Introduction This case considers the issue of the ordinary income and whether or not a gift of shares to an accountant Lewis Hays by the owner of the company Richardson’s Meat Industries Ltd. is assessable as ordinary income for the accountant’s personal services to the private company and the owner. He worked for company for many years and the company upon transition from private to public company the owner gave the accountant a substantial amount of shares. However, when reached by the Federal Commissioner of Taxation the accountant was of the stance that the shares are not been awarded to him in return to his past services but as a gift therefore are not subject to taxation as ordinary income. The Case: In the year 1951, the Taxation Board of Review taxed 12,000 shares of Richardson’s Meat Industries owned by George William Richardson. These shares of 5s each were given to Lewis Hayes as a gift by his ex-employer and boss George Richardson. The Commissioner decided to tax the shares at a total face value of 3,000 pound as a part of taxpayer’s assessable income. Similarly, the majority of board keeping the same view in mind were of the opinion that the commissioner’s decision was rightly made and the shares must be taxed since Richardson received constant advice from Hayes and for that Hayes was never paid. Lastly, Richardson’s statement, “…were given in recognition of services rendered in the past by the recipients and as an inducement or incentive to continue good service in the future” stamped the matter. The commissioner was of the view that the shares issued to Hayes should be constituted as assessable income since the payment of money or a transfer of property although given in form of a gift, as there was no obligatory reason to present it, may in certain cases be income in the hands of the recipient. He was concluding his hypothesis on the basis of English cases that of Squatting Investment Co Ltd and Squatting Investment Co Ltd. Lewis and Christine Hayes both decided to appeal to the High Court on this matter and the court decided to hear the matter for appeal stating that the board of review’s decision of marking the shares as assessable income based on statutory definition of value of allowances ect. was in fact a matter of law under sections No. 27 of 1936, No. 48 of 1950 and ss. 6, 26 (e) and 196 (I) of Income Tax and Social Services Contribution Assessment Act 1936-1951. Section 196 (I) of the act gave Hayes the right of appeal to the High Court from any decision of a board of review, which involves a question of law. The Judgement: Judge Fullagar gave a detail judgement on the matter that covered all the aspects of the case starting from 1939 when Hayes was residing in Melbourne. Hayes was an accountant by profession and Richardson was carrying on business in Hobart in meat and small goods under the name of “Richardson’s Choice Provisions”.
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