London Australia Investment Co Ltd v Commissioner of Taxation

The appellant company was incorporated in New South Wales in 1957. Capital in the company was in the year of its incorporation subscribed to the extent of one million pounds divided into 1,000,000 shares of one pound each. At all times material to the question presently before the Court, the subscribed capital was $7,500,000 divided into ordinary stock units of $1 each. The primary object of the company was stated in cl. 3 (1) of the memorandum of association as follows:

(1) To carry on the business of an investment trust company and to acquire and hold shares, stocks, debentures, debenture stocks, bonds, obligations, securities and evidences of indebtedness or of the right to participate in profits or assets or other similar documents issued or guaranteed by any company wheresoever constituted or incorporated, or by any government, sovereign ruler, commissioners, public body or authority, supreme, municipal, local or otherwise, whether at home or in any other part of the world and any options or rights in respect thereof and to buy and sell foreign exchange.

The company was not listed on any stock exchange in Australia but at some time after July 1960 it was listed on the London Stock Exchange. The shareholders in the company were mostly residents of the United Kingdom. The company did not at any relevant time have a place of business in Australia and it had no employees in Australia. Its affairs were managed by a management company in this country, at first by Anglo-Australian Corporation Pty. Ltd. and later by Australian United Corporation Ltd.

The subscribed capital of the company was for the most part invested in the ordinary shares of Australian companies, mostly those whose shares were quoted on Australian stock exchanges. The management company provided advice and recommendations to the appellant company on its investments and generally provided management services including accounting and secretarial services.

A company such as the appellant was of particular interest to shareholders resident in the United Kingdom because there were particular tax benefits which could be obtained by such residents in respect of income received from dividends declared by such a company to the extent that those dividends were derived from the distribution to the company of dividends from Australian companies whose source of income was outside the United Kingdom. The same advantage did not exist in so far as dividends of such a company were declared out of profits other than the dividends of such Australian companies.

There was provision in the articles of association of the appellant company which precluded the distribution of profits by way of dividend to the extent to which the profit represented money realized on the sale or payment off of any capital asset of the company in excess of the price at which the asset should stand in the books of the company. Such moneys were required to be carried to the credit of an account called "Provision for diminution in value of capital assets" and thereafter at the discretion of the directors to a reserve called the "Capital Reserve".

Over the years the company bought and sold shares in Australian companies. It commenced so to do in 1957. The years with which the present three appeals are concerned are the calendar years 1967, 1968, and 1969, the appellant's accounting and tax years being the calendar years. In each of these years there was a surplus of gains over losses arising from the sale of shares, and the respondent Commissioner included this surplus in the assessable income of the appellant in each year. The method of calculation of gains and losses was not based on the difference between actual purchase price and actual sale price of any particular parcel of shares but was based on the difference between the latter and the average purchase price of the particular class of shares in the particular company. No question arises on these appeals on the correctness or otherwise of this method of calculation. The surplus of gains over losses in respect of the 1967 year was $816,651, of the 1968 year $140,166 and the 1969 year $413,263.

The appellant objected to the inclusion of these surpluses in its assessable income; its objections were disallowed, and it appealed to the Supreme Court of New South Wales. Helsham J. upheld the assessments [35] and it is from his decision that these appeals are brought.

1. (1974) 23 F.L.R. 89; 4 A.L.R. 44; 4 A.T.R. 638; 74 A.T.C. 4213.

The hearing before Helsham J. occupied some days and in his reasons for judgment upholding the assessments the learned judge reviewed the evidence at length and expressed his conclusions thereon with analysis of the legal questions arising. His detailed expression of his conclusions on questions of fact and his analysis of the legal conclusions flowing therefrom is of great assistance and considerably simplifies the task of this Court. The questions which the learned judge decided were, broadly speaking, as follows. Had the shares which were sold at a profit in each of the subject years been acquired by the appellant company for the purpose of resale at a profit or as part of a profit-making undertaking or scheme? If not, were the purchase and sale of the shares part of a business of purchasing and selling shares whereby profits from that activity were income of the appellant company within s. 25 of the Income Tax Assessment Act? An alternative framing of the latter question is whether the incomings and outgoings on sale and purchase of shares were incomings and outgoings under s. 25 and s. 51 of the Act respectively.

