Income Tax Assessment Act 1936, ss.6(1), 105B

Solicitors for the Applicant: Australian Government Solicitor

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

This is an appeal by the Commissioner of Taxation from a decision of the Administrative Appeals Tribunal upon a reference of the respondent taxpayer's objection, which the Commissioner had disallowed. The issue before the Tribunal was whether interest received by the respondent was income from personal exertion as defined in s.6(1) of the Income Tax Assessment Act 1936 ("the Act") or income from property. The distinction was very significant (in theory - the actual amount involved in this appeal could only be described as insignificant) for the purposes of s.105B of the Act, which provided a formula for the calculation of the retention allowance applicable to the respondent, as a private company, during the financial year in question, the year ended 30 June 1982. By s.6(1) it was relevantly provided:

"'income from personal exertion' or 'income

derived from personal exertion' means income

consisting of earnings, salaries, wages,

commissions, fees, ... the proceeds of any

business carried on by the taxpayer ..., but

does not include -

(a) interest, unless the taxpayer's

principal business consists of the

lending of money, or unless the interest

is received in respect of a debt due to

the taxpayer for goods supplied or

services rendered by him in the course

of his business; or

(b) rents or dividends".

2. The issue before the Tribunal was whether the taxpayer's principal business consisted of the lending of money. But the sole question upon the appeal is simply whether, in finding that the respondent's principal business did consist of the lending of money, the Tribunal erred in law. There is clear authority that the finding itself relates to a question of fact (see American Leaf Blending Co. SDN. BHD. v. Director-General of Inland Revenue (1979) AC 676 at 683 and cf. John v. Federal Commissioner of Taxation 89 ATC 4101 at 4107). But as Mason J. explained in Hope v. The Council of the City of Bathurst [1980] HCA 16; (1980) 144 CLR 1 at 9 it may always be asked, as a matter of law, "whether the material before the Court reasonably admits of different conclusions on the question whether the (respondent's) activities constitute a 'business'."

3. The Tribunal found that the respondent was incorporated for a particular purpose it explained in some detail. A substantial overseas borrowing being available to a group of companies, the persons in control of them decided to incorporate the respondent in order that it should be the entity to borrow the overseas funds. The proposal was it would then on-lend to the companies in the group. The respondent's memorandum of association conformed to this intention, containing as one of the objects for which the company was incorporated an object expressed in these terms:

"To carry on any of the following businesses:

...

(ii) Brokers insurance real estate land and

mercantile agents financiers money

lenders and factors.

(iii) Investors and dealers in all kinds of

securities."

4. On 13 August 1981, the respondent entered into an agreement to borrow four million dollars in Swiss francs at an interest rate to be assessed semi-annually by reference to the "Interbank offered rate for Swiss francs ... quoted in Singapore" at a particular time. A further sum of five million dollars was borrowed on 8 July 1982, also in Swiss francs. The respondent, which was a wholly owned subsidiary of a member of the group previously mentioned, Noel F. Mitchell Pty Limited, obtained the first loan with the support of the guarantee of that company and of other companies in the group, and obtained the second loan with the support of similar guarantees.

5. The bulk of the four million dollars was promptly on-lent to one of the companies in the group which was also a guarantor. By the loan agreement, the interest was to be determined between the lender and the borrower from time to time, but at least yearly, and in default of agreement it was provided that "the rate shall be that of the Commonwealth Trading Bank as at 30 June of that year (ie of the year for which a rate was required to be fixed)." The Tribunal found that other monies were lent at interest to unrelated corporations, and that there was an investment in the purchase of a block of partially equipped and furnished flats, yielding in the financial year in question rents in the sum of $46,075.64. The total interest received in the same period was $432,615.63, making in all a gross income of the respondent of $478,691.27. Interest paid in respect of the monies borrowed was $455,567.24. There was a substantial loss shown in the profit and loss statement, after taking into account an unrealized exchange loss. But, as it was accepted the exchange loss was not deductible for income tax purposes, the company's return showed a taxable income of $6,167.08. The details furnished showed that the amount invested in real estate represented 21.85% of the total monies borrowed, the balance being the subject of the loans made by the respondent. On this basis, the interest paid was apportioned as to $99,541.44 as an expense against rents, and as to $356,025.80 as an expense against interest income, thus showing a surplus in respect of loans and a loss in respect of letting of property. The subsequent borrowing of five million dollars was outside the financial year in question. The Tribunal found that the monies borrowed on that occasion were "on-lent within the group at interest".

