2. The contest between the parties is not whether any sales tax at all is payable; rather it is whether the applicant was entitled to a concessional rate of sales tax because of the provisions of the relevant Sales Tax Act and the Sales Tax (Exemptions and Classifications) Act 1935 ("the Act") which were in force at the time of the transaction. The relevant provision of the Act is item 7 of the third schedule which provides as follows:-

"7. (1) Machinery, implements, apparatus and

materials (other than road vehicles of

the kind ordinarily used for the

transport of persons or the transport or

delivery of goods, towing trucks or

salvage vehicles, or parts for those

road vehicles, towing trucks or salvage

vehicles) for use exclusively or

primarily and principally, for business

or industrial purposes, in-

(a) servicing, repairing or

reconditioning-

(i) motor vehicles;

(ii) aeroplanes (including

flying boats,

seaplanes and

helicopters);

(iii) ships, boats and

other vessels;

(iv) railway rolling

stock; or

(v) parts of any goods

specified in the

preceding provisions

of this paragraph;

(b) repairing tyres, including

retreading and recapping;

(c) constructing, maintaining or

repairing (or excavating or

levelling in connexion with

constructing, maintaining or

repairing) buildings or other

structures, or roads, dams,

pipe lines, drains, trenches,

tunnels or other works; or

(d) repairing footwear for human

wear,

but not including goods which become

part of the goods, structures or works

serviced, repaired, reconditioned or

constructed, as the case may be, or

lubricants as defined in sub-clause (1)

of clause 1 of the First Schedule.

(2) Machinery, implements, apparatus and

materials (other than road vehicles of

the kinds ordinarily used for the

transport of persons or the transport or

delivery of goods, or parts for those

vehicles) for use by a person

exclusively or primarily and principally

in the repair or maintenance of

machinery, implements or apparatus used

by him and covered by sub-item (1), but

not including lubricants as defined in

sub-clause (1) of clause 1 of the First

Schedule.

(3) Parts for machinery, implements or

apparatus covered by sub-item (1) or

(2)."

An item in similar terms has been in force for many years. Previously it was item 113F of Schedule 1. If the goods in question fall within item 7 of Schedule 3 to the Act, the rate of tax which is payable is, so I was informed by counsel, 7.5 per cent. Otherwise it is 20 per cent. The amount of tax involved is of the order of $330,000.

3. The question to be determined is whether the despatch system which is in question is properly described as "Machinery, implements, apparatus and materials ... for use exclusively or primarily and principally, for business or industrial purposes, in ... servicing, repairing or reconditioning ... motor vehicles".

4. There is no dispute about the nature of the despatch system which was supplied by the applicant to the NRMA nor about the purpose for which it was supplied. It is necessary, however, to refer in a little detail to what the system involves.

5. By way of background it should be mentioned that roadside service and assistance has been provided by the NRMA to members since 1924. The service has always been financed from membership fees. These comprise an initial fee payable on joining and an annual subscription fee paid for each motor vehicle owned by the member. These fees are used by the NRMA to acquire, operate and maintain plant and equipment necessary for the operation of the roadside service system and to employ persons to operate it. The NRMA has grown from a membership of almost 5,000 at the end of 1924 to two million today. It is the eighth largest motoring organization in the world. On an average, 3,500 service calls are answered each day. The NRMA employs about 400 patrolmen. The figures for membership and numbers of patrolmen for 1984 when the transaction was entered into are not given but it may be inferred that the numbers involved were considerable.

6. In order to operate such an extensive roadside service, the NRMA has to have an efficient method of dealing with calls, identifying vehicles and members and despatching service vehicles to stranded motorists.

7. The CAD system came into operation in 1985. It has the following attributes:-

(a) It provides for efficient and effective despatching of jobs

as it lists and distributes them. The system is more

efficient than the previous one because it eliminates a

substantial amount of radio congestion.

(b) The system has eliminated problems of identifying members

which previously existed. The system indicates whether a

motorist is a financial member on the keying in of the

name, car registration or membership number. This has

eliminated disputes between motorists and patrolmen which

sometimes occurred in cases where a member was not in a

position to show his or her membership card.

(c) The system is able to inform the members where they are in

the queue of persons awaiting service and thus how long it

is likely to be before their calls are answered.

