ANZ Banking Group v Commmissioner of Taxation of the C of A

[1994] HCATrans 24

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
              Melbourne        No M42 of 1994

B e t w e e n -

AUSTRALIA AND NEW ZEALAND
  BANKING GROUP LIMITED
  Applicants
  Applicant

and

THE COMMISSIONER OF TAXATION
  OF THE COMMONWEALTH OF
  AUSTRALIA

Respondent

Application for special leave
  to appeal

MASON CJ
BRENNAN J
DAWSON J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 16 SEPTEMBER 1994, AT 10.36 AM

Copyright in the High Court of Australia

MR D.H. BLOOM, QC:   May it please the Court, I appear with my learned friend, MR B.J. SULLIVAN, for the applicant.  (instructed by Freehill, Hollingdale & Page)

MR F.H. CALLAWAY, QC:   May it please the Court, I appear with my learned friend, MR G.T. PAGONE, for the respondent.  (instructed by the Australian Government Solicitor)

MASON CJ:   Mr Bloom.

MR BLOOM:   Your Honours, the applicant Bank, in the ordinary course of its business, buys chattels which it hires to its customers.  When the lease is terminated, those chattels are again, in the ordinary course of business, disposed of, usually at a loss.  The result is that the Bank becomes entitled to deductions for depreciation under the depreciation provisions and for the loss under section 51(1).  They are deductions, however, of a different character.

The deductions under the depreciation provisions are concessional capital deductions.  The deduction under section 51(1) is, of necessity, a revenue loss.  it is a loss of the Bank’s circulating capital.

Now, the total of the amounts allowed under the depreciation provision and under section 51(1) is always going to be the same except in the case of so‑called luxury motor vehicles, that is, motor vehicles to which section 57AF applies.  In the case of those motor vehicles, the depreciation is limited.  That is because it is not calculated on the actual cost of the motor vehicle but on a deemed lesser cost.  That deeming, of course, is for the purposes of the depreciation provisions only.  So that in the result when it comes to 57AF motor vehicles, the total of the deductions allowable under the depreciation provisions will be less than the deduction allowable under section 51(1).

Now, in the case of chattels other than 57AF motor vehicles, it was our submission to the Federal Court that section 8291) will apply.  Do Your Honours have a copy of section 82(1)?

MASON CJ:   The answer is in the negative.

MR BLOOM:   Your Honours will find it in the judgment of Sir Ninian Stephen in Williams v Federal Commissioner of Taxation, one of the cases on our list of authorities, set out in His Honour’s judgment at page 651 of 128 CLR.  The section is there set out with three subsections.  Subsection (3) has since been omitted but that is not presently relevant.  Subsection (1) remains the same:

Where in respect of any amount, a deduction would but for this section be allowable under more than one provision of this Act, and whether it would be so allowable from the assessable income of the same or different years, the deduction shall be allowable only under that provision which in the opinion of the Commissioner is most appropriate.

So that the Act recognises the deductions for the same amount and, presumably, as here, of different kind, may be allowable under different provisions of the Act, and then gives in section 82(1) the Commissioner the discretion to, in effect, decide which of the deductions for that amount shall be allowed.

Your Honours also have annexed to our outline of submissions the unusual explanatory memorandum which the Tax Office issued under the authority of the Treasurer, Mr Casey, when the 1936 Act was introduced, and that says that the purpose of section 82(1) was to deal with the problem that the general provision, section 51(1), was:

followed by other provisions which allow deductions in respect of expenditure on repairs ‑

et cetera.  That:

Some, at least, of the deductions specifically provided for, are covered by the general terms of section 51, and it is for the purpose of ensuring that expenditure deductible under the specific provisions is not again deductible under the general provision, that section 82(1) is necessary.

Now, as I said to Your Honours, it was our submission to the Federal Court that section 82(1) applied in the case of ordinary non‑57AF chattels and that submission was rejected in the judgment of His Honour Mr Justice Hill at page 140 of the application book where he gives an example at the top of the page:

A mathematical example reveals, however, that this submission is incorrect.  Let it be assumed that property is purchased for $20,000, depreciated by $10,000 and then sold for $9,000.  The deduction available to the taxpayer, in such a case under s.59(1), is $1,000.

And, one might add there, the taxpayer has already had as deductions $10,000 under section 54.  So, the total deductions, the total amount deductible under the depreciation provisions is $11,000 and that is, as His Honour goes on to point out, the precise amount of the deduction available under section 51(1).  So, in terms of section 82(1) there is the same amount in respect of which deductions are allowable under different provisions and over a different period of years.  So, with respect to His Honour, he should have held that section 82(1) applied for that reason, that it would be open to the Commissioner, under section 82(1), to apply the depreciation provisions to the exclusion of section 51(1) in the ordinary case.

