Tax-motivated transactions – duty of disclosure and right to deduction

Justices: Webster, Bull, Kallerud, Bergh, Thyness

An oil company under financial pressure had spent large amounts on seismic data, of which around two thirds were settled by way of credit from the supplier. The company claimed tax deduction for the entire purchase amount, including the supplier's credit, and received an exploration reimbursement from the State. The cash part of the payment to the supplier was financed by a loan on the security of the exploration reimbursement application. The company's general manager had been acquitted in the Court of Appeal of aggravated tax fraud, see section 12-2 cf. section 12-1 of the Tax Assessment Act 1980. When applying the deduction provision in section 6-1 of the Tax Act, the Supreme Court found like the Court of Appeal that possible tax-motivated transactions alone did not prevent that the connection requirement – the requirement of a connection between the costs and the future income – from being fulfilled. The so-called main purpose doctrine was thus not applicable. The Supreme Court also found with reference to Rt-1992-1588 that the taxpayer's duty of disclosure did not comprise the motivation for the transaction. The Court of Appeal had found that the doctrine of substance over form implied that no deduction was granted. This issue was not considered by the Supreme Court. The Public Prosecution Authority's appeal against the Court of Appeal's judgment was dismissed.

Read the whole judgment (Norwegian only)