(d) The system plays an important part in assisting the

patrolman to start the motorist's vehicle. His ability to

do this depends on his being able to diagnose the fault

which has caused the vehicle to come to a halt. If the

patrolman is uncertain about the cause, the display unit in

his vehicle has a "request to speak" button. He is able to

switch from "data mode" to "voice mode" by which he

communicates with a supervisor either at headquarters or on

patrol. In this way the system has improved the access of

patrolmen to supervisors who possess superior technical

skills, thus resulting in a reduced number of vehicles

having to be towed.

(e) The system has an inbuilt emergency alarm which enables a

patrolman who is in some kind of difficulty or danger to

call urgently for help.

8. Each service vehicle is fitted with a display unit which, in addition to the display, has a small keyboard. The patrolman commences his day by pressing a button on the unit. This sends a signal to the computer which in turn advises the despatch clerk that the patrolman is on duty. His payroll sheet is noted accordingly. He receives a message identifying his shift manager and confirming the time he has signed on. A similar message is conveyed notifying the despatch clerk of the time that the patrolman has signed off at the end of a shift.

9. The detail of the way in which the system works is as follows:-

(a) NRMA members requiring road service telephone the NRMA

headquarters through 80 incoming telephone lines. The calls

pass through an Ericsson automatic call distribution system

to a road service telephonist.

(b) The road service telephonist has before her a visual display

(c) The screen is arranged in a format which allows the road

service telephonist to type in the member's name, address,

membership number, make of vehicle and location of the

stranded vehicle.

(d) If there are difficulties encountered in the spelling or

communication of the location of the stranded vehicle a

spelling aid facility is utilised.

(e) The information is then entered by the road service

telephonist into the computer by means of a key stroke and

the computer allocates the job to the despatch clerk

handling the area where the job is located.

(f) The patrol despatch clerk has two screens on his desk, one

showing the jobs to be allocated listed by vehicle

registration number and type and the other the patrolmen who

are currently on duty. The second screen shows which

patrolmen are available.

(g) The patrol despatch clerk's role is to match the next

service job in line with the nearest available patrolman and

the despatch clerk pushes a button on his screen which

causes the main computer to relay a data message.

(h) The data message is transmitted from the headquarters at

Villawood to one of four sites in the Sydney metropolitan

area at Pennant Hills, Terrey Hills, Bondi and Villawood, by

means of a microwave signal. The system is able to select

the best available communication path to receive

information. The microwave signals are collected on dishes

located at the four sites and automatically relayed to the

patrolman's vehicle.

(i) The patrolman has a transceiver unit located in his vehicle

and on his dashboard has a display screen. When the message

is transmitted to the terminal in his vehicle he receives a

tone to alert him that a message is on his display. A red

light also indicates the presence of a message.

(j) The patrolman acknowledges the fact that there is a message

available to him by pressing a button on his display screen.

The text of the message then appears on his screen giving

him details of the location of the stranded vehicle and the

type of vehicle and registration number.

(k) The system has a built in UBD street directory. Once the

location of the vehicle is determined, the computer produces

on the patrolman's screen a UBD street directory page

number. The street name is therefore spelt correctly and

map co-ordinates are depicted in the data transmitted to the

patrolman. This eliminates misreading of information and

identifies the correct street.

(l) When the stranded vehicle is repaired the patrolman presses

a pre-programmed button on his display screen which advises

headquarters that the vehicle has been repaired.

(m) The computer acknowledges the receipt of that message and

the patrol despatch clerk is informed by the computer that

the patrolman is available for another job.

(n) If the patrolman needs assistance in solving a difficult

service problem or if the vehicle is in a condition which

requires it to be towed, the patrolman can push another

button on his display screen which is "a request to speak".

That request appears on the visual display unit of the

communications clerk until the patrolman is instructed by

the communications clerk to go into "the voice mode". This

signal from the communications clerk is transmitted to the

patrolman's display screen and he switches his transceiver

from data to voice channel.

(o) The patrolman then picks up a hand microphone located in his

vehicle and speaks to the communications clerk. If the

problem is one which requires technical assistance from the

shift manager, the communications clerk, by intercom,

contacts the shift manager who then speaks directly to the

patrolman. Whilst the voice mode is being used data

messages are held until the hand microphone is replaced.

(p) In a similar manner the patrolman can speak to the tow desk

to provide details of the vehicle and the tow desk then

arranges with towing subcontractors to go to the location of

the stranded vehicle.

