Issue: The issue in this case deals with the moving cost of machinery to a new site as permissible deduction under Section 8-1 of the Income Tax Assessment Act 1997.
Regulations: The needed legislations are discussed below:
Application: As per Section 8-1 of the Income Tax Assessment Act 1997, the generated cost while moving the machinery to a new site is capital expenditure. In this case, the charged depreciation increases the cost of the machinery while moving to a new site. As the cost incurred from moving the machinery to a new site is due to a small change, it will be allowable for deduction under Section 8-1 of the Income Tax Assessment Act 1997. In this case, the main reason for allowable deduction is that the cost is incurred for the carrying on the daily business activities.
The case of British Insulated & Helsby Cables involves the fact that there was an increase in business benefits due to the shift of shift of depreciable assets in the business premises. As per Taxation Ruling of TD 93/126, the cost of installing the machinery and starting the business needs to be treated as revenue as it increases the business benefits. Thus, in case of the provided situation, the cost to move the machinery will be treated as capital expenditure and is allowed for permissible deduction.
From the above discussion, it can be concluded that the cost to move the machinery is capital expenses in nature and will be subject to allowable deduction as per Section 8-1 of the Income Tax Assessment Act 1997.
Issue: The issue covers the topic to affect the insurance cover by the revaluation of assets will subject to allowable deduction under Section 8-1 of the Income Tax Assessment Act 1997.
Regulations: The needed legislation is Section 8-1 of the Income Tax Assessment Act 1997.
Application: The provided situation proves that the expenditure has association with the fixed cost. Thus, in the process to determine the amount of deduction, it is required to determine the fact that whether the mentioned expenditure has generated out of the asset revaluation that increases the revenue of the company or the expenditure has incurred for the protection of the asset. In case protecting the assets is repetitive in nature, then it will be subject to allowable deduction as per Section 8-1 of the Income Tax Assessment Act 1997. In the provided scenario, the evaluation of assets to affect the insurance cover will be treated as permissible deduction for its repetitive nature of occurrence.
From the above discussion, it can be concluded that the cost of the insurance cover contributes to allowable deduction as per Section 8-1 of the Income Tax Assessment Act 1997 due to the fact that the expenditure is occurring repetitively.
Issue: The issue in this case deals with the legal expenses to oppose the petition of winding up as permissible deduction under Section 8-1 of the Income Tax Assessment Act 1997.
Regulations: The needed regulations are provided below:
Application: As per Section 8-1 of the Income Tax Assessment Act 1997, the expenditure for winding up of businesses is incurred from business operations and thus, it leans to permissible deduction. As per Taxation ruling of ID 2004/367, legal cost is considered for deduction in case it is incurred for the generation of taxable incomes of the companies. The case of FC of T v Snowden and Wilson Pty Ltd (1958) states that the unusual expenses that are not occurred from the business operations will not be subject to allowable deduction. In this case, it needs to be mentioned that as the expenditures to oppose the ending up petition is capital in nature, it will not be subject to allowable deduction as it is not occurred out of the business operations of the company.
From the above discussion, it can be concluded that the cost to oppose the winding up of the organization is capital expenditure and it will not be subject to allowable deduction under Section 8-1 of the Income Tax Assessment Act 1997.
Issue: The issue deals with the legal expenses paid to the solicitor are whether subject to allowable deduction or not under Section 8-1 of the Income Tax Assessment Act 1997.
Regulations: The regulation in this case is FC of T v Snowden and Wilson Pty Ltd (1958).
Application: It is mentioned in Section 8-1 of the Income Tax Assessment Act 1997 that all the legal expenses incurred out of the business opera rations of the companies are subject to allowable deduction. However, exception of this fact can be seen in case of domestic and private expenses for the generation of non-chargeable and non-exempt incomes. In regards of the provided situation, it can be said that different kinds of legal fees might not be a subject to allowable deduction, as they do not have any association in the generation of assessable income of the company. In case of the provided case study, it needs to be mentioned that all the legal expenditures to the solicitor will be subject to allowable deduction as all these expenses are incurred for the generation of taxable income of the business organization under Section 8-1 of the Income Tax Assessment Act 1997.
