Dalton v Deputy Commissioner of Taxation

[1985] FCA 121

Re: THOMAS ANDREW DALTON
And: DEPUTY COMMISSIONER OF TAXATION
No. NSW G 51 of 1985
Income Tax

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Franki J.

CATCHWORDS

Income Tax - Reference of decision of Commissioner to Board of Review - Application of reg.35 of Income Tax Regulations - Whether s.25D of Acts Interpretation Act 1901 applies.

Income Tax Regulations - reg 35.

Acts Interpretation Act 1901 - s.25D.

HEARING

SYDNEY
#DATE 2:4:1985

ORDER

(1) The application be dismissed; and

(2) The applicant pay the Commissioner's costs.

(Settlement and entry of order is dealt with by 0.36 of the Federal Court Rules.)

JUDGE1

The applicant, Mr. Thomas Andrew Dalton, a taxpayer, has applied for a review, pursuant to s.5 of the Administrative Decisions (Judicial Review) Act 1977 of two decisions of the Deputy Commissioner of Taxation (the "Commissioner"). The Commissioner has refused to apply s.25D of the Acts Interpretation Act 1901 to the provisions of reg.35(1) of the Income Tax Regulations.

1. This application has been conducted by both counsel with great expedition and they have made every effort to get a decision as quickly as possible. A statement of agreed facts was tendered and an affidavit of Mr. John Michael Herlihy, the solicitor for the applicant was read, but no oral evidence was called.

2. The applicant lodged income tax returns in respect of the years ended 30 June 1979 and 1980. The resolution of this case does not require consideration of the details of the tax position of the applicant. It is sufficient to say that the return contained a document headed "Thoroughbred Trading and Profit and Loss Account for the year ended 30 June 1979" which showed a loss of $12,044 and a similar trading and profit and loss account showing a loss of $17,449 was contained in the return for the next year. The respondent disallowed deduction of the losses in each case on the ground, in substance, that the taxpayer was not carrying on a business. The taxpayer objected to both the assessments. The Commissioner disallowed both objections pursuant to s.186 of the Income Tax Assessment Act 1936 and the taxpayer requested the Commissioner to refer the decisions to a Board of Review pursuant to s.187. This was done by the Commissioner and various documents were furnished by the Commissioner pursuant to reg.35(1) of the Income Tax Regulations. The taxpayer wrote to the Commissioner and referred to s.25D of the Acts Interpretation Act and complained that the documents furnished under reg.35(1) did not comply with the requirements of s.25D of that Act. The Assistant Commissioner replied by saying that advice was being sought but that "... the present view of this Office is that the section has no application to particulars which the Commissioner is required to provide to a Board of Review pursuant to sub-regulation 35(1)."

3. It appears that the hearing of the matter before the Board of Review is fixed for 16 April 1985. I set out the provisions of ss.186 and 188 of the Income Tax Assessment Act:
   
   

"186. The Commissioner shall consider the objection, and may either disallow it, or allow it either wholly or in part, and shall serve the taxpayer by post or otherwise with written notice of his decision."

"188. (1) If the request is accompanied by a fee of $2, the Commissioner shall refer the decision or forward the objection to a Board or Court in accordance with the request.

(2) ...."

Section 25D of the Acts Interpretation Act provides:

"Where an Act requires a tribunal, body or person making a decision to give written reasons for the decision, the instrument giving the reasons shall also set out the findings on material questions of fact and refer to the evidence or other material on which those findings were based."

Regulation 35 provides:

"35(1) The Commissioner, in referring a decision to a Board of Review in accordance with sub-section (1) of section 188 of the Act or section 189 of the Act, shall furnish the Board with a printed or typewritten statement, in quadruplicate, containing -

(a) the name and address of the taxpayer;

(b) full details of the taxpayer's claim as made to the Commissioner; and

(c) the Commissioner's reasons for disallowing the taxpayer's claim.

35(2) The Commissioner shall at the same time furnish the taxpayer with a copy of the statements referred to in sub-paragraphs (b) and (c) of the last preceding sub-regulation."

Section 46 of the Acts Interpretation Act has the effect that the word "regulation" may be substituted for the word "Act" in s.25D.

1. The applicant pointed out that reg.35(1)(c) required the Commissioner to furnish the Board with a printed or typewritten statement of the Commissioner's reasons for disallowing the taxpayer's claim. He argued that the Commissioner was obliged by s.25D to incorporate in this statement his findings on material questions of fact and refer to the evidence or other material on which those findings were based.

2. The respondent crystallised the issues as follows:
   
   

"1. Whether the duty imposed on the Commissioner by subreg. 35(1) ITR is expanded by s.25D AIA.

