The Federal Court has granted the Commissioner’s application for an order, under s 7(1)(c) of the Foreign Evidence Act 1994, that a letter of request be sent to the judicial authorities of Israel to obtain the evidence of a bank employee there, as well as an order that the taxpayer provide to the Court a document signed by or on behalf of the taxpayer in aid of, and for transmission with, the letter of request.
The substantive proceeding before the Court is an application by the taxpayer against the Commissioner’s decision to disallow its objection against certain notices of assessment, amended assessments and penalty assessments. The objection decision related to assessments of the amount of taxable income of the taxpayer for the income years ending 30 June 1997 to 30 June 2008 inclusive. In issuing the assessments and disallowing the objection, the Commissioner claimed that certain deductions claimed by the taxpayer as interest and withholding tax on alleged loans made to the taxpayer by a bank based in Israel known as Bank Hapoalim should be disallowed and that a payment made pursuant to an alleged loan arrangement with this bank should be included as income.
The Court said the essential issue in dispute was the status of the arrangements between the taxpayer and Bank Hapoalim. The Commissioner’s position was that the available evidence was not sufficient to support the existence of the arrangements as loans and that the genuineness of the arrangements was in question. The Court said the Commissioner contended there were numerous indicia, which indicated that the arrangements should not be accepted as genuine arrangements.
The Commissioner sought to rely on s 7(1)(c) of the Foreign Evidence Act 1994, whereby the Court could, if it appeared in the interests of justice to do so, on an application by a person who is a party to the proceeding, make an order relating to a person outside Australia for issue of a letter of request to the judicial authorities of a foreign country to take the evidence of the person, or cause it to be taken. The Commissioner pointed out that the application before the Court was “somewhat unusual” in that he was seeking to obtain evidence from Bank Hapoalim, which if obtained, would support the taxpayer’s case rather than the Commissioner’s case. Nevertheless, the taxpayer opposed the making of the order sought.
The Federal Court said it was satisfied that it appeared “to be in the interests of justice to make an order in accordance with s 7(1)(c)” in the terms the Commissioner sought.
(BCI Finances Pty Limited v FCT [2012] FCA 855, Federal Court, Jagot J, 9 August 2012.)
[LTN 158, 16/8]