Liverpool and London and Globe Insurance Company Limited v Federal Commissioner of Taxation

[1927] HCA 18

108 HIGH COURT

[1927.

H. c. OF A.

Gavan D uffy J.

In my opinion the judgment appealed against

1927 . . .

.

■

is right and the appeal should be dismissed.

B o u c a d tB ay

Co. L t d .

Powers J. I agree.

<1n L iq u id a ­

t io n )

V.

T he R ich J. I agree.

Co m m o n ­

w e a l t h .

Appeal dismissed with costs.

Solicitors for the appellant, McLaughlin, Eaves cfe Johnston.

Not Foil

Solicitor for the respondent, W. H. Sharwood, Crown Solicitor for

H'<iA ,

,

McArthur Ltd

vFCTfl930)

45 CLR 1

the Commonwealth.

B. L.

[HIGH COURT OF AUSTRALIA.]

THE LIVERPOOL AND LONDON AND

GLOBE INSURANCE COMPANY

A p p e l l a n t ;

L I M I T E D ............................................

AND

THE FEDERAL COMMISSIONER

OF

R e s p o n d e n t .

T A X A T IO N ...................................

H. C. OF A. War-time Profits Tax—Assessment— Objection to assessment—Allowance of objection

1927.                and cancellation of assessment—Right of Commissioner afterwards to add to or alter assessment— War-time Profits Tax Assessment Act I9I7-I918 {No. .13 of

S y d n e y ,

1917—No. 40 of 1918), secs. 23, 28.

April 12, 20.

Where an objection has been taken by a taxpayer to an assessment for

Knox C.J.war-time profits tax and the Commissioner either allows the objection and

cancels the assessment, or, having disallowed the objection and having been requested to treat the objection as an appeal and to refer it to the High Court, withdraws his disallowance, allows the objection and cancels the assessment, he is not entitled afterwards to revive the question of liability to tax which has

40 C.L.R.] OF AUSTRALIA.

10»

80 been decided or to treat the assessment which has been cancelled as an

H. C. OF A.

existing assessment and under sec. 23 of the War-time Profits Tax Assessment

1927.

Act 1917-1918 to alter or add to it.

'—-—'

L iv e r p o o l

Trustees, Executors and Agency Co. v. Federal Commissioner of Land Tax,

AND

L o n d o n

(1915) 20 C.L.R. 21, distinguished.

AND

G l o b e

I n st jb a n c b

A p p e a l from the Federal Commissioner of Taxation.

Co . L t d .

V.

The Liverpool and London and Globe Insurance Co. Ltd. having received notices, dated 9th Jime 1925, of assessment to war-time

F e d e r a l C o m m is ­

s io n e r OE

profits tax for the years 1917-1918 and 1918-1919 respectively and

T a x a t io n ,

the Commissioner of Taxation having allowed one of the grounds of objection, the Commissioner issued amended notices of assessment. It was then agreed that the objections already lodged, except that which had been allowed, should be treated as an appeal from the amended assessment. The appeal was heard by Knox C.J., in whose judgment hereunder the material facts are stated.

The fifth ground of objection referred to in the judgment was as follows : “ The excess of losses over profits of life insurance business has not been allowed as a deduction as prescribed by the proviso to sec, 10 (1) notwithstanding that such deduction was made in the amended assessment of 5th October 1918 for the same period under a decision of the Commissioner given after he had duly considered and allowed an objection on that ground against the original assessment dated 18th September 1918.”

Flannery K.C. and H, E. Manning, for the appellant.

Teece K.C. and Hill, for the respondent.

Cur. adv. vult.

K nox C.J. delivered the following written judgment:—On 9th June 1925 the respondent caused to be served on the appellant notices of assessment to war-time profits tax in respect of profits made during the years 1917-1918 and 1918-1919 respectively. The appellant on 25th June 1925 lodged notices of objection to these assessments and the Commissioner, having allowed one ground of obiection contained in each notice, issued amended notices of

April 20.

110 HIGH COURT

[1927.

H.C. OF A. assessment. It was then agreed that the objections lodged, except

1927.that which had been allowed, should be treated as an appeal from

L iv e r p o o lthe amended assessment; and the appeal now comes on for determina­

AND

L o n d o n

tion. The grounds stated in the objection lodged in respect of

AND

G l o b e each assessment include the following :—(1) The assessment is not

I n s u r a n c e nor does it purport to be made by the Commissioner pursuant to

Co. L t d .