It was necessary for Helsham J. to determine the purpose or purposes of the appellant company at the time of acquisition of the various shares and whether that determination disclosed that the shares which were sold at a profit had been acquired by the company for resale at a profit within the meaning of those words in s. 26 (a) of the Income Tax Assessment Act. In addition to much documentary evidence, he had the oral evidence of Mr. Harper who as an employee of the first management company, Anglo-Australian Corporation Pty. Ltd., and as general manager of the second management company, Australian United Corporation Ltd, and as director of the appellant company since 1962, was accepted by the learned judge as being in a strong position to give evidence on the course of business of the appellant and on the policies and purposes guiding the directors of the appellant. He also had the evidence of Mr. MacKinnon who during the years 1967 to 1969 was the portfolio manager of the second management company. He had previously been on the staff of the first management company. Much depended upon whether or not these witnesses, particularly Mr. Harper, were believed on the question whether the shares which were sold during the relevant years had been acquired by the appellant company for the purpose of resale at a profit within the meaning of those words in s. 26 (a). Helsham J. accepted the evidence of Mr. Harper that they had not been so acquired. This finding of fact must be accepted and it makes it unnecessary to review all the reasons given by his Honour in the course of reaching this conclusion. It is sufficient to go to his conclusions upon this question. It is convenient to use the language of Helsham J. in his conclusions with the omission of his discussion of the evidence which led to those conclusions.

The company was an investment company, the primary object of its investment activities being to produce dividend income which it could distribute to shareholders. In order to produce this income, the appellant invested in a number of shares in listed public companies in Australia from which it hoped or expected it could immediately or within a reasonable time obtain a dividend yield of four per cent or better. Dividend yield here means return on shares calculated as a percentage of their market value. The total of the company's investment holdings was known as its share portfolio. Certain considerations governed the makeup of the appellant's share portfolio. One was the holding of an adequate number of shares in any company in which an investment was made so that adequate supervision of the assets of the appellant could be ensured. Another consideration governing the makeup of the company's share portfolio was a requirement that shares held should be readily marketable so that they could be disposed of in the event that a change of investment became necessary or desirable. It was an aspect of marketability that investments should be made in companies, the market value of whose shares were not likely to decline. Another consideration was that a proportion should be kept in the holding between various companies and the appellant aimed at not permitting any one holding to exceed about five per cent of its total investment. Another consideration was the earning yield of the companies in whom investment was made. It was desirable that companies in which shares were held should have current earning yields of one and one and a half to two times dividend yield so that dividends were adequately covered. A result of this investment emphasis and policy was that the appellant was always interested in growth potential of shares and Helsham J. was satisfied that the company was interested in shares with growth potential in the sense that that expression was defined by Mr. Harper as "potential for growth in income from dividends". His Honour realized that growth potential looked at in this way was very much the same thing as potential for increasing in market value. He discussed this aspect and concluded [36] :

Notwithstanding all this, I am quite satisfied that to this company in relation to decisions about shares, growth potential meant the expectation of greater dividend yield, and that one of the considerations motivating purchase of shares by it was the growth potential of those shares in this sense. Equally, I am satisfied that the prospect of an increase in capital value alone was not a factor which guided the Board of the company in the purchase of shares. Both Mr. Harper and Mr. McKinnon have sworn that shares were never bought by the company for the purpose of profit-making by sale, or for the purpose or with the intention of selling them; nor were they bought with the expectation of increase in market value as the sole reason for purchase. I accept their evidence. 1. (1974) 23 F.L.R., at p. 97; 4 A.L.R., at p. 52; 4 A.T.R., at pp. 644-645; 74 A.T.C., at p. 4220.

His Honour then further discussed the relationship between the policy adopted and what he described as the inevitable increase in market value. The word "inevitable" has been criticized but clearly his Honour meant extreme likelihood or practical certainty and so read his statement is correct when account is taken of the economic or market climate of the time. His Honour proceeded in his reasons as follows [37] :

With the type of shares that the company chose to invest in, and the market climate that existed in 1967, 1968 and 1969, sales of shares did take place, the capital base of the company was enlarged, and the dividend income increased. I have already referred to the figures showing an increase in shareholders' funds in the three years; the corresponding dividend income was $478,406 for 1967, $515,314 for 1968 and $546,233 for 1969. But notwithstanding this I accept what Mr. Harper says, namely that the purpose of selling and buying shares was the improvement of the dividend return to the company from the capital employed in producing it.

