ICI Australia Ltd. v. Federal Commissioner of Taxation.

Judges:
Walsh J

Court:
High Court

Judgment date: Judgment handed down 16 December 1971.

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Walsh J.: The respondent disallowed an objection made by ICI Australia Limited (ICI) to the assessment of its income tax for the year which ended on 30 September 1967. The objection has been treated as an appeal and forwarded to this Court.

The first of the questions raised by the appeal relates to a deduction claimed under Div.10 of Pt. III of the Income Tax Assessment Act 1936-1966 (Cth) (the Act). (The changes made in this Division by the amending Act of 1968 are not applicable.) The claim was that ICI had incurred expenditure of a capital nature on necessary plant and on development in connection with the carrying on of mining operations upon a mining property for the purpose of gaining or producing assessable income. It claimed that its residual capital expenditure, ascertained in accordance with sec.122 of the Act, as at 30 September 1967, was $1,874,767 and that it was entitled to a deduction of one-thirteenth of that sum, that is, $144,213. The number chosen for the purposes of the provisions of sub-sec.(2) of sec.122 as ``the number of whole years in the estimated life of the mine'', as at the end of the year of income, was based upon an estimated total life of fourteen years. The primary dispute between the parties as to the application of sec.122 is that ICI claims and the respondent denies that the operations of the taxpayer in connection with which the expenditure was incurred were ``mining operations upon a mining property''.

A great deal of evidence was called concerning the project established near Port Alma in Queensland for the obtaining of salt; concerning the geological formation and history of the underground source from which brine containing salt is there procured; concerning the methods used in various parts of the world and at various times for the recovery of salt and of other substances from places on or beneath the surface of the earth; and concerning the terminology used to describe the processes by which they are obtained. At the end of the hearing there was not much in contest between the parties as to what ICI did and does at its works near Port Alma or as to the geological and hydrological questions discussed in the evidence. What remained in contest was whether the operations could and should be described as ``mining'' and, if so, what was the divisor that should be used in applying sub-sec.(2) of sec.122. Since many of the principal matters of fact and of expert opinion stated in the evidence called on behalf of ICI are not now challenged, I am relieved of the need to make such a detailed examination of the evidence as might otherwise have been needed. But it is necessary to give an account of the aquifer, as it is called by the expert witnesses, from which ICI obtains brine and of the lay-out of the works (to use a neutral term) which it has constructed.

Leases are held by ICI in respect of an area of some ten square miles to the south of the Fitzroy River near Rockhampton. These are part of a much larger area of land beneath which lies a deposit of sand and gravel, described by Mr. Hancock in his report (Exhibit V) as ``an alluvial sand and gravel sequence'', which partially fills the ancestral valley of the Fitzroy River. This contains within it water in which there is a concentration of salt (sodium chloride) much greater than the normal concentration of salt in sea water. Beneath the leases the salt content is about 9% whereas in sea water it is about 3%. But the brine in the sand and gravel sequence is not all of the same concentration. At some distance to the west or north-west of the leases it has been found to be about 6%.

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ATC 4256

Below the sand and gravel sequence is a weathered shale bedrock. Above the sequence is a marine clay layer which is impermeable to normal water flow. It is because of that quality in the clay that the water, which originally came from the sea, was trapped in the sand and gravel sequence. For reasons which are explained in the report (Exhibit V), the presence of the clay layer resulted in the concentration of the salt content of the sea water beneath it.

Salt is obtained in Australia and elsewhere by exposing sea water to a process of evaporation. But there is an obvious advantage if at the beginning of the process of evaporation there is a brine which has a salt content much greater than that of sea water. From a natural deposit of brine, which can be brought by pumping to the surface and then put through a controlled series of evaporation processes, there may be obtained a deposit of salt in crystallised form which may then be ``harvested''. That is in essence the nature of the operation at Port Alma.

The description which I have given of the occurrence of the brine-bearing sand and gravel sequence between a clay layer above and bedrock beneath is over-simplified and may suggest a continuous uniform sequence. The arrangement and the composition of the sediments laid down below the upper layer of clay are much more complicated. There are clays including sandy clays below the upper layer of clay which, although saturated with brine, do not permit the flow of liquid. The conclusions made by Mr. Hancock about the manner in which these are disposed in relation to each other and to the marine clay above them have been depicted in perspex sections (Exhibit H) and in cross-section drawings (Exhibits J & K) prepared by him. But those details do not affect, in my opinion, the primary question which I have to decide. It should be mentioned however that the depth of the available aquifer is not uniform and that that means that exploratory work was required, including the making of test holes in order to determine how far down the production bores would need to go.

According to the American expert witness, Mr. Richner, the brine deposit described in this case is similar to natural underground brine deposits which occur commonly in many parts of the world, although it is unusual to find them so close to the ground surface as is the deposit at Port Alma. The process of obtaining natural brines from below the surface of the earth by pumping has been used for a long time in England and elsewhere.

At Port Alma, ICI caused bores to be made to extract the brine. In order to make a bore a steel casing is driven into the ground. The material within it is removed. When the casing has gone down to the required depth and all the material within it has been removed a plastic casing is put down inside the first casing and at the end of the plastic casing there is a screen or sieve which will serve when pumping begins to separate sand from the brine. Within that casing a pump casing is lowered, to the bottom of which is attached the impeller of the pump which will be driven by an electric motor on the surface. To aid the subsequent flow of brine the material in the vicinity of the screen is subjected to scouring by hydraulic pressure. When the inner casings are in position the outer steel casing is lifted up so as to be clear of the screen attached to the plastic casing.

A number of production bores were constructed. After pumping began the brine was pumped into a pond, identified in the evidence and on a flow chart (Exhibit C) as J.1. This and other ponds used in the process are large areas of fairly flat land upon which the brine is concentrated by evaporation. The ponds are enclosed by walls constructed of earth and of rock. Each of the two ponds designated J.1 and J.2 has an area of about 1,300 acres. The ponds F.1 and F.2, to which the brine is removed later in the process of concentration, are much smaller. The pond F.1 has an area of about 390 acres. The ponds are not provided with an artificial ``floor''.

The brine has a gravity flow from J.1 to the adjoining pond J.2. In both ponds the density of the brine is checked. When it is necessary to do so because there has been a high evaporation rate, sea water is added to the brine. The evidence of Mr. Melvin is that this sea water is used to dilute the brines, not because of its own salt content but because it is readily available. It is pumped from Inkerman Creek which runs through the area occupied by the saltfields. I accept the view that the primary purpose of pumping sea water is to dilute the brine to control its density. The ultimate object is to get the brine to its crystallisation point after it reaches the crystallisers and to avoid premature crystallisation. But it is true nevertheless that a significant part of the salt produced is derived from the sea water which is added during the concentration process. From the pond J.2 the brine goes to a pond F.1 which is at the opposite side of Inkerman Creek. There is a bridge across the creek. On the bridge is a drain made of timber. The brine is pumped up to the drain and flows along it into the pond F.1. When the brine is in J.2 its desired density is 12% of salt and when it is in F.1 it is 17%. The ``salting point'' at which the salt begins to crystallise is about 20%.

