6 F. C. IN THE MATTER TAX ACT OF 1902. Cooper C.J. ST. R. QD. vessels and using the facilities of a Queensland port to enable him to carry on a business from which he derived considerable profit, and it seemed to me rather extraordinary that he should not be liable to pay income tax. But if by the provisions of the Act such a transaction is not included within its purview, of course he cannot be made liable. By the section I have read, the income, to be liable to taxation, must be either earned in or derived from Queensland, or it must be shown to arise or accrue from a business carried on in Queensland. Can it be said that the income which the objector receives is gained in Queensland, or in any way is derived from Queensland? It seems to me that the income is derived from the sale of a material which is obtained outside the territorial limits of Queensland by operations conducted outside those limits. That consideration is sufficient, I think, to dispose of the case; but that view is strengthened by an examination of s. 13, because if the income which the objector derived from this business was produced in Queensland, he would, by that section, be allowed to deduct "all losses and outgoings actually incurred in Queensland by him in production of income." It is clear that the losses and outgoing incurred in getting these shells were not incurred in Queensland. They were incurred at the places where the diving and other work was done. Therefore, if the objector's income is liable to taxation the whole is liable; for there is no section by which he is enabled to make any deduction of the costs of production from the gross amount. I think the absence of any such provision is a strong argument against the contention that the income is derived in Queensland. I am therefore of opinion that the income of the objector is not taxable income, but he is not altogether exempt from the payment of income tax, for as a resident of Queensland he is liable to pay the amount of ten shillings. Real J. REAL J.: Upon the case as stated, I am of opinion that this firm carries no business on in Queensland; that the whole business, so far as it relates to obtaining pearl shells, is conducted and carried on outside of Queensland, and if the operations carried on to procure the shell were conducted within any State or country, they would constitute a carrying on of business within that State 66 1905. or country. Commissioners of Taxation v. Kirk, per Lord Davey (1), who in referring to San Paulo Railway Co. v. Carter (2), said— All that the House of Lords had to decide was whether a company with a head office in London, from which the board of directors governed the operations of the company in Brazil, did not exercise a business in England." So here it seems to me the profits were, to some extent at least, earned where the shell was procurred. And the question is, does the statute render a person liable in respect of income derived from carrying on business out of Queensland by reason that part of that business is carried on in Queensland? In Colquhoun v. Brooks (3), Lord Herschell says"I think the respondent has successfully shown that the Act has not provided the requisite machinery for assessing the duty on trade profits arising and remaining abroad, which is strong to show that it was not intended to tax them." The words of the Act under which that case was decided were wide enough to support, prima facie, the contention of liability to taxation. So in the present case the words of s. 3 are inclusive enough to cover the taxpayer; but s. 14 shows that the operation of the former section was not intended to apply to any business not in Queensland, for it provides only for the deduction of losses and outgoings which are actually incurred in Queensland in the production of income. The requisite machinery for assessing a Queensland business is given by the Act, and the tax is assessed on the net income.. It would not be equitable and could never have been intended to tax one business on the net and another on the gross income, and hence appears to me that taxation of the profits arising from the business of the taxpayer in this case was not contemplated by the Act. On the question of whether the taxpayer is altogether exempt from taxation I agree with the learned Chief Justice. it POWER J. Concurred. F. C. IN THE MATTER 7 OF THE INCOME TAX ACT OF 1902. Real J. The taxpayer was allowed costs. Solicitor for the Commissioner: The Crown Solicitor. (1) [1900], A. C. 588, at p. 594. (2) [1896], A.C. 31. (3) 1889, 14 A.C. 493, at p. 507. 