Federal Commissioner of Taxation v Clyne [1958] HCA 10; (1958) 100 CLR 246 (2 April 1958)

HIGH COURT OF AUSTRALIA

COMMISSIONER OF TAXATION v. CLYNE [1958] HCA 10; (1958) 100 CLR 246

Income Tax (Cth.)

High Court of Australia
Dixon C.J.(1), McTiernan(2), Williams(3), Webb(4), Kitto(5) and Taylor(6) JJ.

CATCHWORDS

Income Tax (Cth.) - Provisional tax and contribution - Whether within power to make laws with respect to taxation - Not separate tax but liability ancillary to income tax and social services contribution - Constitutional validity - Matters other than taxation - Whether combined in statute imposing taxation - Collection of provisional tax not acquisition of property on unjust terms - Prescribed area - Zone allowances - Discrimination between States or parts of States - Validity of section introducing discriminatory provision - Invalid ab initio - Never valid part of Principal Act - Preference to one State or part thereof over another State or part thereof - The Constitution (63 & 64 Vict., c. 12). ss. 51 (ii.) (xxxi.), 55, 99 - Income Tax and Social Services Contributions (Individuals) Act 1956, s. 12 - Income Tax and Social Services Contribution Assessment Act 1936-1956, ss. 79A, 221YA.

HEARING

Sydney, 1957, November 12, 13, 14, 15; 1958, April 2. 2:4:1958
DEMURRER.

DECISION

April 2, 1958.
The following written judgments were delivered:-
DIXON C.J. This suit is brought by the Commissioner of Taxation against a due under the provisions of the Income Tax and Social Services Contribution (Individuals) Act 1956 (No. 102 of 1956) as that Act operates upon the Income Tax and Social Services Contribution Assessment Act 1936-1956. (at p258)

2. The suit is brought under the authority of ss. 208 and 209 of the latter Act as applied to provisional tax and contribution by sub-s. (2) of s. 221YA. Sub-section (3) of that section provides that the ascertainment of the amount of any provisional tax (an expression including contribution) shall not be deemed to be an assessment within the meaning of any of the provisions of the Assessment Act, but s. 221YD provides in effect that the amount may be notified on the notice of assessment of the income of the year next preceding the year of income and shall become due and payable on the date specified in the notice or on 31st March next if that be the later date. Section 221YH makes the notice of assessment prima facie evidence that the amount of provisional tax and all particulars relating thereto are correct. (at p258)

3. The commissioner's statement of claim alleges that the amount claimed is for provisional tax and contribution, within the meaning of the Acts mentioned, lawfully ascertained in respect of the income of the defendant for the year of income ending 30th June 1957. By particulars treated by agreement as part of the pleading it is stated that the amount of 752 pounds was ascertained on 9th April 1957 and notified on a notice of assessment of the income tax payable by the defendant in respect of the income of the year ended 30th June 1956. It is also stated that the amount was ascertained under Div. 3 of Pt. VI of the Assessment Act and that the tax claimed is provisional tax within the meaning of the Act and as defined by s. 221YA. (at p258)

4. To this statement of claim the defendant demurs on grounds, stated at length in his demurrer, impugning the validity of the legislation under which a liability for provisional tax is imposed. The legislation is said to be invalid on grounds forming two alternative lines of reasoning which are quite independent one of the other. (at p258)

5. According to one line of reasoning the provisions dealing with provisional tax are either outside altogether the power conferred by s. 51(ii.) of the Constitution to make laws with respect to taxation and are simply invalid for want of power or, if within the scope of s. 51(ii.), offend against one or other paragraph of s. 55. A further, if somewhat desperate-looking, argument was adduced under this alternative, namely that if some footing was found for the provision as incidental to s. 51(ii.), s. 51(xxxi.) applied and required that there should be just terms, because on such a footing provisional tax must be treated as an acquisition of property for a purpose in respect of which the Parliament has power to make laws. (at p259)

