HIGH COURT OF AUSTRALIA

                                     British Imperial Oil Company Limited

                                                           Vs.

                                Federal Commissioner of Taxation Respondent.

                                (Knox C.J., Isaacs, Powers Rich and Starke JJ.)

                                                     9 April 1925

Knox C.J.

The question raised in this case is whether sec. 28 of the Income Tax Assessment Act 1922-1923 and
the Income Tax Acts 1922 and 1923, so far as they operate thereon, are within the legislative powers
of the Parliament of the Commonwealth. Sec. 28 (1) provides that in certain circumstances a person
carrying on a business in Australia shall be assessable to income tax on such percentage of the total
receipts of the business as the Commissioner in his judgment thinks proper. Sec. 28 (3) provides
that, on the request of a taxpayer who is dissatisfied with the decision of the Commissioner under
the section, "his case" shall be referred to a Board of Appeal. In my opinion, this sub-section
purports to confer on any person on whom an assessment is made under sub-sec. 1 the right to have
every part of his case reconsidered by the Board of Appeal. The "case" is to be "referred" to the
Board of Appeal, which is empowered by sec. 44 (1) to hear the case and, by sec. 44 (2) coupled
with sec. 51 (1), to make such order as it thinks fit, and either to reduce or to increase the
assessment. It is clear that on a reference of the case to the Board of Appeal the decision or opinion
of the Commissioner is open to review in respect of matters which could not be raised by the
taxpayer on an appeal to the High Court or to the Supreme Court of a State under sec. 50. On such
an appeal neither the decision of the Commissioner that the business produced no taxable income or
less than the ordinary taxable income which might be expected to arise from the business, nor his
decision as to the percentage to be charged, would be open to review, for these are matters as to
which Parliament has made the opinion of the Commissioner the test of liability subject only to the
right of the taxpayer to have his case referred to the Board of Appeal.

The arguments against the validity of the section may be summarized as follows:--(1) Sec. 28 (1) of
the Assessment Act and the Income Tax Acts, so far as they operate on that section, are obnoxious
to the provisions of sec. 55 of the Constitution, either because the exaction authorized is not
"taxation," or because it is a different subject of taxation to that dealt with by other provisions of the
Acts referred to, or because the subject matter of the enactment is outside the territorial limits of the
Commonwealth. (2) It was beyond the powers of Parliament to confer on a Board of Appeal
constituted in accordance with the provisions of sec. 41 the powers conferred on the Board by sec.
51 of the Act. The only Board of Appeal provided for by the Act is a Board of Appeal having these
powers, and therefore no "Board of Appeal" can be validly constituted.

The first objection--that founded on the provisions of sec. 55 of the Constitution--in my opinion
cannot be supported. Sec. 28 in effect provides a method of ascertaining in certain specified cases
the proportion of the total receipts of a business carried on in Australia which is to be treated as
taxable income. The provisions of this section are no different in principle from those contained in
sec. 23 of the Act, the object in each case being to ascertain what proportion of the amount received
by a taxpayer in any year is to be treated as taxable income. The tax is to be levied on a person
carrying on a business in Australia in respect of an ascertainable portion of the total receipts of the
business so carried on by him. In this view the tax levied under the Income Tax Acts by virtue of
sec. 28 of the Assessment Act is clearly a tax on income, and it follows that the enactment is not
obnoxious to the provisions of sec. 55 of the Constitution.

