Following the decision of the Full Federal Court in Pratt Holdings Proprietary Limited v FCT [2013] FCAFC 82 (see above), the Court has now addressed a range of further issues left until after the determination of the primary tax issue: including that the trial judge erred in law in finding that the taxpayer or its tax agent failed to take reasonable care to comply with the tax laws and that it was therefore liable for additional tax under s 226G of the ITAA 1936 and that the trial judge ought to have found that it was reasonably arguable that the taxpayer was correct in treating LME1 as having available for transfer the tax losses that arose from deducting the s 330-85(h) ACE [Allowable Capital Expenditure].
In relation to the penalty imposed under s 226G of the 1936 Act, the Full Court unanimously held that the factual and legal premises upon which the trial judge based her conclusion on the s 226G issue was not otherwise challenged on appeal and in the absence of such challenge, it agreed with the trial judge’s conclusion. Likewise, the Full Court agreed with the trial judge’s reason for imposing the penalty under s 226K of the 1936 Act. Accordingly, in the light of these conclusions, the Full Court held that LME1’s entitlement to a balancing adjustment deduction under s 330-485(3) of the ITAA 1997 was not “reasonably arguable” and in consequence, nor was the taxpayer’s deduction under s 170-20 of that Act.
(Pratt Holdings Proprietary Limited v FCT (No 2) [2013] FCA 1118, Full Federal Court, Dowsett, Edmonds and Griffiths JJ, Full Federal Court, 21 August 2013.)
[LTN 161, 21/8/13]