• The impact of this case on ATO policy is discussed in Decision Impact Statement: Intoll Management Pty Ltd v Commissioner of Taxation (NSD 567/2012).

INTOLL MANAGEMENT PTY LTD v FC of T

Judges:
Edmonds J
McKerracher J
Jagot J

Court:
Full Federal Court, Sydney

MEDIA NEUTRAL CITATION: [2012] FCAFC 179

Judgment date: 11 December 2012

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Edmonds, McKerracher and Jagot JJ

THE COURT:

INTRODUCTION

1. This is an application by way of appeal against an appealable objection decision of the respondent ("the Commissioner") that disallowed the applicant's objection against an amended assessment of income tax for the year ended 30 June 2005 ("the year of income").

2. By that amended assessment the Commissioner included in the assessable income of the trust fund known as "Intoll Trust (II)" ("the Trust") an amount of $183,323,059, representing dividends received during the year of income from Macquarie Infrastructure (Luxembourg) SA ("MILSA") and Macquarie Infrastructure (Toll Route) SA ("MITRSA"), companies incorporated in Luxembourg.

3. The actual "increase" in taxable income effected by the amended assessment was only $134,596,752 owing to the Commissioner's allowance of deductions in respect of tax losses in the sum of $48,726,307 (in consequence of the inclusion of the amount of $183,323,059 in assessable income).

4. By determination of the Chief Justice made on 12 July 2012 pursuant to s 20(1A) of the Federal Court of Australia Act 1976 (Cth) the proceeding was referred to a Full Court.

ISSUES

5. The issues in this appeal may be shortly stated:

• (1) First, whether, if s 44 of the Income Tax Assessment Act 1936(Cth) ("the 1936 Act") would otherwise apply to the dividends received from MILSA and MITRSA, s 23AJ of the 1936 Act also applies to those dividends so as to exclude them from assessable income.

  The applicant contends that s 23AJ does apply to exclude the dividends from assessable income while the Commissioner contends that it does not.

• (2) Secondly, but relevant only if the applicant is unsuccessful on the issue identified in (1) above, whether the Commissioner is bound by his public ruling that s 23AJ does apply to a trust that is a member of a consolidated group.

  The applicant contends that the ruling binds the Commissioner to accept that s 23AJ does apply while the Commissioner contends that, on the facts of the applicant's case, the ruling does not bind him to accept that s 23AJ applies.

THE FACTUAL CONTEXT

6. The primary facts are not in dispute. They are set out in an Amended Statement of Agreed Primary Facts filed on 31 August 2012 which is reproduced below in a modified form to take account of terms which have already been defined in these Reasons.

AMENDED STATEMENT OF AGREED PRIMARY FACTS ("ASAPF")

