LLC “B” appealed to the court with an administrative claim to the Main Department of the State Tax Service in Lviv region to declare illegal and cancel the tax notice-decision (hereinafter – TND), issued as a result of an unscheduled documentary on-site inspection of LLC “B” on relations with the counterparty that increased the amount of the monetary liability on the value added tax (further – VAT) to the company. The courts of first and appellate instance satisfied the claim. MD STS filed a cassation appeal. About the course of such a lawsuit – below.
In deciding the case, the court took into account the following:
- the courts found that LLC “B” (customer) and its counterparty (contractor) concluded a contract for the provision of services, in accordance with which the contractor provides services for the manufacture, installation, dismantling, maintenance of advertising images on advertising structures of the customer (own or leased), services for repair, manufacture, dismantling of advertising structures and advertising media. The courts stated that the provision of services by the contractor is confirmed by acts of delivery and acceptance of works, which detailed the type of services provided, their quantity and cost. The plaintiff paid for the services received, which was confirmed by the content of the inspection report and is not denied by the tax authority;
- the courts concluded that the business transactions between the plaintiff and the counterparty were documented and actually carried out for use in taxable transactions. The tax authority did not provide evidence that would refute the reality of such transactions, determine the absence of the plaintiff relevant settlement and other primary documents, the obligation to maintain and store which is provided by accounting rules, non-compliance of business operations with the goals and objectives of the plaintiff etc., which would indicate, individually or in combination, that the commission of such transactions was not due to reasonable economic reasons (business purposes);
- the position of the tax authority on the plaintiff's violation of tax legislation is based only on information obtained as a result of tax control of its counterparty's relations with other persons, and without any facts of fixing the violation, a conclusion is made about the unreality of business transactions with counterparty. At the same time, the legal relationship of the counterparty with third parties in supply chains with which the plaintiff did not enter into business relations in the absence of other objective and confirmed evidence of violation of tax law by the plaintiff, per se cannot indicate unrealistic business transactions of the taxpayer.
The Resolution of the Supreme Court of Ukraine of April 10, 2020 in case 813/3807/17: in the absence of any evidence in the case file that would indicate that the plaintiff's business transactions with the specified counterparty were aimed at obtaining unreasonable tax benefits, awareness of the payer regarding illegal nature of the enterprise in the supply chain, direct or indirect involvement in such illegal activities, the presence of deficiencies in the primary documents, etc. the courts of previous instances came to the correct conclusion about the illegality of the contested TND, based on the assumptions of the controlling authority and unproven circumstances. Dismiss the cassation appeal of MD STS body.