V.sec. 22 of the Acts. (2) A previous assessment purporting to be

F e d e r a l

C o m m is ­

made pursuant to sec. 21 of the Acts in respect of the same period

s io n e r

OF

T a x a t io n .was cancelled or withdrawn on 23rd July 1923, upon ground of

objection similar to ground No. 5 herein, after such objections had

Knox C.J.

been duly considered and allowed by the Commissioner in pursuance of sec. 28 of the Acts. (3) The assessment hereby objected to is neither an “ alteration in ” nor “ an addition to any assessment ” made “ in order to ensure its completeness and accuracy ” or otherwise made in pursuance of sec. 23 of the Acts by the Commissioner. (4) The assessment objected to is in the nature of an attempt by unauthorized methods to reverse or avoid the previous decisions of the Commissioner duly given and notified by him after due consideration and allowance of objections thereto pursuant to sec. 28 of the Acts.

The facts relevant to the determination of the questions raised by these grounds are as follows :—

(1) As to the assessment in respect of the financial year 1917-1918.— On 23rd March 1920 notice of assessment was issued stating the amount of tax payable as .£6,509 2s. 6d. On 29th March 1920 notice of objection to this assessment was lodged, the grounds of objection being that the Company was entitled to a deduction which had not been allowed in respect of the loss on life insurance business carried on by it and that there were no excess profits liable to taxation under the Act. The notice of objection included also a claim that the

assessment should be cancelled.

On 30th June 1920 the Commissioner

gave notice that he had disallowed these objections. On 10th July 1920 appellant requested the Commissioner to treat his objection as an appeal and refer it to the High Court. I t was subsequently arranged that the appeal should not be set down for hearing until a decision has been reached in certain matters pending in England. On 23rd July 1923 the Commissioner sent to the appellant a letter in the

40C.L.R.]

OF AUSTRALIA.

words following

“ I have to advise that the assessments which

.

1927.

issued to you under the above Act in respect of profits derived

___

during the periods ended 30/6/16 and .30/6/18, have now been L iv e b p o o l

cancelled. The result of these adjustments is a credit balance ol

L o n d o n

£3,770 14s., and this amount has been transferred in part payment

of your assessment for the year ended 30/6/19, leaifing a balance

V.

thereon of £1,505 11s. which sum should be paid not later than

F e d e r a l

22nd Sept. 1923.” In explanation of this letter it should be stated Co m m is ­

s io n e r OF

that the sum of £3,770 14s. was the amount which had been paid T a x a t io n .

by the appellant as war-time profits tax for the financial year

Knox C.J*

1915-1916, that nothing had been paid in respect of the tax for 1917-1918, and that by notice of assessment issued on the same day, 23rd July 1923, tax in respect of the financial year 1918-1919 was assessed at £5,276 5s. Nothing further happened until 9th June 1925 when the Commissioner issued the notice of assessment to which this appeal relates.

(2) As to the assessment in respect of the financial year 1918-1919. —On 23rd July 1923 a notice of assessment was issued stating the tax payable as £5,276 5s. On 10th August 1923 notice of objection to this assessment was lodged, the grounds of objection including the following:—If and when the calculation of war-time profits is made in accordance with law, it uill be found that no tax is leviable under the Act. The notice of objection included also a claim that the assessment should be cancelled. On 25th October 1923 the Commissioner sent to the Company a letter in the words following, namely :—“ War-time Profits Tax Assessment Act 1917- 1918.—I desire to inform you that your objection of 10th August 1923 to Assessment No. 1662 issued under date 23 /7 /23 in respect of excess profits derived in the year ended 30/6/19 has been allowed and the assessment cancelled. The effect of the cancellation is to entitle the Company to a refimd of £5,276 5s., form of claim for which amount is enclosed for favoiu' of signature as claimant ŵ here indicated on the face thereof and early return to this office. On receipt of the signed voucher, a ‘ not negotiable ’ cheque, payable to your order, will in due course be forwarded to you by the Treasury.

The amount caimot be paid by this office to a bank for credit of your account nor can an order to any other person to collect be

112 HIGH COURT

[1927.

H. C .OF A.

recognized.” The amount of £5,276 6s. was subsequently repaid

1927.

'—

to the Company, Nothing further happened until 9th June 1925,

L i V E B P O O I/

when the Commissioner issued the notice of assessment to which

AND

L o n d o n

this appeal relates.

AND

G l o b e

No explanation of the events which I have narrated was offered

I n s u e a n o e by the Commissioner. His counsel do not now contend that sec. 22

Co. L t d .

