Royal Australasian College of Surgeons v Federal Commissioner of Taxation

68 CLR 436

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(Judgment by: Latham CJ)

Royal Australasian College of Surgeons
v Federal Commissioner of Taxation

Court:

Judges:
Latham CJRich J
Starke J
McTiernan J
Williams J

Subject References:
Taxation and revenue
Income tax
Assessment
Exemptions for scientific institutions

Legislative References:
Income Tax Assessment Act 1936 No 27 - s 23(e)

Hearing date: MELBOURNE 21 October 1943; 5 November 1943;
Judgment date: 5 November 1943

Melbourne

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Judgment by:
Latham CJ

Case stated upon an appeal from an assessment of the Royal Australasian College of Surgeons to income tax in respect of income derived by the College from investments. It is contended for the appellant that the income of the College is exempt from tax under the Income Tax Assessment Act 1936-1941, s. 23 (e), which provides that "the income of a religious, scientific, charitable or public educational institution" shall be exempt from income tax. It is contended for the College that the College is a scientific institution. If it is a scientific institution, then it is a charitable institution. It has not been argued that the College can on the evidence be held to be a charitable institution if it is not a scientific institution. It has not been argued that it is a public educational institution. The only question, therefore, is whether the College is a scientific institution within the meaning of the provision quoted.

The company was incorporated under the Companies Act 1928 (Vict.) as a company with limited liability without the addition of the word "limited" to its name (see s. 27 of the Act). The objects of the company as set forth in its memorandum of association are stated in the case. They include the following:

"(a) To cultivate and maintain the highest principles of surgical practice and ethics-

(b) To promote the practice of Surgery under proper conditions by securing the improvement of hospitals and hospital methods-

(c) To arrange for adequate post-graduate surgical training at Universities and Hospitals and to conduct examinations of candidates for admission to Fellowship-

(d) To promote research in Surgery-

(e) To bring together the Surgeons of Australia and New Zealand periodically for scientific discussion and practical demonstration of surgical subjects-"

"(g) To acquire by purchase, donation or otherwise a library of scientific works and to maintain and from time to time extend and improve such library-"

"(n) To acquire establish print and publish books magazines periodicals newspapers leaflets or other literary or scientific work that the College may think desirable for the promotion of its objects."

Other "objects" are plainly incidental and subsidiary, such as to acquire land and buildings, to erect buildings, to invest moneys, to draw, etc, cheques.

The activities of the College are fully stated in the case. They include the holding of conferences of surgeons for the discussion and study of surgical matters and dissemination of knowledge. Papers are read and addresses are given at these meetings. The programmes of three annual meetings have been put in evidence. They show that a very large number of papers have been read, addresses given and demonstrations conducted, all relating to surgical science. A consideration of the subjects dealt with at the meetings shows that on only one occasion, when a discussion took place upon surgical apprenticeship, was any strictly professional, as distinct from a scientific, subject dealt with in an address. The other lectures and addresses and demonstrations, more than three hundred in number, all related to matters of surgical science.

The College also maintains a technical surgical library and publishes a surgical journal. It admits fellows by examination. The fellowship of the College does not constitute a qualification to practise surgery. The College administers funds devoted to surgical research and conducts and assists such research in various ways.

It is plain that the objects and activities of the College include the promotion of surgical science, but the question to be determined is whether it can properly be found upon the evidence that it is a scientific institution. The question for consideration was very clearly expressed in the case of Inland Revenue Commissioners v Aberdeen Medico-Chirurgical Society ^[F1] , at p. 249, by the Lord President:"Now the members and associates of the Society are composed exclusively of members of the medical profession; and while it is easy to grasp the general distinction between a society for the advancement of professional objects and interests, and a society for the advancement of letters and science, the distinction is not always easy to draw in the case of societies composed of professional men just because all professional work belongs to the sphere of either letters or science. Nothing could show this more clearly than the difference of opinion displayed in Inland Revenue Commissioners v Forrest ^[F2] . But the question-difficult or easy to answer-must always be-what is the true nature and the objects and activities of the particular society? If these objects and activities are of a mixed character, being partly professional and partly literary or scientific, then the question must be decided according to the prevalent or main character." In that case it was held that the Society was a professional society and not a scientific institution. See also Institution of Civil Engineers v Inland Revenue Commissioners ^[F3] , where the same test was applied in determining whether the Institution of Civil Engineers was a body of persons established for charitable purposes only or a body of persons established for scientific purposes only.

