Bus Transportation Activities Within A Cooperative – Court Of Appeal Decision
TURKISH COURT OF APPEALS
Board of Tax Appeals
Esas: 2002/ 519 Decision: 2003 / 335
Date of Decision: 13.06.2003
Summary of Request : On the grounds that the plaintiff left his transportation activity outside the knowledge of the tax office, did not keep books and did not submit declarations, a tax liability was established on behalf of the plaintiff as of 1.1.1995 and value added tax with ex officio fault and gross fault penalty was imposed for 1998.
Tekirdağ Tax Court dated 28.6.2001, E: 2000/292, K: 2001/267; rejected the lawsuit filed for the cancellation of the transaction for the establishment of tax liability and the abolition of the penalized assessment.
The Seventh Chamber of the Council of State, which examined the appeal request, issued a decision dated 25.12.2001 and numbered E: 2001/3656, K: With the decision numbered 2001/4105; the court decision states that there is no contradiction to the law in the rejection of the request for the annulment of the transaction to establish tax liability on behalf of the plaintiff as of 1.1.1995, the plaintiff abandoned the transportation activity and left the S. S… After he became a partner of the Passenger Transportation Motor Carriers Cooperative, transportation activities were carried out by the cooperative with the bus he owned, passenger tickets, passenger list documents and invoices printed on behalf of the cooperative by contracted printing houses were used during transportation, revenue, The expense/accounted and deductible value added tax is monitored in the books certified on behalf of the cooperative in terms of bus license plates, the value added tax declarations are submitted by the cooperative, and it is determined by a report issued by the plaintiff that he did not submit the value added tax declaration in the period in dispute, In this case, it is necessary to determine whether there is a difference between the value added tax declared by the cooperative regarding the bus used in transportation and the value added tax that the plaintiff should declare, in this respect, the court, by making a research from the tax office directorate and the cooperative, should determine whether the missing value added tax is paid in relation to the transportation activity carried out with the bus owned by the plaintiff.
The Tekirdağ Tax Court, which did not comply with the reversal decision, issued a decision dated 30.5.2002 and numbered E: 2002/179, K: With the decision numbered 2002/208; In the examination made about the S.S…. Passenger Transportation Motor Carriers Cooperative; 9.3. Established in 1990, the initial purpose of the cooperative was to market the transportation services of the members and to meet their needs related to these services, this purpose was changed to passenger transportation by road in the same year, it was understood that the plaintiff, who was a cooperative member, did not comply with the conditions stipulated in the articles of association, the transportation activity was carried out by the members under the name of the cooperative, therefore, it was understood that income and value added tax liability was established and a tax assessment was made on behalf of the cooperative members on the grounds that they were not considered to have left the business, It is clear that the plaintiff, who reserves all the dispositions of the use on the vehicle, carries out the activity independently and acts in order to provide some tax advantages that are not in accordance with the law under the name of a cooperative in order not to be an income taxpayer, does not submit declarations, does not pay value added tax, in this case, The fact that some of the taxes declared and paid by the cooperative and recorded as income to the treasury in this way have been paid by the plaintiff as a cooperative member will not affect the liability of the plaintiff and will not reduce the amount of tax to be paid, Article 20 of the Value Added Tax Law No. 3065 defines the tax base in delivery and service works as the price that constitutes the equivalent of these transactions, and the revenue obtained from these works is kept by the plaintiff in the 13. 6. 2000 dated report, in the 3rd article of this report, it was stated that it was determined from the examination of the legal books and documents of the cooperative for the years 1995, 1996, 1997 and 1998 that the revenues and expenses of the cooperative members in question were arranged in terms of bus license plates, and the table with the relevant documents was attached to the report, the amount of revenue determined by the minutes as the base of the value added tax for the period in question, and that it is appropriate not to take into account the value added tax deductions since it is clear that it does not comply with the legal rules such as not establishing a taxpayer in its own name, not keeping legal books, not issuing the documents belonging to the value added taxes to be deducted in its own name and not recording them in the legal books.
