Fujitsu Australia Ltd and Commissioner of Taxation

[2001] AATA 711

DECISION AND REASONS FOR DECISION [2001] AATA 711

ADMINISTRATIVE APPEALS TRIBUNAL      )

)     Nos    NT2000/80 & NT2000/374

TAXATION  APPEALS  DIVISION       )       
           Re      FUJITSU AUSTRALIA LIMITED            
  Applicant

And    COMMISSIONER OF TAXATION          
  Respondent

DECISION

Tribunal       Senior Member M D Allen

Date13 August 2001

PlaceSydney

Decision      The decisions under review are set aside and this matter remitted to the Respondent with the direction that it consider the Applicant's claim pursuant to a letter dated 21 August 1996.                
  (Sgd)  M.D. ALLEN

.............................

Senior Member
CATCHWORDS
TAXATION  -  Sales Tax.  Claim for credit entitlements.  Whether prior "stop the clock" letter had been dealt with by Respondent.  Nature of a decision.

Sales Tax Assessment Act 1992 - s51

Taxation Ruling SST Ruling No7

Australian Broadcasting Tribunal v Bond 170 CLR 321

REASONS FOR DECISION

Senior Member M D Allen

1. By applications lodged with the Tribunal on 17 February 2000 and 14 August 2000 the Applicant sought review of decisions by the Respondent rejecting claims for a refund of overpaid sales tax in respect of Tax Advantaged Computer Programs (TAPCs) in mainframe computers sold by the Applicant in the period 1 July 1993 to 9 May 1995.

2. Section 51 of the Sales Tax Assessment 1992 reads:

   "(1)    [Entitlement to Credit]  Tables 3 and 3A set out the situations in which a claimant is entitled to a credit.

   (2)     [Previous credit entitlement]  A claimant is not entitled to a credit for an amount of tax for which a credit entitlement has previously arisen (whether for the claimant or another person).

   (3)     [Claim to be lodged within 3 years]  A claimant is not entitled to a credit unless the claim for the credit is lodged within 3 years after the time when the credit arises.
   (3A)  …

   (4)     [Form and manner of claim]  A claim for a credit must be made in the form and manner approved by the Commissioner, and must be accompanied by such supporting evidence as the Commissioner requires."

1. The actual objection decisions for which review was sought were dated 22 December 1999 and 8 August 2000 and referred to claims for credits dated 2 May 1997.

2. On 20 July 2001 the matter came on before me to consider, as a preliminary point, whether a prior claim for refund of sales tax lodged by the Applicant with the Respondent on 21 August 1996 was still extant, and if these matters should be remitted to the Respondent in order that a decision might be made with respect to that claim. 

3. At the outset of the hearing, the Tribunal took in the documents prepared for the Tribunal pursuant to section 37 of the Administrative Appeals TribunalAct 1975, numbered T1 – T27 for matter number NT2000/80 and T1 – T7 for matter number N2000/374. The Tribunal's reference to Tribunal documents in this decision relates to matter number NT2000/80 unless stated otherwise.

4. Taxation Ruling SST Ruling No 7 reads inter alia:

   "6.8As stated at paragraph 4.7, a claimant is not entitled to a credit unless the claim is lodged within three years after the time when the credit arose.  A credit claim must be made in the form and manner approved by the ATO, and accompanied by any evidence required by the Commissioner.

   6.9It is not always possible for claimants to work out the precise amount of a credit claim at the time they discover that tax has been overpaid.  In these circumstances, we accept that a claim can be made by a letter, rather than using a completed refund form.  A credit claim can be made in this way, without specifying an amount of sales tax involved, provided that the letter making out the claim sufficiently identifies the basis of the claimant's entitlement to a credit and the amount of the claim is supplied within a reasonable time.  A letter of this type is often referred to as a 'stopping the clock' letter.

   6.10A 'stopping the clock' letter should include the following details:

   ·the identity of the claimant (tax advisers need written authority from the claimant before being able to act on their behalf);

   ·a summary of the legal entitlement (or basis) for the credit claim in sufficient detail to allow the ATO to determine whether or not an entitlement to a credit exists in principle;

   ·the period of credit entitlement sought; and

   ·a date when the balance of the information will be supplied.