I think one can summarise this evidence by stating that the relevant business of the company consisted of investing money in shares for the purpose of producing income to be paid as dividends to shareholders, safety and preservation of capital being a factor that influenced investment policy, but the underlying or basic factor being the use of shareholders' funds for the acquisition and retention of satisfactory income-producing shares. The law must be applied to a business of this nature in order to determine its tax liability.

1. (1974) 23 F.L.R., at pp. 97-98; 4 A.L.R., at pp. 52-53; 4 A.T.R., at p. 645; 74 A.T.C., at p. 4220.

Helsham J. next examined the scale of the company's purchases and sales of shares. He concluded that there was over the period in question a continuous large scale activity in the buying and selling of shares. This can hardly be disputed. There were purchases in every month and sales in every month except three. The yearly figures were as follows: 1967 Purchases $1,470,182.98 Sales 2,062,610.27 1968 Purchases 1,700,408.97 Sales 1,816,086.21 1969 Purchases 1,248,730.61 Sales 1,114,472.42 The total funds in share investments at cost in each of the three years were as follows: 1967 $9,813,896 1968 9,879,229 1969 10,530,040 Then his Honour stated [38] :

But it is proper to reiterate that the investment policy considered by the Board best suited to further the interests of this investment company required this amount of buying and selling, and that sales and purchases of shares by the appellant were geared to dividend yield, and that the decisions were made with the object of ensuring the best dividend return upon the capital available pursuant to an investment policy I have tried to explain. 1. (1974) 23 F.L.R., at p. 99; 4 A.L.R., at p. 54; 4 A.T.R., at p. 646; 74 A.T.C., at p. 4221.

Before Helsham J. the respondent Commissioner had pointed to certain apparent exceptions to the company's underlying policy of share investment and to the dealings in fourteen companies in particular. His Honour examined the evidence and, relying largely on the evidence of Mr. Harper, he declined to regard the apparent exceptions as falling into a special category. Next he examined the evidence relating to the rise over the relevant years in the All Ordinaries Index. He concluded [39] :

I think the state of the market is one factor explaining the course of business adopted by the appellant, and I have taken it into account in reaching the conclusions I have reached as to what the company was doing and why it was doing it. Then he examined the effect if any on his conclusions of a change in activities in 1967 brought about by the suggestions of Sir Maurice Hutton, then a director of the appellant company. He concluded: " the Hutton activities did not yield profits that come into any category of income different from that made by the company on its other disposals of shares." 1. (1974) 23 F.L.R., at pp. 101-102; 4 A.L.R., at p. 56; 4 A.T.R., at p. 648; 74 A.T.C., at p. 4223.

Helsham J. then proceeded to his ultimate conclusions from the findings of fact which he had made. He stated [40] :

By reason of my findings the share dealings over the three years cannot be fragmented and dealt with separately but must be looked at as a whole. And taken as a whole I have found that the shares were not property acquired by the taxpayer for the purpose of profit making by sale; this was not the main or dominant purpose actuating the acquisition of the shares (see per Gibbs J. in Jacob v. Federal Commissioner of Taxation [41] ). Nor do I believe that the profits obtained from a continuity of the business activity of the appellant over three years fall within the concept of profit arising from the carrying on or carrying out of any profit-making undertaking or scheme. 1. (1974) 23 F.L.R., at pp. 103-104; 4 A.L.R., at p. 58; 4 A.T.R., at p. 650; 74 A.T.C., at p. 4224. 2. (1971) 45 A.L.J.R. 568, at p. 569.

Helsham J. here refers to "main or dominant" purpose and it is clear that he has directed his mind to the application of s. 26 (a). His earlier finding wherein he accepted the evidence of Mr. Harper and Mr. MacKinnon that shares were not bought for the purpose of profit-making by sale, or for the purpose or with the intention of selling them or "with the expectation of increase in market value as the sole reason for purchase", was likewise clearly directed to the same question, the applicability of s. 26 (a).

