Words and Phrases - "indemnity"
Victoria Power Networks Pty Ltd v Commissioner of Taxation, [2019] FCA 77
Australian electricity distributors were entitled to require their customers to pay an amount equal to the estimated net economic burden to the distributors of hooking them up to electricity, i.e., where the the present value of the incremental cost exceeded the present value of the incremental revenue. Moshinsky J found that these “Customer Cash Contribution” amounts were ordinary income to the distributors as they were received “as an ordinary incident of their electricity distribution businesses” (para. 165).
The customer could instead choose to perform the work, in which case, on transferring the constructed assets to a distributor, the distributor would pay a rebate that did not represent the full cost of the work, so that again, the customer effectively bore the excess of the present value of the incremental cost over the present value of the incremental revenue (the “Customer Contribution”). In finding that a Customer Contribution was not ordinary income to the distributor, Moshinsky J stated: (para. 179):
[T]he Customer Contribution was not a payment or gain received by the Distributor; it was merely a component used in the calculation of the [rebate] amount to be paid [the other way] by the Distributor to the customer.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 9 - Nature of Income | a calculated reduction in the amount of a rebate required to be paid by a taxpayer was not income to it | 325 |