The decision of the Court of Appeal was appealed by the obliged party and the decision was reversed by claiming that the bus was operated by the cooperative, the income and expense documents were issued by the cooperative, and the value added tax declarations were submitted by the cooperative.
Summary of Defense: The request should be rejected.
Opinion of Ali Alpan, Audit Judge of the Council of State: In accordance with the Law No. 3065, the deduction of value added tax is possible in the presence of expense documents, and since the value added tax declaration required to be submitted in the period subject to the dispute was submitted by the cooperative, it is considered that the tax court’s insistence decision should be reversed by accepting the appeal request, considering that the assessment to be made again on behalf of the plaintiff will cause duplication.
Opinion of the Council of State Prosecutor Bilgin Arısan: The annulment of the transaction regarding the value added tax liability of the plaintiff established ex officio as of 1.1. 1.1. 1995 and the cancellation of the transaction related to the value added tax liability established ex officio as of 1995 and the abolition of the value added tax imposed ex officio for the year 1995 on behalf of the plaintiff and the defect and gross defect penalty imposed by the Tekirdağ Tax Court in the case filed with the request for the abolition of the value added tax imposed ex officio for the year 1995 and the defect and gross defect penalty imposed on the plaintiff, it is requested that the decision of the Tekirdağ Tax Court, which insists on its first decision by not complying with the decision of the 7th Chamber of the Council of State, which confirms the provision paragraph of the decision of the Tekirdağ Tax Court regarding the establishment of the tax liability and reverses the part related to the penalized value added tax, be reversed on appeal.
The dispute is related to the value added tax with defect and gross defect penalty imposed ex officio for the year 1995 due to the fact that the plaintiff, who is a partner of the carriers cooperative, obtained commercial income with the vehicle he operated under the name of the cooperative.
In Article 1 of the Value Added Tax Law No. 3065, it is ruled that the deliveries and services made within the framework of commercial activity constitute the subject of value added tax, and in Article 8, paragraph 1/a, it is ruled that in cases of delivery of goods and performance of services, those who perform these works are liable for value added tax.
In Article 20 of the Value Added Tax Law No. 3065, the base for delivery and service works is defined as the price that constitutes the equivalent of these transactions. The revenue obtained by the plaintiff, who carries out the passenger transportation activity by road with the vehicle he owns, was determined by the minutes dated 13.6.2000 kept by the plaintiff. In the 3rd article of this report, it was stated that during the examination of the legal books and documents of the cooperative for the years 1995, 1996, 1997 and 1998, it was determined that the revenues and expenses of the cooperative members were arranged in terms of bus license plates.
The plaintiff did not object to the amount of revenue in this table, but objected to the establishment of a taxpayer in his name. In this respect, since the amount of revenue determined by the minutes is the revenue obtained by the plaintiff due to this activity, it is appropriate to evaluate it as the base of the value added tax for the period subject to the lawsuit. In the tax inspection report, which is the basis of the assessment subject to the lawsuit, while determining the value added tax base, no assessment was made above the amount of revenue determined by the minutes, and the dues paid to the cooperative were deducted from the base.
The regulation introduced by Articles 29 to 36 of the Value Added Tax Law No. 3065 allows the taxpayers to deduct the value added tax calculated from the value added tax calculated over the taxable transactions made by the taxpayers from the value added tax calculated due to the deliveries and services made to them and shown in the invoices and similar documents, but the possibility of deduction is subject to the condition that the value added tax to be deducted must be shown separately on the purchase invoice or similar documents and customs receipt and these documents must be recorded in the legal books.
Taxpayers who deliver goods and render services collect the value added tax from the beneficiaries of these deliveries and services in addition to the cost of goods and services and pay it by submitting a declaration. The value added tax to be deducted is the value added tax paid by the taxpayer in addition to the price of goods and services due to the delivery of goods and performance of services.
However, it is not possible for taxpayers who do not comply with the legal conditions regarding the use of these rights to benefit from the right of deduction on the grounds that value added tax is imposed due to the delivery of goods and performance of services to them.
