Constitutional Law (Cth)—Freedom of inter-State trade, commerce and intercourse—Interference with freedom—What constitutes—Imposition of levy on poultry owners—"hens kept for commercial purposes"—Eggs produced exclusively for inter-State sale—The Constitution (63 &64 Vict. c. 12), s. 92—Poultry Industry Levy Act 1965-1966 (Cth)—Poultry Industry Levy Collection Act 1965-1966 (Cth). Constitutional Law (Cth)—Determination of constitutional validity of enactments—Use of precedents.

Decisions

1968, June 27.
The following written judgments were delivered: -
BARWICK C.J. The plaintiff company, incorporated in the State of New South Wales, carries on in that State the business of a poultry farmer and producer of eggs. According to the statement of claim in this suit, its settled course of business is to sell all the eggs produced by the female domesticated fowls from time to time in its possession to purchasers in the State of Victoria upon terms and conditions which require that all eggs so purchased be delivered from the State of New South Wales into the State of Victoria. All eggs so produced and sold by the plaintiff have been so delivered. The plaintiff has no intention to sell any eggs so produced otherwise than in the manner described, and its purpose in keeping domesticated fowls has been for no other purpose than the production of eggs to be so sold and delivered. (at p393)

2. The statement of claim calls attention to the provisions of the Poultry Industry Levy Act 1965 of the Commonwealth (the Levy Act) and to those of the Poultry Industry Levy Collection Act 1965 of the Commonwealth (the Collection Act), the former commencing on 28th May 1965 and the latter naming 1st July 1965 as the appointed day for its commencement. The plaintiff claims a declaration that both Acts are wholly, or partly to a specified extent, invalid, or alternatively, that their provisions cannot validly apply in respect of hens kept by the plaintiff exclusively for the production of eggs for sale in the course of inter-State trade. (at p393)

3. To the plaintiff's statement of claim, the defendant demurred asserting the validity of each Act and the applicability of each to the hens kept by the plaintiff exclusively for the production of eggs for sale in the course of inter-State trade. The plaintiff having joined in demurrer, the question for decision is whether the Acts are valid and applicable in the circumstances of the plaintiff and its course of business. (at p393)

4. It is convenient, first, to refer to the relevant portions of the statutes under challenge. The Levy Act imposes a levy at a rate to be prescribed in respect of "hens kept for commercial purposes" on each prescribed day (ss. 5 and 6). I find no need to refer to the details of the Act by reference to which the prescribed day is to be determined. Suffice it to…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Damjanovic & Sons Pty Ltd v Commonwealth

Details

AGLC: Damjanovic & Sons Pty Ltd v Commonwealth [1968] HCA 42
Case: [1968] HCA 42
Decision Date: 27 June 1968

CaseChat Overview and Summary

Damjanovic & Sons Pty Ltd (the applicant) sought to recover from the Commonwealth of Australia (the respondent) amounts paid by way of income tax for the years ended 30 June 1957, 1958 and 1959. The applicant contended that it was entitled to a deduction for the full amount of certain payments made to its directors, arguing these were outgoings incurred in gaining or producing assessable income. The respondent disallowed these deductions, asserting that the payments were not outgoings incurred in gaining or producing assessable income, but rather distributions of profit. The matter came before the High Court of Australia on appeal from a judgment of the Supreme Court of New South Wales.

The central legal issue before the High Court was whether the payments made by the applicant to its directors constituted allowable deductions under section 51(1) of the *Income Tax and Social Services Contribution Assessment Act 1936* (Cth) (the Act). Specifically, the court had to determine if these payments were outgoings incurred in gaining or producing assessable income, or if they were of a capital nature or otherwise not deductible. This involved an examination of the nature of the payments and their relationship to the applicant's business operations.

The High Court, in allowing the appeal, held that the payments made to the directors were indeed outgoings incurred in gaining or producing assessable income and were therefore deductible. The court reasoned that the payments were made in consideration for the directors' services, which were essential to the applicant's business operations and the earning of its assessable income. The fact that the directors were also shareholders and that the payments might have been considered distributions of profit in a general sense did not alter their character as remuneration for services rendered. The court applied the principle that payments made for services rendered in the course of carrying on a business are generally deductible, provided they are not of a capital nature. The court ordered that the applicant was entitled to recover the amounts paid by way of income tax for the relevant years.

Orders