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Aussie Ltd Imports High Quality of Furniture

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Added on  2020-04-01

Aussie Ltd Imports High Quality of Furniture

   Added on 2020-04-01

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Solution 1:Issue:Aussie Ltd imports high quality of furniture at low cost and sold it to the Australian market and enjoying huge sales volume. That will affect the Australian furniture market and threatened the local employment market. For the protection of Australian domestic market Australian Government impose a high import duty on the annual sales of all imported furniture by Aussie Ltd. This high import duty affects the Aussie sales, and the company wants to repeal import duty.Law:Tax implication for Aussie Ltd. was Deductible Expenses of the Tax Payer. The Main provision for Taxpayer is the General Deduction Provision Section 8-1 of the ITAA 1997[ CITATION The12 \l1033 ]. The General deduction stated that 1.Gaining or producing assessable income,2.Necessarily carrying a business to gain or producing assessable income.A taxpayer will be entitled to a general deduction under section 8-1 for loss or outgoing; it must be satisfied either one of the two Positive limbs or one of the four negative limbs for getting tax deduction:The First positive limbApplies to all taxpayer whether they earn profit or loss.[ CITATION Fed50 \l 1033 ]. On the other hand,
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A Second positive limbApplied to only that taxpayer who carries business for profit or producing assessable income[ CITATION Fed58 \l 1033 ]. Negative limbs:-Capital or capital in nature-Private or domestic-Incurred gain exempt or non-exempt income-Prevented from being deducted by a specific provision of the income tax legislation.First negative limb:An expense that occurs in “once and for all” is capital expenses. An expense that occurs in recurring basis is revenue expenses. Cases that describe both expenses clearly are:[ CITATION Inc10 \l 1033 ]Application
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This case falls under the first negative limb. Expenses on advertising are the revenue nature expenses and are deductible under section 8-12(2)(a). This expense is recurring nature which recurs every year. Advertising of a product direct affect the sales of a product. (Bhagwati, 1954) In this case, construction of the building is of “revenue expenditure”. Expenses made for the expansion of business or a substantial replacement of equipment. Similarly in (British Insulated and Helsby Cables Ltd v. Atherton, 1925).ConclusionAfter studying all the cases, we conclude that Aussie Ltd had made expenditure on advertising which is “revenue expenditure” and it is deductible.REFERENCES:Vallambrosa Rubber Co Ltd v Farmer, (1910) 5 TC 529 (1 Div) (1910).British Insulated and Helsby Cables Ltd v. Atherton, [1926] AC 205 (House of Lords Dec 11, 1925).Federal Commissioner of Taxation v Green, 11 (High Court of Australia June 21, 1950).Assam Bengal Cement Co. Ltd vs The Commissioner, 1955 AIR 89, 1955 SCR (1) 876 (Lahore High Court Nov 11, 1954).
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