FEDERAL COURT OF AUSTRALIA

Tolich v Commissioner of Taxation (No 2)

[2007] FCA 1776   

MATE TOLICH v COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

WAD 47 OF 2005

DOMENIC PRINCI v COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

WAD 48 of 2005

KEVIN DORN v COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

WAD 49 of 2005

VINCENT PRINCI v COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

WAD 50 of 2005

ALLEN PRINCE v COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

WAD 57 of 2005

KEVIN SLEIGHT v COMMISSIONER OF THE COMMONWEALTH OF AUSTRALIA

WAD 59 of 2005

BESANKO J

26 OCTOBER 2007

ADELAIDE (HEARD IN PERTH)

THE COURT ORDERS THAT:

1.         The objection decision in relation to the year of income ended 30 June 1994 be set aside and the matter be remitted to the respondent with the direction that the objection in relation to the year of income ended 30 June 1994 be allowed so as to allow the applicant a deduction to the extent of the cash outlays of $71,550.49 and otherwise the objection be disallowed.

2.         The objection decision in relation to the year of income ended 30 June 1995 be set aside and the matter be remitted to the respondent with the direction that the objection in relation to the year of income ended 30 June 1995 be allowed so as to allow the applicant a deduction to the extent of the cash outlays of $11,000 and otherwise the objection be disallowed.

3.         The matter is otherwise remitted to the respondent for consideration whether any compensating adjustments pursuant to s 177F(3) of the Income Tax Assessment Act 1936 (Cth) should be made in either of the years of income ended 30 June 1995 or 30 June 1996 in relation to any further cash payments which may have been made by the applicant in connection with the applicant’s involvement in the TVI Project in the 1995 financial year.

4.         The objection decision in relation to the year of income ended 30 June 1996 be set aside and the matter be remitted to the respondent with the direction that the objection in relation to the year of income ended 30 June 1996 be allowed so as to allow the applicant a deduction to the extent of the cash outlays of $58,125 and otherwise the objection be disallowed.

5.         The applicant is to pay 90 per cent of the respondent’s costs of the appeal.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

THE COURT ORDERS THAT:

1.         The objection decision in relation to the year of income ended 30 June 1994 be set aside and the matter be remitted to the respondent with the direction that the objection in relation to the year of income ended 30 June 1994 be allowed so as to allow the applicant a deduction to the extent of the cash outlays of $71,550.49 and otherwise the objection be disallowed.

2.         The objection decision in relation to the year of income ended 30 June 1995 be set aside and the matter be remitted to the respondent with the direction that the objection in relation to the year of income ended 30 June 1995 be allowed so as to allow the applicant a deduction to the extent of the cash outlays of $11,000 and otherwise the objection be disallowed.

3.         The matter is otherwise remitted to the respondent for consideration whether any compensating adjustments pursuant to s 177F(3) of the Income Tax Assessment Act 1936 (Cth) should be made in either of the years of income ended 30 June 1995 or 30 June 1996 in relation to any further cash payments which may have been made by the applicant in connection with the applicant’s involvement in the TVI Project in the 1995 financial year.

4.         The objection decision in relation to the year of income ended 30 June 1996 be set aside and the matter be remitted to the respondent with the direction that the objection in relation to the year of income ended 30 June 1996 be allowed so as to allow the applicant a deduction to the extent of the cash outlays of $58,125 and otherwise the objection be disallowed.

5.         The applicant is to pay 90 per cent of the respondent’s costs of the appeal.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

THE COURT ORDERS THAT:

1.         The objection decision in relation to the year of income ended 30 June 1994 be set aside and the matter be remitted to the respondent with the direction that the objection in relation to the year of income ended 30 June 1994 be allowed so as to allow the applicant a deduction to the extent of the cash outlays of $71,550.49 and otherwise the objection be disallowed.

2.         The objection decision in relation to the year of income ended 30 June 1995 be set aside and the matter be remitted to the respondent with the direction that the objection in relation to the year of income ended 30 June 1995 be allowed so as to allow the applicant a deduction to the extent of the cash outlays of $11,000 and otherwise the objection be disallowed.

3.         The matter is otherwise remitted to the respondent for consideration whether any compensating adjustments pursuant to s 177F(3) of the Income Tax Assessment Act 1936 (Cth) should be made in the year of income ended 30 June 1995 in relation to any further cash payments which may have been made by the applicant in connection with the applicant’s involvement in the TVI Project in the 1995 financial year.

