The respondent submitted that the applicants should re-invest the relief in an asset of a like kind. The re-investment must be made within one year of the disposal. The Tribunal already noted that at the time the disposal took place the applicants still had time to re-invest in an asset of a like kind. The transfer of interests took place on the 21^st February 2012. The applicants had up to the 21^st February 2013 to re-invest in an asset of a like kind. The applicants closed their case on the 28^th November 2012. They had about three months remaining to reinvest in an asset of a like kind.   S. 54(1) (c) of the ITA requires the proceeds to be reinvested in an asset of a like kind within one year from the date of disposal. S. 54 (3) mentions a replacement asset. The respondent argued that the use of proceeds to fund pre-existing obligations under the PSAs is not an acquisition of a replacement asset as required by S. 54(3) of the ITA.

The applicants are required to reinvest in an asset of a like kind by S. 54(1) (c) of the ITA. The word ‘like’ is defined by Oxford Advanced Learner’s Dictionary 6^th Edition p.66 as “similar to sb/sth…”  The word similar is not synonymous with the word same. One may have similar products that are not the same. A similar product may not be the same as a replacement. Using that definition, S. 54(1) (c) of the ITA requires a taxpayer to invest in an asset of a similar kind. It does not have to be the same asset.   In order to find out what assets of a like kind the applicants would be required to reinvest in, one would need to know what they sold to CNOOC and Total. A perusal of the PSAs, show that the applicants transferred their interests which were defined to be: “mean an undivided …  legal and beneficial participating interest in …., in and under the interest documents and all rights and obligations attaching thereto, including, but without limitation, such interest in the Interest Property and the Interest Data;” In totality, the interests sold included interests in data, documents and property. The applicants did not only sell their rights to explore and produce oil.

The Tribunal does not think that the applicants would be interested in re-investing in data or documents but in property. Under the PSAs ‘Interest Property’ was defined to mean: “means all of the property related to the Interests including any platforms, pipelines, plant, machinery, wells, facilities and all other offshore and onshore installations and structures.” Hence if the applicants were to invest in an asset similar to the interest property, they would be investing in an asset of a like kind.   Having taken note that the applicants had three months remaining to reinvest from November 2012, the Tribunal shall extend the time for the applicants to furnish the respondent with evidence of a reinvestment in a like kind to a tune of US$ 135,698,455.

Pages: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57