   6.11A letter claiming that tax has been overpaid, but not adequately describing the circumstances of the claim or the goods to which it relates will not usually be sufficient to constitute a credit claim in the approved form and manner.  If a claimant's letter cannot be regarded as setting the period of credit entitlement, the claimant will be notified of the reasons for that conclusion and told what further details or information must be supplied if a subsequent refund claim is to be lodged.  Claimants who provide sufficient details and seek a period of up to three months from the date of their 'stopping the clock' letter to calculate the amount of the credit claim, can ordinarily expect to have their request approved in writing within fourteen days."

I was informed from the bar table that although the said ruling was issued on 8 October 1997, it represents the practice in the Australian Tax Office (ATO) at the time of the Applicant's original claim.

1. By letter dated 21 August 1996 the Applicant lodged a sales tax credit claim with the Respondent.  That letter read inter alia (T3):

   "Fujitsu herein claims refunds of sales tax overpaid from 1 January 1993 to date including any sales tax overpaid on tax advantaged computer programs (TACPs) embodied on taxable goods sold or applied to own use.
   Refunds are claimed in accordance with section 51(3) of the Sales Tax Assessment Act 1992 as well as section 45 and credit ground CR1 of that Act.
   Reliance is also placed on your recent Sales Tax Determination STD 96/5 and the currently understood policy of extending the time to claim refunds until issues in the above STD are clarified.  I understand Mr Rob Hughes of your Hurstville office is aware of this recent concession to industry to extend the normal time limit.
   Once Fujitsu has confirmed and quantified any refund claim, more detailed information will be available.  This will take into account any safe harbours or valuation principles yet to be resolved.
   I respectfully request this extension of time in view of recent developments in relation to the interpretation of STD 96/5 particularly on valuation."

1. On 16 September 1996 the Respondent wrote to the Applicant stating inter alia (T4):

   "Reference is made to your letter dated 21 August 1996 regarding a refund of sales tax …
   I wish to confirm that for the purposes of section 51(3) of the Sales Tax Assessment Act 1992 the above dated letter acts to stop the clock and sets the three year period for the claiming of a sales tax refund. In this instance, it is confirmed that the three year period would commence 1 July 1993.
   For this refund claim to progress, full details of the refund claim lodged on an appropriate Refund Application Form should be provided to this Office within three months of the date of your letter. If you wish to discuss the matter further, do not hesitate to contact the officer nominated above."

The officer who wrote that letter was a Mr Magee of the ATO's Chatswood Office.

1. Whereas the initial claim had been made by the Applicant itself, the Applicant then engaged Messrs Price Waterhouse (as they were then called) to have the carriage of its claim with the Respondent.  Correspondence took place between Messrs Price Waterhouse and the Respondent and various extensions of time were granted by the Respondent's officers for the Applicant to provide particulars of its claim.

2. On 8 April 1997 Messrs Price Waterhouse requested a further extension of time but that was denied by the Respondent in a letter dated 10 April 1997.  That letter stated inter alia (T7):

   "Your request for further extension of time has been considered however, it will be subject to completion of a refund form submitted to this office by close of business 10 April 1997 for the above two business units.  Subject to receipt of this refund form by the agreed time, an extension of time to lodge a refund form for the remainder of the business units by 2 May 1997 is now granted."

By this time the Applicant and their accountants had been dealing with a Mr Robinson of the ATO.  On 15 April 1997 Mr Robinson again wrote to Messrs Price Waterhouse stating (Exhibit DG-1 p39):

"I refer to your letter dated 8 April 1997 on behalf of Fujitsu Australia Limited …
… You are advised that the office guidelines do not allow for valuation of TACP in goods to be established by an independent engineer alone.  You are therefore advised that this approach is not accepted.
When Fujitsu submits a refund claim, a summary of the basis of the claim and details to explain the amount of the refund claim is requested to be attached.  As advised in our letter 10 April 1997, a refund claim for all outstanding TACP values is to be submitted to this office by 2 May 1997 for a commencement date of 1 July 1993 to be effective."