But in my opinion the contention on behalf of the taxpayer which is rested on the provisions relating
to the constitution and powers of the Board of Appeal is well founded and must prevail. By sec. 50
(4) of the Assessment Act a taxpayer who is dissatisfied with the assessment made by the
Commissioner may appeal to the High Court or to the Supreme Court of a State or to the Board of
Appeal. It is clear that there is a right of appeal to the Board on questions of law, provided the
objection also raises a question of fact. By sec. 51 the Board is empowered on the hearing of the
appeal to make such order as it thinks fit, whether on questions of law or on questions of fact--the
only distinction being that, while the decision of the Board on questions of fact is final and
conclusive, its decision on questions of law is subject to appeal to the High Court "in its appellate
jurisdiction." The power conferred on the Board of determining questions of law, the association of
the Board as a tribunal of appeal with the High Court and the Supreme Court of a State, and the
provision for an appeal to the High Court in its appellate jurisdiction from any order of the Board,
except a decision on a question of fact, in my opinion establish that the expressed intention of
Parliament was to confer on the Board portion of the judicial power of the Commonwealth, which at
any rate includes the power to adjudicate between adverse parties as to legal claims, rights and
obligations, and to order right to be done in the matter (per Griffith C.J. in Waterside Workers'
Federation of Australia v. J. W. Alexander Ltd.[1]). And it is clear by the express terms of sec. 44
that the Board of Appeal in hearing references is to have the same powers, so far as applicable, as
are conferred on it by sec. 51 in regard to appeals. It follows that Parliament has by this legislation
purported to vest in the Board of Appeal on the hearing of either appeals or references under the Act
portion of the judicial power of the Commonwealth. The decision in Alexander's Case establishes
that the judicial power of the Commonwealth can only be vested in "Courts," that is, in Courts of
law in the strict sense; and that, if any such Court be created by the Parliament, the tenure of office
of the Justices of such Court, by whatever name they may be called, shall be for life subject to the
power of removal contained in sec. 72 of the Constitution. Now, the Board of Appeal created by the
Assessment Act either is or is not a "Court" in the strict sense. If it be not, Parliament has no power
to invest it with functions appertaining to the judicial power of the Commonwealth; if, on the other
hand, it be a "Court," its members have not the tenure of office required by the Constitution. In
either event the provisions of the Constitution are infringed, and it follows that the Board of Appeal
which Parliament has purported to create is not, and cannot lawfully be, constituted under the
Assessment Act in its present form.

The result is that the case stated by the Board must be struck out.

Isaacs J.

This is a case stated under the Income Tax Assessment Act 1922-1923. The Commissioner assessed
the taxpayer under sub-sec. 1 of sec. 28. Thereupon the taxpayer, being dissatisfied with the
Commissioner's decision, required him under sub-sec. 3 of sec. 28 to refer the case to a Board of
Appeal. On the same day the taxpayer under sec. 50 objected to the assessment, stating the grounds
of objection. These included a contention that sec. 28 was ultra vires of the Parliament. The matter
came before the Board of Appeal, and at the request of the parties a case was stated for the opinion
of this Court on various questions. These include questions as to the duties of the Board in the
proceeding before it, as to whether it could entertain both a reference under sec. 28 and an appeal
under sec. 50 and as to the validity of sec. 28, and also a general question as to the validity of the
whole Acts.

The invalidity of sec. 28 primarily relied on was that it attempted to create a tax other than a true
income tax and, therefore, there was a contravention of the second branch of sec. 55 of the
Constitution. If such a contravention were established, the consequences might not be limited to sec.
28; and this is probably the reason for inserting the question as to the validity both of the Income
Tax Acts of 1922 and 1923 and the whole Assessment Act of 1922.

The argument to establish the invalidity of sec. 28 was that the word "receipts" showed that
something more than "profits and gains" were taxed, and it was urged that "profits and gains" alone
were true "income" for taxation. There is no substance in the contention. There is nothing in the
Constitution to compel the Parliament to limit a tax which it chooses to describe as "income tax" to
"profits and gains." Parliament has the full range of the word "taxation," limited only by the express
restrictions of the Constitution itself. Examination of the relevant Acts will show that Parliament has
taken as a single subject of taxation gross income as the basis less such exemptions and deductions
as it considers just. That is its general scheme. But special cases have to be met. One of these special
cases is provided for in sec. 28, namely, the case of a business in Australia carried on by some
person here, the business drawing its receipts from Australian sources but being so controlled by
persons resident outside Australia that those receipts apparently show no such surplus as would be
taxable income or ordinarily taxable under the general scheme if the business were independent of
the outside control. Internal manipulation may thus easily, by conforming outwardly to
technicalities of law, conceal the realities of the Australian "business"--regarded as a productive
entity; and therefore the Commissioner is empowered to inquire into the facts and ascertain what
percentage of the total receipts represents the true measure of the net income result of Australian
trading. Parliament then for the special case accepts that percentage as the "taxable income" in
respect of the business in place of the misleading result that would be arrived at under the general
scheme. It must be remembered that this special provision is not new taxation but a new method of
assessment, and that is entirely within the power of Parliament.

