Aitken v Federal Commissioner of Taxation

The parties to this matter were George Lewis Aitken and The Union Trustee Co. of Australia Ltd., as executors of the estate of Andrew Spence Chirnside deceased (the appellants), and the Federal Commissioner of Taxation (the respondent). The dispute concerned the liability of the deceased's estate to pay income tax for the financial year 1934-1935, in respect of income derived by the deceased during the calendar year 1933. The deceased had died on 17 April 1934, prior to the commencement of that financial year and after the Income Tax Act 1934, which imposed the tax, had come into operation. The matter came before the High Court of Australia by way of a special case stated by Starke J.

The legal issues before the Full Court were whether the executors of a deceased taxpayer could be assessed for income tax for a financial year in which the taxpayer had died before its commencement, and whether section 62 of the *Income Tax Assessment Act 1922-1934* imposed such a liability on the executors. The appellants argued that income tax was an annual tax imposed on living persons, and that without a specific charging provision, their liability could not be established. They contended that section 62 was merely a machinery section for the recovery of tax, not a charging section.

The Court, in dismissing the appeal, reasoned that section 62 of the *Income Tax Assessment Act 1922-1934* was intended to impose a liability on executors for income tax derived by the deceased up to the date of their death, where such tax had not been assessed and paid. While the section primarily referred to the Commissioner having the same powers and remedies for assessment and recovery from executors as if the deceased were alive, the Court found that this language, particularly when read in conjunction with subsection (4) of section 62, was sufficient to create an independent liability on the executors. Subsection (4) provided exemptions from the section's application in certain circumstances, which would be meaningless if section 62 did not itself impose a liability. The Court noted that the deceased had consistently used a calendar year for his income returns, and this practice was accepted by the Commissioner.

The Full Court answered the question stated in the case by holding that the appellants, as executors, were liable to be assessed to income tax for the financial year 1934-1935 in respect of the income derived by the deceased during the calendar year 1933.