6. The Tribunal analysed the figures to show that in the year in question the respondent received income of which 83% represented interest from a borrower within the group of companies, 7.4% represented interest from unrelated corporations, and 9.6% represented rents. The Tribunal also analysed the return obtained from the investments, as revealed by the accounts, and pointed out that the relatively small real estate investment returned 5.3% in the period, while the interest received on monies lent amounted to 13% (it was actually, I think, 13.8%). It may be important to note, though the Tribunal did not expressly advert to the fact, that the interest paid in respect of the borrowing of four million dollars, by which these activities were funded, was just under 11.4% for the period, which was not quite one year.

7. The Tribunal had no difficulty in regarding the lending of money as the principal source of the respondent's assessable income, so large a proportion of which consisted of interest. The question it then considered was whether the respondent's lending of money was a "business" and could be regarded as its "principal business" within the meaning of s.6(1). Reference was made to the respondent's position as a separate legal entity serving the needs of other companies within the group. The scale of the activity was considered together with its nature. The Tribunal then turned to the decision of the High Court in Commercial Banking Company of Sydney Limited v. Federal Commissioner of Taxation [1950] HCA 15; (1950) 81 CLR 263, and particularly to a passage in the judgment of Dixon J. commencing at 303 and continuing over to 304. The Tribunal emphasized by underlining certain passages at the top of 304, including references to the obtaining of interest as the substantial purpose of a business, and to the lending of money as the chief part of a business from which the profit is obtained. The Tribunal concluded that the taxpayer's principal business did consist of the lending of money.

8. On the appeal, counsel for the Commissioner argued that the Tribunal had wrongly rejected his claim that the respondent did not carry on the business of lending money, or any business. Counsel criticised the Tribunal for setting on one side what were called the "primary production" cases and the "commencement of business" cases; for having regard to the generation of assessable income rather than to profit making; for failing, so he alleged, to address the question whether the respondent was carrying on a business of lending money, or for erroneously concluding that the Commercial Banking Company case required a finding that it was carrying on such a business which was its principal business; and on the basis that s.6(1) was misconstrued as concerned with a principal investment of the lending of money. It was asserted that the only conclusion open to the Tribunal was that the respondent was a participant in a private arrangement, between members of a group of companies, that it receive a loan on behalf of the group and lend funds to members as required; that this was not enough; that there was no finding and no evidence that the arrangement was made with a view to profit being obtained by the respondent; and that there was no lending to members of the public.

9. The last point was put in reliance upon what was said by Farwell J. in Litchfield v. Dreyfus (1906) 1 KB 584 at 589:

"Speaking generally, a man who carries on a

money-lending business is one who is ready

and willing to lend to all and sundry,

provided that they are from his point of view

eligible."

Litchfield v. Dreyfus was a case under the Money-lenders Act 1900, and this passage was quoted with apparent approval by Williams J. in Austin Distributors Limited v. A.H. Paterson Car Sales Proprietary Limited [1941] HCA 16; (1941) 65 CLR 118 at 128, a case brought under the Money Lenders Act 1938 (Victoria). In Modern Permanent Building and Investment Society (in liquidation) v. Federal Commissioner of Taxation [1958] HCA 11; (1958) 98 CLR 187 at 191 Williams J. again quoted the passage from Litchfield v. Dreyfus, as well as his own earlier judgment. The point there, as he held, was that a building society, which lent money secured upon freehold property to its members for periods ranging from twelve months to twelve years, "was really making a series of investments for the purpose of deriving an income from the interest they produced." He did not regard it as "carrying on the business of a moneylender in the ordinary acceptation of that term." He thought it was "really carrying on an investment business."

10. To my mind, no assistance can be obtained in respect of the present case from the distinction drawn in the wholly different situation of a building society. But it is an important question whether there can be derived from cases under the various Moneylenders Acts a general proposition that a business of moneylending is not being carried on unless the proprietor of the business is ready and willing to lend to all eligible persons who may seek loans. That proposition, if applied to other areas of the law, such as income tax, could have significant consequences. In Commissioner of Taxation v. Marshall and Brougham Pty Ltd (1987) 17 FCR 541 at 553 I referred to a claim for relief under s.63 of the Act, subs.(1)(b) of which relates to "money lent in the ordinary course of the business of the lending of money by a taxpayer who carries on that business." I said:

"The learned judge at first instance

considered this section did not afford the

respondent relief. He thought it could not

be said that the respondent was 'carrying on

the business of moneylending', citing certain

cases on the Money-lenders Acts which assert

the proposition that, in effect, a

moneylender is one who holds himself out as

willing to lend to a wide class of borrowers.

