Burt v Commissioner of Taxation
15 CLR 469(Decision by: Barton J)
Burt v Commissioner of Taxation
Court:
Judges:
Griffith CJ
Barton JHiggins J
Subject References:
Crown
Crown lands
Crown lease
Liability to income tax
Pastoral lease
Owner
Deductions
Business premises
Improvements
Taxation and revenue
Income tax
Legislative References: - Land and Income Tax Assessment Act 1907 (WA) No 15; Land Act 1898 (WA) 62 Vict No 37
Judgment date: 29 October 1912
PERTH
Decision by:
Barton J
Sec. 30 of the Land and Income Tax Assessment Act 1907 (No. 15 of 1907) prescribes that every taxpayer shall be entitled to certain deductions from the sum on which income tax would otherwise be payable (See, among others, ss. 29 and 19). One of the deductions is expressed by sub-s. 7 in these terms:"Where any taxpayer occupies and actually uses for the sole purposes of his business any business premises or any portion thereof of which he is the owner, he shall be entitled, in any return of income derived from such business, to claim as an outgoing a sum computed at the rate of four pounds per cent per annum on the actual value of his interest in such business premises or portion thereof." Sub-s. 1 allows the deduction of "... outgoings ... actually incurred in Western Australia by the taxpayer in the production of his income ..." So that a 4 per cent deduction per annum on the value of his interest in "business premises" is to be allowed the person classed as "owner" just as if it were an "outgoing actually incurred in the production of his income."
There are four questions to be formally answered, all arising in the construction of s. 30 (7), but they resolve themselves into two. The first is whether on the facts admitted a pastoral lessee is an "owner" within the meaning of that sub-section. If he is not, the appeal fails altogether. The second, which arises only the appellant is the "owner," is whether on the facts admitted, the leasehold lands, the shearing sheds, the windmills, bores, fencing and huts, etc, mentioned in the case stated, or any portion of them, are "business premises" within the meaning of the sub-section. If we are of opinion that the leasehold lands are such business premises, their accessories, that is to say shearing sheds, windmills, bores and fences, but not the "huts and other buildings" in which employees live, must, I think, be included in the valuation of the owner's interest therein, upon which he may claim 4 per cent. per annum as an outgoing to be deducted. If the lands are not "business premises," the same question arises as to all that is mentioned in questions 2 and 3, except that the "huts and other buildings" included in question 3 are subject to different considerations, and I shall deal with these separately.
First, then, it is contended by the respondent Commissioner that the appellant, who is a lessee from the Crown of lands for pastoral purposes, is not "the owner" meant by sub-s. 7, but that the words are there used in their ordinary sense. By s. 2, however, "owner," unless the context otherwise requires, includes, when applied to any estate or interest in land, not only the owner as that term is usually understood, but also the holders of freehold estates less than the fee simple, married women holding separate estates otherwise than through trustees, the makers of settlements and other such instruments not made bona fide, persons entitled to the receipt of rents and profits, etc, not being entitled to the beneficial legal estate in fee, and together with all these, "every person who is, jointly or severally, whether at law or in equity ... (b) entitled to land for any leasehold estate or interest granted under the Land Act 1898, or any amendment thereof, or under any Land Regulations thereby repealed, with or without the right to acquire the freehold." Does the context require that "owner" in sub-s. 7 should be read not to include such a leaseholder? We were referred to numerous sections of the Act by the appellant to show that the word is, in all the material context, used in the same sense; but counsel for the Commissioner did not point out, nor have I been able to discover in the Act, any place apart from the debatable sub-section in which the word is used in a sense which is not within the area of the definition. So far, then, as the word "owner" is used elsewhere in the Statute the context does not limit the prima facie extension of the word as used in sub-s. 7. Certainly it does not "otherwise require." There are other considerations which tend to show that the sub-section intends the privilege for the Crown lessee as much as for the absolute freeholder. One of them is that, if "owner" is to be understood in a sense other than that of s. 2, the exclusion must extend not merely to the Crown lessee but also to other classes of holders mentioned in the glossary of that section, such as, tenants for life, and many persons who, though not holding the fee, are entitled to the receipt of rents and profits. I can find no warrant in reason, any more than in the context, for the supposition that the legislature intended so to limit the privilege. As my learned brother Higgins pointed out during the argument, the ordinary lessee has not to bear the land tax, not being an owner either by force of the definition or apart from it. But the Crown lessee, being expressly included in the definition, has that burden imposed on him. Is it not reasonable then to conclude that the legislature intended him, and not the absolute owner alone, to have the privilege as well as the burden?