1. A further letter from Messrs Price Waterhouse dated 2 May 1997 read (T8 p40):

   "…
   The enclosed claim is in respect of the sales tax overpaid for high value spare parts and mainframe products.  The amount of the refund claim is $803,332.81.  The period covered is from 1 July 1993 to 9 May 1995 in respect of mainframes and from 1 July 1993 to 31 March 1995 in respect of high value spares.  Supporting schedules detailing the composition of the refund claim are attached to the claim form."

1. By letter dated 9 May 1997 Mr Robinson made a request for further details relating to the claims made on 10 April 1997 and 2 May 1997.

2. A meeting was held between Mr Robinson and representatives of Messrs Price Waterhouse on 23 June 1997.  Notes made by Mr Robinson of the meeting read inter alia (Exhibit DG-1 p 99):

   "The only matter mentioned, which may have been the main subject of the meeting, was by GP stating that he thought the safe harbour value of 10% was understated.  They would obtain independent advice on the value to support a further claim.  I said that this would not be sufficient and referred to costings, R&D, production runs and break even points etc for each TACP ie, they would need to follow our guidelines for us to accept a higher value.
   …
   GP said that they were aware of others, not necessarily in the same industry, claiming a far greater TACP value than 10%.  He claimed that this would disadvantage them to be understood that some of these tax payers had approval from, the ATO for the high ACP (sic) value.  I suggested that he would need to provide information on these competitors for any action to be taken and in any event, the higher value may be justified for those people."

1. On 1 August 1997 Messrs Price Waterhouse wrote to the Respondent answering questions asked by the Respondent in its letter of 9 May 1997, then on 16 September 1997 a further meeting was held between officers of the ATO and representatives of Messrs Price Waterhouse.  This meeting was then followed by a letter authored by Mr Robinson to Messrs Price Waterhouse which reads inter alia (Exhibit DG-1 p124):

   "I refer to your refund claims on 10 April 1997 and 2 May 1997, subsequent information under cover of your 1 August 1997 letter which partially complied with our request dated 9 May 1997 as well as a meeting on 16 September 1997 …
   …
   Due to the number of errors, deficiencies and lack of explanations at this time, the refunds cannot be processed."

Following that letter, various telephone conversations were held between Mr Robinson and a Mr M Ford of Messrs Price Waterhouse.

1. Mr Robinson on 17 June 1998 (T13) wrote to Messrs Price Waterhouse stating inter alia:

   "As the information sought has not been furnished it can only be concluded that both refund claim amounts cannot be substantiated as correct.  Therefore, should you choose to proceed with refund claims in relation to TACP, you are requested to provide fresh refund applications which can be substantiated."

2. In or about November 1998 the Applicant engaged the services of Mr Gilmour, a tariff consultant.  Mr Gilmour had had prior dealings with the ATO regarding TACPs for mainframe computers sold by Amdahl Pty Limited.  Fujitsu Australia Limited held a 50% interest in Amdahl Pty Limited and also sold Amdahl mainframe computers.  I gather from the statement of Mr Gilmour (Exhibit A3) that the expertise he had developed in acting for Amdahl Pty Limited in its dealings with the Respondent would be applicable to his acting on behalf of the present Applicant.

3. According to Mr Gilmour's statement he informed Mr Robinson that there was in existence, in relation to the claims by the Applicant, a "stop the clock" letter.  Mr Robinson told Mr Gilmour that he was unaware of any such letter.  On 4 March 1999 Mr Robinson wrote to Mr Gilmour stating inter alia (T16 p86):

   "I have also been informed that a 'stop the clock' letter in respect of a refund has been issued by the ATO in respect of this matter. I am not aware of such a letter issuing from this office and a copy is again requested from you."

1. I note that the 'stop the clock' letter dated 16 September 1996 had in fact been issued by Mr Magee of the Chatswood office of the Respondent.  That is to say the same office from which Mr Robinson was operating.

