Pharm-A-Care Laboratories Pty Limited v Chief Commissioner of State Revenue

[2010] NSWADT 54

CITATION:	Pharm-A-Care Laboratories Pty Limited v Chief Commissioner of State Revenue [2010] NSWADT 54
DIVISION:	Revenue Division
PARTIES:	APPLICANT Pharm-A-Care Laboratories Pty Limited RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	086088
HEARING DATES:	1 February 2010
SUBMISSIONS CLOSED:	1 February 2010
DATE OF DECISION:	22 February 2010
BEFORE:	Verick A - Judicial Member
CATCHWORDS:	Duty assessment - Goodwill
LEGISLATION CITED:	Duties Act 1997 Administrative Decisions Tribunal Act 1997 Taxation Administration Act 1996 Therapeutic Goods Act 1989 (Cth)
CASES CITED:	Collis v Federal Commissioner of Taxation of the Commonwealth of Australia (unreported 21 August 1996 – BC9603823) Granby Pty Ltd v Federal Commissioner of Taxation (1995) 129 ALR 503 Box v Federal Commissioner of Taxation (1952) 86 CLR 387 FCT v Murry (1998) 193 CLR 605 Inland Revenue Commission v Wesleyan & General Assurance Society [1948] 1 ALL ER 555 Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184 FCT v Hoffnung & Co Ltd (1928) 42 CLR 39 F J Bloeman Pty Ltd v FCT (1981) 11 ATR 914 FCT v Stokes (1997) 34 ATR 478
REPRESENTATION:	APPLICANT DD Knoll, counsel RESPONDENT AH Rider, counsel
ORDERS:	The reviewable decision is set aside and the matter remitted to the Respondent for reconsideration as directed.

REASONS FOR DECISION

1 The Applicant seeks a review of the Respondent’s objection decision to disallow an objection against an “estimate” assessment of stamp duty made on 12 July 2004. The assessment was made in respect of dutiable transactions effected by an Asset Sale Agreement executed on 16 September 2002 between Bioglan Limited, Biovital Pty Limited and Natural Biocare Pty Limited (“the Vendors”) and the Applicant and Natural Bio Pty Limited (“the Purchasers”).

2 The sale by the Vendors to the Purchasers was of certain business assets in relation to the Vendors’ Bioglan, Procure and Pretorius health care products.

3 The principal issue in these proceedings concerns the dutiable value under the Duties Act 1997 (“the Act”) of the goodwill component of the dutiable transactions effected by the Asset Sale Agreement. In making the “estimate” assessment the Respondent disregarded the individual prices stated in the Asset Sale Agreement and apportioned the global price paid differently to the apportionment agreed upon by the Vendors and the Applicant.

Factual Background

4 The Tribunal had before it the documents (marked as Exhibit “R1”) lodged pursuant to s.58 of the Administrative Decisions Tribunal Act 1997. It received written submissions by both the Applicant and the Respondent. The Tribunal also accepted the tender of exhibits as follows:

Exhibit “A1” - Affidavit of Michael Halter

Exhibit “A2” - Affidavit of Charles Parisi

Exhibit “A4” – Affidavit of Geoffrey Allan Hilton

Exhibit “R2” - Respondent’s Evidence

Exhibit “R3” – Respondent’s Supplementary Evidence

Exhibit “R4” – Affidavit of Gerardus Henricus Van Emmrick

5 Mr Halter, Group Operations Manager of the Applicant also gave oral evidence and was cross-examined by counsel for the Respondent.

6 Sometime in early 2002, the Applicant became aware through a broker that the Vendors were interested in selling some of their business assets. After negotiations that went on for some months, the parties agreed on 26 June 2002 to a “Heads of Agreement”. The agreement was prepared by the Vendors’ solicitors. Under this agreement, the Vendors agreed to sell to the Applicant the following business assets:

Trade marks for Bioglan, Procure and Pretorius products;

Therapeutic Goods Administration registrations or listings; and

Saleable stock of those products (whether finished goods, bulk goods, raw materials or packaging materials) including point of sale advertising and promotional material.

