Brookton Co-operative Society Ltd v Commissioner of Taxation (Cth) [1981] HCA 28

High Court of Australia Gibbs C.J. Mason, Murphy, Aickin and Wilson JJ. Brookton Co-operative Society Ltd v Commissioner of Taxation (Cth) [1981] HCA 28

ORDER Appeal dismissed with costs. Cross-appeal dismissed with costs. Applications for special leave to appeal refused with costs.

Cur. adv. vult.

The following written judgments were delivered:—

1981, June 12 Gibbs C.J.

I have had the advantage of reading the reasons for judgment prepared by my brother Mason and those prepared by my brother Aickin. I agree with them that the appellant company did not fall within the description of a "co-operative company" contained in s. 117 (1) of the Income Tax Assessment Act 1936 Cth, as amended. In other words it was not "a company which is established for the purpose of carrying on any business having as its primary object or objects one or more of the following: (d) the rendering of services to its shareholders". Since the material facts and the questions raised are stated in the judgments of my brethren I may express my reasons very shortly. The evidence establishes that one purpose for which the appellant was established was to render services to its shareholders in relation to the purchase of wine, but that the dominant purpose for which it was established was to hold shares in subsidiary companies which would engage in share trading and dividend stripping, so that both the appellant and the subsidiaries would benefit, from the point of view of income tax, from the circumstance that the appellant was a public company. This conclusion of fact disposes of the matter; the appellant does not answer the description contained in s. 117 (1). The main argument presented for the appellant was that the appellant was established for the purpose of carrying on only one business—that relating to the purchasing of wine—and that such business was one whose primary object was the rendering of services to its shareholders. It was then said that the other purpose for which the appellant was established, not being the purpose of carrying on a business, was irrelevant. This argument proceeds on a view of the effect of the sub-section which cannot be accepted. The relevant words of s. 117 (1) require that two questions should be considered—first, whether the company is established for the purpose of carrying on any business, and, if so, whether such business had as its primary object or objects any one of those described in the lettered paragraphs of the sub-section. The use of the present tense in the phrase "is established" makes it necessary to consider the purpose for which the company was carried on in the relevant income year, rather than at the time of its formation. If the company is established for a purpose other than that of carrying on a business, it does not answer the description. It is therefore immaterial whether or not the activities which the appellant carried on in relation to its subsidiaries could be described as a business. If they could be so described, the business did not have as its primary object the rendering of services to its shareholders, and on no view could it be said that the purpose for which the company was established at the relevant times was that of carrying on a business of the kind described in s. 117 (1).