22 October 1923, 23 October 1923, 25 October 1923, 5 March 1924

Higgins J. delivered the following written judgment: -

The appellant here, a racehorse trainer, objects to being taxed under the War-time Profits Tax Assessment Act 1917-1918 for the year ending 30th June 1919. The first three grounds of objection raise the point that under sec. 8 (1) (c) and (d) he is not taxable at all, whatever the profits of his business; the fourth ground is that the assessment is excessive; the fifth ground, relating to the inclusion of his freehold premises, has been abandoned.

By sec. 7 (1) the tax is levied on all war-time profits from any business to which the Act applies. Under sec. 4 "business" includes any "profession" or trade. Under sec. 8 (1) the businesses to which the Act applies are all businesses of any description deriving profits from sources within Australia, excepting (inter alia) (c) "offices or employments," and (d) "any profession the profits of which depend mainly on the personal qualifications of the person by whom it is carried on, and in which comparatively little or no capital expenditure is required."

What the appellant does to earn his profits is set out in par. 2 of the admissions: - "The appellant has acquired considerable knowledge, skill and experience extending over many years in connection with the training, handling and treatment of racehorses for the purpose of competing for prizes and money, and by reason thereof he is engaged by various owners of racehorses separately and individually to train their horses for the purpose of racing. He accordingly receives the custody of the horses, provides them with the requisite stabling and feed and the necessary attendance by apprentices, grooms and stable boys, and formulates a plan for training each horse in accordance with the views, directions and requirements of the owner - which views, directions and requirements he is bound to obey and carry out; and by the terms of his engagement in each case he is paid for his services by a remuneration of a fixed sum per week for each horse together with a commission at the rate of 10 per cent. upon the amount of stakes won by each successful horse, and each owner has to bear and pay all other expenses in connection with his horse, such as entrance and acceptance fees for races, riding fees for jockeys, shoeing charges and travelling expenses. During the year of assessment, the appellant on behalf of the owners paid £2,592 under the latter mentioned headings and was reimbursed by the owners for such payments."

I treat the appellant, therefore, as "employed" by various owners, separately and individually, to train their horses; but it does not follow that he is in the employment of any one owner. He is not the whole-time employee or servant of any owner. What is the meaning of exempting from the businesses to which the Act applies "offices or employments"? In my opinion, the meaning is that although the owner of a business is taxed (cf. sec. 7 (5); sec. 8 (3) (a); sec. 10 (1), proviso, (3); sec. 11 (1A); sec. 14 (2); sec. 15 (9); sec. 17 (1), &c., &c.), his employee is not taxed in respect of his remuneration. The employee does not carry on the business for himself. If the word "offices" were used alone, in the exemption (c), the exemption might be treated as restricted to what are technically "offices"; so the words "or employments" are added. The employer is taxed - not any employee as such. This view is in accordance with the reasoning of the Court of Appeal in Robbins v. Commissioners of Inland Revenue [1]. Therefore, the appellant, by keeping stables and staff for the owners who employ him separately, is not in the employment of any one owner or body of owners, and cannot claim exemption under sec. 8 (1) (c). He carries on the business of trainer; he gets the profits of that business.

As for the exemption claimed under sec. 8 (1)(d), I quite concur with the view taken by my brother Starke, in the recent Queensland case of Robbins Herbal Institute v. Federal Commissioner of Taxation [2], that it is not sufficient for the appellant to show that his profits depend mainly on his personal qualifications, and that comparatively little or no capital is required; he must also show that his occupation can properly be called a "profession." What is a "profession"? I turn to the Standard Dictionary, an American dictionary, for in America the denotation of the word seems to be even more liberal in practice than amongst ourselves; and I find "profession" is said to mean: - "1. An occupation that properly involves a liberal education or its equivalent, and mental rather than manual labour; especially, one of the three so-called learned professions. 2. Hence, any calling or occupation involving special mental and other attainments or special discipline, as editing, acting, engineering, authorship, &c." As Scrutton L.J. said in Currie v. Commissioners of Inland Revenue [3], a question of degree is involved in nearly every case in applying the word "profession"; and I have no hesitation in saying, having seen and heard the witnesses, that the occupation of this racehorse trainer is not a "profession." I see no reason for differing from the view taken by the Commissioner on this subject. The assessment itself is, on this appeal, prima facie evidence that the amount and all the particulars of the assessment are correct (sec. 25); and that prima facie evidence has not been shaken by anything that I have heard. Nor am I satisfied that the other conditions for the exemption have been satisfied.

