CPH Property Pty Ltd & Ors v Commissioner of Taxation [1998] FCA 1276

FEDERAL COURT OF AUSTRALIA

INCOME TAX – avoidance – whether Part IVA of Income Tax Assessment Act 1936 ("the Act") applies to scheme where monies are subscribed for redeemable preference shares in an Australian company which company subscribes for similar shares in a United Kingdom company – whether a tax benefit arises as a result of s 79D of the Act prior to its amendment in 1991 applicable to assessments in the 1991 year where no foreign dividend is paid. INCOME TAX – quarantining of deductions – whether s 79D of the Act operates in the 1990 year to quarantine deductions where a taxpayer derived no assessable foreign income of a relevant class in that year of income. INCOME TAX – interpretation of section 79D unambiguous on its face – whether literal construction should be adopted – whether literal interpretation absurd – whether parliamentary purpose is promoted – legislative history of s 79D discussed. INCOME TAX – avoidance – dividend stripping – whether transfer of shares in United Kingdom companies as part of reorganisation a scheme of or in the nature of dividend stripping – whether scheme has effect of dividend stripping. INCOME TAX – avoidance – formation of opinion by Commissioner as to extent of profits and whether distribution represented profits – profits treated as equivalent to net assets – miscarriage of process of formation of opinion. Income Tax Assessment Act 1936 (Cth) – ss 51(6), 51(7), 79D, 160AFD, 177A, 177D, 177C, 177E, 177F, 260 and Part IVA

WORDS AND PHRASES "dividend stripping"; "class of income"; "foreign source"; "an amount"; "carried on"; "scheme"; "tax benefit"; "the effect of"; "profits" Federal Commissioner of Taxation v Ryan (1998) 98 ATC 4323 – referred to Grey v Pearson (1857) 6 HLC 61 at 106; 10 ER 1216 – cited Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1980-1) 147 CLR 297 – discussed Corporate Affairs Commission (NSW) v Yuill (1991) 65 ALJR 500 – cited CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 – cited Saraswati v the Queen (1990-91) 172 CLR 1 – referred to