(q) As mentioned, the system has a safety aspect. If the

patrolman is involved in an accident or exposed to other

danger while repairing the vehicle, he can, by the push of a

button on his display unit, immediately alert headquarters

through the computer that there is an emergency. The

despatch clerk will be informed on his visual display unit

of the location of the patrolman's present job so that

emergency services can be notified and other patrolmen in

the area can attend the scene. Under the old computer

system the only way to communicate with headquarters even in

a situation of emergency was through the radio which was not

practical or convenient in many instances.

10. Mr S B Peatman is the Operations Manager of the Road Service Headquarters of the NRMA. The account of the way in which the system works which I have just concluded comes from his evidence. Mr Peatman, after saying that the system had addressed two of the main deficiencies of an earlier system, said:-

"It has virtually eliminated difficulties

previously associated with congestion and

poor reception on the voice channel by the

implementation of data despatch. The

spelling facility has permitted the accurate

location of the stranded vehicle and the

operating system has enabled the N.R.M.A. to

carry out its aim of giving assistance to a

stranded motorist in the shortest possible

time. The operating system materially

assists the patrolman to carry out his

function of servicing the vehicle by getting

him to the site and by allowing him to

communicate and receive accurate information

in the diagnosis of the problem affecting the

stranded vehicle, and in the carrying out of

repairs to get the vehicle started or towed

to a repair point."

11. In the submission of counsel for the applicant, the system consists of machinery, implements, apparatus and materials which are used exclusively or primarily and principally, for business or industrial purposes, in servicing, repairing, or reconditioning motor vehicles; see subpara. (1)(a)(i) of item 7 earlier quoted. In the submission of counsel for the Commissioner the system, although appropriately described as "machinery, implements, apparatus and materials", is not so used. In particular, counsel submitted that it was not itself used in servicing, repairing or reconditioning motor vehicles and, in any event, it was not for use exclusively or primarily and principally, for business or industrial purposes. The basis for this latter submission was that the NRMA, in providing roadside service, was not carrying on a business or engaging in a business or industrial activity. It was a mutual organization within the meaning of that expression as used in a number of authorities.

12. Counsel for the applicant began their submissions with a reference to a number of authorities which they said established that a provision of the kind in question here should receive a benevolent construction and should not be given any narrow or restricted operation. They relied on Federal Commissioner of Taxation v. Top of the Cross Pty. Limited [1981] FCA 175; (1981) 12 ATR 413 per Bowen C.J. and Ellicott J. at p 422 and Penrith Rugby League Club Limited v. Commissioner of Land Tax (1983) 2 NSWLR 616 where Hunt J. said (p 622) that the intention of the provision of the Land Tax Management Act 1956 (N.S.W.) there under consideration was not to raise revenue, but to relieve certain community groups from the burden of land tax upon the land used and occupied by them. The two authorities are not so much authorities for the proposition that provisions of the kind in question here should receive a benevolent construction, but rather for the proposition that such provisions should not be narrowly construed and should be interpreted to promote the purpose or object underlying the relevant Act of Parliament; see s. 15AA of the Acts Interpretation Act 1901.

13. Counsel for the applicant put their case in two alternative ways. Firstly, they said that the NRMA, in providing road service, was engaged in a single complex of activities. Upon this approach, they contended that the first matter to be determined was the nature of the business of the NRMA. Plainly the system was used in the carrying on of that business and was an essential part of the service which the NRMA provided. Counsel's second alternative involved interpreting the word "in", where it appears immediately before the commencement of para (a), as if it meant "in connection with" or "ancillary to". Counsel drew attention to the words of para (1) which are in parenthesis and which exclude from the exemption road vehicles of the kind ordinarily used for the transport of persons or the transport or delivery of goods, towing trucks or salvage vehicles, or parts of such vehicles. They said that some of these vehicles were used for a purpose which, in one sense, was ancillary or incidental to the servicing, repairing or reconditioning of motor vehicles. If the paragraph had the narrow meaning for which counsel for the Commissioner contended, it would not have been necessary specifically to exclude such vehicles.

