The Federal Court has set aside the Commissioner’s decision on the basis on which copyright deductions could be claimed by the taxpayer and ordered that the matter be remitted to the Commissioner for re-determination in accordance with its own basis on which the deduction should be claimed.
The deductions were claimed by the taxpayer under both former Div 10B of the ITAA 1936 and the current provisions in Div 373 and 40 of the ITAA 1997 for the years 1998 to 2006.
The matter related to the purchase by the taxpayer of the Victorian state-owned electricity transmission business for some $2.5bn, which included copyright items, but without specifying any allocation of the purchase price to these or other assets.
The main issue before the Court was the interpretation of s 124R(5) of the ITAA 1936 for the purposes of determining the amount of the purchase price to be allocated to the copyright and, in particular, whether s 124R(5) was dependent upon the Commissioner’s discretion or whether it operated objectively in this case.
The Court found that the matter was to be determined objectively, by relevant valuation criteria, in these circumstances where the taxpayer acquired the assets in an arm’s length transaction. Having arrived at this conclusion, the Court then accepted the taxpayer’s preferred methodology of valuing the copyright and arrived at an amount of id=”mce_marker”62,711,808 – being the “mid-point” of the value for the copyright assets after relevant adjustments.
(SPI PowerNet Pty Ltd v FCT  FCA 261, Federal Court, Pagone J, 25 March 2014.)
[LTN 60, 28/3/14]