V.of the Act, providing for default assessments, has any apphcation to

F b d b e a l

C O M M IS -

this case, nor do they deny that under this Act, as under the Income

S IO N B E

O F

T a x a t io n .Tax Assessment Act, there can only be one main or basic assessment Knox C.J.in respect of any one financial year (per Isaacs J. in R. v. Deputy Federal Commissioner of Taxaticm (S.A.); Ex parte Hooper (1)). But they say that, notwithstanding the earher transactions in respect of the assessments for these years, the Commissioner had power in 1925 to treat the assessments which he had cancelled as existing assessments and to alter or add to them as often and as much as he pleased. They contended accordingly that the assess­ ments made in June 1925 were vahd as alterations of or additions to the assessments previously made. But, in my opinion, the Commissioner was not in 1925 entitled to treat the assessments previously made as existing assessments capable of being altered or added to. In the case of each assessment now under consideration the taxpayer, being dissatisfied, lodged an objection under sec. 28 (1) of the Act. Under sec. 28 (2) it was the duty of the Commis­ sioner to consider the objection and to disallow it or allow^it wholly or in part. Acting under this provision he disallowed the objection to the 1917-1918 assessment, and the taxpayer then availed himself of his right to have the objection determined by the High Court. The appeal to the High Court was, I think, instituted by the request of the taxpayer to have his objection treated as an appeal, and while that appeal was pending, the Commissioner withdrew his disallowance of the objection and in substance, if not in express words, allowed it. The objection being thus disposed of in accord­ ance with the procedure laid down by sec. 28 of the Act, it seems to me that the dispute as to that assessment was concluded and that the Commissioner could not thereafter reopen the matter on the footing that the objection was wrongly allowed. In the case of

(1) (1926) 37 C.L.R. 368, at pp. 372-374.

40 C.L.R.] OF AUSTRALIA.

113

this assessment the Commissioner’s action resulted in frustrating H. C. o f a .

the appeal to the High Court then pending and thus precluding

the taxpayer from obtaining the opinion of the Court on his objection. L iv e b p o o l

The injustice of allowing the Commissioner to revive at a later date

L(wdon

the controversy wldch he had ended by determining it in favour

IjrXiOBS

of the taxpayer appears to me to be obvious, and I do not think iNsmiAiJCE

Co Ltd

the Act compels the Coint to hold that the action of the Commis-

’

sioner was within his power.

I t is true that no express power is

given to the Commissioner to “ cancel ” an assessment, but by

s ig n e r o f

^

•' T a x a t io n .

sec. 28 he is authorized to decide any objection raised by the taxpayer

Knox C.J.

and, in my opinion, his decision on such an objection if not appealed from must be regarded as final and conclusive. To hold otherwise would be to attribute to Parliament the intention that the decision of the Commissioner on an objection under sec. 28 should have no binding force or effect unless it were against the taxpayer.

Turning to the 1918-1919 assessment, the Commissioner in that case expressly allowed the objection. In the case of each financial year the taxpayer raised the contention that no tax was assessable and that the assessment should be cancelled. In each case the Commissioner, acting under sec. 28, allowed the objection and cancelled the assessment, or, in other words, decided that no tax was payable, and refunded what had been paid. I do not think he was entitled after so deciding to revive the question of liability to tax which had been decided, or to treat as an existing assessment the assessment which he had on the objection of the taxpayer declared to be cancelled. In my opinion, the intention of the Legislature in enacting sec. 28 of the Act was to provide a method for finally determining the liability of the taxpayer on an assessment with which he was dissatisfied. If the proceedings under that section result in a decision that no tax is payable, it seems to me that the original assessment ceases to operate or to have any legal existence, and in such a case it follows that the original assessment cannot be added to or altered. Counsel for the Commissioner relied on the decision of this Court in Trustees, Executors and Agency Co. v. Federal Commissioner of Land Tax (1), but, in my opinion, that decision has no application to the facts of the present case. In the case cited no

(1) (1915) 20 C.L.R. 21.

VOL. XL.

HIGH COURT

[1927.

H C. OF A. objection had been lodged by tlie taxpayers to the original assessment

1927.or to any of the amended assessments prior to that which was the

L iv e r p o o lsubject of appeal. Consequently there had been, in that case, no

AND

L o n d o n

allowance by the Commissioner of any objection, nor any cancellation

AND

G l o b e

by him of the original assessment.

I n s u r a n c e

For these reasons I am of opinion that the appeal should be

Co. Ltd .

V. allowed and the assessments of 9th June 1925 set aside. The

F e d e r a l

C o m m is ­Commissioner is to pay the costs of the appeal.

s io n e r OF

T a x a t io n .

Appeal allowed and assessments of 9th June 1925 set aside. Respondent to pay costs of appeal.

Solicitors for the appellant, Norton, Smith & Co.

Solicitor for the respondent, Gordon H. Castle, Crown Solicitor for

the Commonwealth.

B. L.