14. Counsel referred to the decision of a Divisional Court in Kingsland v. Hayben (1904) 90 LT 449 where the word "in", in the legislation there in question, was construed as meaning "in reference to" or "in connection with". To a similar effect is the judgment of Yeldham J. in Pioneer Concrete (N.S.W.) Pty. Limited v. Federal Commissioner of Taxation (1986) 86 ATC 4435 where his Honour was concerned with the construction of para (c) of item 7(1) in schedule 3 to the Act. The question was whether the concrete mixer in question was apparatus "for use exclusively or primarily and principally ... in ... constructing ... buildings". His Honour said (p 4,441):-

"In my opinion the proper inquiry is whether

the mixer is an apparatus used principally

for industrial purposes in the course of the

construction of a building. That question I

would answer in the affirmative. The

situation is precisely the same as if a

concrete mixer had been used on site for the

preparation of concrete for use in the

building being erected upon that site. The

critical inquiry is into the characteristic

of the equipment. Here it is adapted to the

construction of a building and that is the

sole use to which it is put. In my opinion

the word 'in' should be construed as meaning

'in the course of' or 'in connection with'

see Amalgamated Zinc (De Bavay's) Ltd. v.

F.C. of T. [1935] HCA 81; (1935) 54 CLR 295 at p 309."

15. Substantial reliance was placed by counsel for the applicant upon the decisions of this Court, at first instance and on appeal, in Reynolds Australia Alumina Limited v. Federal Commissioner of Taxation (1987) 87 ATC 4305 and 5018. The provision there in question was another item of the Act which provided for an exemption from tax in the case of the sale of machinery, implements and apparatus for use in the mining industry, in carrying out mining operations or in the treatment of the products of those operations. The machinery in question consisted of an overland conveyor for bauxite which transported bauxite from the mine in question to a refinery. Northrop J. said (p 4,321) that machinery for use in the mining industry or in the treatment of the products of mining operations was not limited to machinery which was used in the direct treatment of such products. He said that the conveyor was used in the mining industry in the treatment of bauxite. His Honour did not consider whether the word "in" meant "in connection with". That was not how the case was put to him.

16. The appeal against the judgment of Northrop J. was dismissed by majority. In the course of his judgment Beaumont J. said (p 5,026):-

"In my opinion, the location of the conveyor

facility on the mine site at its commencement

point together with its role as part of a

single complex of operations occurring

between the surge pile at the mine site and

the blended stock piles at the refinery site

suggest that there is only one relevant

activity being carried on; and that this

activity should be viewed as operations

pertaining to mining rather than the

independent activity of the transportation of

minerals. Put differently, to fragment the

respondents' activities in the way suggested

by the Commissioner leads to arbitrary and

therefore artificial distinctions being drawn

within what is acknowledged to be an

integrated activity. The preferable view is

that the conveyor facility is so closely

associated with and ancillary to the

respondents' mining activities as to be part

of those activities. It is an operation

which pertains to mining."

It is to be observed that the phrase used by counsel for the applicant in their submissions, "single complex of activities", comes from this passage in the judgment of Beaumont J.

17. In the course of his judgment, Burchett J., who agreed in the judgment of Beaumont J., said (p 5,031):-

"In my opinion, the beneficial purpose of the

legislation with which this appeal is

concerned is as apparent as was that of Div.

10 in the cases to which I have referred.

But this purpose would be stultified if the

Court unrealistically refused to recognise

change in the mining industry, and confined

the exemption to operations conducted in a

manner, once familiar or even invariable,

which the progress of the industry has now

(in large measure) left behind. The

extension of the site of an operation,

linking activities by conveyors or pipelines,

in order to make the best use of available

advantages and do the least damage to the

ecology of the area, are everyday features of

new mining ventures; while novel or improved

techniques and practices are introduced from

time to time to open up to exploitation

mineral deposits which were previously

worthless.

When the Act speaks of 'mining operations',

it uses an elastic expression the full

meaning of which emerges from its application

in a particular context; it is not frozen

into an immobility that cannot accommodate

changes in technology."

