Taxation and Income Statutory Income

 

v Assessable income=ordinary income + statutory income. Ordinary income: income deriving from the courts (s6-5) Negative propositions: items that are not income by ordinary concepts: 1. Amounts not convertible into money :In Tennant v Smith (1892) free accommodation provided to a bank manager was held not to be ordinary income because building could not be sub-let and the benefit thereby converted to money. In FCT v Cooke & Sherden (1980) an incentive prize offered by a manufacturer was not income of the winning retailers because it was not transferable and so not convertible into money.

2. Capital does not have the character of income: For tax law purposes we need to distinguishing income and capital for several reasons: a) ordinary concepts notion of income does not include capital; [see below] b). general deductions [and some specific deductions, eg: repairs] specifically excludes deductions for capital outlays c) capital receipts may generate capital gains CGT; concessional tax treatment; the gain might be discounted by 50%.

d) trust distribution of corpus [capital] is not assessable income • In general terms it may be stated that capital receipts and profits arising from the mere realisation of a capital asset are not income but where what is done is truly the carrying on of a business, the proceeds will be on revenue account: California Copper Syndicate Ltd v Harris (Surveyor of Taxes) (1904) 5 TC 159; Commr of Taxation v Myer Emporium Ltd (1987) 163 CLR 199; 87 ATC 4363.

3Mere gifts : This proposition is grounded in Hayes v FCT (1956): a voluntary payment from A to B prima facie is not income; but that presumption will not apply when the payment is in substance a product of services 4. Proceeds of gambling and windfall gains : Punting: Martin’s case, a ‘keen punter’ not carrying on a business as might be the case with an owner/breeder of racing stock and would be for a bookmaker. So, a successful punter not assessable on winnings – Evans – an unsuccessful punter not entitled to a deduction – Brajkovich.

The weight of Australian authority is against a conclusion that punting and gambling gains are income. But: horse racing may amount to a business activity; prizes: may be income when they are incidental to commercial activity 5. Mutual receipts The essence of the ‘mutuality principle’ is that persons cannot profit through dealings with themselves. Mutuality implies a non-profit orgainsation in pursuit of a common objective generating funds from its members to be applied to the common cause. Funds generated externally (interest on deposits, dealings with the public etc) fall outside of mutuality principle.

Positive propositions: characteristics of income by ordinary concepts 6. An amount must be beneficially derived Constable’s case is authority for the non-assessability of employers’ contributions to superannuations funds. The payments are not fringe benefits either. In the present context, Constable’s case is also authority for saying that an amount that would have been income had the necessary derivation existed at some earlier period of time, does not become income at some later time when it is derived unless in the circumstances of the later derivation it has an income character.

The employer’s contributions to the fund were not allowed, given or granted to the taxpayer. When the benefits were paid out at a later time, they were not income. An amount has to be characterised at the point of its derivation7. Income is to be judged from the character it has in the hand of the recipient The decision in Just v FCT (1949) provides an insight to this proposition: the Just brothers sold property for consideration that included a percentage of profits for 50 yrs from the redeveloped site.

Normally, such a sale would be a ‘mere realisation’ in terms of the California Copper principle. The HCA held the payments were income because the payments were for an indefinite amount and took the form of an annuity. 8. Income generally exhibits recurrence regularity and periodicity. regularity is the hallmark of wages, annuities pensions, workers’ compensation [Inkster’s case] etc. But: — just because regularity is a common feature of income, do not conclude that an isolated or one-off receipt cannot be income: see Cooling’s case.

[Principle upheld by a majority of HCA in Montgomery (1999). ] Isolated transactions may generate income when they are entered into with the intention of making a profit – Myer Emporium (1987); California Copper (1904). 9. Amount derived from carrying on a business The old view was that this provision captured only what was already income by ordinary concepts other than its non-convertibility to money [hence ‘value to the taxpayer’ – Scott’s case] but in Smith’s case (1987) Brennan J considered the provision captured capital amounts too.

The application of s26(e)/15-2 has been largely overtaken by Fringe Benefits Tax (for employees) and s21A (for business benefits) 10. Amount derived from employment or the provision of service. • Isolated transactions See Myer Emporium [California Copper]. ~ Isolated or unusual transactions involving the sale of capital assets [structure] may yet produce revenue amounts when entered into with the intention of making profit. ordinary business transactions generate income by ordinary concepts because the nature of business is profit making; 11.

