R v Federal Commissioner of Taxation; Ex Parte Sir Kelso King [1930] HCA 17

R v Federal Commissioner of Taxation; Ex Parte Sir Kelso King [1930] HCA 17 - HCA 1930 case summary — Zoe

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prophecy the prescription of time is attributable to the rebate section. There is nothing upon the face of sec. 18 which either indicates or implies an intention to incorporate sec. 37. It is said that the machinery of assessment must be resorted to for the _ purpose of ascertaining the amount of tax payable after the rebate 'is allowed. This appears to me to be a gratuitous assumption warranted by nothing contained in the section. On the contrary, the formula prescribed for determining the rebate in terms refers to the case of the tax having already been paid, which plainly means that the assessment must have been made and notified. The correct ascertainment of the rebate in such a case presupposes a complete and accurate assessment. The suggestion that because afterwards a rebate becomes payable under sec. 18 the assessment becomes incomplete and inaccurate so that the Commissioner may alter it by including the rebate appears to me to have nothing but ingenuity to recommend it. It imputes to the Legislature the unworthy intention of conferring in terms sounding fair to the taxpayer's ear aright to a rebate which upon examination turns out to be no more than a right to solicit the favourable exercise of the Commissioner's discretion. Sec. 18 of the Act is an attempt to carry out the reciprocal arrangement entered into between England and the Dominions where income taxes are imposed by the respective countries resulting in double taxation. If the contention of the Commissioner is right the attempt is a failure and the relief illusory

a delusion and a snare. No time is limited for giving notice of a claim for relief under the English Act, and, if the claim is not estab- lished before the first of January in the given year of assessment, 'telief is granted by way of repayment of the tax (10 & 11 Geo. V. ¢. 18, sec. 27 (2)). Moreover, it is difficult to suppose that the Legislature thought it desirable that a limit of time to relief should he imposed where the distance between the two countries is so great

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within the meaning of the proviso to sec. 37 (2). The questions were not discussed whether the attorney was notified of the assess- ment as under sec. 89 and, if so, whether, having regard to secs. 40, 54 (1) and 57, such a notification set time running against the taxpayer under sec. 37, and, if on the other hand notification was not sent to the attorney as under sec. 89, whether it was " given to _ the person liable to pay the . . . tax' within sec. 40 (1) and "served by post" within sec. 54 (1) as affected by sec. 29 of the Acts Interpretation Act 1901. These questions, however, do not arise unless the limitation of time prescribed by sec. 37 applies to the right of a taxpayer to a rebate under sec. 18, and I am clearly of _ opinion that it does not so apply. The limitation of time relates only to alterations in or additions to assessments made under sub-sec. 1 of sec. 37. This sub-section says that the Commissioner may at any time cause to be made all such alterations in or additions to any "assessment as he thinks necessary to ensure its completeness and accuracy. The nature of this provision has been explained in Ex parte Carpathia Tin Mining Co. (1); Ex parte Hooper (2); Williams, Kent & Oo. v. Federal Commissioner of Taxation (3); and the Federal Commissioner of Taxation v. S. Hoffnung & Co. (4). In the last case the present Chief Justice said (5) : - ' An 'alteration or addition' is not something extraneous to a standing assessment. When an alteration or addition is made the assessment henceforth exists as altered or added to, and not as previously existing plus independent alteration or addition." The question, therefore, really 'is whether the rebate under sec. 18 is an allowance to the taxpayer in his assessment, i.e., a deduction which ought to be made in assessing him, or on the other hand is a rebate of the tax for which he would be liable upon the assessment. The first view may be expressed by saying that sec. 18 (1) must be understood as if it said that the taxpayer " shall be entitled in is assessment to a rebate of tax." The second view may be expressed by saying that sec. 18 (1) must be understood as if it said that the axpayer "shall be entitled to a rebate of the tax paid or payable

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upon his assessment." The sub-section goes on to provide that the rebate shall be at a rate ascertained by reference to the "" Common- wealth rate" and this expression is defined by sub-sec. 2 (a) to mean: "the rate ascertained by dividing the total amount of income tax paid or payable for the year by the taxpayer (before the deduction of rebate granted under this section) by the amount of the total taxable income in respect of which the tax paid or payable under this Act has been charged for that year;" The result of this definition is that the rebate to be allowed is ascertained by reference to (i.) the amount of income tax paid or payable for the year by the taxpayer ; (ii.) the amount of total taxable income in respect of which the tax paid or payable has been charged for that year. This clearly contemplates the ascertainment of the rebate (i.) either after or before the income tax has been paid from which it is to be allowed; (ii.) after the total taxable income is. known in respect of which the tax paid or payable under the Act has been charged for the year, and (iii.) after the tax has been "charged." Every one of these three events appears to me to require the previous making of the assessment. Of the first there can be no doubt. Income tax is paid, not before but after assess- ment. Thus, by giving the rebate before or after payment of the tax, the provision, at least in one alternative, necessarily allows it from the tax already assessed. This consideration alone establishes that the rebate need not be made in the assessment. But a consideration of the second of the three conditions set out goes far to show that the rebate cannot be made in the assessment. For in practice the amount of taxable income can never be known until it is assessed although in legal theory it may be open to a taxpayer to foretell the figure to be assessed if his assessable income and his claims for deductions include no discretionary elements. But even in legal theory it is not possible for the taxpayer to se in advance the amount of his taxable income when it is affected by the exercise of a discretion in the Commissioner as it very often is. The extent. to which the amount of the taxable income depends upon the judgment or discretion of the Commissioner is illustrated by secs. 16c, 17, 21, 23 (1) (e), 23 (1) (A) (ii.), 23 (1) (J), 23 (1) (n), 23 (1) (p). 23 (1a), 23 (18), 25 (9), 25 (i), 27 and 28.

At a glance

Court

Decision date

Before

Source

Judgment (65 paragraphs)