JUDGMENT No. SIA. fil ; _-NOT_FOR' GENERAL DISTRIBUTION IN THE FEDERAL COURT OF AUSTRALIA } ) NEW SOUTH WALES DISTRICT REGISTRY ) No. G19 of 1987 ) - - GENERAL DIVISION - - ) BETWEEN : DR. CLEMENT H. MUSGROVE Applicant AND: DEPUTY COMMISSIONER OF TAXATION Respondent CORAM: FOX J. DATE: 15 SEPTEMBER 1987 REASONS FOR JUDGMENT EX TEMPORE FOX J. This is an application under the Administrative Decisions Judicial Review Act 1977 which it is now agreed relates only to a decision in relation to a request that s.206 of the Income Tax Assessment Act 1936 ("the Act") be applied by the Commissioner. The case has its origins in s.201 and s.177 of the Act which have the consequence that the Commissioner is able to recover tax notwithstanding there has been objection to the relevant assessment or assessments, and that they have been referred to an appropriate tribunal for adjudication. This is Loess ge wa the really a collateral challenge to the operation of those sections. It is regrettable, I think, that the Court's time, and indeed, the time of the profession, should have to be occupied in _this way, but that is the way it is, especially when there is a long delay, as I understand there is, in the hearing of taxation cases referred to the Administrative Appeals Tribunal. There is less delay' in the cases that come directly to this Court. The applicant applied for an extension of time for payment of the relevant assessments pursuant to s.206(1) of the Act, the intention being that time for payment would be extended until judicial or tribunal processes had been exhausted. The decision of the respondent to refuse the applicant's application was made on 21 October 1986 and communicated to the applicant by letter of that date. The relevant assessments relate to the income tax years ending 30 June 1980, 1981, 1982, 1983 and 1984. IT understand that because of the way payments to the Tax Office were appropriated, the 1985 and 1986 assessments have been met. The total amount said to be outstanding is $62,742.78 and there is anaction to recover this amount pending in the District Court. It includes the amounts of the primary assessments and the amounts of additional tax imposed by the Commissioner. The core of the matter is whether deductions should in each of the years have been allowed in respect of film production in accordance with s.124K and associated sections of the Income Tax Assessment Act. There is in the end but one taxation issue, and that is whether under the arrangements made between the eye eee oe of the one film production enterprise. taxpayer and others deductions could validly be made in respect As I understand it is said on behalf of the Commissioner that the scheme whereby the deductions were to he obtained was artificial. There was a partnership, of which the taxpayer was a member, but the partnership documents have not been put before me and are not referred to in the evidence produced on behalf of the Commissioner. Substantial arguments centred around whether the Commissioner 'took into account the merits of the case raised by the objections. The deductions were, of course, originally disallowed and at that time, it is reasonable to assume, the position was examined. I think there were some five years over which the process extended. The returns showed the deductions, the assessments refused the deductions and objections were, in due course, lodged and disallowed. In that process, one imagines, there was some consideration given to the likelihood of success or otherwise of the taxpayer's case. I have for myself no means of assessing the likelihood of success and I do not suggest that I should be required to do so. If, in an application under s.206 the Commissioner has to consider, as I think he has, the merits, generally speaking of the taxpayer's objections, then by and large he would be doing that in a general way based upon the knowledge he already has. we eres pm me a ce ee om . 1 re rose Pat ial The argument as to whether when considering the application under s.206 he took into account the "merits of tthe case has been a rather inconclusive one, there being reference to the Commissioner's policy document or documents and the actual _ statement of reasons delivered under s.13. - The statement of reasons refers to the policy documents' rulings but just which ruling or rulings were applied is not at all clear. The reasons given in fact are most uninformative. The policy documents contain reference to many different types of situation and this is only one of them and one should not have to go through the documents in full to see what rulings of the Commissioner might have been applied. This is just as well because one of the documents has some 60 rulings in it and the next one has some 39 rulings. The rulings, or guidelines, of course are by no means conclusive so far as the Court is concerned. This is a matter that has been dealt with in a number of decisions of the Court. In considering an application like the present, the Court is entitled to know with some precision the basis upon which the Commissioner proceeded. There is one paragraph in the s.13 statement which says:- "In accordance with the Commissioner''s guidelines the ' objections were not considered to be genuinely based." There has been much discussion about what this means and ere —— went saree cen wee mma woe ee other rather unhelpful discussion. - I mentioned to. counsel for the Commissioner in the course of the proceedings that it seemed to me that the reasons as stated were not full or adequate ora reasonable statement of reasons at all. The statement of reasons was treated as evidence in the case as to what it asserted but I do not think it is at all satisfactory that a case should be decided largely, or even partly, on a statement which is so ' fatuous. . The application, as I have said, is one for review of a decision to refuse the s.206 application and no application is made in respect of the s.13 statement itself. However, I do not think I should proceed to resolve this question without a proper statement of reasons being provided and what I propose to do is to adjourn the matter until a proper statement of reasons is provided with liberty to either party to have the matter relisted on three days notice. I make no other order at this stage. I certify that this and the four (4) preceding pages are a true copy of the Reasons for Judgment herein of his Honour Mr. Justice Fox. Associate: Share Cob Date: 29 September 1987 Counsel for the Applicant: Mr. A. S. Martin Solicitors for the Applicant: Messrs. Sly & Russell Counsel for the Respondent: Mr. G. Hosking a i Solicitors for the Respondent: Date of hearing: Date judgment delivered: Australian Government -Solicitor Sydney: 15 September 1987 Sydney: 15 September 1987 mo es colee oe