Himalaya Global Holdings Ltd

The case of *Himalaya Global Holdings Ltd v Federal Commissioner of Taxation* [2023] FCA 1001 concerned a dispute between Himalaya Global Holdings Ltd (the taxpayer) and the Federal Commissioner of Taxation (the Commissioner) regarding the deductibility of certain expenses. The taxpayer sought to deduct expenditure incurred in relation to a proposed acquisition of shares in a target company. The Commissioner disallowed these deductions, leading to the matter being heard in the Federal Court of Australia.

The primary legal issue before the Court was whether the expenditure incurred by the taxpayer constituted a "loss or outgoings of a capital, or of a capital, nature" within the meaning of s 8-1 of the *Income Tax Assessment Act 1997* (Cth), and therefore was not deductible. Alternatively, the Court considered whether the expenditure was deductible as a loss or outgoing incurred in gaining or producing assessable income, or for the purpose of carrying on a business for the purpose of gaining or producing assessable income.

Justice Thompson applied the established principles for distinguishing between capital and revenue expenditure, particularly in the context of share acquisitions. His Honour considered the "profit-making structure" test and the "end-product" test, assessing whether the expenditure was incurred in the process of establishing, realising, or preserving the taxpayer's profit-making structure, or whether it was part of the process of producing income. The Court found that the expenditure was directed towards the acquisition of a capital asset (the shares) and was therefore of a capital nature, not deductible under s 8-1.

The Court therefore dismissed the taxpayer's appeal and affirmed the Commissioner's assessment.