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21 Aug 06 Taxpayer's s 39B attack on Part IVA "excessive" assessment fails - Futuris Corp

The Federal Court ( Finn J) has dismissed an application made by a taxpayer (Futuris) under s 39B of the Judiciary Act 1903 (Cth) that an assessment issued by the Commissioner in pursuance of the operation of Part IVA was invalid and ought to be quashed. As a result of the Part IVA assessment, an amount that had previously been included in the taxpayer's assessable income was "double counted". The Commissioner was aware of the "double counting" when he issued the assessment. However, assuming that the Part IVA assessment was ultimately upheld in objection and appeal proceedings, the Commissioner took the view that the "double counting" could be corrected by a compensating adjustment under s 177F(3) ITAA 1936. The taxpayer argued that by issuing an assessment which he knew to be incorrect, the Commissioner was exceeding his authority and that the assessment was not a "valid assessment". The taxpayer sought to distinguish the decision of Kenny J in Australia and New Zealand Banking Group Ltd v FCT (2003) 137 FCR 1.

In dismissing the taxpayer's application, the Court said, at para 60:

"For my own part, I agree with the Commissioner...The present matter is one which falls naturally within both the language and the evident purpose of s 177F(3). But even if I am wrong in this, I equally am satisfied that at best all that Futuris has shown is that in making a definitive assessment (i.e. the [Part IVA] Assessment)...the Commissioner proceeded upon a mistaken view of the applicability of s 177F(3). That mistake did not invalidate the assessment or evidence bad faith on the Commissioner’s part in the exercise of the power to assess. The effect of the mistake could, and should properly, be addressed in Part IVC [objection and appeal] proceedings."

Futuris Corporation Limited (ACN 004 336 636) v FCT [2006] FCA 1096 (Federal Court, Finn J, 18 August 2006)

For a copy of the decision, go here

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