Case L15

Judges:
AM Donovan Ch
LC Voumard M
G Thompson M

Court:
No. 2 Board of Review

Judgment date: 21 March 1979.

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A.M. Donovan (Chairman); L.C. Voumard and G. Thompson (Members): The question for decision in this reference is whether the taxpayer, a married woman, is entitled to a rebate of tax of $200, or for that matter any lesser amount, in respect of her husband.

2. Throughout the entire year ended 30th June, 1976, the taxpayer and her husband were married and resided together. Until 31st December, 1975, the husband was making preparations to carry on business and derived no income. For the remainder of that fiscal year, however, he did derive income in excess of $3,000. During that year the taxpayer was in employment and in receipt of a salary which for the first six months was used to maintain herself and her husband. From the beginning of January 1976 until the end of the financial year the incomes of both herself and her husband were deposited in joint accounts from which were withdrawn funds necessary for their maintenance.

3. In one way or another, subsec. (1) to (5) of sec. 159J impinge on the present problem. Subsection (1) provides:

``Where, during the year of income, a taxpayer contributes to the maintenance of a person (in this section referred to as a `dependant') specified in the second column of the table set out in sub-section (2), the taxpayer is entitled, in his assessment in respect of income of that year of income, to a rebate of tax ascertained in accordance with this section.''

The second column of the table set out in subsec. (2) contains a reference to the spouse of the taxpayer, so that the two provisions read in conjunction mean that subject to the entirety of sec. 159J the taxpayer is entitled to a rebate in respect of her husband in the amount of $400.

4. In the circumstances, it may well be that by subsec. (5) the taxpayer is deemed to have contributed to her husband's maintenance throughout the entire year ended 30th June, 1976. It is not necessary, however, to decide this point and we are content to assume in her favour that she contributed to his maintenance during part only of the year of income, that is until the end of December 1975. On this assumption subsec. (3) provides that the rebate of $400 otherwise allowable is reduced to the amount which ``... in the opinion of the Commissioner is reasonable in the circumstances''. It can be taken that the amount of $200 contended for on the taxpayer's behalf would be reasonable.

5. From the taxpayer's point of view, the difficulty does not arise until subsec. (4) has to be considered. It provides:

``The amount of the rebate otherwise allowable under this section in respect of a dependant shall be reduced by $1 for every $4 by which the separate net income derived by the dependant in the year of income exceeds $150.''

The separate net income of the taxpayer's husband during the year of income was in excess of $3,000 and the reduction which subsec. (4) requires means that the reduced rebate of $200 otherwise allowable is further reduced to nil.

6. Counsel for the taxpayer made heroic attempts to overcome the difficulty posed by subsec. (4). His arguments, ably put as they were, involved one or other of two approaches. The first was that ``dependant'', where secondly appearing in the provision, should be understood as meaning a person factually dependent; the second was that there should be understood after the word the phrase ``while he is a dependant'', or as counsel put it, the word should be interpreted as indicating a temporal status and not a descriptive status.

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ATC 84

7. Persuasive as were the arguments, they cannot be adopted. It is necessary to turn first to the word ``dependant'' where it first appears in the subsection, and to understand it in either of the senses suggested by counsel is quite simply not open, for unless interpreted in the sense which subsec. (1) requires, subsec. (4) becomes nonsensical. The use of the definite article in relation to the word where it secondly appears requires it to be understood in the same sense as when it was first used. For this short reason, the proper interpretation of the subsection denies any rebate to the taxpayer in respect of her husband.

8. Other observations in support of the taxpayer's claim were made - not by counsel we hasten to add. We have considered them but find them entirely without substance. We intend no discourtesy by referring here to one only of them. It was suggested that the interpretation we have adopted was really not open to the Board because it would have the effect of denying a rebate in circumstances in which members of the accountancy profession believe a rebate to be allowable and in which it was the Commissioner's practice in fact to allow such a rebate. Those circumstances were said to arise where a taxpayer married during the course of the fiscal year and thereafter wholly maintained his spouse who was in receipt of no income after marriage but had derived a disqualifying amount beforehand. Whether or not a rebate is allowable in the postulated circumstances is a matter upon which this Board is not here required to give a decision, and it refrains from making any comment in relation to it beyond saying that the suggested result may not necessarily follow. Even if it does, neither the belief of accountants nor the Commissioner's practice provides a compelling reason for departing from what we regard as the clear and unambiguous words of sec. 159J(4).

9. We would uphold the Commissioner's decision on the objection and confirm the assessment.

Claim disallowed