Commissioner of Taxation v Executors of the Estate of Santha Thevy Subrahmanyam

HILL J: 1 The applicant, the Commissioner of Taxation, appealsfrom the decision of the Administrative Appeals Tribunal ("the Tribunal") constituted by a Deputy President and Member setting aside the Commissioner's objection decisions in respect of objections lodged by the executors of the Estate of Santha Thevy Subrahmanyam ("the executors") against a private ruling made by the Commissioner. The original jurisdiction of this Court is exercised by a full court pursuant to s 44(3) of the Administrative Appeals Tribunal Act 1975 (Cth). 2 The system of private rulings became part of the taxation law as a result of s 4 of the Taxation Laws Amendment (Self Assessment) Act 1992 (Cth) which inserted Pt IVAA into the Taxation Administration Act 1953 (Cth) ("the Administration Act"). As the case law has since demonstrated, there are difficulties in the legislative scheme which are both legislative and practical. The present case illustrates some of these difficulties. Whether or not the Commissioner had jurisdiction to issue the ruling or, following the disallowance of an objection by the Commissioner and referral to the Tribunal, the Tribunal had jurisdiction to review an objection decision relating to the ruling as the case may be, the present case demonstrates that there will be cases where the question at issue would be better dealt with by the ordinary assessment, objection, review and appeal provisions of the Administration Act rather than by a consideration of the correctness of a ruling on an "arrangement" under Pt IVAA of the Administration Act. 3 The present proceedings commenced with a request dated 16 August 1999 from the Australian solicitors of the executors for a private ruling. The ruling sought related to whether Miss Subrahmanyam ("the taxpayer") was assessable under s 25(1)(a) of the Income Tax Assessment Act 1936 (Cth) ("the 1936 Assessment Act") on interest income she derived on monies invested in Australia in the years of income ended 30 June 1995, 1996 and 1997 and whether she was assessable under the equivalent section to s 25(1)(a), namely s 6-5(2) in the Income Tax Assessment Act 1997 (Cth) ("the 1997 Assessment Act"), on such income in the year of income ended 30 June 1998. That request was accompanied by a number of documents in support of the application. 4 Prior to the request, however, the Commissioner had been asked to indicate his view as to whether the taxpayer was a resident of Australia and, if so, from what date. The Commissioner had indicated that it was his view that the taxpayer had been a resident of Australia from the date of her first arrival here on 7 September 1994. The solicitors were of the opinion that the view was incorrect and based upon wrong assumptions. They therefore requested formally the private ruling that is the subject of the present application. The question was of considerable significance as the taxpayer had derived a substantial amount of interest income in the years of income following her arrival in Australia and ending with her death in Australia on 17 June 1998. In general terms it may be said that if she was indeed a resident of Australia in any of the relevant years of income the interest she derived would have been included in her assessable income and she would have been liable to pay Australian tax on it. 5 Following receipt of the application for the ruling the Commissioner sought and was supplied with further information pursuant to s 14ZAM of the Administration Act. In the result the Commissioner had before him when making the ruling the information supplied in the original ruling request, which included the various documents attached to that request, as well as information in and attached to letters from the solicitors to the Commissioner dated 7 January 2000 and 8 February 2000. 6 The Commissioner issued the private ruling the subject of the present proceedings on 24 February 2000. He identified the "arrangement" in respect of which the ruling was sought as that set out in the ruling request and subsequent correspondence mentioned above, meaning thereby, presumably, the various facts stated plus the facts which could be deduced from the documents which were attached to the request and subsequent letters. The ruling asserted that the taxpayer was assessable on her interest income in each of the relevant years of income. A document which accompanied the ruling and sought to explain it (it was said not to form part of the Notice of Private Ruling) made it clear that it was the Commissioner's view that in respect of the whole of the period from her first arrival in Australia to her death the taxpayer was a resident of Australia and as such assessable to tax on the interest income she derived. 7 The executors objected against the ruling separately in respect of each year of income. The objections put at issue as the sole question for decision whether in the whole or some part of the relevant years of income the taxpayer was a resident of Australia. There was no suggestion in the objections (or for that matter in the request for ruling) that there could be an issue between the parties under the provisions of the Double Tax Agreement between Australia and the Republic of Singapore which would arise if the taxpayer was both a resident of Singapore and a resident of Australia. Such dual residency which would then need to be resolved by the Double Tax Agreement would impact upon the liability of the taxpayer to Australian tax. The objections were disallowed and the executors referred each objection decision to the Tribunal for review. The Tribunal was of the view that the taxpayer was not a resident of Australia and accordingly set aside the objection decisions "holding" that the taxpayer was not a resident of Australia during the period 7 September 1994 to 17 June 1998. The Commissioner applied to this Court by way of an appeal from the decision of the Tribunal. 8 The Tribunal accepted that it was entitled to have regard to the whole of the material in the request and letters including the attachments. In so holding it was clearly correct. The executors did not, before us, seek to suggest otherwise. In so far as some of the documentary material pointed in one direction and some in the other direction, the Tribunal was of the view that this did not necessarily disqualify the subject matter from the private ruling system. Implicitly it saw its task as resolving any factual conflict in that material, otherwise it is difficult to see how the Tribunal could decide the question whether the taxpayer was a resident of Australia. 9 The Tribunal summarised the facts in delivering its reasons. It claimed that the version of the facts it set out in its reasons represented "an extraction" of the identified facts constituting the arrangement. The word "extraction" was criticised by counsel for the Commissioner. However, as the criticism was not encompassed in any ground contained in the Commissioner's application to the Court, I do no more than note that the Tribunal is obliged under the Administration Act to treat the "arrangement" upon which the ruling is sought as a "given", not to select some parts of it by way of "extraction". The task of the Tribunal is to stand in the shoes of the Commissioner and itself make, in respect of the arrangement which is the subject of the ruling request (supplemented by such other information as the Commissioner seeks and is given and perhaps inferences to be drawn therefrom), the right or preferable decision, if necessary itself ruling on the arrangement the subject of the request.