Shell Co of Australia Ltd v Commissioner of Taxation [1949] HCA 29

High Court of Australia Latham C.J. Rich, Dixon, McTiernan and Webb JJ. Shell Co of Australia Ltd v Commissioner of Taxation [1949] HCA 29

ORDER Questions in case answered—(1) Yes. (2) No. (3) Unnecessary to answer. Costs of case to be costs in the appeal. Case remitted to Latham C.J.

Cur. adv. vult.

The following written judgments were delivered:—

Aug. 4 Latham C.J.

The Shell Company of Australia Limited in the year ending 31st December 1943, which was the accounting year of the company for income-tax purposes in Australia, carried on business in Australia and the United Kingdom. English and Australian legislation provides for a rebate in the amount of tax payable in each country in order to avoid double taxation. The effect of the joint operation of the provisions is that the taxpayer pays tax on the amount of income taxable in both countries at the higher of the rates applicable in those countries. In each country a rebate is allowed. The amount of rebate depends upon the relation of the Commonwealth rate of tax to the British rate of tax. The Commonwealth rate of tax is ascertained by dividing the total amount of income tax by the amount of the total taxable income. Income tax in Australia includes ordinary income tax and (in the case of a company which has a taxable income of more than £5,000) super tax, and also a further tax upon undistributed income ascertained in the manner prescribed by Part IIIA. of the Income Tax Assessment Act 1936-1944—ss. 160A. to 160E. For the purpose of ascertaining this income taxes "paid" (or, at the option of the company, taxes "payable") in the year of income are deducted. Thus the amount of these taxes enters into the calculation of the rebate allowed in Australia. A war-time (company) tax is imposed upon the taxable profit of a company as defined in the War-time (Company) Tax Assessment Act 1940-1944. "Taxable profit" is defined in the Act as meaning the amount remaining after deducting from the taxable income of the accounting period as assessed under the Income Tax Assessment Act—"(a) the income tax payable in respect of that taxable income," and certain other amounts. Thus the amount of war-time (company) tax is affected by the amount of income tax payable in respect of taxable income of the year.