Air Liquide Australia Ltd v Commissioner of Taxation of the Commonwealth of Australia - [1996] FCA 267

CATCHWORDS

INCOME TAX - allowable deductions - investment allowance - vacuum insulated vessels installed by manufacturer of industrial gases on premises of customers - whether granting of rights to other persons to use eligible property

Income Tax Assessment Act 1936 (Cth): ss 82AA and 82AG

Tourapark Pty Ltd v Federal Commissioner of Taxation (1982) 149 CLR 176

Air Liquide Australia Ltd v Commissioner of Taxation of the Commonwealth of Australia
(No.VG 170 of 1992)

Judge:     Heerey J
Date:     17 April 1996
Place:     Melbourne

IN THE FEDERAL COURT OF AUSTRALIA    )
  )
VICTORIA DISTRICT REGISTRY          )          No. VG 170 of 1992
  )
GENERAL DIVISION  )

B E T W E E N:

AIR LIQUIDE AUSTRALIA LTD
Applicant
- and -

COMMISSIONER OF TAXATION OF THE
COMMONWEALTH OF AUSTRALIA
Respondent

JUDGE: Heerey J

DATE: 17 April 1996

PLACE: Melbourne

MINUTES OF ORDERS

Appeal is dismissed.
Applicant pay the respondent's costs, including reserved costs.

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

IN THE FEDERAL COURT OF AUSTRALIA    )
  )
VICTORIA DISTRICT REGISTRY          )          No. VG 170 of 1992
  )
GENERAL DIVISION  )

B E T W E E N:

AIR LIQUIDE AUSTRALIA LTD
Applicant
- and -

COMMISSIONER OF TAXATION OF THE
COMMONWEALTH OF AUSTRALIA
Respondent

JUDGE: Heerey J

DATE: 17 April 1996

PLACE: Melbourne

REASONS FOR JUDGMENT

The taxpayer Air Liquide Australia Ltd (formerly named Liquid Air Australia Limited) appeals against the rejection of deductions claimed by way of an investment allowance in respect of vacuum insulated vessels (VIVs) installed on the premises of its customers. The Commissioner took the view that Air Liquide had granted to other persons rights to use the VIVs within the meaning of s 82AA(1)(a)(ii)(C) of the Income Tax Assessment Act 1936 (Cth) (the Act). An identical issue arises under s 82AG(1)(b). The relevant period is 1 January 1980 to 31 December 1985.

VIVs
During the relevant period Air Liquide manufactured, sold and supplied gases such as oxygen, nitrogen and carbon dioxide for industrial and medical purposes. In the case of a few very large
customers Air Liquide supplied the gas by a dedicated pipe-line from its factory to the customer's premises. With smaller customers the gas was supplied in portable cylinders. Between those two extremes were the customers with which this case is concerned. Air Liquide installed a VIV on the customer's premises for the storage of gas in liquid form and replenished the VIV from time to time by road tanker delivery.

A VIV consisted of a stainless steel inner vessel and a carbon steel outer vessel separated by an annulus which was both insulated and evacuated, a vaporiser (where the customer required gas in a gaseous state), a pressure building coil, a regulator, gauges (pressure and content) and ancillary pipe-work and valves. The regulator maintained the pressure within the vessel. The VIVs varied in size. The evidence included a photograph of one which showed a cylindrical structure that…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

AGLC: Air Liquide Australia Ltd v Commissioner of Taxation of the Commonwealth of Australia [1996] FCA 267
Case: [1996] FCA 267
Decision Date: 17 Apr 1996

CaseChat Overview and Summary

Air Liquide Australia Ltd, formerly Liquid Air Australia Limited, sought to appeal against the Commissioner of Taxation's rejection of deductions claimed by way of an investment allowance in respect of vacuum insulated vessels (VIVs) installed on the premises of its customers. The Commissioner argued that Air Liquide had granted to other persons rights to use the VIVs within the meaning of s 82AA(1)(a)(ii)(C) and s 82AG(1)(b) of the Income Tax Assessment Act 1936 (Cth). The central issue before the court was whether the VIVs installed by Air Liquide on the premises of its customers constituted a granting of rights to use the eligible property to other persons within the meaning of the Act.

The court determined that Air Liquide had indeed granted rights to its customers in relation to the VIVs through formal contractual documents. The contracts explicitly outlined restrictions on Air Liquide's rights to retake possession of the VIVs or control what the customer did with them. Additionally, Air Liquide charged customers a monthly fee for the continued retention of the VIV on their premises. The court held that the presence of the VIV on the customer's premises played an essential part in the customer's operations, as they drew off gas from the VIVs and regulated the supply through their own pipelines. The fact that Air Liquide referred to the installation as being for its "own use" did not alter the fundamental reality that the customers were using the VIVs pursuant to the rights granted by Air Liquide. Consequently, the court concluded that the VIVs were used by "other persons" within the meaning of the statutory provisions, leading to the disallowance of the investment allowance deductions.

The appeal was dismissed, and Air Liquide was ordered to pay the respondent's costs, including reserved costs. Similar orders were made in the linked cases VG 171, 172, 173, 174, and 175 of 1992.

Orders