Taxation, Federal Commissioner of v Patcorp Investments Ltd

Taxation, Federal Commissioner of v Patcorp Investments Ltd - [1976] HCA 67 - HCA 1973 case summary — Zoe

[144]

Section 51 deduction: Mason J. felt he was bound by the decision of this Court in Investment & Merchant Finance Corporation Ltd. v. Federal Commissioner of Taxation [16] and concluded that the amount of the losses sustained by the taxpayers in the dividend-stripping transactions other than Austin Sales (Aust.) Pty. Ltd. were deductible. Two decisions of the House of Lords, Griffiths (Inspector of Taxes) v. J. P. Harrison (Watford) Ltd. [17] and Bishop (Inspector of Taxes) v. Finsbury Securities Ltd. [18] were referred to by Menzies J. in the I.M.F. Case [16] to support the conclusion of the majority. Since then, however, the House of Lords has decided F.A. & A.B. Ltd. v. Lupton (Inspector of Taxes) [19] and Thomson (Inspector of Taxes) v. Gurneville Securities Ltd. [20] . In the F.A. & A.B. Ltd. Case, it was held by Lord Morris of Borth-y-Gest and Lord Guest that where a taxpayer buys shares to conduct a dividend-stripping operation the share dealing transaction does not come within the area of trade of a dealer in shares. Viscount Dilhorne and Lord Donovan held that if a transaction viewed as a whole (including the manner of its implementation) was entered into with the purpose of securing a tax advantage then the transaction cannot be viewed as forming part of the trading activities of a dealer in stocks and shares. Lord Simon of Glaisdale expressed a similar opinion. In theGurneville Securities Ltd. Case Lord Morris of Borth-y-Gest, Lord Guest, Viscount Dilhorne, Lord Donovan and Lord Simon of Glaisdale reiterated the opinions they had expressed in the F.A. & A.B. Ltd. Case. In my opinion the views expressed by their Lordships in these two cases are to be preferred and should be followed here with the result that the outgoings on the purchase of the shares in the companies the taxpayers were endeavouring to dividend strip are not within s. 51 nor are they proceeds of sale within s. 25 of the Act. It cannot be said that the outgoings were incurred as an incident of the taxpayers' share trading business. They were not designed to achieve anything for those businesses except save the profits of the businesses from tax. In the circumstances the outgoings do not come within the second limb of s. 51 and they also fall outside the first limb since the shares acquired were not trading stock and hence the cost of the shares would be non-deductible capital expenditure, not saved by s. 51 (2). The proceeds of sale are not assessable under s. 25 since they are proceedings of a capital nature.

[148]

