Gerard Cassegrain & Co Pty Ltd v Commissioner of Taxation [2007] FCA 415

FEDERAL COURT OF AUSTRALIA

Gerard Cassegrain & Co Pty Ltd v Commissioner of Taxation [2007] FCA 415

CAPITAL GAINS TAX – settlement of litigation for an undissected lump sum – side agreement between applicant company and its managing director that settlement sum was apportioned between them in respective amounts – result would be that capital gain by company would be less than it would otherwise be – company did not include amount agreed to be apportioned to its managing director as capital gain in its income tax return – identification of dispositions of assets in the settlement agreement – mixture of releases and contractual undertakings given by managing director, by company, and by both of them jointly and severally – whether s 160ZD(4) of Income Tax Assessment Act 1936 (Cth) operated to require determination of part of settlement sum that might reasonably be attributed to disposal of assets by taxpayer company – whether side agreement between company and managing director relevant – whether that agreement was a "sham" – whether Administrative Appeals Tribunal had erred by not correctly identifying the dispositions of assets by the company, by the managing director, and by both of them jointly and severally. Held: yes to this last question.

Income Tax Assessment Act 1936 (Cth) Part IIIA, ss 160M, 160ZD, 160ZN.

Advanced Prosthetic Centre Pty Ltd v Appliance & Limb Centre (Int) Pty Ltd (2002) 53 ATR 331 distinguished Allsop v Federal Commissioner of Taxation (1965) 113 CLR 341 distinguished Calverley v Green (1984) 155 CLR 242 distinguished Cassegrain v Cassegrain [1998] FCA 811 referred to Cranstoun v Federal Commissioner of Taxation (1984) 75 FLR 220 cited CSR Ltd v Federal Commissioner of Taxation (2000) 171 ALR 392 distinguished Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 211 ALR 101 cited McLaurin v Federal Commissioner of Taxation (1961) 104 CLR 381 distinguished Richard Walter Pty Ltd v Commissioner of Taxation (1996) 67 FCR 243 cited