Macquarie Group has been granted permission in the Federal Court to argue against the dismissal of an application affecting the way the bank accounts for salaries and bonuses relating to offshore work.Macquarie is trying to have a "U-turn" by the Australian Taxation Office scrubbed out. In 2012, this reversed a practice ruling that had been in force for eight years.Yesterday, Macquarie claimed Federal Court Justice Richard Edmonds erred when he ruled in favour of the ATO's 2012 U-turn, which did away with an established method of how to account for the remuneration of employees working in offshore operations.The case centres around the question of how to allocate, for tax purposes, the salaries and bonuses of employees who work for offshore operations, or part of whose work is for offshore operations.Offshore operations are taxed differently to onshore operations, and the relevant deductions, therefore, have to be treated differently.Instead of paying part of a person's salary at offshore rates and part at onshore rates, in order to create the required paper trail, the ATO agreed, in 2004, that Macquarie could simply allocate the expenses during their normal record keeping.The decision to allow record keeping for this purpose was made after an audit and a subsequent public statement to this effect by a deputy commissioner, Jim Killaly.However, in Practice Note PS LA 2011-27, the ATO reversed its position and refused to accept record keeping as complying with the regulations. It sought to apply the new rule retrospectively back to 2006, insisting the bank produce other evidence attesting to the correct allocation of salaries and bonuses between offshore and onshore duties.Macquarie approached the court seeking a review of the practice note, arguing that the ATO did have the power to tell taxpayers that they could use a particular method of record keeping.The ATO argued that the decision to allow record keeping as evidence was actually encouraging non-compliance with the law. It argued that it did not have the power.The court found against Macquarie, which appealed the decision, only to have the application dismissed by Justice Edmonds, sitting alone.The court will hand down its decision on yesterday's appeal at 4.30pm today.Macquarie also had a small setback early in proceedings when the bench denied an application for a suppression order on some of the evidence.Barrister Jason Potts argued that disclosure of some documents in the court book would reveal details of the tax affairs of Macquarie Bank."The nature of expenditures broken down into these categories, if disclosed, may be prejudicial to the ongoing operation of my client," he told the court."I have some difficulty about this," Justice John Middleton said, adding that the expenses related to 2006, which was "a little while ago". Middleton heard the application with Tony Pagone and Jennifer Davies.After a short consultation, the bench decided to turn down the suppression order.