During the years of income ended 30th June 1968, 1969 and 1970 respectively, Mining Traders Ltd. (whose name later became Patrick Corporation Ltd. and is now Patcorp Investments Ltd.) ("Mining Traders") carried on the business of trading in stocks and shares. In each of those years it conducted a dividend-stripping operation on the shares of one or more private companies. There were eight such transactions in all, but seven of these may be considered together, since they were indistinguishable in all material respects save one, which will be mentioned. The seven private companies the subject of these transactions were the following: in 1968, Remfore Pty. Ltd. ("Remfore"); in 1969, E. P. & A. Fraser Pty. Ltd. ("Fraser"), Austral Stevedoring and Lighterage Company Pty. Ltd., Thomas Napier & Co. Pty. Ltd. and Stevedoring Insurance Co. Ltd.; in 1970, Yarra Investment Co. Pty. Ltd. ("Yarra") and Harbour Holdings Pty. Ltd. ("Harbour Holdings"). It is convenient to refer to each of these companies as "the stripped company". In each case the stripped company had ceased to trade, but had a fund of undistributed profits and had assets which could readily be realized. Mining Traders entered into an agreement to buy the whole of the issued capital of the stripped company, for a price which in four cases was the same as the value of the assets, in one case was a little more and in another a little less; in the seventh case the value of the assets was not established by the evidence. Transfers of the shares to Mining Traders were executed, and a meeting of directors of the stripped company resolved that the transfers be registered. Subsequently it was resolved that a dividend be paid out of unappropriated profits. According to the unchallenged findings of Mason J., the transfers to Mining Traders of the shares in Remfore and Harbour Holdings were in fact registered before the dividend was declared on the shares in the former company and before the second of two dividends was declared on the shares in the latter company, but in all the other transactions (including the first dividend declared by Harbour Holdings) the dividends were declared and paid before the transfers of shares were registered. This is the one possible point of distinction between these seven transactions. However, in each case the share register shows that Mining Traders became a shareholder on the day on which registration was approved. After the dividend had been received Mining Traders resold all the shares in the stripped company to another company at a price very much less than it had paid for them. The resale took place within a short time - usually a matter of days - after Mining Traders had first agreed to buy the shares. The entire operation was in each case carried out within one financial year, and towards the end of that year; in four cases the shares were resold on 30th June and in the other cases the resales were made in the month of April or the month of June. In each case the directors of Mining Traders bought the shares with the knowledge that they could be resold as in fact they were, and with the intention of engaging in the dividend-stripping operation. The purchases were financed by loans made by the stripped company, and cheques were exchanged for this purpose. In each transaction the purchase and resale of the shares resulted in a substantial loss to Mining Traders, but Mining Traders received dividends which - except in one case - more than offset that loss so that on the whole Mining Traders ended the transaction with a net gain. The exception was the case of Yarra, where the loss on resale was exactly balanced by the amount of the dividend so that there was ultimately neither gain nor loss. Mining Traders, in its returns of income tax, showed an overall profit (in 1968 and 1969) or loss (in 1970) on share trading which was arrived at after deducting or including, as the case may be, the losses incurred on the sale of the shares in the stripped company, i.e. the difference between the price paid for the shares and the price obtained on their resale. The dividends received from the stripped companies were treated as income but Mining Traders claimed to be entitled to a rebate in respect of the whole amount of the dividends under s. 46 of the Income Tax Assessment Act 1936, as amended ("the Act"). The Commissioner, in his assessment, refused to allow any rebate under s. 46, and in consequence assessed Mining Traders to tax on the basis that on each transaction it had made a profit calculated by deducting the cost price of the shares from the sum of the price received on resale and the dividends received. Mason J. upheld the contentions of Mining Traders in respect of all these transactions and from his decision in these cases the Commissioner has appealed to this Court (Appeals 109, 110 and 102).

[149]

The effect of the transactions may be illustrated by taking one example. On 21st April 1969 Mining Traders agreed to buy and Patrick Stevedoring (Victoria) Pty. Ltd. ("Patrick Stevedoring"), the owner of the share capital in Fraser, agreed to sell the whole of the issued capital in Fraser for $190,497. The similarity of the name of Patrick Stevedoring to that which Mining Traders later adopted is quite coincidental, for the companies were in no way connected. On 22nd April 1969 the directors of Fraser resolved to register the transfers of the shares to Mining Traders and its nominees. The share register shows that Mining Traders became a shareholder on 22nd April 1969. On the same day Mining Traders drew a cheque in favour of Patrick Stevedoring for $190,497, the price of the shares. On the same day a cheque for $190,497 drawn by Patrick Stevedoring in favour of Fraser in repayment of a loan and indorsed by Fraser in favour of Mining Traders was deposited to the credit of Mining Traders' bank account - the indorsement was by way of loan from Fraser to Mining Traders. On 23rd April 1969 the directors of Fraser resolved to declare a dividend of $189,247. On the same day a cheque in that amount was drawn by Mining Traders in favour of Fraser in partial repayment of the loan made by Fraser to Mining Traders. The cheque was indorsed by Fraser in favour of Mining Traders and credited to the latter's bank account; this indorsement and delivery of the cheque back to Mining Traders was intended to represent payment of the dividend. On 24th April 1969 Mining Traders sold the whole of the issued capital of Fraser to Warrina Pty. Ltd. for $4,250. Mining Traders claimed that it made a loss of $186,247 ($190,497 minus $4,250) on the resale of the shares and that the dividend of $189,246 [sic] was entirely rebatable. The Commissioner reassessed on the footing that as a result of this transaction Mining Traders made a profit of $2,999 ($4,250 plus $189,246 [sic] minus $190,497). The discrepancy of $1 in the amount of the dividend is quite immaterial.

