Australasian Scale Company Limited v Commissioner of Taxes (Qld) [1935] HCA 23

Australasian Scale Company Limited v Commissioner of Taxes (Qld) [1935] HCA 23 - HCA 1935 case summary — Zoe

[50]

sec. 42 of the Income Tax Act 1924 were in contravention of 92 and/or 117 of the Constitution of Australia and were beyond legislative competence of the Parliament of Queensland and were 'unconstitutional and void; and (6) that the sections in question ere beyond the powers of the Legislature of Queensland as they purport to tax profits earned outside Queensland. In the alterna- tive : - (c) that the respondent should have been assessed in accord- nce with the first paragraph of sub-sec. 4 (iv.) of sec. 14 of the said Act; (d) that the Commissioner was not in fact and/or could not 'reasonably or honestly on the evidence have been of opinion that 'the profits of the respondent could not be otherwise satisfactorily etermined ; (e) that on the evidence it was proved that the profits 'of the respondent could be satisfactorily determined ; (f) that the respondent had an unrestricted right of appeal and that it was my y sitting as a Court of Review to find on the evidence whether inmy opinion the profits could be otherwise satisfactorily determined nd to give effect to my opinion; and (y) that the Commissioner had purported to exercise his discretion on a wrong view of the law. _ 21. The Commissioner through his counsel disputed the correct- ness in law of each of those submissions and submitted that the ssments were valid and that the appeals should be dismissed. ~The question raised under sec. 117 of the Constitution was not argued before me by reason of the decision of the High Court of Australia in Australasian Temperance and General Mutual Life Assurance Society Ltd. v. Howe (1). 22. On 24th June 1932 I delivered a written judgment finding facts as therein set out and allowed the appeal and set aside the assessments appealed against on the ground that the second ph to sec. 14 (4) (iv.) of the Income Tax Act 1924 makes a discrimination against foreign companies of such a nature as to constitute an interference with trade and commerce among the _ States and is therefore repugnant to sec. 92 of the Constitution and of no effect. 23. I found: (a) that the Commissioner did form opinions that the profits of the respondent in each of the years in question could otherwise be satisfactorily determined ; (b) that such opinions

[139]

It is to this very problem that sec. 14 (4) (iv.) is addressed. The ature decided to render subject to taxation the amount of e profits made by a foreign company in Queensland. But it was perceived that difficulties would arise in ascertaining the precise nount of such profits. If the difficulties proved so considerable that ie profits could not in the Commissioner's opinion be " otherwise tisfactorily determined," the formula set out in the second aph of sec. 14 (4) (iv.) is to become operative. That formula wires the ascertainment of the total profits of the company and the fixing of such proportion of those total profits as is represented the ratio which the company's Queensland sales bears to its tal sales or, if there are no sales, by the ratio which the company's nd revenue bears to its total revenue. Tt is contended by the respondent that the application of the mula places an unlawful burden on trade and commerce among States. At first sight, the contention appears fanciful, because e does not appear to be any relation between such trade and ce and the ascertaining of the subject matter of taxation by ce to the formula. But the argument is that, in the case of the result of adopting a formula is this: that, if the amount company's sales in Queensland increases, there will be an increase the subject matter of taxation. But this is a very inaccurate of expressing the true position. No doubt, in the case of a gn company which is conducting sales in Queensland, some of sh sales may be made in the course of trade and commerce among States, just as they may be made in the course of domestic or s trade. It follows that, if every other transaction of sale is 'from the calculation or is treated as irrelevant, an increase in company's sales in Queensland will tend to increase the ratio of sales which has to be ascertained under the formula. But is argument overlooks the fact that, even upon the assumption dy mentioned, the increase in the ratio which results from an e of the inter-State sales in Queensland will not be directly oportionate to the increase of such sales ; it also overlooks the fact it inter-State sales by a foreign corporation in other States of the mwealth have to be taken account of in the denominator, in the numerator, of the fraction which represents the required

[146]

uld not be satisfactorily determined otherwise than by the adoption of the statutory formula, was open to review by the Court of Review. e better opinion is that such a decision was not open to review. principal object of sec. 14 (4) (iv.) was to meet the difficulty olved in allocating to Queensland that part of the total profits of the company which should be properly attributed to its business activities in that State. Accordingly, the Commissioner was made the final judge in determining whether recourse should be had to 'the formula. In a general sense, the Commissioner's decisions are "open to objection and appeal, but the particular matter as to which he gives a decision has to be examined in order to ascertain from the ative scheme whether the general rule applies to that matter. The other point to which the cross-appeal relates is question 8 of the special case. The Full Court held that if the Court of Review s of opinion that if, by the adoption of the formula in the second of sec. 14 (4) (iv.), the assessment resulted in the inclusion of profits made out of Queensland within the subject matter of taxation, 'the assessment could, and should, be set aside. The Full Court was ly impressed by the argument that invalidity would attach to 14 (4) (iv.) if by any chance profits made out of Queensland e included in the assessment as a result of applying the formula. It must be conceded that the adoption of the formula makes it possible that the subject matter of taxation will include profits not confined to those made within Queensland itself. But the Queens- Legislature is clearly entitled to impose an income tax upon n corporations doing business in Queensland, without being limited by any rigid doctrine of territorial competence to the fits made in Queensland alone. The Full Court referred to cases dealing with this problem of territorial competence, but they do not appear to have considered such cases as Commissioner of Stamp Duties (N.S.W.) v. Millar (1); Trustees, Executors and cy Co. v. Federal Commissioner of Taxation (2), and Colonial Gas

At a glance

Court

Decision date

Before

Source

Judgment (154 paragraphs)