A long-running court battle between St George Bank and the Australian Taxation Office over the treatment of sell-back rights came to an end yesterday when the High Court overturned the decision of the Federal Court and ruled in favour of the tax office.The High Court found that St George shareholders were liable for tax on gains realised on the rights - a form of option.The issue goes back to 2001, when St George announced a $375 million share buy-back. The deal was that for every 20 shares held St George would issue one option (the sell-back right), which obliged the bank to buy back one share at a price that was higher than the current market price. Shareholders could elect to use the rights to sell their shares back to St George or trade the rights on the Australian Stock Exchange. Shareholders who bought extra rights on market increased the number of their shares St George would acquire.In cases where shareholders made no election, the rights were passed to Credit Suisse First Boston to sell on market, with the proceeds going to the shareholders. CSFB sold 11 million sell-back rights.The Australian Taxation Office funded the costs of each side of the case, used as a test case. The disputed gains of the shareholder selected for the test case, Helen McNeil, were trivial, but representative of the issue over whether the taxable portion of the rights was the increase in the value of the rights from the time of issue, or the whole amount realised.The ATO said the whole amount was taxable. St George, on behalf of McNeil, said it was the increase after issue only. About 80,000 other taxpayers were in a similar position.St George and McNeil got a ruling in her favour in the Federal Court, which was upheld on appeal before the Full Court.The High Court found for the ATO, ruling that the sell-back rights did not represent any portion of her existing rights as a shareholder but were generated by the execution of a buy-back scheme.