Case: Australia and New Zealand Banking Group Ltd v Commissioner of Taxation [2003] FCA 1410 ; (2003) 137 FCR 1
Outcome: followed
An internal ATO email of 6 May 2004 responding to a Part IVA paper relating to Futuris commented of a paragraph in the position paper: "4. PARAGRAPH 4.2 In my opinion, this is one of the two matters covered in the response which is truly relevant to the argument of whether $82,950,088 should be included, under Part IVA , in Futuris' assessable income for the 1998 year of income in respect of the scheme defined in the Position Paper. At the Part IVA Panel meeting of 3 December 2003, the matter covered by this paragraph was raised with the Panel. The Panel advised the assessment should be made on the full amount of $82,950,088 and, depending on the outcome of the Division 19A issue, a compensating adjustment can be made at a later stage if necessary. No doubt the Panel came to this view in order to 'protect the Revenue'. In my opinion, a recent Federal Court case, Australian &amp; New Zealand Banking Group Ltd v Federal Commissioner of Taxation [2003] FCA 1410 , is relevant here. In that case, pursuant to section 39B of the Judiciary Act 1903 , the taxpayer contended that amended assessments that issued as a result of the application of Part IVA were invalid assessments because each of the amended assessments included an amount that had already been returned by the taxpayer as assessable income. The Court found against the taxpayer. I must point out that this decision is subject to appeal." (iv) A document entitled "Reasons for Decision" of 20 August 2004 noted: "9. Thus, in the absence of the First Scheme, immediately after the Bristile shares were transferred from Vockbay to Walshville, the indexed cost base of the Walshville shares to Futuris would probably have been $2. Consequently, I consider that as a result of the First Scheme being carried out, the indexed cost base of the Walshville shares to Futuris was increased by $82,950,088 (following the Division 19A adjustment) from $2 to $82,950,090 (for the purpose of this and the following paragraph, I am ignoring the $19,950,088 possible error in regard to the capital gain returned by Futuris on the float of Walshville that is now subject to appeal. This is in line with the recommendation made by the Part IVA Panel at its meeting of 3 December 2003 refer to para. 34 below)." The par 34 referred to reflects the email comment in (iii) above though with the additional observation: "Obviously, we will not pursue recovery for both amounts of tax, penalty and 170AA interest/general interest charge involved with the two $19,950,088 adjustments." The "Reasons" went on to consider the making of a compensating adjustment under s 177F(3) if a Part IVA assessment was issued for the full amount of $82,950,088 even though the First Amended Assessment included the $19,950,088. It noted: "The Panel recommended that the Part IVA assessment should be made on the full amount of $82,950,088 and, depending on the ultimate outcome of the Division 19A issue, a compensating adjustment can be made if necessary. No doubt, the Panel came to this decision to protect the Revenue. If, as I recommend, an amended assessment issues including an amount under Part IVA of $82,950,088, then obviously we would only pursue payment of the tax, penalty and 170AA interest/general interest charge involved with one of the two $19,950,088 adjustments. Futuris has already paid half of the tax, penalty and 170AA interest/general interest charge involved with the $19,950,088 Division 19A adjustment. The Division 19A amended assessment is currently subject to appeal..." (v) Comments reflecting those in the above "Reasons" were repeated in a document entitled "ATO Final Audit Report" with the following recommendations being made that the Commissioner: "(a) determine under subsection 177F(1) that $82,950,090 be included in the assessable income of Futuris for the 1998 year of income; (b) determine under subsection 177F(2) that $82,950,090 be deemed to be included in the assessable income of Futuris for the 1998 year of income under subsection 160ZO(1); and (c) at this stage does not determine under subsection 177F(3) that any compensating adjustments be made to the assessable income of Futuris for the 1998 year of income any such determination/s should be made when the Part IVA and Division 19A matters have been finalised." I would note in passing that the making of a s 177F(1) determination forms part of the "making of an assessment" for the purposes of s 177(1) of the Act: see Australia and New Zealand Banking Group Ltd v Commissioner of Taxation [2003] FCA 1410 ; (2003) 137 FCR 1 at [32] (" ANZ Banking Group "). I would also note that the Notices of the First Amended Assessment and of the Second Amended Assessment have been produced in this proceeding.