2. If it is, whether a taxpayer will be heard to complain to the Court about an alleged failure by the Commissioner to comply with this expanded duty.

3. If he will and if he complains successfully or if the Commissioner has voluntarily furnished to the Board the additional information referred to in s.25D AIA, whether subreg. 35(2) ITR or s.25D AIA or both in combination impose on the Commissioner a duty to furnish that additional information to the taxpayer."

1. I will consider these questions against the background of two judgments of the High Court and one of a single Judge of this Court. In Sutton v. Commissioner of Taxation (1959) 100 CLR 518, the High Court, in a joint judgment, held that a Board of Review had no power over the Commissioner as a litigant party to impose on him a legal obligation to formulate his case by pleadings or particulars or to give discovery by answering interrogatories or to fulfil some other procedural requirement borrowed from the courts of justice. This judgment was applied by the High Court in The Queen v. Cain; Ex Parte Evatt (1975) 133 CLR 37.

2. Both of these cases were of course decided before s.25D was enacted. That section was enacted by an amendment to the Acts Interpretation Act (No. 27 of 1984) operative from 12 June 1984.

3. In Robinson v. Deputy Commissioner of Taxation (1984) 52 ALR 719, Lockhart J. considered whether the Deputy Commissioner was required to furnish particulars of grounds upon which he relied for disallowing an objection in a case where the taxpayer had not then made a decision whether not to proceed further or to request a reference to the Board or to appeal to the Supreme Court. The taxpayer sought to rely on s.186 but Lockhart J. held that it did not require the Deputy Commissioner to give particulars of the grounds of his disallowance of the taxpayer's objection. This judgment was delivered on 13 April 1984.

4. Prior to the enactment of s.25D a taxpayer whose objection had been disallowed was not entitled to get any particulars from the Commissioner (Robinson v. Deputy Commissioner of Taxation, supra). If he chose to appeal to the High Court, the ordinary powers of the Court over litigants applied to the Commissioner and particulars and similar matters could be sought (Bailey v. Federal Commissioner of Taxation (1977) 136 CLR 214).

5. The first question for me to consider is whether s.25D requires the Commissioner to furnish the Board of Review not only with its reasons for disallowing the taxpayer's claim but also with the findings on material questions of fact and the other matters to which that section refers. The only obligation under s.186 upon the Commissioner is to consider the objection and either disallow it or allow it wholly or in part and serve the taxpayer with written notice of his decision. The taxpayer then has to decide whether he will accept the assessment or request a reference to a Board of Review or appeal to the Supreme Court. If a taxpayer requests the Commissioner to forward the objection to the Board of Review, the Commissioner has to comply with reg.35(1) & (2). In that case the Commissioner must furnish the Board with his reasons for disallowing the taxpayer's claim. The critical point is that at the stage where the Commissioner has an obligation to furnish written reasons he is not making a decision. The decision has been made earlier under s.186 and the Commissioner, at that stage, has no obligation to furnish any reasons. He only has to serve the taxpayer with written notice of his decision.

6. Section 25D is, of course, a remedial section. It was not submitted that any material within any category set out in s.15AB of the Acts Interpretation Act was relevant, nor was reference made to any such material.

7. In general, I agree respectfully with the comments of Lockhart J. in Robinson v. Deputy Commissioner of Taxation, supra, about the "requirement of fairness". I consider that it is not possible to construe s.25D as extending to reg.35 without making an unwarranted guess about "the purpose or object underlying the Act" (ss.15AA of the Acts Interpretation Act).

8. In my opinion s.25D does not extend to reg.35 and the words of s.25D must be given their ordinary meaning.

9. At one stage of the proceedings I had some doubt whether the Court had jurisdiction but it seems that the decisions which it is sought to have reviewed do not fall within schedule 1 of the Administrative Decisions (Judicial Review) Act.

10. If I am wrong in the views I have expressed as to the operation of s.25D the applicant would still have to show that he was a person aggrieved within the meaning of s.5 of the Administrative Decisions (Judicial Review) Act. In this regard, my attention was directed to the passage in Sutton v. Commissioner of Taxation, supra, where it was said that s.35(1)(c) is not directed to ensuring that the taxpayer is informed of the Commissioner's reasons but to supplying the Board with them. In this case, there is no evidence that the Board has expressed any dissatisfaction over the present position.

11. Because of the view I have expressed and because no issues of fact are involved, I consider it would be unwise for me to deal in detail with any further grounds of opposition to the application.

12. For the reasons that I have set out, I dismiss the application and order that the applicant pay the Commissioner's costs.