MP Metals Pty Ltd v Commissioner of Taxation (Cth) [1968] HCA 89

High Court of Australia Windeyer J. Barwick C.J. McTiernan, Kitto and Menzies JJ. MP Metals Pty Ltd v Commissioner of Taxation (Cth)

ORDER Appeal dismissed with costs. Assessment confirmed. Appeal dismissed with costs.

Cur. adv. vult.

The following written judgment was delivered:—

1967, April 28 Windeyer J.

This is an appeal by a taxpayer, M.P. Metals Pty. Limited, from a decision of the Commissioner of Taxation who disallowed its claim to certain deductions in the assessment of its income for the year ended 30th June 1965. The taxpayer carries on business as a scrap-metal merchant. In the course of that business it collects scrap metal, the offcuts and discards of motor-car body making and the like. It sells this to buyers for use in steel making and foundry processes having first cut it into sizes suitable for buyers' requirements. Much of the loose scrap it collects, especially irregular-shaped, curved, or bent pieces, is pressed by mechanical presses into bundles or bales and sold as "bundled scrap" or "baled scrap". "Bale" is the term commonly used in Australia, "bundle" in America. Scrap brought together under pressure adheres together thereafter by reason of its twisted, irregular and entangled character. In this baled form it is more conveniently handled than when loose; and, because of its greater density, it is more suitable as a charge for foundry furnaces.

The question is whether amounts expended by the taxpayer in the purchase of equipment it used for the treatment of scrap in these ways were expended for the purchase of "new manufacturing plant" within the meaning of s. 62AA of the Income Tax and Social Services Contribution Assessment Act 1936-1965 Cth. That section, first enacted in 1962, is long and at first sight complicated. Put briefly, it provides that a manufacturer who incurs expenditure of a capital nature on new manufacturing plant shall be allowed an amount equal to one-fifth of that expenditure as a deduction from his assessable income of the first year in which the plant was used or installed ready for use. The deduction is, with some qualifications, in addition to the annual allowance for depreciation under other and older provisions of the Act. It is allowed only in respect of "manufacturing plant", the term it uses for articles or plant used, in one of the ways it describes, in or in conjunction with manufacturing operations. It relates only to new articles or plant of a capital nature. The word "new" is defined as meaning "not having previously been either used by any person or acquired or held by any person for use by that person". Second-hand equipment is thus excluded, although it be newly acquired by the taxpayer. It is not disputed that the various articles in question in this case were all new and that the expenditure by which they were acquired was of a capital nature.