Taxation - Theory - Practice &Law Collecting Essential Fund

Question: Discuss about the Taxation, Theory, Practice Law for Collecting Essential Fund. Answer: Introduction All the nations have important taxation laws and taxation system that help the government of countries in collecting essential fund for their necessary expenditure like infrastructure development of the country and to maintain the law and order of the country, for defense of the country etc. Income tax imposes to the residents as well as non-residents as per the income criteria and the income tax rule of the country (Hamilton, Deutsch and Raneri, 2001). The income tax is a levy that the government levied on the financial income generated by the entire companies within the constitutional jurisdiction, it is a annual fees imposed on earned income along with the unearned income to the citizen of the country. The income tax collected by the government helps it to develop the infrastructure of the country, provide better facilities to its citizens and therefore any responsible citizen is bound to pay the taxes to his or her government as per the guidance provided in the legal system of th at particular country (Krever and Black, 2007). Any firm or individual failing to pay the due taxes are bound to face the penalties and charges pressed by the court by taking into consideration the laws, rules and regulations that can be applied in that situation. The income tax imposes on two types of income; ordinary income capital gain to the residents of the country. Main body I. Californian Copper Syndicate Ltd v Harris (Surveyor of Taxes) (1904) 5 TC 159 In this specific case, the main objective or purpose of the business was to get hold of a land that contained copper. But eventually the company or organization did not make any attempt of removing copper from the land and after a point of time sold the land to another firm. The verdict given by the court stated that the land could be used for any purpose that would generate income and selling the land fulfilled the criteria (Law.ato.gov.au, 2016). On the basis of this reason, the selling of the land was considered to be a general incident for the tax payers company from the perspective of taxation law. II. Scottish Australian Mining Co Ltd v FC of T (1950) 81 CLR 188 In this particular case, the business organization or firm started a business venture of coal mining on a property that was acquired by the firm. After a certain period of time, the coal was removed from the land and after that the firm took the decision of selling off the land. In order to make the sale more profitable the firm developed the infrastructure of the land by subdividing the property and making roads on it. Since the firm was not in the business of real estate so the selling off of the land could not be considered under the category of commercial business. As a result of it the court gave the verdict that the profit or revenue collected by the organization as a result of selling the land would not be measured. As a consequence of this, the income made by the organization was capital in nature (Coursehero.com, 2016). In this specific case it has been observed that mining company after excavated the entire coal from a land decided to sell the land and in order to improve t he value of the land the company made significant infrastructure development in that particular land such as the land had been subdivided, road constructed in the land and above all the company took grant to build public institutions like schools, churches, parks and railway station in the land thus, it is profit making activities and intention of the company and the company functioned as land developer instead of the core mining business operator thus, the income from the selling of the land must be assessed as assessable income (Nethercott, Richardson and Devos, 2011). III. FCT v Whitfords Beach Pty Ltd (1982) 150 CLR In this particular case the tax payer taken into consideration is a company that wanted to get a field of underdeveloped property at the beach of Whit Fords. The property under discussion was located just at the front of the beach and thus could easily be used for the purpose of fishing. After a few years when all the problematic shares of the firm got sold as the company got a very good order. As a result of this, the new shareholders acquired this particular land and in order to increase the productivity of the shareholders they divided the land amongst themselves and sold the different parts at the optimum profit. Though the part of the land got sold, the new shareholders got involved in a disagreement about whether they should include the profit that they earned in their regular income or not. On the other hand as per the verdict of the court the shareholders can sell the land with the aim or objective of generating a revenue or profit from that particular land (Iknow.cch.com.au, 2016). Moreover, because of this particular reason, the firm established a business of land development which will generate profit by the selling of the land on one hand and on the other, the profit earned by the members would fall under the category of regular income. The verdict of the court was that during the time of purchasing or buying that particular land, the motive of the organization was to find out way through which the income from the property can be increased thus, the organization or firm developed the land on one hand and on the other hand sold it too for which the investment can be looked upon as a commercial investment and the sale of the land is quite an ordinary incident for which the revenue earned through the process is regarded as regular income. There were most of the members of the High Court (Gibbs