Case T13

Judges:
KP Brady Ch
JE Stewart M
DJ Trowse M

Court:
No. 2 Board of Review

Judgment date: 21 March 1986.

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K.P. Brady (Chairman), J.E. Stewart and D.J. Trowse (Members)

In each of the years of income ended 30 June 1980 and 1981, the taxpayer made a gift of $50,000 to a donee described in her taxation returns as ``St Columban's Missions''. The matter for determination is whether the gifts are deductible under sec. 78(1)(a)(ii) of the Income Tax Assessment Act 1936; in other words, can the donee be properly regarded as ``a public benevolent institution''?

2. At the hearing, the taxpayer was represented by her tax agent. The taxpayer herself did not appear to give evidence, the only evidence being given by Father A, a member of the donee Society, formally called the Society of St Columban for Foreign Missions, but more popularly known as St Columban's Mission Society, or St Columban's Missions. The Commissioner of Taxation was represented by one of his officers. He, and the taxpayer's agent, agreed that the references for both years should be heard concurrently.

3. Tendered in evidence by the Commissioner's representative was a newsletter of the Society which showed how donations and bequests made to the Society over a twelve months' period had been spent. It showed that some donors had provided money to the Society itself, whilst others had made donations to specific missions, missionaries and projects operating in various countries throughout the world. The list included the Philippines, Fiji, Burma, Japan, Pakistan, Taiwan, Korea, Chile and Peru.

4. In giving his evidence, Father A told us that he first went to the Philippines in 1971, and returned from his last term of duty there in 1984. In responding to a question directed to the activities undertaken by the Society, he said:

``In our work as a Society throughout the world, we try to serve the whole person, not just the spiritual, but also the social side of man. So we have facilitated medical and nutritional programs. We have facilitated the building up of physically and mentally handicapped workshops in South America. We work with the ethnic groups here in Australia. We also do counselling with Maori people, and again with ethnic groups in Australia because of our training. We

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work with farmers in helping them in their self-help programs, in facilitating their buying and acquiring work animals for their farms. In moments of disaster like earthquakes, we provide aid for them, which aid could come from Australia. We offer counselling services through the telephone in Japan. We have a drug addiction rehabilitation centre in the Philippines. That is roughly it, yes.''

He went on to add that the Society facilitates and sponsors non-denominational feeding programs in South America, also a comprehensive medical service. The same service was provided in Korea.

5. In determining the purposes for which the Society was established, it is necessary to refer to its expressed objects and to the actual activities in which it is engaged. It is perhaps appropriate to mention here that the Society was incorporated in Victoria on 29 April 1936. The Constitutions of the Society were tendered in evidence, and the following clauses appear relevant for present purposes:

``CHAPTER I

NAME, PURPOSE, AND SPIRIT OF THE SOCIETY

1. The name of the institute is the Society of St Columban for Foreign Missions. However, on consultation with the Sacred Congregation for the Evangelization of Peoples (S.C.E.P.), the Central Administration can permit the civil registration of the Society under another name.

2. The Society of St Columban is one of those institutes founded under the inspiration of the Holy Spirit for the glory of God and the sanctification of its members that take as their special task the duty, which weighs upon the whole Church, of preaching the Gospel to the nations.

3. It is exclusively missionary Society (not a religious institute) at the service of the universal Church, especially for work undertaken under the direction of the S.C.E.P., on which as a Society it directly depends.

4. As such, its work involves:

• (a) Establishing the Church among peoples or groups who do not yet believe in Christ;
• (b) Aiding the young churches until they attain sufficient maturity to evangelize their own people;
• (c) Helping to renew churches no longer able to evangelize their own people.

5. To achieve these ends the Society undertakes the following work:

A.Service to the Mission Churches

• (a) In consultation with the mission churches and the universal Church, it tries to establish what are the most urgent needs of the missions in general and of the particular missions in which it is involved.
• (b) It supplies personnel and, when necessary, the material assistance to meet these needs, and seeks to develop in the local church the capacity to evangelize its own people and contribute to the universal mission of the Church.
• (c) It participates, under the direction of the local Ordinary, in the planning and implementing of pastoral programs to suit the particular circumstances of the local church.

B. Service to the Home Churches

It collaborates with the bishops of the home churches by helping to:

• (a) Inform the home churches of the needs and progress of the missions, thereby inspiring them to understand and accept their missionary responsibility;
• (b) Recruit, form, send and, if necessary, support personnel for missionary service.

