Papua New Guinea Law Reports - 1977
[1977] PNGLR 62
N86
PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]
THIESS BROS. (PACIFIC) PTY. LTD.
V
CHIEF COLLECTOR OF TAXES
AND
CHIEF COLLECTOR OF TAXES
V
THIESS BROS. (PACIFIC) PTY. LTD.
Waigani
Williams J
27-28 May 1976
11 March 1977
INCOME TAX - Allowable deductions - Losses of previous years - Requirement of beneficial holding of 50% of shares - “Beneficially held” - Necessity for entry in share register - “Year of income” - “Beneficially owned” - Literal interpretation - Income Tax Act 1959 s. 101d[lxvi]1 (as operative from 1st July, 1967 to 30th June, 1972) and s. 101d[lxvii]2 (as operative from 1st July, 1972) considered.
The appellant taxpayer company incurred losses in the tax years ending 30th June, 1968, 1969 and 1970, and produced an assessable income in each of the tax years ending 30th June, 1971, 1972 and 1973. On 30th June, 1970, a company, Thiess Holdings Pty. Ltd. (hereinafter called “Holdings”) acquired by transfer 1,529,989 shares in the appellant company (in a total shareholding of 1,750,000), but the shares were not actually entered into the share register until 1st July, 1970. The total shareholding of Holdings for the years ending 30th June, 1971, 1972 and 1973 were 1,579,989 shares.
In its income tax returns for the years ending 30th June, 1971, 1972 and 1973, the appellant claimed the allowability of past years’ losses pursuant to s. 101 of the Income Tax Act 1959; the claims being disallowed, the appellant appealed to the Review Tribunal constituted under s. 240 of the Income Tax Act 1959, which disallowed the claims for deduction with respect to the years ending 30th June, 1971, and 1972 and allowed in part the claim with respect to the year ending 30th June, 1973.
Section 101d of the Income Tax Act (as operative from 1st July, 1967 to 30th June, 1972) provided that no loss incurred by a company in any year preceding the year of income should be an allowable deduction unless that company satisfied the Chief Collector “that on the last day of each year of income subsequent to the year of loss, shares of the company carrying not less than fifty percentum of the voting power were beneficially held by persons who beneficially held shares of the company carrying not less than that percentum of the voting power on the last day of the year of loss.”
The amended s. 101d (operative from 1st July, 1972) provided that no loss incurred by a company in any year before the year of income should be an allowable deduction unless that company satisfied the Chief Collector that at all times during the year of income, shares in the company carrying between them not less than fifty percentum of, the voting rights, the right to not less than fifty percentum of the dividends and the right to not less than fifty percentum of any distribution of capital “were beneficially owned by persons who, at all times during the year in which the loss was incurred, beneficially owned shares in the company carrying rights of those kinds.”
On appeal from the decision of the Review Tribunal.
Held
(1)      That for the purpose of s. 101d of the Income Tax Act 1959 (as operative from 1st July, 1967 to 30th June, 1972) shares in a company are not “beneficially held” by a person unless his name is on the company register as the holder thereof with the corresponding voting rights.
Avon Downs Pty. Ltd. v. Federal Commissioner of Taxation (1949) 78 C.L.R. 353; 23 A.L.J. 322; and Dalgety Downs Pastoral Co. Pty. Ltd. v. Federal Commissioner of Taxation (1952) 86 C.L.R. 335, 26 A.L.J. 459, adopted and applied.
Patrick Corporation Ltd. v. Commissioner of Taxation (Cth) (1974) 48 A.L.J.R. 283; and Patcorp Investments Ltd. v. Commissioner of Taxation (Cth) (1976) 76 A.T.C. 4225 referred to.
(2)      Accordingly, in respect of the tax years ending 30th June, 1971 and 1972, the company “Holdings” was not within the meaning of the section, the “beneficial holder” of the 1,529,989 shares on the 30th June, 1970, and the appellant could not recoup, in the years ending 30th June, 1971, 1972, for loss incurred in prior years.
(3)      The words “year of income” in s. 101d of the Income Tax Act 1959 (as operative from 1st July, 1967 to 30th June, 1972) are to be given their meaning as defined in s. 4 of the Act; they are not to be limited to years in which a taxpayer has an assessable income.
(4)      Section 101d of the Income Tax Act 1959 (operative from 1st July, 1972) should be interpreted literally.
(5)      Accordingly, in respect of the tax year ending 30th June, 1973, the company “Holdings” was within the meaning of the section the “beneficial owner” of the 1,529,989 shares on the 30th June, 1970 and the appellant could recoup in the year ended 30th June, 1973, for loss incurred in the year ended 30th June, 1970.
