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New headnoted cases reported in NZ Tax Cases, 03 July 2014

Headnotes and text of the full judgment are now available for the following cases: 


  • • Fraudulent transaction results in unpaid GST - In a case where the Commissioner was left with a debt payable by an asset-less company, Paugra Holdings Ltd (in liq) (Paugra), the Court of Appeal has allowed an appeal by the liquidators of the company from a High Court decision and held that a caveat lodged by the liquidators against the title to a property should continue. The liquidators claimed that the company had a proprietary interest in this property as a result of the alleged fraud perpetrated by another company. The Court of Appeal found that Paugra had established a reasonably arguable case to support its claim for a proprietary interest in the property and remitted the application to the High Court for further consideration - Paugra Holdings Ltd (in liq) v Harvestfield Holdings Ltd (2014) 26 NZTC ¶21-070.

  • • Tax avoidance arrangement and penalties confirmed - The High Court has dismissed an appeal by the taxpayer company from a decision of the Taxation Review Authority (TRA) and held that elements of fraud did not preclude application of the tax avoidance provisions of the Income Tax Act. The High Court also dismissed the taxpayer's appeal against the TRA's decision that the taxpayer had taken an abusive tax position and confirmed the taxpayer's liability for a shortfall penalty for taking an abusive tax position - HC Services Ltd v C of IR (2014) 26 NZTC ¶21-071.

  • • Commissioner entitled to indemnity costs - The High Court has awarded indemnity costs in favour of the Commissioner on the basis that the taxpayer's case was hopeless from the outset. The Commissioner had successfully challenged the jurisdiction of the High Court to consider and determine proceedings brought against the Commissioner by the taxpayers - Ben Nevis Forestry Ventures Ltd v C of IR (2014) 26 NZTC ¶21-073.

  • • Commissioner gets summary judgment against Mr Russell - The High Court has granted the Commissioner's application for summary judgment against the taxpayer, Mr Russell, in the sum of $367,204,207.41. The High Court considered that the issue of whether or not the Commissioner ought to have entered into an instalment arrangement with the taxpayer was not relevant to the question of whether judgment ought to be entered for the amount of tax – C of IR v Russell (2014) 26 NZTC ¶21-074.

  • • Interlocutory applications granted pending appeal - In a case concerning the deregistration and subsequent reregistration of the National Council of Women of New Zealand Inc (NCWNZ) as a charitable entity, the High Court has granted interlocutory applications by NCWNZ to adduce further evidence and ordered service on the Attorney-General. The High Court also held that it was appropriate that the appeal relating to the effective date of the reregistration and a tax challenge be heard together rather than consolidate the proceedings - In re National Council of Women of New Zealand Inc; National Council of Women of New Zealand Inc v C of IR(2014) 26 NZTC ¶21-075.

  • • Applications for leave to appeal dismissed - The Supreme Court has dismissed an application for leave to appeal from a judgment of the Court of Appeal reported as Sovereign Assurance Co Ltd v C of IR (2013) 26 NZTC ¶21-056. The Court considered that the question raised by the case was one of application rather than principle and there was no appearance of a miscarriage of justice - Sovereign Assurance Co Ltd v C of IR (2014) 26 NZTC ¶21-072.

  • - In a case concerning the Commissioner's reconstruction powers in relation to a tax avoidance arrangement and time bar issues, the Supreme Court has dismissed an application for leave to appeal as there was no risk that a substantial miscarriage of justice may have occurred - Vinelight Nominees Ltd v C of IR(2014) 26 NZTC ¶21-076.

  • • Tax avoidance arrangement results in shortfall penalties - The Taxation Review Authority (TRA) has held that consideration received by the taxpayers on the sale of shares was in substitution for an amount which if a tax avoidance arrangement had not been entered into, the taxpayers would have derived as dividends in the 2007 or subsequent tax year. The TRA also found that the taxpayers were liable for a shortfall penalty for taking an abusive tax position - Case 4/2014 (2014) 26 NZTC ¶2-014.

  • • Commissioner's assessments deemed correct - Failure to follow the disputes procedures in the Tax Administration Act 1994 has resulted in a taxpayer being unable to challenge the Commissioner's assessments. The Commissioner's assessments were deemed correct and the taxpayer's notice of claim was struck out -Case 5/2014 (2014) 26 NZTC ¶2-015.

  • • Order made for discovery of documents - In a case where a taxpayer filed tax returns and claimed deductions for expenses exceeding income in two of the three years in dispute, the Taxation Review Authority has granted the Commissioner's application for discovery orders and made an order for discovery of certain documents - Case 6/2014 (2014) 26 NZTC ¶2-016.

  • • Taxpayer granted leave to proceed with challenge proceeding - The Taxation Review Authority has found that a taxpayer's failure to attend a directions hearing was due to a misunderstanding and granted the taxpayer leave to proceed with a challenge proceeding - Case 7/2014 (2014) 26 NZTC ¶2-017.