Giris Pty. Ltd. v. Federal Commissioner of Taxation.

Judges: Barwick CJ

McTiernan J
Kitto J
Menzies J
Windeyer J
Owen J

Court:
High Court (Full Court)

Judgment date: Judgment handed down 5 March 1969.

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McTiernan, J.: The question for decision is whether sec. 99 and 99A of the Income Tax Assessment Act 1936-1965 are valid laws. These sections occur in Division 6 of Part III of the Act. The sections relate to the liability of trustees to taxation under the Act in respect of income of trust estates in cases in which there are no beneficiaries presently entitled to such income. A trustee is only assessable and liable to tax under sec. 99 if the Commissioner forms the opinion in accordance with sec. 99A that it would be unreasonable to tax him under this section. We were informed in the course of argument that the rate of tax under sec. 99 is higher than under sec. 99A. The constitutional validity of sec. 99A principally was attacked. It was said that the two sections constitute an entire scheme of taxation so that if sec. 99A falls, sec. 99 should fall also. The contentions on which the attack is based derive from the words ``if the Commissioner is of the opinion that it would be unreasonable that this section should apply'', occurring in sub-sec. (2) and from para. (c) of sub-sec. (3), which provides that in addition to the matters set forth in paras. (a) and (b) - ``the Commissioner shall have regard to such other matters, if any, as he thinks fit.''

Sections 99 and 99A depend, of course, for validity on sec. 51 (ii) of the Constitution. This power is of a plenary nature. The legislative discretion of Parliament exercisable by it under this power extends to authorising the Commissioner to form the opinion mentioned in sec. 99A(2) on a consideration of the matters set forth in sub-sec. (3), which include any matter properly comprised in para.(c), and making such opinion the criterion of the liability of the trustee concerned to pay tax as provided in sec. 99. The criterion is attacked on the ground that it is not authorised by sec. 51(ii) of the Constitution, and is otherwise unconstitutional, because there is no certainty as to what relevance an opinion, that it would be ``unreasonable'' to tax the trustee under sec. 99A, would have to assessing him under sec. 99 and levying tax accordingly: In my view, to uphold an attack of this kind against sec. 99A, it would be necessary to add to sec. 51(ii) a condition, that laws or provisions of statutes, made under this placitum must be certain. There is no decision or rule of interpretation which would support imposing a condition or limitation on sec. 51(ii) making certainty indispensable to the exercise of this power. The provisions of each of the sections now in question constitute, in my opinion, a law with respect to taxation. Neither section manifests an intention to authorise the Commissioner to discriminate in his treatment of trustees, contrary to the words of sec. 51(ii). All the provisions of both sections should be read as intending to operate only within the limits of this placitum.

A trustee, assessed under sec. 99, may not know what idea conceived by the mind of the Commissioner led to the opinion that it would be unreasonable to apply sec. 99A. But neither section attempts to prevent any taxpayer from having recourse to the judicial power with a view to proving that he is not taxable or not taxable in the sum assessed. A trustee within the operation of either section has the same right of appeal under Division 2 of Part V of the

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Act as any other taxpayer assessed in respect of a liability to tax made dependent by a provision of the Act on the opinion of the Commissioner. In an appeal under the Division, the Court, as the Act now stands, would not inquire into the correctness of an opinion formed by the Commissioner under sec. 99A or any other provision by reason of which an assessment is made. But an assessment under sec. 99A is open to such judicial review, as any assessment based on the opinion of the Commissioner, on the ground that the opinion is invalid. There is no need to state here the grounds, established by judicial decisions, on which the Court may in such a case set aside the Commissioner's opinion. It is not a ground on which to hold sec. 99A invalid that the sort of opinion it authorises the Commissioner to form results in the imposition by sec. 99 of an incontestable tax. In my judgment it does not for the reasons I have stated. In my judgment sec. 99A is a valid exercise of the power granted by sec. 51(ii) of the Constitution. Section 99 is also a valid exercise of this power. The order of reference pursuant to which this matter was argued before us states that the question for argument is the validity of sec. 99 and 99A of the Income Tax Assessment Act 1936-1965 and I have dealt with the matter on that basis.