the paid-up value of shares distributed by a company to its shareholders to the extent to which the paid-up value represents a capitalization of profits.
And the effect of the definitions of "income from personal exertion" and "income from property" is, in my opinion, to bring dividends into the category of "income from property". This was the conclusion reached by Menzies J. in Fuller's Case [1] and, with respect, I agree with it. Section 44 (1) appears to me to proceed upon this footing and provides that, subject to the section, the assessable income of a shareholder in a company shall - if he is a resident - include dividends paid to him by the company out of profits derived by it from any source. It is true that s. 44 (2) (b) (iii) provides that the assessable income of a shareholder shall not include dividends paid wholly or exclusively out of profits arising from the revaluation of assets not acquired for the purpose of resale at a profit if the dividends paid from such profits are satisfied by the issue of shares in the company declaring the dividend. Its effect is to take such a dividend out of or perhaps to prevent it falling into the category of assessable income with the result, in the present case, that the paid-up value of the shares issued by Gibb & Miller Limited to Gibbsons Investments Limited, being a "dividend paid wholly or exclusively out of profits arising from the revaluation of assets not acquired for the purpose of resale at a profit", formed no part of the latter company's assessable income. But although this dividend did not form part of the company's assessable income, the Act, in my opinion, regards it as income. This accords, I think, with the view stated by Fullagar J. in Fuller's Case [1] . His Honour had earlier expressed the opinion that the application by a company on behalf of a shareholder of an amount representing the latter's share of capitalized profits in payment of bonus shares issued to that shareholder in circumstances similar to those in the present case was a derivation of "income" by the latter in the ordinary or commercial sense of that word. He went on, however, to say that even if it were wrong to hold that the taxpayer in such a case had derived income in the generally accepted sense of that word
s. 44 (1), read with the definitions in s. 6 of "dividend", of "income from personal exertion", and of "income from property", clearly treats the amount represented by the face value of bonus shares as income - income for all the purposes of the Act .
With respect, I agree, and I think the same view should be taken of the meaning of the word income in s. 47 (1). The judgment of Menzies J. in that case seems to me to have followed the same line of reasoning. The Act, his Honour said, expressly includes
"bonus shares (which are by their nature capital) within the definition of dividends (which are by their nature income). The result, prima facie, is to give everything that falls within the definition of dividends the character of dividends, that is, income" [2] , and "It is my opinion, therefore, that the Act does give to the paid-up value of bonus shares, the character of income" [3] .
1. (1959) 101 C.L.R. 403.
2. (1959) 101 C.L.R., at p. 421.
3. (1959) 101 C.L.R., at p. 424.
4. (1959) 101 C.L.R., at p. 425.