From F.1 the brine goes by gravity flow to F.2

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ATC 4257

through a gate in the wall which separates those two ponds. The operators endeavour to keep the brine in F.2 a little below salting point and to rid it of calcium sulphate, which crystallises at this stage of the evaporation process and is deposited. From F.2 the brine is pumped into a long drain called a launder along which it goes to the crystallising area. That drain runs alongside a roadway. It is fifteen to twenty feet wide and has raised walls of earth and stone. It runs for about three-quarters of a mile. It is connected then with pipes running under a road and a railway line and through the pipes the brine flows into the crystallisers, of which there are sixteen, each having an area of twentyeight acres.

At the wall of F.2 there is a bore (shown in Exhibit C) by which brine is pumped from the aquifer, when required as a dilutant to control the density of the concentrated brine. At this stage of the process the control of density is very important, since the brine must be prevented from crystallising before it is transferred to the crystallisers.

By crystallisation a layer of salt with a hard surface is gradually built up in the crystallisers. The fields which are given that name have earthen banks. By means of drains cut through the saltcovered area, liquid is carried away and some unwanted substances, such as magnesium salts, are removed.

When ``harvesting'' of the salt takes place the top of the salt layer is removed, leaving a hard salt surface remaining above the clay floor of the field. The harvester breaks up the salt crust. It picks up the salt and carries it to a conveyor at the top of the harvester and it is then transferred to a mobile conveyor system. At this point the salt is a loose mass of crystals. It is then conveyed to a wash plant. Brine is pumped into a container in the wash plant in which the salt is deposited. Then it is agitated. It is carried upwards and as it goes up it is washed further with brine. It drops into a centrifuge, to reduce the remaining moisture. It is taken by an elevator to a hopper placed above a loading point. From the hopper it goes into a truck. If no truck is available the salt is diverted to a stack from which trucks are afterwards loaded. At this time the salt has a remaining moisture content of about 5%, which is regarded as a satisfactory percentage. What takes place in the washing plant is designed to remove other salts so as to increase the purity of the sodium chloride and to remove so far as is possible what remains of the mother liquor from which the salt was crystallised. After being loaded on to a truck, the salt is carried about three and one-half miles to a stockpile at the Port. Thence it is shipped away for industrial uses.

The process of crystallisation and the harvesting operations go on throughout the year. The harvesting takes place at different times in the different crystallisers.

There is no place in Australia where rock salt is or has been extracted from the earth, either in its solid form, or after being dissolved in water introduced in order to dissolve it and to enable the solution to be brought to the surface. In Australia, some rock salt has been discovered (see Exhibit E), but so far as the evidence discloses, none has been recovered from the earth. In various places in Australia, salt is recovered from salt lakes. Except for the operations of ICI and of a company called Central Queensland Salt Industries Limited (``Central Salt'') carried on close to those of ICI, this being the area in which for a short period during the year 1908 salt works were in operation, natural brine containing salt has not been recovered from underground brine deposits in Australia. There are solar saltfields in South Australia, operated by ICI. The salt is obtained there from sea water which is pumped into a concentration system and goes then to a crystallising system. As at the Port Alma works, water is evaporated by natural processes. The principles upon which the ponds are constructed and the fluid is caused to flow through the system are the same as at Port Alma and a similar type of harvester is used. But there are some differences between the two fields. The ponds in South Australia occupy a very much larger area. The salt is not washed. After it is harvested it is carried in solution by pipe lines to the company's alkalite factory at Osborne. The final salt crystallisation process and the harvesting operation are not continuous, but are confined to a period of about six months in each year and the harvesting is done over a period of ten to twelve weeks.

The production of salt from sea water by solar evaporation has occurred at other places in Australia as has the harvesting of lake salt (see the booklet Exhibit E).

A brochure issued by ICI relating to its works at Port Alma refers to a ``saltfield''. It uses the same word for its operations near Osborne in South Australia. The word ``mine'' is not used. The annual report for 1967 of ICI refers to the ``new saltfield'' at Port Alma. The term ``saltfields'' and the term ``salt works'' are used in a booklet issued by the Bureau of Mineral Resources in the year 1962 on the subject of salt. The booklet deals with the production of salt in Australia. It does not refer to any of that production as ``mining''. It was published before the Port Alma Works of ICI were established, but it refers to the production of salt from solar evaporation of underground brine in the Port Alma area by Central Salt, beginning in 1958.

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It appears that little material has been published in Australia relating to the production of salt, so that not much guidance is available from publications in this country as to the usage adopted in describing the operations by which salt is produced. Some overseas publications have been put into evidence. A book well known to students of minerals and of methods of recovering them is a ``Handbook of Mineral Dressing'', by A.F. Taggart, an American professor. It has a section dealing with salt, in which rock salt and underground brines are mentioned as sources of supply. The word ``mined'' is used in relation to rock salt and the term ``well mining'' is used in relation both to rock salt and to the recovery of brines, in a passage which goes on to discuss methods of evaporation, separation from other substances and crystallisation. There is evidence that rock salt is often recovered by dissolving it and bringing it to the surface in solution. I shall refer again to this and to the question whether the terms used to describe that process are necessarily appropriate to describe the operation with which I am now concerned. The expression ``well mining'' is used in Taggart's handbook.

A professor of mining engineering named Peele was the editor of a handbook published in America, part of which has been put into evidence. The table of contents contains the expression ``Mining through Boreholes''. Under a heading which includes the words ``underground mining'' there is a description of the extracting of soluble minerals, including salt, through boreholes, in the form of artificially produced brines, where this method is for some reason preferable to mining the deposit of salt by ``room-and-pillar methods''.

A paper (Exhibit U) published early in 1971 in England deals with the procedures and the problems associated with the obtaining of planning permission for the development of new mines in Britain and with public inquiries relating to applications for permission for the working of potash deposits in Yorkshire. These applications were all concerned with the winning of potash from solid seams. In choosing the method by which it was to be extracted, two companies adopted what the paper calls ``conventional mining'' and a third company adopted what it calls ``solution mining''. This is a recent example of the use in England of the expression ``solution mining'', which has become common in the United States. The paper uses the word ``mine'' as a noun to describe both a ``conventional mine'' and a ``solution mine''.

In ``The Picture Book of Salt'', published in England in 1965, the expression ``salt mine'' is used many times in referring to underground workings where rock salt is obtained by conventional methods. References are made to salt farms, salt fields, salt beds, and saltworks. In relation to the obtaining of rock salt by pumping water down to it and pumping a salt solution back to the surface, the term ``salt wells'' is used. This process is described as ``hydraulic mining''.