Although his Honour did recognise that cases

under the Money-lenders Acts are 'coloured by

the penal and sometimes draconian

consequences' of a finding that the business

in question is one of moneylending, it seems

to me, with respect, that he gave

insufficient weight to the fact that they are

really exercises in construction of penal

statutes. Those statutes have left a mark on

the law of moneylending, but the stain should

not be allowed to spread into the law of

income tax. In Fairway Estates Pty Ltd v.

Federal Commissioner of Taxation (1970) 123

CLR 153 at 163-164 Barwick C.J. expressly

contrasted the approach taken in the 'cases

upon the application of legislation to

control moneylenders' to what is requisite

for the carrying on of a moneylending

business with the view taken of what is meant

by the carrying on of a business "in the

application of a taxing statute". (Compare

Commissioner of Taxation v. Mercantile

Credits Ltd (1986) 10 FCR 340 at 345.)"

11. It is true that, on the issue under s.63, I was in the minority in Commissioner of Taxation v. Marshall and Brougham Pty Ltd. However, although Bowen C.J. at 549 referred to Litchfield v. Dreyfus, he did not affirm its application to the construction of the Income Tax Assessment Act, his decision (with which Jenkinson J. agreed) turning on the proposition that the moneylending involved was "merely ancillary or incidental to the primary business" of the taxpayer in that case, which he held fatal to the claim. He described the question as "in the end ... a question of fact for the court to decide by looking at all the circumstances involved."

12. In the Fairway Estates case, Barwick C.J. referred to South Behar Railway Company, Limited v. Commissioners of Inland Revenue (1925) AC 476. There Lord Sumner, at 485, discussing the expression "carrying on any trade or business or any undertaking of a similar character, including the holding of investments", in the context of the Finance Act 1920, commented:

"The statute does not define any of these

words, but leaves them to their vernacular

meaning and, where the Legislature did not

think fit to tread, I certainly have no mind

to rush in. Nor is much help to be got from

the authorities, for the expression 'carrying

on a trade or business' has generally been

discussed in totally different contexts."

An approach of this kind would clearly not lead to the transplantation to the law of taxation of a construction found appropriate in the special context of moneylending legislation. (As to how special that context is, and how unsuitable a seedbed it would provide for other areas of the law, see the somewhat sardonic remarks of Isaacs J. in Lapin v. Abigail [1930] HCA 6; (1930) 44 CLR 166 at 192-193). Nor was the view that a moneylending business involves lending "to all and sundry" adopted, outside the context of moneylending legislation, in the tax case Reid's Brewery Company, Limited v. Male (1891) 2 QB 1. In that case, the brewery conducted what was described at 2 as a "branch business of bankers and money-lenders, limited to the customers and connections of the firm." The question debated was the deductibility of bad debts in respect of money lent in those circumstances. It was not suggested that the limitation of lending to the customers of the brewery made any difference to the characterisation of the business. What Pollock B. discussed at 8 was whether there were two businesses, one of brewing and one of banking and moneylending, upon which question he concluded: "I think that the banking and money-lending is carried on as an adjunct and ancillary to the business of brewers, and that it is all one business." Charles J. at 10 expressed the same conclusion as follows: "I think that the legitimate conclusion is that the appellants carry on the brewing business with the business of money-lending as a branch or adjunct to it." It was clearly not a business of money-lending "to all and sundry".

13. There is nothing in the context of the definition of "income from personal exertion" in s.6(1), or in any policy which can reasonably be thought to underly the provision, which requires the words "unless the taxpayer's principal business consists of the lending of money" to be read as confined to the lending of money in the course of a business which offers loans "to all and sundry". On the contrary, the association of the provision with the further provision "or unless the interest is received in respect of a debt due to the taxpayer for goods supplied or services rendered by him in the course of his business" suggests that the legislature had no narrow or artificial concept of moneylending in mind. Its concern was rather to widen the concept. I reject the argument that the absence of lending to members of the public denies the respondent the benefit of the provision.

14. In any case, it was open to the Tribunal, having regard to the evidence of loans outside the circle of members of the group to which the respondent belonged, to refuse to accept a view of the respondent as unwilling to lend available monies to any eligible applicant.

