In a decision handed down Fri 10.8.2012, the Full Federal Court dismissed the Commissioner’s appeal thereby confirming the September 2011 decision of the Federal Court in Visy Industries USA Pty Ltd v FCT [2011] FCA 1065 that the taxpayer was entitled to a deduction under s 8-1 of the ITAA 1997 for an “indemnity fee” of $27m paid as part of an internal hedge under a forward exchange contract (FEC) to deliver US dollars to a related finance company.
Visy USA submitted that the Forward Exchange Contract was a commercial transaction or an adventure in the nature of trade which it entered into in 1997 for the not insignificant purpose of profit-making. It also submitted that any profit which it might earn from the Contract would be assessable to it and any loss it incurred would be an allowable deduction. The Commissioner disagreed.
The Commissioner raised 12 grounds of appeal, concerning for example alleged errors by the primary judge in making findings of secondary fact, claimed errors by the primary judge in applying principles from authorities. The Full Federal Court dismissed all the grounds of appeal.
(Full Federal Court, a decision of Justices Edmonds, Greenwood & Robertson made on 10 August 2012 and reported at [2012] FCAFC 106)
[LTN 154, 10/8]