D and W Murray Limited v Federal Commissioner of Taxation

[1927] HCA 51

148 HIGH COURT

[1927.

[HIGH COURT OF AUSTRALIA.)

D. & W. MURRAY LIMITED

Appella n t :

THE FEDERAL COMMISSIONER

OF

R espondent.

T A X A T I O N .................................................

H.C. OF A. War-time Profits Tax—Assessment—Deduction from profits—Sum paid on account

1927. of any war-time profits tax or similar tax imposed, in any other country—Excess

^ pyrofits tax paid and subsequently repaid—War-time Profits Tax Assessment Act

M e l b o t o n e ,

1917-1918 (No. 33 of 1917— No. 40 of 1918), sec. 15 {A)— Finance {No. 2) Act

Oct.

28.

1 9 1 5 ( 5 * 6 Oeo. V. c. 89), sec. 38.

S y d n e y , Sec. 15 (4) of the War-time Profits Tax Assessment Act 1917-1918 provides Nov. 28.that in determining the profits of an accounting period “ a deduction shall be

Isaacs A.C.J., allowed for any sum which has been paid in re.spect of the profits

on account

Higgine, Powers,

Rich and

of any war-time profits tax or similar tax imposed in any country outside the

Starke JJ .Commonwealth. ”

The appellant company, which carried on business in Great Britain and Australia, paid excess profits tax in Great Britain pursuant to the Finance (No. 2) Act 1915 in respect of its profits, including those derived in Australia, for a particular accounting period. Subsequently the appellant having sustained losses in its business applied for and obtained, pursuant to sec. 38 (3) of that Act, the amount paid by it as excess profits tax. On an assessment of the appellant for war-time profits tax for the same accounting period made after the amount paid by it as excess profits tax had been repaid.

Held, by Isaacs A.C.J., Higgins, Powers and Starke J J . (Rich J. dissenting), that the sum which the appellant had originally paid for excess profits tax having been repaid was not a “ sum which has been paid ” within the meaning of sec. 15 (4) of the War-time Profits Tax Assessment Act 1917-1918, and that the appellant was not entitled to deduct it from its profits of the period.

40 C.L.R.] OF AUSTRALIA.

149

H. C. or A.

Case

St a t e d .

1927.

On the hearing of an appeal to the High Court by D. & W. Murray

Ltd. from an assessment of it for war-time profits tax, Starke J.

D. & W.

M u b b a y

stated, for the opinion of the Full Court, a case which was substantially

L t d .

V .

as follows:—

F b d e b a i .

COMMIS- SIONEE OF

1. On 7th March 1927 the Commissioner ultimately assessed the

appellant to war-time profits tax for the financial year ending

T a x a t io n .

30th June 1918.

2. Pursuant to sub-sec. 2 of sec. 7 of the War-time Profits Tax Assessment Act 1917-1918 the accounting period for the purposes^of such assessment was taken to be the period of twelve months for which the accoimts of the business of the appellant had been made up and ending respectively on 19th July 1917 and 19th July 1918.

3. The business in respect of which such assessment was made was a softgoods business carried on by the appellant in the United Kingdom and in Australia.

4 r . The appellant was assessed to excess profits duty imposed by

the Act of the United Kingdom called the Finance {No. 2) Act 1915 amended and extended by subsequent enactments for the accounting period hereinafter set forth. Pursuant to the provisions of the said Acts the accounting period for the purposes of the said assess­ ment was taken to be the period for which the accounts of the business had been made up and ending respectively on 19th July 1917 and 19th July 1918.

5. The last-mentioned assessment was made upon the whole profits of the said business including profits arising from sources within Australia.

6. The appellant paid the excess profits duty for which it was assessed under the said Finance (No. 2) Act 1915 amended and extended as aforesaid.

7. Subsequently, in its accounting period of twelve months ending 19th July 1921 the appellant sustained losses in its said trade and business.

