ZENTRUM HOLDINGS LTD AND ANOR V COMMISSIONER OF INLAND REVENUE SC 44/2006
Leave to appeal was granted on the discrete question whether the Farnsworth principle continues to apply and, if so, whether it precludes the Commissioner from arguing the transactions were a sham, because that issue was sufficiently arguable; leave was refused on the s108 ground because it was not sufficiently...
Source-derived case information.
- Citation
- SC 44/2006
- Parties
- Applicant: Zentrum Holdings Limited; Applicant: Ngahemi Properties Limited (as the Zentrum Holdings Group); Respondent: Commissioner of Inland Revenue
- Court
- Supreme Court
- Jurisdiction
- New Zealand
- Judgment Date
- 19 September 2006
- Procedural Posture
- Appeal / Leave Granted (supreme Court)
- Outcome
- Leave to appeal granted on the Farnsworth/sham issue; leave refused on the s108 time‑bar point.
- Legal Topics
- Sham Doctrine, Tax Assessment Time Bar, Section 108 Tax Administration Act 1994, Farnsworth Principle, Leave to Appeal Under Supreme Court Act 2003
Source-derived case record
Summary, issues, holding and outcome
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Parties
Zentrum Holdings Limited
Applicant
Ngahemi Properties Limited (as the Zentrum Holdings Group)
Applicant
Commissioner of Inland Revenue
Respondent
Procedural Posture
Appeal / Leave Granted (supreme Court)
Legal Issues
- 1 Whether the Farnsworth principle continues to apply under the tax legislation applicable to the issues in dispute
- 2 Whether the Farnsworth principle precludes the Commissioner from arguing on appeal that the applicants' transactions were a sham
- 3 Whether s108 of the Tax Administration Act 1994 bars the Commissioner from advancing the sham argument
Ratio Decidendi
Leave to appeal was granted on the discrete question whether the Farnsworth principle continues to apply and, if so, whether it precludes the Commissioner from arguing the transactions were a sham, because that issue was sufficiently arguable; leave was refused on the s108 ground because it was not sufficiently arguable that the Commissioner's position would increase the amount assessed so as to fall within the time bar in s108.
Court Disposition
Leave to appeal granted on the Farnsworth/sham issue; leave refused on the s108 time‑bar point.
Orders
- Leave to appeal granted on the ground: Whether the principle in CIR v Farnsworth [1984] 1 NZLR 428 continues to apply under the tax legislation applicable to the issues in dispute and, if so, whether it precludes the Commissioner from arguing on appeal that the applicants' transactions were a sham.
- Leave to appeal refused on proposed ground 1(d): whether s108 of the Tax Administration Act 1994 bars the Commissioner from advancing the argument that the transactions were a sham.
Full Case Text
Judgment text and source record
1 paragraphs
ZENTRUM HOLDINGS LTD AND ANOR V COMMISSIONER OF INLAND REVENUE SC 44/2006 19 September 2006IN THE SUPREME COURT OF NEW ZEALAND SC 44/2006 [2006] NZSC 71BETWEEN ZENTRUM HOLDINGS LIMITED AND NGAHEMI PROPERTIES LIMITED (AS THE ZENTRUM HOLDINGS GROUP) Applicants AND THE COMMISSIONER OF INLAND REVENUE Respondent Court: Tipping and McGrath JJ Counsel: G D Clews for Applicants R J Ellis for Respondent Judgment: 19 September 2006JUDGMENT OF THE COURT[1] The applicants are granted leave to appeal on the ground: Whether the principle in the decision of the Court of Appeal in CIR v Farnsworth [1984] 1 NZLR 428 continues to apply under the tax legislation applicable to the issues in dispute and, if so, whether it precludes the Commissioner from arguing on appeal in the High Court that the applicants' transactions were a sham. [2] Leave is not given on proposed ground 1(d) in the application, which is whether s 108 of the Tax Administration Act 1994 bars the Commissioner from advancing the argument that the transactions were a sham. It is not sufficiently arguable to meet the requirements of s 13(1) of the Supreme Court Act 2003 that theCommissioner's position, if upheld, would ultimately lead to an increase in the "amount assessed" subject to the time bar under s 108 of the 1994 Act.Solicitors: Hunt Edward Worker, Orewa for Applicants Crown Law Office, Wellington for Respondent