7 Under the Heads of Agreement, the purchase price for the assets was a global sum of $9,000,000.

8 On 30 June 2002 the annual report of Bioglan Ltd valued the company’s “Trademarks, product material and documentation (Therapeutic Goods Act)” at cost after amortisation as $4,790,428. On the same date the annual report of Natural Biocare Pty Limited valued “Registrations and Trademarks” at Directors valuation after amortisation as $3,097,281.

9 On 18 July 2002, Mr Hilton, solicitor in the firm of Henry Davis York, solicitors for the Vendors, sent the first draft of the Asset Sale Agreement by email to Dr H Klieber, the Chief Executive of the Vendors. In the draft, no sale price was stated for each of the various assets that were to be sold and set out in clause 4.

10 On 22 July 2002, Dr Klieber emailed the draft Asset Sale Agreement to Mr Hilton with some deletions of assets from sale and with a sale price for each of the assets to be sold under the agreement.

11 On 30 July 2002, Mr Hilton received further instructions from Dr Klieber and sent him a further draft Asset Sale Agreement with sale prices for each of the assets to be sold.

12 On or about 29 August 2002, Mr Hilton sent the then draft of the Asset Sale Agreement to the Applicant’s solicitors, Wood Marshall Williams.

13 Between August and September 2002, the parties carried out negotiations as to the terms of the Asset Sale Agreement.

14 On 16 September 2002, the Asset Sale Agreement was executed by the parties.

15 On or about 20 September 2002, the Asset Sale Agreement was lodged with the Respondent for assessment and payment of duty.

16 On or about 26 September 2002, an officer of the Respondent advised Hazlett & Co (the registration clerks appointed by Wood Marshall Williams, the Applicant’s solicitors) that the Heads of Agreement and Asset Sale Agreement would be assessed in due course and asked that the Agreements be stamped on an interim basis with a duty of $10. That was agreed to and the Agreements were accordingly stamped with the interim stamp duty of $10 each.

17 On or about 8 September 2003, the Respondent wrote to Wood Marshall Williams informing them that the Applicant’s liability was now calculated to be $41,683.50. This letter was treated as an assessment by both the Applicant and the Respondent.

18 In a letter dated 12 July 2004, the Respondent informed Wood Marshall Williams that the assessment made on 8 September 2003 was only in respect of the trademarks and business records which were treated as dutiable property for purposes of Chapter 2 of the Duties Act 1997. The basis of the 8 September 2003 assessment was explained by the Respondent to the Applicant’s solicitors as follows:

“These items of dutiable property have a GST-inclusive dutiable value (as apportioned under sec. 28) of $817,344 and $204,334.39 respectively: an aggregate dutiable value (for these items of dutiable property alone) of $1,021,700 (to the next $100). We agree none of the stock or the contracts are dutiable property.”

The Respondent’s officer went on to state in that letter -

“That leaves the product registrations under the Therapeutic Goods Act 1989 (C’Wth) (“the TGA”) and the goodwill of the business purchased by your client.

…

We note your advice that the apportionment of the purchase price was made by the vendors (and for their purpose) without any input from your clients. Thus, whilst the overall (GST-inclusive) purchase-price would have been negotiated on an arm’s length basis, the allocation of this price among all the assets being sold was not the result of an arm’s length bargaining between the parties. (As mentioned in my previous letter, even if the apportionment had been worked out between the parties the resultant apportionment would not necessarily have been conclusive against the Chief Commissioner – see Zealandia Soap and Candle Company v Minister of Stamp Duties [1922] NZLR 1117 at 1132). Moreover, we are still not persuaded that ascribing a value of $5.6 million to the product registrations and only $2 to the goodwill of the vendors’ businesses was realistic or appropriate. In my previous letter, I mentioned that the ascription of only a nominal value of $2 to the goodwill was inconsistent with the fact that the overall purchase price of $9 million was based on an aggregate gross annual turnover for the vendors’ business of over $12 million …

