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Part A
(i) Facts of the two cases –
FCT v Dixon (1952):
In the given case, the taxpayer had got himself enlisted in the Australian Imperial Forces in
the year 1940 and had continued to serve till he got discharged in the year 1945. Before he
got himself enlisted, his employer, Macdonald, Hamilton & Co. had undertaken to pay to
their employees who enlisted a sum to make up for the difference in their pay as a civilian
and those they would receive from the naval and military authorities. This was also in
accordance with the usual practice in those days. During this period of time, he received a
series of such payments from the employer and the sum in question was 104 pound received
for the year of assessment ended 30
th
June, 1943. Further, subsequently when he returned
after his discharge, he resumed work with Macdonald as he had found out that they wanted
him to do so. However, this was in spite of the fact that they had not accepted to re-employ
him on completion of his war service; and nor had he accepted to resume his employment on
such completion of war service.
Scott v FCT (1966):
The taxpayer was a solicitor who performed several professional services for his longstanding
client Mrs. Freestone and on the death of her husband, acted for her on the probate
application and in relation to the administration of the estate. The administration of the estate
was a complex matter as it was a large estate valued at 190,000 pounds and the probate duties
amounted to 94,000 pounds. Since there were not enough liquid funds for the same, various
properties had to be sold and the taxpayer helped to get them all done. A major asset out of
these was a plot of vacant land of eighty-two acres called “Greenacres” and it was subject to
several restrictions to sale which were pending before the authorities. The taxpayer worked in
his professional capacity and helped to get these lifted and enabled to realise a sum of
170,000 for forty-eight acres of the land. This large sum of money enabled her to not only
pay the dues but also, create a monument to her husband. Further, she went on to make
several gifts to her and her husband‟s relatives and including a sum of 10,000 pounds to
Scott. He was surprised to hear of this as he had already been paid for his professional duties.
(ii) Issues raised and the ITAA 97:
The issue in question is that why the payment to the taxpayer in FCT v Dixon (1952) 86 CLR
540 was assessable income but the payment in Scott v FCT (1966) 117 CLR 514 was not. The
elevant provision is contained in Sec 6-5 of the ITAA 1997 as per which assessable income
includes income according to ordinary concepts and which is ordinary income. Further, all
income are assessable if they are derived directly or indirectly from Australian sources. An
income is said to be derived if it is applied or dealt with in a manner of direction of or on
ehalf of the taxpayer. Moreover, the concept of „income according to ordinary concepts‟ has
een developed on the basis of several propositions or guidelines which have been developed
over the years on the basis of various case laws.
(iii) Cases and other sources of information relevant to the issues and legislation:
FCT v Dixon (1952):
The applicable proposition in this case is that amounts derived from employment or provision
of services are income and thus, any salary, wages or fee received in connection with...