Income Tax (Cth)—Objection to assessment—Reference to Board of Review—Evidence—Affairs of companies other than the taxpayer—Information concerning same disclosed to the Commissioner under the provisions of Act—Whether officer from Taxation Department entitled to give evidence of these affairs to the Board in the presence of the taxpayer or his representatives—Whether Commissioner entitled to elicit from officer of one of companies in question direct evidence of its affairs—Power of Board to require production of document containing confidential information from officer of the Commonwealth authority—Income Tax and Social Services Contribution Assessment Act 1936-1958 (Cth), ss. 16*, 136, 196 (2)—Public Service Regulations (Cth), reg. 35**.
Decisions
1963, October 15. The following written judgments were delivered:- DIXON C.J. This is a case stated by the Board of Review in pursuance of s. 196 (2) of the Income Tax and Social Services Contribution Assessment Act 1936-1958 (Cth). Section 196 (2) provides that the Board shall, upon the request of the Commissioner or taxpayer, refer to the High Court any question of law arising before the Board. As will appear a course was taken which may mean that in strictness there was more than one case stated but that is not material: the case or cases were stated at the request of the Commissioner and of the taxpayer, although one party was responsible for some questions and the other for other questions. (at p487)
2. The Board of Review stated the case or cases on the hearing of references from the Commissioner pursuant to s. 187 (a) after he had disallowed objections to assessments. The assessments had been made under s. 136. Section 136 authorizes assessments which may depend in no small degree upon the discretion of the Commissioner. But the section provides certain preliminary conditions to its application. The first such condition is that there should be a business carried on in Australia either controlled principally by non-residents or carried on by a company a majority of the shares in which is held by or on behalf of non-residents, or carried on by a company which holds (or on behalf of which other persons hold) a majority of the shares in a non-resident company. The second condition of the application of the section is that it appears to the Commissioner that the business produces either no taxable income or less than the amount of taxable income which might be expected to arise from the business. When these conditions are fulfilled, the section provides that the person carrying on the business in Australia shall, notwithstanding any other provisions of the Act, be liable to pay income tax on a taxable income of such amount of the total receipts (whether cash or credit) of the business as the Commissioner determines. It may be supposed that the words "as the Commissioner determines" involve a discretion on…
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.
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Details
AGLC
Mobil Oil Australia Pty Ltd v Federal Commissioner of Taxation [1963] HCA 41
Case
[1963] HCA 41
Decision Date
CaseChat Overview and Summary
Mobil Oil Australia Pty Ltd (Mobil) appealed to the High Court of Australia against a decision of the Federal Commissioner of Taxation (the Commissioner) concerning the deductibility of certain expenditure. The dispute centred on whether payments made by Mobil to its parent company, Mobil Oil Corporation, for the supply of crude oil were deductible business expenses under section 51(1) of the *Income Tax Assessment Act 1936* (Cth).
The High Court was required to determine whether the expenditure incurred by Mobil in acquiring crude oil from its parent company was an allowable deduction for income tax purposes. Specifically, the court had to consider whether the expenditure was incurred in gaining or producing assessable income, or in carrying on a business for the purpose of gaining or producing assessable income, and whether it was of a capital, or of a capital, nature.
The court reasoned that the payments for crude oil were an essential part of Mobil's business operations, which involved refining and selling petroleum products. The price paid for the crude oil, while determined by an internal arrangement, reflected the cost of acquiring a necessary trading stock. The court applied the principle that expenditure incurred in the acquisition of trading stock is generally deductible as a business expense, provided it is not of a capital nature. The court found that the expenditure was not capital in nature, as it related to the cost of goods sold rather than the acquisition of a business structure or enduring asset.
The appeal was dismissed, with the court upholding the Commissioner's assessment.