Amount derived from property. Property yields rent, interest, dividends and royalties. Interest is not defined in the Act. Its ordinary meaning is the amount generated from the use or employment by others of a capital amount. Interest is inherently on revenue account: Steele’s case. • Rent is not defined but at common law it means a payment received by a lessor in return for the use by a lessee of real or personal property: Yanchep Sun City Pty Ltd v C of State Taxation (WA) (1984) 15 ATR 1165. 12- Amount received as substitute for or compensation for lost income.

Where a taxpayer gives up his income in exchange for other payments, the other payments take on the character of income for which they were exchanged (C of T (Vic) v Phillips (1936 55 CLR 144 at 157). And where payments are made pursuant to a statute as compensation for an asset acquired by the State or sterilised in the hands of the taxpayer in order to serve the public interest, those payments take their character from the character, in the taxpayer’s hands, of the asset acquired or sterilised (see, for example, Newcastle Breweries Ltd v IRC … Commr of Taxation v Wade (1951) 84 CLR 105 …).

Thus in Allman v FCT 98 ATC 2142 a payment made for income lost through wrongful dismissal was assessable income because it was a substitute for income that would have been earnedS 6-5 Sale S6-5 Fees S6-5 Interest Received: (income from property)Interest relates to a sum borrowed or agreed to be borrowed. Without a borrowing there can be no interest. In Riches v Westminster Bank Ltd. Lord Wright described interest as being.

A payment which becomes due because the creditor has not had his money at the date. It may be regarded either as representing the profit he might have had the use of the money, or conversely the loss he suffered because he had that use. The general idea is that he is entitled to compensation for the deprivation. Interest therefore has a favour of payment made for the use of lender’s money.

Although it can be generally said as ordinary income (s6-5), there are exceptions for example pre-judgement interest in personal injury cases and some discount or premium. S6-5 Commission ReceivedStatutory income Statutory income are amounts outside the ordinary concepts of income that have been specifically included in  assessable income. It is derived form specific sections. S(6-10) 15: 2 Employment allowance / benefit 15-3 return to work15-5 leave transfer payment 15-10 Bounties and subsidies: refers to payments by government ,government authorities and like: Case:T55 per Mr.

O’Neil and cover payments made in order to assist taxpayers in carrying on their business. Bounties or subsidies have been held to include :-A) cash payment to racing clubs to assist them in carrying on their business. (Case K48), B)grants under legislation designed to encourage research and development in the particular feild. (Reckitt and Colman Pty Ltd v FC of T) C)Subsidies to manufacturers under an act designed to ensure a minimum price of the product.

(Lincolnshire Sugar Ltd v Smart) and D) grant received under the Dairy Regional Assistance Program , designed to promote the employment of former daily workers due to deregulation of the dairy industry(plant v FC of T)15-15 profit making undertakings 15-20 royalities15-25 receipts for lease repair obligations15-30 Insurance indemnity for income loss15-35 insurance for overpayment of tax15-50 work in progress15-70 Reimbursed car travel 20-20 Assessable recoupment Div 20: Amounts included to reverse the effect of past deductions [UTL 5. 22] Div 20 is directed to recouping amounts that were formerly deductible.

The division operates independently in that there is no underlying principle of revenue law that the recovery of an amount that was previously deductible is, ipso facto, of a revenue nature. There is no necessary symmetry between assessability and deductibility: FCT v Rowe (1997) 187 CLR 266; 97 ATC 4317 For Div 20-A to apply there must be an assessable recoupment. This is:- (a) any type of recoupment, reimbursement, refund, insurance, indemnity or recovery of a loss or outgoing, however described; and (b) a grant in respect of a loss or outgoing.

The loss or outgoing refers to any amount deductible under the Acts of 1936 or 1997. The recoupments are made assessable under s 20-20: 20-20(2) An amount you receive as recoupment of a loss or outgoing is an assessable recoupment if:: (a) you receive the amount by way of insurance or indemnity; and (b) you can deduct an amount for the loss or outgoing for the current year, or you have deducted or can deduct an amount for it for an earlier income year, under any provision of this Act.

