Industry Research and Development Board v Bridgestone Australia Ltd

The case of Industry Research and Development Board v Bridgestone Australia Ltd was an appeal against a decision of the Administrative Appeals Tribunal (AAT) which had found that Bridgestone Australia Ltd (BSAL) had not exploited the results of its research and development activities otherwise than on normal commercial terms. The appeal was brought by the Industry Research and Development Board (the Board), which had originally granted a certificate to BSAL allowing it to claim taxation concessions in relation to its research and development expenditure. The Board argued that the AAT had erred in its interpretation of section 39C of the Act, which required the Board to consider whether any contract or transaction relating to the exploitation of the results of the research would not have been entered into, or contained terms that would not have been contained or would have been different, if the contract or transaction had been entered into by persons dealing with each other at arm's length and from positions of comparable bargaining power. The Full Court of the Federal Court allowed the appeal and remitted the matter to the AAT for further hearing, holding that the AAT had erred in its interpretation of section 39C. The Full Court held that the correct test was whether any actual contract or transaction that was entered into relating to the exploitation of the results of the activities must have been of the kind to be expected of hypothetical persons dealing with each other at arm's length and from positions of similar or like or roughly equivalent bargaining power. The Full Court held that the AAT had not applied this test correctly and had instead considered whether the actual negotiations between BSAL and its parent company, Bridgestone Corporation (BSJ), could be regarded as at arm's length. The AAT was required to consider whether the terms of the Technical Assistance and Licence Agreement (TALA) between BSAL and BSJ would have been the same if the agreement had been entered into by persons dealing with each other at arm's length and from positions of comparable bargaining power. The Full Court held that the AAT had not considered this question and had instead focused on whether BSJ had in fact exercised bargaining power vis-à-vis BSAL. The Full Court held that this was not the correct approach and that the AAT was required to consider the hypothetical negotiations between arm's length parties. The case was remitted to the AAT for further hearing in light of the Full Court's decision. No orders were made by the Full Court as the case had been remitted to the AAT.