Arthur Murray (NSW) Pty Ltd v FCT (1965) 114 CLR 314 - Taxation Law Case Study

Running head:
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

Running head:
Arthur Murray (NSW) Pty Ltd v FCT (1965) 114 CLR 314
Case Facts:
The taxpayer was regarded as carrying on the business of dancing. The taxpayer held
a dance school. The dancing less that was provided by the taxpayer was relating the receipts
that were received in advance and the receipts of such amounts was placed into the suspense
account of the taxpayer until and unless the lessons were rendered by the taxpayers
(Kiprotich 2016). Upon the completion of the dancing lessons the taxpayer transferred the
advance payment into the revenue account. The students that were enrolled under the
taxpayer did not had any kind of right of refunding the however in the actual practice the
refunds were made by the taxpayer.
According to the “section 25 (1) of the Income tax assessment act 1936-1965” lay
down that the taxable income of the taxpayer must be included as the gross income that is
obtained directly or indirectly from all the source (Jones and Rhoades-Catanach 2015).
Likewise, the case facts provide that the student should assume the accountability relating the
entire amount of the dancing tuition that was set forth. The contract was entirely non-
refundable and non-cancellable. The agreement of the licences in which the taxpayer
performed its dancing lesson business comprised of the provision where the license for
refund is justified by making a correct refund.
The accounting method that was adopted by the taxpayer was regarded as the accrual
methods while the advance payment for lessons to be provided were credited under the
general revenue immediately (Pomp and Rodriguez 2015). In its place, the amounts were
credited to the account that was known as the unearned deposits under the untaught lesson
account. Upon giving each lesson the instructor entered the amount in the record books that
was kept by him containing the students name. After the end of the month the amounts that

Running head:
were corresponding to amount of the tuition that were provided were transferred to the earned
revenue account.
The taxation commissioner in the statement issued that the amount that was received
by the taxpayer should be included in the taxable income as the amounts that were originally
obtained by the taxpayer during the income year instead of showing the amount into the
accounting system as the amount that is earned (Miller and Oats 2016). The majority of the
board noticed that the receipt of cash was regarded as the gross proceeds of the business and
should be included into the taxable income of the taxpayer. An appeal was launched by the
taxpayer to the Australian Court for reassessment of the judgement.
Issue:
The present issue that is associated with the taxpayer is entirely associated to the
derivation of the income. The issue here is based on determining whether the taxpayer has
derived the income from the tuition fees in the year when the such amount of tuition fees was
received.
Conclusion:
The decision of the court stated that the income cannot be considered as the income
since it was not derived until the services were rendered (Keen and Mullins 2017). The
objective of the court was to determine whether the gains that were received as come home to
the taxpayer that have not only been received but also come home to the taxpayer. The court
of law enquired that whether the situation arrived where the amount received was considered
as the gain entirely so that there is neither legal nor business regarding it without having the
qualification of income (Zeff 2016). Even though the amount was paid in advance it did not
resulted any legal impediment in the manner in which the amount was derived. The court
further stated that the amount that was received by the taxpayer was not entered into the