D & W Murray Ltd v Federal Commissioner of Taxation [1927] HCA 51; (1927) 40 CLR 148 (28 November 1927)

D. & W. Murray Limited Appellant; and The Federal Commissioner of Taxation Respondent.

The question in this case may be thus stated: Does a sum which was originally paid as excess profits duty under sec. 38 of the Imperial Finance (No. 2) Act 1915 (5 & 6 Geo. V. c. 89) still answer the description in sub-sec. 4 of sec. 15 of the Commonwealth War-time Profits Tax Assessment Act 1917-1918 of "any sum which has been paid in respect of the profits," &c., if it has since been repaid or allowed in accounts to the taxpayer under sec. 38 of the Imperial Act? The crucial words in the Commonwealth Act already quoted are: "any sum which has been paid." I entertain no doubt that one cannot fasten simply on the formal act of payment and say that the word "paid" is thereby once and for all necessarily satisfied. If by mistake, as by over-calculation, or wrong inclusion of an item or a figure or of identity, a sum is paid and then, the error being detected, a repayment takes place, it would be offending all common sense to treat the sum repaid as "paid" for the purposes of the Commonwealth Act. There the act of payment is itself undone and the money simply restored to its rightful owner. But here the original payment was in all respects obligatory, regular and accurate, and when paid the Crown became the true owner of the money. When afterwards, in pursuance of sub-sec. 3 of sec. 38 of the Finance (No. 2) Act 1915, the taxpayer obtained "repayment of such amount paid by him as excess profits duty in respect of" his assessment, which included the profits now relevant, some other valid and satisfactory reason must be found, if the sum is not to be regarded as "paid" for the purpose of Commonwealth deduction. I think the true answer is found in this:— Sec. 38 of the English Act certainly required payment of the sum for the appropriate accounting period. But by the very terms of the section, that payment was provisional only. In the event that happened, the taxpayer had a right to repayment and that right, subject to the happening of the event, existed from the moment of payment. The repayment was not an act of grace: it was made in pursuance of one of the terms of the original payment. Having been restored on the occurrence of the condition, it is then as if the payment had not been made—that is, for the purposes of deduction under the Australian Act. The taxpayer cannot now, in any reasonable sense, assert that that is a "sum paid in respect of the assessed profits" so as to prevent double taxation.

In my opinion, this question in the case stated must be answered No. The simple answer to the objection of the taxpayer is that the sum which it claims as a deduction under sec. 15 (4) of the War-time Profits Tax Assessment Act 1917-1918 had not been in fact "paid" to the British officials at the date of the assessment in question—7th March 1927—it had been restored by them to the taxpayer on 10th March 1922. On the date in question, the facts which had occurred would not support a plea of payment of the sum in question to the British officials. A recalled payment is no longer a payment. If there were need of an authority on such a point, the point is involved in the case of Walter v. James[1]—a case otherwise very different.

I thought during the argument that the words of the proviso to sec. 15 (4) possibly afforded support to the otherwise grotesque contention of the taxpayer, "once a payment, always a payment"—notwithstanding repayment. For, under the proviso a deduction is to be allowed, from the profits of an accounting period, of land taxes and income taxes paid in the accounting period "less any refunds ... received in the accounting period." The existence of such a provision for deduction of refunds in respect of land taxes and income taxes, coupled with the omission of such a provision in respect of war-time profits tax might, at first sight, seem to favour the view that mere payment, though recalled, was sufficient in respect of the latter tax. But the peculiar express provision for deduction of refunds in respect of land taxes and income taxes is obviously due to a desire of Parliament to meet such provisions as that in the Income Tax Assessment Act 1915-1918 (sec. 18 (1) (b)) for bringing any refunds into account as income in that year only in which the refund is received; and it is to be noticed that there is no such provision for deduction of refunds in relation to deductions from the profits of "all rates and other taxes paid in Australia in the accounting period" (sec. 15 (4) proviso (c)). The doctrine of expressio unius exclusio alterius affords merely a presumption; and, in my opinion, the presumption is here sufficiently rebutted. In this light, the express provision for deduction of refunds in the case of land taxes, and income taxes, assumes that refunds must be deducted, while confining the deduction to the year in which the refund is received.

