Scott v Federal Commissioner of Taxation [1966] HCA 48 | 24 August 1966

Scott v Federal Commissioner of Taxation [1966] HCA 48; (1966) 117 CLR 514 (24 August 1966).

Income Tax (Cth) – Assessable income – What constitutes income – General principles – “Gratuity . . . in respect of, or for or in relation directly or indirectly to, any employment of or services rendered by him” – Gift by client to solicitor – Deduction of gift duty where gift constitutes income – Income Tax and Social Services Contribution Assessment Act 1936-1961 (Cth), s. 26 (e).

A solicitor received 10,000 pounds gift from a client. Windeyer J accepted that the 10,000 pounds was a gift and not made or taken in discharge of an obligation. His Honour ruled that the gift was not assessable income as it was not remuneration or recompense for services rendered.

His Honour stated at 526-7:

“Whether or not a particular receipt is income depends upon its
quality in the hands of the recipient. It does not depend upon
whether it was a payment or provision that the payer or provider
was lawfully obliged to make. The ordinary illustrations of this are
gratuities regularly received as an incident of a particular
employment. On the other hand, gifts of an exceptional kind, not
such as are a common incident of a man’s calling or occupation, do not ordinarily form part of his income. Whether or not a
gratuitous payment is income in the hands of the recipient is thus
a question of mixed law and fact. The motives of the donor do not
determine the answer. They are, however, a relevant


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