Unisys Corporation v Federal Commissioner of Taxation [2002] NSWSC 1115

New South Wales Supreme Court

CITATION : Unisys Corporation v Federal Commissioner of Taxation [2002] NSWSC 1115 FILE NUMBER(S) : SC 1527/02 HEARING DATE(S) : 18/11/02,19/11/02 JUDGMENT DATE : 4 December 2002

PARTIES : Unisys Corporation Inc - Plaintiff Federal Commissioner of Taxation - Defendant JUDGMENT OF : Gzell J

COUNSEL : Mr R F Edmonds SC/ Mr R Harper - Plaintiff Mr A H Slater QC/Mr R L Hamilton - Defendant SOLICITORS : Ernst & Young Law Australian Government Solicitor CATCHWORDS : TAXES AND DUTIES - Income Tax and related legislation - Royalties paid by resident to limited partnership of overseas partners deemed to be a resident - Royalties paid by partnership to overseas head licensor - Whether royalty withholding tax payable - Domestic legislation adopting international treaty provisions - Priniciples of construction - Acquisition of intellectual property rights and their sub-licence constitutes a business under international tax law - Place of conduct of business in overseas country by dependent agent not a permanent establishment - Agent not habitually exercising power to negotiate and conclude contracts - General authority "or" habitual exercise means general authority "and" habitual exercise. Income Tax Assessment Act 1936 (Cth) Income Tax Assessment Act 1968 Income Tax (International Agreements) Act 1968 Partnership Act 1892 LEGISLATION CITED : Income Tax (Dividends, Interest and Royalties Withholding Tax) Act 1974 (Cth) International Tax Agreements Act 1953 Taxation Laws Amendment Act (No. 2) Internal Revenue Code (US) Tax Laws Amendment Act (No. 5) 1992 Income Tax Ruling TR 2002/5 at par 16-par 24 CIC Insurance Ltd v Bankstown Football Club Ltd (1995)-1997) 187 CLR 348 at 408 Re Bolton; Ex parte Beane (1987) 162 CLR 514 at 518 Stag Line Ltd v Foscolo Mango & Co [1932] AC 328 at 350 James Buchanan Co Ltd v Babco Forwarding & Shipping (UK) Ltd [1978] AC 141 Shipping Corporation of India Ltd v Gamlen Chemical Co (Australasia) Pty Ltd (1980) 147 CLR 142 at 159 Reg v Chief Immigration Officer Exparte Bibi [1976] 1 WLR 979 at 984 Quazi v Quazi [1980] AC 744 at 808, 822 Fothergill v Monarch Airlines Ltd [1981] AC 251 at 276, 282, 290 The Commonwealth v Tasmania (The Tasmanian Dam Case) (1983) 158 CLR 1 at 222 Thiel v Federal Commissioner of Taxation (1990) 171 CLR 338 at 344, 349, 357 Sun Life Assurance Co of Canada v Pearson (1986) 59 TC 250 at 331 No. 630 v Minister National Revenue 59 BTC 300 Commissioner of Inland Revenue v JFP Energy Incorporated (1990) 12 NZTC 7176 Commissioner of Taxation v Lamesa Holding BV (1997) 77 FCR 597 at 604 Colonial Mutual Life Assurance Society Ltd v Federal Commissioner of Taxation (1946) 73 CLR 604 Producers' and Citizens' Co-operative Assurance Co Ltd v Federal Commissioner of Taxation (1956) 95 CLR 26 Australian Catholic Assurance Co Ltd v Federal Commissioner of Taxation (1959) 100 CLR 502 Chamber of Manufacturers Insurance Ltd v Federal Commissioner of Taxation (1984) 2 FCR 455 CMI Services Pty Ltd v Federal Commissioner of Taxation (1990) 94 CLR 153 RAC Insurance Pty Ltd v Federal Commissioner of Taxation (1990) 95 ALR 515 Employers' Mutual Indemnity Association Ltd v Federal Commissioner of Taxation (1991) 103 ALR 17 CASES CITED : GRE Insurance Ltd v Commissioner of Taxation (1992) 34 FCR 160 AGC (Investments) Ltd v Federal Commissioner of Taxation 92 ATC 4239 London Australia Investment Co Ltd v Federal Commissioner of Taxation (1976-1977) 138 CLR 106 Minister of National Revenue v Tara Exploration and Development Co Ltd (1972) 28 DLR (3d) 135 Commissioner of Taxes v Aktiebolaget Tetra Pak [1966 (4)] 198 Secretary for Inland Revenue v Dowing (1975) (4) SA Studebaker Corporation of Australasia Ltd v Commissioner of Taxation (NSW) (1921) 29 CLR 225 at 232-233 Premier Automatic Ticket Issuers Ltd v Federal Commissioner of Taxation (1933) 50 CLR 268 at 285-286 Tariff Reinsurance Ltd v Commissioner of Taxes (Vict) (1938) 59 CLR 194 at 205-206 Federal Commissioner of Taxation v United Aircraft Corporation (1943) 68 CLR 525 at 528-529, 533-535 Firestand Tyre & Rubber Co Ltd v Lewellin (1956-1957) 37 TC 111 at 142 Commissioner of Inland Revenue v Hang Seng Bank Ltd [1991] 1 AC 306 at 322-323 American Leaf Blending Co SDN BHD v Director-General of Inand Revenue (1979) AC 676 Esquire Nominees Ltd v Federal Commissioner of Taxation (1971-1973) 129 CLR 177 Brookton Co-operative Society Ltd v Federal Commissioner of Taxation (1980-1981) 147 CLR 441 at 469 Donroy v US 301 F 2d 200 (1962) "Klaus Vogel on Double Taxation Conventions", 3rd edition, Kluwer, London,1997 Huston J and Williams L, "Permanent Establishments a planning primer", Kluwer, Boston, 1993 Arvid A Skaar "Permanent Establishment Erosin of a Tax Treaty Principle", Kluwer, Boston, 1991 Vienna Convention on the Law of Treaties OECD draft Double Taxation Convention on Income and Capital OECD model Tax Convention on Income and Capital 1992 DECISION : Summons seeking declarations that no withholding tax payable dismissed with costs.