THE COMMISSIONER OF INLAND REVENUE V LUNDY FAMILY TRUST AND BEHEMOTH CORPORATION LIMITED CA CA115/04

THE COMMISSIONER OF INLAND REVENUE V LUNDY FAMILY TRUST AND BEHEMOTH CORPORATION LIMITED CA CA115/04 19 December 2005IN THE COURT OF APPEAL OF NEW ZEALAND CA115/04BETWEEN THE COMMISSIONER OF INLAND REVENUE Appellant AND LUNDY FAMILY TRUST AND BEHEMOTH CORPORATION LIMITED Respondents Hearing: 12 September 2005 Court: Glazebrook, Hammond and O'Regan JJ Counsel: J H Coleman and M D Deligiannis for Appellant C E Bibbey for Respondents Judgment: 19 December 2005JUDGMENT OF THE COURT A The appeal is allowed in part as set out below. B In respect of each taxable period during the GST periods April 1998 to June 2000 inputs may be claimed pursuant to s 20(3)(a) and (b) of the GST Act with respect to rates, insurance and maintenance with respect to the properties in question adjusted pursuant to s 21(1) of the GST Act so as to allow a 75% input tax refund in respect of each supply. C Costs of $4,000 plus usual disbursements are awarded to the respondents in this Court. Costs on a 2B basis (plus usual disbursements) are awarded for the High Court hearing.____________________________________________________________________REASONS(Given by Glazebrook J)Introduction[1] This appeal concerned the GST adjustments that should be made when a property developer lets out properties temporarily for residential purposes. In our judgment of 10 November 2005, we dismissed the Commissioner's appeal in two respects and asked for further submissions on whether the appeal should be allowed on the question of adjustments to service costs where arguably the basis of assessment was different from this Court's analysis. We also asked the Commissioner to provide a draft order should the appeal be allowed and gave leave for the extra submissions to deal with the question of costs.Commissioner's submissions[2] In the Commissioner's submission, the basis on which the assessment was made differs from this Court's judgment only as to quantum. This is a situation therefore that is governed by s 138P of the Tax Administration Act 1994 and not s 138G. Additionally, the Commissioner submitted that, in any event, the level of any apportionment under s 21(1) of the GST Act was an issue arising from the facts and evidence and propositions of law discussed or raised in the Statements of Position. [3] The Commissioner suggested the following wording for the order allowing the appeal on this point:That in respect of each taxable period during the GST periods April 1998 to June 2000 inputs may be claimed pursuant to s 20(3)(a) and (b) of the GST Act with respect to rates, insurance and maintenance with respect to the properties in question adjusted pursuant to s 21(1) of the GST Act so as to allow a 75% input tax refund in respect of each supply.[4] As to costs, the Commissioner indicated that he was prepared to accept the respondents' position.Taxpayers' submissions[5] No submissions were made in response to the Commissioner's submissions set out at [2] and the respondents had no comment on the form of the draft order. [6] It was submitted that costs should be awarded to the respondents for a number of reasons, including that the Commissioner succeeded in a very minor part of this appeal. In the respondents' submission, costs on a 2B scale should be awarded in the High Court and $4,000 in this Court.Discussion and result[7] We accept the Commissioner's submission that the suggested adjustment in this case relates only to quantum and that therefore the appeal should be allowed in relation to the service costs. [8] The Commissioner provided a draft order. The respondents made no comment on that order. It is thus appropriate that the order be made in the form proposed by the Commissioner. [9] As the Commissioner failed in his main arguments in this appeal, we accept the respondents' submission that costs should be awarded in their favour. Costs of $4,000 plus usual disbursements are awarded accordingly. There will also be costs in the High Court awarded on a 2B scale (plus usual disbursements) to be set by the Registrar if they cannot be agreed.Solicitors: Crown Law Office, Wellington for Appellant G D Horne, Christchurch for Respondents