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03 May 10 High Court refuses special leave in Tasman, South Steyne and Handbury

On 23 April 2010, the following special leave applications were refused by the High Court:

In Tasman Group, the Full Federal Court (Ryan, Kenny and Stone JJ) upheld the Commissioner's appeal from the decision of Heerey J, who held that although the commercial debt provisions of Div 245 of Schedule 2C of ITAA1936 applied to debts of $118,696,459 owed by the taxpayer to its former parent, the assumption of solvency in ss 245-55(2), (3) did not apply in the valuation of those debts because of the application of the exception in s 245-55(4).

In South Steyne, the Full Federal Court (Finn and Emmett JJ, Edmonds J dissenting) upheld, in part, the taxapyers' appeal in the test case brought in relation to 4 different types of supply of 83 strata titled, serviced apartments in a hotel complex.

The only point on which the taxpayer sought special leave to appeal to the High Court was the upholding, by the Federal Court (by majority) of the finding of the primary judge that the supply by the management company was in its own right and not as agent of the lessee of the relevant apartment. On this basis the supply fell within the exception in s 40-35(1)(a) of the GST Act 1999 and was held not to be an input taxed supply. The High Court held that no question of principle warranting the grant of special leave arose on a finding that was dependant on the particular terms of the management agreement.

In Handbury Holdings, the Full Federal Court (Finn, Sundberg and Perram JJ) dismissed the taxpayer's appeal from the decision of Kenny J, who held that liabilities of a subsidiary company were to be taken into account when the subsidiary left a consolidated group, notwithstanding the fact that the very act of "leaving" was caused by the issue of shares to the creditors (being persons other than the head company) in consideration of the extinguishment of the liabilities. In particular, the Court held that the phrase "at the leaving time" in s 711-45(1) ITAA 1997, which is referred to in Step 4 of the table in s 711-20(1), meant "just before the leaving time". This resulted in the taxpayer deriving two large capital gains which would not otherwise have arisen.

 


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