Colby Corporation Pty Ltd v Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Federal Court of Australia (WAD 359 of 2006)
Judgment date: 20 February 2008
Date published: 2 September 2008
Decision outcome: Appellant's appeal against the decision of the Administrative Appeals Tribunal dismissed.

Summary of decision:
Whether a contractor "purchased" fuel for use in a qualifying use under subsection 53(2) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA).

Overview of facts:
A drilling contractor consumed diesel fuel using its own machines in carrying out drilling operations for a mining company in the course of mining operations. The mining company supplied the fuel to the drilling contractor under a contract and for the purpose of carrying out the contracted activities. No separate charge was made by the mining company for the fuel. However, some contracts provided for alternative payment rates for the work done by the contractor depending on whether the mining company supplied the fuel or the contractor supplied its own fuel - although the mining company supplied the fuel in this instance. There was evidence that the contractor did not have to account for any residual fuel left in the fuel tanks of its drilling rigs at the end of a contract but that the amounts in question were insignificant. | The drilling contractor argued that it had "purchased" the fuel for the purposes s.53 of the EGCSA thus entitling it to off-road credits (and, therefore, energy credits) under the EGCSA. It argued that it acquired property in the fuel because it was allowed to retain residual fuel at the end of a contract. It argued also that it had provided consideration for the fuel by agreeing to accept a lower contract rate for its work than it would have accepted had it supplied its own fuel. | The Administrative Appeals Tribunal (AAT) found that the drilling contractor had not "purchased" the fuel and in particular that no mutual intention that property in the fuel was to pass from the mining company to the drilling contractor could be discerned from the contracts. | Issues decided by the court | For there to be a "purchase" of fuel there must be both consideration provided to the supplier and an intention that property in the fuel will pass from the supplier. | While a majority of the court was of the view that consideration for the fuel was provided, it was unanimous in holding that the proper construction of the relevant contracts was that there was no intention that property in the fuel would pass.

Issues decided:
For there to be a "purchase" of fuel there must be both consideration provided to the supplier and an intention that property in the fuel will pass from the supplier. While a majority of the court was of the view that consideration for the fuel was provided, it was unanimous in holding that the proper construction of the relevant contracts was that there was no intention that property in the fuel would pass.

ATO view of decision:
The decision supports the ATO view of the meaning of the word "purchase" in s.53 of the EGCSA. The ATO view is that for there to be a relevant "purchase" of fuel consideration is required and there must be an intention that property in the fuel pass to the party seeking to claim the relevant credits. In the above situation where a contractor is supplied fuel for the purposes of performing the contract, ownership of the fuel will not pass unless there is mutual intention of the parties that property in the fuel is to pass.

Administrative treatment:
Current practice affirmed. | Implications on current Public Rulings & Determinations | As above

Legislative references: Energy Grants (Credits) Scheme Act 2003 (EGCSA) 53(1) 53(2)
Case references: Comptroller-General of Customs v Woodlands Enterprises Pty Ltd [1996] 1 QdR 589 (1995) 128 FLR 113 Re Riviera Nautic Pty Ltd v FCT [2002] AATA 657 (2002) 50 ATR 1106 (2002) 68 ALD 581
Subject references: Energy Grants Off-road credits Off-road diesel fuel Product Grants and Benefits Purchase of fuel Mining operations