was also carrying on her writing activities when she was having her breakfast, when she walked or sat in the park and when she lay in bed. Whilst ideas may on occasions have occurred to the taxpayer at such times, she usually tried to ``switch off'' when she was not sitting down in the home office; but when such ideas did occur, they were noted by her, or put into effect, in the home office.

The room used by the taxpayer as a home office contained a floor to ceiling wardrobe, which was the only one in the unit in which long dresses and overcoats could be hung. The clothing which she hung in this wardrobe was used by the taxpayer on a regular basis, but she would invariably take the particular item of clothing through the archway into the bedroom before putting it on, there being no mirror in the home office.

The taxpayer agreed that on occasions she took social telephone calls on the telephone extension at her desk, rather than going through to the other telephone in the loungeroom, but such interruptions to her work were few as her

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ATC 4806

friends knew of her working pattern and did not intrude during her work hours.

The taxpayer also used the desk in her study to pursue her investment activities. These activities consisted solely of filling in applications to renew debentures and the like. She was engaged in such activities only for five minutes at a time every few months.

Neither the A.B.C. nor the Grundy Organisation provided the taxpayer with any accommodation in which to carry out her writing activities. The taxpayer said that, if either producer had in fact offered her for that purpose the use of a self-contained office where she would not be disturbed, she would have taken up that offer although she would have preferred to work at home. The taxpayer, however, did not seek such accommodation from either producer because she knew that none was available for scriptwriters who were not permanently employed. I am satisfied that neither the A.B.C. nor the Grundy Organisation would have provided such accommodation had the taxpayer sought it; clearly enough there was no contractual obligation for such accommodation to be provided and there was in any event none available. Indeed, it is a fair inference from the evidence that, if such accommodation were to be provided, some element of payment for its use would no doubt be taken into account in fixing the taxpayer's remuneration for the work which she carried out in it.

The Commissioner's first submission was that, following the decisions of the High Court in
Handley v. F.C. of T. 81 ATC 4165; (1981) 148 C.L.R. 182, and
F.C. of T. v. Forsyth 81 ATC 4157; (1981) 148 C.L.R. 203, deductions are no longer available, as a matter of law, in relation to that proportion of the rent or of the interest on mortgages paid by a taxpayer which relate to a home office. Excepted from that proposition, as I understood it, would be a doctor's surgery where the room in which that surgery is situated is physically separate from the house or it has distinctive physical characteristics which do not readily permit it to be used for private or domestic purposes.

What the High Court was dealing with in Handley and in Forsyth was in each case a study in the taxpayer's home (ignoring the family trust in the latter case) which the taxpayer (who also maintained chambers in the city) used for professional work of the type which could ordinarily be done at home and which was in fact done at home rather than in his chambers only as a matter of convenience. The ``essential characteristic of the expenditure'' (
Lunney v. F.C. of T. (1958) 100 C.L.R. 478 at p. 497) was therefore in each case held to be that of a private or domestic nature and thus excluded for that reason by the express terms of sec. 51(1): Handley at ATC pp. 4171-4173, 4175; C.L.R. pp. 194, 196-197, 201 and Forsyth at ATC pp. 4163-4164; C.L.R. p. 215.

There can be no doubt that, as a result of those two cases, it will be difficult (perhaps impossible) for any taxpayer to obtain a deduction where his home office is a study used in those circumstances. It is, however, to take a very large step further to say that, as a result of those decisions, no deduction will be available in relation to a home office as a matter of law. As Mason J. said in Handley (at ATC p. 4172; C.L.R. p. 195), there is an infinite variety of factual situations to which sec. 51(1) may apply. I suspect that we are dealing here more with words than ideas (or propositions of law). In my view, the accuracy of the Commissioner's submission depends upon what is meant by a ``home office''. The area designated as such, it seems to me, may either constitute business premises notwithstanding the physical association of that area with the taxpayer's home, or it may be only part of the taxpayer's home (such as a study) used for business purposes as a matter of convenience. Whilst in most cases a home office will not constitute business premises unless, like the doctor's surgery, it is physically distinct from the area used as a home, I would not be prepared to say that a home office cannot, as a matter of law, amount to business premises.

