US-based Unisys Corporation had claimed that it was not obliged to pay withholding tax on royalties received through a licensing partnership with Unisys Australia, arguing that any royalty payments from the Unisys licensing partnership (ULP) arose as a result of the ULP's US business activities.

'The Court was told that Unisys Corporation sub-leased rooms to the partnership in the US and the only functions carried out in these rooms were the filing and retrieval of the partnership's records (approximately 100-200 pages of information),' the ATO statement explained, continuing:

'The Tax Office disputed whether the purpose of the licensing partnership was to conduct a business, and whether the business was carried on at or through the rooms leased to the partership in the US.'

Giving his verdict last week, Justice Gzell supported the ATO's challenge, explaining that although the rooms leased to the partnership in the US were at the disposal of the ULP, they could not be said to be the place 'at or through which' the partnership carried on its business.

'The storage and retrieval of documents could hardly constitute the carrying on of Unisys licensing partnership's business,' he ruled, ordering the corporation to pay both the royalty withholding tax for which it is liable in Australia and the ATO's costs.