Appeal
This was an appeal against a decision of a Review Tribunal constituted under s. 240 of the Income Tax Act 1959.
Counsel
R. J. Bainton Q.C. and V. Bruce, for the appellant company.
L. J. Priestley and P. A. Benson, for the respondent, The Chief Collector.
Editorial Note
An appeal to the Supreme Court has been lodged.
Cur. adv. vult.
11 March 1977
WILLIAMS J: In its returns of income for the financial years 30th June, 1971, 1972 and 1973 the appellant claimed the allowability of past years’ losses pursuant to the provisions of s. 101 of the Income Tax Act 1959 (as amended). The respondent disallowed these claims and the subsequent objection to the disallowances, whereupon the appellant referred the respondent’s decision to the Review Tribunal constituted under s. 240 of the Act.
On 11th March, 1975 the Review Tribunal:
(1)      Decided that the respondent’s decisions, upon the appellant’s objections with respect to the years ended 30th June, 1971 and 1972 be upheld and the assessments with respect to those years confirmed;
(2)      Allowed in part the appellant’s objection with respect to the year ended 30th June, 1973 and varied the assessment accordingly.
The appellant appeals to this Court against the Tribunal’s decision with respect to the years ended 30th June, 1971 and 1972. The respondent cross-appeals against the Tribunal’s decision in relation to the year ended 30th June, 1973.
The appeals and cross-appeal were argued before me in May, 1976. Counsel for the appellant, in the course of his argument placed considerable reliance upon a decision of Mason J. in Patrick Corporation & Ors. v. The Federal Commissioner of Taxation[lxviii]3, which decision was then under consideration by the Full Court of the High Court of Australia. I asked that counsel for the parties deliver written submissions following delivery of the Full Court’s decision. I received these written submissions in late December, 1976. I mention these matters to explain the otherwise apparent delay in dealing with this case.
It appears that the following losses were incurred by the appellant:
Year ending	Loss	
30th June, 1968	$177,432.00	
30th June, 1969	$571,726.00	
30th June, 1970	$695,349.00	
 	$1,444,507.00	
It further appears that in the years ending 30th June, 1971, 1972 and 1973, the appellant derived assessable incomes of $721,239.00, $603,177.00 and $77,517.00 respectively and sought, pursuant to the provisions of s. 101 of the Act, to recoup the losses mentioned in the manner shown in the table set out hereunder:
Year ending 30th June, 1971 — Profit $721,239.00	
 	1968	1969	1970	Total	
Losses	$177,432	$571,726	$695,349	$1,444,507	
Recoup	177,432	543,807	—	721,239	
Losses carried forward	—	27,919	695,349	723,268	
Year ending 30th June, 1972 — Profit $603,177.00	
 	1969	1970	Total	
Losses brought forward	$27,919	$695,349	$723,268	
Recoup	27,919	575,258	603,177	
Loss carried forward	—	120,091	120,091	
Year ending 30th June, 1973 — Profit $77,517.00	
1970 Loss brought forward	$120,091	
Recoup	77,517	
Loss carried forward	42,574	
						
As at 30th June, 1967 the issued share capital of the appellant company was 250,000 fully paid $1.00 shares. In July, 1967 the issued share capital was increased to 1,750,000 fully paid $1.00 shares.
Issues crucial to this appeal arise from certain share transactions which took place on 30th June, 1970. As a result of these transactions a company, Thiess Holdings Pty. Ltd. (“Holdings”) acquired by transfer 1,529,989 shares in the appellant company. This, coupled with earlier holdings, gave Holdings a total of 1,579,898 shares in the appellant company and the share register shows Holdings to be the holder of that number of shares as at 30th June, 1970.
At the hearing before the Review Tribunal evidence was adduced and argument addressed designed to establish that the transfers of the 1,529,898 shares previously referred to were actually entered in the share register on 30th June, 1970. However, the Tribunal was not satisfied that the transfers were made on that date and found, as a fact, that they were not made until 1st July, 1970. Whilst the notice of appeal to this Court alleges that this finding was incorrect this ground of appeal was abandoned by counsel for the appellant at the hearing.
It is, however, contended on behalf of the appellant that, notwithstanding the fact that the entries in the share register were not made until 1st July, 1970, s. 101d of the Act, upon its proper construction, entitles the appellant to the relief sought. On this branch of the case it is necessary from the appellant’s point of view that it be shown that on 30th June, 1970 Holdings “beneficially held” within the meaning of s. 101d the 1,529,898 shares previously referred to.
Section 101d of the Income Tax Act 1959 was repealed by Act No. 49 of 1972 and a new s. 101d inserted in its stead.
