Australasian Scale Company Limited v Commissioner of Taxes (Qld)

The case of Australasian Scale Company Limited v Commissioner of Taxes (Qld) concerned a dispute between the Australasian Scale Company Limited (the appellant) and the Commissioner of Taxes for Queensland (the respondent) regarding income tax assessments. The appellant, a company registered in New South Wales, carried on business across various Australian states, including Queensland, where it had a branch office. The core of the dispute lay in the Commissioner's assessment of the appellant's taxable income in Queensland under section 14(4)(iv) of the Income Tax Act 1924 (Qld), which allowed the Commissioner to estimate taxable income based on a proportion of total profits if those profits could not be satisfactorily determined. The appellant argued that this method of assessment infringed section 92 of the Commonwealth Constitution, which guarantees freedom of trade, commerce, and intercourse among the States. The matter was heard by the High Court of Australia on appeal from the Supreme Court of Queensland.

The legal issues before the High Court were primarily whether the second paragraph of section 14(4)(iv) of the Income Tax Act 1924 (Qld) constituted an interference with inter-State trade and commerce, thereby contravening section 92 of the Constitution. This involved determining whether the method prescribed for assessing taxable income, which linked it to the proportion of sales or revenue within Queensland compared to total sales or revenue, placed an impermissible burden on inter-State commerce. Additionally, the Court considered whether the Commissioner's opinion regarding the inability to satisfactorily determine profits was subject to review on appeal, and if the assessment formula could validly include profits not made within Queensland.

The High Court, in a majority decision, held that the second paragraph of section 14(4)(iv) did not infringe section 92 of the Constitution. The reasoning varied among the judges. Rich and Dixon JJ. found that the taxation was levied on a proportion of profits, and the method of ascertaining that proportion through the ratio of sales did not impose a burden on sales. Starke J. reasoned that the tax was imposed after inter-State trade was completed, not on the operation of inter-State commerce itself. Evatt and McTiernan JJ. concluded that the formula's structure, where increases in inter-State sales in other states tended to reduce the statutory ratio, meant it did not directly infringe section 92. They also noted that while the formula might potentially include profits not made in Queensland, the provision was valid as part of Queensland's law for its peace, order, and good government. The Court further affirmed that the Commissioner's opinion on the satisfactory determination of profits was final and not subject to appeal, provided it was honestly formed and not arbitrary or capricious.

The High Court varied the decision of the Supreme Court of Queensland. The appeal by Australasian Scale Company Limited against the Supreme Court's answers regarding the constitutionality of the provision under section 92 was dismissed. The Commissioner's cross-appeal concerning the reviewability of the Commissioner's opinion and the extent to which assessments could include profits made outside Queensland was allowed in part. The Court found that the assessments were valid to the extent they included profits made within Queensland, but not profits made outside the State.