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HAYNE CRENNAN BELL AND GAGELER, JJ.
■ | PBL owned all of the nearly three billion issued and paid-up ordinary shares in Crown. | |
■ | On 28 June 2002, PBL and Crown entered into a share buy-back agreement for the sale by PBL to Crown of just over 840 million of those shares ("the share buy-back agreement"). | |
■ | Crown's general ledger had accounts including those labelled a "Shareholders Equity Account" and an "Inter-company Loan (Payable) Account". On 28 June, 2002, Crown established a new account in its general ledger labelled a "Share Buy-Back Reserve Account". | |
■ | On 28 June, 2002, Crown debited $1 billion to the newly established Share Buy-Back Reserve Account and made a corresponding credit entry in its ledger which was shown as a $1 billion credit to the Inter-company Loan (Payable) Account. | |
■ | No entry was made in the Shareholders Equity Account, which retained a constant credit balance throughout the year ended 30 June, 2002, in excess of $2.4 billion. | |
■ | The Commissioner of Taxation ("the Commissioner") took the view that section 159GZZZP(2) of the ITAA 1936 applied to the $1 billion, PBL was entitled to receive under the share buy-back agreement as at 30 June, 2002, and went on to assess PBL to have made a capital gain in respect of the buy-back | |
■ | PBL's appeal in Federal Court dismissed it. On further appeal, the Full Court allowed PBL's appeal. Hence, the present appeal by the Commissioner to the High Court of Australia |
■ | Section 159GZZZP of the Australian Income-tax Assessment Act, 1936 (ITAA,1936) deals with tax treatment of off-market buybacks in the hands of shareholders. | |
■ | On-market buybacks are buybacks made in the ordinary course of trading on stock exchange on which they are listed. Off-market buybacks are buybacks other than on-market buybacks | |
■ | According to section 159GZZZP(1), for the purposes of ITAA,1936 and ITAA,1997, purchase price in off-market buybacks of own shares by a company is taxable as dividend in the hands of the seller-shareholder to the extent that the difference between the purchase price and "the part(if any) of the purchase price …which is debited against amounts standing to the credit of……the company's share capital account". Seller is ordinarily entitled to a corresponding rebate of income-tax | |
¦ | Section 159GZZZP(2) provides that the remainder of purchase price is not to be taken as dividend but to be considered in computing capital gains/capital loss | |
■ | Section 6D of ITAA,1936 defined "share capital account". |
■ | The issue in the appeal is whether the $1 billion, which PBL was entitled to receive under the share buy-back agreement would be deemed as "debited against amounts standing to the credit of [Crown's] share capital account" within the meaning of section 159GZZZP(1) of the ITAA 1936. |
■ | The statutory text must be considered in its context. That context includes legislative history and extrinsic materials. | |
■ | Understanding context has utility if, and in sofaras, it assists in fixing the meaning of the statutory text. Legislative history and extrinsic materials cannot displace the meaning of the statutory text. Nor is their examination an end in itself. | |
■ | The word "account" in section 6D doubtless referred to a record of debits and credits relating to a designated topic. Neither limb of section 6D(1) turned on how the topic of a particular record of debits or credits was designated. | |
