Lever Bros Pty Ltd v Federal Commissioner of Taxation

Lever Bros Pty Ltd appealed to the High Court against a decision of the Board of Review that upheld the Commissioner of Taxation's disallowance of objections to several assessments. The dispute concerned six assessments made under section 136 of the Income Tax Assessment Act 1936-1941, and two assessments of further tax on undistributed income made under Part IIIA of the Act, for the income years ending 30 June 1936 to 1941. The company contended that these assessments were void as they contravened section 170(3) of the Act, which restricts amendments that increase a taxpayer's liability after a full and true disclosure of material facts.

The primary legal issue before the court was whether the Commissioner was precluded by section 170(3) from making the assessments in question. The company argued that the assessments made under section 136 and Part IIIA were amendments to the original assessments made under section 166, and that since the company had made full and true disclosures in its initial returns, these subsequent assessments, which increased its tax liability, were invalid. The court was required to determine the nature of the assessments made under section 136 and Part IIIA, and whether they constituted amendments or original assessments.

Williams J. held that the assessments made under section 136 were not amendments but original assessments, based on a "notional taxable income" rather than the actual taxable income. He reasoned that section 136 applies to businesses controlled abroad that produce little or no taxable income, allowing the Commissioner to assess tax on a determined amount of total receipts. This process, governed by section 169, is distinct from the ordinary assessment under section 166. Furthermore, the court found that section 170(3) should be read distributively in relation to each separate assessment the Commissioner is authorised to make, and therefore did not prevent the Commissioner from issuing these distinct original assessments. The assessments under Part IIIA, based on the notional taxable income derived under section 136, were also considered original assessments, replacing rather than amending previous assessments. The court concluded that the Commissioner had a separate and distinct right to make assessments under section 169 pursuant to a determination under section 136, which was not an alternative to his ordinary right to assess under section 166.

Consequently, the appeals were dismissed with costs.