20-20(3) An amount you receive as recoupment of a loss or outgoing (except by way of insurance or indemnity) is an assessable recoupment if: (a) you can deduct an amount for the loss or outgoing for the current year; or (b) you have deducted or can deduct an amount for the loss or outgoing for an earlier income year; under a provision listed in section 20-3020-110 Disposable of leased car for profit 70-35 Trading Stock refers to anything produced, manufactured or acquired that is held for sale.

70-90 Disposable of trading stock outside normal course of business82-130 Employment termination paymentDiv 83A Employee share scheme102-5 Net Capital Gain 21 A Non Cash Business Benefit 44 Dividends 47 Distribution of Liquidator92 Partnership Income. | | | | Exempt income is an amount excluded from assessable income by statute, even though otherwise it is either ordinary or statutory income. Eg. salary paid to a member of the Australian Army Reserve is income by ordinary concepts but it is specifically exempted from assessable income; s51-5.

Non-assessable Income is an amount that is neither ordinary nor statutory income is not assessable; eg, mutual receipts. Do not describe such amounts as ‘exempt’ income. These are simply not income. Exempt income is a technical term. For example: lottery winnings are not income by ordinary concepts and no specific provision makes them statutory income. So they are not assessable income because they are not income in the first place. Deductions Section 8-1= Most commonly encountered deductions fall within the general deduction provision, which is modelled on former s 51(1) ITAA36.

like its predecessor’s 8-1 applies to “loss “ and “Outgoing” and it has both positive and negative “limb”. Two positive limbs are: You and deduct from your assessable income any loss or outgoings to the extent that: a) it is incurred in gaining or producing your assessable income. Related case Ronpibon Tin NL and Tongkah Compound NL v FC of T (1949) 78 CLR 47 b) It is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. Related case Hannan, principles of income taxation (1946) p 291: FC of T v Snowden & Willson Pty Lted (1958) 99 CLR 431.

Four negative Limbs are: However you cannot deduct loss or outgoings under this section 8-1 to the extent that: a) It is a loss or outgoing of capital or of a capital nature b) It is loss or outgoing of a private or domestic nature c) It is incurred in relation to gaining or producing your exempt income or non-assessable non-exempt income d) A provision of this act prevent from deducting it. Allowable deduction with section and case 25-05 Tax related expenses= Subsection 25-5(1) of the ITAA 1997 allows a deduction for certain types of tax related expenses.

These include costs related to managing tax affairs, the cost of complying with obligations imposed by a commonwealth law, or general interest charge. in absence of s 25-5 tax related expenses would be generally be deductible under s 8-1 if relating to carrying on a business. Falcetta & Anor V FC of T Under s25-5 not to be deduction for income tax, amounts withheld or payable under the PAYG system ,expenditure in borrowing money to pay amount cover by (1) n (2) | | | |

25-10 Repairs = you can deduct expenditure you incur for repairs to premises (or part of premises) or a depreciating asset that you held or used solely for the purpose of producing assessable income. Thomas & Co Pty Ltd v FC of T Property held or used partly for that purpose If you held or used the property only partly for that purpose, you can deduct so much of the expenditure as is reasonable in the circumstances. Repair involves replacement or renewal of a part of an item. No deduction for capital expenditure You cannot deduct capital expenditure under this section.

Replacing the roof of building amount of $7000 not deductible under section 25-10 Industrial building claim capital work allowances 2. 5% . Partitioning and panelling, Furniture for lunch room these two depreciable calculation mention below:-Depreciation on Partitioning and Panelling or Furniture for lunch room =$10000 X 2. 5% 8/12 =$167 25-15 Lease obligation to repairs =you can deduct an amount that you pay for failing to comply with a lease obligation to make repairs to premises if you use or have used the premises for the *purpose of producing assessable income.

25-20 lease document =you can deduct expenditure you incur for preparing, registering or Stamping 🙁 a) A lease of property; or (b) An assignment or surrender of a lease of property; 25-25 Borrowing expenses =you can deduct expenditure you incur for *borrowing money, to the extent that you use the money for the *purpose of producing assessable income. In most cases the deduction is spread over the*period of the loan. Where the Borrowing is $100 or less, the whole of the borrowing expense is deductible in the year in which it is incurred.

