B.O.A. Pty. Ltd. v. Federal Commissioner of Taxation

Judges:
Rogers J

Court:
Supreme Court of New South Wales

Judgment date: Judgment handed down 11 November 1980.

---

Rogers J.

This is an appeal from a decision of the Taxation Board of Review (Case L67,
79 ATC 519) dismissing an appeal by the taxpayer and confirming the Commissioner's assessment. In respect of the years ended 30 June 1973 to 1976 inclusive, the taxpayer would have been liable to tax on assessable income gained by it but for accumulated losses which had been incurred in previous taxation years. The Commissioner for Taxation disallowed the claim in respect of those accumulated losses and, by assessment, assessed the taxpayer to tax and, in adjustment sheets accompanying the assessments, specified the reason for the disallowance. The section assigned by the Commissioner as the reason for the disallowance was sec. 80DA.

The taxpayer objected to the action taken by the Commissioner and included in the grounds of objection was the following: ``(4) At all times during the year of income ended 30 June 1973, shares carrying between them the rights mentioned in sec. 80A(1)(c)(d) and (e) were beneficially owned by persons who at all times during the years of income ended 30 June 1966 and 30 June 1967 respectively beneficially owned shares in the company carrying between them rights of those kinds, and the Commissioner is, or ought to be, so satisfied.''

I have chosen as an example the notice of objection relating to one particular year, but all the other objections included similar grounds. The Commissioner disallowed the objections and, as I have said, an appeal was taken to the Taxation Board of Review.

As required by the regulations, the Commissioner forwarded a statement purporting to be pursuant to the provisions of reg. 35(1). Later, apparently, there was an amended statement and in that document the Commissioner stated that the claims for accumulated losses were not allowable because of, inter alia, the provisions of sec. 80A(1). Clearly enough, therefore, one of the issues tendered for decision by the Board of Review was whether the provisions of sec. 80A operated to disqualify the taxpayer from the benefit of the accumulated company losses.

The reasons for disallowing the taxpayer's appeal were delivered by the Chairman of the No. 1 Board and one of the other members was content merely to agree; the third member of the Board delivered certain supplementary reasons. All members of the Board were united, however, in the view expressed by the Chairman, who concluded that, for the reasons given, the requirements of sec. 80A were not satisfied in relation to any of the years under review.

An appeal was thereupon brought to this court and, when the matter was called on, senior counsel for the appellant taxpayer called upon the Commissioner of Taxation to produce documents pursuant to subpoena issued and served upon the Commissioner. It is common ground between the parties that the subpoena is perhaps in somewhat wide form, but certain documents were produced pursuant to subpoena, relating to the affairs of the taxpayer during the years in question and, in particular, documents which resulted in the issue of the assessments under challenge. When counsel for the taxpayer appellant sought access to the documents it was submitted on behalf of the respondent that that access should not be permitted. The basic ground which was argued was whether or not the documents could be relevant to any issue before the court.

The contentions of the appellant were founded on certain statements that were made by members of the court in
Kolotex Hosiery (Australia) Pty. Ltd. v. F.C. of T. 75 ATC 4028; (1975) 132 C.L.R. 535. In particular, reliance was placed upon what fell from the Chief Justice at ATC pp. 4031-32; C.L.R. pp. 542-3 and Gibbs J. at ATC

---

ATC 4030

p. 4048; C.L.R. p. 567. In the interests of saving time, I shall venture to seek to summarise what their Honours said. In the matter then before the court, their Honours took the view that if in truth the Commissioner was, in the process of making the assessment, satisfied as to the existence of the matters called for by sec. 80A of the Act, he could not then resile from that state of satisfaction, except by the issuing of an amended assessment. This necessarily broad summary of the purport of what fell from their Honours was, however, applicable and applicable only to the circumstances which obtained in that case. That was an appeal which was taken directly to the High Court and on appeal to the Full Court of that Court. There was no intervention in the process by the Board of Review as was the case here.

Counsel for the Commissioner submitted that that intervention made all the difference. I am no longer concerned, he submitted, with whatever may have been the Commissioner's state of satisfaction or dissatisfaction as to the existence of the matters in question under sec. 80A. By reason of the fact that there had been launched and determined an appeal to the Taxation Board of Review, the provisions of the Act operated to substitute the views of the Board as to whether or not the matters specified in sec. 80A were satisfied or not.

