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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Owen, J.: In this matter we have to consider the validity of sec. 99A of the Income Tax Assessment Act which, along with sec. 99, was introduced into the Act in 1964.

The sections - and particularly sec. 99A - take a most unusual form.

Section 99 is in these terms:

• ``(1) This section applies in relation to a trust estate in relation to a year of income only if the next succeeding section does not apply in relation to that trust estate in relation to that year of income.
• (2) Where -
  • (a) there is no part of the net income of a trust estate that is included in the assessable income of a beneficiary in pursuance of section ninety-seven of this Act or in respect of which the trustee is assessed and liable to pay tax in pursuance of the last preceding section; or
  • (b) there is a part of the net income of a trust estate that is not included in the assessable income of a beneficiary in pursuance of section ninety-seven of this Act and in respect of which the trustee is not assessed and is not liable to pay tax in pursuance of the last preceding section,

  the trustee shall be assessed and is liable to pay tax on that net income or on that part of that net income, as the case may be, as if it were the income of an individual and were not subject to any deduction.''

Section 99A(1) which, for the purposes of this case, is not material, excludes from the operation of sec. 99A trusts resulting from certain sources and sec. 99A(2), (3) and (4) provide that:

``(2) This section does not apply in relation to a trust estate (other than a trust estate referred to in the last preceding sub-section) in relation to a year of income if the Commissioner is of the opinion that it would be unreasonable that this section should apply in relation to that trust estate in relation to that year of income.

(3) In forming an opinion for the purposes of the last preceding sub-section -

• (a) The Commissioner shall have regard to the circumstances in which and the conditions, if any, upon which, at any time, property (including money) was acquired by or lent to the trust estate, income was derived by the trust estate, benefits were conferred on the trust estate, or special rights or privileges were conferred on or attached to property of the trust estate, whether or not the rights or privileges have been exercised;
• (b) if a person who has, at any time, directly or indirectly -
  • (i) transferred or lent any property (including money) to, or conferred any benefits on, the trust estate; or
  • (ii) conferred or attached any special right or privilege, or done any act or thing, either alone or together with another person or persons, that has resulted in the conferring or attaching of any special right or privilege, on or to property of the trust estate, whether or not the right or privilege has been exercised,

    has not, at any time, directly or indirectly -

  • (iii) transferred or lent any property (including money) to, or conferred any benefits on, another trust estate, not being a trust estate referred to in sub-section (1) of this section; or
  • (iv) conferred or attached any special right or privilege, or done any act or thing, either alone or together with another person or persons, that has resulted in the conferring or attaching of any special right or privilege, on or to property of another trust estate, not being a trust estate referred to in sub-section (1) of this section, whether or not the right or privilege has been exercised,

    the Commissioner shall have regard to that fact; and

• (c) the Commissioner shall have regard to such other matters, if any, as he thinks fit.

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(4) Subject to the next succeeding sub-section, where -

• (a) there is no part of the net income of a trust estate that is included in the assessable income of a beneficiary in pursuance of section ninety-seven of this Act or in respect of which the trustee is assessed and liable to pay tax in pursuance of section ninety-eight of this Act; or
• (b) there is a part of the net income of a trust estate that is not included in the assessable income of a beneficiary in pursuance of section ninety-seven of this Act and in respect of which the trustee is not assessed and is not liable to pay tax in pursuance of section ninety-eight of this Act;

the trustee shall be assessed and is liable to pay tax on that net income or on that part of that net income, as the case may be, at the rate declared by the Parliament for the purposes of this section.''

Sub-section (5) need not be set out since it has no application in the present case.

In fact the rate of tax declared by the Parliament for the purposes of sec. 99A differs from that which is applicable to a case to which sec. 99 applies and the taxpayer here was assessed at the rate declared for the purposes of sec. 99A. It would seem to follow therefore that the Commissioner did not form an opinion that it would be unreasonable to apply that section.

An examination of the two provisions shows that sec. 99 is to be applied to the income of a trust estate of the kind with which the section deals only if sec. 99A does not apply to it and sec. 99A is not to be applied if the Commissioner is of opinion that it would be unreasonable to apply it having regard to the matters set out in sec. 99A(3) (a), (b) and (c). But although the Commissioner in forming his opinion is directed to have regard to the matters mentioned in these three lettered paragraphs, he is given no legislative indication of the effect that the existence or non-existence of some or all of those matters is to have upon his mind when he is considering whether he should form the opinion that it would be unreasonable to apply sec. 99A to the case with which he is dealing nor is there anything that I can find in either of the sections to show what were the mischiefs which the Parliament presumably intended to remedy. That, however, is only to say that sec. 99A requires the Commissioner to perform a most difficult, indeed an almost impossible, task and does not, to my mind, throw light upon the question of the constitutional validity of the section.