[158]

At a later meeting, held on the same day, it was resolved that Austin declare an interim dividend totalling $5,789,677.98 "payable to Patrick Nominees Pty. Limited on behalf of beneficial shareholders in the following proportions"; there were then set out the names of Mining Traders and the other appellant companies and A.O.M. Securities Pty. Ltd. and the amount of dividend payable on behalf of each. The exchange of cheques made to enable the transaction to be effected was carried out on behalf of the purchasers by Patrick & Co., a firm of stockbrokers closely associated with Mining Traders, and on 30th June 1970 that firm, having received from Austin a cheque representing the dividend, credited the account of each of the purchasers in its books with the amount to which each was entitled. By a further agreement made on 30th June 1970 Mining Traders, the other appellant companies and A.O.M. Securities Pty. Ltd. agreed to sell the whole of the issued shares in Austin to Hill Minerals N.L. for $362,020. After the dividend and the price received on the resale of the shares in Austin have been set off against the cost of the purchase of those shares, this transaction, unlike the others, resulted in an overall loss - which in total exceeded $25,000. Later on 30th June the directors of Austin tabled a transfer of all the shares held by Patrick Nominees Pty. Ltd. and Mr. Keir to Hill Minerals N.L. and it was resolved that the transfers be accepted and the shares be registered in the name of Hill Minerals N.L. It was noted that Mr. Davidson held one share in his own name as nominee for Hill Minerals N.L. In these circumstances neither Mining Traders nor any other of the appellant companies was ever entered in the register of Austin as the holder of any shares. Mason J. held that in consequence none of them was "a shareholder" within s. 46 and that for that reason no rebate was allowable under that section. From this decision appeals have been brought by Mining Traders (Appeal No. 101 - there are thus cross-appeals in respect of Mining Traders' assessment for the year 1970) and the other appellant companies (Appeals Nos. 103, 104, 105, 106 and 107). It will be convenient to use the expression "the appellant companies" to refer generally to Mining Traders as well as to the other companies which are appellants.

[160]

It was not challenged that each appellant company was a dealer in shares. It was clearly established that in the case of each transaction the appellant company bought the shares with the intention of taking the dividend and then reselling the shares within a short time. If the purchase and sale of the shares formed part of the appellants' business of share trading there can be no doubt that the proceeds of the sale of the shares would be assessable income, or that the expenditure incurred in the purchase of the shares would be deductible under s. 51. Such expenditure would not be of a capital nature, because in the circumstances mentioned the shares would be trading stock within s. 51 (2). So much was established by Investment & Merchant Finance Corporation Ltd. v. Federal Commissioner of Taxation [21] . However, the Commissioner contended that the transactions presented such extraordinary features that they should properly be regarded as isolated dealings not forming part of the ordinary ebb and flow of the business of share trading carried on by the appellant companies. The so-called extraordinary features of these transactions go only to show that the motive that inspired the appellant companies to enter into the transactions, and the effect which they were intended to achieve, was to improve their taxation position by taking advantage of the provisions of s. 46 of the Act. In addition it might be said, in relation to the shares in Austin and possibly also in relation to those in Yarra, that it was not intended to make a commercial gain, i.e. that the only object of those transactions was to derive a fiscal benefit. However, the fact that a dividend-stripping operation is carried out for the purpose of obtaining taxation advantages, and not to make a profit, does not mean that it must be regarded as outside the scope of the taxpayer's share trading business, or that the shares cannot be treated as trading stock. The Commissioner's submissions are contrary to what was decided in Investment & Merchant Finance Corporation Ltd. v. Federal Commissioner of Taxation. In that case the shares were purchased and the dividends received in one income year and the shares were resold in the next income year and the amount which the taxpayer paid for the shares exceeded what it got by way of dividend and on resale. The question for decision was whether the shares were trading stock whose value at cost should be taken into account in the second year of income. The majority of the Court answered this question in the affirmative. Walsh J. said [22] :

[162]