It was also said that, inasmuch as not the owners of the business but the person carrying it on was
made liable, it was not an income tax but a personal or other tax. That is equally unsustainable. A
person who carries on a business within the jurisdiction, is sufficiently identified with it and with
the control and receipt of income to be justly regarded as answerable for payment of the income tax
in respect of it. If the owners place him in that position, they have no reason to complain, and, if he
desires any indemnity beyond what appears to be the full and sufficient protection of secs. 89 and 90
of the Assessment Act, he must obtain it from his principals. The objection referred to therefore
fails.

But the section was attacked on an independent ground much more serious. Sub-sec. 3 of sec. 28, on
which the objection is founded, is in these terms: "A taxpayer who is dissatisfied with the decision
of the Commissioner under this section may require the Commissioner to refer his case to a Board
of Appeal, and the Commissioner shall refer the case accordingly." It is contended on behalf of the
taxpayer, in the first place, that sub-sec. 3 is invalid because it purports to invest a tribunal which is
not a Court with judicial power, and thereby it violates sec. 71 of the Constitution; and, in the next
place, that the sub-section is inseparable from the rest of the section and consequently the whole is
void. It is necessary to examine this objection step by step. Assuming the existence of a Board of
Appeal free from any constitutional objection, sub-sec. 3, if nothing more were said as to the
functions of the Board, would be unimpeachable. It would raise an implication that in the event of
the taxpayer's dissatisfaction with the Commissioner's decision the Legislature entrusted the Board
with the duty of reviewing the decision of the Commissioner, and, in case of difference, of
substituting its opinion for his, with the legal effect that would otherwise have attached to the
Commissioner's decision. The Board of Appeal would in that case be a mere revisory body of the
same nature as the Commissioner and in no way exercising judicial power, because its decision
would not be one determining existing rights and duties as they already stand, but would be one
merely ascertaining a fact which the Legislature adopted as the standard upon which its will
operated to create rights and duties. And that is the position asserted for it now by learned counsel
for the Commissioner. That simple position, however, does not exist. The Legislature has certainly
not left the Board's functions to implication. They have been expressed, and therefore there is no
room for implication. Sec. 41 provides for a Board, consisting of a chairman and two other
members, and fixes the tenure of its members at seven years. The nature of the tenure makes it
impossible to be a Court (sec. 72 of the Constitution). Consequently no portion of the
Commonwealth judicial power can be vested in a Board so constituted. This is, if possible,
accentuated by the provisions of sec. 43 providing for temporary membership. Sec. 41 (1), however,
distinctly states that the Board is to be created "for the purposes of this Part," which means that, if
those purposes were inapplicable, no Board would be created. Then sec. 44, which is extremely
important in this connection, says:--"(1) A Board of Appeal shall have power to hear such cases as
are prescribed, or are referred to it by the Commissioner under this Act. (2) The provisions of
section fifty-one, fifty-two, and fifty-three of this Act shall apply, so far as applicable, to references
by the Commissioner to the Board as if those references were appeals." "References" are thus
placed, as far as they can be, in precisely the same position as "appeals" so far as the Board's duty
and powers are concerned; and this compels us to examine the provisions as to appeals. Turning
then to sec. 50, dealing with "appeals," it provides by sub-sec. 4 that a taxpayer dissatisfied with the
decision of the Commissioner may, by the method stated, require the Commissioner to forward his
case, where the objection does not raise questions of law only, to (1) the High Court or (2) a
Supreme Court or (3) a Board of Appeal. Pausing there for a moment, it is quite evident that judicial
power is thereby conferred on the Board, because the power invested in the High Court is
necessarily judicial (In re Judiciary and Navigation Acts[2]) and it is the identical power given by
sec. 50 to the Supreme Court and the Board. The power thus given is one of ascertaining and
determining whether and how far the rights and duties independently enacted have been accurately
declared by the Commissioner, and not for the purpose of superseding his discretionary judgment to
create a constitutive element of liability. This at once affects the third sub-section of sec. 28 in two
ways. First, even assuming the Board's functions under that sub-section to remain always non-
judicial, still a validly constituted Board is necessary. But, if the only Board intended by sub-sec. 3
is a Board as constituted under Part V., the invalidity of Part V. strikes also at sub-sec. 3 of sec. 28.

