Ravenor Overseas Inc & Ors v Readhead

Ravenor Overseas Inc and others (the applicants) sought leave to appeal from a decision of the Full Federal Court. The dispute concerned the applicants' entitlement to claim a tax deduction for certain payments made to a foreign entity, Ravenor Overseas Inc, which was incorporated in Panama. The Commissioner of Taxation (the respondent) disallowed these deductions, leading to the Full Federal Court’s decision against the applicants.

The primary legal issue before the Full Federal Court, and subsequently before Brennan CJ in chambers, was whether the payments made by the Australian entities to Ravenor Overseas Inc constituted assessable income in the hands of Ravenor Overseas Inc, thereby satisfying the condition for deductibility under section 82 of the *Income Tax Assessment Act 1936* (Cth). This section required that the expenditure be incurred in gaining or producing assessable income. A further issue was whether the payments were of a capital nature, which would render them non-deductible.

Brennan CJ, in chambers, considered the nature of the payments and the circumstances under which they were made. His Honour noted that the Full Federal Court had found the payments to be of a capital nature, and that Ravenor Overseas Inc had not derived assessable income from these payments. The Chief Justice agreed with the Full Federal Court's reasoning that payments of a capital nature are not deductible, and that the absence of assessable income derived by the recipient meant the condition in section 82 could not be met.

Leave to appeal was refused.