Federal Commissioner of Taxation v Broken Hill South Ltd
65 CLR 1501941 - 1107C - HCA
(Judgment by: Starke J)
Between: Federal Commissioner of Taxation
And: Broken Hill South Ltd
Judges:
Rich ACJ
Starke JMcTiernan 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:
Starke J
Appeals by the Federal Commissioner of Taxation against the decision of a board of review sustaining the claim of the taxpayer to a deduction of calls on shares in a mining company carrying on mining operations from its income assessable to income tax under the relevant Income Tax Assessment Acts for the years 1934-1938 all inclusive. Under these various Acts a deduction is allowed from the assessable income in the year of income of calls paid on shares in a mining company carrying on mining operations in Australia for gold, silver, base metals, rare minerals, or oils: See Income Tax Assessment Act 1922-1934, s. 23 (1) (i); Income Tax Assessment Act 1936-1940, s. 78 (1) (d).
An appeal to this court may be brought from any decision of the board which involves a question of law (Income Tax Assessment Act 1922-1934, s. 51 (6); Income Tax Assessment Act 1936-1940, s. 196). The taxpayer objects that the decision of the board from which the commissioner appeals involves no question of law.
The expression "mining operations" is not a term of art; it is popular and not technical (Australian Slate Quarries Ltd v Federal Commissioner of Taxation [F7] ). The common understanding of those words is not a question of law but of fact (Girls Public Day School Trust v Ereaut [F8] ; Attorney-General for the Isle of Man v Moore [F9] , at p. 267). But if there be no material which would justify the meaning given by the tribunal to the words, that is a question of law. This court has no authority to decide whether the finding is correct, but only whether there is any material upon which the tribunal could reasonably so find (American Thread Co v Joyce [F10] ; Currie v Inland Revenue Commissioners [F11] ).
Willyama Mining Pty Ltd was formed in 1934 by a group of three Broken Hill mining companies (consisting of the taxpayer, North Broken Hill Ltd , and the Zinc Corporation Ltd ) to take over the assets of Broken Hill Pty Block 14 Ltd (in liquidation) which had been purchased by the group for PD1,750. The main asset consisted of a mine on Block 14, shaft and equipment and surface buildings, and of mining rights in respect of silver, lead, tin, copper, antimony, calcium, gold, sulphur, and zinc. The ore body remaining in the mine was large: it was estimated at 220,000 tons, but was of low grade. No ore has been extracted from the mine since the Willyama company took it over, owing to economic conditions in the years in question here, namely, the low price of metal and the cost of production, rendering operations unprofitable. But the company has nevertheless employed a staff of surface men and engine drivers who have been engaged on the mine in performing, in some measure, what are called the labour convenants in the mining lease, and in maintaining and protecting the mine from damage by fire and otherwise and in pumping (occasionally) to keep the upper levels of the mine free from water. It may be observed that the maintenance expenditure of the company for the years 1934-1938 inclusive averaged over PD2,000 per annum, which I presume rendered necessary the calls upon its shares.
The commissioner contends that the mine was closed down, or, in other words, the company was not engaged in extracting ore from its mine and was consequently not engaged in mining operations. But the majority of the board took the view that the common understanding of the expression "mining operations" covered activities in connection with a mine additional to the mere extraction of ore or metals such, for instance, as the provision and maintenance of plant both above and below the surface and work connected with the protection and safety of the mine and the mining rights. In my opinion, this was a conclusion which the board might reasonably adopt in point of fact, and, if so, there was material before the board upon which it could reasonably find that the Willyama Mining Pty Ltd was during the years in question here carrying on mining operations. It is not for this court, as I have said, to determine whether the decision of the board was correct, but only whether there was material before it upon which it could reasonably reach its conclusion.
In my opinion, the decision of the board was a decision of fact and involves no question of law. Consequently, this appeal should be dismissed.