Again, sub-sec. 3 is affected as to functions by force of sub-sec. 2 of sec. 44 and sec. 51, which
carries on the judicial functions of sec. 50, because the Board, when sitting on a "reference" under
sec. 28, would in deciding the "case" have to determine, if disputed, even the applicability of sec. 28
to the "case." That is, the Board would have to determine whether the "business which is carried on
in Australia is controlled principally by persons resident outside Australia." Unless that is so, sec. 51
does not apply to a reference at all in any intelligible sense.

By sec. 51 the Board is empowered by sub-sec. 1 to make such "order" as it thinks fit. By sub-sec. 2
its order on questions of fact is final and conclusive. By sub-sec. 4 it has jurisdiction over the costs.
By sub-sec. 5 it can order the forfeiture of deposit. By sub-secs. 6, 7 and 8 it is enacted:--"(6) On
the hearing of the appeal the Board shall, on the request of a party, and the Court may, if the Court
thinks fit, state a case in writing for the opinion of the High Court upon any question arising in the
appeal which in the opinion of the Board or of the Court, as the case may be, is a question of law.
(7) The High Court shall hear and determine the question, and remit the case with its opinion to the
Court below or to the Board, as the case may be, and may make such order as to costs of the case
stated as it thinks fit. (8) An appeal shall lie to the High Court, in its appellate jurisdiction, from any
order made under sub-section 1 of this section, except a decision by the Board on a question of
fact." Sub-sec. 8 completes the chain of proof that Parliament has endeavoured to invest the Board
with what is strict judicial power. Read with sub-sec. 2, it leaves the Board's decision on facts final
and conclusive, and allows to the High Court, in its appellate jurisdiction, an appeal from the
Board's order under sub-sec. 1 on a matter of law. These provisions offend against sec. 71 and sec.
73 of the Constitution because the Board is not by sec. 72 constituted as a Court. It follows that, so
far as the purposes of Part V. of the Act are concerned, they are not purposes for which a Board as
described in sec. 44 could be validly created. As sec. 41 declares that it is "for the purposes of this
Part" there shall be the "Board or Boards of Appeal" described in that section, sec.41 cannot stand
alone, and the whole of the provisions of Part V. relating to Boards are invalid and of no effect. In
law, therefore, there is no Board of Appeal.

