(Solution) Australian Taxation Law : Assignment
Added on 2021-06-14
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Running head: TAXATION LAWTaxation LawName of the StudentName of the UniversityAuthors NoteCourse ID
TAXATION LAW1Arthur Murray (NSW) Pty Ltd v FCT (1965) 114 CLR 314Facts of the Case: The facts surrounding the case is relevant to the question that are few and simple.During the relevant years the company executed the business of providing course of tuition indancing and derived fees of variable amount each hour1. The case describes that the basictuition courses that was available comprised of 5, 15 or 30 hours of the private tuition to betaken following the appointment inside the span of one year. The payments related to thecourse fees was generally made in advance either as the lump sum or in the form ofinstalment with a variable amount of discount is allowed for making an immediate payment. In the books of the company the fees that were received were immediately creditedfollowing their receipt under the account named as the “Unearned Deposits- Untaught LessonAccount”. The amount from that account was corresponding to the lessons taught and was onperiodical basis transferred to the credit of the account named as the “Earned TuitionAccount”. The income tax returns were made by the company based on the footings that thefees that was received in advance of the tuition does not formed the part of the taxableincome during the time of receipt2. The commission following the relevant assessment onviewing the fees that was received in advance of the tuition had the nature of income in thehands of the recipient from the moment when it was received in the income year. 1Mumford, Ann.Taxing culture: towards a theory of tax collection law. Routledge, 2017.2Basu, Subhajit. "International Direct Taxation and E-Commerce: A Catalyst forReform."NUJS L. Rev.10 (2017): 19.
TAXATION LAW2The taxpayer treated prepaid the tuition fees in the form of income that is obtainedand the same was recorded in the books of accounts following the completion of the dancinglesson that was provided to the students3. Furthermore, there was no such inclusion of theprepaid sum of tuition fees in the taxable income of the taxpayer. However, during thecalculation of the taxable income, it was found that the fees which was involved in thecomputable proceeds during the year in which it was received. Hence, the taxationcommissioner held that the taxpayer obtained the assessable income in the form of prepaiddancing lessons charges during the year in which the course lesson was delivered or when thefees that were obtained. The receipt of prepaid tuition fees constituted an ordinary incomebased on “section 25 (1) of the ITAA 1997”4.Issue: The issue surrounding the case is that had the taxpayer obtained the advance amountof dues during the income year in which it was received? The issue surrounding the caserequired the vital assessment of the fact whether the taxable income of the taxpayerconstituted a prepaid tuition fees? Conclusion: The objective of the case was to understand whether the income that comes home tothe taxpayer in the form of prepaid was held as taxable. The court of law in its decision held3Savage, Michael, and Tim Callan. "Modelling the impact of direct and indirect taxes usingcomplementary datasets." (2015).4Asatryan, Zareh, Thushyanthan Baskaran, and Friedrich Heinemann. "The effect of directdemocracy on the level and structure of local taxes."Regional Science and UrbanEconomics65 (2017): 38-55.
TAXATION LAW3that the given the fees that is received in advance for the services but yet to be provided thensuch receipt of fees does not form the part of the taxable income5. The court of law held thatthere would be an agreement among the student and the taxpayer, to clearly mention that theno refund is possible against the prepaid fees. However, in the real situations of this case thefees were refunded by the taxpayer if no tuitions or lesson is provided to the student. Thecourt of law passed its verdict that the taxpayer did not included the tuition fees as the incomeduring the year of receipt since there was the probability of refunding the same if no tuition isprovided to the students by the taxpayer6. The taxation commissioner held that the tuition feesthat was obtained by the taxpayer does not carries the character of income until the servicesare rendered. Answer to A (i):Meaning “section 6-5 of the ITAA 1997” any sum that is reived by a person or onbehalf of the taxpayer, conversely the sum that is received must he regarded as income7.Furthermore, derivation of such income is required to be counted in the chargeable earningsof an individual in respect of “section 6-5 of the ITA Act 1997”. 5Becker, Johannes, E. Reimer, and A. Rust.Klaus Vogel on Double Taxation Conventions.Kluwer Law International, 2015.6Miller, Angharad, and Lynne Oats.Principles of international taxation. BloomsburyPublishing, 2016.7Lang, Michael.Introduction to the law of double taxation conventions. Linde VerlagGmbH, 2014.
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