In various articles in the Encyclopaedia Britannica and in a Junior Encyclopaedia the usage generally adopted is to employ the words ``mining'' and ``mine'' when referring to the recovery of rock salt and not to employ them when referring to recovery of salt from sea water or other natural liquid sources or even when referring to what was called ``solution mining'' in the paper (Exhibit U) to which I referred above. For example, in an article on Salt Manufacture (Exhibit 3, p.381) the author refers to the ordinary mining methods followed when ``rock-salt is mined'' and then states ``if mining is impossible, there are two ways of pumping brine''. On the other hand, in another article dealing with Metal Mining (Exhibit 2, p.541) there is a statement in these terms, ``Mining, broadly, is the industrial process of removing a mineral-bearing substance from the place of its natural occurrence in the earth's crust''. This accords with the following statement made in evidence in this case by Mr. Hancock -

``I believe that the term `mining' as has been taught to me through my training, is the winning of a mineral from a more or less concentrated body of limited extent by whatever means.''

He added that the means ``are irrelevant for the purpose of determining whether you would classify it in your mind as mining''. That is a view which I have no doubt is shared by other experts in sciences relevant to mining. But it gives to the term ``mining'' a more extensive meaning than that which I am able, consistently with the authorities, to find that it has in sec.122 of the Act. But I think that the evidence of the experts called in this case may nevertheless be of assistance in arriving at its meaning as there used. To the question of the use that may be made of it, I shall return after a statement of what the witnesses have said as to their understanding of what is meant by mining.

Mr. Hancock would not agree that his concept already mentioned did not accord with the common usage in speech in the circles in which he moved. He could not refer to any work which he had read in which the term ``brine mining'' had been used, but he thought he had used it and heard it used in discussions with officers of the Lands Department in Queensland. He referred to a report relating to the Port Alma aquifer, in which

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ATC 4259

the phrase ``the brine reserves will be mined'' was used.

Mr. Budivari, an expert in mining engineering, who has only recently come to Australia, has a great deal of knowledge about the recovery of salt and of potash in England. He heard the terms ``wet mining'' and ``dry mining'' used at the public inquiry concerning applications for permission to recover potash, which has already been mentioned. He uses the former of those expressions in the same sense as that in which the term ``solution mining'' is frequently used in America. He agreed that such expressions would be likely to be found in technical writings rather than in general works. He did not know when they were first used. He knew that in England the expression ``brine pumping'' was commonly used. He gave the opinion that the extraction of brine at Port Alma ``is basically a mining operation''. He said that from a mining engineer's point of view the operations involved in it are of the same pattern as in other methods of obtaining minerals from the earth. The first stage is that there must be prospecting and exploration of the location of the mineral in the strata and a calculation of the reserves available. Next there is development to get access to the deposit. Then there is the exploitation of it, which in this case means the pumping of the brine from its position underground to the surface. Finally there are the operations of concentrating the mineral and separating it from waste material.

Mr. Richner, an American geologist, has a very extensive knowledge of rock salt deposits and of natural and artificial brines in many countries. To him the expression ``solution mining'' is now a common expression. He knows he has used and heard it as far back as 1953. He cannot say whether it was used earlier than that. The process which it describes is a very old one. Mr. Richner described earlier techniques of obtaining underground natural brines by digging a pit in the ground. These pits or wells became deeper as time went on. Sometimes natural brines are obtained by bores made horizontally into the side of a hill. Mr. Richner gave an explanation also of placer mining, including hydraulic mining. Two main points emerge from his evidence. One is that in his own terminology he would classify what takes place at Port Alma as a mining operation. He said that it is ``very similar to mining operations around the world''. The second is, that so far as general usage is concerned, he is familiar with the expression ``brine pumping'' but asserts that the term ``wet mining'' has long been used as a synonym for it, as has the term ``brining''. The term ``solution mining'' has come later and is now used to describe an operation which includes the injection of water into salt, as distinct from ``brining'' in the sense of obtaining natural brine. He says that is a distinction which was not made in the past but is made now. He said that he believed the term ``wet mining'' was in use before the beginning of this century, but he could not refer to any book or article in support of that statement. He agreed that it was probably correct that prior to and even into this century one would have difficulty in finding the word ``mining'' applied to a process in which bores were put into the earth but in which no persons went underground. He agreed that most of the available literature in the English language is American.

Counsel for the respondent relied on the failure of ICI to produce any additional evidence of the use of the term ``mine'' (and associated terms) to refer to an operation of the kind which it conducts at Port Alma and on its failure to produce any examples of that use in correspondence relating to that project. In this connection the evidence of Mr. Palm should also be noticed. He could not recall that the project was ever described as a mine. He said that he would himself refer to it as a salt field.

Under the legislation of the State of Queensland to which ICI was and is bound to conform in establishing and conducting the works at Port Alma, the recovery of the brine is treated as a mining operation. In the Mining Acts, 1898 to 1967, of that State (the Mining Acts), the expression ``To Mine'' is defined thus -

```To Mine' - To disturb, remove, cart, carry, wash, sift, smelt, refine, crush, or otherwise deal with any earth by any mode or method whatsoever for the purpose of obtaining gold or any other mineral therefrom.''

The term ``Mineral'' is not defined but it is not suggested in this appeal that salt is not a mineral. Section 30 of the Mining Acts gives power to grant a mineral lease and, in certain circumstances, to grant a special mineral lease. In this case special mineral leases covering the area in question were granted to Central Salt and were transferred to ICI. Each of them specifies salt as the mineral for the working of which it is granted. Each lease contains a covenant relating to the working of the land ``by carrying on mining operations for the purpose of producing salt from underground brines obtained from such land'' (see sec.34).

In an agreement dated 2 August 1966, between ICI and Central Salt, there is a recital of an authority to prospect held by Central Salt covering an area of about thirty-five square miles and by the agreement Central Salt agreed to apply for certain mineral leases or special mineral leases and to transfer them, subject to the approval of the Minister for Lands, to ICI. The agreement uses the

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expression ``salt works''. The authority to prospect to which it refers gives to the holder, by cl.5, ``the sole and exclusive right to conduct a special field investigation of the said lands...for the purpose of determining the existence or otherwise of salt from brine and its extent and nature in the said lands''. Clause 19 provides that, subject to certain conditions, the holder shall be entitled to apply for and to have granted to it in priority to any person or company ``mining leases for the mineral specified in condition 5 hereof''. Such an authority to prospect is granted under the Mining Acts: see sec.23A.

As to the sense in which the terms ``mine'' and ``mining'' are used in State legislation, by which mining is controlled and regulated, I add some further references. In the Mining Act of 1968 (Q.) the definitions in sec.7 of ``mineral'', ``mining purpose'' and ``mining lease'', together with secs.21 and 28, show that the provisions of that Act (which repealed and replaced the Mining Acts) are applicable to the obtaining by ICI of salt from its works at Port Alma. The Mines Regulation Act of 1964(Q.), in sec.5, has this definition -

```Mining' and `To mine' - To disturb, remove, cart, carry, wash, sift, crush, concentrate, smelt, refine or otherwise deal with any mineral, rock, stone, quartz, clay, sand or soil by any mode or method whatever for the purpose of obtaining metal or mineral therefrom.''