The present case, in my opinion, is clearly distinguishable from what was being considered in Handley and in Forsyth. The work done by the taxpayer in the present case was not done at her home rather than elsewhere as a matter of convenience. This was the only place where she did carry out her writing activities. This was the base, and the only base, of the taxpayer's operations: Forsyth at ATC pp. 4163-4164; C.L.R. p. 215. I do not consider that her attendance at the studio for rehearsals and to collect the synopses, her subsequent delivery of the scripts to the producer or the three hours each week which she spent watching television in the loungeroom as part of her work would detract from that fact. This room was where she

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ATC 4807

physically did her writing, and the only place where she did so. It was used by her virtually solely for that purpose. The facts that she used the wardrobe in the room to hang her longer clothes, and that she answered a few telephone calls and filled out a few investment forms every few months when sitting at her desk there do not detract from that finding.

The Commissioner submitted that scriptwriters do not of necessity require any place of business at all, so that if such a writer chooses to have one (whether in a commercial office building or in his home) the choice is for his convenience only and the expenditure incurred is not deductible. That submission, it seems to me, exhibits a basic misunderstanding of what is involved in the profession of writing, and appears to have originated in the unsuccessful attempts in cross-examination to have the taxpayer in the present case agree that such a task could have been undertaken by her sitting on a park bench. The Commissioner asserted nevertheless that, as the expenditure of rent for such a place of business was unnecessary (in the sense that it was not indispensable or unavoidable), the expenditure was not ``necessarily incurred in carrying on a business for the purpose of gaining or producing (assessable) income'' as required by sec. 51(1). The word ``necessarily'' in the second limb of sec. 51(1) has never been interpreted in the sense for which the Commissioner now contends. The expenditure need only be clearly appropriate for the purpose of producing assessable income:
Ronpibon Tin N.L. v. F.C. of T. (1949) 78 C.L.R. 47 at p. 56; see also
F.C. of T. v. Snowden & Willson Pty. Ltd. (1958) 99 C.L.R. 431 at pp. 436-437 and 444;
Magna Alloys & Research Pty. Ltd. v. F.C. of T. 80 ATC 4542 at p. 4557.

I see no valid distinction here between a scriptwriter and any other author. In my view, any author (including a scriptwriter) who rents out premises in a commercial office building solely for the purpose of earning assessable income is entitled to a deduction in relation to the rent paid, and this would be so whether or not he was a disciplined writer such as the taxpayer in the present case who needs to sit at a desk for set hours, and whether or not he also received his inspiration when away from these premises - having breakfast, walking or sitting in the park or lying in bed. That an author (including a scriptwriter) may have a place of business is expressly recognised by Murphy J. in Handley at ATC p. 4173; C.L.R. p. 197.

The Commissioner's next submission is in two parts. He argues that the essential characteristic of an outgoing can only be determined at the time when the taxpayer undertakes the obligation to make the relevant payment. In the present case, this would have occurred when the taxpayer entered into the agreement to pay rent for the whole unit, including the space used as a home office. The Commissioner says that, as the taxpayer would have been obliged to continue to pay the whole of the rent for that unit whether or not she continued to use the second bedroom as a home office, the outgoing as a whole must be considered to be one undertaken in relation to her private residence. It is thus, he says, essentially private or domestic in character. No direct authority could be produced in support of the first part of this submission, and the second, it seems to me with respect, defies logical analysis.

I do not see why the essential characteristic of an obligation to pay rent must in every case be determined at the time when the relevant lease is entered into, although obviously in many, if not most, cases that would be the appropriate time at which to determine that issue. However, two examples should demonstrate the absurdity of the situation which would follow if the Commissioner's argument is correct. Assume a lease of premises for a period of three years - if necessary without restriction imposed by the lease upon the use to which those premises may be put. Assume also that the taxpayer, at the time the lease was entered into, bona fide proposed to use the whole of those premises for an unmistakably commercial purpose in connection with his business, such as the storage of stock, so that the outgoings for rent are correctly characterised at that stage as essentially for the purpose of producing assessable income. After one year of the lease has elapsed, the taxpayer changes the nature of his business so that he no longer needs the premises in connection with it. Accordingly, he uses the premises for the remaining two years of the lease for some unmistakably private or domestic purpose such as storing unused furniture from his home. Does the Commissioner's argument mean that the taxpayer could continue to claim a deduction in relation to the rent for the remaining two years

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ATC 4808

of the lease because the essential characteristic of the outgoing was determined at the date of that lease? Surely not. Now take the converse of the first example. At the time of the lease, the taxpayer intends to use the whole of the premises for some unmistakably private or domestic purpose. After one year of the lease has elapsed, the taxpayer changes the nature of his business so that he bona fide needs the whole of the premises in connection with that business. Could a claim for a deduction in relation to the rent for the remaining two years of the lease properly be refused by the Commissioner upon the basis that the essentially private or domestic character of the outgoing was determined against him at the time the lease was entered into? Again, surely not.

As to the second part of the Commissioner's submission, the rejection by Wilson J. in Forsyth (at ATC p. 4165; C.L.R. p. 217) of the ``use'' criterion - preferred by the New Zealand Court of Appeal in
Commrs. of I.R. (N.Z.) v. Banks 78 ATC 6001; (1978) 2 N.Z.L.R. 472 - in favour of the ``essential character'' test - preferred by the High Court in Lunney v. F.C. of T. (supra) - does not mean that the use to which the premises are to be put is irrelevant in determining the essential character of the expenditure. Although by no means conclusive, that use, as Mason J. says in Handley (at ATC pp. 4171-4172; C.L.R. p. 194), remains a matter of great importance in determining that issue. This is a question to which further attention is paid later in this judgment.

Why in logic should the fact that particular premises intended to be used for commercial purposes may nevertheless subsequently be used for private purposes preclude the determination of the essential character of the payments of rent as being for the purpose of producing assessable income when those premises are in fact being used for commercial purposes? I can see no reason, nor was any suggested. What the Commissioner says is that Mason J. and Wilson J. denied such an approach in Handley, where the fact that the study which the taxpayer in that case used for his professional work was also readily capable of use for domestic purposes was one of the circumstances which determined the case against him (at ATC pp. 4171-4176; C.L.R. pp. 194, 202). The Commissioner, in my view, has read too much into the views there expressed by their Honours. In any event, the ratio of that case does not depend upon those particular views. What was agreed by all three Justices who formed the majority in that case was, as I stated earlier, that the expenditure by way of payments of interest by the taxpayer there was rendered essentially private or domestic in character because his study at home was used for professional work of a type which could ordinarily be done at home and which was in fact done at home, rather than in the chambers which he maintained in the city, only as a matter of convenience. If need be, moreover, there is, it seems to me, a valid distinction to be drawn in relation to the payments of interest upon moneys borrowed to purchase premises (when the essential character of the payments of interest are usually related back to the character of the expenditure upon the purchase of the premises) and the payments of rent for those premises (when the essential character of those payments of rent may more readily be related to the use of the premises at the time of each such payment).

The Commissioner's submissions are rejected. I am satisfied by the taxpayer in this present case that the essential characteristic of her expenditure upon rent, so far as that expenditure related to the additional room which she rented to carry out her writing activities, was for the purpose of producing assessable income and was not of a capital, private or domestic nature.

Finally, the Commissioner objects that the decision of the Board of Review did not involve a question of law, so that no appeal lies from that decision to this Court: sec. 196(1). It is the decision of the Board, not the appeal from that decision, which must involve the question of law:
Foreman v. F.C. of T. 83 ATC 4073 at pp. 4074-4075; (1983) 45 A.L.R. 258 at p. 261. Hence the Commissioner's principal submission of law before me (which was not made before the Board and which does not appear to have been involved in its decision) does not give this Court jurisdiction, however surprising such a result may be. That was the submission that, following the decisions of the High Court in Handley and Forsyth, deductions are no longer available, as a matter of law, in relation to that proportion of the rent or of the interest on a mortgage paid by a taxpayer which relates to a home office. Nor is the requirement of sec. 196(1) satisfied if a principle of law was either merely necessarily applied by the Board in

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ATC 4809

arriving at its decision, or merely implicit or assumed in that decision; the question must be one which was actively involved in the Board's decision.
Boyded (Holdings) Pty. Ltd. v. F.C. of T. 82 ATC 4236 at p. 4239. It does not matter whether the question of law was correctly or incorrectly decided by the Board:
Krew v. F.C. of T. 71 ATC 4213 at p. 4215; (1971) 45 A.L.J.R. 324 at p. 325;
XCO Pty. Ltd. v. F.C. of T. 71 ATC 4152 at pp. 4154-4155; (1971) 124 C.L.R. 343 at p. 348. Nor does it matter, it seems to me, whether there is or is not any specific challenge to that decision in the appeal to this Court; once a question of law is involved in the decision of the Board, the whole decision of the Board and not merely that question of law is open to review.
Ruhamah Property Co. Ltd. v. F.C. of T. (1928) 41 C.L.R. 148 at p. 151.

In
Lombardo v. F.C. of T. 79 ATC 4542, the Full Court of the Federal Court gave detailed consideration to some of the circumstances in which a question of law can be said to be involved in a decision. It is clear from the judgments delivered in that case (at pp. 4545 and 4550) that it is unnecessary for the point of law to have been formally taken or even expressly referred to before the Board; a point of law is sufficiently involved in the decision, it was held, if it is obvious from the decision or the transcript of the case that the Board in arriving at its decision has misunderstood the law in some relevant particular.

The Commissioner says that the taxpayer's case before the Board was argued upon the basis that the application of the decisions of the High Court in Handley and Forsyth was a question of degree, and therefore one of fact only. The taxpayer submits that several questions of law were involved in the decision of the Board - some formally taken before the Board and some misunderstood by members of the Board in arriving at their decision.

It is submitted by the taxpayer that the decision of the Board involved the proper construction of sec. 51(1), and the proper principles to be applied in relation to a claim for a deduction under it.

It is said on her behalf that the Chairman of the Board had misunderstood what had been held by the High Court in Handley and Forsyth. The Chairman, in para. 4 of his reasons, based his decision in part upon what he said was the rejection by the High Court of the ``usage concept'' in sec. 51(1). I am not fully confident that I understand precisely what the Chairman intended to say in para. 4. Nor does the context assist me. If the Chairman intended to suggest, as he appears to suggest, that the use of the premises in question has been held by the High Court to be irrelevant in determining the essential character of the expenditure for the purposes of sec. 51(1), then he is wrong.

It would seem that the Chairman in para. 4 was referring to what was said by Wilson J. in Forsyth (at ATC p. 4165; C.L.R. p. 217) concerning the decision of the New Zealand Court of Appeal in Commrs. of I.R. (N.Z.) v. Banks (supra), to which I referred earlier in this judgment. In Banks (at ATC pp. 6007-6011; N.Z.L.R. pp. 478-479, 481-482), the Court of Appeal approved an earlier decision in
I.R. Commrs. v. Castle (1971) 2 A.T.R. 481, in which the trial Judge had adopted the test of whether the principal or the primary use of the particular premises was for professional purposes. Such a test must be accepted as being inconsistent with the decision of the High Court in Lunney's case (supra). Such an acceptance does not, however, mean that usage is irrelevant in determining the essential character of the expenditure for the purposes of sec. 51(1). As I said earlier, it is clear that in Forsyth, Wilson J. rejected the ``use'' criterion preferred by the Court of Appeal in Banks. It is also clear that, although in Forsyth, Mason J. (at ATC pp. 4158-4159; C.L.R. p. 206) stated that he was ``in general agreement'' with what Wilson J. had written in that case, he also stated that his agreement was to be read in the light of his own reasons for judgment in Handley. In Handley, his Honour said (at ATC pp. 4171-4172; C.L.R. p. 194) that, whilst he did not agree that (in determining the essential character of the expenditure) only the use to which the premises are put should be looked at, use was nevertheless obviously a matter of great importance. His Honour also (at ATC p. 4172; C.L.R. p. 195) firmly rejected the ultimate decision in Banks. But it cannot be said that Mason J. has rejected the relevance of use in determining the essential character of the expenditure. Both Stephen and Aickin JJ. who formed the minority in Handley, also held (at ATC pp. 4169, 4174; C.L.R. pp. 190, 199) that, despite Lunney, the use to which the premises were put and the purpose of the expenditure remained relevant in determining the essential character of that expenditure. There is a clear majority of the High Court in

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favour of holding that the use to which premises are put remains relevant in determining the essential character of the expenditure.

In these circumstances, it may be said that, insofar as he intended to suggest to the contrary, the Chairman appears to have misunderstood the law in some relevant particular so that a question of law is involved in his decision.

It is also submitted on behalf of the taxpayer that a question of law was involved in the reasons of Mr. Pape, at para. 6 of his reasons where he referred to the decision in
F.C. of T. v. McCloy 75 ATC 4079 at p. 4082 when determining that the expenditure upon rent incurred by the taxpayer in the present case bore the essential character of domestic expenditure because it was incurred irrespective of whether the income activity was carried on at the residence. Counsel for the taxpayer had submitted to the Board that McCloy's case should not be followed insofar as it said that the character of the expenditure upon interest in that case acquired its domestic character at the time of the purchase of the premises as a home, and that a subsequent use of part of those premises for a place of business did not alter the essential character of those interest payments. I do not read McCloy's case as laying down any proposition of law to that effect, although such was clearly the basis of the decision upon a question of fact. I do not see that Mr. Pape has used McCloy's case as other than an illustration of the factual situation which he saw arising (in my view, wrongly) in the present case. And I have already referred earlier to what seems to be a proper distinction in such circumstances between a deduction claimed for interest payments and one claimed for rental payments.

Next, it is argued that the mere submission made to the Board concerning the effect of McCloy's case which was not thereafter accepted by the Board means that its decision involved a question of law. This argument is based upon what was said in
Stewart v. F.C. of T. 73 ATC 4007 at p. 4008. I do not agree that the judgment in that case goes so far. The taxpayers there had invited the Board to place a broad construction upon a section of the Act, an invitation which the Board did not accept. The correctness of that construction was the issue which determined the reference in favour of the Commissioner. That is not the situation in the present case, because I am not satisfied that Mr. Pape adopted McCloy's case as a proposition of law.

Thirdly, the taxpayer points to another submission made to the Board on her behalf which sought to distinguish that line of cases culminating in Handley and Forsyth, and which was rejected. That submission purported to give a somewhat different interpretation to statements made in those cases to the effect that it is not sufficient to establish that the home office was used exclusively for income-earning activities. That such statements were made expressly or by implication in some of those cases is not in dispute; for example,
F.C. of T. v. Faichney 72 ATC 4245 at p. 4248; (1972) 129 C.L.R. 38 at p. 43; McCloy at p. 4083; Handley at ATC pp. 4171-4173; C.L.R. pp. 193, 194-195, 197; although the word ``exclusively'' is in reality the taxpayer's own gloss. It is the next step of the argument which presents the problem. It was submitted that this word ``exclusively'' could be understood in three ways: (a) the room was not used for anything but income-earning activities; (b) the room was the only area used by the taxpayer for those activities; and (c) the room was constantly used for those activities and not just part-time. Then it was submitted that, if it be established that the home office was used in each of those three ways, the taxpayer was entitled to the deduction sought. Such a submission appears to have been accepted by Mr. McCarthy in para. 8 of his reasons, but it must necessarily be regarded as having been rejected by the majority of the Board and thus by the Board's decision - and rightly so, for it is in my view clearly without foundation in either the terms of sec. 51(1) or the cases which have sought to divine its meaning. There is, in the second of the three meanings ascribed to the word ``exclusively'' the shadow of a submission that, as I have already held, the decisions in Handley and Forsyth may be distinguished where, as in the present case, the taxpayer used the home office as the only basis of her operations and not to do work of the type which could ordinarily be done at home rather than at his or her usual base of operations and which was in fact done at home only as a matter of convenience. But it was not put to the Board in that way. What the taxpayer says, nevertheless, is that she had invited the Board to place this particular construction upon sec. 51(1), an invitation which the Board did not accept. The correctness of that construction was at least one issue which determined the