We are mindful, however, of your client’s financial position (as referred to in your letter of 19 September 2003). As indicated in my letter of 8 September 2003, we are prepared (with your client’s consent) to issue a compromise assessment of duty under sec. 12(1) of the Taxation Administration Act 1996 which would not involve your client in the expense of obtaining an accountant’s valuation of the goodwill. The basis of this compromise assessment would be to treat the value of the product registrations (as distinct from the goods themselves and the product goodwill they have generated) as being equivalent to what it cost the vendors to effect these registrations (a cost your client will not have to replicate), with the balance of the $5,600,002 apportioned to the goodwill and registrations being attributed to the goodwill. In their letter (to your firm) of 3 February 2004 the solicitors for the vendors say that the cost of product registrations with the Therapeutic Goods Administration has increased from $75 in 1989 to $420 at the present time (although they are unable to provide details of the dates of registration or the amounts paid for registration of the subject products prior to the sale to your client). According to Schedule 3 to the Asset Sale Agreement, there are 208 separate product registrations. If we ascribe a value of $420 to each of these registrations they have an aggregate value of $87,360. The overall value of goodwill would then be ($5,600,002 - $87,360) = $5,512,642. The NSW portion of this goodwill (at 51.6%) would then be $2,844,523. The GST on this amount would be $284,452.30, making a total GST-inclusive dutiable value for the goodwill of $3,128,975.30 (say, $3,128,975). Thus, the total GST-inclusive dutiable value of the dutiable property (upon which the duty would be assessed) would be $817,344 (trademarks) + $204,334 (business records) + $3,128,975 (goodwill) = $4,150,653: duty of $213,478.50 (with no duty being assessed on the stock, contracts or registrations).

Please indicate whether your client consents to an assessment of duty on this basis; if so, we will then issue a formal notice of assessment. (Please note that the compromise assessment would be non-reviewable: Taxation Administration Act 1996; s.86(2)(a)).”

19 No reply was received by the Respondent to his letter dated 12 July 2004 and the Respondent sent reminders for a response on 31 August 2004 and 18 October 2004.

20 On 4 April 2005, the Respondent sent to the Applicant following letter:

“ Asset Sale Agreement – Purchase from Bioglan Limited and ors.

The above Agreement which was lodged in this office on your behalf by Wood Marshall Williams, Lawyers, is held pending payment of the balance of stamp duty. Recent correspondence to that firm has received no reply and as the person/s primarily liable for the duty this letter is now directed to you to have this long outstanding matter finalised.

On the 12 July 2004 a compromise assessment issued under the Taxation Administration Act 1996, however as no reply has been received it is proposed to issue a formal assessment.

Taking into account several payments paid on account, a balance of duty of $192,580.68 remains outstanding. It should be noted that, in addition, interest also has accrued in view of late payment.

Failing a reply within 21 days the matter will be referred to the Compliance Division of this office to commence recovery action.”

21 On 8 April 2005, Wood Marshall Williams responded to the Respondent’s letter and informed the Respondent, inter alia, that “Our clients dispute the amount claimed on the basis of the submissions previously made”.

22 On 14 September 2005 Wood Marshall Williams wrote to the Respondent and requested “details as to the calculation of the alleged outstanding stamp duty of $262,421.50” and on 26 September 2005, the Respondent provided some short details of how that amount was calculated.

23 On 6 October 2005, a facsimile message was sent by Wood Marshall Williams to the Respondent informing him that they were “currently in the process of finalising advice from Counsel in relation to an Application before the Administrative Decisions Tribunal in relation to the assessment of stamp duty”. A further letter was sent by Wood Marshall William on 28 October 2005 stating that the Applicant “does not admit nor does he (sic) agree that the assessed duty was correct and within the provisions of the Duties Act”.

24 On 7 November 2005, the Respondent sent a letter to Wood Marshall Williams stating as follows:

“Your comments are noted in the third paragraph of your letter of 28 October 2005 and as this office records indicate only $21,197.82 has been received it is requested that you furnish evidence of the balance of payments referred to in your letter.

