ICI Alkali (Australia) Pty Ltd v Commissioner of Taxation (Cth)

High Court of Australia BARWICK CJ Gibbs and Mason JJ ICI Alkali (Australia) Pty Ltd v Commissioner of Taxation (Cth)

ORDER Order Questions referred to be answered as follows:— Question 1: Do s 85 and s 88B of the Income Tax Assessment Act 1936-1966 and of the Income Tax Assessment Act 1936-1967 apply to a lease within the meaning of those sections granted before 6 November 1954? A— Sections 85and 88B(2)and (3) so apply, but s 88B(1) does not so apply. Question 2: i (a) Did the taxpayer acquire by assignment on or about 17 August 1937 a lease of area no 234 within the meaning of the said sections? (b) Did the taxpayer acquire by grant on 1 April 1949 (or in the month of August 1949) a lease of area no 234 within the meaning of those sections? (c) If part (a) is answered affirmatively, did the lease of area no 234 that the taxpayer acquired on or about 17 August 1937 subsist for the purposes of the said sections after 1 April 1949? Answer: (a) Yes. (b) Yes. (c) No. Question 3: (a) Did the taxpayer acquire by assignment or grant in or about the year 1937 a lease of area no 389 within the meaning of the said sections? (b) Did the taxpayer acquire by grant on or about 1 January 1957 a lease of area no 389 within the meaning of the said sections? (c) If part (a) be answered affirmatively did the lease of area no 389 that the taxpayer acquired in or about the year 1937 subsist for the purposes of the said sections after 1 January 1957? Answer: (a) Yes, by grant. (b) Yes, by grant. (c) No. Question 4: Did the taxpayer acquire by grant in or about the month of April 1956 a lease of area no 600 within the meaning of the said sections? A—Yes. Question 5: (a) Does s 85(1) allow the deduction of an amount which was paid by a taxpayer in effecting improvements upon land which is the subject of a lease assigned by the taxpayer when improvements were effected and paid for by the taxpayer before the commencement of the lease assigned by the taxpayer? (b) If part (a) be answered affirmatively, should any of the amounts claimed by the taxpayer be allowable deductions in respect of improvements effected upon: (i) area no 234; (ii) area no 389; be disallowed on the ground that they were effected and paid for by the taxpayer before the commencement of leases assigned by the taxpayer on or about 27 August 1966? Answer: (a) Yes. (b) Unnecessary to answer. Question 6: (a) Does s 88B of the said Acts require that an election under subs (5) must be made not only by the parties to the assignment of a lease but also:— (i) where the assignor acquired the lease by assignments by the parties to the previous assignment at or about the date of that assignment; (ii) where the assignor acquired the lease by grant by the parties to the grant at or about the date thereof? (b) Should any of the amounts claimed by the taxpayer as allowable deductions as aforesaid be disallowed on the ground that at or about the date the taxpayer acquired leases of area no 234, area no 389 and area no 600 no election was made under s 88B(5) of the said Acts in respect of the said leases? Answer: (a) The election must be made by the parties to the grant of a lease if s 85 is to apply to an assignment or surrender by the person to whom the lease was granted. Where the claim to deduct is by a person to whom the lease has been assigned, the election must have been made by that person and the person who assigned the lease to him within the time calculated under s 88B(5) in relation to the time of the transactions between those persons. (b) (i) In the case of area no 234, No. (ii) In the case of areas nos 389 and 600, Yes, the whole amount so claimed should be disallowed. Question 7: Where an application was made under the Mining Act 1930 of the State of South Australia, as amended, for a miscellaneous (salt) lease and the Minister approved of the grant of the lease but no document in the form or to the effect of Form I in Sch C to the Regulations made under the said Act was issued by the Governor of the said State in respect of the land for which approval was given, is there a mining lease in respect of the said land within the meaning of s 88B(7) of the said Act? A—Yes. Question 8: Should any of the amounts claimed by the taxpayer as allowable deductions as aforesaid be disallowed on the ground that the taxpayer did not on or about 27 August 1966:— (a) assign a lease of area no 234; (b) assign a lease of area no 389; (c) assign a lease of area no 600; within the meaning of s 85(1) of the said Acts? A—No. Question 9: (a) Is the whole or any part and what part of the sum of $26,540 specified in para 16 of the statement of facts an allowable deduction from the assessable income of the taxpayer for the year of income ended 30 September 1966? (b) Is the whole or any and what part of the sum of $35,250 specified in para 23 of the statement of facts an allowable deduction from the assessable income of the taxpayer for the year of income ended 30 September 1966? (c) Is the whole or any and what part of the sum of $159,288 specified in para 29 of the statement of facts an allowable deduction from the assessable income of the taxpayer for the year of income ended 30 September 1966? Answer: (a) Yes, the whole sum. (b) and (c) No; no part of the sum is an allowable deduction. Appeal No 58 of 1976 dismissed. Appeal No 59 of 1976 allowed in part, in accordance with the answers given to the questions referred. Barwick CJ