High Court of Australia|1965-09-09|Before: McTiernan J, Taylor J

Allsop v Federal Commissioner of Taxation [1965] HCA 48; (1965) 113 CLR 341 (9 September 1965)

ALLSOP v. FEDERAL COMMISSIONER OF TAXATION [1965] HCA 48; (1965) 113 CLR 341

Income Tax (Cth) - Assessable income - Action to recover fees wrongly exacted under colour of office pursuant to State Transport legislation - Release of cause of action and other claims for acts done pursuant to legislation in consideration of undissected lump sum payment - Payment not assessable income - Income Tax and Social Services Contribution Assessment Act 1936-1958 (Cth), ss. 25, 26 (j), 72.

BARWICK C.J. AND TAYLOR J. The question in this case is whether a sum of ended on 30th June 1959, constituted assessable income in his hands. The amount in question was the net amount remaining after the deduction of certain legal costs and expenses from the sum of 37,500 pounds which was paid to the appellant by the Government of the State of New South Wales and the Commissioner for Motor Transport on 5th July 1958. (at p348)

2. The circumstances in which this payment was made are set out in the case stated. It appears that from 1947 onwards the appellant carried on the business of carrying goods by road for reward on inter-State journeys and that between 12th April 1951 and 30th June 1954 he paid to the Commissioner amounts totalling 54,868 pounds 18s. 10d. as and for prescribed fees for permits pursuant to s. 22 of the State Transport (Co-ordination) Act, 1931-1951 (N.S.W.). The question of the validity of the application of the relevant parts of this Act to persons exclusively engaged in the inter-State carriage of goods was considered by this Court in 1952 (Hughes and Vale Pty. Ltd. v. State of New South Wales [1953] HCA 14; (1953) 87 CLR 49 ) when a majority of the Court followed the decision in McCarter v. Brodie [1950] HCA 18; (1950) 80 CLR 432 and upheld the legislation in its application to inter-State trade. However in 1954 the Judicial Committee of the Privy Council reversed this decision and declared that "the provisions of the Act requiring application to be made for a licence, and all provisions consequential thereon, are inapplicable to the appellant while operating its vehicles in the course and for the purposes of inter-State trade" (1955) AC 241, at p 309; (1954) 93 CLR, at p 35 . This meant that the fees collected from the appellant did not, in law, become payable and in the following year the appellant commenced an action in the Supreme Court of New South Wales in which, ultimately, he claimed to recover the sum of 54,868 pounds 18s. 10d. as and for money had and received by the Commissioner for the use of the appellant. The particulars given show that what the appellant was claiming to recover in this action were the amounts which had been paid by him as and for permit fees between April 1951 and the end of June 1954. The basis of the claim was that these amounts had been "improperly demanded under colour of office". Whether or not the appellant had a legal right to recover these moneys does not appear from the case stated (cf. Mason v. New South Wales [1959] HCA 5; (1959) 102 CLR 108 ) but, except for one aspect of the matter, this is not of much importance in the case. However, it is not unreasonable to infer from the circumstances related in par. 10 (a) and (b) of the case that unless the appellant had paid the fees demanded he would have been prevented from carrying on his business. Those two sub-paragraphs deal with two occasions when, permits not having been obtained by the appellant, officers of the Commissioner unlawfully detained vehicles of the appellant and interfered with the goods which they were carrying. (at p349)

3. Prior to the appellant's action coming on for trial negotiations took place between his solicitors and those of the Commissioner and, as the ultimate result of those negotiations, a deed of release was executed by the appellant and, pursuant to the provisions of the deed, the said amount of 37,500 pounds was paid to his solicitors. The deed recited that the appellant's action had been commenced and briefly described its nature: that the Government of the State of New South Wales and the Commissioner denied all liability to repay the moneys claimed in the action and that it had been agreed between the parties that without any admission of liability the Government of the State of New South Wales and the Commissioner would pay to the appellant and the appellant would accept the sum of 37,500 pounds in full satisfaction and discharge of all actions suits claims and demands for the recovery of the moneys as claimed to have been paid and all moneys and expenses incurred by the appellant in and about the prosecution of the said action and in full satisfaction and discharge of all actions suits claims and demands which the appellant might then have or at any time thereafter have against the Government of the State of New South Wales or the Commissioner or otherwise for or in respect of any other moneys claimed to have been paid at any time theretofore for or in respect of permits issued under the State Transport (Co-ordination) Act, or paid in satisfaction of any imposts taxes or charges imposed levied or made under that Act or any other Act of the State of New South Wales relating to motor vehicles or to the use or operation of motor vehicles and whether or not such Act was valid and effectual to impose or authorize the imposts levy or charge and in full satisfaction and discharge of all actions suits claims and demands which the appellant might then have or at any time thereafter have against the Government of the State of New South Wales or the Commissioner or otherwise for or connected with or in any way arising out of anything done or omitted or purporting to have been done or omitted by any person under the said Act or under any other Act of the State of New South Wales relating to motor vehicles or the use or operation of motor vehicles whether or not such Act is valid and effectual to authorize the act or omission. Thereupon the deed witnessed that in consideration of the sum of 37,500 pounds paid by the Government of the State of New South Wales and the Commissioner to the appellant (the receipt whereof was thereby acknowledged) the appellant released remised and forever quit claims unto Her Most Gracious Majesty Queen Elizabeth II and the Colonial Treasurer and all other Ministers of the State of New South Wales and the Commissioner and each of them and the State of New South Wales and the officers servants and agents of each and every one of them all and singular all manner of actions (including the action in the Supreme Court of New South Wales) suits proceedings causes of action arbitrations debts dues demands costs charges and expenses whatsoever which the appellant then had or would or might but for those presents at any time thereafter have or have had upon or against them or any of them for or in respect of any sum or sums of money paid or claimed to have been paid for or on behalf of the appellant for or in respect of permits issued under the State Transport (Co-ordination) Act, 1931 or for or in respect of or in satisfaction of any imposts taxes or charges imposed levied or made or purporting to have been imposed levied or made in pursuance of that Act or under or in pursuance of any other Act of the State of New South Wales relating to motor vehicles or the use or operation of motor vehicles whether or not such Act was valid and effectual to impose or authorize the imposts levy or charges and all and singular all manner of actions suits proceedings causes of action arbitrations debts dues demands costs charges and expenses which the appellant then had or could or would or might but for those presents at any time thereafter have or have had upon or against any of them for or connected with or arising out of anything done or omitted or purporting to have been done or omitted by any person under the State Transport (Co-ordination) Act or under any other Act of the State of New South Wales relating to motor vehicles or the use or operation of motor vehicles whether or not such Act was valid and effectual to authorize the Act or omission. (at p350)

