Macmine Pty Ltd v Commissioner of Taxation (Cth); Commissioner of Taxation (Cth) v Macmine Pty Ltd

High Court of Australia GIBBS, Stephen, Jacobs, Murphy, AICKIN JJ Macmine Pty Ltd v Commissioner of Taxation (Cth); Commissioner of Taxation (Cth) v Macmine Pty Ltd

ORDER Order Appeal No 203 of 1976:— Appeal allowed with costs. Cross-appeal dismissed with costs. Order of the Supreme Court of New South Wales (Sheppard J) set aside and in lieu thereof order that the appeal be allowed with costs, the assessment be set aside and the matter be remitted to the Commissioner to be dealt with in accordance with the judgment of this court. Appeal No 204 of 1976:— Appeal allowed in so far as it relates to the profits made by the respondent from the sale of 900 rights to acquire ordinary shares in Petroleum Securities Australia Ltd. Appeal otherwise dismissed. Respondent to pay the costs of the appeal limited to the issues on which the appeal succeeded. Order of the Supreme Court of New South Wales (Sheppard J) varied by deleting the words: "and from the sale of 900 rights to acquire ordinary shares in Petroleum Securities Australia Ltd". Appeal No 205 of 1976:— Appeal dismissed with costs. Gibbs J

Before the Court are three appeals from orders made in the Supreme Court of New South Wales by Sheppard J who heard and determined appeals by Macmine Pty Ltd (Macmine) against assessments to income tax in respect of the years ended 30 June 1968, 1969 and 1970. One of the appeals (No 203 of 1976), which relates to the year ended 30 June 1969, is brought by Macmine and a notice of cross-appeal has been lodged by the Commissioner of Taxation. The appeals in respect of the other two income years (Nos 204 and 205 of 1976) are brought by the Commissioner.

Macmine was formed in November 1964 as a family company. Its shareholders and directors were Mr Kenneth McMahon and his wife. Mr McMahon was the chairman and managing director of a private company, Kenneth McMahon and Partners Pty Ltd (McMahon Partners), which carried on the business of mining consultants and mine managers. At all material times Macmine owned two-thirds of the shares in McMahon Partners, and regarded that company as a wholly-owned subsidiary, although the formalities for the purchase of the remaining one-third of the shares had not been completed, and although, after the middle of 1969, Macmine was entitled to only one-third of the distributable profits made by that company. Mr McMahon arranged the formation of three other companies, Mineral Securities Australia Ltd (Minsec), Petroleum Securities Australia Ltd (Petsec) and Pexa Oil NL (Pexa). Mr McMahon was chairman of directors of all of these companies: he greatly influenced, if he did not control, their activities and the formation of their purposes.