For other provisions including within the scope of mining the extraction of material ``by any mode or method whatever'' for the purpose of obtaining metal or mineral from it, reference may be made to the Mines Act 1958 (Vict.), sec.3, definitions of ``Mine'', ``Mining purposes'' and ``To mine'' and to the Mining Act 1906 (N.S.W.), as amended, sec.3, definition of ``To mine''. (But in the latter Act the term ``minerals'' is defined by specifying substances and it does not refer to salt.)

The circumstance that according to State legislation an operation is a mining operation is not conclusive that it is such an operation within the meaning of sec.122 of the Act. In
The Australian Slate Quarries Limited v. F.C. of T. (1923) 33 C.L.R. 416, at p.423, Higgins J. said that it was dangerous to rely much on the language used in Acts of the States. But it has been regarded as a factor that can be taken into account: see the same case, at p.420 of the report;
F.C. of T. v. Henderson (1943) 68 C.L.R. 29, at p.44 and
North Australian Cement Limited v. F.C. of T. (1969) 69 ATC 4077; 119 C.L.R. 353, at p.359. I am of opinion that where a question arises whether or not a given type of operation falls within the ordinary meaning of the words used in the Act, according to the ``common understanding'' of the sense in which they are currently used (see
N.S.W. Associated Blue-Metal Quarries Limited v. F.C. of T. (1956) 94 C.L.R. 509, at pp.512, 514) it cannot be irrelevant that the Parliaments of the States have treated that type of operation as being within those words. It is true, of course, that a Parliament may use an expression in a defined sense that does not correspond with its ordinary meaning. But when in many different enactments an operation is treated as being a mining operation, this must itself have an influence upon the ``common understanding'' of that term, at any rate upon the understanding of it by those whose business it is to be acquainted with legislative provisions applicable to the operation in question.

In relation to some of the State Acts, to which I have referred, a question may be raised whether some of the definition provisions apply to the extraction from the earth of a substance which in its natural state in the earth is in liquid form. Thus in the Mining Acts, sec.3, ``Earth'' is defined as ``Any rock, stone, quartz, clay, sand, soil, or mineral'' and the definition of ``To mine'' includes the word ``earth''. But I think it is clear that to carry on the operations of ICI which I have described is to ``deal with any earth''. The aquifer is a sand and gravel deposit, not a body of liquid unassociated with solids and, in any event, since the term ``earth'' includes any mineral, it includes the salt contained within the brine.

The cases in this Court in which the meaning of ``mining operations'' and ``mining property'' in sec.122 of the Act has been considered do not include any case in which there was an operation of the type with which I am now concerned, that is to say, the extraction by pumping through bores of a mineral deposit located underground. In the
Blue-Metal Quarries case, 94 C.L.R., at p.512, Kitto J. said that neither in the provisions of Div.10, nor in any of the other provisions of the Act, was there to be found any indication that the Parliament intended ``any other meaning than that which the words ordinarily have in this country and at this time''. His Honour had no need in that case to consider the special provisions relating to expenditure on prospecting or mining for petroleum which were then part of Div.10 but are now contained in Div.10AA. What he said ought not perhaps to be taken as an expression of a definite opinion that to speak of mining for petroleum (including naturally occurring liquid hydrocarbons in a free state) was to use the term ``mining'' in its ordinary meaning. But whether or not his Honour adverted to that question, it is to my mind of considerable significance that the Act

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has long contained and still contains provisions which refer to the recovery of petroleum as ``mining''.

In this case no question arises as to the propriety of referring to open-cut operations as mining. But a question does arise whether the nature of the deposit which is to be worked and the method used to recover it are the decisive considerations by which it must be determined whether the operations are mining operations. I think that it could not be disputed that if in Australia an underground deposit of rock salt were discovered and underground workings for its recovery by conventional mining methods were established these would be mining operations. According to common usage, there would be a salt mine. But when no workers go underground and when by the drilling of bore holes and the use of pumps a liquid mineral or a liquid containing a mineral in solution is brought to the surface is that a mining operation? In considering whether that description of it ``would sound odd and incongruous'' (94 C.L.R., at p.524) and would be ``an unnatural and inapt use of language'' (94 C.L.R. at p.514), I cannot escape the conclusion that it is important to consider the language used in the Act itself in relation to the recovery of petroleum and in the making of provisions for the deduction of expenditure connected with the mining of petroleum, which are of a similar kind to provisions made for the deduction of expenditure connected with mining generally.

Division 10AA was inserted in Pt. III of the Act in 1963 with the heading ``Prospecting and Mining for Petroleum''. In nearly every section in that Division the term ``mining operations'' or the term ``prescribed petroleum operations'', which by definition (in sec. 124DB) means prospecting or mining operations, is used. Several sections contain the words ``mining right'' or ``mining information''. The term ``mining operations'' is used also with reference to petroleum in sec. 6 (definition of ``assessable income from petroleum'') and with reference to ``oil'' in sec. 78(1)(b).

Prior to the enactment of the amending Act No.44 of 1951, a deduction for capital expenditure incurred in prospecting or mining for petroleum by a taxpayer who derived income from carrying on mining operations for the purpose of obtaining petroleum was allowed under sec. 123A. At that time secs. 122 and 123 were applicable also (subject to sec. 123A(3)) to mining for petroleum but sec. 123AA was not, because petroleum was expressly excluded. As a result of the 1951 Act, the provisions relating to the development of mining properties and to exploration and prospecting for petroleum and for other minerals respectively were still all contained in Div. 10 under the heading, ``Mining'', but they were made mutually exclusive. Section 123A related to petroleum and it excluded petroleum from the operation of secs. 122, 122A, 122B and 123AA. Section 123A which, until its repeal in 1963, when a new Division relating to petroleum was enacted, had been a provision relating solely to the deduction of capital expenditure incurred in prospecting or mining for petroleum, had been inserted in the Act in 1939.

I have mentioned these facts as to the history of that portion of the Act with which I am now concerned in order to show that the inclusion in the concept of mining of the recovery of petroleum is not a consequence of a recent change in usage. It goes back even further than the 1939 Act, to an Act passed in 1923. That is of some significance, having regard to the endeavour made by counsel for the respondent to establish that the use of the term ``mining'' to refer to the recovery in liquid form of minerals, in such expressions as ``solution mining'' and ``wet mining'', is both a recent development and one confined mainly to the United States or to scientists and technologists in England who had been influenced by literature of American origin.

