GP International Pipecoaters Pty Ltd v Commissioner of Taxation (Cth) [1990] HCA 25

High Court of Australia Brennan, Dawson, Toohey, Gaudron and McHugh JJ. GP International Pipecoaters Pty Ltd v Commissioner of Taxation (Cth) [1990] HCA 25

ORDER Appeal dismissed with costs.

Cur. adv. vult.

The Court delivered the following written judgment:—

June 20 Brennan, Dawson, Toohey, Gaudron and McHugh JJ.

The appellant taxpayer was assessed to income tax and to undistributed profits tax for the income year ended 30 June 1983 on the footing that its assessable income included the sum of $3,117,291, described in an adjustment sheet as "mobilisation deposits". It was assessed to income tax for the income year ended 30 June 1984 on the footing that its assessable income included the sum of $1,558,639, also described in an adjustment sheet as "mobilisation deposits". The sum of these two amounts, $4,675,930, was received by the taxpayer from the State Energy Commission of Western Australia ("S.E.C.W.A.") under a contract which described that sum as "establishment costs". The taxpayer objected to the relevant assessments claiming that the moneys received as establishment costs did not form part of its assessable income. The objections having been disallowed, the taxpayer appealed unsuccessfully to the Supreme Court of Western Australia (Pidgeon J.) and to the Full Court of the Federal Court of Australia. In its appeal to this Court, the question is whether the amount received by the taxpayer as establishment costs is assessable income falling within s. 25(1) of the Income Tax Assessment Act 1936 Cth ("the Act"). The Commissioner does not rely on s. 26(a) as that provision stood in the relevant income years.

The contract related to the external and internal coating of pipes to be used to transport natural gas from Dampier to Perth and the south-west area of Western Australia. Tenders had been called by S.E.C.W.A. for the external and internal coating of the pipe required. A joint tender, submitted by Gardner Perrott C.K.K. Pty. Ltd. ("G.P.C.K.K.") and Commercial Resins-Indeng Pty. Ltd. ("C.R.I."), was accepted by S.E.C.W.A. on 9 December 1981. The tender price, based upon the estimated quantities of pipe required, was $31,172,910. The several components of the price were set out in the several schedules of rates to be charged for the respective units of equipment or service. The taxpayer was incorporated by G.P.C.K.K. and C.R.I. on 15 January 1982 to take an assignment of their interests under the accepted tender and to enter into and to perform the contract which was to embody the agreed terms. The tender price of $31,172,910 was translated into the contract as the contract price for the several categories of work to be done under the schedule of rates set out in Sched. B.