8 ST. R. QD. 1912 own 3 1913929089 1904. October 29, 30, Cooper C.J. [IN THE FULL COURT.] IN THE MATTER OF THE INCOME TAX ACT OF 1902 (No. 2). During the year 1903 the flocks and herds of a grazier, carrying on business in Queensland, were considerably augmented in numbers by reason of the natural increase of the sheep and cattle. This progeny had not been sold, but was depasturing on the grazier's lands. Held, that the increase was not income within the meaning of The Income Tax Act of 1902. SPECIAL case stated by the Commissioner of Income Tax under s. 56 of The Income Tax Act of 1902. The facts set out were as follows:-The taxpayer in this case was a grazier carrying on business at a station in the State of Queensland; and for the purpose of having an assessment of income tax prepared for the year ending 31st December, 1903, he made a return to the Commissioner showing (amongst other things) that between 1st January, 1903 and 31st December, 1903, there had been an increase, after allowing for deaths, of 6626 sheep on his station, which were the progeny of other sheep depasturing there during that period, and which were of the value of £2484 15s., and that there had been an increase during that period of 511 cattle, after allowing for deaths, which were the progeny of other cattle on the station, and which were of the value of £1022, being a total value of £3506 15s. for the said sheep and cattle. These sheep and cattle were at the time of making the said return grazing on the taxpayer's station, and were unsold. The Commissioner assessed a sum of £87 13s. 6d. as the income tax payable by the taxpayer in respect of these sheep and cattle, but he allowed the whole of the expenses of working the station as a deduction from income. The number of sheep and cattle on the station on 31st December, 1903, together with those sold therefrom, during the said period greatly exceeded the number 1905. of sheep and cattle there on 1st January, 1903, without taking into account any purchases made during the period. F. C. IN THE MATTER OE THE INCOME (No. 2.) Real J. The taxpayer gave notice of objection to the assessment, and TAX ACT OF 1902 claimed that he was not liable to pay any income tax in respect thereof on the ground that the annual cast of lambs and calves should not be taken into gross income unless actually realised. The questions for the opinion of Court were : 1. Whether or not in assessing the tax for the year ending 31st December, 1903, which the taxpayer is liable to pay under The Income Tax Act of 1902, the Commissioner should take the said sum of £3506 15s. into account of his gross income. 2. Whether or not in assessing the tax for the year ending 31st December, 1903, which the taxpayer is liable to 3. Whether or not in assessing the tax for the year ending Lilley (Stumm with him), for the Commissioner: During the year the taxpayer's stock increased, and his wealth was augmented. Income means the balance of profits and gains over loss, and it does not matter whether the balance is represented by money or in kind. If there has been an accretion to his wealth, he is bound to pay on it. He has not sold the stock, but they are added to his herds, and are profits converted to stock-in-trade, and added to the business. The Income Tax Act of 1902, s. 20 (1) [REAL J. Would your argument apply where an increase in value had been made in a particular thing itself, such as a rare work of art ?] (1) 2 Edw. VII., No. 10, s. 20: Whenever profits arising from any business have been converted into stock-in trade or added to the capital of, or carried to reserve, or in any way invested in such business, such profits so con- F. C. IN THE MATTER OF THE INCOME TAX ACT OF 1902 (No. 2.) Real J. That might involve different considerations, but here s. 20 applies, for he has by expenditure of money added sheep and calves to his stock-in-trade. Income should be given its material and commonly accepted meaning of the balance of gain over loss. Lawless v. Sullivan (1), The Gresham Life Assurance Society v. Styles (2). Where the word is not defined by the statute it includes "all gains and profits derived from personal exertions, whether such gains and profits are fixed or fluctuating, certain or precarious, whatever may be the principle or basis of calculation." Attorney-General of British Columbia v. Ostrum (3). The taxpayer has been enriched by the value of the increase, it is part of his income, and has been converted into stock-in-trade or invested in the business, and whether considered in one way or the other, income tax is payable. As to losses, we concede that if he is charged on the increase he must be allowed deductions for losses; but otherwise any loss in the increase cannot be deducted, and if he is not to be charged with income tax on the increase, he cannot receive credit for working expenses in respect of that increase. The cost of rearing the increase is money invested in the business, and if the increase is kept on the station for breeding purposes, it is an addition to the stock-in-trade. Stumm dealt with the method of ascertaining profits, and contended that the increase in the flocks and herds was ordinary profits in the business at the actual value, and that the increase of progeny should be taken into account at its actual cost. He cited Palmer on Companies, 8th Ed., Part I., p. 737, Robinson v. Ashton (4), Verner v. The General and Financial Investment Trust (5), Dovey v. Cory (6). Feez: Section 20 is absolutely inapplicable. The Act was not intended to impose duty on accretion of capital. It is not a property tax. The Act contemplates a tax on property in the nature of money only, a tax payable on property realized, and here the tax is payable only when the stock is turned into cash, cf. ss. 3, 7, 12, 13, 17, 19, 25, 39, 41, 44. He referred to In re Micklethwait (7), Lawless v. Sullivan (1), Maxwell on Interpretation of Statutes, (1) 1881, 6 A. C. 373, at p. 384. (3) [1904], A.C. 144, at p. 147. (4) 1875, L.R. 20 Eq. 25. (7) 1855, 11 Ex. 452. |