6. The other line of reasoning on which the validity of the imposition of provisional tax was attacked goes to the validity of the whole Income Tax and Social Services Contribution (Individuals) Act 1956 (No. 102) and for that matter the Income Tax and Social Services Contribution (Companies) Act 1956 (No. 28 of 1956). Indeed the argument affects the validity of the whole system since 1945. It is based on the assertion that there is a failure to observe both the condition of the power given by s. 51(ii.) that there shall be no discrimination between States or parts of States and the command of s. 99 of the Constitution that the Commonwealth shall not by any law or regulation of revenue give preference to one State or any part thereof over another State or any part thereof. The discrimination or preference which the defendant claims to have discovered has nothing to do with the circumstances of his particular case but, of course, he can as a person sued for tax rely upon it if it be true that it brings down the whole edifice of income tax. It lies in s. 79A of the Assessment Act, a section which few persons in the more populous parts of Australia have occasion to read or notice. Section 79A (1) states that for the purpose of granting residents of the prescribed area an income tax concession in recognition of the disadvantages to which they are subject because of the uncongenial conditions and high cost of living in a zone called A and to a lesser extent in a zone called B in comparison with parts of Australia not included in the prescribed area, an amount ascertained in accordance with the section should be an allowable deduction. It is unnecessary at this point to go into the details of the provision. It is enough to say that within the very extensive areas to which it refers, covering parts of five States, one or other of two deductions from his assessable income is allowed to the taxpayer. It is this which is said to produce a forbidden discrimination or preference. Section 79A was inserted in the Assessment Act by Act No. 4 of 1945 which commenced on 15th June 1945 and, though it has since been amended, there can be no doubt, if the argument be right and justify the conclusion, that it is at that time that the total invalidity claimed for the imposition of income tax must have set in. (at p259)

7. It is convenient to consider first the ground of attack based upon the character of provisional tax and the alleged want of power to impose it or, if otherwise its imposition be within power, the suggested contravention of s. 55 or of the condition attached to s. 51(xxxi.) of the Constitution. (at p260)

8. The first question which necessarily was raised by the argument in support of this ground is the question whether s. 51(ii.) covers the provisional tax as established by Div. 3 of Pt. VI of the Assessment Act and imposed by s. 12 of the Tax Act 1956, and if s. 51(ii.) does so cover it, why? By why, is meant whether s. 51(ii.) covers it because provisional tax is itself a tax or, on the other hand, because the imposition of a liability to pay provisional tax falls within the conception of what is incidental to the legislative power to make laws with respect to taxation. (at p260)

9. Beginning thus the argument in relation to the ensuing steps, not unnaturally, was presented with an elaboration of the respective consequences which would flow from each of the alternative solutions to which this primary or initial question concerning the power to impose a provisional tax was said to be open. It is unnecessary however to follow the course of recapitulating the contentions as to the consequences which flow from the various solutions proposed to the question. It is sufficient to deal with the question itself and, having determined it, to proceed from that point without complicating the matter with an account of alternative possibilities which on that footing become hypothetical only. (at p260)

10. To my mind the system of provisional tax and contribution as prescribed by Div. 3 of Pt. VI is clearly within the power conferred by s. 51(ii.) of the Constitution to make laws with respect to taxation. It is not a separate tax but a liability ancillary to the income tax and social service contribution which s. 17 of the Assessment Act provides shall be levied and paid, at the rates declared by the Parliament, for each financial year, upon the taxable income derived during the year of income by any person. That is the tax that is imposed. The liability to pay provisional tax is ancillary to that; it is not a liability to another and distinct tax. There is no objection to saying that provisional tax is an incident of the imposition of the income tax but that does not take it outside the power conferred by s. 51(ii.) to make laws with respect to taxation. To distinguish the ancillary liability from the principal tax has no purpose under s. 51(ii.); so far as the power conferred by that paragraph is concerned it is not only without purpose, it is almost without meaning. It is under s. 55 that for the purpose of the argument the distinction is given an importance whether real or supposed. For s. 55 provides that laws imposing taxation shall deal only with the imposition of taxation and any provision therein dealing with any other matter shall be of no effect. It is contended by the defendant that once it is conceded that the liability for provisional tax is not imposed as a tax, or "the" tax, it follows that it must be "another matter" within the meaning of s. 55 so that the provisions dealing with it are of no effect, at all events the provisions dealing with it in the Tax Act, if not also in the Assessment Act. (at p261)

11. Before dealing with this contention it is necessary first to state why I think that it is within the legislative power conferred by s. 51 (ii.) of the Constitution to impose a liability to provisional tax notwithstanding that I think that it is not a distinct and separate tax. (at p261)