C. Co-operation with Other Missionary Institutes, especially through National Mission Councils.

The Society sees itself both as an instrument through which the home churches fulfil their missionary responsibilities, and as a link between these churches from which its members come and the distant churches to which they are sent.

CHAPTER II

MEMBERS OF THE SOCIETY

6. Membership of the Society comprises priests, brothers, and students preparing for

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the priesthood. Admission to permanent membership in the Society is to be preceded by a period of probation and a period of temporary membership as determined by the Constitutions.

...

CHAPTER III

MISSIONARY SPIRITUALITY

19. As the Father sent the Son to redeem and sanctify the world, missionaries are sent by Christ to continue this work of redemption and sanctification: `As the Father has sent me, so I send you'. The specific mission of Columbans is to cross boundaries of language, culture and faith in order to spread the Good News of Jesus Christ. This mission, while being the incentive for, is also the shape of Columban spirituality - a spirituality which is a total way of life.

...

CHAPTER VI

THE CHAPTER AND ELECTIONS

50. The General Chapter represents the whole Society and is its supreme authority. Its duties are:

• 1. In response to the voice of the Spirit, who speaks to us constantly through the Church, and in the changing circumstances of today's world, to examine the state of the Society, to deal with its problems, and to issue guidelines for its activities;
• 2. Through deliberation on matters affecting the whole Society, to preserve unity between regions and renew zeal for our missionary vocation;
• 3. To revise the Directory of the Society and, when necessary, to recommend changes in the Constitutions;
• 4. If the Chapter is an ordinary Chapter, to elect the new Central Administration.

...

53. The following persons constitute the Chapter:

• 1. The Superior General;
• 2. The four members of the Superior General's council;
• 3. All Regional Directors;
• 4. A delegate or delegates from each region, the number to be determined by each Chapter for the following Chapter.

54(1) All members permanently aggregated to the Society except bishops and ecclesiastical superiors are eligible for membership of the Chapter.''

6. The taxpayer's representative pointed out to us that the Constitutions which had been tendered in evidence did not cover all the various types of activities which the Society was currently undertaking in Third World countries. He submitted that the Constitutions should be read in conjunction with proposals passed by the General Chapter of the Society's supreme authority at its 1976 meeting. The Commissioner's representative acquiesced in that contention. The thrust of the submissions made on behalf of the taxpayer was to show that, in more recent times, the Society has been catering, to an ever-increasing extent, to the human and social needs of the indigenous peoples, particularly those of the poor and oppressed, as well as to their spiritual needs. He tendered in evidence the proposals drawn up by the Chapter, and directed our attention to the following:

``1....

Our special role as an exclusively missionary Society is in crossing boundaries of language, culture and faith to establish the Church and to assist local churches in bringing the knowledge and love of Jesus Christ to the unevangelized. In the light of the tremendously urgent challenges of our age, Christ calls us:

• 1)...
• 2) to bring about full Christian liberation to the poor and the oppressed of the countries in which we work;

...

3. To actualise the basic thrust of our Society it is recommended that:

• 1)...
• 2) New men be placed where they can acquire the necessary skills to work competently with the unevangelized and poor and oppressed.

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• 3) Those who are suitable to specialize in `dialogues' with cultures, with other religions and with the poor and oppressed, should be encouraged to do so.

...''

``13. That the Society immediately set up a Justice and Peace Office and that each region establish a similar office or be affiliated with already existing offices of this nature.

The first objective of these offices would be to contribute to a process of education among ourselves as a Society in order to:

• 1) Acquire a better appreciation of how the promotion of human rights is a constitutive element of the Gospel.
• 2) Acquire a more critical awareness and understanding of socio-economic realities, particularly as they relate to global justice and development.

The second objective of these offices would be to contribute to a process of education of home churches in order to help them acquire a similar awareness.

14. That each home region continue: -

• ...
• - To associate where possible, with the personnel of aid and development agencies to help situate their promotional activities within the context of the full mission of a local church.

15. That our mission magazine may continue to share our insights and access to the mission world with home regions, the Chapter directs that:

• ...
• 5) Home region directors provide adequate staffing, lay and Columban, and give adequate coverage to 3rd World problems.

...

