Koitaki Para Rubber Estates Ltd v Federal Commissioner of Taxation

(1941) 64 CLR 241
(1941) 2 AITR 167

(Judgment by: Rich ACJ)

Between: Koitaki Para Rubber Estates Ltd
And: Federal Commissioner of Taxation

High Court of Australia

Rich ACJ
Starke J
McTiernan J
Williams J

Subject References:
Income Tax (Cth)

Judgment date: 21 April 1941

Judgment by:
Rich ACJ

This is an appeal from the judgment of Dixon J. which denies that the appellant company is a resident of Papua within the meaning of s. 23 (n) of the Income Tax Assessment Act 1936-1937.

The company owns and operates rubber plantations in Papua, the rubber from which is sold in Australia. The company objects to the inclusion of the proceeds of such sales in the assessment of its income, claiming that so much of its income is exempt under the section. The only provision in the section disputed by the commissioner is that the appellant is a resident of Papua. The question then which falls for determination is whether the appellant is such a resident. In De Beers Consolidated Mines Ltd v Howe, Lord Loreburn L.C. laid down the principle as the result of the cases that a company resides for the purposes of income tax where its real business is carried on and "the real business is carried on where the central management and control actually abides." That is "a binding authority today" (Egyptian Delta Land and Investment Co Ltd v Todd).

It remains to be considered whether the present case falls within that rule.

"This is a pure question of fact to be determined, not according to the construction of this or that regulation or by-law, but upon a scrutiny of the course of business and trading" (De Beers' Case).

The statement of facts agreed upon by the parties sets out what they consider to be the material facts of the way in which the company carried on its business and they are sufficiently summarized by Dixon J. and he concludes from these facts that the company is not a resident of Papua. With that conclusion I agree. It is true that a company may reside in more than one place (Swedish Central Railway Co Ltd v Thompson). But the facts in the present case show conclusively, I think, that there is no divided control. The head and seat and dominant power is in Sydney. The corporate acts of the company whether done by the whole body politic or by the directors are performed at the registered office of the company in Sydney where all the directors and the majority of the shareholders reside. Sydney is the pivot or axis (nowadays a much misused word) on which the operations of the company hinge. There matters of policy and finance are determined and all the direction, control and management take place. There it has its life and being. In Papua the company's operations fall into an auxiliary or subordinate position of a purely local as opposed to a central nature. They consist in the growing, production, preparation and shipment to Sydney for sale of rubber from the plantations carried on by the company's manager in Papua under the supervision, direction and control of the Sydney office. The manner in which the cases relating to the residence of corporations have been influenced by analogy to the residence of individuals and the inferences to be drawn from the provisions of the Act itself have been discussed in the judgment of Williams J., which I have had the opportunity of reading and with which I agree. It is, therefore, unnecessary for me to cover the same ground.

The appeal should be dismissed with costs.