12. If you turn to the provisions of Div. 3 of Pt. VI of the Assessment Act 1936-1956 the material characteristics of the liability will be seen. Its purpose is described as that of enabling the income tax and social service contribution which will be payable by taxpayers to whom the system applies to be collected during the financial year for which the income tax and social service contribution is levied: see s. 221YB(1). It is payable in respect of the year of income which of course means, in relation to an individual, the financial year for which income tax is levied or the accounting period, if any, adopted in lieu of that financial year: see ss. 6(1) and 221YB (2). Provisional tax is not payable unless the taxing Act for the year of income provides that it shall be payable: s. 221YB(3). The amount of the provisional tax is prima facie an amount equal to the income tax assessed in respect of the taxable income of the previous year, subject to an increase or decrease according to any variation in the rates of income tax that may have been declared for the current financial year: ss. 221YC(1) and (2). But a taxpayer receiving a notice of assessment on which is notified the amount of the provisional tax is entitled before the due date for payment or the 31st March, whichever may be the later, to make an estimate for himself showing, to put it briefly, the amount of provisional tax payable. If the commissioner has reason to believe that his taxable income for the year will be or is already greater than what he has estimated, the commissioner may serve him with an estimate of his own; but failing that the taxpayer's estimate stands: see s. 221YDA. In any case there is a deterrent to taxpayers who might be minded to make an under estimate. If a taxpayer's estimate proves lower by four-fifths than his last year's taxable income and the taxable income of the year in question, he becomes liable by way of penalty to additional tax: see s. 221YDB. (at p261)

13. When provisional tax has been paid the commissioner is to credit the amount paid first against such income tax, if any, as is payable by the taxpayer in respect of the income, next against any provisional tax in respect of the income of the ensuing year, and thirdly against any other income tax payable by the taxpayer. If after these successive credits there still be a balance, it is to be refunded to the taxpayer: s. 221YE. It will be seen that there is no appeal provided against the notification by the commissioner of his estimate. The taxpayer however may make his own estimate and that the commissioner must accept unless he has reason to believe that the taxable income will be greater. From that liability the taxpayer cannot relieve himself by any legal process until he is assessed to income tax. He may of course then appeal against the assessment and reduce its amount. If in the event the commissioner has proved mistaken in his refusal to accept the taxpayer's own estimate, the commissioner must refund the excess after making the credits already described. The taxpayer is therefore not without an ultimate remedy and the fact that the machinery is such that he is under an interim liability cannot be enough to invalidate the provisions. (at p262)

14. For the year in respect of which the suit is brought s. 12 of the Income Tax and Social Services Contribution (Individuals) Act 1956 (No. 102 of 1956) provides that provisional tax and contribution is imposed and is payable in accordance with the provisions of the Assessment Act in respect of the income of the year of income which commenced on 1st July 1956. It is plain that these provisions assume the existence of an income tax and provide means for an anticipatory payment. The payment is compulsory but the liability to make it is not imposed as a separate tax. It is provisional as its name implies. Payment made in pursuance of the liability for provisional tax is applicable in discharge of the ultimate liability to income tax and is otherwise repayable. The purpose is not simply to ensure payment of tax. The purpose is to bring the discharge of the burden of tax into a closer temporal relation with the accrual of the income upon which the tax is levied. The execution of such a policy appears to me to be fairly within the power expressed in s. 51(ii.) of the Constitution even if it be described as incidental. The main purpose of that power is expressed by the words "with respect to taxation". It gives a legislative authority which includes prima facie whatever is reasonably and properly incidental to the effectuation of the purpose. There is no reason why the means described in Div. 3 of Pt. VI for giving effect to the principle should not be regarded as proper for the effectuation of the power to make laws in respect to taxation. I therefore think that the provisions are covered by the power conferred by s. 51(ii.). (at p262)