As previously stated, stamp duty has been assessed at $213,778.50 and full details as to the basis and reason for the estimate assessment were detailed fully in my letter of 12 July 2004. The interest payable to date on this amount is stated in our letter of 27 September 2005.

Please note, for avoidance of doubt, that this now is an estimate assessment under section 11(2) of the Taxation Administration Act 1996 No 97.”

25 There was some further correspondence between Wood Marshall Williams and the Respondent as to the amounts of duty paid by the Applicant.

26 On 31 January 2006, Wood Marshall Williams wrote to the Respondent and confirmed that the Applicant disputed “the payment of stamp duty which seems to have been undertaken under cover of letter dated 12th July 2004”.

27 The Respondent treated the letter dated 31 January 2006 as an objection and on 26 September 2006 disallowed the objection.

The Applicant’s Case

28 The Applicant’s case was put by Mr Knoll on the basis of various contentions.

29 The first contention was that the Respondent does not have statutory power to apportion the price paid upon the sale of business assets differently to the apportionment agreed on by the Vendors and the Purchasers. It was submitted that this contention arises under section 27 of the Duties Act 1997 which did not give the Respondent any power to make an apportionment.

30 The second contention was that “by reason of the applicant and the vendors being arms length parties who negotiated their transaction on an arms length basis, there is no occasion for the respondent to apportion the price paid upon the sale of business assets by the vendors to the purchasers differently to the apportionment agreed on by the vendors and the purchasers”. Mr Knoll referred the Tribunal to the decisions of Collis v Commissioner of Taxation (unreported 21 August 1996 – BC9603823) and Gansby Pty Ltd v Federal Commissioner of Taxation (1995) 129 ALR 503, to distinguish the facts of this matter. It was submitted that in both those cases the parties were not dealing with each other at arm’s length because there had been no negotiations between the parties. And that in the present matter -

“The Halter Affidavit is evidence relied upon by the Applicant in support of two propositions that take the present matter well away from the critical facts in Collis and Granby, First, the purchasers acted entirely separately and entirely independently of the vendors in forming the bargain, and there was no submission by the applicant to the exercise of the will of the vendors. Secondly, in the present case, substantial and sufficient dealing occurred. For each of those reasons, there is no occasion for the respondent to apportion the price paid upon the sale of business assets by the vendors to the purchasers differently to the apportionment agreed on by the vendors and purchasers.”

31 The third contention was that the Respondent has statutory power under s.305 of the Act to require or obtain a valuation of property, that power is only exercisable in relation to dutiable property and only for the purpose of determining whether a person is liable for duty or determining a person’s liability to duty. And it was further submitted that as the respondent did not exercise his right under s. 305 of the Act to require or obtain a valuation of the goodwill, the recorded value of the goodwill is not an issue in these proceedings.

32 The fourth contention was that in the circumstances that have happened, there is no occasion to require an independent valuation of the goodwill sold by the vendors to the Applicant. Reliance was placed on the decisions of the High Court in Box v Federal Commissioner of Taxation (1952) 86 CLR 387 and FCT v Murry (1998) 193 CLR 605 to submit that the nominal value was allocated to goodwill because the business assets did not have any goodwill independent of the business which was not sold by the vendors.

33 The final contention was in relation to the interest imposed by the Respondent on the outstanding duty. It was submitted that there was an agreement with the Applicant that the respondent will either remit or waive the interest when the agreements were stamped with a nominal duty.

The Respondent’s case

34 Mr Rider, counsel for the Respondent, first made a preliminary submission that “the label that the parties gave the Agreement (i.e. an ‘Asset Sale Agreement’, as opposed to a ‘Business Sale Agreement’) did not determine the substance of the transaction between the parties as a matter of fact or law. (See Inland Revenue Commission v Wesleyan & General Assurance Society [1948] 1 ALL ER 55 at 556)”

35 Further, as a preliminary issue, counsel brought to the attention of the Tribunal the observations made by the High Court in Murry, that the identifiable assets of a business had to be valued with precision and that the book value of business assets may be under or over valued and may require valuations. It was submitted that in this case, “the Applicant has failed to adduce any evidence that the identified assets of the Business, including the Goodwill, Trademarks and Registrations, were valued with precision, or even valued at all” and that the Applicant has failed to prove the real value of the Goodwill in accordance with the principles in Murry.