8. The appellant thereupon applied to the proper authority in the United Kingdom for repayment (inter alia) of the amount paid by it as excess profit duty in respect of the accounting period mentioned in pars. 4 and 6 hereof.

150 HIGH COURT

[1927.

H. C. OF A.

9. Thereupon the proper authority in the United Kingdom repaid

1927.

or allowed in account to the appellant the excess profits duty paid

D. & W.

by the appellant and mentioned in pars. 4 and 6 hereof.

MtJBRAY

L t d .

10. Such repayment or allowance was made on 10th March 1922

V.

F e d e r a l

pursuant to the provisions of the Finance (No. 2) Act 1915, sec. 38,

C0MM1.S-

SIONBR OF

sub-sec. 3.

T a x a t io n .11. The sums included in the excess profits duty by reason of

the inclusion in the said assessment of profits arising from sources

in Australia have not yet been ascertained but are considerable.

12. On 12th April 1926 the appellant objected to its assessment to war-time profits tax as aforesaid for [inter alia) the following reason ;—“ (a) That sums have been paid in respect of the profits on account of a similar tax imposed in a country outside Australia, namely, excess profits duty has been paid in Great Britain in respect of profits earned during the accounting periods and the years covered by the Commonwealth War-time Profits Tax Assessment Act 1917-1918 and no deduction has been allowed therefor as provided by sec 15 (4) and sec 9 of the War-time Profits Tax

Assessment Act."

13. The Commissioner disallowed the said objection. The appellant asked that it be treated as an appeal. The Commissioner so treated it and forwarded the same to this Court pursuant to the provisions of sec. 28, sub-sec. 4, of the War-time Profits Assessment Act 1917-1918.

14. The High Court shall be at fiberty to refer to the Finance [No. 2) Act 1915 of the United Kingdom and any subsequent Acts amending or extending the same, and so far as relevant the same are incorporated in this case.

15. The appeal now coming on before this Court, this case in writing is stated for the opinion of the High Court upon the foUowing question arising in the appeal and which in the opinion of this Court is a question of law ;—

Is the appellant entitled to any deduction from the profits dealt with in the assessment mentioned in par. 1 hereof for moneys paid by the appellant in respect of such profits on account of the excess profits duty imposed by Great

40C.L.R.]

OF AUSTRALIA.

Britain and subsequently repaid or allowed in account to

H. C. OF A.

1927.

the appellant as aforesaid ?

D. & W.

Owen Dixon K.C'. (with him Martin), for the appellant. The

M u r r a y

L t d .

provisions of sec. 15 (4) of the War-time Profits Tax Assessment Act

V.

F e d e b a i .

1917-1918 have been literally fulfilled. The tax paid under sec. 38

Co m m is ­

s io n e r OF

of the Finance (No. 2) Act 1915 is a similar tax to the war-time

T a x a t io n .

profits tax, and when the appellant paid that tax it was at once entitled under sec. 15 (4) to deduct the sum paid. The word “ paid ” means paid pursuant to a legal obligation to pay. The fact that the sum paid was subsequently repaid pursuant to sec. 38 (3) of the Finance (No. 2) Act 1915 does not wipe out the payment. The Commonwealth Parliament, when it enacted the War-time Profits Tax Assessment Act, must have had before it the Finance (No. 2) Act 1915 and the provisions of sec. 38 (3). Yet no provision is made in sec. 15 (4) of the War-time Profits Tax Assessment Act for a repayment of the tax, whereas the proviso to sec.-15 (4) expressly provides for refunds of land tax and income tax in allowing a deduction in respect of those taxes. The repayment under sec. 38 (3) is a substantive repayment quite independent of the tax ; it is an act of generosity and not a repeal of the tax.

