British Imperial Oil Co Ltd v Federal Commissioner of Taxation

The case involved the British Imperial Oil Co. Ltd. (the taxpayer) and the Federal Commissioner of Taxation. The dispute arose from an income tax assessment for the 1922-1923 financial year, where the Commissioner applied section 28 of the Income Tax Assessment Act 1922-1923. The taxpayer, dissatisfied with the assessment, lodged an objection and requested a reference to a Board of Appeal. The Board of Appeal subsequently stated a case for the opinion of the High Court of Australia.

The High Court was required to determine several legal issues, including the validity of section 28 of the Income Tax Assessment Act 1922-1923 and the associated Income Tax Acts of 1922 and 1923, particularly in relation to section 55 of the Constitution concerning the subjects of taxation. Crucially, the Court also had to consider whether the powers conferred upon the Board of Appeal by sections 44, 50, and 51 of the Act constituted an unlawful vesting of the judicial power of the Commonwealth in a body that was not a constitutionally recognised court.

The Court held that the powers conferred upon the Board of Appeal, including the power to hear references and appeals, make orders, and deal with costs, were part of the judicial power of the Commonwealth. As the Board of Appeal, constituted under section 41 of the Act, did not have the tenure of office required by section 72 of the Constitution for federal judges, it could not lawfully exercise such powers. Consequently, the Board of Appeal could not be validly constituted, and any case stated by it was invalid. The Court also considered and rejected the argument that section 28 of the Act contravened section 55 of the Constitution, finding that it provided a method for ascertaining taxable income rather than imposing a different subject of taxation.

As a result of the invalidity of the Board of Appeal's constitution, the High Court ordered that the case stated by the Board be struck out. This meant that the Court could not entertain the substantive questions raised in the case, including the validity of section 28 of the Income Tax Assessment Act 1922-1923.