36 The third preliminary issue that counsel raised was “that the Applicant failed to discharge its onus of proof that the Assessment was excessive because it failed to adduce any corroborative evidence:

-that the Purchasers negotiated the Apportionment with the Vendors;

-that its due diligence investigations supported the Apportionment;

-that the book values of the Business Assets, particularly the Trademarks and Registrations, reflected their historical cost and the Apportionment; and

-that the dutiable value of the goodwill was other than $3,128,975 as set out in the Assessment.”

37 Counsel then referred the Tribunal to some general principles relating to a dutiable transaction as follows:

“133. As a general principle, the Act imposes duty on the dutiable value of dutiable property the subject of dutiable transactions. Relevantly, s.21(1) of the Act provides that ‘dutiable value’ of dutiable property is the greater of:

(a) the consideration (if any) for the dutiable transaction (being the amount of a monetary consideration or the value of a non-monetary consideration); and

(b) the encumbered value of the dutiable property.

134. Under s.23(1), the ‘unencumbered value’ of dutiable property is the value of the property determined without regard to any encumbrance to which the property is subject.

135. The effect of the above is that where dutiable property (say goodwill) is transferred for a consideration of (say) $1,00, but its unencumbered value is $1 million, duty is imposed on $1 million, being the greater of the consideration and the unencumbered value of the dutiable property the subject of the dutiable transaction.”

38 Finally, Mr Rider responded to the various contentions made by Mr Knoll on behalf of the Applicant.

39 In relation to the first contention, Mr Rider conceded that s.27(1) is only relevant “where an undivided lump sum is paid for dutiable and non-dutiable property” and was not applicable in this matter.

40 Mr Rider’s response to the second contention was that “the Respondent does not accept that the Apportionment was negotiated by the parties (rather, the Applicant merely accepted the Apportionment as put forward by the Vendors) and/or that it represented the encumbered value of the various Business Assets”. He gave a number of reasons including that the vendors apportioned the purchase price without any factual basis, the accountants of the parties did not consider the apportionment, the Applicant’s Due Diligence Report did not review the values of the Vendors’ Trademarks or Registrations and were largely based on directors’ valuations, which were not acceptable valuations. Further, it was submitted “that the situation in this case is analogous to that in Collis”.

41 In relation to the s 305 contention, it was submitted that “the Respondent did not require the Applicant to provide a valuation of the Goodwill based on the Solicitors’ representations that the Applicant was suffering from financial hardship” but that in “any event, the onus was on the Applicant to prove by evidence that the Respondent’s basis for the Assessment was incorrect”.

42 The Applicant’s fourth contention was rejected by the Respondent on the grounds that in the “the absence of any expert valuation evidence in relation to the Trademarks and Registrations, there is no basis for the Applicant’s assertion… that there was value in the Registrations and no value in the Business or Goodwill”.

43 In relation to the contention of the Applicant that no late payment interest should charged, the Respondent submitted that it was a statutory imposition and the Respondent further submitted that as the Applicant did not include a ground in his objection objecting to the interest, the Tribunal did “not have jurisdiction to review such a decision. (See s.96 of the TAA and s.38(3) of the ADT Act. See also Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184 at [28])”

Discussion and Reasons

44 I have, notwithstanding all the submissions by the parties, come to the view that in this matter it is only necessary for me to consider the validity of the assessment process which commenced on 20 September 2002 when the Applicant lodged the Agreement for an assessment and ended some four years later when the Applicant’s objection was disallowed by the Respondent on 26 September 2006.

45 During that period the Respondent attempted to make at least five different sets of assessments.

46 The first assessment was purportedly issued on 26 September 2002 to assess the Agreement to a nominal duty of $10.

47 The second assessment was issued on 8 September 2003 to assess the Applicant to a duty of $41,683.50 in respect of just the Trademarks and Business Registrations.