■ | Section 6D(2) required that all share capital accounts that individually answered the description in either section 6D(1)(a) or section 6D(1)(b) be treated as a single account for all purposes of the ITAA 1936. Section 6D(2) could not be confined in a way that made it merely facilitative of transfers between share capital accounts. That the operation of section 6D(2) in combination with Div. 7B of Pt IIIAA might result in a transfer from a profit account to a reserve account tainting the whole company's combined share capital account was not, as PBL argued, "anomalous". It was the outcome specifically foreshadowed in the note to section 6D(2) forming part of the statutory text. | |
■ | The financial position of Crown in relation to its share capital as at 30 June, 2002, could only be understood by subtracting the $1 billion debit balance in its Share Buy-Back Reserve Account from the credit balance of just over $2.4 billion in its Shareholders Equity Account. Thus, Share Buy-Back Reserve Account was a share capital account. | |
■ | As Crown's Share Buy-Back Reserve Account, along with its Shareholders Equity Account, was, as at 30 June, 2002, a share capital account, the Share Buy-Back Reserve Account and the Shareholders Equity Account were, by the operation of section 6D(2), to be taken for the purposes of section 159GZZZP(1) of the ITAA 1936 to be Crown's single combined share capital account. | |
■ | Taken as a single account, Crown's combined share capital account had an amount of just over $2.4 billion standing to its credit and a debit of $1 billion to the same combined share capital account. To characterise that debit as a debit "against" the amount standing to the credit of the combined share capital account is not to extend the fiction created by section 6D(2), but to apply it. |
(a) | an account which the company keeps of its share capital; or | |
(b) | any other account (whether or not called a share capital account), created on or after 1 July 1998, where the first amount credited to the account was an amount of share capital." |
1. | Appeal allowed with costs. | |
2. | Set aside the orders made by the Full Court of the Federal Court of Australia on 20 March 2012 and in their place order that the appeal from the orders made by Emmett J on 14 April 2011 be dismissed with costs. |
[1] | Section 286(1) of the Corporations Act. | |
[2] | Sections 292 and 295 of the Corporations Act. | |
[3] | Sections 9, 296 and 334 of the Corporations Act. | |
[4] | Section 297 of the Corporations Act. | |
[5] | Section 9 of the Corporations Act. | |
[6] | Section 159GZZZK(a) of the ITAA 1936. | |
[7] | Section 159GZZZK(b) of the ITAA 1936. | |
[8] | Section 159GZZZM(a) of the ITAA 1936. | |
[9] | Section 159GZZZK of the ITAA 1936. | |
[10] | Section 6(1) of the ITAA 1936 ("this Act"). | |
[11] | Section 44 of the ITAA 1936. | |
[12] | Section 46 of the ITAA 1936. | |
[13] | Section 159GZZZQ of the ITAA 1936. | |
[14] | Section 160ARDM of the ITAA 1936. | |
[15] | Sections 2-35, 2-45 and 995-1 ("this Act") of the ITAA 1997. | |
[16] | Consolidated Media Holdings Ltd. v. Commissioner of Taxation [2011] 82 ACSR 637 [70]-[73]. | |
[17] | Consolidated Media Holdings Ltd. v. Federal Commissioner of Taxation [2012] 201 FCR 470 [43]. | |
[18] | Consolidated Media Holdings Ltd. (supra) | |
[19] | (2012) 201 FCR 470 at 486 [46]. | |
[20] | Companies Act 1981 (Cth). See also Companies (Application of Laws) Act 1981 (NSW); Companies (Application of Laws) Act 1981 (Vic); Companies (Application of Laws) Act 1981 (Q); Companies (Application of Laws) Act 1981 (WA); Companies (Application of Laws) Act 1982 (SA); Companies (Application of Laws) Act 1982 (Tas); Companies (Application of Laws) Act (NT). | |
[21] | Section 37(1 )(c) of the Companies Code. | |
[22] | Section 123 of the Companies Code. | |
[23] | Section 129 of the Companies Code. | |
[24] | Section 118 of the Companies Code. | |
[25] | Section 119 of the Companies Code. | |
[26] | Sections 119 and 565 of the Companies Code. | |