The old section was in the following terms:
“101d(1)        Notwithstanding any of the provisions of Sections 101, 101a, 101b and 101c of this Ordinance, in the case of a taxpayer that is a company a loss incurred by the company in a year preceding the year of income is not an allowable deduction unless the company establishes to the satisfaction of the Chief Collector that, on the last day of each year of income subsequent to the year of loss, shares of the company carrying not less than fifty per centum of the voting power were beneficially held by persons who beneficially held shares of the company carrying not less than that percentage of the voting power on the last day of the year of loss.
(2)      For the purposes of Subsection (1) of this section, shares of a company beneficially held by a person on the last day of a year of income shall be deemed to have been beneficially held by the same person on the last day of the year of loss if:
(a)      the person has died and the shares were, on the last day of the first-mentioned year, beneficially held by the trustee of his estate or a shareholder who received the shares as a beneficiary in his estate; or
(b)      the shares have been transferred by that person to a company, the majority of the shares of which were on the last day of the first-mentioned year beneficially held by that person, or, if he has died, by the trustee of his estate or a shareholder who received the shares as a beneficiary in his estate.”
Put shortly, the primary contention put forward on behalf of the appellant is that, although the transactions effected on 30th June, 1970 were not entered in the share register of the appellant company until the following day, the transferee of the shares was the “beneficial holder” of them within the meaning of the section. It is contended that this proposition is supported by the judgment of Mason J. in Patrick Corporation & Ors. v. The Federal Commissioner of Taxation[lxix]4 and by the Full Court of the High Court of Australia on appeal from the decision of Mason J. reported sub. nom. Patcorp Investments Limited (formerly Patrick Corporation Limited) & Ors. v. Federal Commissioner of Taxation[lxx]5.
For the respondent it is argued that the term “beneficially held” appearing in s. 101d should be construed in accordance with the decision of Dixon J. (as he then was) in Avon Downs Proprietary Limited v. The Federal Commissioner of Taxation[lxxi]6, which was approved by the Full Court of the High Court of Australia in Dalgety Downs Pastoral Company Pty. Limited v. Federal Commissioner of Taxation[lxxii]7. It is also contended on behalf of the respondent that nothing that was said by Mason J. in the Patrick Corporation[lxxiii]8 case and in the judgments on the appeal from his decision can be taken to reverse or modify the decision in Avon Downs and Dalgety Downs.
It is thus necessary to examine these cases.
The Avon Downs case involved a consideration of the provisions of s. 80(5) of the Australian Income Tax Assessment Act, which, although not in the identical terms of s. 101d of the Papua New Guinea Act, is a provision to similar effect.
In that case the company’s issued capital consisted of 3907 $1 shares of which one G. A. Vivers held 1001 and Jack L. Vivers 2900. Of the remaining six shares two were held by Beryl I. Vivers and one each by two accountants. By an agreement dated 14th June, 1944 three men named McCauley and two men named O’Neill agreed to purchase 2907 shares in the company. Under the agreement G. A. Vivers was to transfer 743 of his shares leaving him 258 and Jack L. Vivers was to transfer 2158 of his shares leaving him with 742. The six shares previously mentioned were also to be transferred. There was a further transaction between G. A. Vivers and Jack L. Vivers whereby the former transferred his remaining 258 shares to the latter. Transfers to give effect to all the agreements referred to were executed on 14th June, 1944. It appears, however, that, despite some representation made by the taxpayer to the Commissioner to the contrary, one of the transfers was not recorded in the share register of the company until subsequent to 30th June, 1944. The only persons who could be said to fulfil the double qualification of having 25% of the voting power on the last days of the years of loss and on 30th June, 1944 were G. A. and Jack L. Vivers. Dixon J. (as he then was) held that they did not hold beneficially shares carrying 25% of the voting power on 30th June, 1944. He said (at p. 365):
“It seems to me that a transferor of a share who has been paid the consideration for the transfer, holds simply as a passive trustee until the registration of the transfer and the entry of the transferee’s name on the register. He could not be said to hold ‘beneficially’.”
It was also held that s. 80(5) is concerned with voting; it should therefore be treated as using the terminology of company law with the meaning attached to it in company law. For the purposes of s. 80(5) shares are “held” by persons on the share register.
