The Commissioner's power of access under s 263 extends to the books and records of Territorial residents even where their income is derived solely from Territorial sources, provided the access is sought for the purposes of the Act.
Later decisions that cite South-Western Indemnities Ltd v Bank of NSW
Decisions cited by South-Western Indemnities Ltd v Bank of NSW
SOUTH-WESTERN INDEMNITIES LTD. v. BANK OF NEW SOUTH WALES. [1973] HCA 52; (1973) 129 CLR 512
Income Tax (Cth)
High Court of Australia.
Barwick C.J.(1)
CATCHWORDS
Income Tax (Cth) - Powers of Commissioner of Taxation - Investigation - Access to books and documents - Application of powers to books records or documents relating to Norfolk Island company deriving income only from sources within Norfolk Island - Investigation of liability to assessment under Act of persons other than Norfolk Island company - Income Tax Assessment Act 1936-1972 (Cth), ss. 7 (1), 263.
HEARING
Sydney, 1973, October 3, 23; November 9. 9:11:1973DECISION
November 9.
2. On 2nd October this year an investigation officer of the Department of
Taxation attended at the Norfolk Island premises of the
Bank of New South
Wales, the applicant's bankers, and requested access to the bank ledger cards
of a number of companies whose names
appeared on a list produced by the
officer to the manager of the Norfolk Island branch of the bank. The
applicant's name appeared
on that list. The officer, who was duly authorised
in that behalf under the provisions of the Income Tax Assessment Act 1936-1972
(the Act), in answer to the manager's inquiry, said that his request for
access to the ledger cards was "in terms of s. 263 of the
Income Tax
Assessment Act", i.e. the Act. (at p515)
3. On 2nd October 1973 the applicant by writ of summons commenced an action
against the Bank of New South Wales and the Commissioner
of Taxation endorsing
a claim for declarations and orders as follows:
"1. A declaration that any notice served by the Commissioner
of Taxation for the Commonwealth of Australia requiring
Bank of New South Wales to produce any documents from the
said Bank relating to Southwestern Indemnities Limited or
the giving of any information by the said Bank in relation to
Southwestern Indemnities Limited or the photostating of any
documents held by the said Bank in relation to Southwestern
Indemnities Limited, is null and void and is of no effect.
2. An order that Bank of New South Wales its servants
and agents be restrained up to and including the hearing of
the suit from disclosing to, showing to or making available to
the Commissioner of Taxation for the Commonwealth of
Australia or any officer employed by the Commissioner of
Taxation any books, records or documents relating to Southwestern
Indemnities Limited or any banking or other transactions
of Southwestern Indemnities Limited.
3. An order that the Commissioner of Taxation for the
Commonwealth of Australia be restrained up to and including
the hearing of the suit from requiring compliance with any
notice served by him pursuant to the Income Tax Assessment
Act, 1936-1972 by the Bank of New South Wales requiring
the production of any documents from the said Bank relating
to Southwestern Indemnities Limited or the giving of any
information by the said Bank in relation to Southwestern
Indemnities Limited or the photostating of any documents
held by the said Bank in relation to Southwestern Indemnities
Limited.
4. ..." (at p516)
4. On the same day the applicant applied to me in chambers for an
interlocutory injunction in terms of pars 2 and 3 above. I granted
leave to
serve notice of motion for such relief for 2.15 p.m. the following day,
Wednesday, 3rd October. Upon the matter coming before
me on Wednesday, 3rd
October, it was adjourned, suitable undertakings being given by the parties.
Ultimately it was heard on Tuesday,
23rd October, when, after reading further
affidavits and hearing argument, I reserved my decision. (at p516)
5. From the additional material placed before me it would appear that the
respondent Commissioner does not concede the applicant's
assertion that its
only income is income derived from a source in Norfolk Island by a resident of
that island and that, in any case,
his purpose in seeking access to the Bank's
records is to pursue his investigations into the liability to taxation of
persons other
than the applicant. It is said that there is reason to think
that information to be derived from the banking records to which he
seeks
access, including those relating to transactions by and with the applicant,
will be relevant to that investigation. (at p517)
6. The applicant's submission is that, by reason of s. 7 (1) and its own
circumstances, s. 263 is not available to the respondent
in relation to the
applicant's financial records, including in that description those of its
banker relating to the applicant's affairs.
