Texas Co (Australia) Ltd v Federal Commissioner of Taxation; Federal Commissioner of Taxation v Texas Co (Australia) Ltd
(1940) 63 CLR 38214 ALJ 32
(Judgment by: Rich J)
Between: Texas Co (Australia) Ltd
And: Federal Commissioner of Taxation
Between: Federal Commissioner of Taxation
And: Texas Co (Australia) Ltd
Judges:
Latham CJ
Rich JStarke J
Dixon J
McTiernan J
Subject References:
Income Tax (Cth)
Judgment date: 18 March 1940
Judgment by:
Rich J
These appeals from the board of review were brought before the Full Court in April 1938 upon material which had been laid before the board of review and without any evidence taken before this court.
This procedure might not have been open to any objection of a substantial nature if, as soon as the argument had been fairly opened, it had not appeared that the parties were in hopeless disagreement upon all the crucial facts. In the circumstances the Full Court took the only possible course of remitting the appeals to a single justice. The appeals were accordingly brought before me in that capacity. The discussion before the Full Court had made it plain that, unless a commission were issued to take evidence abroad, the appellant could not proceed very far in the strict proof of the facts, the burden of proving which fell upon it, at all events by admissible evidence. Such a commission would not have been returned, if at all, except after the lapse of some years, and the parties seemed to have been sufficiently chastened by the unfortunate course their proceedings had so far followed to listen to the voice of reason and endeavour to agree upon the facts, which, after all, there was not much reason to doubt. The not unnatural reluctance of the commissioner to admit facts which were outside his knowledge, and the great difficulty of reducing the details of complicated transactions to a compendious yet accurate statement, proved the source of much delay and many embarrassments in arriving at an agreement.
The parties, however, brought before me a lengthy statement of facts and a catechism of questions upon both of which they agreed. Although I was not myself perfectly satisfied with the form of the questions or the sufficiency and clarity of the facts I was loath to take any steps to disturb a harmony achieved at the expense of surmounting so many obstacles and of so much labour, and I accordingly adopted what the parties had agreed upon and referred the matter to the Full Court. In dealing as a member of the Full Court with the reference I have to remember that the matter must again come before me to be disposed of finally. I think I shall cause myself and the parties less embarrassment by refraining from entering upon a disquisition concerning the matters of law and questions of mixed fact and law which arise under the questions.
I have had the advantage already of reading the judgments prepared by the Chief Justice and by Dixon J., which cover the ground of all thirteen questions put to the Full Court and adopt substantially the same view of the greater number of those questions. As to the first five questions those judgments agree except in the form of the answer, and it is unnecessary for me to do more than say that I am substantially of the same opinion.
As to the seventh question I agree on the whole that it would be safer and better to leave it unanswered. Questions 8 and 9 and 9A are answered by the two judgments to which I have referred substantially to the same effect and I concur in the result.
The tenth question causes more difficulty. From the taxpayer's point of view its importance lies in the taxpayer's contention that the pump rents are to come into the account for the purpose of special property tax as an item of gross income so that on the other side of the account - the expenditure side - the very great cost connected with the maintenance of the pumps shall be brought in and thereby reduce or extinguish the large revenue items of interest, etc. I cannot think this is right. The pump rents are at best insignificant items of receipts arising in the course of a business activity concerned only with the sale of petrol, i.e., the establishment and maintenance of petrol pumps for the retail sale of the petrol from which the company derives its business income. To include the pump rents in the account of property income and under colour of doing so to bring in this large business expenditure on the other side is, to use a homely phrase, to make the tail wag the dog. The answer may be that rents of this description cannot be conceived of as income arising independently of the business activity of supplying petrol. In the practical world rents from petrol pumps are unknown except to the distributor of petrol. But quacunque via I think that the company's contention should fail. The purpose of the expenditure is not to obtain pump rents but to advertise the company and its wares and sell petrol. For these reasons I think the board of review was not wrong but was right in refusing to allow the company to deduct the amounts in question. As to question 11 I agree with the view which both judgments I have mentioned adopt that the company is liable to the further income tax or special property tax imposed by the taxing Act notwithstanding that sec. 28 of the Income Tax Assessment Act is applied for the purpose of ascertaining the company's taxable income for ordinary income tax. I agree also in the view those judgments take of the twelth question, viz., that in ascertaining the further income tax or special property tax sec. 28 has no application and an account is to be made up to ascertain the taxable income subject to the tax entirely independently of sec. 28. (at p447)