Taxation laws : Sample Assignment

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

TAXATION LAW1
Table of Contents
Arthur Murray (NSW) Pty Ltd v FCT (1965)............................................................................2
The fact Situation:..................................................................................................................2
Issue:......................................................................................................................................3
Conclusion:............................................................................................................................3
Answer to A...............................................................................................................................4
Answer to (i):.........................................................................................................................4
Answer to question (ii):..........................................................................................................5
Answer to (iii):.......................................................................................................................6
Answer to question B:................................................................................................................7
Answer to Part B:.......................................................................................................................7
Answer to A:..........................................................................................................................7
Answer to B:..........................................................................................................................8
Answer to C:..........................................................................................................................8
Answer to D:..........................................................................................................................9
Answer to E:...........................................................................................................................9
Reference List:.........................................................................................................................11

TAXATION LAW2
Arthur Murray (NSW) Pty Ltd v FCT (1965)
The fact Situation:
Arthur Murry (N.S.W) Pty Ltd who is the taxpayer in the current situation was under
licence from the United States Company, carried out the business of providing lessons in
dancing in Sydney and Melbourne. Contract were signed by the pupils that came to take
lessons generally for five, ten or fifteen hours that was spread over the period of a year.
Payments were made either in the form of full upon the signing of the contract or in the form
of substantial deposits followed by the payment of instalment in the course of lesson (Hora
2014). The contract provision included that the contract was entire and not separable and the
students were held responsible for the entire amount of tuition that was set forth in the
contract. The contract was non-refundable and non-cancellable.
The agreement of the licence contained that any request for refund would be
entertained if the provision of request is justified (Kiprotich 2016). In spite of the terms
contained in the contracts the taxpayer during the year of income made certain refunds on
circumstances when the students failed to take the agreed number of dancing lessons and
provided a satisfactory explanations for discontinuation of the contract.
The taxpayer undertook the method of accounting that was considered as the
“accrual” or the “earnings method” where the entire sum of money that is received in
advance in form of advance payment for dancing lessons provided were not credited
immediately to the general revenue (Jones and Rhoades-Catanach 2013). Rather, these
amounts were credited to the account named as “Unearned deposits”-“Untaught Lessons
Account”. As soon as the each lessons were given the instructor used to enter the amount on
the record sheet that was maintained by him with the name of students.

TAXATION LAW3
Following the end of the every month a corresponding sum of amount that earned
from the lessons were transferred to the account known as “Earned Tuition Account”.
Therefore, the amount of money that was received by the taxpayer were not held as income
by the taxpayer as having been earned till the lesson is provided (Hart et al. 2017). Following
the year of income the consequences of the amount that was standing as the “Unearned
Deposits-Untaught Lesson Account” was to be carried forward to the next year.
The taxation commissioner issued an assessment of the amount in relation to the years
of income along with the taxable income, the sum that was eventually received by the
taxpayer in each of those income year instead of the amount that was presenting the taxpayers
bookkeeping scheme as having been received. The taxpayer raised the objection for
assessment that was not allowed by the commissioner and requested that the matter be
referred to the Board of review (Coleman et al. 2014). From the board review it was found
that the receipt of cash constituted gross proceeds in the business of the taxpayer and was
regarded as the part of the taxable income in the year in which the amount was received and
thus, upholding the assessments. The taxpayer however raised an appeal in the Australian
High Court.
Issue:
Had the taxpayer actually derived the prepaid amount of tuition fees during the year in
which it was the tuition was provided or the year in which the fees were received?
Conclusion:
The court of law relied on the principles of “Federal Commissioner of Taxation v
Flood (1953)” where the court of law declined to follow the accounting and the commercial
practice based on the question of what established an appropriate deduction from the income
(Graetz et al. 2015). In deciding the verdict in Arthur Murray, it was held that the amount that