Dickson v Commissioner of Taxation (NSW)

(1925) 36 CLR 489
26 SR(NSW) 292
42 WN(NSW) 155
[1925] R & McG 168
31 ALR 393

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(Judgment by: Knox CJ)

Between: Dickson
And: Commissioner of Taxation (NSW)

Court:

Judges:
Knox CJIsaacs J
Higgins J
Rich J
Starke J

Subject References:
Income tax (NSW)

Judgment date: 24 August 1925

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Judgment by:
Knox CJ

The first question raised by this appeal is whether the decision of Cohen D.C.J. that the sum of 1,916 pounds received by the company - the Adelong Gold Estates No Liability - in the year ending on 31st October 1919 was taxable income of the company within the meaning of the New South Wales Income Tax (Management) Acts 1912-1918, is correct in law. (at p494)

The facts found by the learned District Court Judge are set out in the special case stated by him for the opinion of the Supreme Court of New South Wales as follows: - (Par. 4 of the case was here set out.) (at p495)

Sec. 9 of the Act provides that income tax shall be paid in respect of "taxable income" which has been received by any person during a given period. By sec. 4 "taxable income" means the amount of income remaining after any deductions allowed by the Act have been deducted from the income of any taxpayer. "Income" means "income derived from any source in the State" (of New South Wales) "or earned in the State." By sec. 10 it is provided that nothing in the Act shall apply to (g) income derived from sources outside the State. The question for decision, therefore, is whether the facts found by Cohen D.C.J. can support his conclusion that the "source" of the sum of 1,916 pounds which was undoubtedly received as income by the company was in New South Wales. (at p495)

On the facts stated the only acts done in New South Wales were:

(1)

production of certain gold;

(2)

putting the gold so produced in course of transmission to the Mint;

(3)

receiving from the Mint the memorandum of out-turn; and

(4)

putting this document in course of transmission to the manager of the company in Melbourne. (at p495)

It is not alleged that the sovereigns so sold were coined from gold produced from the company's mine or from any other mine in New South Wales, but the respondent contends that the production of gold from the company's mine is the "source" of this profit, because the permission to buy and export sovereigns was dependent on the production of gold by the company, and the company's mine from which the gold was produced was in New South Wales. In other words, the respondent's contention is that, as the profit could not have been made but for the production of gold by the company and as the gold produced by the company was produced in New South Wales, the source of the profit was in New South Wales. It is admitted that this profit is not derived from the sale of the gold produced in New South Wales. That gold is sold to the Mint, and the profit made on that sale is admittedly income taxable in New South Wales. In considering the meaning of the phrase "income derived from any source in the State" of New South Wales, it must, I think, be taken that "derived" means "directly derived" (see Lovell & Christmas Ltd. v. Commissioner of Taxes (1908) AC, at p 52; Nathan v. Federal Commissioner of Taxation (1918) 25 CLR, at p 189 ), and that the source of the income must be its real source as a hard practical matter of fact (Nathan's Case; Studebaker Corporation of Australasia Ltd. v. Commissioner of Taxation (N.S.W.) (1921) 29 CLR 225 ). (at p496)

In the present case the immediate source of the income in question was the sale of sovereigns in a foreign country. The more remote source was the purchase in Victoria and export thence of sovereigns under permission of the Commonwealth Government. It is true that that permission was obtained because the company had produced from its mine in New South Wales and sold to the Mint a given quantity of gold, but, in my opinion, this fact affords no support for a finding that the production of the gold was, in any relevant sense, the source of the profit derived from the sale of the sovereigns. (at p496)

I think Mr. Leverrier was right in saying that the only way in which the receipt of this income was connected with or attributable to any act done in New South Wales was that the production in New South Wales of a certain quantity of gold supplied the motive or reason for permission being granted to purchase and export the sovereigns the sale of which was the immediate source of the income. (at p496)

For the reasons given by my brother Gavan Duffy and myself in Mount Morgan Gold Mining Co. v. Commissioner of Income Tax (Q.) (1922-23) 33 CLR 76 , I think the decision in Commissioners of Taxation v. Kirk [1900] AC 588 is not applicable in the facts of this case. (at p496)

In my opinion the appeal should be allowed and the questions in the special case answered as follows: (1) No; (2) No; (3) Yes. (at p496)