Example Borrowing Expenses $300 for 3 years =300/3=$100($100 is divided by month 1 February 2012 to 30th June 2012) Now, 5 month borrowing expenses =$100 x 5/12=$42 25-30) Mortgage expenses (Mortgage for borrowed money) You can deduct expenditure you incur to discharge a mortgage that you gave as security for the repayment of money that you *borrowed if you used the money solely for the *purpose of producing assessable income.

Mortgage for property bought You can deduct expenditure you incur to discharge a mortgage that you gave as security for the payment of the whole or part of the purchase price of property that you bought if you used the property solely for the *purpose of producing assessable income. Money or property used partly for that purpose If you used the money you *borrowed, or the property you bought, only partly for the *purpose of producing assessable income, you can deduct the expenditure to the extent that you used the money or property for that purpose. No deduction for payments of principal or interest You cannot deduct payments of principal or interest under this section.

25-35 bad debts =you can deduct a debt (or part of a debt) that you write off as bad in the income year if: (a) It was included in your assessable income for the income year or for an earlier income year; or (b) It is in respect of money that you lent in the ordinary course of your *business of lending money. 25-40 Loss from profit-making undertaking or plan=You can deduct a loss arising from the carrying on or carrying out of a profit-making undertaking or plan if any profit from that plan would have been included in your assessable income by section 15-15 (which is about profit-making undertakings and plans).

25-45 Lost on theft =you can deduct a loss in respect of money if: (a) You discover the loss in the income year; and (b) The loss was caused by theft, stealing, embezzlement, larceny, defalcation or misappropriation by your employee or *agent (other than an individual you employ solely for private purposes); and (c) The money was included in your assessable income for the income year, or for an earlier income year. 25-50 Non salary payment to staff =you can deduct a payment of a pension, gratuity or retiring allowance that you make to: (a) An employee; or (b) A former employee; or.

(c) A dependant of an employee or a former employee. However, you can deduct it only to the extent that it is made in good faith in consideration of the past services of the employee, or former employee, in any *business that you carried on for the purpose of gaining or producing assessable income. 25-55 Payments to associations=you can deduct a payment you make for membership of a trade, business or professional associations Maximum amount—$42 (2) However, $42 is the maximum amount you can deduct under this section for the payments that you make in the income year to any one association.

If you deduct under section 8-1 (3) If you deduct a payment under section 8-1 (which is about general deductions) instead of this section: (a) the payment does not count towards the $42 limit; and (b) the amount that you can deduct for the payment is not limited to $42. 25-75: Rates & land tax=deductible for property used to produce mutual receipts. Rates on income producing property (factories, rental units etc. ) deductible under s8-1. 25-100Travel between two places: a transport expense between two places of employment is deductible.

25-110 Capital expenditure to terminate lease etc. =you can deduct an amount for capital expenditure you incur to terminate a lease or licence (including an authority, permit or quota) that results in the termination of the lease or licence if the expenditure is incurred: (a) In the course of *carrying on a *business; or (b) In connection with ceasing to carry on a business. 26- 5: Fines & penalties imposed by Australian courts. Not deductible under s8-1 anyway. Such penalties fall on the individual in the capacity of an errant citizen, not in the course of gaining income.

; Madad Pty Ltd, Mayne Nickless. 26-10: Leave payments: payment for annual, sick & LSL not deductible until paid. This is the conclusion of decisions such as James Flood and Nilsen Developments. 26-20: Higher education contributions payments not deductible (unless made as fringe benefits) 26-25: interest & royalties not deductible if withholding tax not deducted 26-30: Relatives’ travel cost of relatives accompanying taxpayers on income related travel not deductible unless relative is an employee performing bona fide duties.

26-35 Related entities You can only deduct reasonable amounts paid to related entities If, under another provision of this Act, you can deduct an amount for a payment you make, or for a liability you incur, to a *related entity, then you can only deduct so much of the amount as the Commissioner considers reasonable. However, a partner in a partnership is not a related entity of the partnership. If you can’t deduct, then related entity doesn’t include amount as income 26-40 maintaining your family.

You cannot deduct under this Act expenditure you incur for maintaining: a) Spouse (except a spouse permanently living separately and apart from you) or (b) your *child who is under 16 years. 26-45 Recreational club expenses You cannot deduct under this Act a loss or outgoing to the extent you incur it to obtain or maintain: (a) Membership of a *recreational club; or (b) Rights to enjoy (otherwise than as a *member) facilities provided by a *recreational club for the use or benefit of it’s *members; 26-50 Expenses for a leisure facility or boat.