From the evidence given by witnesses with special knowledge in mining geology and mining engineering, it appears that amongst such people it would not be thought strange to refer to the salt extraction as a mining operation. For them that would be a natural use of language. Counsel for the respondent has suggested that this evidence, particularly that of Mr. Hancock, does not establish that even by technical men the process is commonly described in ordinary speech as mining, but means only that as a matter of reasoning that is considered a legitimate classification of it. But whilst the evidence did include a justification of a conceptual assimilation of the process to mining processes, it went further than that. Even when considered in the light of the lack of similar evidence from other technical men, particularly those closely associated with ICI, it went to show that at least for some technical men the term ``mining'' is as a matter of usage applied to a process of this kind. It is true that other terms are also used to describe it but, in my opinion, that is of no consequence.

There has been some debate as to the proper use to be made of the evidence of experts and of conclusions based upon it as to their usage of the words whose meaning I have to determine. I have no doubt that such evidence and conclusions may be taken into account. I think that they may be of much importance, especially in a situation where there has not been in fact any occasion for a widespread adoption or development by the

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general public of a terminology to describe the particular processes under review. At the same time I think that use may be properly made of such knowledge as is available to the Court concerning more general usage. In
F.C. of T. v. Broken Hill South Limited (1941) 65 C.L.R. 150, at p. 160, Williams J. referred to ``the vernacular of mining men''. In North Australian Cement Limited v. F.C. of T. (1969) 69 ATC 4077; 119 C.L.R. 353, at p.362, Menzies J. referred to ``an informed general usage''. But those statements do not suggest to me that the Court is restricted to a consideration of the usage adopted by ``mining men''. Indeed, it seems plain from his judgment that Menzies J. did not think it was so restricted. In
Waratah Gypsum Proprietary Limited v. F.C. of T. (1965) 112 C.L.R. 152, at p.160, McTiernan J. referred to literature which showed how the mining profession described the winning of gypsum and then he referred also to ``common parlance''. With respect, I am of opinion that his Honour was right in taking both into account.

In Australia, as has been stated, there has been no transition from underground mining of rock salt to the extraction of brine by a different process. There has been experience of the obtaining of salt from sea water or lake water by evaporation. It seems to me that this latter process should not be regarded as a ``mining operation'', within the ordinary meaning of those words. If salt water were scooped up from the sea or from a salt lake or creek and the water evaporated by artificial or natural heat salt would be obtained. But it would not be natural to call this mining. Likewise, in my opinion, if salt water from the sea or a lake is pumped in large quantities to fields in which it is concentrated by solar evaporation, that would fall outside the ordinary understanding of the meaning of the term ``mining''. It is the resemblance which in some respects that process bears to the operations of Port Alma that constitutes, in my opinion, the strongest consideration in favour of the respondent's contention in this appeal. Yet I think it can be said that the resemblance lies mainly in those parts of the total activity of obtaining salt, which follow the recovery of the brine. When the brine has reached the concentration ponds, the subsequent processes are in both cases similar and so too is the appearance of the areas upon which they take place. That appearance is a factor which tends to lead one away from a description of the area as a ``mine'' and towards the use of some such expression as ``salt fields''. A very large area is covered by a shallow liquid or by deposits of crystallised salt and this, rather than the relatively small area where the pumping operations take place, is likely to be the dominant feature in what is observed. Yet it is the pumping operations to which I think attention must be primarily directed in determining whether ICI is engaged in mining operations. If it is not so engaged when extracting the brine it is clear, in my opinion, that the later operations are not mining operations. But if the recovery of the brine is found to be a mining operation, there will be a further question to be considered whether the subsequent processes or some of them should also be so described.

In my opinion there is an essential difference, for the purpose under discussion, between the collection of salt water which is naturally on the surface of the earth and the pumping of underground brine, which has first to be discovered and surveyed and then exploited by bores going down to the deposit, which is (in Mr. Hancock's words) ``a more or less concentrated body of limited extent''. Therefore I am of opinion that if it be right, as I think it is, to deny the application of the term ``mining'' to the pumping and concentration of surface water or surface brine, it does not follow that its application must be denied likewise to the recovery of brine from a natural underground deposit.

I am of opinion, also, that an acceptance of the use of the term ``mining'' in a description of the process which witnesses called ``solution mining'' does not conclude the question under discussion. The recovery of a solid underground mineral deposit by dissolving it and bringing it to the surface in a liquid form, as an alternative to hewing it out and carrying it up in solid form, might come to be called ``mining'', without the same usage being necessarily adopted for the recovery of natural brines. Nevertheless the use of such expressions as ``solution mining'' or ``wet mining'' does show an extension of what has been said to be the primary meaning of the term ``mine'', which is not identical with the extension of it by which it has come to include the extraction of some substances by surface excavations, but which is I think somewhat similar to the latter extension. In both extensions the meaning is no longer confined to underground workings, that is, to ``diving under the earth and then working horizontally or laterally'': see
Bell v. Wilson (1865) 2 Dr. & Sm. 395, at p.399, quoted in the Blue Metal Quarries case, 94 C.L.R., at p.523. In one extension it applies to the recovery of some minerals located near the surface, by surface workings. In the other extension it applies to the recovery at least of some minerals, which are far below the surface, by operations which are carried out on the surface.

It was submitted for the respondent that it would be a fundamental misunderstanding of the earlier decisions of this Court if they were taken to

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establish that if it is found that a substance has been traditionally mined by the traditional method of underground workings and then it is found that the same substance is obtained by another method, a trial judge will conclude that this is a mining operation. It was submitted that if the judge finds that in the actual use of language, the other process has come to be called a mining operation, he will conclude that in the sense in which words are currently used it is a mining operation. But this will not be simply because it is seen that a reason for calling it ``mining'' may be found in the circumstance that it is another way of bringing about the same result as that achieved by a traditional mining operation. It will be because of the fact that it has come to be called mining, not because of historical reasons that have caused it to be so called. When it has come to be called mining, the cause may be the kind of association of ideas described in the Blue Metal Quarries case (1956) 94 C.L.R. 509, at pp.513 and 253-4. But the cause of this happening is not important. It was submitted that in this instance that association of ideas has not occurred in fact. It has not happened that to the alternative process the description ``mining'' has been given. It was submitted that the association of ideas has had centuries in which to take place and to find expression in language, but this has not occurred. The process has not been called ``mining'', but has continued to be called ``brining'' or ``brine pumping''.