• A. Macquarie Infrastructure Trust (II)
  • 1 The applicant (previously known as Macquarie Infrastructure Investment Management Limited) was, from 1 July 2004 to the present, the trustee of the Trust.
  • 2 At all material times the applicant was a resident of Australia. Prior to 30 June 2002, the Trust was an Australian resident unit trust and an Australian public trading trust in relation to each relevant year of income for the purposes of Div 6C of Part III of the 1936 Act. From the year ended 30 June 2003 and subsequent income years the Trust was a resident of Australia.
  • 3 On 18 July 1996 the Trust, then known as the Infrastructure Trust of Australasia (II), was established by deed.
  • 4 On the following dates the Trust was renamed:
    • (a) In or around the period between 19 September 1996 and 10 October 1996 the Trust was renamed Infrastructure Trust of Australia (II);
    • (b) on 15 May 2000 the Trust was renamed Macquarie Infrastructure Trust (II): and
    • (c) on 9 February 2010 the Trust was renamed Intoll Trust (II).
  • 5 The Trust Deed was amended by the following amending deeds:
    • (a) The supplemental deed dated 19 September 1996;
    • (b) the supplemental deed dated 10 October 1996;
    • (c) the supplemental deed dated 26 May 1997;
    • (d) the supplemental deed dated 16 September 1997;
    • (e) the supplemental deed dated 7 October 1997;
    • (f) the supplemental deed dated 27 July 1999;
    • (g) the supplemental deed dated 12 May 2000;
    • (h) the supplemental deed dated 19 September 2000;
    • (i) the supplemental deed dated 21 November 2001;
    • (j) the supplemental deed dated 14 November 2002; and
    • (k) the supplemental deed dated 17 November 2003.
• B. Tax Consolidation
  • 6 For the years of income ending 30 June 1997 to 30 June 2002, inclusive, the applicant lodged income tax returns with the Commissioner on the basis that the Trust was a resident unit trust and a public trading trust for the purposes of Div 6C of Part III of the 1936 Act.
  • 7 The Commissioner was notified that the Trust had made a choice, pursuant to ss 713-130 and 703-50 of the Income Tax Assessment Act 1997 (Cth) ("the 1997 Act"), to form a tax consolidated group for the purposes of Pt 3-90 of the 1997 Act with effect from 1 July 2003.
  • 8 By a letter dated 11 March 2005 the Commissioner notified the applicant that the Commissioner had recorded the applicant as the head company of an income tax consolidated group and that the start date for income tax consolidation is 1 July 2003. An attachment to the letter dated 11 March 2005 listed the then 15 subsidiary members of the income tax consolidated group.
• C. MILSA and MITRSA
  • 9 MILSA was incorporated in Luxembourg on 19 December 2001. On the same date the Constitution of MILSA was executed.
  • 10 MITRSA was incorporated in Luxembourg on 15 March 2002. On the same date the Constitution of MITRSA was executed.
  • 11 Article 19 of the Constitution of each of MILSA and MITRSA conferred voting rights on the basis that each share was entitled to one vote. Article 5.3.6 of the Constitutions of each of MILSA and MITRSA provided that each Class A preference share was entitled to one vote.
  • 12 The audited annual accounts for MILSA for the year ended 30 June 2004 recorded that as at 30 June 2004 the subscribed capital in MILSA was represented by 24,806 ordinary shares and eight "A" preference shares fully paid-up.
  • 13 The audited annual accounts for MILSA for the year ended 30 June 2005 recorded that as at 30 June 2005 the subscribed capital in MILSA was represented by 24,806 ordinary shares and eight "A" preference shares fully paid-up.
  • 14 The Share Register of MILSA records that the following number of shares were in the following periods registered to:

    "Macquarie Infrastructure Trust (II) represented by: Trust Company of Australia Ltd custodian of the assets of Macquarie Infrastructure Trust (II)"

    • (a) from 19 December 2001 to 23 April 2002: 3,328 ordinary shares; and
    • (b) from 23 April 2002 to 2 November 2004: 3,329 ordinary shares.

  • 15 The holding of 3,329 shares by the Trust represented 13.4% of the shareholding in MILSA.
  • 16 The audited annual accounts for MITRSA for the year ended 30 June 2004 recorded that as at 30 June 2004 the subscribed capital in MITRSA was represented by 24,804 ordinary shares and six "A" preference shares fully paid-up.
  • 17 The audited annual accounts for MITRSA for the year ended 30 June 2005 recorded that as at 30 June 2005 the subscribed capital in MITRSA was represented by 24,804 ordinary shares and six "A" preference shares fully paid-up.
  • 18 The Share Register of MITRSA records that from 15 March 2002 to 2 November 2004, 3,328 ordinary shares were registered to:

    "Macquarie Infrastructure Trust (II) represented by (Trust Company of Australia Limited custodian of the assets of the Macquarie Infrastructure Trust (II))".

  • 19 The holding of 3,328 shares by the Trust represented 13.4% of the shareholding in MITRSA.
  • 20 At all material times MILSA and MITRSA were not Part X Australian residents (as defined in ss 317 and 6(1) of the 1936 Act).
• D. Payment of the distributions by MILSA and MITRSA and receipt by the Trust
  • 21 On 2 November 2004 MILSA paid distributions of AUD $127,606,402 to the Trust.
  • 22 On 2 November 2004 MITRSA paid distributions of AUD $55,716,657 to the Trust.
• E. Assessment and Amended Assessment
  • 23 On 3 April 2006 the Trust, as head company of the tax consolidated group, lodged with the Commissioner a company tax return for the year of income.
  • 24 Schedule 25A (Item 11) of the income tax return for the year of income recorded an amount of $183,323,059 representing "Section 23AJ - non-portfolio dividend from foreign countries".
  • 25 Pursuant to s 166A(3) of the 1936 Act:
    • (a) The Commissioner was taken to have made, on the day on which the tax return for the year of income was lodged, an assessment of taxable income and no tax was payable thereon, in accordance with what the taxpayer specified in the return; and
    • (b) on and after the day on which the Commissioner is taken to have made the assessment, the return is taken to be a notice of the assessment.
  • 26 By a notice of amended assessment issued on 18 February 2011 the Commissioner amended the Trust's assessment for the year of income to include in assessable income the distributions in the amount of $183,323,059.

