The Federal Court (Edmonds J) has dismissed the taxpayer's appeals against the Commissioner's decisions in relation to the application of Part IVA ITAA 1936, under which the Commissioner sought to cancel foreign tax credits to which the taxpayer was otherwise entitled in consequence of its participation in two very complicated Hong Kong bond transactions.
The Court considered the transactions in the light of the matters contained in s 177D(b) ITAA 1936 and concluded that absent the foreign tax credits, the Hong Kong bond transactions "did not make sense" in terms of cash flows.
However, the Court also concluded that under the law as it stood when the Part IVA determinations were made, the taxpayer was not liable to pay General Interest Charge on any tax shortfall. The Court noted that the law had subsequently been amended, with the result that "the position would be different today".
Citigroup Pty Limited v FCT  FCA 826 (Federal Court, Edmonds J, 9 August 2010).