2. The question of dealings between Amdahl Pty Limited and the ATO was taken up in a letter by Messrs Price Waterhouse to Mr Robinson dated 9 April 1999.  That letter said in part (T17 p87-88):

   "We have become aware that at the time of your letter, a sales tax private ruling was in place in respect of the valuation of TACP in certain mainframe computer equipment which was sold by Amdahl Australia.  We further understand that you were aware of the  existence of the private ruling in respect of Amdahl equipment.  …
   In light of the information that we have now become aware of, it is apparent that there was in existence at the time of your letter information which accurately quantified and substantiated the TACP refund claim in respect of Amdahl mainframe equipment sold by FAL to Telstra.  …"

The reply by Mr Robinson to Messrs Price Waterhouse did not discuss the matters raised in the letter quoted above.  Mr Robinson's letter dated 22 April 1999 simply reads (Exhibit DG-1 p175):

"We have been advised by the General Manager Finance of Fujitsu that a different consultant to yourself would be representing them from December 1998 in respect of TACP values in relation to goods sold by Fujitsu.  We will be writing to Fujitsu to clarify this matter before commenting further on your letter."

1. Mr Robinson did, however, in a facsimile message sent to Mr Gilmour and dated 11 May 1999 state (T18):

   "… You will see that there is no copy of an ATO 'stop the clock' letter attached which is current and covers TACP values in mainframes sold by FAL.
   I also mentioned an old refund claim in respect of TACP for the period 1 July 1993 to 9 May 1995.  A transaction sample testing of this refund found that the claimed amounts could not be substantiated.  You should note that the period of this old refund application is in excess of 4 years."

1. On 13 May 1999 Mr Gilmour again wrote to Mr Robinson stating inter alia (T19):

   "I am aware of correspondence to Fujitsu 'stopping the clock' from 1st July 1993, and subsequent extensions given to Price Waterhouse as it was then called, up until at least the 2nd of May 1997.
   As pointed out by Margherita Antonelli from PWC, there was an Amdahl private ruling dated 18th December 1996 in force for TACP's on certain mainframes marketed by Fujitsu, and in fact there was a subsequent ruling issued on 30th June 1997.  …"

2. That particular letter brought a response from Mr Robinson dated 18 May 1999 in the course of which he wrote (Exhibit DG-1 p185):

   "I further note that your refund application dated 2 May 1997 was not formerly disallowed by our letter dated 17 June 1998.  …"

1. As a result of statements made in the letter of 17 June 1998 referred to above, the Applicant in fact made fresh applications to the Respondent for credit entitlements and those are the matters currently before the Tribunal, however, the contention of the Applicant is that the original claim made pursuant to letter dated 21 August 1996 is still extant. 

2. The Respondent countered the Applicant's claim by reference to subs51(4) which requires that a claim for a credit be accompanied by "such supporting evidence as the Commissioner requires". In this matter the Commissioner, by a series of letters starting with its letter of 16 September 1996, extended the time in which to lodge those details.

3. By letter dated 8 April 1997 Messrs Price Waterhouse, on behalf of the Applicant, stated the basis of its claims, namely by reliance upon the "safe harbours" as set out in Sales Tax Determination STD 96/5.  The Respondent's reply to that claim is set out in the letter of 15 April 1997 quoted above.

4. On 2 May 1997 Messrs Price Waterhouse submitted a claim for the sum of $803,332.81 covering the period 1 July 1993 to 31 March 1995 together with supporting schedules.

5. The claim as crystallised by the letter of 2 May 1997 was investigated by the Respondent and on 9 May 1997 the Respondent requested further and better details from Messrs Price Waterhouse regarding the claim.  The letter concluded by setting a definite time limit in which the demand for further and better particulars was to be answered, namely 11 July 1997.  The specific wording of this time constraint is however important, namely (Exhibit DG-1 p93):

   "The above information is requested to be provided to this office by 11 July 1997 for your refund claim to be further considered."    (Tribunal's emphasis)

1. The submission by the Respondent is that once the claim for a credit had crystallised in a sum certain, namely $803,332.81 as stated in the letter of 2 May 1997, it was no longer possible for the Applicant to amend the amount of the claim or the basis upon which it was based.