As for the £250 gratuity (or "bonus," as the appellant calls it) paid by a certain firm of owners to the appellant, in addition to the stipulated weekly payment and the commission on first winnings, this sum was, in my opinion, rightly included in the assessment. Assuming, as the appellant contends, that by virtue of sec. 10 the provisions of the Income Tax Assessment Act 1915-1918 (sec. 14 (f) and (g)) are applicable to this sum, I am of opinion that, on the true construction of sec. 14, this sum is a "gratuity" or "bonus" - in the nature of a "tip" - within (g), and not "a retiring allowance or gratuity" within (f).

A small matter - as to £10 "additional tax" claimed by the Commissioner because of the failure of the appellant to comply with the regulations in time - gave me some trouble. I assume, in favour of the appellant, that the matter is one of excessive assessment within objection 4. The appellant's agent alleges that after the due time he asked one McGrath, acting chief assessor, to extend the time, and that the extension was granted. McGrath is in Sydney, and could not be called. But I am not satisfied that there was any promise to remit the additional tax already incurred; and, on the construction of sec. 55, I am of opinion that no officer other than the Commissioner could relieve the taxpayer of this liability. So strictly are such remissions regarded by Parliament that the Commissioner, under sec. 55, has to furnish to the Treasurer, for presentation to Parliament, a report of all such remissions, with his reasons. It may well be that the officer merely meant that the office would not prosecute if the taxpayer performed his duty before 24th February. Giving the full benefit, however, of the defective evidence as it stands to the appellant, I am not satisfied that the inclusion of the £10 in the assessment was not right.

In this case I think it is quite clear that the decision of the learned Judge was right and that the appeal should be dismissed.

I agree that the appeal should be dismissed. I wish to say a few words as to the meaning of the words under consideration.

Two words are relied on by Mr. Hayes with regard to liability at all. One is the word "employments." I think that word is used in contradistinction to principal in relation to a business. The other word is "profession." That is an expression which I agree is not capable of exact definition. The Act is one addressed to the general understanding of the community, and the meaning of the word as there found depends entirely on that understanding. The word "profession" is not one which is rigid or static in its signification: it is undoubtedly progressive with the general progress of the community, but at the present time and according to the present understanding of people the business of a horse-trainer is not included in the word "profession."

With regard to the £250, Mr. Hayes admits that if the word "retiring" is to be applied to the word "gratuity" in sub-sec. (f) of sec. 14 of the Income Tax Assessment Act , he has no case on the subordinate point. I think it clearly is to be so applied.

I agree that the judgment appealed from is right and that the appeal should be dismissed.

I agree with the conclusion arrived at by my brother Higgins. The facts show that the appellant was a principal. The word "employments" in clause (c) of sec. 8 (1) was not intended to and does not include the case of a principal in a business. The word "profession" is a vague and now-a-days a somewhat elastic term. There is no need to go afield, whether to dictionaries or to other countries, to ascertain its meaning. In Australia, at any rate, although we have travelled beyond the well-known three learned professions, a horse-trainer does not carry on a "profession." On the minor point I think that the word "retiring" qualifies the word "gratuity."

Hayes K.C. and Reginald Hayes , for the appellant.

Solicitor for the respondent, Gordon H. Castle , Crown Solicitor for the Commonwealth .

[1] (1920) 2 K.B. 677.

[2] [1923] HCA 28; (1923) 32 C.L.R. 457.

[3] (1921) 2 K.B. 332, at pp. 340-341.