THE STATUTORY CONTEXT

A. Part 3-90 of the 1997 Act: Consolidated groups

7. Subdivision 713-C of Pt 3-90 of the 1997 Act is expressed, by s 713-125(1), to have as its "main object" that of providing for "certain unit trusts to be treated like companies and therefore like *head companies of *consolidated groups, with consequent effects on … (a) the trustees; and (b) members of the trusts [beneficiaries]; and (c) entities the trustees hold *membership interests in [subsidiary members]". This object is achieved by "letting a *corporate unit trust, or *public trading trust, that could become a *head company of a *consolidated group if the trust were a company, choose to form such a group (with other entities as *subsidiary members)": s 713-125(2).

8. The operative provision, s 713-130, provides that "[a] trust may make a choice [to consolidate] as if the trust were a company".

9. The Trust made such a choice: see para (7) of the ASAPF in [6] above.

10. Section 713-135 provides that "[i]f the trust makes the choice" the 1936 Act and the 1997 Act ("the applied law") "applies in relation to the trust in a way corresponding to the way in which that law applies to a company…(as appropriate)" with "appropriate modifications" including those described in s 713-140. The latter section provides that in relation to a trust which has made such a choice, a reference in the applied law to a body corporate includes a reference to the trust or trustee, as appropriate: s 713-140(2) item 1; and that Pt 3-90 "has effect as if an entity were a *wholly-owned subsidiary of the trust if the entity would have been one had the trustee owned beneficially *membership interests in the entity that the trustee owned legally": s 713-140(5) item 4.

11. Section 701-1 provides that for the purpose of working out the liability to income tax of each of the head company and the subsidiary members of the group, all subsidiary members of the group are "taken…to be parts of the *head company of the group, rather than separate entities" during the subsidiary member's membership of the consolidated group. The "head company" must be an Australian resident holding company or trust taxed at the corporate rate: s 703-15(2). All membership interests in the subsidiary members must be beneficially owned, directly or indirectly, by the "head company": ss 703-30 to 703-45.

12. Under these provisions "a trust" (but not its trustee) can be a head company for Pt 3-90 purposes and, where it so chooses, its taxable income must be worked out under the applied law as if it were a company. This proposition was put in issue by the Commissioner in his written submissions (at [25]) where he submitted that under ss 713-135 and 713-140 it is either the trust or the trustee, as appropriate, which is treated as a company; and that s 23AJ and its related definitional provisions are appropriately applied to the trustee, not the trust, in order to preserve their effective operation. For reasons which we give below, this submission is misconceived.

B. Dividends paid by companies to shareholders who are trustees

13. Section 44(1) of the 1936 Act includes in the assessable income of a resident shareholder, dividends paid to the shareholder by the company out of profits derived by the company from any source.

14. Section 44(1) of the 1936 Act does not apply to a shareholder who is a trustee because the dividend is not received beneficially (
Countess of Bective v Commissioner of Taxation (1932) 47 CLR 417 at 424) and Div 6 of Pt III of the 1936 Act, in particular s 96, will protect him:
Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 15 per Dixon CJ.

15. Section 96 of the 1936 Act provides:

Except as provided in this Act, a trustee shall not be liable as trustee to pay income tax upon the income of the trust estate.

16. In Div 6 of Pt III of the 1936 Act, ss 98, 99 and 99A provide for such taxation as does, for example, s 102S for a unit trust that is a public trading trust for the purposes of Div 6C, but in each case on the "net income" (s 95(1)) or a share of the "net income" of the relevant trust estate.

C. Non-portfolio dividends from foreign countries

17. Section 23AJ of the 1936 Act provides:

A non portfolio dividend (as defined in section 317) paid to a company is not assessable income, and is not exempt income, of the company if:

• (a) the company is an Australian resident and does not receive the dividend in the capacity of a trustee; and
• (b) the company that paid the dividend is not a Part X Australian resident (as defined in that section).

