Federal Commissioner of Taxation v Miller Anderson Limited

The Federal Commissioner of Taxation appealed to the High Court against decisions of the Board of Review concerning assessments of Miller Anderson Limited for War-time (Company) Tax. The dispute centred on the calculation of "accumulated profits" for the purposes of section 24 of the War-time (Company) Tax Assessment Act 1940-1941. The company had incurred a significant loss in earlier years, resulting in a debit balance of £13,107 in its Profit and Loss Appropriation Account as at 31 January 1935. Following an agreement between preference and ordinary shareholders, a new Profit and Loss Appropriation Account was opened from 1 February 1935, and the previous debit balance was not carried forward into this new account.

The legal issues before the High Court were whether "accumulated profits" for the purposes of section 24 of the Act encompassed profits on a continuous account, and how to treat the averaging of these profits over the relevant accounting period, particularly in light of a dividend declared and paid shortly after the commencement of a new accounting period. The court was required to determine the true amount of accumulated profits available for tax purposes, considering the company's accounting practices and the impact of dividend distributions.

The High Court held that "accumulated profits" for the purposes of section 24 included profits on a continuous account. Therefore, the company's accumulated profits were to be calculated by netting the credit balance of the new account (£20,548) against the debit balance of the old account (£13,107), resulting in a net accumulated profit of £7,441. Furthermore, the court ruled that for the purpose of averaging these profits over the accounting period, the entire £7,441 must be considered as having been absorbed by the dividend paid on 31 March 1941. This meant the company was deemed to have had the use of these accumulated profits for only 59 days of the relevant accounting year.