Practitioners advising co-operative companies on tax deductibility of dividends should note that the primary object test looks beyond the memorandum of association and that the class of shareholders receiving services need not match the class receiving dividends.
Later decisions that cite A & S Ruffy Pty Ltd v Federal Commissioner of Taxation
Decisions cited by A & S Ruffy Pty Ltd v Federal Commissioner of Taxation
A. & S. RUFFY PTY. LTD. V. FEDERAL COMMISSIONER OF TAXATION [1958] HCA 18; (1958) 98 CLR 637
Income Tax (Cth.)
High Court of Australia
Dixon C.J.(1), Williams(1), Webb(1), Fullagar(2) and Taylor(3) JJ.
CATCHWORDS
Income Tax (Cth.) - Allowable deduction - Income of co-operative company distr ibuted among shareholders as dividends - Co-operative company defined as "Company the rules of &which limit the number of shares &which may be held by" "any one shareholder" and "is established for the purpose of carrying on any business having as its primary object . . ." - Limitation on shareholding - What constitutes - Primary object - Whether to be considered only by reference to memorandum of association - Necessity for purpose of business to supply shareholders with services etc. - Whether necessary for class of shareholders for whom services rendered to be co-extensive or of same class of shareholder as class among &which distribution of dividend made - Income Tax and Social Services Contribution Assessment Act 1936-1950 (No. 27 of 1936 - No. 48 of 1950), ss. 117-120.
HEARING
Melbourne, 1958, March 5, 6;DECISION
Cotman v. Brougham (1918) AC 514