In Dalgety Downs it was contended that Avon Downs was wrongly decided. A Full Court of the High Court of Australia (Webb, Fullagar and Kitto JJ.) rejected this contention. In the joint judgment of the Court (at pp. 341, 342) it is said:
“What have been described as the remaining steps in the appellant’s argument need not be further considered, because we are of opinion that the construction of s. 80(5) upon which the deputy commissioner acted is correct. Dixon J. so held in Avon Downs Pty. Ltd. v. Federal Commissioner of Taxation ((1949) 78 C.L.R. 353), basing his conclusion upon the view that in the terminology of company law shares are said to be ‘held’ by the person who is registered as a shareholder in respect thereof, and that s. 80(5), being concerned with voting power, should be treated as using that terminology. We share this view. Indeed it is not too much to say that the verb ‘hold’ and its variants, when used in relation to shares in companies, normally refers to the legal ownership of the shares according to the register of members. The Companies Acts of the United Kingdom and of the several States of the Commonwealth have uniformly used the word in this sense, and common usage has followed their example. Before a different meaning is accepted, some justification must be found in the context, or the subject-matter. No such justification is provided by the fact that ‘held’ is modified by the adverb ‘beneficially’. This word serves more naturally the purpose of excluding the case of a holding for the benefit of others than the purpose of so broadening the meaning of the word ‘held’ beyond the particular significance which it normally has in relation to shares as to make it equivalent to ‘owned’ in the most general sense of that word.”
As I have said earlier, considerable reliance was placed by counsel for the appellant on the decision of Mason J. in Patrick Corporation & Ors. v. The Commissioner of Taxation (Cth) (“Patcorp”)[lxxiv]9 and on the decision of the Full Court on appeal from the judgment of Mason J. It is said that, in the present case, an agreement to sell the shares and the actual forms of transfer had been executed. The consideration had been paid. The Board of Directors of the appellant had approved the transfers. All these things were done on 30th June, 1970. All that remained to be done was the administrative act of entering the transactions in the share register and the transferees had an absolute entitlement to have their names entered in the share register as at the date the directors approved the transfers and directed their registration in the share register. In these circumstances it should be held that the shares were “beneficially held” by Holdings on 30th June, 1970.
Patcorp carried on the business of trading in stocks and shares. It entered into seven dividend stripping operations on its own account. Each of the transactions was carried out in the one financial year and each was entered with the knowledge that there was a purchaser prepared to buy the shares involved ex dividend on suitable terms. The purchases were financed by loans made by the stripped company and cheques were exchanged for this purpose. In each transaction the purchase and resale of the shares resulted in a substantial loss to Patcorp but, with the exception of one case, the dividends received by Patcorp more than offset that loss. Except for two dividends, all the dividends were declared and paid before the transfers of the shares to Patcorp were registered, but, in each case, the declaration and payment of the dividends took place subsequently to a meeting of directors of the stripped company resolving that the transfer to Patcorp be registered. In each case the share register showed that Patcorp became a shareholder on the day on which registration was approved.
The Commissioner took the view (so far as is relevant to the present case) that the taxpayer at the time the dividend was declared was not a “shareholder” within the meaning of s. 46 of the Australian Income Tax Assessment Act and accordingly was not entitled to a rebate of tax under that section.
The contention of the taxpayers was it was enough that their names were subsequently entered on the register in respect of the shares acquired and that entry in the register, when made, relates back to the date when it should have been made, that is, when the directors of the company approved the transfers or directed that they be registered. This contention was accepted by both Mason J. and the Full Court.
Mason J. (at p. 293) said:
“Although the word ‘shareholder’ ordinarily signifies a person who is registered as the holder of shares (see Avon Downs Pty. Ltd. v. Federal Commissioner of Taxation (1949) 78 C.L.R. 353, at pp. 363-365), the word ‘member’ may be wide enough to include a subscriber to the memorandum who is a person whose name is not entered in the register of members (Companies Act 1961, s. 16). And the provisions of s. 151(1) with respect to keeping of the register of members indicate that a person’s character as a member is initially ascertained by reference to circumstances dehors the register.
The requirement in s. 151 that there should be entered in the register ‘(b) the date at which the name of each person was entered in the register as a member’ in my view refers, not to the date on which the entry was physically made, but to the date on which he should have been entered in the register as a member, that is, in the case of a subscriber to the memorandum, the date on which he subscribed and, in the case of a transferee, the date on which the directors approved the transfer, or resolved that it be registered. It is the duty of the officers of a company to give effect promptly to the company’s obligation to enter the names of its members in the register. The statutory provision is to be read accordingly as authorizing, indeed requiring, the entry in the register of the date when the directors approved, or directed the registration of, the transfer to the transferee. In all cases other than Austin Sales, the entries in the registers of members correctly show the membership of Mining Traders as having commenced when the dividends in question were paid.
Consequently, I am of the opinion that the moneys received by the appellants pursuant to the declaration of dividend by each of the companies acquired other than Austin Sales were ‘dividends’ within the meaning of s. 46.”
