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The High Court (Heydon and Bell JJ) has refused the Commissioner special leave to appeal from the Full Federal Court decision in FCT v AXA Asia Pacific Holdings Ltd [2010] FCAFC 134 (18 November 2010).

In submissions to the High Court, counsel for the Commissioner criticised "the hypothetical fact-finding approach" adopted in a line of Full Federal Court cases in relation to the identification of an "alternative postulate" for the purposes of determining whether the taxpayer has obtained a tax benefit, which he said "distorts the whole operation of Part IVA".

Counsel for the Commissioner said:

"In our submission, section 177C, the obtaining by a taxpayer of a tax benefit in connection with the scheme, is intended to be a gateway provision rather than a major forensic exercise. However, what has occurred in this case and is occurring in other cases now is that it has become a major forensic exercise to determine whether or not there is a tax benefit. In our submission, in most cases the main issue in Part IVA is the question of dominant purpose in 177D(b)."

In AXA, the taxpayer successfully argued that, absent the scheme, it would have "done nothing", that is, not sold the shares the subject of the Commissioner's Part IVA determination.

The Commissioner also supported the application for special leave by relying on the dissenting judgment of Dowsett J in relation to whether the parties were acting at arm's length.

In refusing special leave, Heydon J said:

"In our opinion the second of the two points to which [counsel for the Commissioner] referred [the arm's length point] is essentially a factual controversy. The first point is a question of construction in relation to which the Full Court of Australia has taken a particular approach. We think there are insufficient prospects of successfully disturbing that approach on appeal. Accordingly, special leave is refused with costs."

FCT v AXA Asia Pacific Holdings Ltd [2011] HCATrans 63 (High Court, Heydon and Bell JJ, 11 March 2011).


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