Bankstream Pty Ltd and Commissioner of Taxation

[2008] AATA 504

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 504

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No WT2004/454

TAXATION APPEALS  DIVISION		)
Re		BANKSTREAM PTY LTD

Applicant

And COMMISSIONER OF TAXATION

Respondent

DECISION

Tribunal Mr A Sweidan, Senior Member

Date12 June 2008

PlacePerth

Decision The Tribunal affirms the decision under review.

......(sgd) Mr A Sweidan.........

Senior Member

CATCHWORDS

CATCHWORDS

Income Tax – objection to assessment –  delay by Commissioner in deciding objection – applicant contending that Tribunal should decide review application on basis of applicant’s Grounds of Objection and without any evidence other than s.37 documents – decision under review affirmed

LEGISLATION

Income Tax Assessment Act 1936 – s 51(1) and 82 KZM, 177C (1), 177D, 177F (1)

Taxation Administration Act 1953 – Part IVC, s 14ZZ, 14ZZK (b (i)), 14ZY (3), 14ZZA. 14ZZK

82KZM, 14ZV

CASES

Federal Commissioner of Taxation v Dalco [1990] HCA 3, (1990) 168 CLR at 614 

McCormack v Federal Commissioner of Taxation [1979] HCA 18 (1979) 143 CLR 284

Gauci v Federal Commissioner of Taxation [1975] HCA 54 (1975) 135 CLR 81

Re Federal Commissioner of Taxation; Ex parte Australena Investments Pty Ltd & Ors (1983) ALR 577

NAES v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCA 2

REASONS FOR DECISION

12 June 2008 Mr A Sweidan, Senior Member    

BACKGROUND

1.      The respondent issued an assessment dated 4 August 1999 to the applicant in respect of the taxable year ended 30 June 1994 (“the assessment”).

2.      The adjustment sheet accompanying the assessment disallowed certain deductions claimed by the applicant in its 1994 tax return relating to Satcom Corporate Services Pty Ltd thereby increasing the applicant’s taxable income by the amount of the disallowed deductions (”the adjusted income”).  The primary tax and the penalty tax assessed in the assessment were calculated on the applicant’s increased taxable income.

3.      The claimed deductions comprised a $30,000 initial franchise fee in respect of each of the 5 franchises the applicant had acquired in the Satcom Corporate Service Pty Ltd franchise arrangement.

4.      Following audit of the Satcom Corporate Services Pty Ltd franchise arrangement, the respondent:-

(a)On 30 July 1999 made a determination under sec 177F (1) (b) of the Act that the claimed deductions were a tax benefit that should not be allowable; and

(b)Issued a notice of assessment to disallow the claimed deductions on 4 August 1999 (“the assessment”).

5.      The applicant by Notice of Objection against assessment dated 1 October 1999 objected against the assessment claiming it was excessive and that the taxable income included therein should be reduced by the amount of the adjusted income and that the primary tax assessed and the penalty tax assessed in the assessment should also be reduced in accordance with the grounds set forth therein (the “applicant’s objection”).

6.      The respondent’s Notice of Decision on Objection to the applicant dated 11 October 1994 (the “Respondent’s Notice of Decision”) disallowed the applicant’s objection in full as at 11 October 1994 (the “Respondent’s Objection Decision”).  The period between the date of the applicant’s objection (1 October 1999) and the date of the respondent’s Notice of Decision (11 October 1994) was approximately 5 years and 10 days.

7.      The applicant relied on the written submissions in the matter of Gregory John Dunn filed in application No WT 2004/445, and repeated the matters set out at B to I inclusive in those submissions, subject to certain amendments in relation to dates, document numbers and other details.

ISSUES

8.      The issues arising are:-

(a)Whether the applicant has failed to discharge the onus under sec 14ZZK(b) of the Taxation Administration Act 1953 (“the TA Act”) of proving its assessment for the income year ended 30 June 1994 is excessive, and consequentially, the Tribunal should affirm the respondent’s objection decision to disallow deductions of $150,000 claimed by the applicant in the year of income in respect of its acquisition of 5 Satcom Corporate Services Pty Ltd franchises (“the claimed deductions”). The respondent disallowed the claimed deductions pursuant to secs 51(1) and 82KZM of the Income Tax Assessment Act 1936 (“the Act”).The respondent also made a determination under sec 177F(1) of the Act that the applicant had obtained in connection with the Satcom Corporate Services Pty Ltd franchise arrangement a tax benefit within the meaning of sec 177C(1) and sec 177D of the Act in the form of the claimed deductions.

(b)Whether the Tribunal has jurisdiction under Part IVC of the TA Act to set aside the respondent’s objection decision for the reasons stated by the applicant at pars 11 to 15 of the written submissions and pars 5.7 and 5.8 of its statement of issues/statement of facts, issues and contentions, namely, that the respondent delayed in making his objection decision.

TRIBUNAL’S FINDINGS

9.      As the issues arising in this application are the same as those addressed by the Tribunal in the application of Gregory John Dunn WT2004/445, the Tribunal adopts and incorporates by reference its findings in that application.

DECISION

10.     The Tribunal affirms the decision under review.

I certify that the 10 preceding paragraphs are a true copy of the reasons for the decision herein of Mr A Sweidan, Senior Member

Signed:         (sgd) T Freeman.....
  Associate

Date/s of Hearing  11 June 2008
Date of Decision  11 June 2008
Counsel for the Applicant         Mr D Shaw
Solicitor for the Applicant          Shaw & Associates
Counsel for the Respondent     Ms L B Price
Solicitor for the Respondent     Government Solicitor