Koitaki Para Rubber Estates Ltd v Federal Commissioner of Taxation
(1941) 64 CLR 241(1941) 2 AITR 167
(Judgment by: Starke J)
Between: Koitaki Para Rubber Estates Ltd
And: Federal Commissioner of Taxation
Judges:
Rich ACJ
Starke JMcTiernan J
Williams J
Subject References:
Income Tax (Cth)
Judgment date: 21 April 1941
Judgment by:
Starke J
Under the Income Tax Assessment Act 1936-1937, the assessable income of a taxpayer, that is, a person deriving income, includes where the taxpayer is a resident the gross income directly or indirectly from all sources, whether in or out of Australia, and where the taxpayer is a non-resident the gross income derived directly or indirectly from all sources in Australia, which is not exempt income. A person, for the purposes of the Act, includes a company. The Act extends to the Territories of Papua, Norfolk Island, and New Guinea, but does not apply to income derived by a resident of those territories from sources within those territories. Any taxpayer who is resident in a territory specified in the section is, for the purposes of payment and assessment of income tax on income derived from sources in Australia, deemed to be a resident of Australia: See s. 7. Further, the following income is exempt from income tax: the income derived by a resident of any territory or island in the Pacific Ocean other than New Zealand, which is governed, controlled or held under mandate by the government of any part of the British Empire or by a condominium in which any part of the British Empire is concerned, from sale in Australia by or on behalf of that person, or produce of the territory or island of which he is resident (Act, s.23(n))
The Koitaki Para Rubber Estates Ltd is a company incorporated under the Companies Act of New South Wales, where is its registered office, and where, in the words of the cases, the central management and control of the company abides, and where also the majority of the shareholders reside. But its business is the production of rubber upon its plantations, which are in the Territory of Papua. The company's plantations are of considerable area, and it there employs a large number of persons under the control of a resident manager appointed by the company, who holds a power of attorney to manage, carry on, and conduct in Papua the property, affairs, and business of the company. The produce of the plantations is shipped to Sydney and there sold by the company through commission agents. The company claims that it is a resident of the Territory of Papua and therefore exempt from income tax in respect of income arising from the sale in Australia of the produce of its plantations in Papua.
It has often been pointed out that a company cannot in the ordinary sense reside anywhere and that in applying the conception of residence to a company it is necessary to proceed as nearly as possible upon the analogy of an individual: See De Beers Consolidated Mines Ltd v Howe, [1906] AC 455 ; Swedish Central Railway Co Ltd v Thompson, [1925] AC 495 ; Egyptian Delta Land and Investment Co Ltd v Todd; Australasian Temperance and General Mutual Life Assurance Ltd v Howe, (1922) 31 CLR 290 . But the Income Tax Assessment Act itself indicates in s. 6 the sense in which it uses the word "resident" in relation to a company: "'Resident' or 'resident in Australia' means a company which is incorporated in Australia, or which, not being incorporated in Australia, carries on business in Australia, and has either its central management and control in Australia, or its voting power controlled by shareholders who are residents of Australia." This provision, I agree, cannot be applied in terms to the provisions of s. 23 (n), but it indicates, as I think, the elements which are of importance in applying the conception of residence to a company for the purposes of the Income Tax Assessment Act 1936-1937.
It is unnecessary for me to traverse again the "weary road of the tax cases." A company may be a "resident" for the purposes of Income Tax Acts and it may have more than one residence for the purposes of these Acts. A company resides "wherever it keeps house and does business." Accordingly the ascertainment of the residence of a company is mainly a question of fact. If its central management and control abide in a particular place, the company resides there for the purposes of income tax, but it does not follow that it has not a residence elsewhere. Thus in the present case it is clear that the company resides in New South Wales, but it may also reside in the Territory of Papua. Again, incorporation of the company does not, apart from special provisions such as are contained in the Acts, conclusively establish the residence of a company: it is a fact to be considered. Swedish Central Railway Co Ltd v Thompson was a case in which it was found that a company resided in England though the real control and management of the business of the company was in Sweden and only some formal administrative business was done in England by a local committee. It was said that the central management and control of a company might be divided and was in that case divided. But I do not suppose that this phrase means that some minor head office functions were performed in England, for the critical question was, did the company keep house and do business in England? The fact of the registration in England, with the other circumstances found by the Commissioners for Special Purposes were, the Lord Chancellor declared, sufficient to enable them to arrive at their finding that the company resided in England.
In the present case, the company had an office in Papua, and was registered as a foreign company under the Companies Ordinance 1912-1936 (Papua). It acquired and worked large plantations there. It kept a manager and local staff there and also books of account. And the local staff prepared and forwarded the produce of the plantations to Sydney for sale. These facts, apart from the incorporation of the company in New South Wales, which perhaps is balanced by the registration of the company in Papua, are stronger, I think, than the Swedish Co's Case, and afford ample material for concluding that the company kept house and did business in Papua and was resident there as well as in Australia.
But there is the provision in the Income Tax Assessment Act 1936-1937 which gives the legislative conception of residence as applied to a company for the purposes of income tax. It looks to the location of the incorporation of the company, the central management and control of the company, and the location of voting power of the shareholders. The appellant company in the case before the court was not incorporated in Papua, its central management and control was not there exercised, and the voting power of its shareholders was not located there. All these features, suggested by the Act itself, being absent in the present case, the court should, I think, conclude that the company was not resident in Papua or at least that it was not error on the part of the primary judge so to conclude.
Accordingly, the appeal should be dismissed.