Unless the promotion of surgical science is the main substantial or primary object of the College, it cannot be described as a scientific institution. It is argued for the Commissioner that the College has another object than the promotion of surgical science, namely, the promotion of the professional interests of its members, and that this object cannot be described as subsidiary or secondary or auxiliary only to the promotion of surgical science. Attention is called in particular to object (a) in the memorandum, namely, "To cultivate and maintain the highest principles of surgical practice and ethics," and also to objects (b) and (c) (which have already been quoted), which also have a relation to the professional practice of surgery. The pursuit of these objects would improve the professional qualifications, and thereby would, in the normal course of events, promote the professional interests, of the members of the College.

Similar arguments were used in the case of an Institution of Civil Engineers, the character of which was considered in Inland Revenue Commissioners v Forrest ^[F4] , where the question was whether the property of the Institution was legally appropriated and applied for purposes connected with the promotion of science. It was pointed out that membership of the Society, though valuable to members, did not constitute a qualification to practise, and it was said:"The Institution of Civil Engineers stands in a very different position from such professional bodies as the Society of Writers to the Signet. The mere fact that membership is confined to those who are actively engaged, and have attained some degree of eminence, in the profession, does not militate against the object of the institution being the advancement of engineering science; because they are really the only persons possessing the knowledge and practical experience requisite for the efficient promotion of that object. Membership is not required for admission to the profession of a civil engineer: it confers no rights or privileges in the practice of that profession, over which the institution neither has, nor professes to have any power of control. A writer to the signet, in carrying on his private business, and practically in no other form, exercises his rights and privileges as a member of the society to which he belongs; but a member of the Society of Civil Engineers does nothing whatever in his corporate capacity except when he takes part in its proceedings within the walls of the Institution... I do not doubt that membership is accompanied with a certain amount of prestige which may prove to be of service to the member in his professional career; but I believe that the same result would attend membership of any society which effectively promoted a branch of science intimately connected with the profession or business in which the member was engaged... It occurs to me that, if any one were asked to say what would be a more efficient method of promoting engineering science than that which the Institution has adopted, he would have difficulty in making a satisfactory reply." These words of Lord Watson ^[F5] , applied to engineering science in the case of the Institution of Civil Engineers, are, in my opinion, equally applicable to surgical science in the case of the College.

In Institution of Civil Engineers v Inland Revenue Commissioners ^[F6] ,, Lawrence L.J. quotes Fry L.J. in Forrest's Case ^[F7] ,:"It has been pressed upon us that the membership in this society is of pecuniary value to engineers, and I have no doubt that that is the case: but the observation does not appear to me to go far. It is obvious that membership in many bodies formed for the cultivation of science is of pecuniary value to certain classes of persons. A fellowship in the Royal Society is undoubtedly of pecuniary value to medical men, to engineers, chemists, and others; nevertheless it is plain that the object of that society is the promotion of science."

The by-laws of the Institution of Civil Engineers contained "rules as to professional conduct to be observed by all corporate members of the Institution": See Institution of Civil Engineers v Inland Revenue Commissioners ^[F8] . This object and activity of the Institution may be compared with object (a) quoted from the memorandum of association of the College. The fact that the Institution concerned itself with the professional conduct of its members did not prevent the conclusion being reached that the Institution was exempt from tax as being carried on for the promotion of engineering science and not for the promotion of the professional interest or advantage of the members.

The College, as already stated, does not grant any degree which is a qualification for professional practice. Accordingly, the constitution of the College is different in this important respect from that of the Royal College of Surgeons of England (See In re Royal College of Surgeons of England ^[F9] ), and the Royal College of Surgeons of Edinburgh (See Sulley v Royal College of Surgeons, Edinburgh ^[F10] ).

In my opinion the College is a scientific institution within the meaning of s. 23 (e) of the Income Tax Assessment Act 1936-1941 and the question in the case should be answered in the affirmative.