4.         The applicant is to pay 90 per cent of the respondent’s costs of the appeal.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

THE COURT ORDERS THAT:

1.         The objection decision in relation to the year of income ended 30 June 1994 be set aside and the matter be remitted to the respondent with the direction that the objection in relation to the year of income ended 30 June 1994 be allowed so as to allow the applicant a deduction to the extent of the cash outlays of $71,550.49 and otherwise the objection be disallowed.

2.         The objection decision in relation to the year of income ended 30 June 1995 be set aside and the matter be remitted to the respondent with the direction that the objection in relation to the year of income ended 30 June 1995 be allowed so as to allow the applicant a deduction to the extent of the cash outlays of $11,000 and otherwise the objection be disallowed.

3.         The matter is otherwise remitted to the respondent for consideration whether any compensating adjustments pursuant to s 177F(3) of the Income Tax Assessment Act 1936 (Cth) should be made in either of the years of income ended 30 June 1995 or 30 June 1996 in relation to any further cash payments which may have been made by the applicant in connection with the applicant’s involvement in the TVI Project in the 1995 financial year.

4.         The objection decision in relation to the year of income ended 30 June 1996 be set aside and the matter be remitted to the respondent with the direction that the objection in relation to the year of income ended 30 June 1996 be allowed so as to allow the applicant a deduction to the extent of the cash outlays of $58,125 and otherwise the objection be disallowed.

5.         The applicant is to pay 90 per cent of the respondent’s costs of the appeal.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

THE COURT ORDERS THAT:

1.         The objection decision in relation to the year of income ended 30 June 1994 be set aside and the matter be remitted to the respondent with the direction that the objection in relation to the year of income ended 30 June 1994 be allowed so as to allow the applicant a deduction to the extent of the cash outlays of $12,009.18 and otherwise the objection be disallowed.

2.         The objection decision in relation to the year of income ended 30 June 1995 be set aside and the matter be remitted to the respondent with the direction that the objection in relation to the year of income ended 30 June 1995 be allowed so as to allow the applicant a deduction to the extent of the cash outlays of $2,000 and otherwise the objection be disallowed.

3.         The matter is otherwise remitted to the respondent for consideration whether any compensating adjustments pursuant to s 177F(3) of the Income Tax Assessment Act 1936 (Cth) should be made in the year of income ended 30 June 1995 in relation to any further cash payments which may have been made by the applicant in connection with the applicant’s involvement in the TVI Project in the 1995 financial year.

4.         The applicant is to pay 90 per cent of the respondent’s costs of the appeal.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

THE COURT ORDERS THAT:

1.         The objection decision in relation to the year of income ended 30 June 1996 be set aside and the matter be remitted to the respondent with the direction that the objection in relation to the year of income ended 30 June 1996 be allowed so as to allow the applicant a deduction to the extent of the cash outlays of $155,000 and otherwise the objection be disallowed.

2.         The applicant is to pay 90 per cent of the respondent’s costs of the appeal.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

REASONS FOR JUDGMENT

1                     On the question of costs I refer to my reasons in these matters [2007] FCA 1195.  At [13] I identified five issues. 

2                     As to the first issue, namely whether the deductions fell within s 51(1) of the Income Tax Assessment Act 1936 (Cth), I refer to [192] of my reasons.  That issue was not an issue which occupied any time at the hearing.  It was suggested by counsel for the respective applicants that it was a live issue before the hearing.  I have perused the relevant court files and I am not satisfied that the Commissioner of Taxation’s decision not to formally concede that the deductions fell within s 51(1) added materially to the costs of preparation and hearing. 

3                     As to the second issue, the respective applicants were unsuccessful.

4                     As to the third issue, the respective applicants were unsuccessful.

5                     As to the fourth issue, that issue was a relatively minor issue when compared with the third issue and to a lesser extent the second issue.  The Commissioner of Taxation accepted that there were some actual cash outlays but there was disagreement as to the amounts.  To the extent that the respective applicants proved their actual cash outlays, that was done in the course of evidence given on other issues. 

6                     As to the fifth issue, that is not a matter which, in the circumstances, should influence the decision on the question of costs. 

7                     I have a broad discretion on the question of costs.  The Commissioner of Taxation has been substantially successful.  Some small allowance should be made for the fact that the applicants have been successful to the extent of actual cash outlays, which in some cases are quite substantial.  I would allow the Commissioner of Taxation 90 per cent of his costs in relation to each appeal.

Associate:

Dated:         16 November 2007