15. The leading authority on the meaning of the definition in s.6(1) of "income from personal exertion" is the High Court case cited by the Tribunal, Commercial Banking Company of Sydney Limited v. Federal Commissioner of Taxation [1950] HCA 15; (1950) 81 CLR 263. In that case, at 304, Dixon J. said:

"(T)he plain object of this particular

provision (he was referring to the words

'unless the taxpayer's principal business

consists of the lending of money') of the

definition is to allow a taxpayer the benefit

of the rate for personal exertion where in

truth the obtaining of interest is the

substantial purpose of his business, if the

interest is obtained by the lending of money.

When, in ordinary understanding, what in

point of law is interest is in substance a

profit dependent upon the pursuit of

organized business activities it is income

from personal exertion. The word 'principal'

is introduced in order to exclude incidental

and subsidiary activities in a business, but

if the chief part of the business from which

the profit is obtained consists of the

lending of money that is enough."

16. In support of the appeal, the main argument advanced depended upon the proposition that there was no evidence from which the Tribunal could properly find that the respondent was pursuing a profit by the obtaining of interest; rather the argument saw the respondent as a convenient corporate cog in the group mechanism, not in itself seeking a profit or carrying on any business at all. It was alternatively claimed that the Tribunal had not found that the respondent's activities were carried on for profit.

17. As to the alternative point, I do not think there is any substance in it. The Tribunal discussed figures showing that a profit, albeit a small one, was in fact earned. It must have been apparent from any consideration of the figures that the profit was entirely attributable to the obtaining of interest by the lending of money, since the much smaller investment in real estate had resulted in a very substantial loss. Counsel for the Commissioner contended that the evidence did not disclose the dates of the various loans, with the result that it was impossible to ascertain the interest rates at which particular loans were made. From this, he argued that loans might have been at unprofitable rates, so that an intention to earn a profit simply could not be inferred from the incomplete evidence before the Tribunal. However, the figures before the Tribunal did disclose the total amount invested in real estate, the only activity other than the lending of money undertaken by the respondent. It was open to the Tribunal to take the view that assuming the balance of the monies borrowed by the respondent, in its entirety, was on loan at interest throughout the year, in order to earn the total amount of interest shown in the accounts, the money was lent at the rate already specified, that is, at a substantial increase on the rate paid to obtain the funds. If, as one would expect, there was some delay involved in achieving the putting out of all the money, the rate obtained must have been higher.

18. On the face of them, the figures show that a company, whose objects included the carrying on of the business of a moneylender, had lent the bulk of its funds at a rate showing a substantial margin of gross profit over the interest paid to procure the funds, so that it was able to cover significant losses suffered from a real estate investment, and still show a small taxable income. If the Tribunal had said nothing in its reasons to suggest positively that it had considered these matters, I should still have been reluctant to infer that it had not. As Foster J. said in Federal Commissioner of Taxation v. Cainero 88 ATC 4427 at 4432:

"It could not be suggested that the Tribunal

was under any obligation to isolate in its

reasons every issue of fact and record a

specific finding in respect of each of them.

... (A) sufficient compliance with the

requirement of considering all issues of fact

and giving adequate reasons occurs when the

reasons themselves provide a sufficient

indication that the ultimate facts to be

decided have been fully kept in mind and that

no significant area of primary fact has been

ignored."

The passage I have quoted earlier from the judgment of Dixon J. in the Commercial Banking Company case was quoted by the Tribunal, together with other passages from the judgment, and the references to the purpose of the business and to the "chief part of the business from which the profit is obtained" were, as has been said, underlined in the Tribunal's citation. To my mind, it is clear that the Tribunal actually focussed on the very question the argument suggests it ignored.

19. In dealing with the question of the Tribunal's advertence to the matter of profit, I have also indicated some of the evidence which makes it clear that there was in fact material before the Tribunal to satisfy the onus resting upon the respondent. Its loans of substantial sums of money in fact yielded a profit, unless the unrealised exchange loss requires a contrary conclusion. I think this loss certainly does not prevent the Tribunal drawing the natural inference that operations so conducted were business operations intended to yield a profit. That is sufficient to sustain the finding of the Tribunal. If the conclusion was open, whether it should in fact be reached was of course a matter for the Tribunal.

20. For the Commissioner, it was urged that the relationship between the companies in the group enabled an inference to be drawn that the commercial interests of the respondent may have been subordinated to those of the other members of the group, so that no profit may have been sought in respect of its lending of money to them. The most obvious answer to this argument is that it is an argument of fact which might have been urged to the Tribunal, but it cannot be said that the Tribunal must have reached a conclusion upon it adverse to the respondent. However, the contention rests on a view of the legal nature of a business consisting of the lending of money, within the meaning of the Act, which I should not allow it to be assumed I accept as correct.

