Henderson and Sons v Federal Commissioner of Taxation

Henderson & Sons appealed to the High Court against an assessment for war-time profits tax for the year 1916-1917. The core of the dispute concerned the correct method for computing the pre-war standard of profits under the War-time Profits Tax Assessment Act 1917-1918. The partnership commenced business in June 1912 and, according to its deed, took yearly accounts as of the last day of December. The Commissioner of Taxation, however, adopted the calendar year for computing war-time profits, leading to a disagreement on the number of pre-war trade years.

The legal issue before the court was to determine the meaning of "accounting period" within the context of the War-time Profits Tax Assessment Act 1917-1918, specifically for the purpose of calculating the pre-war standard of profits. The appellants contended that there had been two pre-war trade years, while the Commissioner argued for only one. This determination hinged on whether the yearly accounts taken as of 31 December, or the Commonwealth's financial year ending 30 June, constituted the relevant accounting period for the business.

The court, applying the principles established in *Walker & Co. v. Federal Commissioner of Taxation*, held that the "accounting period" for the purposes of the Act was the period for which the accounts of the business were actually made up. In this instance, the partnership's deed and practice indicated that accounts were regularly taken for the calendar year ending 31 December. Therefore, the court concluded that there had been only one pre-war trade year, namely the calendar year 1913, prior to 5th August 1914. The court dismissed the appeal.