|
|
[Home]
[Databases]
[WorldLII]
[Search]
[Feedback]
High Court of Australia |
H C of A
On appeal from the High Court (Knox C.J.).
5 March 1928
Knox C.J.
Owen Dixon K.C. and Russell Martin, for the appellant.
Ham K.C. and C. Gavan Duffy, for the respondent.
Mar. 5
Knox C.J. delivered the following written judgment:—
This is an appeal from an assessment to war-time profits tax for the year ending on 30th June 1917. The substantial question at issue relates to the deduction authorized by sec. 15 (4) of the War-time Profits Tax Assessment Act—a deduction of "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" ; but the first contention raised on behalf of the respondent is that it is not open to the appellant to litigate that question on this appeal, either because it is not raised by the notice of objection dated 20th July 1925 or because the appellant is precluded by sec. 23 of the Act from objecting to the amended notice of assessment dated 10th July 1925. In order to decide this preliminary question it is necessary to examine the dealings and correspondence between the parties. [His Honor then stated the facts, which are substantially set out in the above admissions of fact, and continued:—]
In my opinion these dealings between the parties had the effect of keeping open all questions relating to the allowance to be made under sec. 15 (4) of the Act until the assessment of August 1923. I think it is unnecessary to determine whether Starkey & Starkey's letter of 23rd August 1923 constituted a sufficient notice of objection to this assessment or whether the letter of the Commissioner in reply read with the rest of the correspondence amounted to an undertaking that the question of allowance to be made under sec. 15 (4) should be kept open, because by the amended assessment of July 1925 not only was the total liability of the appellant increased but the amount allowed under sec. 15 (4) in the preceding assessment was substantially diminished. The effect of this was in my opinion to give the appellant a right under sec. 23 (1) of the Act to object to the assessment, at any rate in respect to matters in which an alteration had been made having the result of increasing its liability. It follows that, in my opinion, the objection contained in Starkey & Starkey's letter of 20th July 1925 was duly made, and I feel no doubt that the ground of objection on which the appellant now seeks to rely was clearly stated in that letter and the letter of 4th December 1924, which is incorporated by reference in the later letter.
The substantial question is whether the expression "paid in respect of the profits" which occurs in sec. 15 (4) is to be construed as meaning "paid in respect of the profits of the business" or "paid in respect of the war-time profits of the business." The appellant supports the former contention; the respondent the latter. It is common ground that whichever construction be adopted the profits to be considered are limited to profits derived from sources within Australia. In my opinion the contention of the appellant is correct. It is apparent from sec. 7 of the Act that before the amount of war-time profits can be determined it is necessary to ascertain the profits of the business for the accounting period. By sec. 10 the profits of the business are to be determined on the same principles as the profits of the business would be determined for the purpose of Commonwealth income tax but subject to the modifications set out in Part IV. and to any other provisions of the Act. Part IV. consists of sec. 15, and the natural inference is that the provisions of this section are to be applied in determining the profits of the business. This view is confirmed by a consideration of the provisions of the section. The deductions authorized by sub-secs. 2, 3, 7, 8, 9, 11, 13, 14 and 18 and by the proviso to sub-sec. 4 are either expressly or by necessary inference to be made from the profits of the business in the accounting period in order to ascertain the net profits in that period, and the provisions of sub-secs. 10 and 16 relate also to deductions or exclusions from the profits of the business. There is nothing in the section itself or, so far as I can find, in the rest of the Act to indicate that the deduction authorized by sub-sec. 4 is to be made from a fund other than that from which the other deductions authorized by the section are directed to be made, and in my opinion the deduction for any sum paid in respect of a similar tax imposed outside the Commonwealth must be made from the profits of the business before proceeding to apply the provisions of sec. 7 for the purpose of determining the amount of war-time profits. As my brothers Isaacs and Rich said in Hooper & Harrison Ltd. (In Liquidation) v. Federal Commissioner of Taxation[1] [2] "a tax imposed on the profits of that period by the law of another country—say, England—should be treated as an outgoing for that period because the liability arose in respect of the transactions of that period, and should be deducted accordingly."
