A complex financial investment engineered by Deutsche Bank and Commonwealth Bank has gone awry for the parties, which must pay much more tax than planned on cash flows arising from the $1 billon scheme.The Federal Court late last month dismissed an application by Deutsche Asia Pacific Finance Inc seeking to overturn a ruling by the Australian Taxation Office that distribution were not subject to withholding tax. To simplify a complex scheme, Deutsche invested about $1.3 billion in CBA, with a shade more than $1 billion in the form of a deposit and $283 million in the form of a fixed rate loan.Deutsche provided a touch under $1 billion of the funding, sourced from entities headquartered in Germany and the United States. CBA provided $283 million of the funding itself.The two banks filtered the funding chain through two limited partnerships registered in New South Wales, one controlled by CBA and the second by Deutsche.Neither Deutsche nor CBA have responded to requests to clarify if there was any underlying economic purpose to the financing arrangement and the judgement by Richard Edmonds doesn't mention one.Instead the creation of tax savings for Deutsche Bank appears to be the goal.At issue in the court was whether the distributions (that is, interest payments on the deposit and loan) from CBA were exempt from withholding tax under tax treaties between Australia and the United States.Also relevant was whether the distributions were interest, or, as the court found, more akin to profits of the partnerships.Under the financing, one of the two partnerships (Luca LP) was already obliged to pay $22 million a year in income tax. The second partnership (Industrie LP) must pay withholding tax on annual distribution of $51 million to Deutsche Asia Pacific Finance.