Before parting with this branch of the subject, one argument in support of the Board's position
should be noticed. Sec. 53--one of the sections applied to references, "so far as applicable" (which
means so far as the nature of the proceeding permits)--provides in the first sub-section that "the
Governor-General shall make rules for regulating the practice and procedure in relation to appeals
dealt with by a Board of Appeal, and a Board shall not be bound in its consideration of any question
by any rules of evidence, but in forming its decision shall be guided by good conscience and the
facts of the case." It was urged that the latter part of the sub-section was decisive that the Board was
not a Court and that the Act did not purport to invest it with judicial power, because, as it was urged,
the provision was inconsistent with strict judicial power. For this position Moses v. Parker[3] was
relied on. But in that case, as I pointed out in the Tramways Case [No. 1][4], the enactment that the
tribunal was "expressly exonerated from all rules of law or practice" (see Canadian Pacific Railway
Co. v. Toronto Corporation[5]) was an extremely important factor and was the turning-point of the
case. It cannot be maintained here that, by virtue of the words relied on, the Board is absolved from
all rules of law, as, for instance, the express provisions of the Taxing and Assessment Acts
themselves, or the rules of practice and procedure made by the Governor-General. Nor, as already
shown, can it be maintained that the functions of the Board on appeals are confined to mere
ascertainment of facts unaffected by law. Many of the facts ultimately to be found on such appeals,
require, so to speak, a "direction" in law. If a Judge were trying such cases with a jury, he would be
bound to direct them as to the law. The High Court or the Supreme Court would necessarily "direct"
itself in such case, and the Board of Appeal could not possibly in the majority of instances arrive at
a final conclusion without previously forming an opinion as to the intention of the Legislature
respecting some disputed item or items. The observations of Collins L.J. in Maude v. Brook[6] are
illustrative, and the numerous workmen's compensation cases in the House of Lords show how
difficult it is in a disputed case to get all the issues of pure fact. But even the issues of pure fact to
be determined by the Board on appeals are determinations--not to create a standard of liability, but
to ascertain and authoritatively pronounce upon the standard already created. That is judicial power,
and, having regard to the mode of its investment, is Commonwealth judicial power. And none the
less is it so because of the provision relied on in sub-sec. 1 of sec. 53. Not merely does the case of
Moses v. Parker[7] not sustain the argument against judicial power, but there are clear authorities
which show that such a provision is perfectly consistent, not merely with true judicial power in the
first instance, but also with the coexistence of true appellate jurisdiction from the primary decision.
Barlow v. Orde[8] was a case where the law provided that in such a case the Judge was to act
"according to justice, equity, and good conscience." That was part of what Lord Westbury there
termed "the Regulations ... for defining the jurisdiction of the Courts of the Province"[9]. And those
words require the application by the Court of "the principle of natural justice." The Privy Council
itself considered the case by that standard and reversed the primary judgment. In 1913 in Skinner v.
Naunihal Singh[10] Lord Shaw for the Judicial Committee said:--"From the case of Barlow v. Orde
... it is plain that English rules of interpretation--in so far at least as these are artificial rules of
construction which have arisen in the administration of English Courts of equity--must not be
allowed to govern the interpretation of Thomas Skinner's will. Questions affecting the construction
of such a settlement as the present, or the regulation of a succession under it, must be determined by
the principles of natural justice, or, to use the familiar language, according to justice, equity and
good conscience." Their Lordships then proceeded as an appellate tribunal to review the decision of
the appeals from the High Court of Judicature at Allahabad, which had itself reversed judgments
and decrees of a subordinate Court. The Judicial Committee reversed the judgments of the High
Court. It is therefore certain that the argument, so far as it rests on the provision referred to in sec.
53, cannot avail to alter the conclusion otherwise arrived at and already stated.

Strictly speaking, then, since in law there is no Board of Appeal, neither is there, in law, any case
stated upon which we can deliver any binding opinion except so far as to declare the invalidity of
Part V. so far as it relates to Boards of Appeal; and this subject occupies by far the greater portion of
the Part. But, having said so much, it would be very undesirable to leave certain matters that have
been dealt with in argument, and are of great public importance, wholly untouched, however
difficult it may be completely to resolve them. The effect on sec. 28 itself of what has been said is
that sub-sec. 3 when it is read, as it must be, as referring to a Board of Appeal within the meaning of
Part V., is itself invalid. Does that make the whole of sec. 28 invalid? That section, as already stated,
is for the purpose of ascertaining a fact--namely, a just percentage of receipts. That is ascertained in
the first instance by the opinion of the Commissioner. If the taxpayer is satisfied, that is final, and
the law applies automatically. But, says the Legislature, if the taxpayer is dissatisfied it is not final,
and, although the method attempted of obtaining finality is not lawful, it is clear that the
Commissioner's decision cannot be regarded as final where the taxpayer is dissatisfied. But, on the
principle that the Court will preserve the intention of Parliament wherever possible, I hold, as sub-
sec. 3 is intended to apply only where there is dissatisfaction, that sub-sec. 1 is intended to be the
only operative provision in the absence of dissatisfaction and for that purpose it still operates
effectively. In those cases where there is no dissatisfaction the Commissioner's decision stands, and
in those cases only.

