Commissioner of Taxation of Western Australia v D and W Murray Limited

The Commissioner of Taxation of Western Australia appealed to the High Court of Australia against a decision of the Supreme Court of Western Australia. The dispute concerned the assessment of dividend duties payable by D. & W. Murray Limited, an English company with its head office in London and branches in Australia, including Western Australia, carrying on a wholesale softgoods business. The Commissioner had assessed profits made by the company in Western Australia, but the company argued that certain sums, totalling £5,529 11s. 9d., were profits made outside Western Australia and should not be included in the assessment.

The legal issues before the High Court were whether specific sums credited to the Western Australian branch by its London head office, namely a proportion of excess buying commission, manufacturers' cash discounts, and freight and insurance rebates, constituted profits made in Western Australia for the purposes of the Dividend Duties Act 1902-1924 (W.A.), or if they were profits made outside Western Australia. The Supreme Court had held that the manufacturers' cash discounts and London office credits were profits made outside Western Australia, and had referred the matter of the buying commission back for further consideration.

The High Court reasoned that the profit of a business such as wholesale softgoods warehousing is ultimately realised where the goods are sold. While the operations of the head office in London, including purchasing, arranging freight, and obtaining discounts and rebates, were essential to the business, these activities were preparatory to the ultimate sale of the goods in Western Australia. The Court held that the profit was made wholly in Western Australia, and the fact that expenditure incurred abroad to earn that profit was reduced by the company's overseas operations did not localise any part of the profit outside Western Australia. Therefore, the sums credited to the Western Australian branch, representing the excess of the buying commission over actual London expenses, manufacturers' cash discounts, and freight and insurance rebates, were not to be excluded from the assessment of profits made in Western Australia.

Consequently, the High Court allowed the Commissioner's appeal, reversed the decision of the Supreme Court of Western Australia, and ordered that the assessment of profits made by the company in Western Australia should not be reduced by the sums in question.