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: Fullagar J)

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

Court:

Judges: Latham CJ
Dixon J
Higgins J
Williams J
Webb J

Fullagar J

Subject References:
Income Tax (Cth)

Judgment date: 6 June 1950

Melbourne

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Judgment by:
Fullagar J

I have read the judgment of my brother Dixon in this case, and, as to all three of the questions involved in the two appeals, I agree with it. On two of those questions I do not wish to add anything. On the question arising under s. 160AB I wish to add two observations. (at p311)

In the first place, the argument of the taxpayer did not, as I understood it, invite us to ignore the words "included in the taxable income" in s. 160AB, or to read the words "taxable income" as if they were "assessable income." I took it to concede that, for the purpose of calculating the rebate on the interest under s. 160AB, it would be proper to subtract from the gross amount of interest any amount which only became an allowable deduction from assessable income because of the inclusion of the interest in the assessable income. The average investor probably simply collects his interest or has it paid into his bank, and incurs no deductible expenditure in so doing. But there must be many cases in which an agent or trustee collects interest for a client or beneficiary and charges a commission for so doing. I should suppose that the commission so charged would be deductible both for the purpose of calculating the taxable income of the client or beneficiary and for the purpose of calculating his rebate under s. 160AB. Where, but only where, no expenditure can be actually attributed to the receipt of the interest so as to be deductible because of the receipt of the interest, the rebate is to be calculated on the gross amount of the interest. (at p311)

The second observation I would make is this. Under our system taxable income is arrived at by subtracting allowable deductions from assessable income. In the "difference" which results from the subtraction the items which went to make up the assessable income have commonly lost their identity. There is, therefore, a degree of inaccuracy in speaking of an amount which entered into the assessable income as being "included in the taxable income": cf. the example given by Dixon J. in Douglass v. Federal Commissioner of Taxation (1931) 45 CLR, at p 105 . But, as Starke J. said in that case (1931) 45 CLR, at p 103 it has been "included in account," and it seems to me to be the natural and proper way of reading the critical expression in s. 160AB to read it as referring to the amount by which the taxable income is increased through the inclusion of the interest in the calculation. Any other paraphrase of words which cannot be applied with absolute strictness seems to me to depart from the meaning really conveyed by those words. (at p311)

In my opinion, the appeal of the taxpayer should be allowed, and the appeal of the commissioner discmissed, and I agree that the declarations proposed by Dixon J. should be made. (at p312)