Burt v Commissioner of Taxation
15 CLR 469(Decision by: Higgins J)
Burt v Commissioner of Taxation
Court:
Judges:
Griffith CJ
Barton J
Higgins 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:
Higgins J
The questions in this case arise as to the deductions to be allowed from the taxable amount of income under the Land and Income Tax Assessment Act 1907; and they turn finally on the construction of s. 30 (7). Under the previous sub-sections, the taxpayer is allowed to deduct (inter alia) losses, outgoings and expenses incurred in the production of the income. These words are treated as including any rent paid for premises used for the purpose of producing the income. Then come the words in debate:"(7) 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." The words are easily applied in the case of a manufacturer who owns his factory; but what do they mean in the case of a pastoralist who carries on his business on a wide area of land? What are to be regarded as his "business premises"? There is certainly no indication in the rest of the Act of any intention to favour the manufacturer as against the pastoralist; all kinds of pursuits of gain are treated as "business"; but what "business premises" has the pastoralist, unless it be the land on which his sheep or cattle range and depasture? It is admitted on all sides that the words are not technical, that they are to be interpreted as language of ordinary speech. Taking the words by themselves, there would seem to be three conditions to be fulfilled if there is to be a deduction-(1) the premises must be occupied by the taxpayer; (2) they must be actually used for the sole purpose of the business; and (3) they must be "business premises." It is hard to see at first sight how the words "business premises" involve any definite additional condition, if condition (2) be fulfilled-if the premises are actually used for the sole purposes of the business. In my opinion, the key to unlock the meaning of s. 30 (7) is to be found in the corresponding negative provision of s. 31 (8), which prescribes that there shall be no deduction made in respect of "the rent or value of ... any premises not occupied for the purposes of the" business, "or of any dwelling-house or domestic premises except such part thereof as may be occupied for the said purposes." "Domestic premises" are in contradistinction to "business premises." Under this section, if the premises are actually occupied for the purposes of the business, the deduction of 4 per cent, on the value is to be allowed even as regards domestic premises, but only in respect of such part as is occupied for the purposes of the business. It is to be observed that the words of exception in s. 31 (8) are not "unless they (the domestic premises) be occupied for the said purposes (of the business)." If such words were used, it might fairly be said that men's huts, etc, though "domestic premises," are to be treated as within the exception. From the point of view of the taxpayer, the huts are occupied for the purposes of the business; the right to reside therein is taken into account in fixing the wages. But the words are "domestic premises except such part thereof as may be occupied for the said purposes" (of the business). The result is that the words "business premises" in s. 30 (7) include premises which are wholly devoted to the business; but there is the further condition that they must be actually occupied and used for such purposes. For instance, if a warehouse, or a factory, fall into disuse, it is not the subject of the deduction; and similarly with a block of pastoral land, or a shearing shed. If the pastoralist resides on his station, his residence, with, probably, the residential curtilage, would have to be excluded from the computation of theoutgoing. Section 31 (9) also favours the view that the land used by the pastoralist or agriculturist for grazing or crops is to be treated as his business premises. For, surely, in forbidding a deduction for any "improvement of premises occupied" for the business, it is intended to forbid a deduction for any improvement of agricultural or pastoral land. I see no sufficient reason why the land, which is actually used by the pastoralist for the depasturing of his beasts, and the yards, sheds and other places used for his business-excluding domestic premises of himself or his employees, except so far as they are occupied for purposes of the business-should not be treated as his "business premises." Why should not the land be his "business premises"? Where buildings only are meant, the section uses the word "buildings" (s. 30, sub-s. 5); and, if buildings only were to be included under "premises," there would have been no difficulty in using the words "business buildings."
Assuming, however, that the words are equally open to the contrary interpretation, there are certain rules of construction which ought to turn the balance in favour of the interpretation which I have adopted. One is that a liberal construction ought to be given to words of exception confining the operation of the duty (Armytage v Wilkinson [F6] ). Another is that that construction should be avoided which involves injustice-in this case to the pastoralist; and that that construction should be adopted which produces the greatest harmony and the least inconsistency as between the different classes of taxpayers.
The result is that, in my opinion, the owner of pastoral land is entitled to the deduction of 4 per cent, on the value of the land, including the value of shearing sheds, windmills, bores and fences, but not including the "huts and other buildings used solely as residences for the manager and other employees."
The sub-section in question is substantially the same as that in a New Zealand Act (The Land and Income Assessment Act 1908); and we have been referred to two taxation cases, one bearing on a previous Act of 1900-Commissioner of Taxes v Kauri Timber Co [F7] , and the other bearing on the Act of 1908-Commissioner of Taxes v Nightcaps Coal Co [F8] . In the former case, it was merely held, by a majority of the Court, that the taxpaying company did not "occupy and actually use for the sole purposes of its business" a whole forest, when it was merely cutting down some timber trees on its fringe. The company did not occupy the forest any more than a grantee of timber rights-one who has a licence to cut timber on Crown lands. The Court was careful to point out [F9] , at p. 34 that the question did not arise as to land used for agricultural or pastoral purposes, as in this case. In the latter case, the actual decision was merely that the term "business premises" did not include "colliery workings, fixed machinery and plant and buildings of every description"; and the Court declined to attempt any definition of the term.
But the question remains, is the appellant in this case the owner of the land? He is entitled to land for a "leasehold estate granted under the Land Act 1898"; and, under the definition of "owner" contained in s. 2, he is the owner-"unless the context otherwise requires." This definition applies to the whole Act, both to the sections relating to income tax as well as to the sections relating to land tax. By s. 17, the amount paid for land tax has to be allowed as an abatement from the income tax; and the word "ownership" is applied indifferently to land for the purposes of both taxes. I can find nothing in the context, which necessarily requires another meaning for "owner" in s. 30 (7). As McMillan J. says in his judgment: "The whole object of the section is to put the owner of business premises in as good a position as one who pays rent for premises which belong to another." To the extent of the income from his leasehold, the Crown lessee is liable to income tax; and, if the object of the section is to be attained, he must be allowed to treat as an outgoing a percentage on the value of his leasehold as if it were rent for business premises belonging to another. The only difficulty arises from the fact that the Crown lessee has already been allowed to deduct from his receipts his actual rent paid to the Crown; and it is urged that it would be absurd to allow him to deduct the same rent twice. It is not the same rent; but even if it were, there is no absurdity. If a man were the owner of a fee simple held in socage, and had to pay annually a quit rent the value of his interest would be the value of the full fee simple minus the capitalized burden of the annual payment. The land with the value so ascertained comes under the operation of s. 30 (7); and, as the land is used as his business premises, he is to get a deduction of 4 per cent. on that value-not of the land, but of his "interest" in the land (s. 30, sub-s. 7). In estimating the value of his interest in the land, allowance has to be made for the fact that the reversion of the lease is in the Crown, and that rent has to be paid to the Crown.
It has been suggested that if the Crown lessee is to get the benefit of the allowance under s. 30 (7), the actual rent was wrongly deducted. That point is not strictly for us to decide in this case; but, speaking for myself, I do not accept the suggestion. I see no inconsistency or anomaly.
According to my view, the appeal should be allowed, the judgment varied, and the questions answered in favour of the taxpayer as to all but the huts and other buildings used solely as residences for the manager and other employees.