The attack upon its validity was put in two ways. First it was said that it is not a law with respect to taxation within sec. 51(ii) of the Constitution because under it the Commissioner might discriminate between States or parts of States. He might, it was said, under sec. 99A(3) (c) think fit to have regard to the fact that some taxpayers live in New South Wales and others in Victoria and form the opinion, after having had regard also to the matters set out in sec. 99A(3) (a) and (b), that it would be unreasonable to apply the section to those living in New South Wales and not to those living in Victoria. But that argument cannot, in my opinion be sustained. The section does not and, consistently with the Constitution, could not authorise the Commissioner to discriminate in such a way and there can be no doubt that if, in any particular case, it was shown that he had purported to do so, his assessment would be invalid because he had no power to make it.

The second ground upon which the validity of sec. 99A is called in question is that the effect of the section is, so it was submitted, to impose what has been described as an ``incontestable'' tax: see
Deputy Commissioner of Taxation v. Hankin (1959) 100 C.L.R. 566 at pp. 576-577 , and it was rightly conceded by counsel for the Commissioner that a law which sought to prevent a taxpayer from having recourse to the Courts in order to test the legality or the correctness of an assessment to tax would be beyond the power of the Parliament: see
Dawson v. The Commonwealth (1946) 73 C.L.R. 157 , per Dixon J. at p. 182
Deputy Federal Commissioner of Taxation v. Brown (1958) 100 C.L.R. 32 , per Dixon C.J. at p. 40, per Williams J. at p. 52 ;
Hughes and Vale Pty. Ltd. v. The State of New South Wales (1955) 93 C.L.R. 127 ; per Dixon C.J., McTiernan and Webb JJ. at p. 165. In support of the argument for the taxpayer, however, emphasis was placed upon the facts that under sec. 99A(3) (c) the Commissioner, in considering whether he should form the opinion to which the section refers, is to have regard to such matters additional to

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those stated in sec. 99A (3) (a) and (b) as he thinks fit and that he is under no obligation to inform the taxpayer to what ``other matters'', if any, he has had regard under paragraph (c). If he does not do so then, so the argument ran, a taxpayer assessed at the rate declared by the Parliament for the purposes of that section might find it impossible on an appeal to the Courts against the assessment to show, for example, that the Commissioner had regard to extraneous and inadmissible matters outside the scope and purposes of the Act and having no relevance to the subject of income tax. In such case, it was said, the right of appeal might be of little or no avail to the taxpayer. The argument seems to me, however, to fail sufficiently to notice the distinction between a provision which purports to prevent a taxpayer from invoking the aid of the Courts to determine whether or not his liability to tax has been lawfully and correctly assessed and one which may, in some circumstances, make it difficult or impossible to exercise the right of appeal successfully because the facts necessary to success cannot be established. There is, I think, a line to be drawn between purporting to prevent appeal to the judicial power, on the one hand, and, on the other, making the application to a particular case of one taxing provision rather than another dependent upon the existence of a fact - in the present case the opinion of the Commissioner - which the taxpayer may be unable, for lack of evidence, to show was formed after taking into consideration inadmissible matters. A tax does not become an ``incontestable'' tax merely because the person assessed may be unable to produce the evidence necessary to support his appeal. A passage in the judgment of Dixon J. in
Dawson v. The Commonwealth (1946) 73 C.L.R. 157 is, I think, in point. In that case the Court was dealing with a war-time regulation made under the National Security Act which forbade the purchase of land without the consent of the Treasurer and empowered him ``in his absolute discretion'' to grant or refuse to grant his consent. At p. 182 his Honour, after saying that ``no discretion could be conferred wider than the purposes of the National Security Act or of the defence power and any attempt to make a purported exercise of discretion judicially unexaminable must to that extent fail'', went on ``It is complained that ordinary judicial remedies might be defeated if the Treasurer or his delegate were to adopt measures to conceal the grounds upon which his consent is withheld. The answer is that that is a complaint against the inadequacy of judicial process to uphold the law. It does not go to the intrinsic validity of the supposed acts of the Treasurer or his delegate.''

In my opinion sec. 99A is a valid exercise by the Parliament of the power to make laws with respect to taxation. The taxpayer was assessed under that section and the question of the validity of sec. 99 does not therefore arise.

ORDER:

Declare that sec. 99A of the Income Tax and Social Services Contribution Assessment Act is a valid law of the Commonwealth. Appellant to pay to respondent the costs of the argument in the Full Court.