21. In the first place, the proposition sits oddly with the decision of Barwick C.J. in the Fairway Estates case. There, as in the present case, the taxpayer was a company the memorandum of association of which included amongst its objects the carrying on of business as a moneylender. As in the present case, too, it was incorporated as one of a group of associated companies. It had a substantially common shareholding with another member of the group, United Finance Pty Ltd (United). As appears from the judgment of Barwick C.J. (at 123 CLR 158), the taxpayer had not in fact engaged in any moneylending transaction, but only in the subdivisional work mentioned at 155, when an application was made to the taxpayer's chairman, who was also a director of United, for a substantial advance to carry out a tin-mining venture. The result of that application was that United lent the necessary money to the taxpayer at an interest rate of 15%, and the taxpayer made the advance to the borrower (a company referred to as Jubilee) at an interest rate of 10%, but on the condition that it was permitted to subscribe, for a further sum paid by it, for one quarter of the initial issue of shares in the capital of Jubilee. One would have thought, if there was validity in the argument advanced by the Commissioner in the present case, that argument should have applied a fortiori in the Fairway Estates case, the more so as there was no other transaction undertaken which could arguably have been a moneylending transaction, until well over a year later. However, Barwick C.J., at 163, drew attention to the object of moneylending in the memorandum, which, he accepted, represented an actual intention of the subscribers, and held, at 165-166, that the transaction with Jubilee "was a transaction of lending money." He added:

"The proper conclusion from the evidence which

I accept is that the stipulation by the

appellant for participation in the equity was

part of the return it required for advancing

the money at the agreed rate. It tended to

offset the apparent loss due to the

difference between the rate of interest paid

to United and the rate charged to Jubilee. I

say 'apparent' because of the relationship of

the two companies and of their shareholders.

The difference in these rates does not, in my

opinion, indicate or tend to establish that

the true nature of the transaction as a whole

was the investment of capital not the lending

of money."

The comment may be made that still less could the Chief Justice have thought the difference in question deprived the transaction of the character of a business transaction.

22. If it was proper, in the Fairway Estates case, to look at the relationship between the companies and their shareholders in order to conclude that there was only an apparent loss involved in the transaction in question, which should be regarded as a lending of money in the course of the taxpayer's business, I do not think the Commissioner's argument can possibly succeed in the present case, where no such disparity appears on the face of the interest rates, but on the contrary a margin of profit is demonstrated. In a different context, and with regard to a definition of "business" which, unlike that in s.6(1) of the Income Tax Assessment Act, contained a requirement that business be carried on "for pecuniary profit", Richardson J. (with whom both McMullin J. and Casey J. expressed agreement) said in Grieve v. Commissioner of Inland Revenue (1984) 1 NZLR 101 at 111:

"(T)he fact that a profit for tax purposes is

neither expected to be recorded nor intended

could not consistently with the scheme of the

legislation governing incentives preclude

recognition of the activity as a business

attracting those incentives. I am inclined

to think that what is required is to assess

the overall financial result that is intended

in order to determine whether or not in one

form or another a pecuniary profit is being

sought."

23. In my opinion, it would be wrong to take a narrow view of what constitutes a "business" for the purposes of the provision under consideration. It should not be interpreted so as to exclude ordinary business transactions where a particular member of a group of companies may enter into agreements from which profit earned may be received by another member of the same group of companies. Profit, and the obtaining of profit, may take various forms. It is interesting to note that in John v. Federal Commissioner of Taxation 89 ATC 4101 at 4106-4107 the joint majority judgment of the High Court rejected a submission that share trading transactions "are to be treated as non-business activities by reason of the motive or purpose for which they were undertaken." The court noted that it was not in dispute "that the motive for the formation of the Malindi partnership and its activities was to obtain ... a partnership loss ... ." Nevertheless it was held that Malindi "was formed to trade in shares. The fact that its formation and activities can also be ascribed to a desire to obtain a taxation advantage cannot alter the fact that Malindi was at relevant times a share trader."

