TAXATION LAWS
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respect to ordinary concepts. As per the rulings which was held in “Californian Oil Products
Ltd v Federal Commissioner of Taxation (1934)” that any amount which is paid in ordinary
course of business for damages, losses of income would be considered under the purview of
taxation. The main reason due to which the verdict was provided as the profit was derived from
carrying out operations of the business even though the nature of the revenue is extraordinary in
nature.
The case of “CT (Vic) v Phillips (1936)” where a verdict was passed that if a taxpayer
receives compensation for loss of business revenue or commercial scheme and forms the
substances of business activity, then the amount which is received as compensation would be
considered as loss of capital assets. Therefore, if there is an absence of countervailing
examination than the receipts from the same would be treated as capital receipts. It was held in
the case rulings of “FC of T v Spedley Securities Ltd (1988)” that compensatory damages on
goodwill was considered as capital loss for the business. The compensation which was received
by the taxpayer was treated as an injury to the capital asset.
In the case where a taxpayer receives interest as compensation then the interest would be
treated as taxable amount for the taxpayer considering normal provisions. As per the opinion of
the federal court in the case “Whitaker v FCT (1998)” interest should be treated as income in
ordinary sense which is provided to the taxpayer as compensation for lost earnings.
The provisions of “section 8-1, ITAA 1997” states that the taxpayer would be eligible for
deductions for the legal expenses which is undertaken by the tax payer and then the payment or
the reward would also be included in the assessable income of the taxpayer in the form of
recovery under “subdivision 20-A”. The legal expenses which is awarded to the taxpayer is

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