15. No doubt the Income Tax and Social Services Contribution (Individuals) Act 1956 (No. 102 of 1956) is an Act imposing taxation within the meaning of s. 55. It follows that it may deal only with the imposition of taxation and any provision dealing with any other matter is of no effect. Let it be assumed that s. 12 in imposing provisional tax and contribution deals with an incidental liability. Why should it follow that it deals with a matter other than the imposition of taxation? When s. 55 uses the expression "imposition of taxation" it employs a term of somewhat indefinite connotation. In Federal Commissioner of Taxation v. Munro (1926) 38 CLR, at pp 185-193 Isaacs J. discusses the meaning of the first paragraph of s. 55 and gives his reasons for adopting what may be called a narrow interpretation of the words "imposing taxation". A much wider meaning appears to have been adopted by other members of the Court. Isaacs J. however distinguished sharply between the provisions of the Assessment Act directed to the collection of the tax and the actual grant or imposition of the tax. His Honour, however, did not have in view any process for requiring provisional payment of the proportion of income as part of a scheme of taxation in which the burden or incidence of the tax, the source from which the burden should be borne, and the ultimate ascertainment of the tax finally payable formed a closely associated congeries of liability. It does not seem probable that his Honour would have regarded this as no part of the imposition of taxation within s. 55. No other judge who has dealt with this subject has adopted quite so strict an interpretation of the words "imposition of taxation" in s. 55 and it does not seem that any of the judges of the past would have doubted that s. 12 of Act No. 102 of 1956 came within the words "imposition of taxation" and did not form another matter. For these reasons I am of the opinion that neither s. 12 of Act No. 102 of 1956 nor Div. 3 of Pt. VI of the Assessment Act 1936-1956 is obnoxious to the first paragraph of s. 55 of the Constitution. Little need be said of the argument based upon s. 51(xxxi.) of the Constitution. The argument is that "provisional tax" is paid provisionally and returned without interest in the event of no tax accruing due. That is said to be an acquisition of property on terms not just. Once it is held that provisional tax is authorised by s. 51(ii.) it seems absurd to say that, within the meaning of s. 51(xxxi.), the sums paid or payable as provisional tax constitute property acquired for a purpose in respect of which Parliament has power to make laws. The purpose of the power itself which is conferred by s. 51(ii.) is to acquire money for public purposes and that is no less so if the money is raised provisionally and in advance of the actual accrual of the tax as debitum in praesenti solvendum in praesenti. (at p263)

16. From the foregoing it follows that the provisions referred to are not invalid under the first of the two independent grounds taken by the defendant in support of his demurrer. (at p264)

17. It is necessary now to turn to the second of those grounds. Section 11 of Act No. 4 of 1945 introduced into the Assessment Act s. 79A upon which is based the contention that there has been a disregard both of the prohibition against discrimination between States and parts of States and of the prohibition contained in s. 99 of giving preference by a regulation of revenue to one State or any part thereof over another State or any part thereof. The introductory words of sub-s. (1) of s. 79A have been set out early in this judgment. The enacting part of the sub-section provides that in the case of a resident of the prescribed area an amount ascertained in accordance with the section should be an allowable deduction. Sub-section (2) then declares what amounts may be deducted. There have been amendments of s. 79A increasing the fixed amounts of the deduction. See Act No. 11 of 1947, s. 14, and Act No. 101 of 1956, s. 12. It is enough now to give the amounts in the figures as they stand at present. The prescribed area, which is defined in a schedule added to the Assessment Act by s. 19 of Act No. 4 of 1945, is divided into Zones A and B. A resident of Zone A of the prescribed area is to receive a deduction of 180 pounds, a resident of Zone B a deduction of 30 pounds, if he has not resided or actually been in Zone A during any part of the year of income. There is an elaborate definition of "resident" in sub-s. (4). A man is a resident who resides in an area for more than half the year of income or has actually been in the area whether continuously or not during more than half of the year of income or who, provided he does not come within the foregoing, has died during the year of income and at the date of his death resided in the area. There is necessarily a third category of deduction covering persons who cannot be considered residents of Zone A within the definition or a resident of Zone B who has not resided or actually been in Zone A during any part of the year of income. Such persons are to receive a deduction of such an amount being not less than 30 pounds and not more than 180 pounds as in the opinion of the commissioner is reasonable in the circumstances. The prescribed areas in the zones are set out in a schedule. As the schedule stood in 1945 Zone A comprised the whole of that part of Australia which lies north of an imaginary line drawn in an irregular fashion across the continent from west to east. The line began at Exmouth Gulf, went down in an irregular way to the limit of the tropic of Capricorn, followed the meridian marking the tropic easterly to somewhere beyond the border of Queensland and then took an irregular course in a north-easterly direction to Cape Tribulation, the latitude of which may be stated with sufficient approximation as about 16 deg. south. Zone B was a zone south of Zone A bounded in an irregular fashion by a line beginning on the west coast near Geraldton and going south-east to Point Hood and then along the coast through Hopetoun and Esperance and the coastline of the Australian Bight towards Ceduna. Before Ceduna the line left the coast to go inland in such a way as to exclude the Eyre Peninsula, pass through Port Augusta, exclude Quorn and Peterborough, and then pass easterly into New South Wales and then northerly considerably east of the Darling into Queensland and again, after a westerly turn, northerly through the centre of Queensland, turning to the coast so as to meet it at approximately Broadsound which is somewhat north of Townshend Island. Zone B also included the south-western portion of Tasmania. (at p265)

