Commissioner of Taxation v Noza Holdings Pty Ltd [2012] FCAFC 43

In the Federal Court decision of Commissioner of Taxation v Noza Holdings Pty Ltd [2012] FCAFC 43 handed down on the 28 March 2012, the Court affirmed the trial judge’s decision that Noza Holdings Pty Ltd was entitled to a deduction in the 2003 income year.

In 2001, ITW group entered into a series of complex transactions to centralise ownership of its intangibles. This involved the issuing of preference shares by companies within the group which including Noza as the head company of a MEC group in Australia and the later declaration and payment of dividends on those shares.

The issue concern section 25-90 of the Income Tax Assessment Act 1997, which provides for deductibility for losses or outgoings that would, absent s25-90, not be deductible under the general deduction provision as they were losses or outgoings incurred in deriving non assessable income. It was contended by the Commissioner that the entity had insufficient profits to pay the dividend when the declaration was made.

The Full Federal Court rejected this argument because a debt arose upon declaration of the dividend in November. It followed that the outgoing had been incurred for the purposes of s 25-90.

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