In the Full Court judgment Gibbs J. (at pp. 4233, 4234) said:
“I now turn to consider whether the appellant companies were shareholders in the stripped companies at the respective times when the dividends in those companies were declared and paid. By s. 6(1) of the Act, ‘shareholder’ is defined to include ‘member or stockholder’, but that definition provides no assistance in the present case, because in the case of a company limited by shares a member must be a shareholder. For present purposes, the terms ‘shareholder’ and ‘member’ are synonymous. Their meaning must be sought in the rules of company law. Section 16 of the Companies Act, 1961 (N.S.W.) (as amended) provides (inter alia) as follows:
‘(4)     On and from the date of incorporation specified in the certificate of incorporation, but subject to this Act, the subscribers to the memorandum together with such other persons as may from time to time become members of the company shall be a body corporate by the name contained in the memorandum ...
(5)      The subscribers to the memorandum shall be deemed to have agreed to become members of the company and on the incorporation of the company shall be entered as members in its register of members, and every other person who agrees to become a member of a company and whose name is entered in its register of members shall be a member of the company.’
These provisions appear to declare, in the clearest possible way, that a person, other than a subscriber, does not become a member of a company until his name is entered on the register. By s. 151 the company is required to keep a register of its members and to enter therein (inter alia):
‘(a)     the names and addresses of the members ...
(b)      the date at which the name of each person was entered in the register as a member.’
Counsel for the appellant companies submitted that the effect of this section is that the register records the fact of membership but does not in itself confer the status of membership. This submission, however, gives too little weight to the words of s. 16 and is opposed to the views that have consistently been expressed in cases decided on similar company legislation.
In Avon Downs Pty. Ltd. v. Federal Commissioner of Taxation (1949) 78 C.L.R. 353 and Dalgety Downs Pastoral Company Pty. Ltd. v. Federal Commissioner of Taxation (1952) 86 C.L.R. 335 this Court considered the effect of s. 80(5) of the Act as then in force, which referred to ‘persons who beneficially held shares of the company carrying not less than twenty-five per cent of the voting power on the last day of the year in which the loss was incurred’. It was held that a person ‘held’ shares within this provision by having his name on the register. In Avon Downs Pty. Ltd. v. Federal Commissioner of Taxation, one Jack L. Vivers had bought and paid for 258 shares before the last day of the year, but the resolution that the transfer be registered was not passed, and the transfer was not in fact registered, until after that day. Dixon J. said (at p. 363): ‘Beneficially the 258 shares belonged to Jack L. Vivers, but until his transfer was registered and his name placed on the share register he could not be said to ‘hold’ them within the meaning of s. 80(5).’ In Dalgety Downs Pastoral Company Pty. Ltd. v. Federal Commissioner of Taxation it was again contended that a beneficial owner, not on the register, ‘held’ the shares, and again the contention was rejected.”
His Honour then went on to quote certain extracts from the judgment of the Court in Dalgety Downs and referred to several other cases. He then went on (at pp. 4234, 4235):
“These decisions affirm the general principle that entry on the register is necessary to constitute membership of a company, and clearly establish that the beneficial ownership of shares, without registration, does not make a person a shareholder. In my opinion it follows that none of the appellant companies was ever a shareholder in Austin. It is true that they became the beneficial owners of the shares in that company. However, no transfers of the shares were executed in favour of the appellant companies, no resolution was passed by Austin or its directors that the appellant companies be registered and they never were registered. Since they were not shareholders of Austin they were not entitled under s. 46 to a rebate in respect of the sums which they received as a result of the declaration of dividends in that company. For this reason, appeal No. 102 brought by Mining Traders, and appeals No. 103, 104, 105, 106 and 107 brought by the other appellant companies, must fail.
Mining Traders was clearly a shareholder in all the other stripped companies — it was duly registered as such — but (except in the two cases mentioned, of Remfore and Harbour Holdings) registration was not effected until after the dividend had been declared. The registration, when effected, showed that Mining Traders had become a member on the date on which registration had been approved — a date which was before that on which the dividends were declared. The register correctly showed the date ‘at which’ the name of Mining Traders was entered in the register (see s. 151(1)(b) of the Companies Act), rather than the date on which its name was registered. According to the register, therefore, Mining Traders was a shareholder in all the stripped companies (except Austin) when the dividends were declared. This is in my opinion sufficient for the purposes of ss. 44 and 46 of the Act. To depart from the register would lead to the practical inconvenience mentioned in Dalgety Downs Pastoral Company Pty. Ltd. v. Federal Commissioner of Taxation at p. 343. The present case of course is one in which the register does not need rectification — it is correct ... If a person ought to have been on the register on a certain day and he is subsequently registered as from that day, speaking generally I consider that it should be held that he was a shareholder on that day. The registration, assuming it to be a proper registration, operates retrospectively from the date on which it was effected to the date at which the name of the shareholder was entered in the register. In any case, for the reason of convenience already mentioned, I consider that the fact that Mining Traders was registered as a shareholder as at the date at which the dividends were declared, and rightly so registered, is enough for the purposes of s. 46.”
