The Court of Appeal yesterday deferred back to the Inland Revenue Department an appeal by two Hutchison Port Holdings subsidiaries on a more than HK$1 billion tax case related to the company's investment in its Yantian port development in Shenzhen. The case, which goes back to 1994 when HIT Holdings was attempting to raise US$1.78 billion for its stake in Yantian International Container Terminals, involves the taxes payable on a complicated series of transactions between various Hutchison subsidiaries. Hutchison declined to comment. The court's judgment outlined how Hutchison conducted an elaborate circular transfer of money in order to generate the finances needed for the project, and in the end, two of the parties involved attempted to deduct interest payments from the taxable profits generated by the transactions. The Inland Revenue Department disallowed the deductions, and HIT Finance and Hongkong International Terminals, two of the units involved, took their appeal of the tax assessment to the Court of Appeal. The combined taxes owed by the two subsidiaries were assessed at more than HK$1 billion. The court pointed out weaknesses in several of the conclusions by the department's board of review while answering some questions raised by the appeal before passing the case back to the board.