18. Section 317 of the 1936 Act (as at 30 June 2005) defined "non-portfolio dividend" as:

Non-portfolio dividend means a dividend (other than an eligible finance share dividend or a widely distributed finance share dividend) paid to a company where that company has a voting interest, within the meaning of section 160AFB, amounting to at least 10% of the voting power, within the meaning of that section, in the company paying the dividend.

19. Section 160AFB(4) of the 1936 Act provided (as at 30 June 2005):

• (4) For the purposes of this section, a company shall be taken to have a voting interest in another company, if:
  • (a) the first-mentioned company is the beneficial owner of shares (other than eligible finance shares or widely distributed finance shares within the meaning of Part X) in the other company that carry the right to exercise any of the voting power in that other company
  • …
  • and the extent of the voting interest shall be taken to be the total number of votes that, by virtue of that right, can be cast on a poll at, or arising out of, a general meeting of the other company as regards all questions that could be submitted to such a poll.

THE APPLICANT'S SUBMISSIONS

The First Issue

20. The applicant's fundamental submission on this issue was predicated on the following question: Who is the taxpayer properly subject to the provisions of ss 44 and 23AJ of the 1936 Act: The entity that is the Trust, or the entity that is the trustee? According to the applicant, the Commissioner seeks to support the amended assessment by advancing arguments on inconsistent premises as to the identity of the taxpayer assessed:

• (a) For the purpose of supporting his inclusion of the dividends in the taxable income assessed, in reliance on s 44, the Commissioner takes as his premise that the taxpayer assessed is the Trust, as head company, and that liability to assessment befalls the Trust (not the beneficiaries) because under the applied law the Trust is deemed both to be a separate and distinct entity and also to be a company in its capacity as head company and member of a consolidated group.

  If this premise is correct (and the applicant submits that it is: the taxpayer assessed is the Trust as head company), it necessarily follows, according to the applicant, that the dividends are excluded from assessable income by s 23AJ.

• (b) Inconsistently, for the purpose of denying that s 23AJ applies to exclude the dividends from assessable income the Commissioner contends that the taxpayer assessed "received the dividends in the capacity of a trustee".

  But the Trust did not receive the dividends "in the capacity of a trustee": as an entity subject to the substantive taxing provisions as a company, the Trust is taken to have derived them as a company. The actual recipient acting "in the capacity of a trustee" was not the taxation entity comprising the Trust as head company: it was the trustee. If the taxpayer assessed is the trustee (not the Trust), the assessment is wrong: the trustee did not itself derive the dividend income.

The Second Issue

21. On 13 August 2008 the Commissioner issued a public ruling, Tax Determination TD 2008/25, in the following terms:

Income tax: can section 23AJ of the Income Tax Assessment Act 1936 apply to a dividend paid by a company (not being a Part X Australian resident) to the trustee of a trust, even where the trustee then pays an amount attributable to the dividend to an Australian resident company beneficiary?

Ruling

• 1. No. Section 23AJ of the Income Tax Assessment Act 1936 (ITAA 1936) does not apply to a dividend when it is paid by a company (not being a Part X Australian resident) to the trustee of a trust, even where the trustee then pays an amount attributable to the dividend to an Australian resident company beneficiary. However, section 23AJ will apply to a dividend that is paid to a trust which is part of a consolidated group or a multiple entity consolidated (MEC) group.

Date of effect

• 2. This Determination applies to years of income commencing both before and after its date of issue.

(Emphasis added.)

22. Section 703-5(3) provides that a "consolidated group consists of the *head company and all of the *subsidiary members … of the group" for the time being. According to the applicant, by this public ruling, the Commissioner has ruled that s 23AJ applies to the dividends paid by the Luxembourg companies.

THE COMMISSIONER'S SUBMISSIONS

The First Issue

23. In short, the Commissioner's submissions may be summarised as in [24] and [25] below.

24. The fact that the Trust is assessable under s 44 of the 1936 Act on receipt of the dividends, but does not attract the s 23AJ exemption, is not contradictory or illogical, contrary to the applicant's case. It is a consequence of the fact that subdiv 713-C treats a trust as a company and the beneficial owner of its assets for some, but not all, purposes.

