The Commissioner of Taxation of the Commonwealth of Australia v Spotless Services Ltd & Anor [1995] FCA 958

CATCHWORDS INCOME TAX - Interest earned on deposit of funds in the Cook Islands - source of interest - whether exempt income by operation of s.23(q) Income Tax Assessment Act 1936 (Cth) - test to be applied in determining the source of income is to "search for the real source and to judge the question in a practical way" - form and substance of transaction should be considered - inappropriate to discard scheme as a "mere screen" or "stratagem" as it was the explicit intention of the respondents to locate the source of income off-shore in a low-tax area in order to obtain benefit of s.23(q) - certificate of deposit was the critical document intended to govern the relationship between the parties - source of interest was the Cook Islands as this was where the certificate of deposit was issued and enforceable. INCOME TAX - tax avoidance - Pt IVA Income Tax Assessment Act 1936 (Cth) - whether respondents obtained a "tax benefit" in connection with a Pt IVA "scheme" - Commissioner identified both a broad and narrow scheme - scheme must have existence based in fact and reality - whether dominant purpose of scheme was to obtain a tax benefit. WORDS AND PHRASES - "scheme" - "tax benefit" Income Tax Assessment Act 1936 (Cth), ss. 23(q), 25, 177A, 177D, 177F, Pt IVA Cases Considered: "Source" of Income Tariff Reinsurances Limited v Commissioner of Taxes (Vict.) (1938) 59 CLR 194 Federal Commissioner of Taxation v United Aircraft Corporation (1943) 68 CLR 525 Barclays Bank Ltd v Astley Industrial Trust Ltd [1970] 2 QB 527 National Bank of Australia v KDS Construction Services Pty Ltd (1987) 163 CLR 668 Thorpe Nominees Pty. Limited v Federal Commissioner of Taxation 88 ATC 4886 Part IVA Federal Commissioner of Taxation v Jackson 90 ATC 4990 Peabody v Federal Commissioner of Taxation (1993) 40 FCR 531; (1994) 181 CLR 359