Walker and Company v Federal Commissioner of Taxation

This case concerned an appeal by Walker & Co. to the High Court of Australia from an assessment of war-time profits tax. The central dispute revolved around the determination of the "last pre-war trade year" for the purpose of calculating the pre-war standard of profits under the War-time Profits Tax Assessment Act 1917-1918. The Commissioner of Taxation had determined this year to end on 31 August 1913, while Walker & Co. contended it ended on 28 February 1914.

The legal issues before the High Court were twofold: first, how to interpret the term "accounting period" as defined in section 7(4) of the Act, particularly when accounts were not made up for income tax purposes but were regularly prepared for business purposes; and second, how this definition of "accounting period" applied to the determination of the "last pre-war trade year" under section 16(12) of the Act. The court was required to decide whether the usual business accounting periods ending on 28 February and 31 August each year, or a period determined by the Commissioner, or a standard financial year, should be used.

By a majority decision, Knox C.J. and Gavan Duffy J. held that section 7(4) impliedly provided that where accounts were not made up for income tax purposes but were regularly made up for business purposes, the accounting period should be the period for which those business accounts were prepared. Applying this to the facts, they concluded that the last accounting period before 5 August 1914 ended on 28 February 1914, and therefore, this was the last pre-war trade year for the purposes of the Act. Isaacs J., dissenting, held that section 7(4) mandated that the accounting period for the purposes of calculating war-time profits was a twelve-month period from 1 July to 30 June, and that this definition should govern the determination of the last pre-war trade year.

The High Court answered the questions posed in the special case. It was held that the last pre-war trade year of the appellants' business ended on 28 February 1914, and not on 31 August 1913, as determined by the Commissioner. Consequently, the court found it unnecessary to answer the third limb of the question regarding an alternative date.