[27] | Section 120 of the Companies Code. | |
[28] | Section 16 of the Co-operative Scheme Legislation Amendment Act 1989 (Cth). | |
[29] | Division 3A of Pt IV of the Companies Code. | |
[30] | Section 133PC of the Companies Code. | |
[31] | Division 4B of Pt 2.4 of the Corporations Law, inserted into the Corporations Act 1989 (Cth) from 1 January 1991 by Sched. 5 to the Corporations Legislation Amendment Act 1990 (Cth), and applied by the Corporations (New South Wales) Act 1990 (NSW), Corporations (Victoria) Act 1990 (Vic), Corporations (South Australia) Act 1990 (SA), Corporations (Queensland) Act 1990 (Q), Corporations (Western Australia) Act 1990 (WA), Corporations (Tasmania) Act 1990 (Tas), and Corporations (Northern Territory) Act 1990 (NT). | |
[32] | Section 133PD of the Companies Code (inserted by sec. 16 of the Co-operative Scheme Legislation Amendment Act 1989 (ah)) and sec. 206PD of the Corporations Law. | |
[33] | First Corporate Law Simplification Act 1995 (Cth). | |
[34] | Section 191(2)(ea) of the Corporations Law. | |
[35] | Section 206 I of the Corporations Law. | |
[36] | Company Law Review Act 1998 (Cth). | |
[37] | Section 254C of the Corporations Law as amended by Sched 5 to the Company Law Review Act 1998 (Cth). | |
[38] | Section 254S of the Corporations Law. | |
[39] | Section 254T of the Corporations Law. | |
[40] | Section 257H of the Corporations Law. | |
[41] | Sections 9 ("accounts" and "accounting records") and 289(1) of the Corporations Law. See also ss 266 and 267(1) of the Companies Code. | |
[42] | Section 44(1) of the ITAA 1936. | |
[43] | Income Tax Assessment Act (No 4) 1967 (Cth). | |
[44] | Section 4(2)(a) of the Income Tax Assessment Act (No 4) 1967 (Cth), amending sec. 6(1) of the ITAA 1936. | |
[45] | Section 4(2)(b) of the Income Tax Assessment Act (No 4) 1967 (Cth), amending sec. 6(1) of the ITAA 1936. | |
[46] | Taxation Laws Amendment Act (No 3) 1990 (Cth). | |
[47] | Taxation Laws Amendment (Company Law Review) Act 1998 (Cth). | |
[48] | Section 6(1) of the ITAA 1936. | |
[49] | Australia, House of Representatives, Taxation Laws Amendment (Company Law Review) Bill 1998 (Cth), Explanatory Memorandum at [1.5]. | |
[50] | Australia, House of Representatives, Taxation Laws Amendment (Company Law Review) Bill 1998 (Cth), Explanatory Memorandum at [1.59]-[1.60]. | |
[51] | Taxation Laws Amendment Act (No 7) 1999 (Cth). | |
[52] | Section 2(2) of, and items 1 and 2 of Sched 1 to, the Taxation Laws Amendment Act (No 7) 1999 (Cth). | |
[53] | Australia, House of Representatives, Taxation Laws Amendment Bill (No 7) 1999 (Cth), Explanatory Memorandum at [1.1]. | |
[54] | Australia, House of Representatives, Taxation Laws Amendment Bill (No 7) 1999 (Cth), Explanatory Memorandum at [1.6]-[1.8]. | |
[55] | Australia, House of Representatives, Taxation Laws Amendment Bill (No 7) 1999 (Cth), Explanatory Memorandum at [1.34]-[1.35]. | |
[56] | Item 7 of Sched 1 to the Taxation Laws Amendment Act (No 7) 1999 (Cth), amending item 9 of Sched 2 to the Taxation Laws Amendment (Company Law Review) Act 1998 (Cth). | |
[57] | Australia, House of Representatives, Taxation Laws Amendment Bill (No 7) 1999 (Cth), Explanatory Memorandum at [1.23]-[1.28]. | |
[58] | Section 160ARDM(2)(a) of the ITAA 1936, inserted by item 3 of Sched 1 to the Taxation Laws Amendment Act (No 7) 1999 (Cth). | |
[59] | Alcan (NT) Alumina Pty Ltd. v. Commissioner of Territory Revenue [2009] 239 CLR 27 at 46 [47]; [2009] HCA41. | |
[60] | See Australia, Review of Business Taxation, A Platform for Consultation, Discussion Paper 2 (1999), vol 2 at [19.2]. | |
[61] | Consolidated Media Holdings Ltd. (supra). | |
[62] | Consolidated Media Holdings Ltd. (supra). |
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