Federal Commissioner of Taxation v Broken Hill South Ltd
65 CLR 1501941 - 1107C - HCA
(Judgment by: Rich ACJ)
Between: Federal Commissioner of Taxation
And: Broken Hill South Ltd
Judges:
Rich ACJStarke J
McTiernan J
Williams J.
Subject References:
TAXATION AND REVENUE
Income Tax
Assessment
Calls on shares of mining companies
Legislative References:
Income Tax Assessment Act 1922 No 37 - s 23(1)(i); s 51(6)
Income Tax Assessment Act 1936 No 27 - s78(1)(d); s 196
Judgment date: 7 November 1941
Sydney (heard in Melbourne)
Judgment by:
Rich ACJ
This case comes before us on a reference by a single justice under s. 18 of the Judiciary Act 1903-1940.
The order directs that the case be argued before the Full Court on the notice of appeal, the transcript as amended at this hearing, and the evidence and exhibits.
It is an appeal under s. 51 (6) of the Income Tax Assessment Act 1922-1934 from the board of review, which, by a majority, allowed an objection by the respondent to an assessment. The objection was that a deduction in respect of certain calls paid by the respondent taxpayer on shares held by it in a mining company-Willyama Mining Pty Ltd -had been wrongly disallowed.
By s. 23 (1) (i) of the Act a deduction is authorized from the assessable income of so much of the assessable income as is paid in calls on shares in a mining company or syndicate carrying on mining operations in Australia for gold, silver, base metals, rare minerals or oil. The Willyama company was formed to take over the assets of Broken Hill Pty Block 14 Co Its main asset is mining lease No. 14. It is also the lessee of two other leases, but it is not necessary, the chairman of the board says, to consider these two leases, because the activities of the company are confined to Block 14. This lease was originally granted for the mining of silver, lead and tin, but subsequently the right was given to mine for copper, antimony, calcium, gold, sulphur and zinc. All the evidentiary facts were before the board. Only one witness was called, and his evidence was not disputed. This witness-Mr. Andrew Fairweather-is the general manager of Broken Hill South Ltd and its representative on the committee of management of the Willyama company. He said that "its operations have not been ore-winning operations simply because we have never had economic conditions that would make it economical to extract the ore. When the prices of metal are high enough and the demand increases sufficiently Block 14 can be and will be worked." The company has fulfilled the conditions of the leases to the satisfaction of the New-South-Wales Government and has employed a staff of surface-men and engine drivers, who are engaged in protecting the mine from damage by fire or vandalism and, by pumping, to keep the upper levels of the mine free from water. The mines at Broken Hill have "closed-down" periods owing to strikes, fires and unfavourable prices. Similar operations-maintenance and safeguarding of the leases and pumping water-are carried on during these periods. The conditions of the grants require the companies to drain their mines and employ a certain number of workmen.
On these facts the majority of the board decided that the deduction claimed by the respondent of the sum of PD800 paid by it in calls during the relevant income year to Willyama Mining Pty Ltd , which had been disallowed by the appellant, should be allowed to the respondent as a deduction, and that the assessment should be amended accordingly. This conclusion I am not averse from upholding. The policy of the section in question was to encourage mining by giving a concession to taxpayers in respect of outgoings contributed for the purpose of carrying on that activity. I do not think a narrow application should be given to the section, and I regard it as extending to work which is preparatory or ancillary to the actual winning of metal or ore. Maintenance work done by the Willyama company during the relevant years was of this description. I am, therefore, of the opinion that the appeal should be dismissed.
I must not, however, be taken as agreeing in the objection by the taxpayer to the competence of the appeal. Under s. 51 (6) of the Income Tax Assessment Act 1922-1934 a right of appeal is given to the commissioner from a decision of the board of review which involves a question of law. "If some question of law be involved in the decision of the board we apprehend that the whole decision of the board, and not merely the question of law, is then open to review: Cf. Ex parte Walsh and Johnston; In re Yates [F1] " (Ruhamah Property Co Ltd v Federal Commissioner of Taxation [F2] ). The facts in the present case are not in doubt, and the decision depends upon the application of the section conferring a right to deduction. That involves an appreciation of its meaning and some conclusion as to the extent of its operation. "The proper legal effect of a proved fact is essentially a question of law, but the question whether a fact has been proved when evidence for and against has been properly admitted is necessarily a pure question of fact" (Wali Mohammad v Mohammad Bakhsh [F3] , at p. 92). It has been said that it is difficult to distinguish between conclusions of law and conclusions of fact. "My Lords, it may not always be easy to distinguish between questions of fact and questions of law for the purpose of the Taxes Management Act 1880, or similar provisions in other Acts of Parliament. The views from time to time expressed in this House have been far from unanimous, but in my humble judgment where all the material facts are fully found, and the only question is whether the facts are such as to bring the case within the provisions properly construed of some statutory enactment, the question is one of law only" (Farmer v Cotton's Trustees [F4] , at p. 932, per Lord Parker). "I agree," said Lord Macnaghten, "in thinking that the question whether a temporary staging is a scaffolding within the meaning of the Act is not a mere question of fact on which the finding of the county-court judge is final. It is a mixed question of fact and law. When the facts are ascertained it is a question of law on which the Court of Appeal is entitled, and I think bound, to express an opinion" (Hoddinott v Newton Chambers & Co Ltd [F5] , at p. 56). In O'Brien v Dobbie & Son [F6] , at p. 348 Collins M.R. considered whether the law (the construction of a statute) could confer upon a ladder the infliction of the incapacity of ever becoming a scaffolding.
Similarly in this case the question is whether the proper construction of s. 23 (1) (i) of the Income Tax Assessment Act 1922-1934 confers upon the operations deposed to the blessing of being exempted from the liability sought to be imposed upon them by the appellant's assessment.
The appeal should be dismissed.