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27 Jan 099 Decision Impact Statement - Roche Products

The ATO has issued a Decision Impact Statement in relation to the AAT decision in Roche Products Pty Ltd v FCT [2008] AATA 639; 2008 ATC 10-036. The case is the first decision by an Australian tribunal or court in a substantive transfer pricing matter involving the application of the current Division 13 of the ITAA 1936.

In considering whether the Commissioner correctly made determinations for the purposes of Division 13 by reference to the correct considerations, the AAT (Downes, J President) held that although s 136AD(3) of Division 13 applied, the arm's length consideration for the relevant property acquired by the taxpayer was less than that determined by the Commissioner. The ATO states in the Decision Impact Statement that the AAT was entitled, on the evidence before it, to form its own view of the amount of the arm's length consideration for the relevant property and decide that s 136AD(3) applied. If warranted, the Tribunal had the power to apply s 136AD(4) to determine the arm's length consideration. The ATO has not appealed against the AAT's decision.

One of the other issues which the AAT considered but did not need to decide was whether Article 9 of the Swiss DTA and Article 6 of the Singapore DTA authorise the Commissioner to make transfer pricing assessments, independently of Division 13. Without deciding, the AAT commented:

"...I note that there is a lot to be said for the proposition that the treaties, even as enacted as part of the law of Australia, do not go past authorising legislation and do not confer power on the Commissioner to assess. They allocate taxing power between the treaty parties rather than conferring any power to assess on the assessing body."

The ATO disagrees. It states in the Decision Impact Statement that "the Commissioner is not bound by the observations made by [the AAT] on this point and will continue to adhere to the position outlined in TR 92/11, TR 94/14 and TR 2001/13 that the business profits or associated enterprises article of a DTA may provide a separate basis for assessing transfer pricing adjustments, independently of Division 13".

For a copy of the Decision Impact Statement, go here.

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