Jacobs J. (at p. 4238 and p. 4239) said:
“When the word ‘shareholder’ is used in the Income Tax Assessment Act it refers to a person who is regarded as a shareholder under the general law governing the relationship of a person so described to the association in which he has a share. It has been so held in the case of a shareholder in a corporation the capital of which is divided into shares. See particularly Dalgety Downs Pastoral Company Pty. Limited v. Federal Commissioner of Taxation (1952) 86 C.L.R. 335 at pp. 341-343. By the definition in s. 6 the word ‘shareholder’ includes a member or a stockholder. The inclusion of the former word covers a subscriber to the memorandum of association and a member of a corporation the capital of which is not divided into shares and a member of an unincorporated association, not being a partnership, whether or not the capital is intended to be so divided. See the definition of ‘company’ in s. 6.
However, to say that in the law governing incorporated companies a person is only a ‘shareholder’ at any particular date if his name appears on the register of members at that date is an over-simplification. For some purposes, e.g. qualification as a director, it has been decided (prior to the enactment of what is now s. 116 of the Companies Act, 1961 (N.S.W.)) that a person is only the holder of shares if at the date of his appointment as director he appears on the register of members. Spencer v. Kennedy [1926] Ch. 125. On the other hand it is fundamental to company law that despite the language of such sections as s. 16(5) and s. 151(1) the register of members is not conclusive. Indeed, s. 151(4) makes it clear that the register is no more than prima facie evidence of the matters which it is required or authorised to contain. The provision in s. 155 that the register may be rectified embodies the concept that, once it is rectified, the rights of the person whose name is entered therein or removed therefrom are determined as at the date at which the rectification is ordered to have effect. It appears to me that the question which arises in the present case is whether the meaning of ‘shareholder’ in the Income Tax Assessment Act is confined to a person whose name appears on the register of members. In my opinion it is not. It also includes a person who is entitled as against the company to be registered and whom the company is absolutely entitled to register as a member of the company. If a company is at the relevant date absolutely entitled to register the person concerned and he is absolutely entitled to have the register rectified so that his name appears thereon as a shareholder at that date, such a person has more than a beneficial interest in the shares enforceable primarily against the vendor. He is in a direct relationship with the company involving reciprocal rights and duties between them.
In the present case once the directors of each company had approved the respective transfers and directed registration the transferee was absolutely entitled to have its name entered on the respective registers. It was not only beneficially entitled to the shares as property with consequent rights against the vendor in whose name the shares stood. It was entitled vis-a-vis the companies to be treated as a shareholder and to be registered as such and was therefore a ‘shareholder’ within the meaning of the Income Tax Assessment Act. I do not regard this conclusion as inconsistent with the reasoning in the Dalgety Downs case (supra) despite the generality of some of the statements therein. The particular question now being considered did not there arise and my conclusion conforms with the approach of the Court in that case.”
Stephen J. agreed with the reasons of both Gibbs and Jacobs JJ. McTiernan J. made no reference to Avon Downs or Dalgety Downs but concluded that the taxpayers were shareholders within the meaning of s. 46.
It is clear that neither Mason J., Gibbs J. or Jacobs J. expressly stated any disapproval of the decisions in Avon Downs or Dalgety Downs. Indeed each seems to me to have accepted those decisions within the context in which they were made and Jacobs J. expressly stated that he did not regard his conclusion as being inconsistent with the reasoning in Dalgety Downs. He added that the particular question arising in Patcorp did not arise in Dalgety Downs and that his own conclusion conformed with the approach in that case.
In Patcorp the court was concerned to ascertain the meaning of the word “shareholder” appearing in s. 46. Avon Downs and Dalgety Downs were concerned with the different question of the meaning to be attributed to the words “shares of the company ... carrying not less than 50% of the voting power were beneficially held” in s. 85(1) of the Australian Act. I am unable to see that anything that was said in the judgments in the Patcorp cases in any way modifies the decisions in Avon Downs and Dalgety Downs. The latter decisions were given in relation to a section of the Australian Act in terms similar to s. 101d of the Papua New Guinea Act. They are highly persuasive authority on the interpretation of s. 101d and I, with respect, adopt what was said in those judgments. In the result, therefore, it is my view that Holdings cannot be said to have been the “beneficial holder” of the 1,579,898 shares on 30th June, 1970 carrying with them corresponding voting rights.
Counsel for the respondent put another argument in answer to the appellant’s contention that the shares acquired by transfer by Holdings on 30th June, 1970 were “beneficially held” by the company on that date. This, as I understand the submissions, was a further and alternative argument to the contention put by the appellant arising from the Patcorp cases.