18. It will be seen that the State of Victoria is wholly excluded from the prescribed area. It will further be noticed that while the deductions operate to prefer a large geographical area of Australia to that portion of Australia which is excluded from the areas, there is also a preference between the areas enclosed in the respective zones, that is to say a preference in favour of the residents of Zone A over the residents of Zone B. The limits inter se of the two zones have been altered by s. 23 of Act No. 101 of 1956 so that the southern boundary of Zone A has been brought down to the twenty-sixth degree of south latitude, along which it runs to the border of Queensland, whence the line turns to the north as a projection of the westerly border of New South Wales until it meets the old line again. It may be added that the various Territories outside Australia are included. (at p265)

19. The legislative plan by which all this is done is attacked as involving the violation both of ss. 51(ii.) and 99. Section 51(ii.) confers power to make laws with respect to taxation; but so as not to discriminate between States or parts of States. The full text of s. 99 is as follows:- "The Commonwealth shall not, by any law or regulation of trade, commerce, or revenue, give preference to one State or any part thereof over another State or any part thereof." We are not of course concerned with a law or regulation of trade or commerce but only with one of revenue. It happens however that the decision of this Court upon s. 99 most discussed during the argument is concerned with a law or regulation of trade or commerce. It is Elliott v. The Commonwealth [1936] HCA 7; (1936) 54 CLR 657 . In that case the majority of the Court gave to the words "one State or any part thereof over another State or any part thereof" a restricted meaning. If legislation is attacked as violating that portion of s. 99 it would appear that according to that interpretation the legislation will be good unless in some way the parts of the State are selected in virtue of their character as parts of a State. This view seems to accord with that expressed by Isaacs J. in relation to s. 51(ii.) in R. v. Barger [1908] HCA 43; (1908) 6 CLR 41 , a view, however, contrary to that taken by the majority of the Court in that case. See further W.R. Moran Pty. Ltd. v. Deputy Federal Commissioner of Taxation (N.S.W.) (1940) AC, at pp 849, 853, 854, 855, 856; (1940) 63 CLR, at pp 341, 345, 347 . It is a view that was attacked by Evatt J. in his dissenting judgment in Moran's Case (1939) 61 CLR, at p 783 et seq . For myself I have the greatest difficulty in grasping what exactly is the requirement that the selection of an area shall be as part of the State. No doubt it may be expressed in various ways, e.g. "in virtue of its character as part of the State" or "qua part of the State" or "because it is part of a State" or "as such". However it may be expressed I find myself unable to appreciate the distinction between the selection by an enactment of an area in fact forming part of a State for the bestowal of a preference upon the area and the selection of the same area for the same purpose "as part of the State". But I shall not discuss this question further because in the view I take of the case I do not think it is necessary to decide whether s. 79A involves or carries with it a forbidden preference or discrimination. For the purposes of my decision I am prepared to accept the view that s. 79A assumes to give a preference to taxpayers who are residing in Zone A over taxpayers residing in Zone B and to give to the residents of either zone a preference over taxpayers who reside outside the prescribed area. I am further prepared to proceed upon the assumption that in giving this preference s. 79A, as a law or regulation of revenue, gives a preference to parts of five States of the Commonwealth over the State of Victoria and also in the case of each one of those five States gives a preference to part of it over parts of the other four of them. In the same way I am prepared to assume that s. 79A would if valid work a discrimination between Victoria and parts of the other five States as well as a discrimination between a part of each of those five States and parts of the other four of them. It follows that I assume that the provisions of s. 79A are not consistent with the requirements expressed in ss. 51(ii.) and 99. Section 79A prior to its amendment was enacted in a statute directed to the amendment of the Income Tax Assessment Act 1936-1944 which is described as the Principal Act. By s. 11 of Act No. 4 of 1945 it was simply enacted that after s. 79 of the Principal Act the following section is inserted. Thereupon s. 79A was set out in full. By s. 19 of Act No. 4 of 1945 it was provided that the Principal Act is amended by adding at the end thereof the following schedule. Section 19 then set out the schedule containing the description of the zones as they then were defined. But it was by these two sections of the