In the argument of the Commissioner reliance was placed upon two decisions of the House of Lords by which it was held that the dividend-stripping transactions there in question, which had been carried out for the purpose of establishing claims against the revenue, should not be regarded as being trading transactions in the course of the taxpayers' trade of dealers in shares: Lupton (Inspector of Taxes) v. F.A. & A.B. Ltd. [24] ; Thomson (Inspector of Taxes) v. Gurneville Securities Ltd. [25] . The question which the House of Lords had to decide in those cases arose under s. 341 of the Income Tax Act, 1952 U.K., which applied where "any person sustains a loss in any trade ". It is unnecessary for present purposes to discuss in detail the reasoning by which their Lordships reached their conclusion, but a few short passages will illustrate the nature of their approach. In Lupton's Case, Lord Morris of Borth-y-Gest said [26] : "some transactions may be so affected or inspired by fiscal considerations that the shape and character of the transaction is no longer that of a trading transaction", and Lord Simon of Glaisdale said [27] : "what is in reality merely a device to secure a fiscal advantage will not become part of the trade of dealing in shares just because it is given the trappings normally associated with a share-dealing within the trade of dealing in shares". In Thomson's Case, Lord Donovan said [28] : "when shares are bought for the sole or main purpose of dividend-stripping, the transaction is not a trading transaction; and a loss shown by the writing down of the value of the shares consequent upon the dividend-stripping is not a loss sustained in trade". This reasoning cannot, I think, be reconciled with that accepted in Investment & Merchant Finance Corporation Ltd. v. Federal Commissioner of Taxation [29] , and if the two sets of statutory provisions were the same in relevant respects it might be necessary to reconsider what was said in the latter case in the light of these decisions of the House of Lords. However, the scheme of the English legislation is very different from that of the Australian Act. In particular the English legislation does not contain a provision like s. 260 of the Act which is aimed generally at tax avoidance. The presence of s. 260 makes it impossible to place upon other provisions of the Act a qualification which they do not express, for the purpose of inhibiting tax avoidance. In other words, it is not permissible to make an implication which does what s. 260 fails to do in preventing the avoidance of tax. If it is suggested that a taxpayer has engaged in a device to secure a fiscal advantage, and the relevant provisions of the Act do not expressly deal with the matter, the case depends entirely on s. 260. These considerations are sufficient to distinguish the two decisions of their Lordships. Moreover, the Parliament, by enacting s. 46A of the Act (which was not in force at the time material to this case), has legislated in an attempt to overcome what it regarded as the undesirable effects of the decision in Investment & Merchant Finance Corporation Ltd. v. Federal Commissioner of Taxation, and that is a further reason why we should not reconsider the authority of that case.

[172]

Indeed it is not too much to say that the verb "hold" and its variants, when used in relation to shares in companies, normally refers to the legal ownership of the shares according to the register of members. The Companies Acts of the United Kingdom and of the several States of the Commonwealth have uniformly used the word in this sense, and common usage has followed their example. Before a different meaning is accepted, some justification must be found in the context, or the subject-matter. Later in the judgment, the Court referred to the definition of shareholder in s. 6 of the Act and to ss. 108 and 109 of the Act, and said [3] : The policy manifested by these sections might quite well have led to their being expressed so as to be applicable to loans made or remuneration paid to persons entitled to shares in equity only, as well as to registered members, but evidently the uncertainty resulting from a desertion of the register of members as the sole source of information as to the persons in respect of whom the sections apply was considered a decisive practical reason for not carrying the policy to that length. The same uncertainty provides no less cogent a consideration in relation to s. 80 (5) In Federal Commissioner of Taxation v. Angus [4] , a taxpayer was entitled under the will of her late father to a life interest in one-third of his residuary estate which consisted of shares in a company incorporated and resident in Singapore. Notwithstanding his death the shares continued to stand in his name on the company register but pursuant to a direction given to the company by the trustees of the estate one-third of the amount of the dividends was paid by the company direct to the taxpayer. The question which the Court had to decide, whether the income was exempt under s. 23 (q) of the Act, is not one which now concerns us. However, if the taxpayer had been a shareholder she could not have claimed the protection of s. 23 (q), because of the provisions of s. 44 (1A). The Court held that she was not a shareholder: see per Dixon C.J. [5] , per Fullagar J. [6] , and per Menzies J. [7] . Dixon C.J. said [5] that the executors or trustees of the deceased shareholder should be regarded as shareholders for the purpose of the payment of dividend and any tax thereon; that does not indicate a departure from the general rule that the shareholder is the person whose name is entered on the register, for the name of the deceased shareholder remained on the register: see A. L. Campbell & Co. Pty. Ltd. v. Federal Commissioner of Taxation [7a] where the position of the personal representatives of a deceased shareholder is discussed. 1. (1949) 78 C.L.R. 353. 2. (1952) 86 C.L.R. 335. 3. (1949) 78 C.L.R., at p. 363. 4. (1952) 86 C.L.R., at pp. 341-342. 5. (1952) 86 C.L.R., at p. 343. 6. (1961) 105 C.L.R. 489. 7. (1961) 105 C.L.R., at p. 501. 8. (1961) 105 C.L.R., at p. 506. 9. (1961) 105 C.L.R., at p. 515. 10. (1961) 105 C.L.R. at p. 501. 11. (1951) 82 C.L.R. 452.