18. In their submission counsel for the Commissioner said that the legislature had drawn a clear distinction between the word "in" used in a context such as this and the phrase, "in connection with". Counsel pointed to instances where the phrase, "in, or in connexion with" as distinct from the word "in" had been used. These are to be found in items 77(1), 78A(1) and 113A(1) of Schedule 1. They also referred to item 52(2) where the expression "in connexion with" is used alone. It followed, so counsel said, that the legislature, when it used the word "in", did not intend it to have the more extensive meaning that it would have if it were construed to mean "in connection with". The system here in question did not fall within the exemption because in no sense could it be said that it was machinery or apparatus used in the servicing, repairing or reconditioning of motor vehicles. The closest that it came to such a use was when it was used by the patrolmen to speak to supervisors to obtain advice. But this was insufficient because of the words, "for use exclusively or primarily and principally". Counsel referred to dictionary meanings of the words "servicing", "repairing" and "reconditioning". They said that the words in parenthesis did not assist the applicant's case because they applied equally to the other categories dealt with in sub-item (1). Finally, they said that the "single complex of activities" test was not helpful and could be misleading in a case such as this which was very different from the Reynolds Alumina case which was concerned with well understood expressions used in relation to mining.

19. Counsel submitted that, in any event, the use was not for business or industrial purposes. They said that the use here could not be for an industrial purpose. For it to be a business purpose the NRMA had to be carrying on something in the nature of a trade. Here service was provided to members free of charge so that there was no trade. The membership fee entitled members to service irrespective of the amount of use which they made of it. They also referred to the fact that the NRMA was a company limited by guarantee, was a non-profit company (see note 1(d) to the accounts) and was a "mutual company". They relied on Fletcher v. Income Tax Commissioner 3 All ER 1185 at p 1189, State Authorities Superannuation Board v. Federal Commissioner of Taxation (1988) 85 ALR 125 at pp 139 and 142 and Royal Automobile Club of Victoria v. Federal Commissioner of Taxation 73 ATC 4,153 at pp 4,156 et seq. They said that that which attracts mutuality principles is not in the nature of a trade.

20. In reply to this submission counsel for the applicant said that "business" was used in contradistinction to pleasure; cf. s. 51 of the Income Tax Assessment Act and items 107 and 119 of Schedule 1. Item 107 applies in relation to exhibition copies of motion picture films but not including exhibition copies of films "for the private, domestic or personal use of the person by or for whom they are produced". Item 119 applies to ships and other vessels, but not including those to be used exclusively or principally for purposes of pleasure, sport or recreation either by the owner thereof or by any other person or persons. Counsel also said that it would be incongruous to deny the benefit of the exemption to a body such as the NRMA and give it to commercial organizations.

21. The task is to apply the relevant words of the item to the facts of the case. In summary, the CAD System provides the NRMA and its customers with a facility which substantially streamlines the handling of service calls and makes the operation of providing service to motor vehicles very much more efficient than was formerly the case. An aspect of it is the ability which the patrolman has to speak, if necessary, to a more experienced mechanic for the purpose of obtaining advice in relation to a particular problem. That is not the prime use to which the system is put but it is an important use. In those circumstances is it correct to say, as counsel for the applicant contend, that the totality of the various components which make up the system comprises machinery, implements, apparatus and materials for use exclusively or primarily and principally in servicing, repairing or reconditioning motor vehicles. I have left out of account the words "for business or industrial purposes" because they are the subject of the Commissioner's second submission with which I shall deal separately.

22. Counsel for the applicant, in their two-pronged approach, put their case as they did upon the basis of cases decided on different facts and in relation to different items or a different part of the item in question here. Thus, on the basis of what was said by Beaumont J. in the Reynolds Alumina case, they contended that the equipment in question was part of a single complex of operations or activities, the entirety of which was used in the servicing, if not the repairing or reconditioning, of motor vehicles. The alternate argument was based on the proposition that, in the context in which it appears in item 7, the word "in" should be construed as meaning or including "in reference to" or "in connection with". The authorities upon which counsel relied disclose that that is a meaning which the word "in" may sometimes have.

23. For my part, I would prefer not to be placed in a straight jacket made by reference to judicial dicta based upon different factual situations and different items of the schedules to the Act. In my opinion the question whether particular articles fall within an item, such as item 7 of Schedule 3, must involve questions of fact and degree as well, of course, as the question of law which arises because of the need to construe the relevant words of the statute.