You cannot deduct under this Act a loss or outgoing to the extent you incur it: To acquire ownership of a *leisure facility or boat; or to retain ownership of a *leisure facility or boat; or to acquire rights to use a *leisure facility or boat; or to retain rights to use a *leisure facility or boat; or to use, operate, maintain or repair a *leisure facility or boat; or in relation to any obligation associated with your ownership of a *leisure facility or boat; or in relation to any obligation associated with your rights to use a *leisure facility or boat.

26-52 Bribes to foreign public officials You cannot deduct under this Act a loss or outgoing you incur that is a *bribe to a foreign public official 26-53 Bribes to public official You cannot deduct under this Act a loss or outgoing you incur that is a *bribe to a public official. An amount is a bribe to a public official to the extent that: you incur the amount in, or in connection with providing a benefit to another person; or causing a benefit to be provided to another person; or offering to provide, or promising to provide, a benefit to another person.

26-54 Expenditure relating to illegal activities You cannot deduct under this Act a loss or outgoing to the extent that it was incurred in the furtherance of, or directly in relation to, a physical element of an offence against an *Australian law of which you have been convicted if the offence was, or could have been, prosecuted on indictment. 26-54: Legal activities.

Losses and outgoing relation to indictable offences not deductible 26-55 Limit on deductions: limit on some deductions in calculating tax losses 26-60 Superannuation You cannot deduct under this Act: a superannuation contributions surcharge within the meaning of the Superannuation Contributions Tax (Assessment and Collection) Act 1997; or a superannuation contributions surcharge within the meaning of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 Division 32—Entertainment expenses 32-A No deduction for entertainment expenses.

To the extent that you incur a loss or outgoing in respect of providing *entertainment, you cannot deduct it under section 8-1. However, there are exceptions, which are set out in Subdivision 32-B. 32-20 The main exception—fringe benefits Section 32-5 does not stop you deducting a loss or outgoing to the extent that you incur it in respect of providing *entertainment by way of *providing a *fringe benefit. But this exception does not apply to the extent that the taxable value of the *fringe benefit is reduced under section 63A of the Fringe Benefits Tax Assessment Act 1986.

Calculation of FBT For education =$22000 x 2. 0647 (2. 0647 is the gross-up rate =$45423. 4 x 46. 5% =$21122 For Entertainment = $9000 x 2. 0647 (2. 0647 is the gross-up rate) =$18582 x 46. 5% =$8641 For overseas = ($2500+$8000) x 1. 8692 (1. 8692 is the gross-up rate) =$19626. 6 x 46. 5% =$9126 Therefore the total FBT=$21122 + $8641 + $9126 =$38889 Div 40& 43The object of Division 40 is to allow a deduction for the cost of a depreciating asset over the time period. Division 43 provides for a capital write-off of 2. 5% or 4% (depending on when Construction commenced) for capital expenditure for capital works.

‘Capital works’ is not defined but the Division applies to extensions, alterations and improvements to these. TRADING STOCK Trading stock s70-10 for income tax purposes includes anything produced, manufactured or acquired that is held for the purposes of manufacture, sale or exchange in the ordinary course of a business. Trading stock on hand at the start of the period and trading stock on hand at the end of period are taken into account in working out a taxpayer’s taxable income. Where the value of closing stock exceeds the value of opening stock the amount of the excess is assessable income.

Conversely, where the value of opening stock exceeds the value of closing stock, the amount of excess is deductible. The calculation of the effect of changes in trading stock on assessable income does not need to explicitly take into account purchases or manufacture of trading stock during the year. However, the cost of purchasing or manufacturing trading stock is effectively deductible and the value of such trading stock is effectively included in assessable income. The net effect on assessable income is zero.

Valuation(stock in hand)[s70-45]Cost-actual or specific cost In the case of a manufacturer cost means full absorbtion costing which entails the allocation of direct labour and overheads: Philip morris case . Replacement cost: taxpayer’s ordinary buying market Market selling: taxpayer’s ordinary selling marketS70-50 option- taxpayers may adopt a lower value for closing stock if ,due to reasons of obsolescence or other special circumstatnces it is warranted. The valuation must be ‘reasonable’. CONSUMABLE STORES AND SPARE PARTSGenerally expenditure on the acquisition of consumable and spares to meet operational requirements is deductible at the time incurred.