Income Tax Assessment Act 1945 (No. 4 of 1945) that it was sought to make the provisions of s. 79A and the schedule part of the Income Tax Assessment Act. Act No. 4 of 1945 was assented to on 18th May of that year and its date of commencement was the 15th June 1945. The Income Tax Act 1945 (No. 5 of 1945) imposing tax was also assented to on 18th May and also came into force on 15th June 1945. That Act like other Taxing Acts provided by s. 2 that the Income Tax Assessment Act should be incorporated and read as one with this Act. A like provision is contained in s. 4 of the Income Tax and Social Services Contribution (Individuals) Act 1956 (No. 102 of 1956). The argument for the defendant is that this Taxing Act is invalid because it operates on an Assessment Act and indeed incorporates the Assessment Act containing s. 79A so that the Taxing Act embodies an attempt to give by a law of revenue a preference to parts of States over another State or parts of other States and an attempt by a law with respect to taxation to discriminate between a State and parts of other States and between parts of each of those other States and parts of the remaining States. I repeat that I assume that s. 79A with the schedule does attempt to give such a preference and so to discriminate. But this can affect the validity of the Taxing Acts only if s. 79A ever became part of the Assessment Act upon which the Taxing Acts operated. In my opinion this hypothesis or condition never was fulfilled. My opinion is that s. 79A was invalid ab initio and never became a valid portion of the Assessment Act. Let it be assumed to the full that the provisions of s. 79A would involve a preference forbidden by s. 99 once the Taxing Act operated upon them. It appears to me that, because s. 79A would if valid necessarily involve such a preference once the Taxing Act operated upon it, the consequence must be that it never was within the competence of the Parliament to enact s. 79A. It must therefore be treated as void. It is, I think, equally true that without s. 99 s. 79A on the hypothesis stated would be outside the competence of Parliament because it would conflict with the condition expressed in s. 51 (ii.) that a law with respect to taxation must not discriminate between States or parts of States. There is no problem of severance. Severance is not the point. Sections 11 and 19 of the Income Tax Assessment Act 1945 (No. 4 of 1945) are plainly severable from the rest of the enactment. The problem is of another description. It is whether the Taxing Act when it incorporates the Assessment Act is to be read as incorporating the Assessment Act as it is written or as it validly exists. Not without some hesitation I have formed the view that the proper construction of the Taxing Acts is that they incorporate the Assessment Acts not so to speak as pieces of paper but as valid laws of the Commonwealth. Now I do not think that s. 11 of the Income Tax Assessment Act 1945 (No. 4 of 1945) ever could become a valid law of the Commonwealth if the assumption upon which I speak be true. That Act must be dealt with as a separate statute, an observation which is by no means unfavourable to the defendant's contention. But as a separate statute it nevertheless is a law of revenue within s. 99. The Act is a law of revenue because it is an exercise of the legislative power to tax given by s. 51(ii). As an exercise of the power conferred by s. 51(ii.) it expresses a discrimination which ex hypothesi is forbidden by the condition of the power. Sections 11 and 19 therefore could not begin to exist as valid enactments. Section 20 of Act No. 4 of 1945 provided that these two provisions should apply to all assessments for the financial year beginning on 1st July 1945 and all subsequent years. On the hypothesis which I have accepted they could not validly so apply. It is true that a Taxing Act which sought to apply them would itself give a preference. It is for that reason that the critical consideration hypothesis, whether the Taxing Acts are to be construed as incorporating what stands in the printer's copy of the Assessment Acts or incorporating only what has been validly enacted by the legislature in a lawful exercise of its powers as and for part of the Assessment Acts. As in my opinion the latter is the correct view it follows that the defendant's second contention must fail as well as his first. The demurrer should be overruled and judgment entered for the plaintiff for the amount claimed. (at p268)

McTIERNAN J. In my opinion there is no substance in any of the grounds of the demurrer. It is quite unnecessary to add anything to what the Chief Justice has written. But I would affirm the decision of the majority in Elliott's Case [1936] HCA 7; (1936) 54 CLR 657 : see Moran's Case (1940) AC, at pp 856, 857; (1940) 63 CLR, at pp 347, 348 . (at p268)

WILLIAMS J. I have had the advantage of reading the reasons for judgment of the Chief Justice. I respectfully agree with those reasons and the order he proposes. (at p268)

