Industry Research and Development Board v Coal & Allied Operations Pty Ltd

Case [2000] FCA 979

FEDERAL COURT OF AUSTRALIA

Industry Research & Development Board v Coal & Allied Operations Pty Ltd [2000] FCA 979

INCOME TAX – tax concession for expenditure on industrial research and development activity – Industry Research and Development Board refusing to give a certificate under s 39L of the Industry Research and Development Act 1986 (Cth) that certain activities qualified as “research and development activities” as defined in subs 73B(1) of the Income Tax Assessment Act 1936 (Cth) – decision by Administrative Appeals Tribunal that the activities in dispute did satisfy the definition – appeal by the Board to Court under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) – meaning of expressions “involved”, “innovation” and “technical risk” in the definition.

WORDS AND PHRASES – “involved” – “innovation” – “technical risk”.

Income Tax Assessment Act 1936 (Cth) s 73B(1) (Research and Development Activity)
Industry Research and Development Act 1986 (Cth) s 39L

Industry Research and Development Board v Unisys Information Services Australia Ltd (1997) 77 FCR 552, applied
Minister for Immigration and Multicultural Affairs v Singh [2000] FCA 845, cited

INDUSTRY RESEARCH & DEVELOPMENT BOARD v COAL & ALLIED OPERATIONS PTY LIMITED

N 722 of 1999

LINDGREN J
24 JULY 2000
SYDNEY


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 722 OF 1999

ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL, CONSTITUTED BY A DEPUTY PRESIDENT

BETWEEN:

INDUSTRY RESEARCH AND DEVELOPMENT BOARD
APPLICANT

AND:

COAL AND ALLIED OPERATIONS PTY LIMITED
RESPONDENT

JUDGE:

LINDGREN J

DATE OF ORDER:

24 JULY 2000

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.        The application be dismissed.

2.        The applicant pay the respondent’s costs.

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


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 722 OF 1999

ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL, CONSTITUTED BY A DEPUTY PRESIDENT

BETWEEN:

INDUSTRY RESEARCH AND DEVELOPMENT BOARD
APPLICANT

AND:

COAL AND ALLIED OPERATIONS PTY LIMITED
RESPONDENT

JUDGE:

LINDGREN J

DATE:

24 JULY 2000

PLACE:

SYDNEY

REASONS FOR JUDGMENT

Introduction

  1. The applicant (“the IRDB”) appeals pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (“the AAT Act”) from a decision of the Administrative Appeals Tribunal (“AAT”) on an application successfully made to the AAT by the present respondent (“C&A”) under s 39T of the Industry Research & Development Act 1986 (Cth) (“IR&D Act”).  C&A’s application to the AAT had been for review of a decision of the IRDB through its delegate, the Tax Commission Committee (“TCC”), which the IRDB had, again through the TCC, reconsidered and confirmed.

  2. The object of the IR&D Act is (s 3):

    “ …to promote the development, and improve the efficiency and international competitiveness, of Australian industry by encouraging research and development activities.”

    The “encouragement” takes the form of the granting of income tax concessions in respect of expenditure on research and development activities.  C&A claimed that it carried on such activities.

  3. Section 39L of…

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AGLC
Industry Research and Development Board v Coal & Allied Operations Pty Ltd [2000] FCA 979
Case
[2000] FCA 979
Decision Date

CaseChat Overview and Summary

Industry Research and Development Board (IRDB) sought to appeal against a decision of the Administrative Appeals Tribunal (AAT) that had determined whether certain activities carried out by Coal & Allied Operations Pty Ltd (Coal & Allied) were qualifying research and development activities for the purposes of the Industry Research and Development Act 1986 (Cth). The Federal Court was tasked with reviewing the AAT’s decision to ensure that it complied with the statutory obligations under the Administrative Appeals Tribunal Act 1975 (Cth).

The primary legal issue the court needed to address was whether the AAT correctly determined that the activities of Construction, Dewatering, Blasting, and Mining were qualifying research and development activities. The court also had to consider if the AAT provided adequate reasons for its decision, as required by section 43(2B) of the AAT Act. The IRDB argued that the AAT’s reasons were insufficient and amounted to a superficial analysis of the evidence. The court examined whether the AAT’s findings on material questions of fact and its reference to the evidence met the statutory requirement.