24. The contemplation of other examples is not always of assistance. But I think it is helpful to remind oneself that the carrying out of any task involving the use of equipment will necessitate the use by the person doing the task of equipment directly used for the task at hand and other equipment which is used incidentally or which it is necessary to use before one can make use of the equipment which is to be directly used. There is no evidence of it but it would be necessary, one would think, for a patrolman to have a service vehicle which was adequately equipped not only with tools and materials essential for him to do his job, but also with other articles. So it might be asked, is his pad and pencil in which he notes the location of a job used for servicing the vehicle to which he is directed? What of the various shelves, drawers, compartments and boxes which are in the vehicle and in which tools and other equipment of various kinds are stored for use in the servicing of vehicles? What of written material such as instruction books, manuals and the like? If one leaves the patrolman and his vehicle, a host of ancillary equipment not forming part of the CAD System has its place in the servicing and operation which the NRMA undertakes. To speculate about the nature of that equipment is not helpful. But plainly there must be equipment of this kind in offices, service centres, despatch centres and other places as well. If the applicant's first submission is to be accepted, each of these items must itself fall within item 7 because each is part, if not of the single complex of activities or operations which the NRMA conducts, then part of the totality of the equipment which may fairly be said to be used in connection with the servicing of vehicles.

25. It seems to me that the contest is between a view which says that all the items to which I have referred and the system which is in question here are used - it matters not whether directly or indirectly - in the servicing of vehicles and a view which says none are so used; rather they are used not in, but as an adjunct to, that servicing.

26. One sees, from the Pioneer Concrete case decided by Yeldham J. and the Reynolds Alumina case decided in this Court, how courts have approached the problem of equipment claimed to be used in constructing buildings or in mining operations. Both the concrete mixer in the Pioneer Concrete case and the conveyor in the Reynolds Alumina case seemed to me to have involved a much closer connection with the construction of buildings in the one case and mining operations in the other than the system in question here. Yeldham J. reached his conclusion by giving to the word "in" a meaning which included "in the course of" or "in connection with". The Court in the Reynolds Alumina case did not approach the matter in that way, but decided the matter on the basis that there was a single complex of activities and that the expression "mining operations" was an elastic expression, the full meaning of which emerged from its application in a particular context.

27. To my mind it is not critical to determine what is the preferable approach in the present case. To me the better question is whether, as a matter of the ordinary use of language, it is right to say that the components which go to make up the system here, when viewed in their totality, are used in the servicing of motor vehicles. One has to make a judgment about the matter.

28. I accept the submissions made by counsel for the applicant at the outset that one needs to have very much in mind the purpose and object of the legislation. That having been said, however, one is not much further forward because one still has to apply the words used by the legislature to the facts of the case. Perhaps the most that can be said is that one would not give to the words of the item any narrow or restricted operation.

29. When one thinks of what is involved in the servicing of vehicles, one immediately thinks of tools, pliers and spanners and the like, battery leads, tyre jacks and, these days, perhaps some electronic equipment used to diagnose faults in vehicles which have a great deal of electronic equipment. That is the sort of equipment which one would normally find in a motor service garage carrying out ordinary servicing or repair work. The question is whether the line should be drawn at that point or whether one takes a broad view and concludes that a variety of other equipment used as an adjunct to equipment of the kind I have mentioned is also used in the servicing of motor vehicles. To bring the matter closer to the case in question, what view does one take about the telephone equipment used by customers and the repair establishment to make arrangements for customers of the garage to bring in their vehicles for service or to order spare parts or other components? What of the typewriters and word processors used by persons employed in the service area to record jobs to be allocated and work done, to make up accounts and to record payments? What of the office furniture which is in use or the system used to notify mechanics of the next job to be done or amplifying equipment in the workshop over which announcements are made relevant to the repair and servicing of a vehicle? All this equipment is, in one sense, used in, or in connection with, the servicing and repair of vehicles. It would not be an inappropriate use of language to say that they were. But did the legislature intend the language used in the relevant item to be of such wide import?

30. In reaching my conclusion, I have obtained only indirect help from the authorities which have been cited. That is not because I have any disagreement with what was said by any of the judges who decided them. It is because the words used by them were used in relation to quite different factual situations. In the result I have reached the conclusion that the legislature did not intend to afford exemption to every conceivable piece of equipment which might be said to be used in relation to the servicing and repair of motor vehicles. I think its intention was to confine the exemption to articles or equipment which were used, if not directly, then proximately to the actual operation of service or repair. The line is not one which can be drawn with certainty. Each case will depend upon its own facts.

