The tax authorities had adjusted the agreed prices of agricultural commodities transferred by ADM Argentina to a foreign related party.
Following receipt of the additional income assessment, ADM Argentina appealed to the Federal Tax Court.
The Federal Tax Court overturned the assessment. The court concluded that the adjustments made by the tax authorities were arbitrary because they were made only in respect of certain export transactions where the quoted price at the time of the transaction was lower than the quoted price at the time the goods were loaded. Furthermore, the transactions used by the tax authorities as external comparables were not valid for transfer pricing purposes because they suffered from significant comparability flaws and deficiencies.
The Court of Appeal later upheld the Federal Tax Court’s decision and the Supreme Court dismissed a final appeal by the tax authorities.
Excerpts
“On the basis of these premises, I consider that the extraordinary appeal is inadmissible and has been properly denied since, in order to validate the decision of the Tax Court, the a quo provided grounds of fact and evidence which, in my opinion, provide sufficient support for the decision, without the appellant’s discrepancies being effective to enable the exceptional remedy sought.
Indeed, the Chamber concluded that the products marketed by Nidera S.A. and O.M.H.H.S.A. differ from those exported by the plaintiff, both in their type and in their quantities and markets (countries) of destination and, therefore, they are not suitable to support the adjustment claimed by the tax authorities.
In this regard, it explained that, while Nidera S.A. exported to Cuba, Canada, United Kingdom, the Netherlands, Costa Rica, France, Chile and the United States of America, ADM Argentina S.A. exported to the United States of America.
In terms of products, it was established that both Nidera S.A. and O.M.H.S.A. traded refined soybean oil in bulk; soybean meal in bulk; refined sunflower oil; sunflower pellets in bulk; crude soybean oil and bread wheat, while in the same fiscal period, ADM Argentina S.A. sold Argentine corn in bulk; Argentine wheat in bulk; bran pellets, soybeans in bulk and sorghum in bulk. Regarding prices, the Chamber stated that it was established that in 76.67% of the transactions concluded by O.M.H.S.A. with independent third parties, the agreed price was closer to the price published by SAGPyA at the date of the agreement than at the date of shipment. It added that, measured in tonnes, 93.56% of O.M.H.H.S.A.’s exports to independent third parties corresponded to transactions concluded on dates on which the quotation price published by SAGPyA on the date of the contract was higher than the price published by the same body on the date of shipment.
In these circumstances, it is clear to me that the Treasury’s complaints, aimed at defending its adjustment made on the basis of comparable prices whose use was rejected by both the Tax Court and the Chamber, merely reflect a mere disagreement with the assessment of the evidential material used by the judges in the case, which is not covered by the charge of arbitrariness that the federal remedy alleges (Judgments: 280:320; 295:165; 297:333), whose exceptional nature does not tend to replace the judges when they decide issues that are their own (Judgments: 394:394: 295:356; 297:173), even when an error in the solution of the case is invoked (Judgments: 296:82, 445; 302:1030), reasons for which I think that the extraordinary appeal filed has been rightly denied.”
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