Western Gold Mines NL v. Commissioner of Taxation (WA)
59 CLR 729[1938] ALR 203
(Judgment by: Starke J)
Between: Western Gold Mines NL
And: Commissioner of Taxation (Western Australia)
Judges:
Latham CJ
Starke JDixon J
Evatt J
McTiernan J
Subject References:
TAXATION AND REVENUE
Dividend duty
Sale of mining leases
Realization of capital
Legislative References:
Dividend Duties Act 1902 (WA) (No 32) -
Judgment date: 24 February 1938
Melbourne
Judgment by:
Starke J
The Dividend Duties Act 1902-1931 of Western Australia imposes a tax upon all profits made by every company carrying on business in Western Australia. This court held, in W. Thomas & Co Ltd v Commissioner of Taxation (W.A.), [F8] that the tax was imposed upon profits arising from trading or business operations and not upon the proceeds of a realization or an enhancement in value of its capital assets (Forwood Down & Co Ltd v Commissioner of Taxation (W.A.); [F9] and cf. Ruhamah Property Co Ltd v Federal Commissioner of Taxation [F10] and cases there cited). The facts are not in dispute, and the only question is the proper legal conclusion from these facts. The appellant was a company formed in Victoria for mining purposes. It had very extensive powers, including powers to acquire mining properties and leases in any part of the world, and to carry on and conduct the business of mining, to promote and organize any other company for the purpose of acquiring or otherwise dealing with all or any of the property or rights of the company and to sell, exchange or otherwise deal with all or any part of its property or rights.
The appellant had acquired certain gold-mining leases and a pipe track in the State of Western Australia, and was registered or entitled to be registered as the holder of those leases and the pipe track under the Mining Acts of that State. The capital of the appellant company was not sufficient for the purpose of developing and working its properties to the best advantage. It was then decided to form a new company with a capital of PD600,000 to take over the properties. Accordingly, a new company was formed in Victoria for mining purposes and was called Triton Gold Mines No Liability. It also had extensive powers, including the adoption of an agreement for the sale and purchase of the appellant's properties made between it and a trustee for a company to be formed under the name of Triton Gold Mines No Liability, and the power to carry on and conduct mining operations.
The consideration for this sale and purchase was the issue to the appellants by the Triton company of 200,000 shares of 10s. each in its capital, credited as fully paid, and a sum of PD50,000 in cash within a certain time. The commissioner treated the sale price of the lease etc as PD150,000, and from this sum deducted PD107,265 the cost of the leases, various items of expenditure and capital paid up in cash. The balance, PD42,736, he treated as a profit made by the appellant in Western Australia for the year ended 30th June 1934 and assessed it to duty accordingly under the Dividend Duties Act 1902-1931 already mentioned. The assessment was upheld in the Supreme Court of Western Australia, and an appeal is now brought to this court.
Now, the facts make it clear that the appellant acquired the mining properties for the purpose of working and development, but it had not sufficient capital to carry out that purpose. So it promoted a new company with more capital and turned over its mining properties to it for a consideration in cash and shares. The proceeds arose from a realization of the appellant's assets and not from any mining or business operations on its part (Cf. Evans v Deputy Federal Commissioner of Taxation (S.A.) [F11] and Tebrau (Johore) Rubber Syndicate Ltd v Farmer; [F12] Commissioner of Taxation (W.A.) v Newman). [F13]
It has been said that it is often difficult in practice to draw the line between income and capital receipts, but that difficulty is seldom solved by the refinements of legal analysis. The question must ultimately resolve itself into a conclusion of fact, having regard to the circumstances of each particular case. And the present case, as it seems to me, is clearly outside the provisions of the Dividend Duties Act 1902-1931 of Western Australia.
The appeal should be allowed.