31. Upon the test which I have formulated, I think the correct view is that the components which make up the system here in question, are not entitled to the benefit of the exemption. They are not directly used in the servicing operation, and, although they are an important adjunct to it, they are not so closely connected with it as to be aptly described as being used in the servicing of vehicles.

32. I should say something about the words in parenthesis in item 7(1) which exclude from the benefit of the exemption road vehicles of the kind ordinarily used for the transport of persons or goods, towing trucks or salvage vehicles or parts for those various vehicles. I think those words assist the applicant's case rather than that of the Commissioner. If the words in question were not to be given a wide meaning, it would have been unnecessary to exclude the various types of vehicles which are mentioned. This in turn tends to persuade one that anything not excluded and which may reasonably be said to be something used in servicing or repairing vehicles is entitled to the benefit of the exemption. I have given that consideration due weight but I do not think that it is conclusive. One must still reach a conclusion on the question whether the articles in question are used in the servicing or repairing of motor vehicles.

33. In the result I have decided that the system, or rather its various components, is not entitled to the exemption with the consequence that the assessment should be confirmed. My conclusion in that respect makes it unnecessary to deal with the Commissioner's second submission that the system was not used "for business or industrial purposes", but I propose to express a view about it. The cases to which I was referred in argument raise a question whether the use in question was for a business purpose. What the Commissioner relies upon is a principle long established in the field of income tax law, known as the principle of mutuality, which may in some circumstances relieve wholly or in part certain associations from liability to tax. In Social Security Services and Loans Society Limited v. The Commissioner of Taxation [1971] HCA 61; (1971) 125 CLR 560 Gibbs J. (as he then was) said pp 570-571:-

"In England it has been held that where a

number of people, associated together for a

common purpose, have contributed to a common

fund in which all the contributors are

interested, the surplus of their

contributions remaining after the fund has

been applied to the common purpose 'is in

essence a return of their own moneys which

they have overpaid and is not a profit'

(Colonial Mutual Life Assurance Society

Ltd. v. Federal Commissioner of Taxation

[1946] HCA 60; (1946) 73 CLR 604, at pp 618-619). This

principle has found particular application in

the cases of mutual insurance funds and

members' clubs. It may apply notwithstanding

that the people thus associated have been

incorporated, for the corporation is treated

'as a mere entity for the convenience of the

members and policy holders, in other words,

as an instrument obedient to their mandate'

(English and Scottish Joint Co-operative

Wholesale Society Ltd. v. Commissioner of

Agricultural Income-Tax, Assam 1948, AC

405, at p 419). Since the members of an

association may at the same time engage in

dealings that are mutual and business that is

not, it may be necessary, and is permissible,

to sever a fund which consists of receipts

from mutual dealings as well as other

receipts ..."

34. Gibbs J. rejected a submission made on behalf of the Commissioner that the principle had no application in Australia. He noted that it had been rendered inapplicable to certain cases by specific provisions of the Income Tax Assessment Act 1936, but he said that where it was not excluded it would, in appropriate circumstances, lead to the conclusion that the surplus arising from a transaction within the principle could not be treated as income.

35. In my opinion the mutuality principle is not of assistance in determining whether, for the purposes of item 7 of Schedule 3 of the Act, articles otherwise exempted by that item are for use for business or industrial purposes. In my opinion both the words "business" and "industrial" are words of wide import and should not be narrowly construed. On the other hand, I do not think that the reference by counsel for the applicant to s. 51 of the Income Tax Assessment Act is of any more assistance. The Act in question here and the Assessment Act are not statutes in pari materia and the reference to s. 51 is accordingly not helpful.

36. Numerous authorities could be cited for the proposition that the NRMA, in carrying on the activities which it does, including its road service operation, is carrying on a business. I think there is also much to be said for the view that it is engaged in an industry. That that is a term of wide import is established in a number of authorities. I refer only to Jumbunna Coal Mine, No Liability v. The Victorian Coal Miners' Association (1908) 6 CLR 309 per Isaacs J. at p 370 and Re Lee; Ex parte Harper [1986] HCA 30; (1986) 160 CLR 430 per Mason J. (as he then was) and Brennan and Deane JJ. at pp 448 and 454. In my opinion the system in question here was acquired and is used for both business and industrial purposes. Accordingly, I reject the Commissioner's submission based on that matter.

37. In the result the assessment made by the Commissioner is confirmed.