Commissioner of Taxation (Cth) v Brohier [1959] HCA 58

High Court of Australia Menzies J. Commissioner of Taxation (Cth) v Brohier [1959] HCA 58

ORDER Appeal from the decision of the Board of Review allowed. Decision of the Board of Review set aside and the assessment of the Commissioner confirmed.

Cur. adv. vult.

Menzies J delivered the following written judgment:—

Nov. 4 Menzies J

In this appeal, the Commissioner as appellant and the taxpayer as respondent both complain of a decision of the Board of Review No. 2 which allowed to some extent the taxpayer's objections to assessments for the years ended 30th June 1952 and 30th June 1953. The questions which arise are whether the taxpayer was entitled to any credit under s. 45 of the Income Tax and Social Services Contribution Assessment Act 1936-1953 Cth and, if so, to what credit was he entitled in each year. The Board decided that he was entitled to a credit in each year and against this part of its decision the Commissioner appeals; the Board also decided that for the year 1952 the credit allowable was 993 rupees and not 3,307 rupees as claimed by the taxpayer, and for the year 1953 the credit allowable was 185 rupees and not 894 rupees as claimed by the taxpayer. The taxpayer is dissatisfied with this part of the Board's decision.

The taxpayer, a resident of Australia since 1948, was during the years in question a shareholder in a number of companies resident in Ceylon, where he himself had lived before coming to Australia. In the year ended 30th June 1952 the dividends declared by the Ceylon companies in which the taxpayer was a shareholder in respect of his shares totalled 10,471 rupees (equivalent to £993), but the amount received by the taxpayer by way of dividends was 3,307 rupees less because each company, as it was entitled to do, deducted and retained tax in accordance with the provisions to be mentioned later. In the following year the corresponding figures were 3,642 rupees (£335) and 894 rupees. The tax was so deducted and retained pursuant to ss. 43 (1) and 43 (1A) of the Ceylon Income Tax Ordinance, which provided that every resident company should be entitled to deduct tax at specified rates from the amount of any pecuniary dividend becoming payable to a shareholder during a year of assessment. In each year each company, in accordance with s. 43 (2) of the Ordinance, issued to the taxpayer, together with the dividend warrant or cheque, a statement showing (a) the gross amount which, after deduction of the tax appropriate thereto, corresponded to the net amount actually paid; (b) the rate and the amount of tax appropriate to such gross amount; and (c) the net amount actually paid. For each year, the taxpayer made in Ceylon his own return for income tax purposes. For the year ended 31st March 1952 the total income returned was 16,087 rupees, including gross dividends. Upon this taxable income there was assessed tax at 18%—2,895 rupees; but from this there was deducted for relief under s. 45 (2) of the Ordinance 1,266 rupees, leaving as net tax due 1,628 rupees. For the next year the corresponding figures were, for taxable income, 11,971 rupees; tax, 2,154 rupees; relief under s. 45 (2), 1,161 rupees; net tax due, 993 rupees. The foregoing figures appear in the notices of repayment issued by the Ceylon Income Tax Office to the taxpayer. The taxpayer received notices of repayment rather than notices of assessment, because in each year he produced to the Ceylon Income Tax Office the statements obtained under s. 43 (2) as aforesaid, showing the aggregate of the deductions of tax made by the companies paying him dividends during the preceding year. For the year ended 31st March 1952 the notices of repayment showed that during the year ended 31st March 1951, 3,974 rupees had been deducted as aforesaid, and this was described as "tax paid at source in the year ended 31st March 1951". The corresponding figure for the year ended 31st March 1953 was 3,307 rupees, described as "tax paid at source in year ended March 31, 1952". In each case it will be noticed that what had been deducted exceeded the net tax due and the difference between the deduction and the net tax due for the year 1952 was 2,345 rupees, and for the year 1953, 2,313 rupees. These amounts were described as "tax repayable" and the notice of repayment in each case contains the statement that the sum shown as tax repayable was being refunded to the taxpayer. It is clear that in Ceylon the taxpayer was regarded as entitled to the refunds that he received as aforesaid, but, having regard to the second proviso to s. 84 of the Ordinance which deals with refunds of tax paid in excess, it was not clear to me under what authority the refunds were made. In these circumstances, it was agreed by the parties as follows: "Under s. 84 of the Ceylon Ordinance, if it is proved to the satisfaction of the Ceylon Commissioner by a claim duly made in writing within three years of the end of a year of assessment that any person has paid tax by deduction or otherwise (within the meaning of the Ceylon Ordinance) in excess of the amount with which he was properly chargeable for that year, that person is entitled to have refunded the amount so paid in excess. The use of the word "set-off" in section 43 (3) and (5) and section 44 (3) does not deprive the taxpayer of the right of refund of such excess." The taxpayer's Australian income tax return showed gross dividends from the Ceylon companies in which he was a shareholder together with the following note: "Ceylon income tax at the rate of 18% will be paid on these dividends (Australian rebate requested accordingly)". The rebate referred to was, no doubt, a set-off under s. 45, but this, for the two years in question, the Commissioner refused to allow. Instead, he included as part of the taxpayer's assessable income the gross dividends less 18%, which was, as the taxpayer's note indicates, the rate of Ceylon tax with which the taxpayer was chargeable on his taxable income which included the dividends. It is to these assessments that the taxpayer objected. Upon the hearing of his objections, the Board of Review decided that, in the circumstances, the taxpayer was entitled to a credit under s. 45, but decided further that the credit allowable was not the aggregate of the amounts of tax deducted by the various companies from the dividends as they were paid, but the tax assessed and paid by the taxpayer in the years ended 30th June 1952 and 1953, being, as the Board has found, 993 rupees for the first year and 185 rupees for the second year.