48 On 12 July 2004, the Respondent issued the third assessment which the Respondent described as a “Compromise Assessment” under s. 12 of the Taxation Administration Act 1996 (“the TA Act”).

49 On 4 April 2005, the Respondent wrote to the Applicant and stated that as the Applicant had not responded, “it was proposed to issue a formal assessment”.

50 On 7 November 2005, the Respondent informed the Applicant that the “Compromise Assessment” issued on 12 July 2004 was now an “estimate assessment” under s.11(2) of the TA Act.

51 The assessment process used by the Respondent in this matter raises the important question as to the validity of any of these assessments. The assessments issued on 26 September 2002 and 8 September 2003 are not the subject of this review and their validity is not in issue.

52 The assessment purportedly issued on 12 July 2004 was merely a letter to the Applicant’s solicitors seeking agreement that the liability in this matter be determined by way of a “Compromise Assessment”. Under s 12 of the TA Act the Respondent is given power to make a “Compromise Assessment” if it is difficult or impracticable for the Respondent to determine a person’s tax liability under a taxation law without undue delay or expense because of the complexity or uncertainty of the case or for any other reason. The compromise assessment can only be made by the Respondent under this provision “with the agreement of the taxpayer”. No such agreement was given by the Applicant, on the contrary, its solicitors informed the Respondent that the Applicant disputed the amount proposed to be assessed.

53 On 4 April 2005 the Respondent wrote to the Applicant and indicated that “it was proposed to issue a formal assessment”. But no evidence has been produced by the Respondent as to the issue of any “formal assessment”. It appears that the Respondent proceeded to treat the “Compromise Assessment” as a “Formal Assessment”.

54 On 22 November 2005, the Respondent informed the Applicant that the “Compromise Assessment” issued on 12 July 2004 was now an “Estimate Assessment” under s.11(2) of the TA Act.

55 This chronology of events has to be considered to establish if in law a proper assessment was issued by the Respondent that is the subject of this review.

56 As I understand the assessment process in this matter, the Respondent has really proceeded on what can be best described as an arbitrary manner without regard to the law. The Respondent attempted to issue a “Compromise Assessment” but, because the Applicant did not consent to the proposed liability, the purported “Compromise Assessment” issued on12 July 2004 must be void for all purposes.

57 Instead of then embarking on a proper assessment process, the Respondent chose, for reasons not known, to rely on the letter of 12 July 2004 as an assessment throughout the assessment process leading to this application.

58 The Respondent attempted to give different labels to the original “Compromise Assessment” in the assessment process. The Respondent, in his letter dated 4 April 2005 indicated that he will issue a “Formal Assessment” but no fresh assessment was issued. The Respondent merely gave the “Compromise Assessment” this new label.

59 And when informed by the Applicant’s solicitors on 6 October 2005 that the Applicant’s was taking this matter for review at the Tribunal, the Respondent responded and informed the Applicant that it was now an “Estimate Assessment” under s.11(2) of the Act.

60 I do not think the assessment process under the TA Act in conjunction with the substantive liability provisions in the Act allows the Respondent to undertake such an assessment process. Just imagine if the Commissioner had such draconian powers to label his assessment to suit the occasion, the application of the relevant taxation laws would be so uncertain that taxpayers and their advisers would have to pre-empt the mind of the Respondent as to what label he would give the assessment during the assessment process, rather than the operation of the relevant legal provisions that give the Respondent power to make an assessment. Clearly, the legislature did not intend this uncertainty. The provisions of the TA Act and the Act provide for clear provisions as to the proper assessment process to determine the liability of a dutiable transaction.

61 As correctly pointed out by Mr Rider, the dutiable value of dutiable property that is subject to a dutiable transaction is under s.21 of the Act the greater of the consideration (if any) for the dutiable transaction (being the amount of a monetary consideration or the value of a non-monetary consideration), and the unencumbered value of the dutiable property.