The court found that the AAT was entitled to conclude that the Construction activity was systematic, investigative, innovative, and involved technical risks, making it a qualifying research and development activity. The court also determined that the Dewatering and Blasting and Mining activities were directly related to the Construction activity, and therefore, also qualifying research and development activities. In relation to the adequacy of reasons, the court held that the AAT’s reasons, while perhaps not reaching the standard of the consent directions in the Charles IFE case, were sufficient to meet the requirements of section 43(2B) of the AAT Act. The AAT had made findings on material questions of fact and referenced the evidence, thereby satisfying the statutory obligation.

The court dismissed the application, holding that the AAT's decision was correct and that the IRDB's arguments regarding the inadequacy of reasons were not persuasive. The court ordered that the applicant pay the respondent's costs.

Orders

Orders of the court

1. The application be dismissed.

2. The applicant pay the respondent’s costs.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

LINDGREN J (dissent)
Similarly, in relation to the Blasting and Mining activity, the AAT was entitled to find this activity was also directly related to the activity comprised in the Design phase or in the ongoing design involved in the Construction phase. The AAT found that blasting was carried out for purposes of testing the integrity of the wall and levee bank as constructed to ensure that mining of coal for sale and associated blasting could be safely carried on, and to develop an understanding of the effect of future mining on the soil‑bentonite mix. Again, although the timing of the blasting (not earlier than April 1996) might be one factor to be taken into account in determining the directness of the relationship between it and the core activities, I do not think that the suggested “lateness” of the blasting disentitled the AAT to arrive at the factual conclusion that it was directly related to the core activities mentioned.Amended ground of appeal (vi) – inadequacy of reasons for decision This amended ground of appeal is as follows:“(vi)The Tribunal erred in that it failed to make findings on material questions of fact and failed to give adequate reasons for its decision as it was required to do by s 43(2B) of the Administrative Appeals Tribunal Act 1975.” The IRDB submits that if it be thought that the AAT may have had the correct approach in mind, nonetheless it failed to comply with the obligation imposed on it by subs 43(2B) of the AAT. The IRDB submits:“The reasoning of the Tribunal in this matter was superficial, amounting to little more than a cut and paste approach to the evidence of the various witness (primarily their witness statements).” The IRDB seeks to derive support from the consent directions made by Heerey J in the Charles IFE case by which the matter was remitted to the AAT to be heard and decided in accordance with the directions. The IRDB submits that those directions would not have been satisfied by the AAT’s Reasons for Decision in the present case. I am not persuaded to think that the AAT’s Reasons for Decision in the present case necessarily fail to satisfy the requirements of subs 43(2B), merely because they may not, in some respects, have attained the standard represented by the consent directions made in the Charles IFE case. Section 43 of the AAT Act provides that the AAT must give reasons for its decision and subs (2B) of that section provides as follows:“(2B)Where the Tribunal gives in writing the reasons for its decision, those reasons shall include its findings on material questions of fact and a reference to the evidence or other material on which those findings were based.” In summary, the AAT made the following findings on ultimate statutory questions of fact that were material to its conclusions that Construction was a core activity and Dewatering and Blasting and Mining were supporting activities:(1)that the Construction activity was systematic and investigative;(2)that the Construction activity involved innovation;(3)that the Construction activity involved the eight technical risks identified by Mr Davidson;(4)that the Construction activity was carried on for the dominant purpose of: “acquir[ing] new knowledge by way of ascertaining whether the construction of a soil-bentonite cut-off wall with a connected overlapping levee bank in the context of a maximum hydraulic gradient exceeding 30 was a cost-effective way of isolating underground and ground waters to enable open-cut mining of alluvial coal to take place”and also for the purpose of “creating a new or improved process or method for isolating underground and ground water to enable open-cut mining of alluvial coal to take place, …”;(5)that the Dewatering and Blasting and Mining activities were carried on for a purpose directly related to the carrying on of the Construction activity.

Ratio Decidendi

Legal Principle Established

Established by:

Full text does not contain this section.