I think that to some extent those submissions are persuasive, but they go too far. After an examination of the cases in this Court in which the question has been considered, I have no doubt that the conclusions of the judge as to actual usage and as to the actual common understanding of the expression ``mining operations'' have been regarded as being of the highest importance. Yet I cannot agree that the fact that the substance under consideration has been mined by traditional underground methods has been regarded as being of no significance in itself, but as merely providing an explanation of the usage that has been adopted. In this connection I refer to the mention by Kitto J. in the Blue Metal Quarries case (1956) 94 C.L.R. 509, at p.513, of the lack of evidence that blue metal is ever obtained by underground workings, and to the mention of evidence of underground workings in other parts of the world by McTiernan J. in the Gypsum case (1965) 112 C.L.R. 152, at p.156, and by Menzies J. in North Australian Cement Limited v. F.C. of T. (1969) 69 ATC 4077; 119 C.L.R. 353, at pp.359 and 363.

There is another reason for thinking that the submissions for the respondent on this question cannot be accepted in full. They assume that it must be shown by the appellant that the use of the terms ``mine'' and ``mining'' to describe its operations is widespread and consistent and, perhaps, that they are used more frequently than other terms. But, in my opinion, such an assumption is not warranted. If the evidence shows that such operations have been and are described as mining operations, not in some isolated instance but with some frequency, it matters not, in my opinion, that they have been and are described in other ways or even that other descriptions are more common.

Some of the evidence of the usage of the term ``mining'' refers only to recent times, that is, to the last twenty years or so. The respondent sought to attach some weight to that fact. But, in my opinion, I may properly take into account that evidence along with other evidence not confined to that period, including the legislative usage of the term. I think it would be a mistake to say that the question is as to the meaning which the relevant provisions of the Act had at the time when they were enacted and that therefore no regard can be had to anything that occurred afterwards. When the Act was passed there were no works in Australia of the kind which ICI subsequently established. It was not until such works were established that any question could arise whether they were or were not works to which the general expression ``mining operations'' used in the Act applied. When it was raised in this case, the question was whether the expenditure then recently incurred by ICI was incurred in connection with the carrying on of mining operations. In my opinion it must be legitimate to ask whether in the sense in which the words were then used or understood, they applied to the operations of ICI.

I have given an account of the evidence and of the considerations upon which a decision must be made as to the answer to be given to that question. After weighing up all the material before me and the submissions made to me, I find that ICI did incur expenditure of a capital nature in necessary plant and in development, in connection with the carrying on by it of ``mining operations upon a mining property'' in Australia. Accordingly I hold that a deduction should have been allowed under sec. 122 of the Act.

As to the amount which should have been allowed as a deduction two questions arise. The first is the extent of the operations which should be described as mining operations. The residual capital expenditure claimed in the tax year under review was based upon expenditure incurred in exploration and prospecting and in the establishment of the salt fields, including the provision of plant and equipment up to and including the crystallisers. It did not include

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expenditure upon the harvesting equipment or the washing plant. The question whether the harvesting of the salt and its treatment in the washing plant are part of the mining operations has arisen, I was informed, in a later tax year, but it is not a question which is now before me. Although it was suggested that if my reasons for judgment indicated how that question should be answered this might save further litigation, I do not think I should deal now with any matter with which this appeal is not concerned.

I have described the different stages in the treatment of the brine from the time of its extraction from below the surface onwards. Having decided that ICI is carrying on mining operations, the further question whether all the processes up to the crystallisation of the salt fall within that description depends in my opinion upon a decision whether the object of the mining activities should be regarded as the obtaining of brine or as the obtaining of salt in crystallised form. ICI contends that the object was the obtaining of salt harvested and ``washed'' and ready to be transported to those who would use it as a commercial commodity, but for present purposes the question may be put in the form in which I have expressed it. In my opinion, in the sense which is here relevant, the ``end product'' of the operations should be considered to be salt in crystallised form, freed from the water in which it was in solution. Applying to the facts of this case the principle stated in F.C. of T. v. Broken Hill Proprietary Company Limited (1969) 120 C.L.R. 240, particularly at pp.272 to 274, I am of opinion that the relevant expenditure was all incurred in connection with the carrying on of mining operations.

Counsel for the respondent submitted that the situation at Port Alma is wholly different from that which exists at a place where all that you see when you look at the area at the top of the mine will naturally be called a ``mine'', without distinction between what is occurring in the extraction of the precious metal or the mineral and what is afterwards occurring in plants within that area. I appreciate that there is a difference of that kind between these operations and many mining operations and, as I indicated earlier in these reasons, I thought that the physical features of the salt fields tended away from a decision that the operations at ICI should be described as mining. But having decided that they should be so described, I do not accept the submission that what is being sought in that operation (in the sense which is here relevant) is the brine and not the salt. It was suggested that the respondent's argument gains support from the reference in the B.H.P. case, 120 C.L.R., at p.273, to the operation of mining for petroleum. It was there said that this would finish with the obtaining of petroleum as defined, that is, naturally occurring hydrocarbons in a free state and that treatment in a refinery of the hydrocarbons would not be part of the operation of mining. But in my opinion that illustration does not assist the respondent. I do not think that it should be said that to refine petroleum in order to obtain oil of a particular type is to separate that oil from ``unwanted'' materials or substances mined with it. But, in my opinion, it can be said that the concentration and crystallisation processes are operations to separate the end product from other substances (water and some salts other than sodium chloride which are precipitated before the brine reaches the crystallisers) obtained from the earth with it and I think that these are operations of the kind which the leading judgment in the B.H.P. case describes as mining operations. Accordingly on this point my decision is in favour of ICI.

One further question has to be considered in relation to the claim under sec. 122. The respondent contends that the figure taken by ICI as ``the number of whole years in the estimated life of the mine as at the end of the year of income'' (see sec. 122(2)) was wrong, or, at least, has not been shown to be right. The figure taken in the year of income now under consideration was thirteen. Some evidence suggests that this figure was too high. But the question to be decided is whether it was too low. If it was not too low then the deduction claimed was not excessive. The respondent contends that it is not shown that the estimated life was less than twenty-five years and that, therefore, in accordance with sub-sec. (2), the number twenty-five should be used in calculating the amount of the allowable deduction.

I think it is clear that no one can give a precise answer to the question what was in September 1967 the estimated life of the mine. But there were, in my opinion, two limiting factors. One was that the leases were for twenty-one years. At the relevant date they had approximately twenty years to run. They were expressed to be renewable for further periods of twenty-one years ``on the same terms as may be in force with regard to mineral leases at the time of such renewals''. But under the legislation (the Mining Acts, secs. 30 and 33), any renewal would be at the discretion of the Minister. In these circumstances I am of opinion that the leases could be regarded as justifying as assertion that the ``estimated life'' should not be taken at more than twenty years. Another limiting factor was that the leases provided that ICI could not produce more than 4,000,000 tons of salt from underground brines under the leases, except with the permission of the Governor-in-Council. That

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ATC 4265

meant that if the company maintained an annual production of 200,000 tons, the limit would be reached in twenty years. If the average production exceeded that figure then the limit would be reached earlier. Figures were produced at the hearing which showed that the yearly production did exceed 200,000 tons in the two years to which the figures referred. But any calculations based on those figures are made difficult of application to the question to be resolved, because in those years there were abnormal weather conditions affecting production and because the salt produced was derived in part from sea water and not from the underground brine.

