Mercantile Mutual Insurance (Workers' Compensation) Ltd v Commissioner of Taxation of the Commonwealth of Australia Mercantile Mutual Insurance (Australia) Ltd v Commissioner of Taxation of the Commonwealth of Australia [1998] FCA 997

FEDERAL COURT OF AUSTRALIA

INCOME TAX - allowable deductions - liabilities of insurance companies under outstanding insurance claims "reported but not settled" and "incurred but not reported" - appropriate method of estimation of liabilities for income tax purposes - whether "present value" (or "inflated-discounted" value); "nominal or face" value (or "inflated" value); "no inflation - no discount" value - whether "prudential margin" may be included in estimated value. Income Tax Assessment Act 1936 (Cth) - s 51(1), s 70B Taxation Administration Act 1953 (Cth) - s 14ZZ(c) Income Tax Ruling IT 2663 Income Tax Act 1976 (NZ) R.A.C.V. Insurance Pty Ltd v Commissioner of Taxation [1975] VR 1 - considered and followed Commercial Union Assurance Co of Australia Ltd v Federal Commissioner of Taxation 77 ATC 4186 - considered Owen (HM Inspector of Taxes) v Southern Railway of Peru Ltd (1956) 36 TC 602 - referred to Federal Commissioner of Taxation v James Flood Pty Ltd (1953) 88 CLR 492 - considered Commissioner of Taxation (NSW) v Manufacturers Mutual Insurance Ltd (1931) 31 SR (NSW) 575 - cited Ballarat Brewing Co Ltd v Federal Commissioner of Taxation (1951) 82 CLR 364 - referred to J Rowe & Son Pty Ltd v Commissioner of Taxation of the Commonwealth of Australia (1970-1971) 124 CLR 421 - considered Nilsen Development Laboratories Pty Ltd v Federal Commissioner of Taxation (1980-1981) 144 CLR 616 - considered Southern Railway of Peru Ltd v Owen [1957] AC 334 - distinguished Commissioner of Taxation of the Commonwealth of Australia v The Myer Emporium Ltd (1986-1987) 163 CLR 199 - considered and applied Commissioner of Taxation v Orica 98 ATC 4494 - referred to Burrill v Commissioner of Taxation (1996) 67 FCR 519 - considered and applied Australia and New Zealand Banking Group Ltd v Commissioner of Taxation (1994) 48 FCR 268 - referred to Coles Myer Finance Ltd v Federal Commissioner of Taxation (1993) 176 CLR 640 - followed New Zealand Flax Investments Ltd v Federal Commissioner of Taxation (1938) 61 CLR 179 - considered Commissioner of Taxation v Woolcombers (WA) Pty Ltd (1993) 47 FCR 561 - followed Gallagher v Jones (Inspector of Taxes) [1994] Ch 107 - referred to Johnston (HM Inspector of Taxes) v Britannia Airways Ltd (1994) BTC 298 - referred to Commissioner of Inland Revenue (NZ) v Mitsubishi Motors New Zealand Ltd 95 ATC 4711 - considered MERCANTILE MUTUAL INSURANCE (WORKERS' COMPENSATION) LTD v COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA NG 121 of 1996