There are other sections into which the Appeal Board is introduced, and it is necessary to
differentiate. Secs. 17, 21 and 23 are of similar character to sec. 28 in that so far as concerns the
Board they provide for the reconsideration of a constitutive fact of liability. Where the taxpayer is
not "dissatisfied" the rest of the section operates, but where the taxpayer is "dissatisfied" and has
acted under the relevant sub-section the liability does not attach. Sec. 50 is more difficult.
Notwithstanding the great portion of space in Part V. occupied by the provisions as to the Board, the
history of the legislation relating to "objections and appeals" shows that Parliament intended the
appeal to this Court and the Supreme Court to exist whether the Board existed or not. The two are
not bound up so that the appeal to the Court is dependent on the appeal to the Board and that the
first would not have been enacted without the second. Part V. as it stood in the Assessment Act
1915-1918 indicates this quite clearly. Therefore all references to the Appeal Board may be elimated
from Part V. of the present Act without difficulty so far as future objections are concerned.
But a difficulty certainly occurs in the application of sec. 50, sub-sec. 4, where a dissatisfied
taxpayer has not within the thirty days elected either Court as the tribunal for his appeal but has
chosen the Board. This is a difficulty which may need early parliamentary adjustment. Sec. 51
continues the difficulty.

In the result, the Court can only formally declare that the case stated is struck out as incompetent.

Powers J.

In this case stated by the Board of Appeal for the opinion of the High Court under the Income Tax
Assessment Act 1922, several questions of law were submitted to this Court for its opinion; but the
Court decided, after hearing the appellant's counsel, to decide first the question: Is sec. 28 of the
Income Tax Assessment Act 1922 invalid as a whole, on the ground that it includes sub-sec. 3 and
that the Boards of Appeal referred to in that sub-section and as constituted by the Act have
conferred upon them judicial power, they not being Courts properly appointed to exercise judicial
power within the meaning of the Constitution?

The following is a copy of sec. 28, sub-secs. 1, 2 and 3:--"28. (1) When any business which is
carried on in Australia is controlled principally by persons resident outside Australia, and it appears
to the Commissioner that the business produces either no taxable income or less than the ordinary
taxable income which might be expected to arise from that business, the person carrying on the
business in Australia shall be assessable and chargeable with income tax on such percentage of the
total receipts (whether cash or credit) of the business, as the Commissioner in his judgment thinks
proper. (2) The provisions of section twenty of this Act shall not apply in any case in which the
person assessed under this section is a company. (3) A taxpayer who is dissatisfied with the decision
of the Commissioner under this section may require the Commissioner to refer his case to a Board
of Appeal, and the Commissioner shall refer the case accordingly."

The answer to the question depends on the answer to one of three other questions:--(1) Is judicial
power conferred on the Boards of Appeal so far as "references" to the Board are concerned, or only
as to appeals? (2) Is sub-sec. 3 severable? (3) Can sub-sec. 3 without the judicial power the Boards
are invested with be held to be valid?

