B.P. Australia Ltd. v. Commissioner of Taxation of the Commonwealth1
| Author | T. J. Higgins |
| DOI | 10.1177/0067205X6600200106 |
| Published date | 01 March 1966 |
| Date | 01 March 1966 |
| Subject Matter | Case Notes |
CASE NOTES
B.P. AUSTRALIA LTD.
v.
COMMISSIONER
OF
TAXATION
OF
THE
COMMONWEALTH1
Income
Tax-Claim
for Deduction-Expenditure-Whether
of
Capital
or
Income Nature-Amounts paid by Oil Companies
to
secure Trade
Ties-Income
Tax and Social Services Contribution Assessment
Act
1936-1952
(Cth) section
51
(1.).
The most fundamental problem in Income Tax Law
is
to distinguish
between income and capital.
It
is this problem
that
raised itself before
the Privy Council in the instant case. Though this case
but
adds itself
to
the multitude already decided
on
this point, its significance lies in
the
fact
that
it once again illustrates the judicial confusion
that
stands in
the
path
of
acoherent explanation
of
the distinction between capital
receipts
or
expenditure and income receipts
or
expenditure.
The issue raised in the instant case was the determination
of
the nature
of
the expenditure undertaken by the appellant, B.P. Australia Ltd.
This company
had
since
1951
adopted and pursued ascheme to combat
the collapse
of
the formerly free competitive system for the marketing
of
petrol and oils. Formerly garage proprietors would market several
brands
of
petrol
at
their stations.
In
1951 the Shell Company began
to obtain sole rights to sell petrol and oils from service stations thus
threatening agradual extinction
of
B.P.'s major trade outlets. To combat
this crisis, B.P. joined in the struggle for solo site outlets. Amethod
chosen (amongst others) was the promise
of
lump sum payments
to
service station proprietors as
part
of
consideration for acovenant by
them to sell for afixed period only the petrol and oils approved by B.P.
The factors determining the payment included gallonage
but
also included
such items as the profitability
of
the site and other intangibles relating
to the expected advantage
to
be gained by B.P.
The Privy Council2held
that
these lump sum payments were deductible
income expenditure. The decision
of
the High Court appealed from
was reversed. The High Court
had
affirmed the judgment
of
Taylor
J.3
holding that the expenditure was
of
acapital nature.
Taylor J. was
of
opinion
that
the payments were in no real way related
to gallonage, though this was afactor, and were
not
in the nature
of
a
discount
or
trade rebate. The advantages obtained by B.P. were
of
considerable value and, in His Honour's view, constituted
an
asset, being
of
enduring benefit and securing freedom from competition on the:
selected sites.
1(1965)
39
A.L.J.R. 190.
2Lord Reid, Lord Morris
of
Borth-y-Gest, Lord Pearce, Lord Upjohn and Lordi
Wilberforce. Judgment delivered by Lord Pearce.
3(1961) 8A.T.T.R. 263.
115
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