Young Men's Christian Association of Melbourne v Federal Commissioner of Taxation [1926] HCA 2; (1926) 37 CLR 351 (18 March 1926)

The Young Men's Christian Association of Melbourne Appellant; and The Federal Commissioner of Taxation Respondent.

I do not dissent from the opinion about to be expressed by the majority of the Court to the effect that the appellant is a religious institution within the meaning of sec. 11 (1) (d) of the Income Tax Assessment Act 1915-1918, and that its income is therefore exempt from income tax. It follows that it is unnecessary for me to express an opinion on the question whether the Association is also a charitable institution within the meaning of that section, or upon the further questions whether or to what extent the decision of the Judicial Committee in Chesterman's Case[1] is inconsistent with the decisions of this Court in Swinburne's Case[2] and Kelly v. Municipal Council of Sydney[3], and I abstain from doing so.

The appellant Association claims that under sub-sec. 1 (d) of sec. 11 of the Act of 1915-1918 it is exempt from income tax as being (1) a religious institution and (2) a charitable institution within the meaning of that sub-section.

The Association was incorporated under Victorian law as a "philanthropic institution," that being a compendious expression for objects of a very wide ambit tending to improve and elevate human nature. Its by-laws, which perhaps go beyond what the Act describes as "the regulation of its own proceedings," at all events indicate its character in fact. They describe in section i. the "constitution" and in section ii. the "object" of the Association. These two section are analogous to the memorandum of association of an ordinary trading company, and these I regard as giving the dominant impress to the Association and determining its real character. The remaining sections are more properly regulative, directly and indirectly.

Reading the two first sections, and having regard also to the evidence as to the way in which the affairs of the Association are conducted, I entertain no doubt it is entitled to exemption. My conclusion rests on the essentially "religious" character of the institution. To repeat an observation I made during the argument, the Association is an institution with a very broad religious platform carried out in an extremely practical manner. It is therefore unnecessary to consider the second ground of exemption claimed, namely, that it is also "a charitable institution" within the meaning of the sub-section.

But for the sake of all concerned it is right to advert to the state of doubt and confusion that exists with regard to this branch of the subject. As is well known to lawyers—though few others of the six million inhabitants of the Commonwealth suspect it—the word "charitable" has in some collocations a technical meaning of a singular nature. It has what is called the Elizabethan sense, and a "charitable purpose" in this sense, according to the decisions, includes, besides what is ordinarily regarded as charity, such purposes as a trust for a "home for starving and forsaken cats," a trust for the promotion of vegetarianism, and trusts for "the promulgation of conservative principles combined with mental and moral improvement, socialism, and anti-vivisection principles" (see Swifte v. Attorney-General[4]; In re Cranston; Webb v. Oldfield[5], and Halsbury's Laws of England, vol. iv., sec. 182). That technical sense it has now been decided by the Judicial Committee of the Privy Council (Chesterman's Case[6]) must be assigned to the word "charitable" in the Estate Duty Assessment Act as it at present stands, because there is nothing to show that Parliament meant to restrict it to the usually accepted sense. The wording of the exemption in that Act differs, however, from that in the Income Tax Assessment Act: in the one we find the phrase "charitable purposes," in the other "charitable institution." In the Land Tax Assessment Act we find both "charitable purposes" and "charitable institution"; so that there is a certain chance of confusion in the one Act. There stands at present a decision of this Court— Swinburne v. Federal Commissioner of Taxation[7]—which is not directly touched by the Privy Council decision because it arose under a section of the Income Tax Assessment Act where the phrase is "public charitable institutions." There it was held that the technical Elizabethan meaning did not attach to the word "charitable," but that Parliament meant the word in its usual modern sense of relief to persons. That means, of course, in the broad and literal sense of assistance, physical, mental or spiritual, for the benefit of those whose means or opportunities are otherwise insufficient for the purpose. It was strenuously argued before us in this case that, since the ultimate decision in Chesterman's Case[8], Swinburne's Case[9] must be held to be wrong. It is obvious to me that in the interests of all concerned the meaning of Parliament should be legislatively declared beyond doubt. Besides the rights of the Public Treasury, in the first instance, and the possibility of refunds, as well as the administration of the Taxing Branch, which must be seriously hampered by the diversity of expressions and of decisions, the parties immediately concerned as possible taxpayers should be definitely informed, without the necessity of further costly legal proceedings, as to their liability or non-liability, and the general public ought also to know what clear exemptions are intended which cast a heavier burden on the rest of the community. Litigation, perhaps protracted and expensive, is inevitable unless Parliament by a few words declares whether by "charitable" it means to use that word in its ordinary modern sense, or in the technical Elizabethan sense that some quaint Chancery decisions in connection with trusts have affixed to it as its primary legal meaning, extending to objects which include, as I have said, purposes quite outside what any ordinary person would understand by charitable.

As to the amount, since "the income" is exempt it means the whole income, and therefore there is no liability.

By sec. 11 (1) (d) of the Income Tax Assessment Act 1915-1918 (now sec. 14 (1) (d) of the Income Tax Assessment Act 1922-1925) the income of a religious, scientific, charitable or public educational institution is exempt from the tax. This Association, which is incorporated under Victorian law, has been assessed by the Commissioner for 1920, as for £3,400 rent received in 1920, £150 interest on moneys and bonds donated to the Association for its general purposes, £153 moneys received from subscribers to and advertisers in the journal of the Association. The Commissioner admits certain deductions from these receipts; but the amount of the deductions is immaterial if, as claimed, the Association is a religious or a charitable institution, and exempt from the tax.