It flows from the provisions of s. 70 and 71 of the Stamp Duties Act of Papua New Guinea and article 33 of the appellant’s Articles of Association. Section 70 prohibits entry in the share register of a company of a transfer of shares which is not duly stamped. Section 71 provides in effect that the title of a transferee is not invalidated by reason only of a contravention of s. 70. The Review Tribunal considered that s. 70 was not relevant to the construction to be placed on s. 101d of the Income Tax Act. Article 33 provides, inter alia, that a transferor shall be deemed to remain the holder of a share until the name of the transferee is entered in the share register. The Review Tribunal considered that article 33 was not determinative of the question of “beneficial holding” prior to registration. I am inclined to agree with the Review Tribunal’s findings on this aspect of the matter but I do not find it necessary to consider them to finality in the light of the views I have earlier expressed upon the primary argument advanced by the appellant.
A further question arises with regard to the interpretation of s. 101d in its original form. It is contended for the appellant that if it be shown that the 50% voting requirement be shown in 1968 and 1971 then the appellant is entitled to set off against profits earned during the year ending 30th June, 1971 the losses sustained during the year ending 30th June, 1968 for the reason that, during the intervening years (i.e. years ending 30th June, 1969 and 30th June, 1970), there was no year in which there was a taxable income against which past losses might be offset. The term “year of income” is defined in s. 4 of the Act. In the case of a company it means in relation to the year of tax ending on the 30th June, 1968 — the financial year which ended on 30th June, 1967 and, in relation to any subsequent year of tax the financial year next preceding that year of tax. “Year of tax” means the financial year for which income tax is levied. The definitions in s. 4 have application unless a contrary intention appears. It is contended for the appellant that the term “year of income” appearing in s. 101d should not be given its defined meaning as a contrary intention appears.
As I understand the argument, it is that “a year of income” should be construed not in the defined sense of a fiscal year but rather as a year in which a taxpayer has an assessable income. Hence a year in which a loss is incurred is not “a year of income”. It is said that any other interpretation would produce results not intended by the legislature. An example was given in which in years 1 and 2 losses were incurred and in year 3 a profit made. In year 3 a shareholder died. Thus it is said that an intention of the section contrary to that put forward by the appellant would result in the situation where by reason of the fortuitous event of the shareholder’s death a claim to recoupment of losses in the previous years would be lost.
I am by no means sure that, having regard to the provisions of s. 101d(2)(a), the suggested result would ensue. But if it be assumed that it did, it does not, in my view, affect the question of the meaning of s. 101d(1). The plain literal terms of the latter subsection, in my opinion, require a construction adverse to that put forward by the appellant. To my mind the policy expressed in the subsection is to require an identity of “beneficial holding” of the requisite percentage on the last day of a year of loss and the last day of each intervening fiscal year through to the last day of the year in which recoupment is sought. At para. 24 of the reasons of the Review Tribunal it is said:
“In my opinion the word ‘each’ where it appears before the phrase ‘year of income’ in s. 101d(1) (as operative from 1 July, 1967 to 30 June, 1972) makes it necessary to have regard to the last day of every year beginning with the last day of the year in which the relevant loss was incurred and ending with the last day of the year in which it is sought to recoup the whole or part of that loss. Thus the last days of the several intervening years are to be taken into account where, for example, a loss is incurred in the year ended 30 June, 1968 and it is sought to recoup that loss in the year ended 30 June, 1971.”
I agree with the view therein expressed.
It is, I think, here convenient to set out what appears to me to be the major registered shareholdings in the appellant company at the various relevant dates. It should be observed that, with respect to the year ending 30th June, 1970, I have shown the shareholdings disregarding the entries shown in the share register as it was found by the Review Tribunal and accepted in this Court that those entries were not in fact made until 1st July, 1970.