WEBB J. This is a defendant's demurrer in an action in the original jurisdiction of this Court brought by the plaintiff commissioner to recover 752 pounds provisional tax and contribution under the Income Tax and Social Services Contribution (Individuals) Act 1956,, hereinafter referred to as the Rating Act, in respect of the income of the year ended 30th June, 1956. The Rating Act incorporates the Income Tax and Social Services Contribution Assessment Act 1936-1956, hereinafter referred to as the Assessment Act, which latter Act in s. 79A provides for the granting of income tax concessions to residents in Zone A and on a smaller scale to residents in Zone B, each of which zones includes parts of some States but not the whole of any State. No part of Victoria is included in either zone. Zone A also includes the Northern Territory and the Territory of Papua-New Guinea and certain islands. These concessions are expressed by s. 79A to be in recognition of the disadvantages to which those residents are subject because of the "uncongenial climatic conditions, isolation and high cost of living" in those areas in comparison with other parts of Australia, and such disadvantages can, I think, be judicially noticed as existing in those areas. (at p269)

2. There are six grounds of demurrer each based on one or more of ss. 51 (ii.) and (xxxi.), 55 and 99 of the Commonwealth Constitution. These grounds may be summarised: that provisional tax is quite outside s. 51 (ii.); that the concessions given by s. 79A as incorporated in the Rating Act create discrimination contrary to s. 51(ii.), or preference contrary to s. 99; that provisional tax and income tax are different subjects of taxation and are included in the same law, contrary to s. 55; that compelling payments in advance without providing for interest amounts to taking property on terms that are not just, contrary to s. 51(xxxi.); and that, notwithstanding s. 15A of the Acts Interpretation Act 1901-1950, severance is not permissible because it is the Rating Act that creates the discrimination, which did not exist in the Assessment Act taken by itself, nor until it was incorporated in and by the Rating Act, so that s. 79A of the Assessment Act cannot be excised as invalid leaving the rest of the legislation standing as valid; and that, in any event, the Parliament created a scheme of taxation and did not intend that scheme to operate if the concessions were invalid, or to authorise a greater tax liability than the Parliament intended when enacting the invalid provisions. (at p269)

3. Dealing first with severance and the effect of s. 15A: If, after incorporation in the Rating Act, s. 79A enacting the concessions, or the provisional tax independently of those concessions, were found to be invalid, then, assuming that an invalid section could effectively be so incorporated, I see no reason why the remaining sections should not be sustained as valid. I am unable to see such interdependence between the one group of sections and the other that the excision of the one would destroy any scheme of income taxation embodied in this legislation; or any reason why the invalidity of a concession should result in no tax being payable by the taxpayers intended to be benefited. That would be an absurd result not lightly to be attributed to the Parliament in the face of s. 15A. No re-writing of the legislation would be involved; plastic surgery would not be required; mere excision would suffice. However, it is generally accepted, so I understand, that the Parliament in s. 15A does not direct that the challenged legislation shall be upheld to the extent that it could be made valid even at the expense of destroying essential features of any scheme disclosed, however elaborate, or even by the judges acting as draftsmen and re-writing the enactment. I take it that neither the power of the Parliament to delegate its authority, nor the extent of its control over all Australians as individuals in the exercise of its authority, is necessarily questioned; but that the general view is that if the choice is presented of attributing to the language of an enactment a sensible meaning or an absurd one, naturally the former is preferred. (at p270)

4. Because of the view I take on the other questions it is really unnecessary for me to deal with severance. I have done so because of the very full argument on this and indeed on all questions raised. (at p270)