If this deduction is directed to be made in the course of ascertaining the net profits and the ascertainment of the net profits is a necessary step in the determination of the amount of war-time profits, it follows that the deduction to be made cannot be of the amount of tax paid in respect of the war-time profit of the accounting period, which, ex hypothesi, cannot have been determined at the time when the deduction is to be made. It was said on behalf of the respondent that it was necessary to read the words "in respect of the profits" as meaning "in respect of the war-time profits" because the Imperial Act—the Finance (No. 2) Act 1915 (5 & 6 Geo. V. c. 89)—provided for a corresponding deduction and the two Acts could not be worked together except by the method adopted by the respondent in this case. But I do not think the provisions of the Imperial Act can be regarded as affecting the construction of the Commonwealth Act. So far as I can see, the only reason afforded by the local Act for looking at the provisions of the Imperial Act is in order to determine whether the tax imposed by the Imperial Act is a war-time profits tax or similar tax.
For these reasons I am of opinion that the appellant is entitled to have deducted from the profits of the Australian business for the accounting period the amount paid by way of excess profits duty in respect of such profits and that the assessment must be amended accordingly. In order to afford the parties an opportunity of taking the opinion of the Full Court on the question of construction or of agreeing on the amount at which the tax is to be assessed, I propose to make a declaration to the effect stated above and to reserve the further consideration of the appeal with liberty to apply. The respondent is to pay the cost of the appeal up to and including this order.
From that decision the Commissioner of Taxation now appealed to the Full Court.
Appeal dismissed with costs.
Solicitor for the appellant, W. H. Sharwood, Crown Solicitor for the Commonwealth.
Solicitors for the respondent, Blake & Riggall.
H C of A
On appeal from the High Court (Knox C.J.).
1 November 1928
Isaacs, Higgins and Starke JJ.
Owen Dixon K.C. and Russell Martin, for the appellant.
Ham K.C. and C. Gavan Duffy, for the respondent.
Mar. 5
Knox C.J. delivered the following written judgment:—
This is an appeal from an assessment to war-time profits tax for the year ending on 30th June 1917. The substantial question at issue relates to the deduction authorized by sec. 15 (4) of the War-time Profits Tax Assessment Act—a deduction of "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" ; but the first contention raised on behalf of the respondent is that it is not open to the appellant to litigate that question on this appeal, either because it is not raised by the notice of objection dated 20th July 1925 or because the appellant is precluded by sec. 23 of the Act from objecting to the amended notice of assessment dated 10th July 1925. In order to decide this preliminary question it is necessary to examine the dealings and correspondence between the parties. [His Honor then stated the facts, which are substantially set out in the above admissions of fact, and continued:—]
In my opinion these dealings between the parties had the effect of keeping open all questions relating to the allowance to be made under sec. 15 (4) of the Act until the assessment of August 1923. I think it is unnecessary to determine whether Starkey & Starkey's letter of 23rd August 1923 constituted a sufficient notice of objection to this assessment or whether the letter of the Commissioner in reply read with the rest of the correspondence amounted to an undertaking that the question of allowance to be made under sec. 15 (4) should be kept open, because by the amended assessment of July 1925 not only was the total liability of the appellant increased but the amount allowed under sec. 15 (4) in the preceding assessment was substantially diminished. The effect of this was in my opinion to give the appellant a right under sec. 23 (1) of the Act to object to the assessment, at any rate in respect to matters in which an alteration had been made having the result of increasing its liability. It follows that, in my opinion, the objection contained in Starkey & Starkey's letter of 20th July 1925 was duly made, and I feel no doubt that the ground of objection on which the appellant now seeks to rely was clearly stated in that letter and the letter of 4th December 1924, which is incorporated by reference in the later letter.