The learned primary judge then set out the further rival contentions of the taxpayer and the Commissioner - on the one hand that the company was not trading in shares and on the other hand that buying and selling of shares was part of the regular business of the company resulting in a gain to the company and that the activities of the company were directed to a composite gain which was income. Having discussed certain of the authorities, Helsham J. came to his final conclusion which he expressed as follows [42] :

It was, during the three years in question, an integral part of the appellant's business to deal in shares, in the sense that switching of investments was desirable to produce the best dividend returns, indeed was necessary if the appellant's policy of investing in shares with growth potential was to be adhered to. I find it not relevant in this case to assert that the business of the appellant was an investment business with securities as its very capital, its structure, as it was put, and therefore different from a bank or assurance company, which could be said to be using its money through investment to assist its banking or assurance business - carrying on the business of investment within a banking or assurance structure; drawing a distinction between the profit yielding structure and the process of operating it may be useful as a means to solving some tax problems, but I do not believe it to be so here (cf. Sun Newspapers Ltd. v. Federal Commissioner of Taxation [43] per Dixon J., as he then was; Strick (Inspector of Taxes) v. Regent Oil Co. Ltd. [44] ). Nor is it relevant to talk of dominant purpose of investment, i.e. to provide a dividend, when considering the application of s. 25 of the Act. The fact is that the appellant as part of its business regularly and systematically bought and sold shares and used any favourable yield in its business; the evidence shows that a large part of the activities centred around the collation and assessment of materials and the making of decisions about share disposals, retentions, and purchases with a view to maintaining the optimum capital base or dividend return.

In my view the taxpayer has not shown that the buying and selling of shares was no more than an incident in the business of producing dividends from investment in capital assets, something in the nature of a realization or change of investment only. Rather has it been shown that the activities of buying and selling were done as part of the business of the appellant in order to use to best advantage the shareholders' money; the profits which arise from such share movements are as much profits of the business as the income is; a layman would describe them in ordinary parlance as business profits of this investment company. So would I.

The main attack upon the assessments therefore fails and the appeals are not to be upheld on this ground.

1. (1974) 23 F.L.R., at p. 108; 4 A.L.R., at p. 62; 4 A.T.R., at pp. 653-654; 74 A.T.C., at pp. 4227-4228. 2. (1938) 61 C.L.R. 337, at pp. 359-360. 3. [1966] A.C. 295.

The question for this Court is whether on the findings of fact made by the learned judge at first instance his conclusion was a correct one. It does not matter whether the conclusion is described as one of ultimate fact, or one of law or one of mixed fact and law. It is subject to review. However, it would be out of the question for this Court to displace any findings of primary fact, based as they were on the judge's acceptance of the credibility of witnesses before him. It is not suggested that we should do so.

The starting point is that on the findings of fact made by Helsham J. the shares were not acquired for the purpose of resale at a profit within the meaning of those words in s. 26 (a) of the Income Tax Assessment Act. The first limb of s. 26 (a) is therefore not applicable. The questions still remain whether the profit arising from the acquisition and disposal of the shares is income being a profit arising from the carrying on of a profit making undertaking, the second limb of s. 26 (a), and whether there is income as a result of the application of s. 25 and s. 51. In the circumstances of the present case it is unnecessary to distinguish between these two questions. In each case the profit will only be income if it arose from the carrying on of a business undertaking. The identification and characterization of the business carried on by the taxpayer is the essential task.

It may first be stated that the activity of the taxpayer must be identified as a business activity. If, otherwise than as part of a business of so doing, a man purchases a particular item of property primarily in order to enjoy it in specie or to enjoy the income from it, but at the same time expecting and intending that he will at some time in the future, if and when an opportune occasion presents itself, sell the item of property at a profit, the profit will not be taxable under the first limb of s. 26 (a). But if the dominant purpose is that of sale, then it will be.

If the acquisition and disposal of property is part of a business of so doing, the position is significantly different. There must still be a purpose of resale because resale is part of the description of the relevant business, and, since business has in it the notion of profit-making rather than loss-making, there must no doubt be a purpose of resale at a profit. But the significant difference is that the purpose of resale need not be the sole purpose or the primary or dominant purpose, as is the case under the first limb of s. 26 (a). It need only be one of the purposes. And in this context the word "purpose" is hardly if at all distinguishable from intention or expectation. The dominant or primary purpose may be to obtain income from the items of property acquired but if there is a purpose or intention or expectation of selling at a profit if and when a suitable occasion arises then one condition of carrying on a business of buying and selling at a profit is satisfied. If a man makes a business of acquiring property with a dual purpose of enjoying it or its profits and of reselling it eventually at a higher price than he paid for it, then not only the income from the property but also the profit on resale will be income in the ordinary sense of the term, and within the second limb of s. 26 (a).

