The Federal Court has held that a taxpayer was not entitled to deduct a loss transferred to it from a related joint venture company in respect of a project to explore certain mining exploration tenements. This loss included part of a balancing adjustment deduction for “allowable capital expenditure” (ACE) claimed by the joint venture company pursuant to the relevant provisions in Div 330 of the ITAA 1997 that arose following the failure of the venture and the sale of the parties’ respective interests.
The Court disallowed the deduction essentially because the related joint venture company was not entitled to claim the ACE component of the deduction under Subdiv 330-J as it was not available in future years as the its operations had ceased by the 1999 year.
The Court also found that the Commissioner was not bound to allow the deduction by reason of a favourable private ruling issued to the joint-venture company essentially because the Ruling was not binding by reason of a relevant retrospective change to the law. However, in this regard, the Court was critical of the effect of retrospective legislation and in particular the way it may cause uncertainty in relation to private rulings previously issued.
(Pratt Holdings Proprietary Limited v FCT [2012] FCA 1075, Federal Court, Gordon J, 1 October 2012.)
[LTN 203, 19/10]