It is said in support of this
submission that the Act has no application in relation to the affairs of a
Norfolk Island resident
in receipt of no other income than Norfolk Island
sourced income. (at p517)
7. For his part, the respondent submits that s. 7 (1) applies the Act as a
whole to the Territory of Norfolk Island with the sole
limitation that the Act
shall not apply to any income derived by a Territorial resident from sources
within the Territory. He further
submits that the only limitation on his
powers thus applicable to the Territory to seek access to any documents and
other papers
in any person's possession is that that access should be sought
"for the purposes of" the Act. He points out that it is not suggested
in the
case, and certainly not by any evidence, that the respondent or any of his
officers was seeking access to the bank's records
for any purposes other than
that of investigation of the receipt of income for the purpose of assessment
of income tax in accordance
with the provisions of the Act. (at p517)
8. In deciding in Esquire Nominees Ltd. v. Federal Commissioner of Taxation
[1973] HCA 67; (1973) 129 CLR 177 that the source
of certain dividends
received by a company
"resident" on Norfolk Island was within Norfolk Island,
observations were made
by some
members of the Court
upon the scope of the limitation of the Act to
the named Territories effected
by the words "but shall not apply
to any income
derived
by a resident of those Territories from sources within those
Territories"
as they appear in s. 7 (1). (at p517)
9. In my reasons for judgment, I said:
"The sole question therefore before this Court, is whether
or not the proceeds of the dividend paid to the taxpayer by
Mitchell Credits Ltd. was income derived by the taxpayer
from sources within Norfolk Island. If yea, no part of the
Act will apply in respect of the taxpayer's receipt of that sum.
If nay, then ss. 44 and 99 clearly apply and no further questions
arise." (1973) 129 CLR, at p 209 .
"It is the source of the dividend in this case which determines
whether the Act other than s. 7 applies at all to the
circumstances of the case. If that source is within Norfolk
Island none of the other provisions of the Act apply, including
ss. 44 and 260." (1973) 129 CLR, at p 213 . (at p517)
10. These expressions of opinion need to be read together, making it plain
that it was the application of the Act to the receipt
of the income in the
circumstances of the case which was there under consideration. Both s. 44 and
s. 260 are provisions of the
Act relating to the receipt of income. (at p518)
11. My brother Menzies, in his reasons, said (1973) 129 CLR, at pp 222-223 :
"The short answer to that reliance is, I think, to be foundp518)
in s. 7 itself which provides that the Act does not apply to the
income upon which the Commissioner seeks to assess tax. It
is not possible by means of s. 260 to tax income which s. 7
puts outside the operation of the Act, including s. 260 itself." (at
12. My brother Stephen, in his reasons, said as to the Commissioner's
reliance on s. 260 (1973) 129 CLR, at p 230:
"If, as I have concluded, s. 7 (1) operates to exclude from
the operation of the Act this income of the taxpayer then I
consider that s. 260 cannot have any operation in relation to
that income." (at p518)
13. I find nothing in these passages to support the view that a section such
as s. 263 cannot apply in Norfolk Island simply because
the records or papers
to which access is sought are those of a company which is assumed for the
purposes of the submission to be
in fact a resident of the Territory of
Norfolk Island with no income of which the source is not within that
Territory. Further, as
a matter of construction of s. 7 (1), the limitation
upon the application of the Act to the Territory, which the "proviso" within
the section effects, is with respect to the income which falls within the
terms of the proviso. That means, in my opinion, that
only those parts of the
Act which depend upon or deal with the receipt of income and its assessability
are made inapplicable to the
receipt of income which satisfies the description
in the "proviso" in s. 7 (1). (at p518)
14. What I have just said assumes that the assertions of the applicant as to
its residence and the sources of its income are accepted.