2. As stated above, on 17 June 1998 Mr Robinson of the ATO wrote to the Applicant, care of Messrs Price Waterhouse, stating (T13):

   "I refer to our letter dated 13 May 1998 which provided a further 28 days for you to provide the information previously requested …
   As the information sought has not been furnished it can only be concluded that both refund claim amounts cannot be substantiated as correct.  Therefore, should you choose to proceed with refund claims in relation to TACP, you are requested to provide fresh refund applications which can be substantiated."

1. Although in that letter Mr Robinson invites the Applicant to furnish new claims, no decision was made with respect to the claims initiated by the "stop the clock" letter of 21 August 1996.  Even if the claim initiated by that letter was said to be "crystallised" by the further letter of 2 May 1997, as Mr Robinson in his letter of 18 May 1999 to Mr Gilmour points out, the refund application "was not formerly disallowed by our letter dated 17 June 1998".

2. Furthermore, even if the contention that the letter of 2 May 1997 "crystallised" (to adopt the phrase used by the Respondent's counsel) the claim initiated by the "stop the clock" letter, no "decision" was made with respect to the said claim.

3. The letter of 17 June 1998, where it states that "refund claim amounts cannot be substantiated as correct", does not make a decision, much less does it go on to state in unambiguous terms that the claim is rejected.  In Australian Broadcasting Tribunal v Bond 170 CLR 321 Mason CJ and Brennan and Deane JJ required that a reviewable decision entail a decision which is final or operative and determinative at least in a practical sense of the issue of fact falling for consideration (see pp337, 365, 369).

4. Any "decision" by the Respondent pursuant to s51 of the Sales Tax Assessment Act 1992 is subject to an objection by the claimant and then may be reviewed by this Tribunal. It cannot be said that the letter of 17 June 1998 entails a final decision. It simply states that the claims cannot be substantiated as correct.

1. The practical effect of stating that the refund claims could not be substantiated and inviting new claims was that the Applicant did submit new claims which claims, being the claims subject to review, were rejected as being out of time.  I am at a loss to understand why the Applicant was invited to submit new claims when it would (or should) have been apparent to the Respondent that they would be out of time.  There is no power in the legislation to waive the mandatory time limits so the Applicant was being invited to engage in a pointless exercise, unless the invitation to submit fresh applications is read as an invitation to start again with fully substantiated material in support of the claim initiated on 21 August 1996.

2. Later correspondence and notes of conversations, which have been referred to above and are contained in more detail in the exhibit to Mr Gilmour's statement, evidence that at the time he wrote the letter of 17 June 1998 Mr Robinson of the ATO did not know of the existence of the "stop the clock" letter of 21 August 1996.  Therefore to whatever else the letter of 17 June 1998 intends to make reference, it did not address or make any decision upon the claims for credit entitlements made in the said "stop the clock" letter.

3. As no decision has been made with respect to the claims raised by the accepted "stop the clock" letter of 21 August 1996, the matter must be referred back to the Respondent in order that the matter be dealt with.  It was agreed at the hearing of this matter that if I decided that the claim of 21 August 1996 was still extant, then the decision of the Tribunal should read that the decisions under review should be set aside and this matter remitted to the Respondent in order that it might consider the claims raised by the letter of 21 August 1996 and that is the decision which I now make.

I certify that the 36 preceding paragraphs are a true copy of the reasons for the decision herein of:

Senior Member M D Allen

Signed:         .....................................................................................
  Associate

Date of Hearing  20 July 2001
Date of Decision  13 August 2001 
Counsel for the Applicant        Mr Brendan Sullivan S.C.
Solicitor for the Applicant         Baker and McKenzie
Counsel for the Respondent    Mr S. Gageler S.C. and Mr S. McMillen
Solicitor for the Respondent    Australian Government Solicitor