62 The Respondent has wide ranging powers to make assessments under the TA Act but the powers can only be exercised in circumstances prescribed by the TA Act when read in conjunction with the substantive liability to duty provisions in the Act. The Act, as indicated lays the parameters as to how to calculate the duty liability in a particular case. That is spelt out in s.21. If the Respondent is not satisfied that the value of a dutiable transaction represents the correct amount of consideration, the Respondent is entitled to assess a taxpayer on the unencumbered value of the dutiable property. The legal process that allows the Respondent to do that requires him to request the taxpayer under s.305 to produce the necessary valuation for the Respondent. No such request was made in this matter,

63 Section 11 of the TA Act gives the Respondent a power to make an “estimate assessment” where he has insufficient information to make an exact assessment of a tax liability. That was not the case in this matter. The Respondent had all the information but was not willing to accept the apportionment of the value of the various business assets acquired by the Applicant, in particular the nominal amount assigned to Goodwill. This was not a case where the Respondent had insufficient information. If he was not satisfied with the values given in the dutiable agreement, he was entitled under as.305 of the Act to require the Applicant to obtain an independent valuation. That was not done in this matter. I do not think this was a proper case where he was entitled to rely on s.11 of the TA Act.

64 In any case, my view is that the “Compromise Assessment” issued on 12 July 2004 was no more then a “tentative assessment” and did not create a definitive liability to duty under the Act and was not an assessment for either the TA Act or the Act. There is ample authority for this view in Commonwealth income tax law (See FCT v Hoffnung & Co Ltd (1928) 42 CLR 39; F J Bloemen Pty Ltd v FCT (1981) 11 ATR 914 and FCT v Stokes (1997) 34 ATR 478. These well settled principles equally apply to assessments made under the TA Act.

65 There is no provision in the TA Act or the Act that allows the Respondent to give different labels to an assessment in the assessment process. The “Compromise Assessment” was void and not “cured” by the various subsequent labels that the Respondent attempted to give to that void assessment. It was void ab initio and whatever label the Respondent sought to give that “void” assessment the label did not give new life to a fairly “dead” assessment.

66 I should, however, add that the Respondent is entitled to question the valuation of a dutiable property in the context of s 21 of the Act and, if not satisfied with the valuation, require the taxpayer to produce a valuation under s 305 of the Act. I reject the submission that the Respondent is bound by any valuation given by the parties in an arms’ length dutiable transaction. There is no legal basis for that view. No provision of the Act directs the Respondent to accept such a valuation. The scheme of the Act allows the Respondent to question any valuation, if satisfied that it is not the correct valuation.

67 I think the correct and preferable decision in this matter is to exercise the Tribunal’s power under s 63(3)(d) of the ADT Act to set aside the reviewable decision and remit this matter to the Respondent for reconsideration. The course for the Respondent is to issue an assessment made in accordance with the law and having regard to a proper valuation of the goodwill undertaken under s 305 of the Act.

68 I will, however, make two brief comments in relation to the fairly detailed substantive submissions that were made by the parties.

69 The first observation is that, on the evidence, the Applicant purchased certain business assets and not the Vendors’ business. That was the clear evidence of Mr Halter and he was cross-examined on this issue but maintained that view. Mr Halter also explained that, unlike the Vendors, the Applicant was not a manufacturer of the products that are marketed by the Applicant. The manufacturing of their products is done by independent contractors and Mr Halter said that, after a short period of using the Vendors’ facilities, the products purchased were manufactured by contractors on their behalf. In determining the value of goodwill I think this factual background is quite critical.

70 The second comment is that in this matter there was no suggestion by the Respondent nor was there any evidence that the Vendors and the Applicant acted in any manner to avoid or reduce any duty payable on the sale of the assets. But there was no expert evidence that the apportionments made by the Vendors were based on acceptable valuations in the open market. In the absence of any such evidence, the proper assessing approach should have been to seek a proper valuation of the Goodwill, if the Respondent was not satisfied with the Vendors’ apportionments.

71 The matter is accordingly remitted to the Respondent.

Order

The reviewable decision is set aside and the matter is remitted to the Respondent under s 63(3)(d) of the ADT Act for reconsideration as directed.