But the Commissioner
is not bound to accept the applicant's assertions. According to him, he does
not. Further, in my opinion,
the facts as to residence and income source
ought not to be determined in proceedings such as the present, unless as an
incident
of a claim that the purpose of the officer in making the demand for
access to records was a purpose extraneous to the Act and to
the
Commissioner's powers and duties thereunder. No such claim is made in this
case. The submission is that the applicant's circumstances
deny the
availability of s. 263 at all in relation to the applicant and its affairs.
In my opinion, an examination of the applicant's
affairs to test its
assertions as to residence and income source is within the purposes of the
Act. (at p519)
15. But, perhaps more fundamentally, the exclusion of the income of a
Territorial resident from Territorial sources from the application
of the Act
does not mean, in my opinion, that the powers given by s. 263 are unavailable
to the Commissioner on Norfolk Island with
respect to the books, documents and
the papers of and relating to such a resident. Whilst on the one hand it
cannot properly be
said that the proviso to s. 7 (1) does no more than exclude
income derived from a source within the Territory from the assessable
income
of the Territorial resident - and the Court's decision in Esquire Nominees
Ltd. v. Federal Commissioner of Taxation [1972]
HCA 32; (1973)
129 CLR 177 indicates that it
does do more than that - on the other hand, it cannot in my opinion be said
that any
part
of the Act
which is not concerned or dealing with the receipt
and assessability of income is excluded from operation in the
Territory.
(at
p519)
16. In this case, however, the purposes of the Act which the respondent
claims to be pursuing, include an investigation into the
affairs of others
than the applicant. On that footing alone, it could not be said that in
making the demands on the bank on Norfolk
Island the officers of the
Department of Taxation were not doing so for the purposes of the Act. (at
p519)
17. I should observe upon one other argument of the applicant. It was
submitted that because of the inclusion of the words "whether
a taxpayer or
not" in s. 264, and their absence in s. 263, the access given by s. 263 should
be construed as limited to business
places, books etc. relating to the affairs
of a "taxpayer". It is then submitted that a Territorial resident in receipt
only of Territorially
sourced income is not liable to be assessed for income
tax and is therefore not a taxpayer, notwithstanding the definition of
"taxpayer"
in s. 6. (at p519)
18. But, in my opinion, upon its proper construction, s. 263 is not limited
in its application to the affairs of a person who in
fact is in receipt of
assessable income. It suffices that the exercise of the power given by the
section is for the purposes of
the Act, which of course include an
investigation into whether or not a person is or has been in receipt of
assessable income. Such
an investigation cannot be limited to buildings,
books, etc. of a person who is liable to taxation but must extend to any
person.
(at p519)
19. Section 264 authorizes the giving of a notice to any person to furnish
information. It was appropriate in such a provision
to make it clear that the
notice could be given to persons who were not taxpayers as defined in the Act.
In contrast with s. 264
in this respect s. 263, in giving to the Commissioner
a right to access, gave rise to no similar need. It was quite sufficient to
use universal expressions such as "at all times" and "to all buildings", etc.
No further emphasis was required. No limitation could
be suggested. As I
have indicated, the sole limitation or qualification is that the access should
be sought for "the purposes of
the Act". (at p520)
20. Being of this opinion, there is no need for me to discuss the further
submission of the applicant, which involved the proposition
that the
definition of "taxpayer" in s. 6 was made inapplicable to the applicant,
though in receipt of income, by the proviso in
s. 7 (1). Also, I find it
unnecessary to discuss the question whether the applicant, assuming it to be a
Territorial resident in
receipt only of Territorially sourced income, was a
"person" within the meaning of s. 161 (1), bearing in mind the definition of
"taxpayer", and bound to furnish a return of income upon the publication of an
appropriate notice under s. 161 (1). (at p520)
21. In my opinion, the submissions of the applicant should be rejected and those of the respondent accepted. I dismiss the motion for declarations and injunction.