Attorneys of the Law Firm "YUST" successfully represented “MMK-Trans” LLC in a dispute with a tax authority

“MMK-Trans” LLC applied to the Court of Arbitration of the City of Moscow requesting to rule partially invalid the decisions of the Inter-Regional Inspectorate № 6 for large taxpayers of the Federal Tax Service of Russia, alleging non-compliance of the tax authority’s decisions with the norms of the Tax Code of the Russian Federation and violation of rights of “MMK-Trans”. The Inspectorate had decided to bring “MMK-Trans” to responsibility for tax offence and had demanded payment of tax, duty, penalty and fine.

According to the decision, the tax authority concluded that the Company had understated its income originating from the lease agreements. It applied lease prices for the transactions that were sufficiently lower than the market prices, thus violating the principle of defining the lease value, which, in turn, caused the understatement. The tax authority alleged Article 40 of the Tax Code of the Russian Federation (the TCRF) and the expert opinion received while taking additional tax control measures as the grounds for the fact of unfounded lowering of the price.

The Court of Arbitration of the City of Moscow by its Ruling dated June 21, 2010, left unchanged by the decision of the Ninth Arbitration Court of Appeal dated September 23, 2010, upheld the Company’s claim.

The courts, upholding the Company’s claim, concluded that the tax authority had failed to prove the correlation between the parties to the transactions for taxation purposes, as well as that the relationship between these parties had influenced the results and the actual performance under the transactions. Besides, the courts discovered violations by the tax authority of the requirements of Article 40 of the TCRF at defining the price for lease of cisterns for taxation purposes. Also, the tax authority failed to prove that the price established by the Company did not correspond to the market level. The courts also pointed out that the tax authority had requested university professors to define the market value of the evaluation object, who were not evaluation subjects and, consequently, had no special knowledge necessary for establishing a market value. Therefore, the result (the expert opinion) of the evaluation conducted by such persons cannot be considered evidence within the requirements of Article 40 of the TCRF. The courts dismissed the expert opinion submitted by the Inspectorate as the conclusion of evaluation of the services’ market value for failing to meet the Federal standards of evaluation, which ruled out the tax authority’s possibility to use it as the ground for its conclusions.

The Federal Court of Arbitration for the Moscow District, by its Ruling on the case № А40-5244/10-20-66 dated January 25, 2011, left unchanged the court acts fully upholding the claims of “MMK-Trans” LLC and dismissing the cassational claim of the Inter-Regional Inspectorate № 6 for large taxpayers of the Federal Tax Service of Russia.

Maxim Rovinskiy, Attorney at the Firm, together with in-house counsel, represented the Company during the consideration of the above-stated dispute by the courts of arbitration.