Romania vs SC A SRL, October 2016, Supreme Court, Case No 2651/2016

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At issue were tax deductions for expenses related to assets and expenses for services paid by SC A SRL to a related party, C SpA Italy.

Following an audit the tax authorities had issued an assessment, where certain costs were considered non deductible and where the cost of services had been determined by applying the transactional net margin method (TNMM).

The assessment was brought to the courts by SC A SRL.

Judgement of Supreme Court

The Supreme Court found the appeal of SC A SRL unfounded and decided in favor of the tax authorities.

As regards the criticisms made by the appellant concerning the use of the net transaction margin method used by the tax authorities and held by the judgment delivered by the court of first instance to be correct, the Supreme Court considers them to be unfounded.
As is apparent from the evidence adduced in the case, during the period examined by the tax inspection bodies, it was found that the transactions carried out by the appellant were transactions between related persons and that the price at which goods were transferred in transactions between related persons was the transfer price.
Since the appellant submitted an incomplete record of the transfer prices charged in relation to the affiliated person C Spa Italia, in the period 2007-2010, without justifying the transfer prices charged, the tax authorities proceeded in accordance with the provisions of Article 3 of OMFP No 222/2008 to adjust the transfer prices charged between the two companies pursuant to the provisions of Article 11(1) and (2) of Law No 571/2003 on the Fiscal Code, as subsequently amended and supplemented.
The trial judge correctly rejected the conclusions contained in the expert’s report with regard to the method of the net transaction margin used by the tax inspection bodies, the court of judicial review, in its analysis of that ground of appeal, points out that the purpose of the forensic technical expert’s report is to provide the court with an expert opinion on the documentation under examination, but the assessment of the evidence is made on the basis of the judge’s reasoning by correlating it with the other evidence adduced in the case and analysing it in the light of the legal rules applicable in the matter.
In that context, the High Court finds that the criticisms made by the appellant-appellant in relation to the method of the net trading margin used which led to the adjustment of the income from operations in relation to the affiliated company C Spa Italia in the amount of 35 246 585 lei are in fact unfounded, since the judgment under appeal correctly held that the contested administrative and fiscal acts by which additional tax liabilities were established representing income tax with ancillary charges for the period under review are lawful and well founded.
Having regard to all those considerations, the High Court, pursuant to Article 20(1) of Law No 554/2004 and Article 312(1) of the Code of Civil Procedure, will dismiss the appeal brought by the applicant, company A SRL, as unfounded.

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ROM Jurisprudence 2651-2016

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