25. According to the Commissioner, the applicant's case is that subdiv 713-C treats the Trust as a company and, for that reason, it has the effect of deeming the Trust (not the applicant) to be beneficial owner of the shares. The premise of this argument is incorrect, as is its conclusion. First, under ss 713-135 and 713-140 it is either the trust or the trustee, as appropriate, which is treated as a company. Section 23AJ and its related definitional provisions are appropriately applied to the trustee, not the trust, in order to preserve their effective operation. Second, it does not follow from the treatment of a trustee (or trust) as a company under subdiv 713-C that the trustee (or trust) is treated for all purposes of the "applied law" as the beneficial owner of the relevant shares.

26. There were other submissions. First, those going to the policy underlying the s 23AJ exemption and why, having regard to that policy, it is not appropriate to treat a trust that has made a s 713-130 choice as the beneficial owner of its assets.

27. Second, those going to an alleged principle, said to be underlying s 23AJ, namely, that its exemption is only afforded to profits distributed subject to the limitations imposed on companies and does not extend to the more flexible and selective ways in which public trading trusts can distribute profits.

28. Finally, there were submissions suggesting that as a trust could cease to be a public trading trust by ceasing active business and earning only passive income, or by becoming a private trust, such possibilities provided a basis for concluding why it would be inappropriate to treat a public trading trust that has made a s 713-130 election as the beneficial owner of the relevant shares under s 23AJ.

The Second Issue

29. The Commissioner referred to paras 18-20 of the Explanation to TD 2008/25 which provide:

• 18. Where a dividend is paid in respect of shares which are held by a trust that is subsidiary member of a consolidated group or a MEC group, the dividend can be a non-portfolio dividend . When a group of entities consolidates for tax purposes, the single entity rule (SER) applies to deem the head company to own the assets of the subsidiary members. As a consequence, when a trust is part of a consolidated group, the head company will be taken to have full ownership of the shares, meaning all the rights associated with ownership of the shares are held by the head company for its own benefit. Accordingly, the head company will be taken to be the beneficial owner of the shares, and can have the relevant voting interest required under the definition of non-portfolio dividends in section 317.
• 19. The dividend will also be taken to have been paid to a company for the purposes of section 23AJ. The SER operates to deem the dividend paid to the trustee to have been paid to the head company. As a result the dividend can be non-assessable non-exempt income of the head company.
• 20. Subdivision 713-C of the ITAA 1997 contains special provisions that allow a corporate unit trust or public trading trust that chooses to form a consolidated group to be treated like the head company of the group, and in turn to be regarded as a company for most income tax purposes. Therefore, although an Australian resident company receiving a dividend in its capacity as trustee of a trust is specifically excluded from section 23AJ of the ITAA 1936, a trustee of a corporate unit trust or public trading trust that has chosen to be the head company of a consolidated group, and in turn to be regarded as a company for most income tax purposes, is not excluded. However section 23AJ of the ITAA 1936 does not apply to a dividend paid to the trustee of a corporate unit trust or a public trading trust because the dividend will not be a non-portfolio dividend . The trustee is not the beneficial owner of the shares; the shares are held by the trustee for the benefit of the unit holders, who are not part of the consolidated group."

(Emphasis added.)

30. According to the Commissioner, it is clear that the part of the determination on which the applicant seeks to rely - the proposition that public trading trusts can receive non-portfolio dividends for s 23AJ purposes - applies only to a subsidiary member of a consolidated group. The Commissioner observed that the last sentence of para 1 of the ruling does not state that s 23AJ applies to a public trading trust that is the head company of a consolidated group, and indeed the balance of the ruling expressly negatives that proposition.

31. The Commissioner submitted that tax rulings and determinations are not to be interpreted in a technical manner which is contrary to an ordinary reading of the words of the ruling. Further, it is the words of the ruling that are relevant and, in this regard, the ruling must apply "precisely" to the taxpayer's circumstances. The determination does not "apply" to the applicant, which is the head company of a consolidated group.

CONSIDERATION AND ANALYSIS

The First Issue

32. This issue concerns the interaction between ss 713-135 and 713-140 of the 1997 Act on the one hand and ss 23AJ and 44 of the 1936 Act on the other; specifically, whether the words of the relevant provisions of the 1997 Act control the construction and application of the words of the relevant provisions of the 1936 Act to the facts of the present case. This is principally a matter of statutory construction.

