In the matter of Charles IFE Pty Ltd v Industry R&D Board , the Administrative Appeals Tribunal (AAT) assessed the decision of the IR&D Board that activities which Charles IFE Pty Ltd were undertaking did not satisfy the definition of R&D in Section 73B(1) of the Income Tax Assessment (ITA) Act 1936.
Charles IFE Pty Ltd, sought a review of a decision taken by the IR&D Board regarding their R&D activities.
The IR&D Board had found that activities known as Area 1 – front end collection system and grit removal (“Area 1”) met the definition of R&D in the ITA Act.
The decision ruled that those activities known as Area 2 – European designed anaerobic digester system with design adaptations to suit Australian conditions (“Area 2”), Area 3 – development of gas purification methods using gas scrubber (“Area 3”) and Area 4 – evaluation of the byproducts of the digester for suitability as fertiliser (“Area 4”) did not qualify as R&D..
The AAT ruled against the IR&D board, finding that:
Activities involved in Area 1, Area 2, Area 4 qualify as R&D under the ITA Act 1936.
Those parts of Area 3 which are integral parts of the process or plant of Area 1 or Area 2, that is, exclusive of the gas scrubbing tower and the co-generation system, meet the requirements for being described as R&D.
A project that meets the requirements of the legislation can be composed of a number of activities, any one of which may not itself meet the requirements, i.e. the project can be a mixture of activities, some of which do and some of which do not meet the legislative requirements.
It is the Tribunal’s view that the use of a plant for production purposes does not erase the R&D activities that resulted in its creation.