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References in favour of the Commissioner. That was a question of law which must be accepted as being really and not merely colourably involved in that decision, notwithstanding its inevitable fate before the Board: cf.
F.C. of T. v. Miller (1946) 73 C.L.R. 93 at p. 101; see also Krew and XCO Pty. Ltd. to which reference was made earlier in this judgment. In accordance with Stewart's case (supra), therefore, the decision of the Board involved a question of law within the meaning of sec. 196(1). In my view, this submission (unlike that which was rejected by the majority of the Board) is sound. As I have already pointed out, this Court's jurisdiction to hear the appeal is not lost because the question of law was correctly decided by the Board. The taxpayer has, moreover if albeit somewhat faintly, sought (unsuccessfully) before me to challenge the Board's rejection of that construction of sec. 51(1).

Finally, it is submitted by the taxpayer that it is obvious from the decision of the majority of the Board that both the Chairman and Mr. Pape had misinterpreted the decisions of the High Court in Handley and Forsyth as precluding a deduction for a home office wherever the relevant portion of the premises for which the deduction is sought (a) was not physically separate from the rest of the home, and (b) was readily capable of use for domestic purposes. Certainly this is obvious in relation to Mr. Pape's reasons and, for the reasons which I have already expressed, such an understanding of the two decisions (taken as a whole) is in my view wrong. I am not altogether certain that it is so obvious in relation to the Chairman's reasons, because of the difficulties I have in understanding precisely what he intended to say in para. 4 concerning the rejection of the ``usage'' concept.

Nevertheless, it is clear that at least one if not more questions of law is or are involved, in the senses discussed in Lombardo's case (supra), in the reasons expressed by each of the majority of the Board which found in favour of the Commissioner. The objection taken by the Commissioner that no appeal lies to this Court is therefore rejected.

There remains the question of apportionment - that is, the apportionment of the total rent so far as it related to the use by the taxpayer of part of the unit as a home office (not apportionment as to the use of that particular area for both income-earning and domestic purposes).

The taxpayer sought a deduction upon the basis of the proportion of the floor area of the unit which was occupied by her as a home office. Such a claim is in accordance with that which was accepted by Stephen J. in Handley (at ATC pp. 4166, 4171; C.L.R. pp. 185, 193), although his Honour said that it was not the only correct method. In the present case, the claim was accepted upon this basis by Mr. McCarthy, the member of the Board in the minority who upheld the deduction claim. The other two members of the Board did not need to consider this question and did not do so.

The Commissioner sought to have the question of apportionment remitted to him for further consideration, but the question was directly raised before the Board where the representative of the Commissioner conceded that, if a deduction was to be allowed, the basis of that deduction should be the floor area of the room in relation to the total floor area of the unit. There was no cross-appeal or similar complaint by the Commissioner, but in any event I see no reason why he should now be permitted in this case to repudiate the concession which he made before the Board.

I am content to accept as appropriate the approach adopted by Mr. McCarthy in para. 7 of his reasons and to find that the amounts of the deductions to which the taxpayer is entitled are those which Mr. McCarthy has calculated.

Accordingly, I uphold the taxpayer's appeal. I remit the assessments to the Commissioner to be amended, in accordance with the terms of my judgment, to allow deductions under sec. 51(1) of $292 in the year ended 30 June 1978 and of $779 in each of the years ended 30 June, 1979 to 1981 inclusive. I order the Commissioner to pay the taxpayer's costs.