Assignment: Taxation Law and Practice

Running head: TAXATION LAW AND PRACTICE
Taxation law and Practice
Name of the student:
Name of the university:
Table of Contents

2
TAXATION LAW AND PRACTICE
Part A...............................................................................................................................................1
Answer to Question i.......................................................................................................................1
Arthur Murray (NSW) Pty Ltd V FCT (1965) 114 CLR 314..........................................................1
a)......................................................................................................................................................2
(i)......................................................................................................................................................2
(ii)....................................................................................................................................................3
(b).....................................................................................................................................................4
(c )....................................................................................................................................................5
Answer to Question ii......................................................................................................................6
Part B...............................................................................................................................................6
Answer to Question i.......................................................................................................................6
Answer to question ii.......................................................................................................................7
Answer to Question iii.....................................................................................................................8
Reference.........................................................................................................................................9
Part A
Answer to question 1:
Arthur Murray (NSW) Pty Ltd V FCT (1965) 114 CLR 314

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TAXATION LAW AND PRACTICE
Facts of the case:
In the given case the taxpayer is giving dancing lesions to the students. The taxpayer
had different sessions for dancing training purpose. Fees received by the taxpayer is fully
paid for a selected period and such payment is non- refundable (Tran-Nam, Evans and
Lignier 2014). Further the taxpayer creates a separate suspense account under the head
“unearned deposit-untaught lessons account”. The fees transferred to revenue account only
when the taxpayer has provided the dancing classes. Further it is also observed that the
taxpayer refunded the tuition fees on which the student had not exercised the lessons.
After providing the dancing lesions the taxpayer recognised the tuition fees as
“income derived”. Therefore the assessable income does not include the advance payment
received by the taxpayer (Tan, Braithwaite and Reinhart 2016). The income arise on provided
dance lesions to the students, form part of calculation of assessable income by the tax payer.
Whereas the commissioner of tax treated the advance inflow as assessable income of the tax
payer in accordance of ITA Act 1197.

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TAXATION LAW AND PRACTICE
Issues of the case:
In the given case there is a contradiction between the commissioner of tax and the
taxpayer in respect of computation and treatment of pre-paid tuition pees received (Saad
2014). The proceedings in court had started on the issues of commissioner of tax who has
taken the pre-paid expenses as a revenue on receipt basis and therefore he included that in
assessable income as an ordinary income and the assesse only include the precedes on
provided classes.
Conclusion of the case:
The court assed that in the given case according to substance over from principal of
accounting standards the substance of any item will we given more importance than the form
of the item for that reason the pre-paid advances received in advance will not be included in
the assessable income. Though there is a contract between the parties to the contract that the
advance money paid is not refundable such practice is not followed by the taxpayer and there
are significant chances that the taxpayer will repay the dues to the students who has not attain
the classes. Therefore the taxpayer did not included the amount of tuition fees that have been
received in advance as ordinary income but recorded as a liability as there is a probability that
situations might occur where the taxpayer will return the advance money without forfeiting
that. The High court conclude that the accounting adjustment of the taxpayer is correct and
such adjustment hold reasonable grounds where the taxpayer might repay back the dues to the
student who did not attained the classes of dancing.