Archer Brothers Pty Ltd v Federal Commissioner of Taxation [1953] HCA 23

High Court of Australia McTiernan J. Williams A.C.J. Kitto and Taylor JJ. Archer Brothers Pty Ltd v Federal Commissioner of Taxation [1953] HCA 23

ORDER Appeal dismissed with costs.

Cur. adv. vult.

The following written judgment was delivered by:—

May 1, 1953 McTiernan J.

The appellant, a grazing company incorporated in Queensland, was assessed by the respondent to "additional tax" as a "private company" on the basis that it had not made a sufficient distribution of its income of the year ended 30th June 1949. The assessment purported to be made in accordance with the Income Tax Assessment Act 1936-1948, Pt. III., Div. 7.

The parties agreed upon a statement of facts which was put in evidence. The statement is Exhibit A.

It is sufficient to mention at this stage, that on 10th December 1948, the appellant went into voluntary liquidation and the assessment is based upon income derived during the periods of the year of income before and after the liquidation commenced. The appellant admitted that at all material times before 10th December 1948, it was a private company for the purposes of the Income Tax Assessment Act 1936-1948.

The liquidation proceeded subject to The Companies Acts 1931 to 1942 Q. Pt. VII.

The appellant relies upon the liquidation to deprive the respondent of authority to assess it to tax under Div. 7 of the Act. It does not claim that upon liquidation it fell out of the terms of the definition of a private company in s. 103. What the appellant claims by its grounds of objection is in effect that by reason of the liquidation it no longer had power to make such a distribution of its income of the year of income as is contemplated by s. 104, and, therefore, the respondent had no power under the section to make the assessment.

Section 47 of the Act, in my opinion, is an answer to the appellant's objection. This section deals with distributions made to the shareholders of a company by a liquidator in the course of winding up the company. It deals with such distributions to the extent to which they represent income derived by the company, whether before or during liquidation, other than income which has been properly applied to replace a loss of paid-up capital. The section declares that such distributions shall, "for the purposes of this Act", be deemed to be dividends paid to shareholders by the company out of profits derived by it. The words "the purposes of this Act" bring in Pt. III Div. 7. It follows that the word "dividends" in this division includes distributions to shareholders of a company by a liquidator, in the course of winding up the company, which s. 47 assimilates, for the purposes of the Act, to dividends paid to shareholders by a company out of profits. It follows from the provisions of s. 47, that it would be contrary to the clearly expressed intention of the Act to exclude a private company from Div. 7 merely because at the material time it was in voluntary liquidation. In my opinion the appellant was liable to be assessed under this division even though it went into voluntary liquidation during the year of income.