TAX APPEAL

Press, Volume XCIX, Issue 29238, 23 June 1960, Page 10

TAX APPEAL

Profit From Sections

Judgment for the Commissioner of Inland Revenue, in his appeal by way of case stated against the decision of a Magistrate that Edmund Thomas Hubbard, a farmer and horse trainer, was not liable to-pay income tax on the sale of building lots owned by him, has been entered in the Supreme Court by Mr Justice Adams. Mr P. T- Mahon appeared for the Commissioner and Mr A- W. Brown for Hubbard.

In his reserved judgment, his Honour states that the respondent (Hubbard, as a taxpayer) in January, 1953, bought for £7lOO a property of about five acres in Frankleigh street, Spreydon, containing a house, stables, and other buildings.

Respondent then sold a proproperty of two acres and a half in Blenheim road where he had lived since 1951 and which he had used as a training establishment for trotters owned by him. He had only'two horses when he bought the Frankleigh street property. From 1948 until the purchase of the Blenheim road property, respondent had owned and occupied a .farm at Greenpark. He still owned it and the property was managed by one of his sons. The vendor of the Frankleigh street property, one Holmes, had had a subdivision completed before respondent bought it. A few months after he bought it, respondent arranged a further plan and the property was subdivided into 10 lots- In-1953 and 1954, some of the lots were sold and respondent did not include the profits from sale in his income tax returns for 1954 and 1955. ■profits Made

An income tax inspector ascertained the profits made as £1455 9s 3d in the earlier year and £|1065 16s lOd in the later year, and assessments were sent to respondent increasing tax payable by him by £497 12s 6d and £540 9s in the respective two years. The respondent objected' that, inter alia, the profit motive had been absent both when he acquired the property and when the subdivis : onal sales were madeRespondent was not a dealer or speculator in land and had bought the property “as a residential property for his domestic purposes.” The matter was argued before a Magistrate, the only witnesses called being the respondent and a tax inspector, one Hansen. The Magistrate found in favour of respondent, and appellant appealed by way of case stated. His Honour, after reviewing the evidence, the Magistrate’s written decision, and citing other cases, said he could not believe the respondent’s sale of the sections was motivated by the rather flimsy reasons put forward in his evidence in the lower Court.

“I find it equally difficult to imagine he was at the time oblivous to its subdivisional value. I think, even on 10 minutes inspection, he must have been impressed by that potentiality and his willingness to pay a price of £7lOO must have been influenced thereby.

“The result is that he has failed to discharge the onus of satisfying this Court that, when he bought, he did not do so with the intention of selling sections. “He may perhaps now believe in ah honesty that he did not have the relevant intention of selling sections, but he has failed to persuade me that he did not,” his Honour said-

He said the appeal was allowed; the amended assessments for tax on the respondent’s profit were confirmed; the respondent was ordered to pay the Commissioner of Inland Revenue, £8 8s costs for the lower Court hearing and £l5 15s costs and disbursements for the appeal.