Tag: Lack of evidens

Kenya vs Beta Healthcare International Limited, February 2024, Tax Appeals Tribunal, Appeals No 866 of 2022 - [2024] KETAT 143 (KLR)

Kenya vs Beta Healthcare International Limited, February 2024, Tax Appeals Tribunal, Appeals No 866 of 2022 – [2024] KETAT 143 (KLR)

Following an audit of Beta Healthcare International Limited, a Kenyan subsidiary in the Aspen Healthcare Group, the tax authorities issued a notice of additional taxable income relating to controlled transactions, in which they had determined the arm’s length price for controlled transactions using the CUP method instead of the TNM-method as applied by the company. Beta Healthcare International Limited appealed to the Tax Appeals Tribunal, arguing that the tax authorities had failed in its characterisation of the company, failed to consider the comparability factors of the transactions and misapplied the transfer pricing guidelines. Decision of the Tax Appeals Tribunal The Tribunal dismissed the appeal and ruled in favour of the tax authorities. Excerpts “(…) 134. The Tribunal reviewed the parties’ pleadings and established that the Appellant attached the disputed information to its pleadings. However, the Respondent, both in its pleadings and orally at the hearing, urged that the information was never provided to it. Further, while the Appellant stated that ... Read more
US vs Coca Cola, November 2023, US Tax Court, T.C. Memo. 2023-135

US vs Coca Cola, November 2023, US Tax Court, T.C. Memo. 2023-135

In TC opinion of 18 November 2020 the US Tax Court agreed with the US tax authorities (IRS) that Coca-Cola’s US-based income should be increased by $9 billion in a dispute over royalties from its foreign-based licensees. The principal holding was that the Commissioner did not abuse his discretion in reallocating income to Coca-Cola using a “comparable profits method” (TNMM) that treated independent Coca-Cola bottlers as comparable parties. However, one question remained. Coca-Colas’s Brazilian subsidiary paid no actual royalties to Coca-Cola during 2007–2009. Rather, it compensated Coca-Cola for use of its intangibles by paying dividends of $886,823,232. The court held that the Brazilian subsidiary’s arm’s-length royalty obligation for 2007–2009 was actually about $1.768 billion, as determined by the IRS. But the court held that the dividends remitted in place of royalties should be deducted from that sum. This offset reduces the net transfer pricing adjustment to petitioner from the Brazilian supply point to about $882 million. Thus, the issue to ... Read more
Indonesia vs PT Tech Data Advanced Solutions Indonesia, November 2021, Supreme Court, Case No. 2747/B/PK/Pjk/2021

Indonesia vs PT Tech Data Advanced Solutions Indonesia, November 2021, Supreme Court, Case No. 2747/B/PK/Pjk/2021

PT Tech Data Advanced Solutions Indonesia (formerly PT AVnet Datamation Solutions) had paid service fees to a related party in FY 2013. Following an audit, the tax authorities issued an assessment where these service fees, among other issues, was found to be unsubstantiated by the evidence provided by the company. The Company disagreed and brought the case to court. Judgement of the Supreme Court The Supreme Court upheld the decision of the Tax authorities. Excerpts. “That the reasons for the Appellant’s request for reconsideration cannot be justified, because the decision of the Tax Court which partially granted the Appellant’s appeal against the Appellant’s Decision Number KEP-01458/KEB/WPJ.07/2017, dated 5 September 2017, concerning Taxpayer’s Objection to the Tax Assessment Letter for Underpayment of Income Tax for the Tax Year 2013, Number 00005/206/13/056/16, dated 8 June 2016, in the name of the Appellant, NPWP 21.120.445.8- 056.000, so that the calculation of Income Tax for the Tax Year 2013 to be paid is Rp ... Read more
Indonesia vs PT PK Manufacturing Indonesia, March 2021, Supreme Court, Case No. 131/B/PK/Pjk/2021

Indonesia vs PT PK Manufacturing Indonesia, March 2021, Supreme Court, Case No. 131/B/PK/Pjk/2021

PT PK manufacturing Ltd was a contract manufacturer of cabins for excavators for the Japanese parent, Press Kogyo Co. Ltd. Japan, and paid royalties for “use of IP”. Following an audit, the tax authorities issued an assessment where deductions for royalty payments were disallowed due to lack of documentation for ownership to said IP. Furthermore, the tax authorities did not see any economic benefit for the contract manufacturer in paying the royalties, as it had been continuously loss making. The Company disagreed and brought the case to court. The Tax Court ruled in favor of the tax authorities. According to a decision issued 4 December 2019 the existence and ownership to the Intellectual Property in question had not been sufficiently documented. An request for review was then filed with the Supreme Court. Judgement of the Supreme Court The Supreme Court dismissed the request and upheld the decision of the Tax court. “(…) Therefore, the object of the dispute in the ... Read more
France vs. SMAP, March 2021, Administrative Court of Appeal, Case No. 19VE01161

France vs. SMAP, March 2021, Administrative Court of Appeal, Case No. 19VE01161

The French company SMAP carries out activities in the area of advertising management and organisation of trade fairs. Following an audit of the company for FY 2008 to 2011 and assessment was issued where deduction of costs for certain intra group “services” had been denied, resulting in additional value added tax, corporate income tax surcharges, apprenticeship tax and business value added tax. The company held that the tax administration had disregarded fiscal procedures, and that the reality of the services – and deductibility of the costs – cannot be disregarded on mere presumptions. Decision of the Court The Appeal of SARL SMAP was rejected by the Court. “Firstly, the administration notes that by virtue of a Lebanese legislative decree n° 46 of 24th June 1983, companies governed by Lebanese law … carrying out their essential activities outside the national territory are considered as offshore companies and as such benefit from a privileged tax regime. In particular, Article 4 of this ... Read more
Tanzania vs Alliance One Tobacco T. Ltd, August 2019, Court of Appeal, Case No.118 of 2018, TZCA 208

Tanzania vs Alliance One Tobacco T. Ltd, August 2019, Court of Appeal, Case No.118 of 2018, TZCA 208

In 2005 the tax authorities conducted an audit of Alliance One Tobacco T. Ltd and on that basis issued a notices of assessment for FY 2003 and 2004. In 2011 the tax authorities conducted another audit for the years of income 2009 and 2010 and issued an additional assessment. In the assessments, the tax authorities disallowed several corporate tax items relating to capital expenditure, inventory costs, loss of input stock and bad debt written off. Moreover, a significant transfer pricing adjustment was made on the price from Alliance One Tobacco to its sister company Alliance One International AGA. Judgement of the Court of Appeal The court ruled in favour of the tax authorities. “...in view of the reasons we have stated above with respect to the sole ground of appeal, we have to conclude that this appeal is bound to fail.” The court observed that: “In the circumstances, if the intention of the appellant from the outset was to challenge the ... Read more