Commissioner of Taxation (Cth) v Finn

Commissioner of Taxation (Cth) v Finn - [1961] HCA 61 - HCA 1961 case summary — Zoe

[6]

The facts of the present case may be thought simple enough but probably they are not very usual. The taxpayer is a senior design architect in the Public Works Department of the State of Western Australia, a Department which he joined in 1926. In 1936 he went to England to further his knowledge and he remained abroad for four years working and studying in Europe and America. He had qualified as an architect in 1932. Apparently the taxpayer remained very interested in his profession but over many years was able to follow the developments of architecture abroad only by literature, periodical and otherwise. He was aware that in 1956 he would be entitled to long service leave and in order to increase the period of his possible absence from duty he accumulated his annual leave for four years. He had determined to devote himself during his leave to the study of architecture abroad. He corresponded with architects and journals abroad and carefully planned an itinerary for architectural inspection and study. He says that the plan concentrated on good architecture, even if his work in the Department largely concerned hospitals, schools, public buildings, offices and the like. Owing to the work he was doing it became necessary to postpone his departure for some eighteen months and in the result he left Perth on 22nd April 1957 for England. He returned to duty on 30th January 1958. For some time before his departure he had been at work designing a building for the Engineering School at the University of Perth. When the taxpayer applied for his leave and explained his purpose and the plans he had made, the Principal Architect of the Department for Works said that he would like him to include a visit to South America to see the modern architectural developments there, particularly features such as sun screening which seemed to have a significance for Western Australia. He was to look at engineering buildings. Through the Premier on behalf of the Government this extension of his plans was arranged and to meet the additional costs the Government made a contribution to his expenses.

[9]

In considering this argument it is perhaps necessary to see exactly where he stood in the service of the Government of Western Australia. He was a member of the Design Section of the Architectural Division of the Public Works Department. He was one of three Senior Design Architects and of these three he stood highest in seniority. Above him in the Design Section was the Principal Assistant. Departmentally there stood above these the Assistant Principal Architect and the Principal Architect. The latter was at that time to retire within a year. As to the taxpayer's salary he was then at the maximum of the range which his grade or classification allowed. It would be by promotion only that he would go into a range of higher salary. If a vacancy occurred in any of the offices above him and it was thought expedient to fill it by the promotion of an officer, the appointment would be made on the recommendation of the Public Service Commissioner who in making it would have regard to the relative efficiency or, if two or more officers were of equal efficiency, to the relative seniority of the officers: see s. 34 of the Public Service Act, 1904-1956 W.A.. Moreover an officer eligible for promotion may appeal on the ground of superior efficiency against the promotion of someone else to an office to which he aspires: efficiency for that purpose includes special qualifications and aptitude for the discharge of the duties of the office: see s. 4 and s. 14 of the Government Employees' (Promotions Appeal Board) Act, 1945 W.A.. In the course of the taxpayer's evidence given before the Board of Review and used in this Court, he was asked whether he believed his period abroad would better fit him for promotion in the future. He answered "I hope so. That was the whole point of the trip. I mean, this is purely from my side of it. The reason why I did it was that the Principal Architect was due to retire at the end of the year and there were two people senior to me, in seniority, and so the purpose of my trip was to gain the extra knowledge to fit myself to perhaps get possible promotion over them."

[12]

From the facts that have been stated above three or four conclusions may be drawn which perhaps may be considered to govern the question whether the expenditure was incurred in gaining or producing the assessable income. In the first place it seems indisputable that the increased knowledge the taxpayer sought and obtained of his subject and the closer and more realistic acquaintance he secured of modern developments in design and construction made his advancement in the service more certain, and that in respect of promotion to a higher grade these things might prove decisive. This was put clearly by the Principal Architect, though in a letter written ex post facto, "I understand from you that the Commissioner now desires to know whether the experience obtained and the large amount of data collected will result in an increase in your income. To me, it is obvious that this must increase your professional efficiency, and hence your value to this Department, and must materially assist your future advancement to a higher position in the Department with consequent increase in income." In the second place, so far as motive or purpose is material, advancement in grade and salary formed a real and substantial element in the combination of motives which led to his going abroad. In the third place it is apparent that the heads of his Department, and indeed the Government itself, treated the use which he made of his long service and other leave to study architecture, increase his professional knowledge and study modern trends, as a matter not only of distinct advantage to his work for the State but of real importance in at least one project in hand. In the fourth place it was all done while he was in the employment of the Government, earning his salary and acting in accordance with the conditions of his service. He was in fact complying with the desires, and so far as going to South America was concerned, with the actual request of the Government. His journey abroad and what he did while in Europe, as well as in South America in the following year of income, was therefore in a correct sense incidental to his employment and most relevant to it.

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Judgment (20 paragraphs)

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