5. Then turning to other grounds of the demurrer: I will take first what I may call the minor grounds based on ss. 51 (xxxi.) and 55, as both can readily be disposed of with the assistance of the reasoning in Federal Commissioner of Taxation v. Munro [1926] HCA 58; (1926) 38 CLR 153 , other than that of Isaacs J., and in Moore v. The Commonwealth [1951] HCA 10; (1951) 82 CLR 547 . In substance there is, I think, no difference between the payments in advance from wool proceeds held valid in that case and provisional tax, which, like those payments in advance, is ascertained in the exercise of the power to tax under s. 51 (ii.) and is really income tax at an early stage; "ascertained" but not assessed. It is not a different subject of taxation. This also disposes of the ground that provisional tax is outside s. 51 (ii.). Nor is it an acquisition of property under s. 51 (xxxi.). In Moore's Case [1951] HCA 10; [1951] HCA 10; (1951) 82 CLR 547 it was submitted unsuccessfully for the taxpayer that the compulsory payments in advance without providing for interest were an acquisition of property on terms that were not just, contrary to s. 51 (xxxi.). Then neither s. 51 (xxxi.) nor s. 55 applies to invalidate provisional tax. As to the remaining ground of the demurrer, i.e. that based on discrimination and preference contrary to ss. 51 (ii.) and 99: It is not, I understand, submitted by the defendant that for the purposes of this case there is any substantial difference between ss. 51 (ii.) and 99, between discrimination and preference. Dixon J. as he then was, said in Elliott v. The Commonwealth [1936] HCA 7; (1936) 54 CLR 657 : "If s. 99 had been expressed to forbid the Commonwealth by a law or regulation of trade, commerce, or revenue to discriminate against a State or part of a State, I do not think its effect would have been substantially varied" (1936) 54 CLR, at p 683 . I respectfully agree. Then confining attention to s. 51 (ii.), the defendant relies on the reasoning of the majority in R. v. Barger (1908) 6 CLR 41 where Griffiths C.J. and Barton and O'Connor JJ. in a joint judgment, referring to the words "so as not to discriminate between States or parts of States" in s. 51 (ii.), said that those words "recognise the fact that nature has already discriminated, and prescribe that no attempt shall be made to alter the effect of that natural discrimination" (1908) 6 CLR, at p 70 . Their Honours added that "The varying conditions of climate . . . and of locality . . . make an effectual discrimination for many purposes between several portions of the Commonwealth. Lest, however, the Parliament should desire to bring about equality in the incidence of the burden of taxation, or what has been called an equality of sacrifice, by discriminating between such different portions they were expressly prohibited from so doing." (1908) 6 CLR, at p 70 Their Honours then proceeded to say that "States or parts of States" was synonomous with "parts of the Commonwealth" or "different localities within the Commonwealth", and that "it would be a strange thing if Parliament could discriminate in a taxing Act between one locality and another, merely because such localities were not coterminous with States or with parts of the same State" (1908) 6 CLR, at p 78 . However, Isaacs and Higgins JJ. dissented, the former saying that the taxation power is required by s. 51 (ii.) "to be exercised over all persons, things and circumstances, without regard to the existence of separate States" (1908) 6 CLR, at p 106 and without "differentiating in its measure of taxation between States and parts of States because they were particular States or parts of States" (1908) 6 CLR, at p 107 ; and that the discrimination or preference in s. 51 (ii.) or s. 99 that is forbidden is "in relation to the localities considered as parts of States, and not as mere Australian localities or parts of the Commonwealth considered as a single country" (1908) 6 CLR, at p 107 . His Honour added that "it does not include a differentiation based on other considerations, which are dependent on natural or business circumstances, and may operate with more or less force in different localities" (1908) 6 CLR, at p 108 . If his Honour's view is sound it supports the validity of s. 79A. (at p272)

6. Now the view of Isaacs J. as stated above was adhered to by Knox C.J., Isaacs, Higgins and Rich JJ. in Cameron v. Deputy Federal Commissioner of Taxation [1923] HCA 4; (1923) 32 CLR 68 , and in James v. The Commonwealth (1928) 41 CLR, at pp 455, 456 by Knox C.J. and Powers J. It was also adopted by the majority in Elliott's Case [1936] HCA 7; (1936) 54 CLR 657 . This is strong support for that view, although the contrary view has been expressed forcibly by other members of this Court, more particularly in Elliott's Case [1936] HCA 7; (1936) 54 CLR 657 . But conclusive of the matter is the fact that subsequently the Privy Council in Moran Pty. Ltd. v. Deputy Commissioner of Taxation (N.S.W.) (1940) AC, at pp 856, 857; (1940) 63 CLR, at p 348 expressly approved of the view of Isaacs J. and so it would be useless to carry the discussion further. (at p272)

7. In my opinion s. 79A is not invalid as discriminating between States or parts of States, contrary to s. 51 (ii.); or as constituting preference, contrary to s. 99. (at p272)

8. I would overrule the demurrer. (at p272)

KITTO J. In my opinion the order proposed by the Chief Justice should be made. I agree entirely in his Honour's reasons for judgment. (at p272)

TAYLOR J. I entertain no doubt that the demurrer in this case should be overruled and judgment entered for the plaintiff. I agree entirely with the reasons of the Chief Justice and do not wish to add anything. (at p272)

ORDER

Demurrer overruled. Judgment for the plaintiff for 752 pounds with costs.