In addition to referring me to the relevant provisions of the Act dealing with grounds of objection and appeals to the Board of Review, and in particular to sec. 193, counsel drew my attention to the examination of the role of the Taxation Board of Review made by the High Court, and in particular by Sir Frank Kitto in the relatively recent decision in
Mobil Oil Australia Pty. Ltd. v. F.C. of T. (1963) 113 C.L.R. 475. At p. 502 Kitto J. reiterated the well-accepted definition of the role of the Board of Review as merely another stage in the administrative process of assessment to tax. His Honour said, in part:

``It is beyond question that in the ordinary kind of case a Board of Review is not under such an obligation, for its function is merely to do over again (within the limits of the taxpayer's objection) what the Commissioner did in making the assessment - not to give a decision affecting the taxpayer's legal situation, but to work out, as a step in administration, what it considers that situation to be. The Board is `in the same position as the Commissioner himself', as the Privy Council said in
Shell Co. of Australia Ltd. v. F.C. of T. ((1931) A.C. 275, at p. 298; (1930) 44 C.L.R. 530, at p. 545). It is `only another executive body in an administrative hierarchy':
Jolly v. F.C. of T. ((1935) 53 C.L.R. 206), per Rich and Dixon JJ. ((1935) 53 C.L.R. 206, at p. 214). But the taxpayer in the present case contends that a review of an assessment made under s. 136 has special features which give it a quasi-judicial character. The function of the Board under that section, like the function of the Commissioner, is not to ascertain and give effect administratively to a liability existing under the Act, but, where the Board forms a certain opinion as to a matter affecting the taxpayer's liability under the ordinary provisions of the Act, to select an amount (of the total receipts of the business) which it considers normal or reasonable: cf. Minister of National
Revenue v. Wrights' Canadian Ropes, Ltd. ((1947) A.C. 109, at p. 122) to become the taxpayer's taxable income for the purpose of assessment, and by so doing to cause a special tax liability to arise by force of the section. It must give a decision as to whether s. 136 shall operate to subject the taxpayer to the special tax liability for which it provides, and if so what the amount of the liability shall be. If the decision involves a question of law it will be subject to appeal to this Court; but even where an appeal lies to this Court - and it is then an appeal on fact as well as law - the Court will not substitute its own discretionary judgment for those of the Commissioner or of the Board:
Robertson v. F.C. of T. ((1937) 57 C.L.R. 147);
Denver Chemical Manufacturing Co. v. C. of T. (N.S.W.) ((1949) 79 C.L.R. 296, at pp. 311-313);
McEvoy v. F.C. of T. ((1950) 9 A.T.D. 206, at p. 211). The Board's function, therefore, is to decide whether to create a liability.''

The Board is in the same position as the Commissioner, and sec. 193 substitutes the exercise of the Board's views, decisions and determinations for those of the Commissioner. In the result, when the matter comes before the Court it is to the decision of

---

ATC 4031

the Board that regard is required to be paid, and it is the question whether or not the Board was entitled to be satisfied as to the relevant matters called for by sec. 80 to which regard is needed to be paid.

In all the circumstances it is irrelevant what state of satisfaction or otherwise the Commissioner arrived at or held when he issued the assessment, and accordingly documents which embody or indicate what his view was are irrelevant for present purposes. The decision of the Board is the one to which I am required to pay regard, which is substituted for the views and decisions of the Commissioner by sec. 193, and accordingly I consider the documents produced pursuant to subpoena to be irrelevant to any issue before me.

I refuse the application of the taxpayer to have access to the documents called for by the subpoena.

On 12 November 1980, Rogers J. refused the taxpayer's application for adjournment in the following terms:

Rogers J.: During the course of the proceedings Mr. Bainton sought access to certain documents produced on subpoena by the Commissioner of Taxation. For the reasons which I then gave, I denied him access to those documents. Now that the evidence has concluded in relation to all issues bar the particular matter in relation to which those documents have relevance, Mr. Bainton applies for an adjournment for the purpose of enabling him to test my ruling on the question of access. He has submitted that convenience dictates that I should adjourn the matter, so that, in the event that my ruling should be held to be erroneous, the matter can come back and a decision be given on the totality on the evidence, which would perforce include any relevant documents from the Commissioner's file and any further evidence which the taxpayer may wish to adduce arising from or relating to the matters set out in those documents.

I suggested to Mr. Bainton that even if my ruling were seen to be erroneous by those who were better informed, nonetheless the matter could be cured by tendering in any appellate court such documents as may be thought to be relevant from the Commissioner's file. Mr Bainton points out, quite rightly, that that may not be a sufficient remedy because the information contained in the documents may be of such a nature as to cause him to institute further and other inquiries which may result in further and additional evidence to that contained in the documents becoming available.

I of course have an advantage, which Mr. Bainton does not, of having seen the file, and in all the circumstances I am of the view that the better course is to proceed to a final determination, so far as this Court is concerned, of the matters in issue, and to leave it to any appellate court to correct such errors as I might commit.