However such assets are not presently treated as trading stock and their value at year-end is not required to be brought to account for taxation purposes. Accounting treats such assets as inventories to be valued at lower of net realisable value and cost. Bringing consumables and spares to tax in the same manner as trading stock would achieve consistency of treatment and be more compatible with accounting standards. STANDING CROPS Expenditure on planting and tending crops for sale or use in a business is immediately deductible. However, crops do not constitute trading stocks until severed from the land.

Accordingly, there is no requirements to bring their value to tax until either severed or sold with the land. For annual crops this treatment does not raise significant problems but for long-life crops the current treatment would seem to provide significant tax deferral benefits that are not available to other investments. The treatment of expenditure on acquiring standing crops varies according to the nature of the assets. If the assets is standing timber, deductions are not allowable until the timber is either felled or disposed of. Expenditure on acquiring other standing crops is generally deductible at the time incurred.

In both cases, expenditure on tending the assets after acquisition is immediately deductible. One reform option that could be considered is for deduction to be deferred until the value of the crop is realised. While this may have an adverse impact on some taxpayers cash flow, it would move the taxation treatment closer to the accounting treatment. MINERAL RESOURCES Expenditure on extracting minerals from the land is immediately deductible. Some forms of mining significant amounts being expended on removing overburden well in excess of immediate needs.

However, because the minerals do not become trading stock until severed from the land, there is presently no requirement to bring to account the year-end value of work performed. Accounting requires value of work performed to be valued at year-end. The value of this work would be later absorbed into the value of minerals extracted. PARTLY COMPLETED CONTRACTS FOR PROVISION OF SERVICES Expenditure on performing services, such as professional services and construction projects, is immediately deductible. Fees for performing those services are assessable at the time earned, and that is usually at the time of billing.

Presently, taxpayers are not required to account for the value of such work in progress even though they are allowed deductions for the cost of its creation. EXAMPLE Indicate how the trading stock provisions of Div 70 apply to the following events: (i) The proprietor of a men’s clothing store took a suit from trading stock for his own use. The suit cost $350 and had a retail value of $500 : Suit: Section 70-110 applies. The proprietor is deemed to have sold the suit for cost and s 70-90 makes that amount assessable. In effect, the cost of acquiring the suit is cancelled.

(ii) The owner of a confectionery store presented two staff members with a box of chocolates as Christmas presents. : Gift of chocolates to staff: This is an in-house property fringe benefit The cost of providing fringe benefits is an allowable deduction to an employer, unless a specific denying provision applies. The ordinary operation of s 8-1/70-35(3) provides the deduction. (iii) Local retailers donate items to fill a Christmas hamper to be raffled by the Carlyle Bowling Club. : Retailers’ donations of stock: The issue is whether the disposal is outside the ordinary course of business.

If it is, s 70-90 assesses the market value and cancels the deduction. The issues are discussed at 11. 27. Arguably, this is a routine promotional or sponsorship activity and the normal operation of s 8-1/s 70-35(3) provides the deduction. (iv) O Owner sold the ‘Corner Store’ for $100,000 plus stock as valued (SAV). Stock was valued at $25,000. Stock valuation at time of business sale: This is a s 70-90 non-business disposal. The seller is assessable on the amount of $25,000 and the purchaser is deemed by s 70-95 to have acquired the stock at $25,000. Section 70-100 deems the amount not to be of a capital nature.

(v) PhotoCo is in the business of leasing photocopying equipment. At the conclusion of a lease agreement, equipment more than five years old is sold. Sale of leased equipment: This question raises the issues examined in Memorex Pty Ltd: 3. 13. Section 70-30 now applies. There is a notional disposal and reacquisition at either cost or market value. (vi) BuildCo carries on business preparing building sites. This involves supplying and compacting sand. BuildCo pays $100,000 for title to a property containing sand reserves : Acquisition of property for sand reserves: The expenditure is capital. The land itself is not trading stock: see 11.

10. See also Nizich v FCT 91 ATC 4747. The issue there was whether the payment was for trading stock or whether, being a payment f