It was urged that the appellant is not an owner within sub-s. 7, because he is entitled to the benefit of s. 17. The argument did not impress me. Any benefit of s. 17 only belongs to him in common with any other person who derives profit directly either from the ownership, or the use or cultivation, of any parcel of land whether he be an "owner" as defined or a mere tenant of another person, even at will. The section is merely for the prevention of double taxation of the same subject matter, and it can scarcely be urged that such prevention of that which would be an obvious injustice is a privilege which, if the glossary meaning of "owner" be adopted, will be repeated in favour of the Crown lessee by the terms of sub-s. 7. If that sub-section doubles the advantage, which I fail to see, the owner, in the ordinary sense of the term, would still be entitled to the boon, and there is no reason why we should conclude that the advantage, even if it were an additional one, is made his privilege to the exclusion of other holders who are within the interpretation.
But it was argued, and the learned Judges of the Supreme Court are of opinion, that the appellant's contention on this point involves an absurd result, because it gives the Crown lessee who has been allowed to deduct his rent as an outgoing under sub-s. 1, the benefit of a further deduction of the 4 per cent, under sub-s. 7, which, it is said, is merely designed to put an absolute owner of business premises in as good a position as a person who pays rent to another for his premises. This suggestion assumes that the Crown lessee is entitled to the deduction of his rent as an outgoing under sub-s. 1. That question is not before us for decision, and I do not think I ought to express an opinion on it until it is specifically raised. But assuming the appellant's right to that deduction, it does not strike me as absurd that he should be entitled also to a deduction under sub-s. 7. Further, as I think the meaning of the word "owner" as used is clear, whatever difficulties the sub-section may otherwise present, it is not open to me to reject that meaning on the ground of any absurdity in its operation, real or assumed.
With great respect, I think the learned Judges of the Supreme Court have not fully appreciated the force of the concluding words of sub-s. 7. The deduction in favour of the "owner" is a sum computed at 4 per cent, per annum "on the actual value of his interest in such business premises or portion thereof." The words "his interest" seem to include interests less than the fee, while not excluding the fee. Had it been intended to confine the exception to holders in fee simple, those words would have been wholly unnecessary. It would have been sufficient to say that the deduction must be computed "on the actual value of such business premises or portion thereof." On the other hand, if the word "owner" was used in the sense given it by s. 2 it was, of course, necessary to show, and the words do show, that the valuation is to be according to the quantum of the taxpayer's interest-e.g., in cases within paragraph (b) of that section, a "leasehold estate or interest granted under the Land Act."
I do not think the meaning of the word "owner" is affected by the fact that the Act deals with income tax as well as land tax, because the interpretations are expressly made applicable to "this Act," that is, the whole Act. It is to be taken, therefore, that the word "owner" is meant to be read in the same sense, whether the section in which it occurs deals with the one tax or the other, that is, unless the context actually requires another sense. It would have been easy enough for the legislature to use some other expression-such, for instance, as "holder in fee simple"-if it wished to avoid the application of s. 2. If such a desire had existed, to use the term "owner" at all would have been a blunder, and we are to impute care and deliberation to the legislature. We cannot assume a mistake in an Act of Parliament.
It seems tolerably clear that the word must be read in the sense directed by the interpretation section.
The real difficulty is in the second point, and arises from the earlier words, namely, "Where any taxpayer occupies and actually uses for the sole purposes of his business any business premises or any portion thereof." The appellant occupies and actually uses his leasehold lands solely for pastoral and agricultural purposes; that is, he is in respect of those lands a grazier and farmer. Are grazing and farming a business within sub-s. 7, so that the appellant is occupying and using his lands for the sole purpose of that business? Farming and grazing are, if not a profession or trade, certainly an employment and a vocation, and so they must be taken to be included in the word "business" as used in s. 30 (9). In the New South Wales Act of 1895, of which the framers of this Statute have largely made use, "business" is, in s. 28, defined totidem verbis with the definition in s. 30 (9) down to the word "vocation." But the New South Wales Act adds these words: "but shall not include ownership, use, or cultivation of the land." The omission of this exception by the Western Australian Act is significant, because it is clearly deliberate. Its result is to leave the word "business" effective to include occupations for or in which land is owned, used, or cultivated, and the appellant's occupation in respect of this land is, for this further reason, a business.
But that does not suffice. For the appellant to be granted the deduction he claims, lands leased from the Crown must not only be used for the purposes of his "business" of grazier and farmer, and for those purposes only, but they must be "business premises" within the meaning of the sub-section. I find it difficult to decide whether they are or not.
The several deductions allowed by s. 30 are exceptions to the general rule of taxation prescribed by the Act. Where the construction of such exceptions is seriously in doubt, the interpretation should favour those whose claims are based upon the exceptions. For that position there is the highest authority, if authority be necessary. In Armytage v Wilkinson [F1] , at p. 369, the Judicial Committee express their dissent from the principle that in a taxing Act provisions establishing an exception to the general rule of taxation are to be construed strictly against those who invoke their benefit. They point out that such a principle "is opposed to the rule expressed by Lord Ellenborough in Warrington v Furbor [F2] , and followed and confirmed in Hobson v Neale [F3] . Lord Ellenborough's words are [F4] , at p. 245:`I think that when the subject is to be charged with a duty, the cases in which it is to attach ought to be fairly marked out; and we should give a liberal construction to words of exception, confining the operation of the duty.' It is only, however, in the event of there being a real difficulty in ascertaining the meaning of a particular enactment that the question of strictness or of liberality of construction need arise."