Initial Formation

7. That formation staffs take cognisance of the new emphasis of our missionary apostolate, as spelled out in the 1976 Chapter, and ensure that students acquire the requisite skills for:

• 1)...
• 2) understanding the problems related to the underprivileged, the poor and oppressed.

...

Continuing Education

21....

• 3) That in the continuing education of a missionary today, special attention should be given to:
  • ...
  • (c) helping him to acquire a greater skill in communication, especially regarding dialogue with the unevangelized, the poor and oppressed;
  • (d) helping him to gain a better understanding of the socio-political and economic realities of his missionary situation.''

7. In seeking to identify the functions of the Society from an examination of the documentary evidence and of the oral evidence given by Father A, it seems to us that the Society's dominant function in the years in issue was the evangelization of peoples, particularly in foreign lands, and as part of that function it sought to meet the basic human needs of those peoples. Accordingly, we view the benevolent works of the Society as being purely subsidiary to its spiritual role. We accept Father A's evidence that the Society sought ``to serve the whole person, not just the spiritual but the social side of man'', but the emphasis is very much on evangelization, the specific mission of members of the Society being (to quote from the Society's own Constitutions): ``to cross boundaries of language, culture and faith in order to spread the Good News of Jesus Christ''. It is worth noting in this context that members of the Society are priests; they are not social workers, of whom it might be said that they could well be the more appropriate people to have as members if the main objective of the Society on its various mission fields was simply to cater for and satisfy human needs.

8. Our finding on that issue contrasts sharply with one of the grounds stated in the taxpayer's notice of objection, wherein it was stated that:

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``The work of the St Columban's Mission Society is to aid the sick and the poor in underprivileged countries.''

In our view, it would be more accurate to say that a work of the Society is to aid the sick and the poor in underprivileged countries, for we see that work as being very much subsidiary to its dominant function of evangelization. The leading case on the question of what constitutes ``a public benevolent institution'' is that of
Perpetual Trustee Co. Ltd. v. F.C. of T. (1931) 45 C.L.R. 224. In that case, Starke J., speaking as one of the majority of the High Court, stated at pp. 231-232:

``Now we have to consider the expression `public benevolent institution'. It cannot be said that this expression has any technical legal sense, and therefore it is to be understood in the sense in which it is commonly used in the English language. There is no definition in the Act of the composite expression, nor is it to be found in any dictionary. It is, however, found in the Act under consideration in association with such institutions as public hospitals and with funds established and maintained for the relief of persons in necessitous circumstances in Australia. In the context in which the expression is found, and in ordinary English usage, a `public benevolent institution' means, in my opinion, an institution organised for the relief of poverty, sickness, destitution, or helplessness.''

In the result, the majority found that Royal Naval House in Sydney, which provided accommodation and recreation for ratings when ashore, was not ``a public benevolent institution'' and thus bequests made to it were not exempt.

9. Whilst the statements enunciated in the Perpetual Trustee case were concerned with the Estate Duty Assessment Act, it has been stated judicially that they are equally applicable to the words ``public benevolent institution'' contained in sec. 78(1)(a)(ii) of the Income Tax Assessment Act (see
Maughan v. F.C. of T. (1942) 66 C.L.R. 388 at p. 397). More recently they have been used to resolve the question of exemption under the New South Wales pay-roll tax legislation - see
Australian Council of Social Service Inc. & Anor v. Commr of Pay-roll Tax (N.S.W.) 85 ATC 4235.

10. Examining the work of the Columban Mission Society in the light of the above observations of Mr. Justice Starke, it cannot be said of it, in our view, that it was a body organised for the relief of poverty, sickness, destitution or helplessness. Essentially, we see it as a confraternity of men banded together with the objective of evangelizing non-Christian peoples. Whilst the Society displayed a laudable interest in the welfare of the indigenous peoples of the various lands where it undertook missionary work, that interest was patently subsidiary, in our view, to its function of evangelization. The proposals of the Chapter would seem to indicate that members of the Society working on the mission fields now tend to identify themselves more closely with the poor and the needy than perhaps they did in previous times. However, in our view, those proposals only indicate a planned change in emphasis which might, or might not, be implemented either in whole or in part (see para. 6 supra). They do not disturb the basically spiritual nature of the Society's objectives and activities. In any event, the extent, if any, to which those proposals are binding on the Society's members remain in some doubt. Also, pursuing the same sort of enquiry that was in Mr. Justice Starke's mind in the Perpetual Trustee case, we cannot help but feel that the member priests of the Society would be surprised to learn that they formed part of a public benevolent institution rather than of a religious order (see also the comments of Latham C.J. in
The Little Company of Mary (S.A.) Inc. v. The Commonwealth and Anor (1942) 66 C.L.R. 368 at p. 379).