Sir Edward Mitchell K.C. (with him Herring), for the respondent. The payment of excess profits tax under the Finance (No. 2) Act 1915 is, by reason of the provision in sec. 38 (3), only provisional, and sec. 15 (4) of the War-time Profits Tax Assessment Act does not apply to a payment of tax which has been repaid before the assess­ ment is made. Until it has finally been determined under sec. 38 (3) whether or not the amount of the tax is to be repaid, there is not a “ similar tax ” within the meaning of sec. 15 (4). That section should not be interpreted by reference to the proviso to it (O'Shea v. Commissioner of Taxes (1) ; West Derby Union v. Metropolitan Life Assurance Society (2) ).

Owen Dixon K.C., in reply, referred to Greenwood v. F. L. Smidth cfe

Co. (3) ; Attorney-General v Milne (4).

Cur. adv. vidt.

(1) (1926) V.L.R. 434, at p. 446;

(2) (1897) A.C. 647.

48 A.L.T. 84, at p. 88.

(3) (1922) 1 A.C. 417, at p. 423.

(4) (1914) A.C. 765, at p. 772.

152 HIGH COURT

[1927.

H. C. O F A.

The foUowing written judgments were delivered :—

1927.

I saacs A.C.J . The question in this case may be thus stated:

D. & W.

Does a sum which was originaUy paid as excess profits duty under

M u r r a y

L t d .

sec. 38 of the Imperial Finance {No. 2) Act 1915 (5 & 6 Geo. V.

V.

F e d e r a l c. 89) stUl answer the description in sub-sec. 4 of sec. 15 of the

C o m m is ­

Commonwealth War-time Profits Tax Assessment Act 1917-1918 of

s io n e r

OF

T a x a t io n .“ any sum which has been paid in respect of the profits,” &c., if it

Nov. 28.

has since been repaid or aUowed in accounts to the taxpayer under sec. 38 of the Imperial Act ? The crucial words in the Common­ wealth Act already quoted are : “ any sum which has been paid.” I entertain no doubt that one cannot fasten simply on the formal act of payment and say that the word “ paid ” is thereby once and for aU necessarily satisfied. If by mistake, as by over-calculation, or wrong inclusion of an item or a figure or of identity, a sum is paid and then, the error being detected, a repayment takes place, it would be offending aU common sense to treat the sum repaid as “ paid ” for the purposes of the Commonwealth Act. There the act of payment is itseU undone and the money simply restored to its rightful owner. But here the original payment was in aU respects obligatory, regular and accurate, and when paid the Crown became the true owner of the money. When afterwards, in pursuance of sub-sec. 3 of sec. 38 of the Finance {No. 2) Act 1915, the taxpayer obtained “ repayment of such amount paid by him as excess profits duty in respect of ” his assessment, which included the profits now relevant, some other valid and satisfactory reason must be found, if the sum is not to be regarded as “ paid ” for the purpose of

Commonwealth deduction. I think the true answer is found in this

Sec. 38 of the Enghsh Act certainly required payment of the sum for the appropriate accounting period. But by the very terms of the section, that payment was provisional only. In the event that happened, the taxpayer had a right to repayment and that right, subject to the happening of the event, existed from the moment of payment. The repayment was not an act of grace: it was made in pursuance of one of the terms of the original payment. Having been restored on the occirrrence of the condition, it is then as if the payment had not been made—that is, for the purposes of deduction

40 C.L.R.] OF AUSTRALIA.

153

H. C . OF A.

>mder the Australian Act.

The taxpayer cannot now, in any reason-

1927.

abie sense, assert that that is a “ sum paid in respect of the assessed

D. & W.

profits ” so as to prevent double taxation.

M u k k a y

I am of opinion that the question should be answered in the

L t d .

V.

negative.

F b d e r a x COMMIS-

I am authorized by my brother Powers to say that he agrees with

SIOXEB OF

T a x a t io n .

this result.

Higgins J.