Summary at 30th June, 1968—Capital 1,750,000 shares 50% = 875,000	
 	30th June, 1968	30th June, 1969	30th June, 1970	30th June, 1971 to 30th June, 1973	
Fitzroy Holdings Pty. Ltd.	50,000	50,000	50,000	5,000	
Development Finance Corp. Ltd.	86,990	86,990	86,990	8,700	
P.G.H. Industries Ltd.	100,000	100,000	100,000	10,000	
Tenaru Agencies Pty. Ltd.	10,000	10,000	10,000	1,000	
National Plywood Co. Pty. Ltd.	1,000	1,000	1,000	100	
H. V. Quinton	7,000	7,000	7,000	700	
Australian Paper Manufacturers Ltd.	350,000	350,000	—	—	
Harsco Corp.	200,000	200,000	200,000	20,000	
Thiess Holdings Ltd.	50,000	50,000	50,000	1,579,989	
McMillan BloedellPty. Ltd.	630,000	630,000	1	1	
P.N.G. Development Bank	250,000	250,000	250,000	25,000	
Development Nominees Pty. Ltd.	15,000	15,000	994,999	99,500	
It will be seen that for the years ending 30th June, 1971, 1972 and 1973 Holdings “beneficially held” 1,579,989 shares representing more than 50% of the shares and voting power in the appellant company. It seems to me (as was found by the Review Tribunal) that Holdings cannot be grouped with any other “beneficial holder” on the last day of each of the years of loss whereby the appellant is entitled to recoup any losses in the year of income ending 30th June, 1971 nor in the year of income ending 30th June, 1972. Further, it cannot recoup in the year of income ended 30th June, 1973 losses incurred in the years ended 30th June, 1968 and 30th June, 1969.
Different considerations, however, arise when a comparison is made between the year of income ended 30th June, 1973 with the year ending 30th June, 1970. These arise from a change in the relevant legislation.
The new s. 101d effective from 1st July, 1972 is in the following terms:
“101d  LOSSES OF PREVIOUS YEARS NOT TO BE TAKEN INTO ACCOUNT UNLESS THERE IS SUBSTANTIAL CONTINUITY OF OWNERSHIP OF SHARES IN COMPANY
Notwithstanding Sections 101 and 101a of this Act, but subject to Sections 101e, 101f and 101g of this Act, a loss incurred by a taxpayer, being a company, in a year before the year of income shall not be taken into account for the purposes of Section 101 or 101a of this Act unless the company satisfies the Chief Collector that, at all times during the year of income, shares in the company carrying between them:
(a)      the right to exercise not less than fifty per centum of the voting power in the company;
(b)      the right to receive not less than fifty per centum of any dividends that may be paid by the company; and
(c)      the right to receive not less than fifty per centum of any distribution of capital of the company in the event of the winding-up, or of a reduction in the capital, of the company,
were beneficially owned by persons who, at all times during the year in which the loss was incurred, beneficially owned shares in the company carrying rights of those kinds.”
The Review Tribunal found that the appellant could recoup in the year of income ended 30th June, 1973 for loss incurred in the year ended 30th June, 1970. This was based upon the transactions occurring on 30th June, 1970 whereby Holdings, on 30th June, 1970 increased its beneficial ownership of shares in the appellant company (with corresponding voting rights) from approximately 3«% to approximately 90%. Coupled with the beneficial owners of the shares held in the name of Development Nominees Pty. Ltd. there was thus a group who at all times during the years ended 30th June, 1970 and 30th June, 1973 carried between them the requisite percentage of shareholding and voting power.
It is said on behalf of the respondent that on the literal reading of the new s. 101d that the approach adopted by the Review Tribunal was correct. However, it is contended that it should not be read literally as this would produce a result contrary to that intended by the legislature. The legislative intention, it is said, is to be seen from the heading to the section “Losses of previous years not to be taken into account unless there is substantial continuity of ownership of shares in company”, and the intention manifested is that those who get the benefit of the loss should be substantially the same people who sustained the loss. This could only be said to exist in the present case in a small degree.
The new s. 101d effected substantial changes in the legislation. It departed from the previous concept of “beneficial holding” in favour of “beneficial ownership”. It eliminated the former requirement to examine the position on the last day of each year intervening between the year of loss and the year in which recoupment is sought and replaced it with the requirement requiring a comparison between persons who between them “beneficially owned” shares at all times during a year of income and at all times during a year in which a loss is incurred. On its face it is a provision less exacting than the former provision. I am unable to see any valid reason why the section should not be read in its literal terms as against a construction based upon speculative legislative intention not stated in express terms. In my view the construction placed upon the section by the Review Tribunal was correct.
For the foregoing reasons I would dismiss both the appeal and the cross-appeal. I reserve liberty to the parties to apply upon the formal orders to be made and upon the question of costs.
Appeal dismissed.
Cross appeal dismissed.
Solicitors for Thiess Bros. (Pacific) Pty. Ltd.: Gadens.
Solicitor for The Chief Collector: B. W. Kidu, State Solicitor.

[lxvi]Infra p. 66.
[lxvii]Infra p. 78. 
[lxviii](1974) 48 A.L.J.R. 283.
[lxix](1974) 48 A.L.J.R. 283.
[lxx](1976) 76 A.T.C. 4225.
[lxxi](1949) 78 C.L.R. 353.
[lxxii](1952) 86 C.L.R. 335.
[lxxiii](1974) 48 A.L.J.R. 283.
[lxxiv](1974) 48 A.L.J.R. 283.