Commissioner of Taxation v Consolidated Press Holdings Pty Ltd [1999] FCA 1229

Commissioner of Taxation v Consolidated Press Holdings Pty Ltd [1999] FCA 1229

The Court held that profits from the debt defeasance transaction were income according to ordinary concepts, given the finance company's business of borrowing and lending funds, but such profits were not 'adjusted tainted income' because they were not derived from carrying on a business of trading in tainted assets nor from the disposal of tainted assets. Division 16F thin capitalisation rules applied so as to deny deductions for foreign debt interest in attributing income from controlled foreign corporations under Part X.

Parties
Appellant and Cross Respondent: Commissioner of Taxation; Respondent and Cross Appellant: Consolidated Press Holdings Limited (ACN 008 394 509); Respondent and Cross Appellant: Murray Leisure Group Pty Limited (ACN 000 090 273)
Jurisdiction
Australia
Judgment Date
07 September 1999
Procedural Posture
Appeal / Heard and Determined by the Full Court of the Federal Court of Australia on Appeals and Cross Appeals From a Single Judge
Outcome
Appeals and cross-appeals dismissed.
Legal Topics
Controlled Foreign Corporations, Attributable Income, Debt Defeasance, Thin Capitalisation, Notional Assessable Income, Adjusted Tainted Income, Passive Income
Taxation Law Revenue Law Controlled Foreign Corporations Attributable Income Debt Defeasance Thin Capitalisation Notional Assessable Income Adjusted Tainted Income +1 more

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Parties

Commissioner of Taxation

Appellant and Cross Respondent

Consolidated Press Holdings Limited (ACN 008 394 509)

Respondent and Cross Appellant

Murray Leisure Group Pty Limited (ACN 000 090 273)

Respondent and Cross Appellant

Procedural Posture

Appeal / Heard and Determined by the Full Court of the Federal Court of Australia on Appeals and Cross Appeals From a Single Judge

Legal Issues

  1. 1 Whether gain from debt defeasance transaction constitutes passive income or adjusted tainted income for purposes of attributable income under Part X of the Income Tax Assessment Act 1936 (Cth)
  2. 2 Whether Division 16F thin capitalisation rules apply to interest payments made by a controlled foreign corporation, assumed resident under Part X, and therefore should be disallowed as deductions in calculating attributable income

Ratio Decidendi

The Court held that profits from the debt defeasance transaction were income according to ordinary concepts, given the finance company's business of borrowing and lending funds, but such profits were not 'adjusted tainted income' because they were not derived from carrying on a business of trading in tainted assets nor from the disposal of tainted assets. Division 16F thin capitalisation rules applied so as to deny deductions for foreign debt interest in attributing income from controlled foreign corporations under Part X.

Court Disposition

Appeals and cross-appeals dismissed.

Orders

  • The appeal is dismissed.
  • The cross-appeal is dismissed.