Taxation Law Case Study Analysis

Running head: TAXATION LAW
TAXATION LAW
Name of the Student:
Name of the University:
Authors Note:

1TAXATION LAW
Table of Contents
Part A:..............................................................................................................................................2
Answer 1:.....................................................................................................................................2
Answer B:....................................................................................................................................6
PART B:..........................................................................................................................................7
Answer 1......................................................................................................................................7
Answer 2:.....................................................................................................................................8
Answer 3:.....................................................................................................................................9
References:....................................................................................................................................10

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Part A:
Answer 1:
Details for the case Arthur Murray (NSW) Pty Ltd V FCT (1965) 114 CLR 314
In the given scenario, it can be witnesses that the taxpayer was involved in carrying such
business, in which discounts were offered to the students for paying fees in advance for their
dancing lessons. Moreover, the discounts that were allowed to the students made them feel
encouraged so that they can pay the fees in advance (Picciotto 2015). The agreement that was
made between the students and taxpayer already showcased that no refund would be obtained.
The students would not get any refund for such tuition fess that is prepaid in nature. Moreover,
the taxpayer also transferred all such fees in the suspense account that were pre-paid in nature. It
was treated by the tax-payers as their unearned deposit in the form of untaught lessons accounts
(Chureemas 2017).
The taxpayers also transferred their adequate fees from their suspense to revenue account,
after the dance lessons were provided to the students. Moreover, from the given agreement, it is
also clear that the taxpayers are not required to refund the fees given in advance. In fact the
taxpayer has refunded all the students fees that were based on uncompleted lessons. In this case,
the advanced tuition fees are treated by the taxpayer as derived income. The prepaid tuition fees
were also not included within the assemble income of the tax-payer (Hemming and Tuske 2015).
Moreover, during the time of calculation for the assemble income; it was observed that the fees
was inclusive in the tax, for which tuition was conducted during that particular year. Moreover,
the tax commissioner was also involved during the calculation of the assessable income for

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receipt. Under Section 25 (1) of the ITA Act 1197, the prepaid tuition fees are calculated as the
assessable income.
About the case:
The tax commissioner and the taxpayer both were involved for the calculation of the
taxpayer’s assessable income. While the prepaid tuition fess is treated differently by both the
parties. From the perspective of the commissioner, advanced money should be considered as
assessable income. As per the organization, prepaid advance should not be regarded as the
assessable income. Henceforth, the issue took place before the court and needs to be resolved.
As It is also important to evaluate all the facts to ascertain whether the taxpayer’s assessable
income should be inclusive of the advanced or prepaid fees or not (Konvisarova, Samsonova and
Vorozhbit 2015).
Court’s Decision:
The decision made by the court came in the favor of the company and appeal made by the
commissioner of tax was dismissed. As per the statement of the court, the money that was
already paid and transferred into the company is not to be considered as the assessable income.
The prepaid fess is not to be calculated under assessable income unless the tuitions are actually
provided by the organization to its students (Chureemas, R., 2017). A similar case of Carden
(1938) 63 CLR 108 stated that all such issues related to the assessment of the income should be
helpful in determining the profit and should be gained by the taxpayer in a realizable form.
It was concluded that a rule is to be followed by high court, which revealed that if any
service fees that has been received in advanced but the service has not been yet provided then
such type of income shall not be assessed. Therefore, the high court declares that while making