[182]

The transaction consisted in buying shares in the company at prices somewhat lower than the net value of its assets, stripping the company of the whole or a large part of its accumulated profits by means of declarations of dividends or distributions in liquidation or both, and then re-selling the shares if the company was not in liquidation, or, if it was in liquidation, participating in a liquidator's distribution of capital. The Commissioner there sought to apply s. 260 so as to treat the taxpayer as having obtained, not dividends subject to exemption from or rebate of tax, but other income of a taxable character by virtue of the acquisition of the shares. However, the Court held that s. 260 had no application. Kitto J. (with whose judgment on this point Dixon C.J. agreed) said [49] : No doubt among the considerations which led Rowdell to enter into the transactions was the consideration that its tax liability resulting from the transactions would be reduced by the application of ss. 44 (2), 46 and 107 (or whichever of them should apply in the circumstances); but it is impossible to point to any tax liability which Rowdell would have incurred if the arrangement had never been made and for the avoidance of which the arrangement was a concerted means. Menzies J. [50] expressed a similar view. That decision appears to me, with all respect, to be in complete accord with the leading authorities on s. 260. A taxpayer who is entitled to a rebate in respect of dividends does not, by arranging to receive the dividends, avoid any liability imposed on him by the Act. In Europa Oil (N.Z.) Ltd. v. Inland Revenue Commissioner [51] , Lord Diplock, speaking of the New Zealand section which corresponds to s. 260, said: Any liability of the taxpayer to pay income tax must be found elsewhere in the Act. There must be some identifiable income of the taxpayer which would have been liable to be taxed if none of the contracts, agreements or arrangements avoided by the section had been made. Those remarks apply equally to s. 260. In Rowdell Pty. Ltd. v. Federal Commissioner of Taxation [52] the taxpayer did no more than arrange his affairs so as to receive income which was rebatable and s. 260 does not apply to such an arrangement. The Commissioner submitted that the purpose of the arrangements made in the present case was to avoid the tax that would have been payable on the income derived by Mining Traders from its other trading activities. This argument is superficially attractive because, as has been mentioned, the circumstances show quite clearly that the transactions were entered into with a view to their taxation advantages. However, an arrangement whose purpose is to reduce the amount of tax that a taxpayer will have to pay is not necessarily an arrangement whose purpose is to avoid a liability to tax. It was the fact that the dividends were rebatable that made the transactions in the present case so attractive from a fiscal point of view. The shares could be sold at a loss because the declaration of the dividend lowered their value and there would have been no fiscal advantage if the dividends had attracted tax. As I have just indicated, s. 260 did not prevent the appellant companies from arranging their affairs so that the income that they received would include dividends subject to a rebate. Nor does s. 260 enable the Commissioner to treat the expenditure on the purchase of the shares as if it had never been made. In Cecil Bros. Pty. Ltd. v. Federal Commissioner of Taxation [53] , Dixon C.J. said that he had great difficulty in seeing how s. 260 could apply to defeat or reduce any deduction otherwise truly allowable under s. 51. Kitto and Windeyer JJ. agreed with his judgment, and Taylor J. said that he shared that difficulty. Although there is no doubt that the decision reached in that case was correct, it has been suggested that the doubts expressed as to the application of s. 260 to deductions under s. 51 were not well founded: Hooker-Rex Pty. Ltd. v. Federal Commissioner of Taxation [54] ; Franklin's Selfserve Pty. Ltd. v. Federal Commissioner of Taxation [55] . It is unnecessary for the decision of the present case to resolve that question. The expenditure made on the purchase of the shares was in truth the price paid by the appellant companies for the purpose of obtaining income. It was not for the Commissioner to say that they should have paid less or more, or that they should not have bought the shares at all. Whether the whole of any of these transactions, or part, be examined it is not possible to find an arrangement whose purpose was to avoid tax. The purpose was to buy, and later resell, shares the dividends from which would be rebatable. It may rightly be said of the present case, as I said in the very different circumstances of Federal Commissioner of Taxation v. Casuarina Pty. Ltd. [56] , that "no liability to tax imposed by the Act on the company is avoided for whatever tax is appropriate to its situation remains payable". The Commissioner relied on a line of cases in which arrangements, which might be described as dividend-stripping operations, were struck down by s. 260: Bell v. Federal Commissioner of Taxation [57] ; Newton v. Federal Commissioner of Taxation [58] ; Hancock v. Federal Commissioner of Taxation [59] ; Federal Commissioner of Taxation v. Ellers Motor Sales Pty. Ltd. [60] . Those were all cases in which the arrangement had the purpose of giving the character of capital to what, apart from the arrangement, would have been received as income and thus of avoiding liability for tax on the amounts received. They are distinguishable from the present case in which the Commissioner's submissions, when analysed, will be seen as an attempt to deny to Mining Traders a rebate to which the Act gives it an entitlement. In other words, the arrangements which the Commissioner seeks to challenge cannot be predicated to be an attempt to avoid tax - they were an attempt (and a successful attempt) to take advantage of the benefit given by s. 46. In my opinion s. 260 has no application to the case. It follows that the Commissioner's appeals must also fail. 1. (1971) 125 C.L.R. 249. 2. (1963) 111 C.L.R. 106. 3. (1963) 111 C.L.R., at p. 121. 4. (1963) 111 C.L.R., at p. 125. 5. (1963) 111 C.L.R., at p. 134. 6. [1976] 1 W.L.R. 464, at p. 475; [1976] All E.R. 503, at p. 54. 7. (1963) 111 C.L.R. 106. 8. (1964) 111 C.L.R. 430, at p. 438. 9. (1970) 123 C.L.R. 71, at p. 86. 10. (1970) 125 C.L.R. 52, at p. 74. 11. (1971) 127 C.L.R. 62, at p. 104. 12. (1953) 87 C.L.R. 548. 13. (1958) 98 C.L.R. 1; [1958] A.C. 450. 14. (1961) 108 C.L.R. 258. 15. (1972) 128 C.L.R. 602.

