Federal Court hands down decision in “son of South Steyne” case; update on appeal in “son of holdback”

On Thursday last week the Federal Court handed down its decision in MBI Properties Pty Ltd v Commissioner of Taxation [2013] FCA 56 where the Court found that the applicant had an increasing adjustment under Division 135 in respect of the acquisition of a going concern, being the acquisition of residential premises subject to a lease. The Court found that Division 135 applied because the applicant intended that the supplies made through the enterprise to which the supply of the going concern relates will be supplies that are neither taxable nor GST free supplies. The Court rejected the applicant’s submission that the section only applied where the recipient of the going concern itself intended to make supplies that were neither taxable nor GST free.

The decision is related to the decision of the Federal Court in South Steyne Hotel Pty Ltd v Commissioner of Taxation [2009] FCA 13 (and on appeal [2009] FCAFC 155).

My analysis of the decision can be found here.

Update on appeal in AP Group

On 6 February 2013 there was a callover for the appeal by the taxpayer and the cross-appeal by the Commissioner in A P Group and Commissioner of Taxation. The appeal is to be heard by a Full Court rather than by a single judge. As the Tribunal was constituted by a Presidential Member, in appropriate matters the Chief Justice can order that the matter be heard by a Full Court rather than a single Judge. Both parties had been asked to provide reasons why the matter should be heard by a Full Court.

The appeal is listed for hearing in the sittings commencing 29 April 2013 with an estimate of 2 days. This will be an important appeal as it will give the Full Court an opportunity to grapple with the issue of the proper nexus between “supply” and “consideration”.

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