Therefore, once profits on sale are found not to fall within the first limb of s. 26 (a), the determinant is the carrying on of a business, not any associated business in a general sense, but the specific business of acquisition with a purpose or intention or expectation of resale and subsequent resale with consequent profit. Though frequent activity of acquisition and resale does not necessarily signify a business, it is evidence from which it may be inferred that there is a business. First, the frequency of the activity may itself tend to show that it is not of a private or of a casual nature, but that rather the person is carrying on the activity as a business operation. Secondly, the frequency of the activity may enable the inference to be drawn, if the fact be in dispute, that there was a purpose or intention or expectation, at the time of acquisition, of dealing at a profit if and when a suitable occasion should arise. Nevertheless, it must be made quite clear that frequency of an activity is not synonymous with business. There may be no business despite frequency and on the other hand there may be a business where the activity is an isolated one. Every business must begin with an initial transaction.

It is not possible exhaustively to enumerate the facts or circumstances which will support the inference that a course of activity is a business. I have referred to one. It would seem that a course of activity on the part of a company otherwise engaged in commercial activity may more readily be termed a business than one on the part of an individual but no great emphasis should be given to this feature. Cf. Western Gold Mines N.L. v. Commissioner of Taxation (W.A.) per Latham C.J. [45] . The nature of the property acquired, e.g. trading stock, may be evidence that it is acquired as part of a business of acquisition and resale.

A circumstance which appears to me to be of substantial significance is that referred to by Kitto J. in National Bank of Australasia Ltd. v. Federal Commissioner of Taxation [46] :

what was recovered through the sale of the shares was circulating capital, and what ultimately was not recovered was a loss on revenue account just as any excess would have been an income profit: cf. Punjab Co-operative Bank Ltd., Amritsar v. Income Tax Commissioner, Lahore [47] ; Colonial Mutual Life Assurance Society Ltd. v. Federal Commissioner of Taxation [48] ; Australasian Catholic Assurance Co. Ltd. v. Federal Commissioner of Taxation [49] ; Commissioner of Taxation v. Commercial Banking Co. of Sydney [50] . The cases referred to are some of what may be described as the "banking" and "insurance" cases, upon which naturally the Commissioner relies quite strongly on this appeal. But there is a significant difference between a banking or insurance business which involves investment activity and the course of investment activity in the instant case. The nature of a banking or insurance business, as part of its putting of money as circulating capital to use, involves not only occasional acquisition of property in satisfaction of advances, as in the situation to which Kitto J. was referring, but also and more commonly the purchase and sale of various kinds of property whereby moneys which are obtained as part of the business but which form no part of the original capital structure of the bank or insurance company, or of that structure enhanced by accumulated net profits, are put to use short term or long term. All profits arising from that activity are profits of the business of banking or insurance. At any time and from time to time the property acquired may need to be sold, in whole or in part, to meet the requirements of the banking or insurance business and the hope and expectation is that in the meantime not only will the property have earned income but that it will have risen in value. The scale of activity coupled with the source of the funds leads to the inference that a purpose or intention of the acquisition is eventual resale at a profit. But in so far as the original capital or that capital enhanced by accumulated profits is laid out in investments in property and not in the business activity of banking or insurance, the investments will have the character of capital and profits or losses on a sale thereof will not be profits of the business of banking or insurance. The banking and insurance cases thus do not provide an answer to the question which arises in the instant case. The source of moneys for the activities of the appellant company is not money of a kind which can be described as circulating capital. It is essentially investment and reinvestment of moneys which were originally part of, or which were added out of capital profits to, the capital structure of the appellant. 1. (1969) 118 C.L.R. 529, at p. 537. 2. [1940] A.C. 1055, at p. 1072. 3. (1946) 73 C.L.R. 604, at pp. 608, 614. 4. (1959) 100 C.L.R. 502. 5. (1927) 27 S.R. (N.S.W.) 231.

Though the findings of Helsham J. certainly preclude a conclusion that shares were acquired and disposed of for a primary or dominant purpose of profit making, he did not conclude that there was no purpose at all in a relevant sense, when the shares were respectively acquired, of resale at a profit. I am not sure that he found it necessary to direct his mind to this question. Rather, he was satisfied to rely upon the scale of the activity as itself constituting the business. I do not think that a conclusion on scale by itself provides the answer; but it is very important evidence tending to show a business of acquiring and disposing of shares and it was some evidence from which a purpose of thereby making a profit might be inferred. It was for the appellant to rebut the latter inference. In my opinion it has not done so. It has in its favour the very important circumstance that the source of the funds was the subscribed capital of the company. But this is only part of the evidence. The evidence taken as a whole strongly supports a conclusion that a purpose or intention or expectation implicit in the carrying into effect of its investment policy was that shares acquired would be resold if and when an occasion arose which would make it desirable so to do and an element of desirability was that there would be greater financial benefit in disposing of the shares at an enhanced value than in retaining them. The fact that enlargement of dividend income was the dominant purpose does not gainsay the existence of a concurrent purpose of resale if and when that resale would throw up a profit which could be used to enlarge the dividend income. The massive scale of the activities in the years in question practically compels the inference that the investment policy was one which in its inception and throughout the course of carrying it into effect would in the expected state of the rising market require frequent and regular realizations of shares whenever they rose in market price before dividends from them were increased.