11. A case with some parallels to the instant case, but containing essential differences, in our view, is Case 101
(1945) 12 C.T.B.R. 677. There, a taxpayer claimed a rebate of tax in respect of a gift made to the Hobart City Mission. The taxpayer's claim was disallowed by the Commissioner on the basis that the recipient of the gift was not a public benevolent institution. The objects of the Mission as described in its Constitution were (p. 677):

``... to promote the extension of Evangelical religion without denominational distinction, and render relief to the poor in necessitous circumstances.''

The Commissioner took the view that the Mission was primarily a religious institution and not a public benevolent institution because

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of its character as indicated in its Constitution. When the taxpayer's reference came before the Board, however, the evidence given by the City Missioner, and supported by the Mission's annual accounts, indicated that the spiritual work of the Mission had not in recent years been of such overriding importance as was evidently intended by the Constitution. The Board found that the religious activities of the Mission had not changed in their nature, but that its primary work had become that of providing material relief for those in need and that its religious work had become secondary to its relief work. The Board noted too that qualification for membership of the Mission was a donation of not less than five shillings per annum and that any person, including an atheist, could qualify for membership. It therefore allowed the taxpayer's claim on the basis of the following finding (p. 683):

``In view, however, of the volume of relief work, the time devoted to it and other circumstances, including the substantial amount of public recognition and practical aid, we have little difficulty in arriving at the conclusion that the Hobart City Mission is a public institution which promotes the relief of poverty, suffering, distress or misfortune, and is therefore a `public benevolent institution'.''

A further gift, which the taxpayer made to the Self-Denial Fund of the Salvation Army and which was also in dispute before the Board, was however held to be non-rebateable on the basis that the Fund could not be considered to be a public benevolent institution, its activities being devoted mainly to furthering the religious objects of the Salvation Army. It was also held that the Fund was not a public fund.

12. In our view, it could not be said of the Columban Mission Society, on the evidence adduced before us, that its relief works were anything other than a subordinate activity. Also, unlike the City Mission, its membership comprised only priests, brothers and students preparing for the priesthood (in other words, its members were Religious or young men studying to become Religious). It might be argued that, because the Society's Constitutions had been drawn up by its own priestly members, there was a tendency to highlight its spiritual functions to the detriment of its more humanitarian-type functions. However, the evidence does not lead one to believe that there had been any diminution in the Society's spiritual role. We consider that its ``dominant purpose'' (to use the words of Lord Atkin in
Girls' Public Day School Trust Ltd. v. Ereaut (1931) A.C. 12 at p. 32) has always been that of evangelization of non-Christian peoples.

13. In the course of the hearing, passing reference was made to the advice contained in the Commissioner's reg. 35(1) statement which accompanied the taxpayer's returns for both years of income in issue, that, apart from the donations being non-deductible under sec. 78(1)(a)(ii), they were also not deductible under sec. 78(1)(a)(1xii). The latter provision came into operation on 24 June 1981, and authorises deductions for gifts to eligible public funds established to provide relief in developing countries. Sections 78(8) to 78(12) inclusive are the machinery provisions, the main one being sec. 78(8) which enables the Treasurer, by a notice published in the Gazette, to declare that a fund is an eligible fund for the purposes of sec. 78(1)(a)(1xii). If that latter provision applied at all in the instant case, it could only apply, subject to sec. 78(9), to the donation made in the latter of the two years of income, and it was conceded by the taxpayer's representative that no declaration was sought or obtained. Accordingly, the question of deductibility under that subsection cannot be raised as an issue and that was conceded by the taxpayer's representative. In any event, we question whether the issue was adequately raised in the taxpayer's notice of objection. For completeness, we would add that a recent amendment has been made to the Assessment Act whereby gifts made after 17 February 1986, to a fund called the Columban Overseas Aid Fund (as with certain other specific funds) qualify for deduction for income tax purposes as gifts to an approved overseas aid agency for the relief of persons in developing countries.

14. For the reasons detailed above, we uphold the Commissioner's action in disallowing as deductions the gifts made in the two years of income in issue, and we confirm the assessments.

Claims disallowed