H iggins J. In my opinion, this question in the case stated must

be answered No. The simple answer to the objection of the taxpayer is that the sum which it claims as a deduction under sec. 15 (4) of the War-time Profits Tax Assessment Act 1917-1918 had not been in fact “ paid ” to the British officials at the 'date of the assessment in question—7th March 1927— ît had been restored by them to the taxpayer on 10th March 1922. On the date in question, the facts which had occurred would not support a plea of payment of the sum in question to the British officials. A recalled payment is no longer a payment. If there were need of an authority on such a point, the point is involved in the case of Walter v. James (1)—a case otherwise very different.

I thought during the argument that the words of the proviso to sec. 15 (4) possibly afforded support to the otherwise grotesque contention of the taxpayer, “ once a payment, always a payment ” —notwithstanding repayment. For, under the proviso a deduction is to be allowed, from the profits of an accounting period, of land taxes and income taxes paid in the accounting period “ less any refunds . . . received in the accounting period.” The existence of such a provision for deduction of refunds in respect of land taxes and income taxes, coupled with the omission of such a provision in respect of war-time profits tax might, at first sight, seem to favour the view that mere payment, though recalled, was sufficient in respect of the latter tax. But the pecuHar express provision for deduction of refunds in respect of land taxes and income taxes is obviously due to a desire of Parliament to meet such provisions as that in the Income Tax Assessment Act 1915-1918 (sec. 18 (1) (6) ) for bringing any refimds into account as income in that year only

(1) (1871) L.R. 6 Ex. 124.

154 HIGH COURT

[1927,

H. C. O F A.

in which the refund is received ; and it is to be noticed that there

1927.

is no such provision for deduction of refunds in relation to deductions

D. & W. from the profits of “ all rates and other taxes paid in Australia in

M u r r a y

L t d .

the accounting period ” (sec. 15 (4) proviso (c) ). The doctrine of

V.

F e d e r a l

expressio unius exdusio alterius affords merely a presumption ; and,

C o m m is ­

s io n e r OP in my opinion, the presumption is here sufficiently rebutted. In

T a x a t io n .this light, the express provision for deduction of refunds in the case

Higgins J.of land taxes, and income taxes, assumes that refunds must be

deducted, while confining the deduction to the year in which the

refund is received.

R ich J. The appellant was assessed under the Finance (No. 2) Act 1915, the accounting period being the period for which the accounts of the business had been made up and ending respectively on 19th July 1917 and 19th July 1918. The assessment was made upon the whole profits of the business including profits arising from sources within Australia. The appellant paid the excess profits duty for which it had been assessed under this Act, but, later, in its accounting period of twelve months ending 19th July 1921, sustained losses in its trade and business. Upon application to the proper authority in the United Kingdom the duty so paid was repaid or allowed in account to the appellant under the provisions of sec. 38 (3) of the Imperial Act. The appellant having been assessed under the Commonwealth War-time Profits Tax Assessment Act 1917-1918 objected “ that sums have been paid in respect of the profits on account of a similar tax imposed in a country outside Australia, namely, excess profits duty has been paid in Great Britain in respect of profits earned during the accounting periods and the years covered by the Commonwealth War-time Profits Tax Assessment Act 1917-1918 and no deduction has been allowed therefor as provided by sec. 15 (4) and sec. 9 of the War-time Profits Tax Hssess- ment Act.” The Commissioner having disallowed the objection, the appellant asked that it be treated as an appeal. This has been done, and, the matter coming before the Court under sec. 28 (4) of the last- mentioned Act, a case was stated asking ; “ Is the appellant entitled to any deduction from the profits dealt with in the assessment mentioned in par. 1 hereof for moneys paid by the appellant in

40 C.L.R.] OF AUSTRALIA.

155

H. C. or A.

respect of such profits on account of the excess profits duty imposed 1927.

by Great Britain and subsequently repaid or allowed in account to

D. & W.

the appellant as aforesaid.”

M u b e a y

The Commonwealth Act is a transcript of the Imperial Act. The

L t d .