4. The respondent sought to support the assessment on one general ground and two particular grounds. The first, in effect, was that where a refund is made to a trader in one income year of an amount, or part of an amount, which he had expended on revenue account in an earlier year and which had been allowed as a deduction in assessing his taxable income, the amount of the refund constitutes income of the later year and, therefore, assessable income within the meaning of s. 25 of the Income Tax and Social Services Contribution Assessment Act. Whether or not this proposition can be accepted without qualification is open to serious question. But since, in our opinion, the factual basis for such a conclusion does not exist in this case so that acceptance of the proposition would not be decisive and as in any case the point was not fully argued, it is inadvisable for us to express any view on the matter. (at p351)

5. The primary question in the case is whether the payment to the appellant of the sum of 37,500 pounds constituted, in the circumstances, a refund of part of the fees which had been paid by him. In our opinion it did not. There is sufficient in the case to enable it to be said that during the period in question there had been unlawful interferences with the appellant's vehicles and his business operations and in respect of these matters he had valid claims against the Commissioner. His claim for a refund of the fees paid by him was not admitted by the Commissioner and the amount payable upon the execution of the release was the consideration not only for a release of his claim against the Commissioner in respect of the fees paid by him for permits but also for his release of all claims for anything done in purported pursuance of the State Transport (Co-ordination) Act. There is no suggestion that the release was illusory or that it was not designed to operate, or, that it did not operate according to its tenor and, that being so, we do not regard the allegations contained in par. 10 (g) of the case stated as relevant matters for our consideration. But even if they are taken into consideration they would not affect the conclusion that the amount payable was an entire sum paid by way of compromise of all these claims and no part of it can be attributed solely to a refund of the fees paid by the appellant for permits. In these circumstances there is no warrant for regarding the amount paid by him or any part of it as a refund or recoupment to him of any revenue disbursement made in carrying on his business or for regarding it on any other ground as an income receipt. (at p351)

6. The particular grounds upon which the respondent relied were based upon the provisions of s. 26 (j) and s. 72 (3) of the Act. As far as s. 26 (j) of the Act is concerned it is sufficient to observe that no part of the amount paid to the appellant was, as that section requires, received by him by way of insurance or indemnity. (at p351)

7. Though there may be much to be said for the view that s. 72 (2) applies to any refund of an amount paid for rates and taxes without restriction to those mentioned in the earlier sub-sections and for the view that the fees paid for permits under the State Transport (Co-ordination) Act, 1931-1951 were taxes (see e.g. Hughes and Vale Pty. Ltd. v. The State of Queensland [1955] HCA 29; (1955) 93 CLR 247, at p 255 ; Pioneer Tourist Coaches Pty. Ltd. v. The State of South Australia [1955] HCA 32; (1955) 93 CLR 307 at p 314 ; Armstrong v. The State of Victoria (No. 2) [1957] HCA 55; (1957) 99 CLR 28, at p 39 ; and Browns Transport Pty. Ltd. v. Kropp [1958] HCA 49; (1958) 100 CLR 117, at p 129 , the conclusion that no part of the sum paid to the appellant under the deed of release constituted a refund to the appellant of such fees paid by him renders s. 72 on any view inapplicable to the present case. (at p352)

WINDEYER J. I agree that the appellant is not liable to income tax in respect of the receipt by him of the sum of 37,000 pounds in question. (at p352)

2. He had commenced an action to recover from the Government of New South Wales the sum of 54,868 pounds as money had and received to his use. He took 37,000 pounds not simply in satisfaction of his claim in that action but in consideration of his release by deed of a variety of claims that he had, or might be thought possibly to have, ag the Government. It does not appear from the material before us that the sum of 37,000 pounds, or any definite part of it, was computed, paid and received as a refund of particular amounts that had paid by the appellant for road charges and which had been allowed as deductions in the assessment of his taxable income. (at p352)

Question asked in the stated case answered as follows: Whether upon the relevant facts the sum of 37,500 pounds is wholly or partly assessable income of the appellant under the provisions of the Income Tax and Social Services Contribution Assessment Act 1936-1958 for the year ending 30th June 1959.

Answer: No. Costs of stated case to be paid by the Commissioner of Taxation.

Income Tax and Social Services Contribution Assessment Act 1936

Allsop v Federal Commissioner of Taxation [1965] HCA 48;

At a glance

Court

Decision date

Before

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Judgment (14 paragraphs)

Allsop v Federal Commissioner of Taxation [1965] HCA 48; (1965) 113 CLR 341 (9 September 1965)

Parties

Legislation Cited (1)

Cases Cited (8)