[204]

The appellants, in respect of the amounts received from Austin Sales (Aust.) Pty. Ltd., were not "shareholders" within the meaning of s. 46. They were not registered as such and they had no absolute right against the company Austin Sales (Aust.) Pty. Ltd. to be registered; nor did that company have any right to enter their names as members. Further, it seems to me that Federal Commissioner of Taxation v. Angus [64] is an authority directly opposed to the contention that these appellants were shareholders. In that case it was claimed that certain income of the taxpayer was exempt income under s. 23 (q) upon the ground that it was derived from Singapore, that it was not exempt from income tax in Singapore, and that the tax thereon had been paid in Singapore. These conditions were found by the majority to be satisfied in somewhat complex circumstances which it is not necessary to consider for present purposes. The facts so far as they are presently relevant were that the taxpayer was entitled under the will of her father to a life interest in one-third of his residuary estate. Included in the latter were shares in a Singapore company. The shares continued in the name of the deceased father in the company register, but the company at the direction of the trustees paid one-third of the dividends direct to the taxpayer, less Singapore income tax. The taxpayer claimed that the income was exempt income under s. 23 (q). If the income received by the taxpayer was a dividend received by her as shareholder in the company, then by virtue of s. 44 (1A) the dividends would be part of her assessable income unaffected by the provisions of s. 23 (q). That would have been sufficient to establish a liability in the taxpayer to Australian income tax on the amount in question. However the case proceeded on the basis that the taxpayer did not receive the dividends as a shareholder in the company although the ultimate source of the income was the distribution of the dividend. Dixon C.J. stated [65] :

[221]

The question, then, is whether this decision is distinguishable. It has primarily been submitted that the applicability of s. 260 was not argued in the I.M.F. Case [75] . But if the relevant facts are not distinguishable I do not think that this is a valid reason for not following the earlier decision it being one on the applicability of a fiscal Act. What such a case actually decides is that in certain circumstances there is a certain liability, or freedom from liability, to assessment of income tax, whatever be the expressed reasons for that decision. If in another case the circumstances cannot be relevantly distinguished then the same result should follow if a necessary and most desirable uniformity in the principles of assessment of tax is to be achieved and preserved. The question is not so much whether the applicability of s. 260 was argued but whether it was overlooked and the decision given per incuriam. That is not suggested. It is true that the applicability of s. 260 involves a degree of factual inquiry and inference and therefore to a considerable extent its applicability is often a question of fact. But if the facts in one case are not relevantly distinguishable from those in another the same conclusion should follow partly because the ultimate conclusion is, or largely depends on, a question of law as to the true construction and legal effect of s. 260 and partly for the reason to which I have earlier adverted, the need for uniformity in application of a taxing Act. It seems to me that this need is particularly strong in the case of a statutory provision as notoriously difficult to interpret and apply as s. 260. If the court has held that a particular course of operations has a particular fiscal effect and if it has thereby expressly or even impliedly found that it is not a contract, agreement or arrangement falling within s. 260 it is for the legislature to make whatever special provision it thinks is necessary to displace the effect of the decision. There is now a special provision in the Act respecting rebate on dividends paid as part of a dividend-stripping operation. See s. 46A introduced by Act No. 47 of 1972 and subsequently amended.

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