Case: Jackson v Commissioner of Taxation (1989) 87 ALR 461
Outcome: discussed
In Jackson v Commissioner of Taxation (1989) 87 ALR 461 (" Jackson "), the Commissioner made a determination pursuant to s 177F that the amounts of certain tax benefits should be included in the taxpayer's assessable incomes for two years. The taxpayer served on the Commissioner a notice to produce. Gummow J set aside certain questions for separate decision. 100 The first question was whether, on the hearing of an appeal against the disallowance of an objection against an assessment made consequent upon the making of a determination under s 177F(1), it is necessary or relevant for the court to inquire into the matters taken into account by the Commissioner, or his reasoning process, when he formed the view that a tax benefit had been obtained, or would have been obtained, but for the operation of s 177F, by a taxpayer in connection with a scheme to which Pt IVA applied. His Honour answered this first question "No". 101 This holding is instructive but not presently relevant. The obtaining of a tax benefit was one condition precedent to the arising of the Commissioner's power to make a determination under s 177F. Whether that condition was satisfied was to be decided by the application of objective criteria. The condition was thus akin to the present objective condition that the taxpayer supplied property under an international agreement, or that the amount of the consideration received or receivable by the taxpayer was less than the arm's length consideration. 102 While, no doubt, the Commissioner did think that that condition was satisfied, his opinion that it was not made an element of the liability to tax, and his reasons for being of that opinion were therefore irrelevant. Defective reasoning on his part would not advance the taxpayer's case if the condition was in fact satisfied. 103 The second separate question was related to the Commissioner's determination pursuant to s 177F, but not to the provision of particulars. The question was whether, in an appeal, documents are discoverable by the Commissioner or liable to be the subject of a subpoena or notice to produce addressed to the Commissioner, by reason only that the documents record or comprise, in substance, the submissions and internal memoranda prepared by the Commissioner's officers for consideration by the officer who made the determination under s 177F, and any decision or reasons for decision recorded by that officer, or the facts, matters or circumstances referred to in such submissions and memoranda. 106 Gummow J's answer to the second question does not resolve the present question of the Taxpayers' entitlement to particulars. It does, however, suggest that those particulars are not to be refused on the broad ground relied on by the Commissioner that s 177(1) of the ITAA prevents the Taxpayers from attacking the Commissioner's par (d) and subs (4) determinations on judicial review grounds. While his Honour did not refer to s 177(1) of the ITAA, he did refer to s 190(b), and must have regarded a determination not authorised by the ITAA, whether because it failed to satisfy statutorily prescribed conditions or because of judicial review grounds, as lying outside s 177(1). (An appeal from his Honour's judgment, in so far as it answered a further separate question not presently relevant, was dismissed: Commissioner of Taxation v Jackson (1989) 27 FCR 1.) 135 Of some relevance to the present case is the following statement made by his Honour (at 138-139): "A taxpayer may seek to challenge the making of such a determination on the basis that it is not authorised by the Act. Indeed, the objection to the present assessment includes such a ground. In such a case the court has a discretion to order that there be produced to the court, and subject to matters of privilege, to the taxpayer, the material which was before the decision-maker who made the determination at the time the decision maker did so. The court's power to make such an order was recognised by Gummow J when a Judge of this court and is discussed by his Honour in Jackson v Commissioner of Taxation (Cth) (1989) 20 ATR 611 at 621. I am of the view in the present case that discovery of such documents should be given and the applicant be permitted inspection of them but that discovery and inspection be limited to the material that was before the decision-maker." Hill J's reference to a determination's not being "authorised by the Act" is capable of being read as a reference to the non-satisfaction of the statutorily prescribed conditions of the power to make a determination under s 177F(1), or as a reference to judicial review grounds (or as both). The question is not resolved by the reference to the particular passage cited in Gummow J's judgment in Jackson that his Honour cited. In view of his Honour's judgment in the next case to be discussed, however, I would not understand him to have intended to include a reference to judicial review grounds. 142 With respect, however, their Honours appear to have found the result to be more clearly dictated by the authorities, and, in particular, by Richard Walter , than I have found it to be. It is not clear to me why the passage from the judgment of Mason CJ in Richard Walter at 184 (set out in [128] above) establishes that in an appeal it is not open to the taxpayer to challenge the making of a determination on judicial review grounds. Moreover, there is no reference to the passage from the judgment of Mason CJ at 187-8 (also set out at [128] above) (the primary Judge, RD Nicholson J, did refer to that passage, but did not discuss it). There is no reference, either, to Gummow J's answer to the second separate question in Jackson (see [104] [106] above) or, admittedly less relevantly, to WA Capital (see [107] [114] above). 147 Gyles J considered that an appeal to the Court assumed the existence of a valid assessment, and raised only the question whether the amount of it was excessive. This, in turn, his Honour said, involved only one issue: whether or not the actual consideration was an arm's length consideration as defined in s 136AA (see [8] above). His Honour remarked that this is an objective question, and that the Commissioner's opinion concerning it is not probative evidence in respect of it. I respectfully agree (cf Gummow J's treatment of the first separate question in Jackson ). 154 The position established by Peabody (see [119] above), Sleight (see [136] [145] above), and Syngenta (see [146] [150] above) seems to be that a distinction is to be drawn between cases in which the ITAA specifies a state of mind on which the assessment of the amount of taxable income (and tax) depends (cf Avon Downs , George , Giris , Duggan , Brian Hatch , Kolotex , WA Capital , Dalco ), and those in which it specifies, not a state of mind, but the making of a determination, as the event on which the amount of taxable income (and tax) depends (cf Jackson , Peabody , Richard Walter , Binetter, Sleight , Syngenta ). In the latter class of case, the legislature is taken to indicate that the interaction between s 177(1) of the ITAA and s 14ZZO(b) of the TAA produces the result that the Commissioner's state of mind, on the basis of which the determination was made, is part of the due making of the assessment, and cannot be put in issue by the taxpayer.