The substantial question is whether the expression "paid in respect of the profits" which occurs in sec. 15 (4) is to be construed as meaning "paid in respect of the profits of the business" or "paid in respect of the war-time profits of the business." The appellant supports the former contention; the respondent the latter. It is common ground that whichever construction be adopted the profits to be considered are limited to profits derived from sources within Australia. In my opinion the contention of the appellant is correct. It is apparent from sec. 7 of the Act that before the amount of war-time profits can be determined it is necessary to ascertain the profits of the business for the accounting period. By sec. 10 the profits of the business are to be determined on the same principles as the profits of the business would be determined for the purpose of Commonwealth income tax but subject to the modifications set out in Part IV. and to any other provisions of the Act. Part IV. consists of sec. 15, and the natural inference is that the provisions of this section are to be applied in determining the profits of the business. This view is confirmed by a consideration of the provisions of the section. The deductions authorized by sub-secs. 2, 3, 7, 8, 9, 11, 13, 14 and 18 and by the proviso to sub-sec. 4 are either expressly or by necessary inference to be made from the profits of the business in the accounting period in order to ascertain the net profits in that period, and the provisions of sub-secs. 10 and 16 relate also to deductions or exclusions from the profits of the business. There is nothing in the section itself or, so far as I can find, in the rest of the Act to indicate that the deduction authorized by sub-sec. 4 is to be made from a fund other than that from which the other deductions authorized by the section are directed to be made, and in my opinion the deduction for any sum paid in respect of a similar tax imposed outside the Commonwealth must be made from the profits of the business before proceeding to apply the provisions of sec. 7 for the purpose of determining the amount of war-time profits. As my brothers Isaacs and Rich said in Hooper & Harrison Ltd. (In Liquidation) v. Federal Commissioner of Taxation[3] [4] "a tax imposed on the profits of that period by the law of another country—say, England—should be treated as an outgoing for that period because the liability arose in respect of the transactions of that period, and should be deducted accordingly."
If this deduction is directed to be made in the course of ascertaining the net profits and the ascertainment of the net profits is a necessary step in the determination of the amount of war-time profits, it follows that the deduction to be made cannot be of the amount of tax paid in respect of the war-time profit of the accounting period, which, ex hypothesi, cannot have been determined at the time when the deduction is to be made. It was said on behalf of the respondent that it was necessary to read the words "in respect of the profits" as meaning "in respect of the war-time profits" because the Imperial Act—the Finance (No. 2) Act 1915 (5 & 6 Geo. V. c. 89)—provided for a corresponding deduction and the two Acts could not be worked together except by the method adopted by the respondent in this case. But I do not think the provisions of the Imperial Act can be regarded as affecting the construction of the Commonwealth Act. So far as I can see, the only reason afforded by the local Act for looking at the provisions of the Imperial Act is in order to determine whether the tax imposed by the Imperial Act is a war-time profits tax or similar tax.
For these reasons I am of opinion that the appellant is entitled to have deducted from the profits of the Australian business for the accounting period the amount paid by way of excess profits duty in respect of such profits and that the assessment must be amended accordingly. In order to afford the parties an opportunity of taking the opinion of the Full Court on the question of construction or of agreeing on the amount at which the tax is to be assessed, I propose to make a declaration to the effect stated above and to reserve the further consideration of the appeal with liberty to apply. The respondent is to pay the cost of the appeal up to and including this order.
From that decision the Commissioner of Taxation now appealed to the Full Court.
Appeal dismissed with costs.
Solicitor for the appellant, W. H. Sharwood, Crown Solicitor for the Commonwealth.
Solicitors for the respondent, Blake & Riggall.
1. [1923] HCA 56; (1923) 33 C.L.R. 458, at p. 473.
2. (1923) 33 C.L.R., at p. 474.
3. [1923] HCA 56; (1923) 33 C.L.R. 458, at p. 473.
4. (1923) 33 C.L.R., at p. 474.
AustLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.austlii.edu.au/au/cases/cth/HCA/1928/49.html