24. The word "business" is not in itself squeezed into a tightly confined meaning. The concept of an enduring organisation, carrying on successive activities, which is often involved in the use of the word, does not, as Mason J. pointed out in Hope v. The Council of the City of Bathurst [1980] HCA 16; (1980) 144 CLR 1 at 8, derive so much from the word itself, as from its association with the words "carrying on" in the expression "carrying on a business". In Re Ku-ring-gai Co-operative Building Society (No 12) Ltd [1978] FCA 50; (1978) 22 ALR 621 at 625-627, Bowen C.J. held that co-operative terminating building societies, which borrowed money from banks in order to lend it, but not at a profit, to their members, were "carry(ing) on their business of providing loans to members." Deane J. at 642 said:

"The objective of the applicants is to provide

benefits to members by making loans at a

moderate rate of interest rather than to

carry on their commercial activities at a

profit from which dividends to the members

may be declared."

"Notwithstanding the restricted scope and

limited duration of their activities, each

applicant, in my view, carries on a

business."

25. In Grieve's case (supra) at 106 Richardson J. said:

"In common usage 'business' has and has long

had a wide and flexible meaning. In the

sense in which it is used in legislation

imposing a charge for tax in respect of

revenue earning activities The Oxford English

Dictionary definitions 'a pursuit or

occupation demanding time and attention; a

serious employment as distinct from a pastime

...; trade; commercial transactions or

engagements' and Webster's Third New

International Dictionary definitions 'a

usually commercial or mercantile activity

customarily engaged in as a means of

livelihood and typically involving some

independence of judgment and power of

decision ... a commercial or industrial

enterprise' reflect the underlying notion.

... Underlying each of the words in the

definition in s 2 (this New Zealand section

defines 'business' as including 'any

profession, trade, manufacture or undertaking

carried on for pecuniary profit') and the

term 'business' itself when used in the

context of a taxation statute is the

fundamental notion of the exercise of an

activity in an organised and coherent way and

one which is directed to an end result."

Despite the last sentence of the passage I have quoted, at 110 Richardson J. said:

"Businesses do not cease to be businesses

because they are carried on idiosyncratically

or inefficiently or unprofitably, or because

the taxpayer derives personal satisfaction

from the venture."

26. Wide as the concept of business is, it may be even wider in the case of a company. In American Leaf Blending Co. SDN. BHD. v. Director-General of Inland Revenue (1979) AC 676 at 684, Lord Diplock said:

"In the case of a private individual it may

well be that the mere receipt of rents from

property that he owns raises no presumption

that he is carrying on a business. In

contrast, in their Lordships' view, in the

case of a company incorporated for the

purpose of making profits for its

shareholders any gainful use to which it puts

any of its assets prima facie amounts to the

carrying on of a business. Where the gainful

use to which a company's property is put is

letting it out for rent, their Lordships do

not find it easy to envisage circumstances

that are likely to arise in practice which

would displace the prima facie inference that

in doing so it was carrying on a business.

The carrying on of 'business,' no doubt,

usually calls for some activity on the part

of whoever carries it on, though, depending

on the nature of the business, the activity

may be intermittent with long intervals of

quiescence in between."

27. I think, in the present case, there was what Lord Diplock calls a "prima facie inference" that, in lending money at interest, the respondent was carrying on a business, and there was nothing to require the Tribunal to regard that prima facie inference as rebutted. It was further open to the Tribunal to conclude that the taxpayer's principal business consisted of the lending of money.

28. The fact that the bulk of the money lent was lent to one borrower, another company within the group, although there were some additional loans outside the group, did not provide a bar to this conclusion. Every business must commence at some point, and the respondent made further loans early in the ensuing year. Furthermore, as Barwick C.J. pointed out in Hungier v. Grace [1972] HCA 42; (1972) 127 CLR 210 at 219:

"It is, of course, possible to carry on the

business of a money lender with only one

borrower."

(This statement, even as regards the application of the moneylending legislation, casts some doubt on the validity at the present day of the proposition that a moneylender must lend to all and sundry, at least as a universal proposition.) The relative inactivity which may be involved when a business has only one client is also no bar to the conclusion that a business is being carried on: American Leaf Blending Co. case (supra) ubi cit.; Commissioners of Inland Revenue v. Korean Syndicate, Limited (1921) 3 KB 258 at 276-277 where Atkin L.J. referred to "a passive carrying on of a business as opposed to an active carrying on of a business," and said that "there is nothing in the Finance (No. 2) Act, 1915, which says that the business must be actively carried on." The Korean Syndicate case was expressly approved by the House of Lords in the South Behar Railway Company case (supra), where Lord Sumner said at 488:

"Business is not confined to being busy; in

many businesses long intervals of inactivity

occur."

29. In my opinion each of the grounds of attack upon the decision of the Tribunal fails, and the appeal should be dismissed with costs.