Mutual Life and Citizens' Assurance Co Ltd v Commissioner of Taxation [1959] HCA 21

OF AUSTRALIA.

[HIGH COURT OF AUSTRALIA.]

AL LIFE AND CITIZENS' ce APPELLANT ;

_ ANCE COMPANY LIMITED. . . AND COMMISSIONER OF TAXATION é 5 RESPONDENT.

Tax (Cth.)—Assessable income—Ezxempt income—Income from sources out- side Australia—Not exempt from tax in country where derived—Exempt from tax under local legislation—Life assurance company—Branch in United King- dom—Investments in securities—Income therefrom not chargeable to tax in United Kingdom—Company liable to pay tax in United Kingdom—Calculated on formula which disregards exempt income for purpose of ascertaining statutory "proportion—Whether income from securities exempt in United Kingdom— Income Tax Act 1918 (Imp.), 8. 46 (1), schedule C. and 2 (d), schedule D, Case II, r. 3—Income Tax Assessment Act 1936 (Cth.), 8. 23 (q).

Section 23 of the Income Tax Assessment Act 1936 (Cth.) provides :— "The following income shall be exempt from income tax :— . . . (g) income derived by a resident from sources out of Australia, where that income is 'not exempt from income tax in the country where it is derived . . . ".

_ A life assurance company resident in Australia and maintaining a branch in the United Kingdom held as part of its life assurance fund investments in certain United Kingdom war loan securities and securities of British possessions the income from which was payable and paid in the United Kingdom. This income was exempted from United Kingdom income tax under s. 46 (1) and r. 2 (d) of the Rules applicable to schedule C of the Income Tax Act 1918. The company, however, was required by the revenue author- ities in the United Kingdom to pay, and did in fact pay, income tax, computed under r. 3 of the rules applicable to Case III of schedule D, on that " portion " of the total income of the investments of the life assurance fund which bore the same proportion to that total income as the amount of premiums received from policy holders resident in the United Kingdom and certain other policy holders bore to the total amount of premiums received by the company.