V.

provisions of sec. 38 (3) of the latter Act were before the Common­

F e d e b a i . COMMIS-

wealth Parliament, but, although specific provision is made in

sioN E B o r

sec. 15 (4) (a) and (6) of the Federal Act excepting refunds, none is

T a x a t io n .

made excepting the repayment or set-off under sec. 38 (3) of the

Rich J.

Finance (No. 2) Act 1915. The words of sec. 15 (4) are very plain: “ a deduction shall be allowed for any sum which has been paid in respect of the profits on account of any war-time profits tax or similar tax imposed in any country outside the Commonwealth.” The rule is that “ judicial tribunals must in interpreting these taxing Acts stick to the letter of the statute ” (Attorney-General v. Milne (1) ). It is none the less true that there has been a payment in respect of profits although a repayment may be made of subsequent losses. This repayment or refund is, in its turn, subject to taxation under the Imperial Act. It was contended on behalf of the Commis­ sioner that until there has been a final adjustment under the British Act any payment made is only conditional. This contention would result in finahty being impossible—a serious contingency in business affairs—unless the Imperial Act was terminated or repealed.

In my opinion the question submitted should be answered in the

affirmative.

Starke J. In my opinion the question stated should be answered

in the negative. The facts are fully stated in the case and need not

be repeated.

We were reminded that judicial tribunals in interpret­

ing taxing Acts must stick to the letter of the statute. Even so, I am unable to affirm that a sum has been paid on account of excess profits duty under the Imperial Act when that sum has been repaid pursuant to' the authority of the same Act before the date of the assessment to the Commonwealth tax. It may be, as Mr. Dixon argued, that the assessment and imposition of a duty under the Imperial Act has not been undone or cancelled; but in this case the amount of the duty has been in fact repaid. Again, I cannot see

(1) (1914) A.C., at p. 772.

156 HIGH COURT

[1927.

H. C. or A.

that the policy which dictates the repayment matters ; whether it

1927.

be, as the statute suggests, to make excess profits duty accord with

D. & W. the profits or losses of the whole war period, or for any other purpose.

M u r r a y

L t d .

The governing fact in this case is that the amount of excess profits

V.

duty has been repaid pursuant to the statute. Payment has been

F e d e r a l C o m m is ­

s io n e r OP

blotted out by the repayment and return to the taxpayer of the

T a x a t io n .

amount paid by it as excess profits duty.

Question answered in the negative.

Solicitors for the appellant, Blake <& Riggall.

Solicitor for the respondent, W. H. Sharwood, Crown Solicitor for

the Commonwealth.

B. L.

[HIGH COURT OF AUSTRALIA]

BAILLIE

A p p e l l a n t ;

THE FEDERAL COMMISSIONER

OF

R e s p o n d e n t .

T A X A T IO N .................................................

H. C. o r A. Income, Tax—Assessment— Valuation of live-stock— Meaning of “ valve”—Option

1927.                 of taxpayer—“ Value adopted ”— Income Tax Assessment Act 1922-1924 {No. 37 of 1922—Ao. 51 of 1924), sec. 16.

M e l b o u r n e ,

Oct. 31.Sec. 16 (a) (ii) of the Income Tax Assessment Act 1922-1924 provides that for the purposes of par. (a) of sec. 16 “ value ” means “ (ii) in the case of live­

S y d n e y , stock (not being hve-stock used as beasts of burden or as working beasts)—

Nov. 21.the cost price or market selling price at the option of the person ” whose income

Gavan Duffy,

is being assessed “ . . . Provided that the value adopted in relation to

Powers, Kich

and Starke JJ .any live-stock, as the value of that live-stock, as at the end of the period in

which the income was derived, shall, for the purposes of the assessment of the person’s income derived in the next succeeding period, be deemed to be the value of that live-stock as a t the commencement of the next succeeding period,”