Rataplan Pty Ltd v Commissioner of Taxation [2004] FCA 920

FEDERAL COURT OF AUSTRALIA

Rataplan Pty Ltd v Commissioner of Taxation

[2004] FCA 920

INCOME TAX – allowable deductions – Australian parent company loaned substantial sums to Texan subsidiary – parent company resolved that total balance of the loans be capitalised by making additional contribution to share capital of Texan subsidiary – book entries in each company reflected that conversion transaction – before conversion transaction, Texan subsidiary's liabilities greatly exceeded the value of its assets – conversion transaction resulted in value of its assets exceeding its liabilities by relatively modest amount – whether loss incurred as a result of "disposal or redemption" of a "traditional security" – proper law of the contracts pursuant to which the loans were made – whether a different proper law applied to the conversion transaction – whether under Texan law the conversion transaction would amount to an effective waiver by the Australian parent company – conflicting expert evidence on Texan law – how that factual dispute should be resolved – losses transferred to Australian subsidiaries – whether allowable deductions.

Income Tax Assessment Act 1936 (Cth), ss 70B, 79E(3), 80G(6), 26BB(1), 166A Bonython v The Commonwealth (1950) 81 CLR 486 referred to Akai Pty Ltd v The People's Insurance Co Ltd (1996) 188 CLR 418 applied Amin Rasheed Shipping Corporation v Kuwait Insurance Co [1984] AC 50 referred to Koitaki Para Rubber Estates Ltd v Federal Commissioner of Taxation (1941) 64 CLR 241 referred to European Bank Ltd v Citibank Ltd [2004] NSWCA 76 referred to Hamlyn & Co v Talisker Distillery [1894] AC 202 referred to Kahler v Midland Bank Ltd [1950] AC 24 referred to Re United Railways of the Havana v Regla Warehouses Ltd [1960] 1 Ch 52 applied Ashton Mining Ltd v Federal Commissioner of Taxation [2000] FCA 590 referred to The King v Regos and Morgan (1947) 74 CLR 613 referred to Re Banque des Marchands de Moscou (Koupetschesky) [1958] 1 Ch 182 applied