Bank of New South Wales Savings Bank Ltd v Commissioner of Taxation [1962] HCA 43

High Court of Australia Dixon C.J. Kitto, Taylor, Menzies and Owen JJ. Bank of New South Wales Savings Bank Ltd v Commissioner of Taxation [1962] HCA 43

ORDER The question submitted for the opinion of the Full Court is answered that the appellant is entitled to a rebate in its assessment calculated in pursuance of Section 160AB of the Income Tax and Social Services Contribution Assessment Act upon the sum of £1,163,988. Costs of the case stated reserved to be dealt with by the judge disposing of the appeal.

Cur. adv. vult.

The following written judgments were delivered:—

August 29 Dixon C.J.

Section 160AB of the Income Tax and Social Services Contribution Assessment Act 1936-1960 Cth provides that a taxpayer shall be entitled to a rebate in his assessment of an amount of two shillings for every pound of interest which is included in his taxable income and which is derived from bonds, debentures, stock or other securities issued by the Government of the Commonwealth and the Government of a State and certain other bodies. There are certain exceptions, limitations and qualifications which are immaterial.

The appellant Bank is a taxpayer who in the year of income derived large sums of assessable income from the sources mentioned. The sums the taxpayer so derived greatly exceeded the amount of its taxable income. The reason is, of course, that the allowable deductions from its assessable income were sufficient to reduce the taxable income to an amount considerably below the aggregate sum received from interest on Commonwealth securities. The Commissioner of Taxation in calculating the rebate declined to treat the total interest contained in the assessable income as "included" in the taxable income. He took the view that no sum could be "included" in the taxable income which exceeded the amount of the taxable income. The taxpayer claims that, on the contrary, for the purposes of calculating the rebate of two shillings, the whole of the interest included in the assessable income is to be regarded as included in the taxable income. I have stated the argument advisedly in abstract terms but perhaps figures should be given in order to make it clear by illustration. Approximately the amount of the assessable income was £6,702,000. Of that, £3,021,000 consisted of interest received from Commonwealth securities. The allowable deductions amounted to £5,538,000. The taxable income was therefore approximately £1,164,000. The Commissioner calculated the rebate of two shillings in the pound, not on the sum of £3,021,000 as claimed by the taxpayer, but on the net figure of £1,164,000.