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advantage, via a depreciation allowance which reduced their liability to pay tax.”
Minority Decision
The minority in their dissent disagrees with majority on the points such as: the purpose of
the depreciation regime, the facts found by the Taxation Review Authority (TRA) and their
significance and the definition of “arrangement”
The minority agrees that there is an arrangement and that there is a tax advantage arising
from the arrangement. 181 Minority quote Richardson J's view in Challenge 182 that whether
or not the anti-avoidance provisions apply requires a consideration of the scheme and
purpose of the legislation. 183 The minority stated that the issue was whether depreciating
the cost of producing a film when that cost is met by the proceeds of non-recourse loan
which is not in fact applied to the cost of production is a depreciation claim which falls
within the purpose of the depreciation regime. 184 The minority's answer was “no”.
The minority stated the effect of the arrangement could not be reconciled with the
“statutory purpose of encouraging investment in the production of films”. 185 The minority
commented that they could not believe that if the cost of acquisition of the film was inflated
solely to qualify for a higher depreciation deduction, that this was the sort of cost that "the
statutory regime was intended to assist or encourage". 186 The minority’s view was that on
the facts of this case, the amount of each non-recourse loan had been presented to the
investors as a cost of production and as qualifying for depreciation on that basis. It was tax
avoidance “of a plainly undesirable kind and of a kind that cannot, in our opinion, be
reconciled with the statutory purpose of encouraging investment in the production of
films.” 187
181
Ibid, paras 87 and 88.
182
CIR v Challenge Corporation Ltd [1986] 2 NZLR 513.
183
Ibid para 61.
184
Peterson v CIR (2005) 22 NZTC p 19,115, para 65.
185 Ibid para 92.
186 Ibid para 9.
187 Ibid para 92.
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