The Presidium of the Supreme Arbitration Court of the Russian Federation repealed the resolution of the Federal Arbitration Court of the Moscow Circuit in part concerning the refusal of CJSC “COMSTAR-Direct” to satisfy the application for the acknowledge

Pursuant to the decision of the District Inspectorate of the Federal Tax Service for large taxpayers № 7 (hereinafter – Inspectorate) of 30.03.2006 № 3, reached upon the results of an on-the-site tax inspection to check the observance of tax legislation by CJSC “COMSTAR-Direct (prior to change of name – CJSC “MTU-Intel”; hereinafter – Company), the Company was brought to book on charges of tax violations.

The Company filed a claim with the Arbitration Court of the City of Moscow for the acknowledgement of the decision of the Inspectorate and subsequent demand for payment of taxes as partially invalid.

The ruling of the court of the first instance of 21.02.2006 satisfied the claim in part.

The resolution of the Ninth Arbitration Appeals Court of 24.10.2006 upheld the above-mentioned ruling.

In its resolution of 02.02.2007, the Federal Arbitration Court of the Moscow Circuit altered the court acts on the matter, and refused to satisfy the Company’s claim in the part concerning the acknowledgement of the Inspectorate’s decision as illegal and the demands of the episode connected with the inclusion into expenses of sums of accumulated depreciation of objects of communication. The remaining parts of the court acts remained unchanged.

CJSC “COMSTAR-Direct” filed a claim with the Supreme Arbitration Court of the Russian Federation for a review of the matter in supervisory order.

The Determination of 13.07.2007 referred the matter to the Presidium of the Supreme Arbitration Court of the Russian Federation for a review of the resolution of the court of the cassational instance of 02.02.2007 in the order of supervision.

In its decision to revoke the resolution of the court of the cassational instance of 02.02.2007, the court collegium proceeded on the basis of the following.

The materials of the on-the-site inspection established that in 2003-2004 the Company commissioned and used a number of basic assets for the rendering of communications services. Moreover, permission for the exploitation of means of communication for the period in question was not received from the Administration of State Supervision for communications and information in the Russian Federation for the City of Moscow and the Moscow Region, although such permission is envisaged by the Rules of the commissioning into use of objects of communication, approved by the Ministry of Communications of Russia of 09.09.2001 № 113.

In the opinion of the Inspectorate, which was accepted by the court of the cassational instance, this circumstance did not allow the Company to commission into use objects of basic assets, and to claim accumulated depreciation on the basis of p.2 art. 259 TC RF.

However, pursuant to art. 252 TC RF, acceptable and documented expenses are deemed to be expenses (and in cases envisaged by art. 265 TC RF – losses) realized (borne) by the taxpayer.

Expenses connected with production and realization include costs of accumulated depreciation (sub-point 2 p. 2 art. 253 TC RF). Art. 256 TC RF establishes that property subject to accumulated depreciation is property held by the taxpayer under rights to the said property, is used by it for receipt of profit and the cost of which is extinguished through accumulated depreciation. Property subject to accumulated depreciation is deemed to be property with a period of useful exploitation exceeding 12 months and with an original value exceeding 10 000 rubles.

Pursuant to p. 2 art. 259 TC RF, accumulated depreciation of an object of accumulated depreciation commences with the first day of the month following the month in which the said object was commissioned.

Thus, the legality of relegating sums for accumulated depreciation to expenses is determined by the presence of costs for the acquisition (installation) of property, and also their compliance with criteria for accumulated depreciation.

Pursuant to ch. 25 TC RF, basic assets are relegated to property, subject to accumulated depreciation.

The addition of accumulated depreciation of an object of basic assets commences with the first day of the month following the month of commission of the said object according to book-keeping records.

The introduction of basic assets into the Company’s books is performed on the basis of an act of acceptance-transfer of basic assets (invoice) confirmed by the management of the organization, which is compiled for each inventoried object.

Consequently, entry into the Company books for 2003-2004 of communications installations on the basis of acts of acceptance-transfer of basic assets, compiled in accordance with unified form OC-1, is the requisite confirmation of the commissioning of the said assets into use.

Pursuant to the Order of the Ministry of Communications of the Russian Federation of 09.09.2002 № 113, introducing additional conditions for the commissioning of communications installations aimed at realization of the provisions of the Federal Law of 16.02.1995 № 15-FZ “On communications” and accompanying normative acts for state supervision of communications and information do not, in the view of the court collegium, lead to changes in the order of the inclusion of such objects of basic assets in the Company books and do not affect the tax consequences of the indicated actions.

Under such circumstances, the collegium of judges of the Supreme Arbitration Court of the Russian Federation concluded that the resolution of the Federal Arbitration Court of the Moscow Circuit of 02.02.2007 was based on an incorrect application of legal norms and violates the uniformity of interpretation and application of legal norms.

The Presidium of the Supreme Arbitration Court of the Russian Federation, having examined the case of CJSC «COMSTAR-Direct” at a hearing on 18.09.2007, accepted the arguments of the Company and revoked the resolution of the Federal Arbitration Court of the Moscow Circuit of 02.02.2007 in the part concerning the refusal of CJSC “COMSTAR-Direct” to satisfy the declaration on the acknowledgement as illegal the decisions of the Inspectorate regarding additional levying of tax on profit arising from the inclusion of the sum of accumulated deprecitation of communication objects into its expenses, retaining in this part the ruling of the court of the first instance of 21.02.2006 and the resolution of the Ninth Arbitration Appeals Court of 24.10.2006.

A.V. Popov, and advocate of the Law firm “YUST”, took part in the hearing of the Presidium of the Supreme Arbitration Court of the Russian Federation, together with representatives of CJSC “COMSTAR-Direct.”