33. In recent times, the High Court has repeatedly said that in matters of statutory construction, where the words of the statute (the text) are clear, they have "paramount significance":
Nominal Defendant v GLG Australia Pty Ltd (2006) 228 CLR 529 at [22].

34. For example, in
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27 in the plurality judgment at [47] it was said:

This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.

(Footnotes omitted.)

35. More recently, in
Saeed v Minister for Immigration and Citizenship (2010) 241 CLR 252 in the plurality judgment at [31] it was said:

As Gummow J observed in
Wik Peoples v Queensland, it is necessary to keep in mind that when it is said the legislative "intention" is to be ascertained, "what is involved is the 'intention manifested' by the legislation". Statements as to legislative intention made in explanatory memoranda or by Ministers, however clear or emphatic, cannot overcome the need to carefully consider the words of the statute to ascertain its meaning.

(Footnotes omitted.)

36. Very recently, in
Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55 (5 December 2012) at [39], the High Court said:

"This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the [statutory] text [Alcan (NT) Alumina Pty Ltd]". So must the task of statutory construction end. The statutory text must be considered in its context. That context includes legislative history and extrinsic materials. Understanding context has utility if, and in so far as, it assists in fixing the meaning of the statutory text. Legislative history and extrinsic materials cannot displace the meaning of the statutory text. Nor is their examination an end in itself.

(Footnotes omitted.)

37. If the words of the statute are clear and, in our view, contrary to the implication underlying the contentions of the Commissioner, the words of ss 713-135 and 713-140 are clear, they apply equally to s 23AJ as they do to s 44 of the 1936 Act.

38. By s 713-130, a trust may make a choice under s 703-50 (to consolidate a consolidatable group) as if the trust were a company (the assumed company). By s 713-135, if the trust makes the choice, the applied law applies in relation to the trust in a way corresponding to the way in which that law applies to a company. The applied law applies in that way in relation to the trust or trustee (as appropriate), with appropriate modifications. By s 713-140 a reference in the applied law to a (body corporate) includes a reference to (the trust or trustee (as appropriate)) (2); the trust is not covered by a reference in the applied law to a trust (3); and the trustee is not covered by a reference in the applied law to a trustee (4) (except a reference in s 254 of the 1936 Act).

39. It is the Trust which (as head company) is assessed on having derived the dividends. The assessment is not issued to a beneficiary or some actual or intended trust estate of which the Trust is the trustee (even if the Trust as trustee were a meaningful, relevant concept).

40. The Trust does not receive the dividend as trustee, but for its own benefit as an assumed company, so as to be assessable upon it under s 44, subject to the operation of s 23AJ. The word "trustee" in s 23AJ(a) is taken not to refer to the trustee of the trust (s 713-140(4)). Similarly, the phrase "the first-mentioned company" in s 160AFB(4)(a) is a reference to the trust which makes the choice, and for the purpose of assessment the trust is the beneficial owner of the shares and the dividend, not a trustee of them.

41. Further, and as the applicant submitted, the Commissioner's reliance on the references to "appropriate" in s 713-135 of the 1997 Act is misplaced. In the applicant's words (excluding references):

In the context of Subdivision 713-C, "appropriate" means "suitable or fit to the purpose or context" in which the deeming provision is to be applied. It does not allow the Respondent to select which substantive provisions should not be modified because of a result he sees to be "impolitic." It is "appropriate" in furtherance of the directions in Subdivision 713-C to treat "the Trust," in the calculation of whose taxable income as "head company" the dividends are taken into account (and assessed by the Respondent), as a "company" for the purposes of s 23AJ; and in that context it is "appropriate" to treat "the Trust" as deemed head company as, for the purposes of s 317, as imported into s 23AJ, the beneficial owner of the shares on which the dividends are paid.

42. Even if it were to be found in the extrinsic materials cited by the Commissioner in its support, the supposed policy that s 23AJ should not apply to an entity taxed as a head company is one which would not displace the clear words of the statutes. The meaning is to be found in the statutory language, not in unstated policies inferred from a preferred outcome.

