R & D Holdings Pty Ltd v Deputy Commissioner of Taxation

REASONS FOR JUDGMENT 1 In my reasons for decision in R & D Holdings Pty Ltd v Deputy Commissioner of Taxation [2006] FCA 981 I directed that the respondent bring in proposed short minutes of order to give effect to my reasons and that both parties make submissions on costs. Those reasons related to three separate appeals against objection decisions of the respondent Deputy Commissioner relating to the assessments issued to the applicant in the 1997, 1998 and 1999 income years respectively. In the event, the applicant was successful in the first of these but unsuccessful in the other two. The outstanding issue is how the incidence of costs should be borne in the circumstances. 2 The course I intend to take is to treat the three applications compositely, as there were issues common to each, and to make a common costs order in each. I have had regard in making such an order to the submissions that have been made by the parties on the questions of costs. Needless to say those submissions paint the outcomes of the principal proceedings in a light most favourable to the party in question's own cause. 3 It is the case, as I indicated in my earlier reasons, that the respondent has been predominantly successful in the three proceedings. That success in overall outcome was not wholly reflected in the level of success enjoyed in respect of the major legal issues raised in the proceedings. Equally it conceals the significance to be attributed to late won concessions from the Deputy Commissioner. 4 Success for costs purposes in the composite proceedings is to be discerned broadly in the balance of the issues upon which each party was successful and of the relative significance of those issues in the conduct of the trial itself and in the basis of each party's successes and losses on issues. It is, in my view, unhelpful and unnecessary in this matter to attempt to engage in some precise calculation and evaluation of time and effort expended on particular issues or on the significance of the dollar value of what was or was not found to be assessable income in the respective income years. 5 The issues that were dominant in the proceedings and in submissions were (a) the deductibility of interest in each of the three income years; (b) whether particular property was properly to be treated as trading stock in the 1998 income year; and (c) whether a group company purporting to transfer losses was satisfied the same business test of s 165-210 of the Income Tax Assessment Act 1997 (Cth) for the 1998 and 1999 income years. The applicant was successful on the first of these and was unsuccessful on the others. When one translates the significance of these issues and outcomes into the joint conduct of the three proceedings, I am satisfied that an award of costs which requires R & D Holdings to pay one half of the Deputy Commissioner's costs of the composite proceedings reflects the justice of the matter. 6 Accordingly, I will order - (A) in NSD 304 of 2004 that: