Commercial Banking Co. of Sydney Ltd. v Federal Commissioner of Taxation

(1950) 81 CLR 263
24 ALJ 132
9 ATD 112
[1950] ALR 453

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(Judgment by: Webb J)

Between: Commercial Banking Co. of Sydney Ltd.
And: Federal Commissioner of Taxation

Court:

Judges: Latham CJ
Dixon J
Higgins J
Williams J

Webb JFullagar J

Subject References:
Income Tax (Cth)

Judgment date: 6 June 1950

Melbourne

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Judgment by:
Webb J

The bank's appeal: I am unable to distinguish this case from Douglass v. Federal Commissioner of Taxation (1931) 45 CLR 95 or Carpenters Investment Trading Co. Ltd. v. Federal Commissioner of Taxation (1949) 79 CLR 341 . As counsel for the appellant bank pointed out, the exemption in s. 160AB, is of interest, and not of income from interest, and to give effect to the exemption in those words it is necessary to treat the word "included" in s. 160AB as referring to the amount by which the taxable income is increased by reason of the presence of the interest in the assessable income. The choice is between regarding the expression "included in the taxable income" as elliptical, that is as meaning "included in the calculation of the taxable income," and attributing to the legislature the use of an expression that conveys that the items included in the aggregate sum from which the deductions are made continue to be identifiable in the remainder. But even if each pound of interest could be viewed as truncated or shrunken - to employ expressions used by the Chief Justice and counsel for the bank in the course of the argument - so as to be identifiable in the remainder I think the exemption would still be in respect of every pound of interest in its reduced form. However, I think that, even if there were no deductions from the interest, or other item of assessable income, it would not be identifiable in the single figure that represents the taxable income; you must go back further in the calculation for that. The interest then is included in the taxable income in the sense that it is to be taken into the calculation in arriving at the taxable income. But it is a rebate from the taxable income that is granted, and, of course, it is limited by the taxable income. (at p310)

In Douglass' Case (1931) 45 CLR 95 and Carpenters Case (1949) 79 CLR 341 the Court gave the words their ordinary meaning: there was no straining of language to avoid double taxation. The words of exemption given their natural meaning secured that result. (at p310)

I would allow the bank's appeal. (at p310)

The commissioner's appeal: I think the decision of the Board of Review was right, and I have nothing to add to the reasons for sustaining it given by the Chief Justice and Dixon J. (at p310)

I would dismiss the commissioner's appeal. (at p310)