But it is the expected increase in dividend which causes shares to rise in price. The investment policy of the company was such that on a purchase of any particular parcel of shares the company had a then present purpose, intention or expectation of not awaiting an increase in dividends if the market price rose in expectation of such an increase but of anticipating the rise in dividend by realization of the shares at an enhanced price. It is true that the purpose or intention or expectation was contingent in the sense that sale would only take place if dividends had not been raised before the share price also rose. The contingency of this purpose enabled a finding to be made that higher dividend yield was the primary purpose of the operations and that therefore s. 26 (a) was not applicable. But when with such an investment policy which envisages regular and frequent sales of the shares acquired, operations are conducted on such a very large scale, the proper conclusion is that the acquisitions and disposals of shares were part of a business of acquisition and disposal. It is no answer to say that if the share prices did not fall proportionately to a lowered dividend, so that a lowered return on market price would be currently received, the investment policy would require sale, even at a loss. The dealings took place on a market which was regarded by the company as having growth potential. A rising, not a falling, market was expected and it was on that expectation that the investment policy was based.

The appellant placed considerable reliance upon Charles v. Federal Commissioner of Taxation [51] . However, there were differences in the facts which explain the decision. There was evidence that sales were normally made when the managers anticipated a fall in the value of shares. The purpose was to preserve for the fund any increase in value which had occurred and which it seemed likely would otherwise be lost [52] . The Court said [53] :

It remains to consider one argument upon which counsel for the commissioner relied. They contended, in effect, that even if the position be accepted that the course pursued in the administration of the Trust cannot properly be described as the carrying on of a business of stock-jobbing, still it amounted to a business of making profits of various kinds for the certificate holders, and that the selling of rights, and the buying of securities and re-selling them at prices in excess of cost, were part and parcel of the sum of activities by which those profits were made. In such a situation, counsel submitted, cases such as Punjab Co-operative Bank Ltd., Amritsar v. Commissioner of Income Tax, Lahore [54] and Colonial Mutual Life Assurance Society Ltd. v. Federal Commissioner of Taxation [55] show that the whole of the profits realized, even though some part of them would otherwise be of a capital nature, are to be regarded as income. To accept this argument, however, would be to ignore the evidence already mentioned, which is inconsistent with the notion that the activities of the managers, or of the managers and the trustees together, were different in kind from those in which trustees normally engage who hold a portfolio of shares with power to vary investments from time to time as they consider the interests of the beneficiaries require. According to that evidence, the moneys in question arose, not (as in the cases cited) from transactions forming incidents in the conduct of a business or a profit-making scheme, but from transactions effected in the course of performing a fiduciary duty to preserve for beneficiaries as far as practicable the assets comprising the trust fund and any increments in the value of those assets which might appear from time to time to be in jeopardy. The case therefore differs fundamentally from the cases relied upon by counsel for the commissioner. 1. (1954) 90 C.L.R. 598. 2. (1954) 90 C.L.R., at p. 610. 3. (1954) 90 C.L.R., at pp. 611-612. 4. [1940] A.C. 1055. 5. (1946) 73 C.L.R. 604.

Thus it could be concluded that there was no business but merely an activity of investment which was explicable by reference to the specific duties of trustees and therefore did not lead to an inference adverse to the taxpayer. In my opinion the same cannot be said of the course of activity and the reasons given therefor which are present in the instant cases.

I am therefore of the opinion that the principal objections were properly disallowed and that the decision of the primary judge was correct in this regard. It is however agreed that certain amounts have been included in the assessments which, in the light of the decision of this Court inCurran v. Federal Commissioner of Taxation [56] , ought not to have been included. It is therefore necessary to remit the matters for reassessment. To that extent the appellant succeeds. The respondent should pay to the appellant one-half of its costs of the proceedings in the Court below, but the appellant should pay the costs of the appeal.