Commissioner of Income Tax (Qld) v Bank of New South Wales

The Commissioner of Income Tax (Qld) appealed to the High Court of Australia from a decision of the Supreme Court of Queensland. The dispute concerned the assessment of income tax on the Bank of New South Wales, specifically whether premiums received by the bank on the issue of new shares constituted "profits" for the purposes of the Income Tax Act 1902 (Qld). The Supreme Court had overturned a decision of the Court of Review, which had found in favour of the Commissioner.

The central legal issue before the High Court was whether sums received by the Bank of New South Wales as premiums on the issue of new shares were to be considered "profits" within the meaning of section 31 of the Income Tax Act 1902 (Qld). This section stipulated how the income of a foreign banking company carrying on business in Queensland was to be calculated for tax purposes, by reference to its total profits and its assets and liabilities in Queensland.

The High Court reasoned that premiums received on the issue of shares are not profits in the ordinary sense, nor are they profits arising from the business of the bank. Instead, such premiums are more akin to an increase in capital. The Court noted that the transaction involved shareholders contributing more than the nominal value of the shares, but this did not represent a gain made by the bank through its business operations. The Court emphasised that the character of the transaction, rather than the subsequent appropriation of the funds, determined whether the sums were profits. Consequently, the appeal was dismissed.