Thus, based on the above discussion, it can be seen that all the legal expenditures paid to the solicitor are generated out of the business operations and they are paid for the generation of assessable income of the company. Thus, all these legal expenses to the solicitor will be subject to permissible deduction under Section 8-1 of the Income Tax Assessment Act 1997.
Issue: The main issue in this case deals with the determination of input tax credit of advertisement expenses for Big Bank Limited under GSTR Act 1999.
Regulations: The required legislations are shown below:
Application: The taxation law of Goods and Service taxation ruling of GSTR 2006/3 states about the guidelines related to the methods or techniques that needs to be implemented for the determination of input tax credit along with various administration charges for the financial suppliers and this is included under .
the new system of GST Act 1999. This particular section also states the extent regarding the credible purpose and this can be applicable under the sections of 11, 15 and 129 of the GST Act. All the registered taxable business entities and the about to be registered business entities are eligible for the application of this particular ruling and this is done in order to make acquire the financial suppliers that has already crossed the level of threshold limit of financial acquisition. In this case, it needs to be mentioned that the business entities need to be eligible for input tax credit or revised input tax credit.
As per the provided case study of Bib Bank Limited, it can be noticed that there is an expense of $1,650,000 related to the prior year’s advertisement expense that is inclusive of GST. Considering the present situation of Big Bank limited, it can be said that under the ruling of Goods and Service taxation ruling of GSTR 2006/3, the company is well eligible for the claiming of input tax credit or reduced input tax credit. According to the particular ruling, the registered or about to be registered companies are required to pay GST in order to make taxable financial supplies.
The regulation related to GST states that a business organization or an individual is required to pay GST for the financial supplies that has already made an acquisition or import. In this case, it needs to be mentioned that the business organizations or the individuals make financial supplies and the amount of financial supplies cross the limit of threshold, then those business enteritis and individuals will not be able to recover the whole amount of GST. However, under some specific circumstances, these business organizations or the individuals will be able to recover the amount of GST.
The case of Ronpibon Tin NL v. FC of T applied the doctrine of ‘extent’ and ‘to the extent’ for the analysis of the legislation of GST. The obligation in this case includes that the adopted method of apportion needs to be just and appropriate and it needs to be practical for the organizational contexts. The GST ruling under Paragraph 11-5 and 15-5 demands that in order to transform an acquisition a credible acquisition, the particular acquisition needs to be entirely or partly credible. Thus, it can be said that the concept of credible acquisition is important for GST.
As per the requirements of GST ruling under paragraph 11-5 and 15-5 (a), the acquisition needs to qualify as fully credible for the credible purpose in case the acquisition wants to be as credible importation. In case an acquisition is partly credible, then it is required to mention the degree of partial credibility of the acquisition. Thus, Subsection 15-25 states that the import will be considered as credible in case it is partly credible in purpose.
Apart from this, as per Section 11-15 or 15-10, in case a business entity makes supply for the purpose to claim input tax credit, that particular acquisition will be considered as credible acquisition. Thus, it needs to be mentioned that the advertisement expenditure of Big Bank Limited was for the intention of credible acquisition. Hence, based on GSTR ruling of 2006/3, Big Bank Limited has already crossed the financial threshold limit and the invoice related to the advertisement expenses of Big Bank Limited is eligible for the claiming of input tax credit or reduced input tax credit for the supplied made as a purpose of GST.
Conclusion: Thus, as per the above discussion, it can be concluded that under the regulation of GSTR ruling of 2006/3, Big Bank Limited will be able to claim input tax credit for the purpose of advertisement expenses as a part of credible acquisition.
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