The appellant was assessed under the Finance (No. 2) Act 1915, the accounting period being the period for which the accounts of the business had been made up and ending respectively on 19th July 1917 and 19th July 1918. The assessment was made upon the whole profits of the business including profits arising from sources within Australia. The appellant paid the excess profits duty for which it had been assessed under this Act, but, later, in its accounting period of twelve months ending 19th July 1921, sustained losses in its trade and business. Upon application to the proper authority in the United Kingdom the duty so paid was repaid or allowed in account to the appellant under the provisions of sec. 38 (3) of the Imperial Act. The appellant having been assessed under the Commonwealth War-time Profits Tax Assessment Act 1917-1918 objected "that sums have been paid in respect of the profits on account of a similar tax imposed in a country outside Australia, namely, excess profits duty has been paid in Great Britain in respect of profits earned during the accounting periods and the years covered by the Commonwealth War-time Profits Tax Assessment Act 1917-1918 and no deduction has been allowed therefor as provided by sec. 15 (4) and sec. 9 of the War-time Profits Tax Assessment Act." The Commissioner having disallowed the objection, the appellant asked that it be treated as an appeal. This has been done, and, the matter coming before the Court under sec. 28 (4) of the last-mentioned Act, a case was stated asking: "Is the appellant entitled to any deduction from the profits dealt with in the assessment mentioned in par. 1 hereof for moneys paid by the appellant in respect of such profits on account of the excess profits duty imposed by Great Britain and subsequently repaid or allowed in account to the appellant as aforesaid."

The Commonwealth Act is a transcript of the Imperial Act. The provisions of sec. 38 (3) of the latter Act were before the Commonwealth Parliament, but, although specific provision is made in sec. 15 (4) (a) and (b) of the Federal Act excepting refunds, none is made excepting the repayment or set-off under sec. 38 (3) of the Finance (No. 2) Act 1915. The words of sec. 15 (4) are very plain: "a deduction shall be allowed for any sum which has been paid in respect of the profits on account of any war-time profits tax or similar tax imposed in any country outside the Commonwealth." The rule is that "judicial tribunals must in interpreting these taxing Acts stick to the letter of the statute" (Attorney-General v. Milne[2]). It is none the less true that there has been a payment in respect of profits although a repayment may be made of subsequent losses. This repayment or refund is, in its turn, subject to taxation under the Imperial Act. It was contended on behalf of the Commissioner that until there has been a final adjustment under the British Act any payment made is only conditional. This contention would result in finality being impossible—a serious contingency in business affairs—unless the Imperial Act was terminated or repealed.

In my opinion the question stated should be answered in the negative. The facts are fully stated in the case and need not be repeated. We were reminded that judicial tribunals in interpreting taxing Acts must stick to the letter of the statute. Even so, I am unable to affirm that a sum has been paid on account of excess profits duty under the Imperial Act when that sum has been repaid pursuant to the authority of the same Act before the date of the assessment to the Commonwealth tax. It may be, as Mr. Dixon argued, that the assessment and imposition of a duty under the Imperial Act has not been undone or cancelled; but in this case the amount of the duty has been in fact repaid. Again, I cannot see that the policy which dictates the repayment matters; whether it be, as the statute suggests, to make excess profits duty accord with the profits or losses of the whole war period, or for any other purpose. The governing fact in this case is that the amount of excess profits duty has been repaid pursuant to the statute. Payment has been blotted out by the repayment and return to the taxpayer of the amount paid by it as excess profits duty.

Solicitor for the respondent, W. H. Sharwood, Crown Solicitor for the Commonwealth.

[1] (1871) L.R. 6 Ex. 124.

[2] (1914) A.C., at p. 772.

High Court of Australia

D & W Murray Ltd v Federal Commissioner of Taxation [1927] HCA 51; (1927) 40 CLR 148 (28 November 1927)

HIGH COURT OF AUSTRALIA