Dickson v Commissioner of Taxation (NSW)
(1925) 36 CLR 48926 SR(NSW) 292
42 WN(NSW) 155
[1925] R & McG 168
31 ALR 393
(Judgment by: Starke J)
Between: Dickson
And: Commissioner of Taxation (NSW)
Judges:
Knox CJ
Isaacs J
Higgins J
Rich J
Starke J
Subject References:
Income tax (NSW)
Judgment date: 24 August 1925
Judgment by:
Starke J
The Court of Review constituted under the Income Tax (Management) Act 1912 of New South Wales is empowered to state a case for decision by the Supreme Court on any question of law arising before the Court. This appeal is from a decision of the Supreme Court given upon a case so stated. I agree that the Court must state the facts - not the primary or evidentiary facts but the ultimate facts - necessary for the determination of the question or questions of law stated by the case (see Merchant Service Guild Case (No. 1) (1913) 16 CLR, at pp 621-625 ). The Court of Review has in this case set forth, in my opinion, both the evidentiary facts and (in par. 6) the ultimate conclusions in fact and in law. Now, the facts so stated may be thus summarized:
The Adelong Gold Estates No Liability is a mining company incorporated in the State of Victoria under the Companies Act of 1890. The objects of the Company are somewhat extensive, but, speaking broadly, they are to acquire property, real or personal, for the purpose of mining for gold and other metals and mineral substances, and to sell its products in Australia and elsewhere. The place where the central management and control of the business actually abides is undoubtedly Victoria, in which State the directors and shareholders meet and settle the company's affairs. The company acquired a mine in the State of New South Wales, which it works for the purpose of obtaining gold; but whether this is the only mine possessed by it is not stated in the case. Prior to the War the company was able to dispose of its gold as it thought proper. But in 1915 the Commonwealth Government prohibited the export of gold, which practically compelled the company to sell its gold to the Royal Mint at the standard price per ounce. And as the price of gold appreciated in the East and elsewhere, this restriction on export was regarded by gold producers as a hardship.
An arrangement was therefore made with the Treasurer of the Commonwealth whereby he permitted gold producers associated together in a company incorporated in Victoria and called the Gold Producers' Association, to export from Australia coin or bullion equivalent to the amount of gold produced by its members and supplied to the Royal Mint. This arrangement is not so clearly set forth in this case as it was in the case of Mount Morgan Gold Mining Co. v. Commissioner of Taxes (Q.) (1922-23) 33 CLR 76 , but the parties agreed that the Court might treat any relevant facts as to procedure set forth in that case as stated in this case, and we are able to say that the arrangement for export was substantially the same in both cases. It is unnecessary to repeat here the various steps by which the arrangement was carried out, and I merely refer to the facts stated in the Mount Morgan Case. But the facts principally relied upon in the present case were these: that the Adelong Company sold its gold to the Royal Mint in Victoria and was there paid, that the arrangements made by the Gold Producers' Association for the export of coin and bullion equivalent in amount to this gold were also made in Victoria, that the actual export took place from Victoria, and that the sovereigns were disposed of in the East and the proceeds of the realization remitted to Victoria to the Gold Producers' Association, which distributed the same amongst its members pro rata according to its articles of association. (at p510)
The amount received by the Adelong Company from the Association during the year ending on 31st October 1919 was 1,916 pounds. The company was, through its public officer, Dickson, assessed to income tax in respect of this sum, under the Income Tax Acts 1912-1918 of New South Wales; and the question is whether it was rightly so assessed. Both the Court of Review and the Supreme Court of New South Wales answered that question in the affirmative, and the company now, pursuant to the special leave granted to it, appeals to this Court against these determinations. (at p510)
The matter falls for decision under the Income Tax (Management) Acts 1912-1918 of New South Wales, which are substantially the same as the Acts under which Kirk's Case [1900] AC 588 and Meeks' Case (1915) 19 CLR 568 were decided. The question is, what income was arising or accruing to the company from the business operations carried on by it in New South Wales (Kirk's Case (1900) AC, at p 593 ). Now, there is evidence upon which the Court of Review might find that the company engaged in a series of operations in earning its income - the recovery of gold in New South Wales, its realization outside New South Wales, and the receipt of the proceeds also outside New South Wales; and its decision involves that finding. As Lord Davey observed in Kirk's Case (1900) AC at p 592, all these operations "are necessary stages which terminate in money, and the income is the money resulting less the expenses attendant on all the stages." Or, to repeat what was said by my brother Isaacs in Meeks' Case (1915) 19 CLR, at p 588 and referred to by me in the Mount Morgan Case (1922-23) 33 CLR, at p 110, the essence of the business of the Adelong Company is a "whole set of operations" from production to realization. Consequently, the place where one operation is performed cannot be fastened upon as the locality from which the whole income is derived. It is quite true that the taxable income must be directly derived from a source in New South Wales, but to say that the direct source of the income in question here is the sale of coin or bullion abroad involves the fallacy condemned by the Judicial Committee in Kirk's Case (1). Such a sale is only one stage of a series of operations which together result in the income, and to regard it as the direct source of income is to leave out of sight the initial and other stages of those operations.
The arrangement for the sale of coin or bullion was but a final stage of the company's operations, which aimed at the realization of the full value of the gold content of the auriferous ore or stone extracted by it from the earth, in New South Wales. It was, as Wade J. well said, merely incidental to the main purpose of the business of the company and a conventional way of carrying it out. (at p511)
The Courts below were therefore right, in my opinion, in refusing wholly to exclude the sum of 1,916 pounds from assessment to income tax under the Acts of New South Wales. But I do not think, on the facts stated, that the whole of that amount can or ought to be attributed to a source in New South Wales. If the income was derived from a series of operations, some of which were performed in New South Wales and some outside that State, then some part of that income must be attributed to sources outside New South Wales, and an apportionment is necessary (Kirk's Case [1900] AC 588 ; Meeks' Case (1915) 19 CLR 568 ). It may be that sec. 19 of the Act applies to the case, or, if not, some practical and just method, other than that set out in the section, must be found. So far, there has been no attempt to make any such apportionment. Studebaker's Case (1921) 29 CLR 225 is consistent with the view taken by me. There, the income flowed from a contract made in America, and the contract formed the "essence of the business," and, as was said in Lovell's Case [1908] AC 46 , you therefore looked no further, backward or forward, for the purpose of determining the locality in which the income was derived, than the place where the contract was made. (at p511)
The appeal ought, in my opinion, to be allowed, and the questions answered as follows: - (1) No. (2) Yes; the said sum is apportionable between New South Wales and places outside New South Wales. (3) Yes. (at p512)