The case concerned a taxpayer who was challenging the validity of assessments and seeking to require the Commissioner to assess in accordance with a private binding ruling that had been issued to the taxpayer.
The Commissioner ruled that the taxpayer was exempt from income tax because the arrangement as defined in the private ruling was a club established for the promotion of sport. Hence, Item 9.1(c) of s 50-54 of ITAA 97 applied.
Subsequently, the Commissioner issued assessments to the taxpayer for the years ended 30 June 2006 and 30 June 2007, on the basis that the arrangement as defined in the private ruling was not the same arrangement that was actually carried out by the taxpayer. Accordingly, the Commissioner argued that he was not bound by the private ruling.
The taxpayer objected to the assessment for the year ended 30 June 2006 on the ground that the Commissioner was bound by the ruling and thus he did not have the power to make an assessment for the 2006 income year. The objection was disallowed and the taxpayer applied to the AAT under Part IVC of the Tax Administration Act 1953 for a review of the Commissioner's objection decision.
In the meantime, the taxpayer also applied to the Federal Court for judicial review of the Commissioner's decision, on the ground of jurisdictional error.
The Full Court held that no error has been shown in the process of assessment going to jurisdiction. Further, where the taxpayer contends that the Commissioner is bound by a private ruling, the Full Court held that the taxpayer can proceed to have heard its arguments in Part IVC proceedings, and if successful in arguing that the private ruling should be applied, will demonstrate that the 2006 assessment is excessive.
The Commissioner agrees.