So far as this question is concerned, assuming Parliament had the power to enact sec. 28, sub-secs. 1
and 2, it has not been seriously contended that sec. 28 as it stands could not have been passed by
Parliament--if the Boards of Appeal referred to in sub-sec. 3 of the section had been invested only
with the power to decide questions of fact, but not with authority to exercise judicial power. Sub-
sec. 1 authorizes the Commissioner to decide in his judgment, in certain cases set out in the sub-
section, what percentage of the total receipts, whether cash or credits of the business, the person
chargeable with the income tax shall be assessed and chargeable with. Sub-sec. 2 protects the person
assessable, when a company, from extra taxation provided for in sec. 20. Sub-sec. 3 of the Act, the
one in question, gives the right to a taxpayer, dissatisfied with the decision referred to, to require the
Commissioner to refer his case to a Board of Appeal. The Board of Appeal referred to was invested
with judicial and non-judicial functions. The other sections of the Act referred to--secs. 17, 21,
23--giving somewhat similar powers to the Commissioner to act on his opinion, judgment or
discretion as to certain facts to be found by him, support the view that sec. 28, with the two sub-
sections mentioned, would have been passed without sub-sec. 3, which was only added, at the
request of taxpayers, to enable a taxpayer to question the fairness of the decision of the
Commissioner on facts before him to the extent that Parliament could give that right.
In Owners of s.s. Kalibia v. Wilson[11] Barton J. said:--"There can be no severance of the valid
from the invalid where a collective expression such as coasting trade is used. To recall a suggestion
made during the argument, it is not as if Parliament had enacted that certain specified things, say A,
B, and so on down to Z, might lawfully be done, the first half-dozen being within its legislative
power and the remainder outside it. There the bad can be separated from the good and excised, and
if there be left a law not substantially or radically different, dealing effectively with so much of the
subject matter as is within the legislative power, the Act will be good, minus the invalid provisions
eliminated." In Alexander's Case[12] this Court held that the Arbitration Act was valid as to part,
but the judicial powers the Court was expressly invested with by many sections of the Act were held
to be ultra vires and severable.

I hold, on the cases Owners of s.s. Kalibia v. Wilson[13], Proprietors of the Daily News Ltd. v.
Australian Journalists' Association[14], Waterside Workers' Federation of Australia v. J. W.
Alexander Ltd.[15], and other cases of a similar nature decided in this Court, that the judicial
powers given to the Board of Appeal are ultra vires and severable from the powers not judicial
given to the Board. I also hold that sub-secs. 1 and 2 of sec. 28 are severable from the rest of the
section, and that sub-sec. 3 does not in any case invalidate the whole section.

Rich J.

This is a case stated for the opinion of this Court by the de facto Board of Appeal under the Federal
Income Tax Assessment Act.

Several questions are put, but ultimately the taxpayer rests his case on the alleged invalidity of sec.
28 of the Act before referred to. Two distinct grounds are alleged for this invalidity. One is that it
purports to create a tax which is not an income tax. In doing this it is said to violate sec. 55 of the
Constitution because there would be two different subjects of taxation in the same Act. I do not
agree with this contention. The section is only protecting the revenue from the escape by ingenious
business methods from liability to the ordinary income tax.

The second ground of attack upon the section is that the Appeal Board referred to in sub-sec. 3 is
not lawfully constituted. Reading the Act as a whole, any Appeal Board under the Act is invested
with powers that are clearly judicial, that is to say, are part of the judicial power which the
Constitution preserves for Courts. But the Constitution also provides that Federal Courts must be
composed of Judges having a life tenure. The attempt by the Act, therefore, to erect Appeal Boards
with the powers stated is ineffectual and the de facto Board, which is contemplated by sec. 28 (3)
and which has stated this case, has no legal existence.

To allay any doubts as to the effect of the introduction of an Appeal Board into any section, I am of
opinion that so far as possible the various provisions of the sections should be regarded as separable.
"The offending provisions" are not "so interwoven into the scheme that they are not severable" (In
re Initiative and Referendum Act[16]). The test of severability is stated in Alexander's Case[17].
Applying this test, sub-secs 1 and 2 of sec. 28 stand untouched, though of course dissatisfaction or
its absence would still be material in determining a taxpayer's liability. In my opinion also, the
Board may be disregarded in relation to objections and appeals (secs. 50-53) leaving the jurisdiction
of the Courts unimpaired.

The result is that the case stated by the de facto Board of Appeal is not a proceeding which the law
recognizes. It should, therefore, be struck out.
Starke J.

