PepsiCo, Inc v Commissioner of Taxation [2024] FCAFC 86

PepsiCo, Inc v Commissioner of Taxation [2024] FCAFC 86

The Court (per Perram and Jackman JJ, Colvin J dissenting in part) held that the payments made by the Bottler to the Seller under the exclusive bottling agreements were for concentrate alone and did not include a royalty component for the use of trademarks or other intellectual property. Accordingly, there was no...

Source-derived case information.

Jurisdiction
Australia
Judgment Date
26 June 2024
Procedural Posture
Appeal / Judgment After Hearing of Appeals
Outcome
PepsiCo/SVC's appeals allowed; Commissioner's appeals dismissed.
Legal Topics
['royalty Withholding Tax' 'diverted Profits Tax' 'income Tax' 'intellectual Property and Tax' 'part Iva' 'scheme Assessments']
['taxation'] ['royalty Withholding Tax' 'diverted Profits Tax' 'income Tax' 'intellectual Property and Tax' 'part Iva' 'scheme Assessments']

Source-derived case record

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Procedural Posture

Appeal / Judgment After Hearing of Appeals

Legal Issues

  1. 1 ['Whether payments made by the Bottler for beverage concentrate included a royalty component for the use of trademarks or other intellectual property, thereby attracting royalty withholding tax;' 'Whether, if not subject to royalty withholding tax, the arrangements constitute a scheme to obtain a diverted profits tax benefit under s 177J of Part IVA of the Income Tax Assessment Act 1936 (Cth)']

Ratio Decidendi

The Court (per Perram and Jackman JJ, Colvin J dissenting in part) held that the payments made by the Bottler to the Seller under the exclusive bottling agreements were for concentrate alone and did not include a royalty component for the use of trademarks or other intellectual property. Accordingly, there was no royalty withholding tax liability. Further, there was no reasonable alternative postulate under s 177CB(3) supporting the application of diverted profits tax, so Part IVA did not apply. The appeals by PepsiCo/SVC were allowed and the Commissioner's cross-appeals dismissed.

Court Disposition

PepsiCo/SVC's appeals allowed; Commissioner's appeals dismissed.

Orders

  • ['The parties provide a short minute of order to give effect to these reasons within 14 days.' "Orders setting aside the trial judge's orders in respect of royalty withholding tax and Part IVA assessments." 'PepsiCo/SVC to have their costs in both appeals as taxed, assessed or otherwise agreed.']