LLC “M” appealed to the court with an administrative claim to the Main Department of the State Tax Service in Chernihiv region, requesting to declare illegal and cancel the tax notice-decision TDN, made as a result of an unscheduled documentary on-site inspection of the company on the legality of tax consequences of relations with contractors. To substantiate the claims LLC “M” indicated that the conclusions made by the MD STS in the inspection report on the unreality of business transactions of LLC “M” with counterparties are based on assumptions. The courts upheld the claims. The MD STS filed a cassation appeal. More information about all the details of this lawsuit – below.
Considering the case, the court noted the following:
- the agreement on the provision of construction services has been concluded between LLC “M” (customer) and Counterparty-1 (contractor). To confirm the fulfillment of the terms of the agreement, the plaintiff provided: acts of services rendered, defective acts, balance sheet on account 632, payment orders. The plaintiff also purchased goods from a number of contractors, court evidence was provided;
- examining the primary and other documents provided by the plaintiff, the courts of previous instances concluded that they fully disclose the content of business transactions, confirm the plaintiff's assets flow, changes in equity and real results of business activities with counterparties;
- considering the dispute, the courts took into account that the conclusions of the State Tax Service are based solely on tax information on the plaintiff's counterparties, and not an analysis of the nature and consequences of business transactions that took place during the audit period, which, in turn, is not an unconditional ground to claim the absence of actual performance of the disputed agreements, provided that there are primary documents that refute such arguments. Moreover, the courts found that the goods, works and services purchased from the counterparties were used by the plaintiff within the framework of business activity for the purpose of making a profit;
- analyzing the arguments of the tax authority regarding the non-confirmation of the movement of goods along the supply chain, the courts found that such conclusions were based only on information obtained from the Unified Register of Tax Invoices (URTI), while business relations of the plaintiff's counterparties with third parties with whom the plaintiff had not entered into economic relations, in the absence of other objective and confirmed data on the plaintiff's violation of tax legislation, cannot, per se, be an independent and sufficient basis for the conclusion of the unreality of business relations of the plaintiff with its counterparties;
- the courts took into account the information contained in the letters of the plaintiff's counterparties, which confirm that the tax invoices issued on the basis of business transactions were duly registered in the URTI. And the quality certificate for the goods does not belong to the documents on which the accounting and tax accounting is based, and therefore non-preservation and failure of the plaintiff to provide these documents is not indisputable proof of the absence of business transaction.
The Resolution of the Supreme Court of Ukraine of October 21, 2020 in case 620/846/19: dismiss the cassation appeal of the State Tax Service.