I am satisfied that the opinions given by Mr. Hancock and Mr. O'Shea would justify a conclusion that, as at the commencement of the operations, fourteen years was not too low an estimate, provided that I am satisfied, in relation to one essential point of difference between the approach to the problem made by them on the one hand and by Dr. Jones on the other, that the approach of Hancock and O'Shea is acceptable. I proceed to explain how the method adopted by them in reaching an estimate differed from that of Jones. The leases relate to a known area of land. Calculations were made, based upon estimates of the total quantity of the brine-bearing deposits lying beneath the land to which the leases referred and of the amount of brine contained within those deposits. Thus was obtained a figure for the volume of brine lying below the leased land before any pumping operation began. The total volume of the brine-bearing deposit beneath the leased land was estimated to be 193,000 acre feet. The volume of brine was estimated by Hancock to be 54,000 acre feet. There were some differences of opinion as to the correctness of the specific yield figure of 28% taken by Hancock in arriving at the estimate of 54,000 acre feet, but on the evidence I think it may be accepted as a reasonable figure. Then an estimate was made as to the proportion of the brine that would be in a practical sense recoverable by pumping. Hancock put this at 80% in one part of his evidence, but elsewhere he said that he considered that of the 54,000 acre feet, 45,440 acre feet could be extracted. That would be more than 80%. O'Shea thought that the brine extracted might be any percentage between a lower limit of 30 and an upper limit of 100 and expressed the opinion that ``one should work on something around about 60% extractable''. On some further assumptions, which have yet to be mentioned, that opinion of O'Shea would lead to an estimate of about ten years for the life of the mine. Hancock's more optimistic figure as to the extractability of the brine gives, of course, a higher figure for the life of the mine and, on the same further assumptions as those made by O'Shea, he put the life at approximately thirteen years. These further assumptions were (1) that there would be an annual production of 200,000 tons of salt; and (2) that to produce 200,000 tons about 3,200 acre feet of brine would be required. Hancock had made earlier calculations based upon a lower figure, but after further study of available production data, he said that this factor should be taken at about 3,200 acre feet.

I think it is clear that both Hancock and O'Shea assumed for the purposes of their calculations that the maximum volume of the brine resources was the calculated volume of the brine which was beneath the leased land at the time when the operations began. The essential point upon which Jones differed from them was that he assumed that the pumping operations could extract ultimately a substantially greater amount of brine than that which was located at the commencement of the operations within the leased area. He pointed to the facts that the aquifer is not limited to that location but extends far beyond it and that, as pumping goes on, brine from outside that area must move into it and replace partially the brine that has been pumped out. He recognised difficulties in estimating how much would come in but expressed the opinion that over a ten-year period 30% or more of the brine pumped would be brine which had come from outside the area. He said that assuming that there was no change from present activity over the whole of the area of the aquifer, the life of the deposit would be very much longer than the 10 to 13 years that had been suggested and would probably be twice as long as that. It would be twenty-five years or thereabouts.

I think it is plain that the other experts did not think that no brine would come from the rest of the confined aquifer into the area in which the pumps were operating, although if I have understood his evidence correctly, on Hancock's view this process would be slow and would not have such substantial effects as are postulated by Jones. But whether it would be slow or fast, several reasons were put forward by counsel for ICI as justifying the making of an estimate of the life of the mine based upon the estimated volume of brine which was within the leased area at the commencement of operations and not taking into account the volume of brine which might move afterwards into that area. One reason was that as a matter of the construction of the leases no authority was given to the lessee to extract brine in excess of the volume which was originally located within the leased area. I do not accept that submission. The leases impose an express limit upon extraction, expressed in terms of the total production of salt. There is no other express limit. The volume of brine then beneath the surface of the leased area was not a definite figure known to

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the parties to the leases at the time when they were granted. It could be no more than an estimated figure upon which opinions would differ. I do not think it was intended that the lessee might afterwards be in breach of the terms of the lease because of having pumped more brine than was originally beneath the surface of the leased area. It would really be impossible for anyone to know at what point of time, as pumping proceeded, that limit would be reached.

But other reasons advanced in support of the method adopted by Hancock in making his estimate are in my opinion valid. When the problem was considered earlier by other persons, including O'Shea, it is clear that much attention was given to the effect upon the operations of ICI which any other pumping operations outside its area would have. The dramatic effect that this had on O'Shea's mind is shown by his opinion, expressed in March 1969, that after the use of 13,000 acre feet for the establishment of the ponds, there was ``a nil life''. He said that at that time there were real possibilities that happenings outside the area would reduce the movement of brine into the area and that caused him to take a pessimistic view of the continued feasibility of the pumping operations in that area. In stating in his evidence the limits of 30% and 100% for the extractability of brine, O'Shea said that if there were no developments outside the leased area and the pressure was allowed to stay there to help extract the brine, 100% could be achieved but if, on the other hand, the leased area were to be surrounded by other bores extracting brine, then the extraction of brine in that area could come down to the lower limit. Dr. Jones acknowledged that he had disregarded the effects of pumping in adjoining areas. He said that the assumption of no change was the simplest one to make and if you supposed that changes were going to occur but you did not know what they would be, you could not make any estimate ``because there is this complete inter-reaction between what goes on inside the lease and what goes on outside the lease''.

There is another complicating factor in addition to those to which I have referred. Some of the salt produced comes from sea water which is pumped into the ponds. The evidence suggests that there will be significant variations, resulting from differences in weather conditions, in the amount of sea water used. If a given annual target of production of salt is set, there will be variations in the amount of brine used to produce it, corresponding to variations in the amount of sea water that is used. It is not practicable to make accurate calculations as to the effect of this factor.

Having regard to the complexities of the question and bearing in mind that all that can be done is to make an estimate which may turn out to be wide of the mark because the nature of the problem is such that accuracy cannot be achieved, I accept the evidence of Hancock and O'Shea as arriving at reasonable conclusions upon the assumptions which they made and I accept that their estimates were made by methods that might reasonably be adopted.

