LATHAM CJ: The appellant is a naturalised British subject resident in Australia within the meaning of the Income Tax Assessment Act 1936-1942. He brought an action against the Commissioner of Taxation in which he claimed a declaration that his income as a Chief Officer in the Small Ships Division, Transportation Corps, United States Army Services of Supply, South West Pacific Area, is exempt from Income tax and he claimed a return of �30 which had been deducted from his pay upon the basis that the said income was not income as claimed.

His Honour Mr. Justice Williams dismissed the action and an appeal is brought to this Court.

The question which we have to decide arises under the Income Tax Assessment Act, 1936-1942, sec. 23(u), which provides:

"The following income shall be exempt from income tax", in the case of any person enlisted in or appointed to the Naval, Military or Air Force of the Government of any country outside Australia the pay and allowances earned in Australia by him as a member of that Force, if the pay and allowances are not paid, given or granted by the Commonwealth."

There is no dispute as to certain matters: the pay and allowances were earned in Australia by the plaintiff and were earned by him as a member of a body called the Transportation Corps, and the pay and allowances were not paid, given or granted by the Commonwealth.

The question is whether he (the Plaintiff) is a person enlisted in or appointed to the Military Forces of the Government of the United States - and whether the pay and allowances are earned by the plaintiff as a member of that Force. The words "enlisted in or appointed to" are also to be found in paragraph (s) of see. 23, which gives an exemption in relation to certain pay and allowances - described in detail - in the case of any person enlisted in or appointed to "the Defence Force."

A comparison has been made between paragraph (u) and. paragraph (a), and His Honour considered that paragraph (s) relating to the Defence Force of Australia, threw some light upon the provision in paragraph (u). In my opinion, in paragraph (a) the words, "enlisted in or appointed to" the Defence Force of Australia must be construed in accordance with relevant Australian law. The Defence Act, sec.30, provides for the Constitution of the Defence Force, and the Defence Act and other legislation provides for the enlistment of men and appointment of officers, warrant officers and non-commissioned officers in the Defence Force. In the case of paragraph (s) the words, "enlisted in or appointed to" must be read in whatever meaning is attached to them by Australian law in the case of the Commonwealth Defence Force.

In paragraph (u) the words "enlisted in or appointed to" relate to the Forces of other countries than Australia, and in my opinion it is impossible to attach to those words the precise meaning provided under Commonwealth Law in the case of the Defence Force of Australia. The contrary was not argued but in paragraph (u) as in paragraph (o) they refer to the method of becoming a member of the Forces. In order to apply paragraph (u), it is necessary to look at the law or practice of the relevant country, the language being used to describe the method of becoming a member of the Naval, Military or Air Forced of the country in question.

In the present case the plaintiff entered into a contract with the Government of the United States, on 4th August 1944, the term of contract dating back to 1st August. In that contract he is described as an employee, he is employed as a deck officer. The terms of the contract form are applicable to many - probably all - grades of seagoing employment, which are set out in the schedule. The provisions in the contract, as far as the plaintiff is concerned, set out that he is appointed for service In the South West Pacific Area theatre of Operations, he agrees to serve at a fixed minimum wage, under clause 4 he is to work whatever hours are required, he is provided with insurance and under clause 8 he has Workers' Compensation rights. He has rights of leave, the period of service is one year, but either party is at liberty by notice In writing, subject to certain limitations, to terminate the contract not less than 30 days prior to the expiry of the original or any successive one year period. Clause 12 contains a provision entitling the Government to dispense with his services in certain cases, for reasons stated.

The plaintiff was employed as a Chief Officer, the salary was �681 normally, but upon Island pay it was �1366.1.6 - I have already said in sea-going employment as deck officer - He served on various ships and in areas where hostilities were actually taking place. He worked as a member of the United States' Transportation Corps. He is described in a document entitled "Individual Assignment and Paybook Record" as "a non-combatant civilian maritime employee of the Transportation Corps".

The Transportation Corps was established by a general order No. 38 of 1942 of the United States War Department. The Corps was established within the War Department and it provided for the reorganisation of the Corps, which succeeded to a similar supply service but differently organised. The order provided that "all officers and warrant officers now serving with the Transportation service are hereby assigned to the Transportation Corps" and that "enlisted men assigned to the units of the Transportation Service are transferred to the Transportation Corps." That provision plainly deals with military personnel. Another general order is to be found in Circular No. 393 of 1942. This order draws a distinction between persons serving in the Corps, who have already been militarised and are therefore members of the Forces, and other members of the Corps, and refers to civilian crews and the conditions under which they may be engaged. Military personnel, comprising the crews of such vessels, are assigned to the Transportation Corps, but one of the distinctions here drawn is that between civilian crews and military personnel-all of whom are members of the Transportation Corps. Reference is also made to the Commanding General Services of Supply, who is in control of the Corps. Provisions relating to identification also draw a distinction between civilians in the Corps and officers and enlisted men in the Corps.

In relation to service in Australia there is a particular provision contained in an order dated 1st June 1944 dealing specifically with civilian personnel and in Clause 3 under the heading of "Conditions of Employment of Australian Civilians" it is provided that the employment of Australian civilians will be in accordance with rules, hours of duty and wages as closely equivalent as practicable to those established by Australian law and custom.

In my opinion the plaintiff is an Australian civilian who has been employed under these various provisions. It is true that he is subject to military law under the articles of war, but only as a person accompanying or serving with the armies of the United States, "who is not otherwise subject to the articles of war." All these provisions distinguish between members of the Military Forces (officers, warrant officers or men belonging to the Army) on the one hand, and civilians on the other.

A provision which was relied upon by Mr. Taylor, contained in general conditions relating to the organisation and functions of the Transportation Corps, appears to me to point in the other; direction from that which he suggested. The provision is that the Transportation Corps, U.S. Services of Supply, the chief of which is designated Chief Transport Officer, will consist of "such numbers of officers of appropriate grades, warrant officers, enlisted men and civilian personnel as may from time to time be Authorised by the Commanding General U.S. Army Services of Supply". This provision distinguishes between officers, warrant officers and enlisted men in the Corps, on the one hand, and civilian personnel in the Corps on the other hand.

The plaintiff took no oath of enlistment and he holds a certificate of identity as a non-combatant person. It is provided that as a deck officer he has to have the same rights, if taken prisoner of war, as a 2nd Lieutenant in the Army. Here again there is a distinction drawn between a man who is actually in the Army and a man who is to have rights as if he were in the Army.

The conclusion, in my opinion, from all these matters is that the plaintiff is employed under contract as a civilian employee of the United States to do work in the Transportation Corps. It is true that he is to work under military direction and control, but he is not a member of the Military Forces of the United States. It was not argued that he enlisted in the Military Forces. If however the contract of employment may be regarded - as possibly it may be - as an appointment, then he was appointed to the position of Deck Officer in the Transportation Corps as a civilian employee and that appointment did not make him a member of the military forces.

I am therefore of opinion that the appeal should be dismissed.

DIXON J: I agree.

I merely desire to add that, in my opinion, paragraph (u) of sec. 23, the most material words of which are "enlisted in or appointed to" and "member", is seeking to describe the status or capacity in which the taxpayer serves the Government of the other country. Whereas in this case, you have a Corps organized upon the basis of its comprising civilians as well as persons having military capacity or status, it appears to me that the civilians do not come within the fair meaning of paragraph (u).

ORDER: Appeal dismissed with costs.