Cj, Mason and Wilson JJ) detained that the income from the selling of land must be assessable under section 25 (1) of the income tax Assessment Act (1936)(ITAA) . Murphy J instead finalized that the income from the selling of land is assessable under the 2nd part of the section 26(a) of the ITAA (1936) as it was a income from a income generating scheme. The final justice by Gibbs CJ, Mason and Wilson JJ held that the action of the tax payers must be considered a business of land development instead of realization of capital asset. IV. Statham Anor v FC of T 89 ATC 4070 In this particular case, the whole matter is related to that of income tax. The tax that was viable was both measured as well as adjusted in a very wrong and erroneous manner (Law.ato.gov.au, 2016). For this reason the court took the decision that the commission has to take the responsibility of as justing the income of the estates. V. Casimaty v FC of T 97 ATC 5135 The situation states the entire case and there is no intention of making any profit from the deal. Moreover, the real fact is that the individual intend to make profit from selling a definite part of the land. The divergence occurred due to the explanation and there was a doubt on whether the profit incurred by the sell in taxable or not. The tax commissioner had assessed that the income generated by the tax payer by selling of the subdivided blocks under the section 25(1) of the ITAA (1936) based on the profit made by the taxpayer from running the business of subdividing as well as selling land (Law.ato.gov.au, 2016). However, Ryan J. from the federal court the tax payer did not have any direct advertisement for the potential purchaser or he did not construct any dwelling house on that land, the internal fencing as well as other development do not provide any indication that the taxpayer is running a business of land developer (Law.ato.gov.au, 2016). Besides this, as per Ryan J. the tax payer possessed as well as consistently holds the Acton View mainly for domestic or residential usage along with the intention of firm production from the land. Therefore, the tax payer is not entitled to provide any ordinary income tax for the land selling. VI. Moana Sand Pty Ltd v FC of T 88 ATC 4897 The above case study describes that a corporate was carrying out its business of sand and the company owned a land where the company excavated sand from the land. Moreover, the company did not want to trade the land to any other company till the value of the land elevate, because the company wanted to earn more return from the investment. The inclination of the raising price of land the company kept that particular land for a long period (Law.ato.gov.au, 2016). In this situation the conflict had been raised on the taxable amount. The court declared that the land can be trade to anyone for the commercial use. VII. Crow v FC of T 88 ATC 4620 The deciding case is a case related to a farmer, hence it assist in considering the tax payers. Therefore, it aids in observing inclined purchases for enlarging the land area and therefore, the conflict is made in regard of the particular land (Law.ato.gov.au, 2016). Therefore, the completion of the deal helped in definite in order to increment of the scheme for this specific case of the farmer. VIII. McCurry Anor v FC of T 98 ATC 4487 The case described that that the land was owned by two brothers and there were few houses built in this particular land. Moreover, in order to renovate the land the houses from the particular land must be removed. The conflict increased on whether the brothers are forced to make payment for the tax related to that specific land (Law.ato.gov.au, 2016). And at the ending the court gave the judgment by the side of the brothers and a order came from the court that the two brothers did not need to pay any levy for that particular land. Conclusion In order to assess the tax for an entity it is necessary to understand the taxation process of the country and must have the knowledge about the taxation law of the country. The understanding of the ordinary income and capital tax gain is necessary for assessing the income tax of the entities (Woellner, 2013). In the undertaken case studies the judgments has been made by the effective knowledge of the ordinary income law of the country Australia. References Coursehero.com. (2016).Cases to be read Scottish Australian Mining Company - ACCOUNTING - 90016. [online] Available at: https://www.coursehero.com/file/p5aqrqk/Cases-to-be-read-Scottish-Australian-Mining-Company-Ltd-v-FCT-1950-81-CLR-188/ [Accessed 15 Aug. 2016]. Hamilton, R., Deutsch, R. and Raneri, J. (2001).Guidebook to Australian international taxation. Australia: LexisNexis Butterworths. Iknow.cch.com.au. (2016).Australian Tax Accounting | CCH iKnow. 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(2016).TR 92/3 - Income tax: whether profits on isolated transactions are income (As at 30 July 1992). [online] Available at: https://law.ato.gov.au/atolaw/view.htm?DocID=TXR/TR923/NAT/ATO/00001 [Accessed 15 Aug. 2016]. Law.ato.gov.au. (2016).TR 92/3 - Income tax: whether profits on isolated transactions are income (As at 30 July 1992). [online] Available at: https://law.ato.gov.au/atolaw/view.htm?DocID=TXR/TR923/NAT/ATO/00001 [Accessed 15 Aug. 2016]. Law.ato.gov.au. (2016).TR 2007/8 - Income tax: registered agricultural managed investment schemes (As at 11 February 2009). [online] Available at: https://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR20078/NAT/ATO/00001 [Accessed 15 Aug. 2016]. Nethercott, L., Richardson, G. and Devos, K. (2011).Australian taxation study manual. North Ryde, N.S.W.: CCH Australia. Woellner, R. (2013).Australian taxation law 2012. North Ryde [N.S.W.]: CCH Australia.