According to its by-laws, the Association is based upon a Paris declaration of 1855, as follows: [The declaration was here set out.]

According to by-law 3, "the object of the Association is the improvement of the spiritual, intellectual, social and physical condition of young men." It is unnecessary to consider the distinctions between "active," "associate," "sustaining" and "honorary" members, or the details of their activities; for not one of the activities is inconsistent with the basic declaration and the object as stated. That basic declaration shows, in my opinion, that the Association is religious; and I am inclined to think that the mere fact that the object includes the improvement of the intellectual, social and physical condition of young men does not detract from the fundamental religious character of the Association.

But the aim is to improve the spiritual, intellectual, social and physical condition of young men, and not only the young men who happen to be members. To improve the "social condition" of young men, I take it, means to make them better members of human society, and not merely to improve what is called their social position. I am clearly of the opinion that the Association is charitable in the technical sense, as being designed for the good of young men generally. The very recent case of Chesterman v. Federal Commissioner of Taxation[10], on appeal to the Judicial Committee, shows that we are to consider the word "charitable" in the technical sense, and not in any popular sense of eleemosynary, &c. The reasoning of the Judicial Committee in that case may compel us to reconsider the decision in Swinburne v. Federal Commissioner of Taxation[11], should a similar question arise hereafter. But that decision was as to the meaning of the words "public charitable institutions in Australia" in sec. 18 (1) of the Income Tax Assessment Act 1915-1918 (sec. 23 (1) (h) (ii.) of the present Act); and it does not necessarily follow that in this different context the word "charitable" should be treated as having the same meaning as in the Estate Duty Assessment Act 1914-1916, sec. 8. It has not been argued for the Commissioner that this Association is not an "institution" within the meaning of the Act. The meaning numbered 7 in the Oxford Dictionary applies: "An establishment, organization, or association, instituted for the promotion of some object, esp. one of public or general utility, religious, charitable, educational, &c., e.g. a church, school, college, hospital, asylum, reformatory, mission, or the like; as a literary and philosophical institution, a deaf and dumb institution, the Royal National Life-boat Institution," &c. It is true that the name is often popularly applied to the building, appropriated to the work of a benevolent or educational institution; but this is rather a transferred sense. The existence of a distinctive building is not, I think, essential to the word "institution."

In my opinion, the appellant Association was not rightly assessed for income tax in respect of any of the three sums.

The appellant Association seeks exemption from the payment of income tax on the ground that it is either a "religious institution" or a "charitable institution" within the meaning of sec. 11 (1) (d) of the Income Tax Assessment Act 1915. As I am of opinion that it is such a "religious institution" it is unnecessary for me to consider whether it is or is not such a "charitable institution."

The appellant is an association incorporated under the Hospitals and Charities Act 1890 Vict. and the corporation has made by-laws under sec. 10 of that Act. Sections i. and ii. of the by-laws are as follows:—[The sections were here set out.] Section iii. deals with membership and section iv. with the management of the corporation. From these sections it appears that the business of the corporation is conducted by a Board and an advisory council appointed by the Board. The Board is elected at an annual meeting by active members and by persons contributing a sum of not less than £100 per annum. The qualification for active membership is as follows: [By-law No. 5 was here set out.] In my opinion the appellant is substantially an association of persons holding specific religious views, and acting together for the purpose of comforting and encouraging one another, and of inducing others to adopt those religious views and to join that Association. It is therefore a "religious institution" within the meaning of sec. 11 (1) (d) of the Income Tax Assessment Act 1915.

My answer to the question submitted for our consideration is that the appellant was not rightly assessed for income tax in respect of any of the sums mentioned in the case stated.

The appellant claims that its income is exempt from income tax on the ground that it is a religious and/or charitable institution (Income Tax Assessment Act, sec. 11 (1) (d)).

It has not been suggested that the appellant is not an institution. It was incorporated under the provisions of sec. 19 of the Hospitals and Charities Act 1890. And I consider that it is religious. The cardinal principle of the Association is: [The declaration was here set out.] That is the basic idea. Ancillary thereto is "the improvement of the spiritual, intellectual, social and physical condition of young men" (by-law 3).

Reading the by-laws of the Association as a whole document, I find nothing in them to exclude or modify the construction I have adopted. In this view it is unnecessary to express any opinion as to whether the Association is "charitable."

Solicitor for the respondent, Gordon H. Castle, Crown Solicitor for the Commonwealth.

[1] (1926) A.C. 128; 42 T.L.R. 121; ante, 317.

[2] [1920] HCA 8; (1920) 27 C.L.R. 377.

[3] [1920] HCA 52; (1920) 28 C.L.R. 203.

[4] (1912) 1 I.R. 133.

[5] (1898) 1 I.R. 431.

[6] (1926) A.C. 128; 42 T.L.R. 121; ante, 317.

[7] [1920] HCA 8; (1920) 27 C.L.R. 377.

[8] (1926) A.C. 128; 42 T.L.R. 121; ante, 317.

[9] [1920] HCA 8; (1920) 27 C.L.R. 377.

[10] (1926) A.C. 128; 42 T.L.R. 121; ante, 317.

[11] [1920] HCA 8; (1920) 27 C.L.R. 377.

High Court of Australia

Young Men's Christian Association of Melbourne v Federal Commissioner of Taxation [1926] HCA 2; (1926) 37 CLR 351 (18 March 1926)

HIGH COURT OF AUSTRALIA