43. In any event, the extrinsic materials cited do not support the existence of any such policy: the implications which in the Commissioner's submissions are sought to be elicited from the extrinsic materials find no foundation in the language of those materials or elsewhere.

44. We agree with the applicant's submission that the Commissioner's submissions at paras 30 to 44 of his written outline in relation to the policy of s 23AJ are both without foundation and non sequitur.

45. The provisions of s 23AJ of the 1936 Act (see [17] above) if applicable, are applicable to dividends paid after 30 June 2004. The dividends paid by the Luxembourg companies were paid after that date: see paras (21) and (22) of the ASAPF in [6] above. In respect of dividends paid before that date, s 23AJ provided:

• (1) Where:
  • (a) a non-portfolio dividend is paid to a taxpayer by a company that is a resident of a listed or an unlisted country; and
  • (b) the taxpayer is a company that is a resident within the meaning of section 6;

  then the dividend is not assessable income, and is not exempt income, to the extent that it is an exempting receipt of the taxpayer

• (2) in this section:
  • 'company' has the same meaning as in part X;
  • 'exempting receipt' has the same meaning as in Part X;
  • 'non-portfolio dividend' has the same meaning as in Part X;
  • 'resident of a listed country' has the same meaning as in Part X;
  • 'resident of an unlisted country' has the same meaning as in Part X.

46. The difficulty with the Commissioner's submissions is that if it were permissible, and if so appropriate, to have regard to extrinsic material outside the words of the statute as a guide to legislative intention, that guide supports the applicant's case, not the Commissioner's case. The explanatory memorandum to the New International Tax Arrangements (Participation Exemption and Other Measures) Bill 2004 (which became Act No 96 of 2004), substituting s 23AJ in its present relevant form, explained the context in which it was enacted, the mischief to which it was directed and its intended effect:

• 2.3 The decision to expand the current exemptions for foreign non-portfolio dividends and foreign branch profits received by Australian companies is part of the Government's response to the Board of Taxation's report to the Treasurer on international taxation. …
• 2.4 The changes to the current exemptions remove an impediment to the distribution of foreign profits to Australia. … [But] imputation credits are only available where company tax is paid in Australia. …

Application of measures to consolidated groups

• 2.106 The measures discussed above [these being: exclusion of foreign non-portfolio dividends from assessable and exempt income (new s 23AJ, paras 2.13-2.15); exemption of foreign branch profits (new s 23AJ, paras 2.16-2.47), and consequential changes to foreign tax credit provisions and Part X (paras 2.48-2.105)] generally relate to a resident company, other than one that is a trustee of a trust. However, in some circumstances a company may be a trustee of a corporate unit trust or public trading trust that is a head company of a consolidated group under Subdivision 713-C of the ITAA 1997. The new measures apply to a company in the capacity of a trustee of a corporate unit trust or public trading trust that is the head company of a consolidated group .
• (Emphasis added.)

47. The Commissioner has assessed the Trust (as head company) on the basis that the Trust (as head company) derived, for its own benefit, and so was assessable upon, the dividend income. But for the purpose of denying the application of s 23AJ, the Commissioner contends that the Trust (as head company) did not receive the dividends from the Luxembourg companies for its own benefit, but rather as trustee. In our view, the first proposition is correct; it necessarily follows that the second is not and s 23AJ applies to the applicant's receipts of the dividends from the Luxembourg companies.

The Second Issue

48. On the view we take of the first issue, it is unnecessary to consider the second. However, in the event that this proceeding goes further and out of deference to the respective submissions made on the second issue, we offer the following observations.

49. In our view, the Commissioner is bound by the ruling for the purposes of Div 357 of Sch 1 to the Taxation Administration Act 1953(Cth), see s 357-60. The ruling comprises the question in its heading and paras 1 and 2. There is nothing in that material which would deny its application to the facts of the present case, namely, where the Trust is the head company of a consolidated group. The Commissioner submitted, seriously, he said, that the reference in para 1 to "a trust which is part of a consolidated group" meant a trust that was a subsidiary member, but not the head company. This flies in the face of the provisions of s 703-5(3) of the 1997 Act and we reject it out of hand.

50. The material relied on by the Commissioner at paras 18 to 20 of the ruling does not form part of the ruling.

CONCLUSION

51. The appeal must be allowed with costs as agreed or taxed.