But the facts of this case, of course, concerning as they do section 57AF motor vehicles, stands in a different light because the deduction available under the depreciation provisions for such vehicles is less in amount than the deduction available under section 51(1).  So, the opening words of section 82(1) are not met.  There is not the same amount and it cannot apply and so the question arises as to the principles upon which one applies the Income Tax Assessment Act where the general provision provides for a large deduction in respect of a particular transaction and the specific provision provides for a lesser deduction in respect of the same transaction but the deductions are not, strictly speaking, the same.  There is no contest such as would involve the generalibus specialibus rule.  Section 82 does not apply and so, what are the principles?

The way that the Federal Court approached it at pages 143 to 144 of the application book was to found on the first error that we have, with respect, pointed to and, assuming that it was exclusivity of the depreciation provisions for deductibility, I might add, and not assessability, but exclusivity on that side that led to the result that 51(1) did not apply.  But that is not so.  it is 82(1) that leads to that result and it is 82(1) that is there specifically to deal with that problem.

His Honour Mr Justice Hill says, at the bottom of page 143:

In my view, however, the application of the depreciation provisions leave no room at all for the allowance to a taxpayer of a deduction for a loss calculated as the difference between the purchase price of the depreciated plant and the sale price of that plant.  The explanation for this result lies in the fact that the whole of the purchase price for the property is taken into account under s 62 in the determination of “depreciated value”.

So much is true, that it is a concessional capital deduction over a period of years.  It is not the same as the revenue deduction under section 51(1).  That is why section 82(1) is necessary and ordinarily applies.

By so providing, the legislation evidences the intention that the same amount should not be taken into account a second time in calculating a loss under s 51(1) of the Act.  Put in another way, the legislation requires the conclusion that the depreciation provisions and s 51(1) are exclusive ‑

That, with respect, is incorrect.

BRENNAN J:   Why?

MR BLOOM:   It is section 8291) that does it, Your Honour.

BRENNAN J:   No, section 82(1) can only apply when both do apply.

MR BLOOM:   Yes, and both do.

BRENNAN J:   And the question is, before you get to 82(1), which one does?  Do they both applies or does one apply?

MR BLOOM:   They both apply, Your Honour.

BRENNAN J:   Well, so you say.

MR BLOOM:   Yes, Your Honour.

BRENNAN J:   His Honour says one does.

MR BLOOM:   Yes.  Well, His Honour, with respect, is wrong.

BRENNAN J:   What is wrong with His Honour?

MR BLOOM:   Your Honour, the concessional capital deductions are not the same as the 51(1) allowable deduction.  They are different things.  So, it is entirely possible that one transaction involving the purchase and sale of an asset which is, in the meantime, depreciated, will give rise either to assessable income under section 25 or an allowable deduction under section 51(1) in addition to the concessional capital deductions provided for under sections 54 and 59.

BRENNAN J:   What His Honour is saying is but for the special provisions, you would be under 51(1), but having regard to the special provisions, you are not.

MR BLOOM:   If His Honour was applying generalia specialibus, His Honour stayed right away from saying that in any specific terms.  We would submit, with respect, that the reason was that there is no direct conflict of the kind that is usually required before that rule applies.

BRENNAN J:   Well, what is the special leave point?

MR BLOOM:   The special leave point, Your Honour, is this:  there are a number of situations ‑ we have given

a couple more examples in our outline of submissions and there are others ‑ where there will be concessional deductions under the Act for an amount which is a part

of a larger amount which is wholly deductible under section 51(1), where section 82(1) will not apply and where it needs to be stated, in our respectful submission, with some authority, just what are the principles for determining which are deductible:  are both deductible?  Is there some principle in the Act to be found against double deductibility; if so, which one will prevail?  The Commissioner, of course, under 82(1) is given the option but in the ordinary circumstances it may be that the taxpayer is given the option if the Act is to be construed against double deductibility.  That is the special leave point, Your Honour.  If Your Honours please.

MASON CJ:   The Court need not trouble you, Mr Callaway.  The decision of the Full Court of the Federal Court is not attended with sufficient doubt to justify the grant of special leave to appeal.  The application is therefore refused.

MR CALLAWAY:  If the Court pleases, we ask for costs.

MASON CJ:   You do not oppose that, Mr Bloom.  The application is refused with costs.

AT 10.47 AM THE MATTER WAS ADJOURNED SINE DIE