Federal Commissioner of Taxation v Hipsleys Limited [1926] HCA 34

Federal Commissioner of Taxation v Hipsleys Limited [1926] HCA 34 - HCA 1926 case summary — Zoe

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for the time being of the business (owner including a person represent- ing the owner) is normally the person to be assessed ; (b) where the business has ceased, so that normally no one could be assessed, then the last owner, or person acting as such, is assessable; (c) where the business has changed hands, the Commissioner, if he thinks fit, may "take the accounting period as the period ending 'on the date on which the ownership has so changed and assess the tax on the person who owned or carried on the business or acted as agent for the person carrying on the business at that date." That is to say : - In the first case (a) the business may or may not have changed hands. In either case the assessable person is the owner, &c., at the date of assessment. That was necessary because at least two tax years had elapsed before the Assessment Act operated. In case (b) the necessity similarly arose. In case (c) a change of ownership might have taken place before, or it might have taken place after, the commencement of the Act. Both for revenue reasons and for reasons of justice between individuals, the Commis- sioner had a discretion given him in the words quoted. What is the full meaning of that discretionary power? It is a trite principle of construction that every part of a section should be read before finally pronouncing on the meaning of any portion of it. Now, sub-sec. 5 is a very material part of sec. 14 in order to arrive at the true and full effect of sub-sec. 2. I cannot accept the suggestion for the defendant that it is limited in its relation to sub-sec. 3, and I need not say any more as to that. But it has a very close relation to sub-sec. 2. It deals with one of the alternatives included in sub-sec. 2, namely, the transfer of the business after the commence- ment of the Act. Now, in order to understand both these sub-sections, it is essential to observe that, if under the third branch of sub-sec. 2 the Commissioner elects to assess the former owner, he elects thereby to substitute him for the new owner, who apart from that election would be the person assessable. But that though at the time appearing to the Commissioner beneficial to the revenue or individually just or both, might prove after assessment to be extremely prejudicial to the Treasury. As to changes of ownership before the commencement of the Act, the Treasury has

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to abide by the decision of the Commissioner. But in respect of transfers after the commencement of the Act, the new owner is warned that unless the tax assessed on the former owner is paid he, the new owner, is personally liable, as if no election had been made. In other words, the new owner may be relieved, but the Treasury must not lose. That leads me to a conclusion which harmonizes the section and gives to it a consistent, a just, and not an erratic operation. The election permitted to the Commissioner by the third branch of sub-sec. 2 is to make the responsibility of the new owner begin with his ownership, and to substitute for his assessability for the whole antecedent period the assessability of the former owner. There is, so to speak, a discretionary line of - demarcation drawn by the election between the assessability of the former owner and that of the new owner. How that election may be made and evidenced is a matter for consideration under the second question. But assuming an effective election, it is nevertheless subject to sub-sec. 5. Sub-sec. 5 is not an independent provision. As such it would be unnecessary, because the new owner is himself primarily liable. But the sub-section assumes that somewhere in the Act, and presumably in the section, his primary and unconditional responsibility has ceased and the responsibility of the former owner has been substituted. Nowhere can the power to do this be found except in sub-sec. 2. The words " may subsequently be assessed " mean under sub-sec. 2, in the third case of that sub-section. But the conditional responsibility of the new owner would be singularly ineffective unless it extended to the whole period for which the former owner was assessable, and it would be both grotesque and, possibly, in the main, ineffective, unless the former owner were assessable for the whole period of his responsibility as that stood at the moment of transfer. In short, the Commissioner's election, if made, makes the former owner assessable for the whole back period, and the new owner conditionally free, but secondly assessable by way of security.

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whether the words "if he fails to secure the payment" refer to the failure of the old company or to failure of the new company ; for there has been no securing of the payment by anyone. The sub-section clearly implies that the old company may be assessed a subsequently to the transfer - as was done in this case. Why should not effect be given to this sub-section? It confers a substantive power on the Commissioner. It cannot be regarded as a mere qualification of sub-sec. 3, as Dr. Brissenden suggests. q The difficulty arises from the decision of the House of Lords in the Wankie Co.'s Case (1). Sub-secs. 2 and 3 of sec. 14 are copied from the British Finance Act 1915 [No. 2], sec. 45; and, under the Britis Act, it was held, by three Law Lords against two, that the wo "for the time being" in that part of the Act which correspon with our sub-sec. 2 of sec. 14, refers to the time of assessment. T] British Commissioners of Inland Revenue, therefore, have to ass the person carrying on the business at the time of the assessment. In the case before us, the assessment was made on the old company, not on the new company which actually carried on the business at the time of the assessment. We are always prepared to accept the interpretation of a section as found by the House of Lords, if our section is the same; but it is not. In the British Act there is no provision such as that contained in sub-sec. 5. The question is not what does sub-sec. 2 mean, if isolated, but what the whole of our sec. 14 means, taken with the rest of the Act. It is all a :natter of interpretation. It is said that the draughtsman assumed, and wrongly, that the words " for the time being " in sub-sec. 2 referred to the time in which the profits were made - that he who takes the profits is to pay the tax thereon. But what the draughtsman has assumed, the Legislature has assumed; and what the Legislature has assumed is what the Legislature means ; and what the Legislature means is the law that binds us. The provisions of our sec. 14 are obviously designed to make the path of the Commissioner easy, even though it make the position of the public difficult. There is not any express provision that the old company shall indemnify the new company when the old company has taken the relevant profits and the new company is called upon (1) (1922) 2 A.C, 51, % a k

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5; take any period or periods prior to the change of ownership in respect 1 aad of which assessment was still pending and to assess the old company ar to the tax in respect of the years 1916-1917, 1917-1918, 1918-1919. In a recent case in the House of Lords, which came to my hands after the argument in this case, the question whether the powers of the British Commissioners of Inland Revenue were limited to a - single period was discussed. In dealing with this contention, after ' pointing out that in argument stress was laid upon the word ; "period " being in the singular, the duty in the charging sec. 38 (ly (of the Imperial Act) being laid on the profits in any accountin period, Lord Dunedin said : - "*I think the simple answer to this is that while the end of a period may be fixed by the Commissioners as at the date when the ownership changed, there is nothing to prevent them taking the beginning of the period as the point from which the tax still remains unsatisfied. The business, as the present Lord Chancellor, Lord Cave, observed in John Smith & Son v- Moore (1), is a continuous business though the ownership has changed. But further, it seems to me that the point is really settled by the opinions delivered in Wankie's Case (2). Certainly the opposite view, starting from Wankie's Case, would be very anomalous. It has to be admitted that the broken period under the option could be charged against the old company, yet the period. which preceded it would be charged on the new company - a curious. inversion of affairs. Lord Buckmaster, speaking of this final provision of sec. 2, says: ' Where the business has changed, the accounting period may be taken up to the moment when the change took place, and, once more, if the person for the time being were the then owner, there was no need for further words ; but again, the statute declares that in that event the duty can be assessed on the person then owning the trade.' And further on he sa' ~The fact that the clause places in the hands of the Commissioners a discretion as to-

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Judgment (121 paragraphs)

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