Their estimates were based on a production rate of 200,000 tons per year. In fact that has been exceeded. It may be exceeded in the future or, on the other hand, production may fall below it. Counsel for the respondent has contended that ICI must fail upon the question of the estimated life of the deposit, because it has brought no evidence at all to show what it intends to do. It is said that there is no evidence of the rate of production at which it will aim and there is nothing to establish the relevance of the assumed production of 200,000 tons upon which the calculations of the expert were based. I agree that evidentiary material has not been provided upon which a definite finding could be made as to the rate of production which will probably be maintained. But, in my opinion, that does not mean that the estimate of Hancock is of no value. He was asked to advise about the conduct of the operations as well as to qualify himself to give expert evidence. He was asked to make an estimate upon the basis of a production of 200,000 tons per year. I think I am entitled to draw the inference, and I do draw it, that in the early stages of the operations ICI expected and intended to maintain at least in the immediate future a production rate of the order of 200,000 tons. I think I am entitled also to conclude, in the light of what has actually happened, that in the immediate future that rate is likely to be exceeded. Of course, the intentions of ICI may change in the future for any one of a number of reasons. But it would be only if the rate fell significantly below the target of 200,000 tons that there would have to be a revision upwards of the estimated life of the mine. The possibility that such revision may be necessary in the future does not destroy, in my opinion, the validity of an estimate made as at September 1967.

For the reasons I have stated I find in favour of ICI upon all the disputed questions relating to its claim based upon sec.122 of the Act.

There was a claim for a deduction, under sec.54, for depreciation of certain plant and equipment used in the operations at Port Alma. It is acknowledged by ICI that this claim is strictly alternative to its claim based on sec.122 and if the latter claim is upheld the claim under sec.54 cannot be allowed. The respondent disallowed both claims. No reason has been given for disallowing the whole of the claim for depreciation as well as the

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claim under sec. 122. At the hearing counsel for the respondent did not submit that no allowance for such depreciation should be made, although he raised a question concerning the inclusion in the amount upon which the claim was based of costs incurred in making the boreholes. Since I hold that the claim under sec. 122 should be allowed, I need not deal further with this claim under sec. 54.

The next matter to be considered is a claim based on sec. 62AA of the Act. The claim is to deduct one-fifth of certain expenditure of a capital nature on new ``manufacturing plant'' for use in the operations at Port Alma. This claim if within the terms of that section it is shown to be valid, is not excluded by the allowance of the claim under sec. 122: see sub-sec. (10) and (11) of sec. 62AA. But if the operations for which the plant was to be used are ``mining operations'' (as I have found) the application of sec. 62AA is excluded by sub-sec. (3)(a) thereof, unless the operations are of the kind described in para. (a) of sub-sec. (4) thereof.

The first point to be considered is whether the ``plant or articles'' to which the claim relates were to be put to the use described in para. (a) of sub-sec. (4). The paragraph reads -

``(4) Subject to the last preceding sub-section and without either extending or restricting, by implication, the operation of sub-sec. (2) of this section, this section applies in relation to any property being plant or articles owned by the taxpayer that is for use by the taxpayer primarily and principally, and directly, in -

(a) the concentration of a metal or the treatment or processing of a metal after its concentration, or, in the case of a metal not requiring concentration, the application to the metal of a treatment or process which, if the metal had required concentration, would not have been applied until after the concentration.''

In sub-sec. (1) it is provided that ``metal'' includes a compound of a metal and that ``concentration'', in relation to a metal, means ``the separation of the metal from its ore by any process''. It was argued that the separation of the salt from the liquid in which it was dissolved was the separation of a ``metal'' from its ``ore''. In my opinion this submission should be rejected.

Submissions were made on behalf of ICI that the plant and articles in relation to which the claim under sec. 62AA was made came within the provisions of para. (a) of sub-sec. (2) and reference was made also to para. (c) and para. (e) of that subsection. I am disposed to think that it could properly be held that the salt produced by ICI answers the description of ``manufactured goods'' and that it was ``derived from other goods'' within the meaning of para. (a) of sub-sec. (2). But since I hold that the operations in which the plant and articles to which the claim relates are used are mining operations (not being operations of the kind described in sub-sec. (4)(a)), sec. 62AA does not apply. The provisions of sub-sec. (2) are expressed to be subject to sub-sec. (3) and having regard to what I have held concerning the operations at Port Alma, the operation of the provisions of sub-sec. (2) is excluded.

One other question remains, which is entirely separate from those which relate to the salt fields. This is a claim for a depreciation deduction with respect to acoustic ceilings and certain electrical wiring and equipment in the office buildings of ICI in Sydney and Melbourne. An appeal against the disallowance of a claim for depreciation of the same items in the tax year ended on 30 September 1961 was dismissed in March 1970 by Kitto J.: see
Imperial Chemicals Industries of Australia and New Zealand Limited v. F.C. of T. (1970) 70 ATC 4024; 44 A.L.J.R. 119. Counsel for the respondent disclaimed any reliance upon any issue estoppel arising from that decision: cf.
Caffoor v. Commissioner of Income Tax (1961) A.C. 584. As the principal facts upon which this dispute depends are set out in the judgment of Kitto J., I need not restate them here. Some criticism was made of his Honour's statement of the facts, but in my opinion his description of the items in question did not contain any errors which could affect the conclusion which he reached. It may be that in some respects the evidence now before me differs from that which his Honour considered. I have not before me all the evidence which was placed before him. However, Mr. Palm, who gave evidence before me, had given evidence also in the earlier case. After considering his evidence, I do not think it appears that there were important differences between the evidence given before Kitto J. and the evidence given before me. It was submitted that his Honour's conclusion that the items under consideration were part of the ``general setting'' in which work was done should not be followed. I was referred to several authorities. Having considered the evidence and the submissions made to me, I am not satisfied that Kitto J. erred either in law or in fact in reaching his decision, or that I should reach now a different conclusion. I am not satisfied that the items in question were ``property, being plant, or articles owned by a taxpayer and used by him... for the purpose of producing assessable income'' within the meaning of sec. 54 of the Act. On this part of its objection to the assessment, I am of opinion that ICI fails.

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My conclusions may be summarised as follows -

• (1) The deduction claimed by ICI pursuant to Div. 10 of Part III of the Act should be allowed in full.
• (2) Its claim for a deduction pursuant to sec. 62AA of the Act should not be allowed.
• (3) Its claim for a deduction pursuant to sec. 54 of the Act with respect to plant and articles used in its operations at Port Alma, which was a claim alternative to the claim under Div. 10 of Part III, should be disallowed.
• (4) The claim for a deduction, pursuant to sec. 54, with respect to acoustic ceilings and electrical equipment in the city buildings, should be disallowed.

The appeal has not been wholly successful. But the claim upon which ICI has succeeded was a major claim which I have allowed in full. A large part of the time occupied by the hearing was devoted to that claim. It is plain also that the objections to which the appeal related, which included the alternative claims made on the footing that the operations were not mining operations, should not have been wholly disallowed. In the circumstances, I think that the respondent should pay four-fifths of the costs of ICI of the appeal.

ORDER:

I order that the appeal be allowed; that the assessment be set aside and that the matter be remitted to the respondent Commissioner to make an assessment in conformity with this judgment. I order that the respondent pay four-fifths of the costs of the appellant of the appeal. I make the usual order as to the exhibits.