The Income Tax Assessment Act 1922, Part V., provides for the constitution of a Board or Boards of
Appeal consisting of a chairman and two other members appointed by the Governor-General, and
has enacted that the members of a Board shall hold office for a term of seven years, subject to
removal or suspension (see secs. 41, 48). Jurisdiction or authority is conferred upon a Board so
constituted to hear such cases as are prescribed, or are referred to it by the Commissioner under the
Act (see secs. 44, 50, 51). The cases so prescribed are set forth in sec. 50, sub-sec. 4, whilst secs. 17
(5), 21 (5), 23 (3) and 28 (3) are instances of cases which may be referred. A Board is empowered
to decide both questions of law and questions of fact in the cases so prescribed or referred. It may
make such orders as it thinks fit, and either reduce or increase the assessment of a taxpayer made for
the purpose of ascertaining the taxable income upon which income tax is leviable (see secs. 51, 35),
and its decisions on questions of fact are final and conclusive, but otherwise are appealable to this
Court. The jurisdiction or authority is thus to ascertain and declare the liability of a taxpayer to the
tax imposed by the Income Tax Acts. That is a clear exercise of the judicial power of the
Commonwealth (cf. The Constitution, sec. 71; In re Judiciary and Navigation Acts[18]). The
provisions of sec. 53 do not militate against this view; for that section, in my opinion, does not alter
the standards of liability set up by the Acts, but simply deals with procedure and proof of facts.
Alexander's Case[19], however, is an authoritative decision of this Court that the Parliament cannot
confer upon tribunals constituted as are the Board or Boards of Appeal, the judicial power of the
Commonwealth or any part of it. The provisions of the Income Tax Assessment Act purporting to
authorize a Board or Boards of Appeal to exercise part of the judicial power of the Commonwealth
are contrary to the Constitution, and therefore invalid. Consequently, I agree that a case cannot be
stated for the opinion of this Court by a Board which has no existence in point of law, and that it
must be struck out.

As this view disposes of the whole case, I think it undesirable to express any opinion upon the other
questions argued before us. The Parliament, however, may think it right to provide some remedy for
parties who, relying upon the Act, have appealed, or have had their cases referred, to an
incompetent tribunal. The Courts of law were alternative tribunals as to appeals under sec. 50, and
have all the authority and jurisdiction in such appeals that any Board of Appeal could exercise. It
may be that a provision enabling the Courts mentioned in sec. 50 to hear appeals and references to
any Board of Appeal, if a party so requires, would prevent any hardship and incidentally render
unnecessary the expenditure of a sum, not exceeding £10,000 per annum, appropriated for the
remuneration and travelling allowances of tribunals established in violation of the Constitution.

Case struck out.

Solicitors for the appellant, Gillott, Moir & Ahern.

Solicitor for the respondent, Gordon H. Castle, Crown Solicitor for the Commonwealth.

[1] (1918) 25 C.L.R., at p. 442.

[2] [1921] HCA 20; (1921) 29 C.L.R. 257, at p. 264.

[3] (1896) A.C. 245.

[4] [1914] HCA 15; (1914) 18 C.L.R. 54, at p. 72.
[5] (1911) A.C., at p. 471.
[6] (1900) 1 Q.B. 575, at p. 581.
[7] (1896) A.C. 245.
[8] (1870) L.R. 3 P.C. 164.
[9] (1870) L.R. 3 P.C., at p. 186.
[10] (1913) 35 All. 211, at p. 224; 40 Ind App. 105, at p. 114.
[11] (1910) 11 C.L.R., at p. 701.
[12] [1918] HCA 56; (1918) 25 C.L.R. 434.
[13] [1910] HCA 77; (1910) 11 C.L.R. 689.
[14] [1920] HCA 43; (1920) 27 C.L.R. 532.
[15] [1918] HCA 56; (1918) 25 C.L.R. 434.
[16] (1919) A.C. 935, at p. 944.
[17] (1918) 25 C.L.R., at p. 470.
[18] (1921) 29 C.L.R., at pp. 264, 265.
[19] [1918] HCA 56; (1918) 25 C.L.R. 434.

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