I proceed to apply this rule, bearing in mind the qualification stated, to the construction of these words "business premises," and, when I have explained the difficulty, I shall find that the rule impels me to give the appellant "the benefit of the doubt," as Sir John Romilly M.R. put it in Hobson v Neale [F5] , at p. 185.
The word "premises," apart from its use in legal terminology to denote something which has gone before, is no doubt very often applied to buildings. But, whatever may have been the fact half a century ago, it is in these days constantly used to express something more than a mere building-for instance, a place consisting of a building and the land used in conjunction with it. Whatever land is used in carrying on a business may well be termed business premises, at any rate if it is used with structures appropriate to the conduct of the vocation. Take the case of a laundry, with its drying ground; a dairy farm, with grass land for the milking cows, where the business cannot be carried on altogether in a structure or structures, is it not reasonable to include in the concept of the "business premises" all land necessarily or properly used for its complete exercise? If that is so, dairy farms and wheat farms, as well as factories, become business premises. Then, why not grazing farms with their woolsheds, shearing sheds, windmills and bores for watering the sheep, since without these aids the business of a grazier or sheep farmer cannot be carried on? How is it possible then to exclude the paddocks where the sheep depasture that are to breed, to be shorn, to be sent to market? As the grazier cannot carry on his business without sheep, so neither can he carry it on without a great deal of grass. Without these, his sheds and his artesian bores go for nothing so far as "business" is concerned.
On the other hand, while it is not foreign to common parlance to speak of such places as a laundry or a factory, as the owner's business premises, it certainly seems a stretching of terms so to designate a large farm or a sheep station; not because it is really incorrect to describe them so-for it is not incorrect if they are such in fact,-but because such a description is unusual. But a description is not incorrect because it is unusual. It is so true that business premises are in numberless instances not confined to buildings, though they may seldom if ever be confined to land, that on reflection it is hard to withhold the designation, if claimed, in many cases to which one has not actually heard it applied. For instance, a poultry run would surely be "business premises." But who ever heard one called so?
Here then is a serious difficulty in construing this exception. What is the solution?
With much doubt, I have come to the conclusion that the words "business premises" are used in a sense larger than that of an office or a warehouse, and with the view of including, not only all that is commonly spoken of as business premises, but all that is in reason within the term as a concept; that is, with the view conduct of business. An additional reason that I have for coming to this conclusion is that once the term is established as applicable, as I think it is, to some places, such, for instance, as dairy farms, it is impossible as successive gradations or extensions are reached, to draw a line of definition or demarcation which will prevent such a place as a sheep farm from being included. Besides, the class once ascertained, it should not be imputed to the legislature that it withheld equal treatment from one of two specimens of the same class, merely because it operates on a larger scale than the other. It has not shown any such intention, nor has it indicated any point at which it is to begin to take effect. I apply the rule laid down by Lord Ellenborough, by giving "a liberal construction to words of exception, confining the operation of the duty," because I find-using the words of the Privy Council quoted above-"a real difficulty in ascertaining the meaning" of this provision.
I think, then, that all the leasehold lands used and occupied by the appellant solely for farming and pastoral purposes, in conjunction with the shearing sheds, windmills, bores and fences on such lands, are "business premises" within the meaning of s. 30, sub-s. 7.
It remains to consider the "huts and other buildings used solely as residences for the manager and other employees."
By s. 31 "no deduction shall ... be made in respect of ... (8) the rent or value of ... any dwelling-house or domestic premises, except such part thereof as may be occupied for the said purposes"-i.e., the purposes of the profession, trade, employment or vocation.
This provision forbids the making of any deduction under s. 30 (7) in respect of the value of the appellant's interest in these huts and other buildings if and so far as they are occupied as dwelling-houses or domestic premises-i.e., as residences. It seems to me not to matter that they are used as the dwellings of employees. It is the nature of the use or occupation, and not the reason of it or the person who occupies, that is the criterion. The Act draws a sharp contrast between business premises and domestic premises, and forbids deduction on account of the latter unless some part of them be occupied for the purposes of the business. Where no part of the particular dwelling is so occupied, the whole of it is under the ban of s. 31 (8), and cannot be made the subject of any deduction.
The huts and other buildings used as residences are therefore not business premises within the meaning of s. 30 (7)-that is to say, they are not premises on the actual interest of the owner whereof a percentage deduction from the taxable amount may be computed.
I think the order appealed from should be varied, and the questions answered in the sense of the reasons I have given.