In the case, since it is clear that the plaintiff did not comply with the legal conditions such as not establishing a taxpayer in his own name, not keeping legal books, not keeping the legal books, not having the documents belonging to the value added taxes to be deducted in their own names and not being recorded in the legal books, it is appropriate that the defendant administration does not take into account the deductible value added taxes while making the assessment on behalf of the plaintiff.
While the plaintiff was engaged in transportation activities, on 31.12.1994, the plaintiff submitted a notice of cessation of work stating that he abandoned this activity, and in accordance with the contract made by the plaintiff with the S.S. … Passenger Transport Motor Carriers Cooperative, it was decided to operate the bus in question by the cooperative with the decision of the board of directors of the cooperative, and in the examination made about the cooperative, the purpose of the cooperative, which was established on 9.3. Established in 1990, the initial purpose of the cooperative was to market the transportation services of the members and to meet their needs related to these services, but this purpose was changed in the same year to carry out passenger transportation by road, and in the 3rd subparagraph of the 10th article of the cooperative’s articles of association under the title of partnership conditions, the condition of being a tradesman who has actually acquired the profession of transportation was introduced, In the same article, it is stated that the qualification stipulated in the third subparagraph will be proved by the document to be provided from the organizations related to the profession and the tax office, but the plaintiff, who is a cooperative partner, does not have this qualification, although he should have a taxpayer registration related to the transportation business based on the condition stipulated in the articles of association, although the articles of association of the cooperative stipulate that 15% of the positive income-expense difference should be set aside as reserve funds and 1% as promotion and education fund, contrary to the provisions of the law and the articles of association, no reserve funds were set aside, no distribution of risturn, i.e. income-expense difference was made, and 1% promotion fund was not set aside and not shown in the records, and accounts payable to members and accounts receivable from members were used in the accounting records instead of the cash account, It is understood that it was determined that the income and expenses were recorded separately in the current accounts of the partners in terms of bus license plates, in this case, the transportation activity was carried out by the partners under the name of the cooperative, therefore, it is understood that the income and value added tax liability was established on behalf of the cooperative partners on the grounds that they were deemed to have left the business, and the value added tax assessment with severe defect and defect penalty was made.
In the event, although the lease is mentioned in the transaction regarding the tax liability registration, the fact that the bus owned by the plaintiff was not rented and transferred to the cooperative is accepted both in the lawsuit petition and in the defense of the defendant administration.
In this case, it is not possible to mention that the cooperative carries out transportation activities. On the contrary, it should be accepted that the plaintiff, who reserves all the dispositions of the use on the vehicle, operates independently. As a matter of fact, while the income and expenditure claimed to have been obtained by the cooperative should be calculated as a total and the difference should be distributed in proportion to the transactions of the partners, this method stipulated by the law was not followed, separate accounts were kept for the partners in terms of bus license plates, accounting was made as if the partners were operating independently, and at this point, the cooperative followed a course of action that followed the income and expense distribution of the partners. As a natural consequence, the cooperative did not fulfill its obligations under the law and the articles of association, such as setting aside reserves and promotional funds. However, it is already an obligation stipulated in the articles of association that the members must be tradesmen who are actually engaged in transportation as a profession and prove this with a certificate from the tax office. The fact that there is a contract between the cooperative and the members for the operation of the buses by the cooperative, and that the passenger transportation authorization certificate, passenger tickets and other income and expense documents are issued in the name of the cooperative does not change the true nature of the event.
It is understood that the plaintiff did not have an income tax liability and acted in order to provide some tax advantages under the name of a cooperative, and in this way, he did not submit a declaration in his own name and did not pay value added tax. In accordance with the Value Added Tax Law, it is not possible to offset the taxes paid by the cooperative against the tax that the plaintiff must pay. The fact that some of the taxes declared and paid under the name of the cooperative and recorded as income to the treasury in this way have been paid by the plaintiff as a member of the cooperative, it is not possible for the plaintiff to reduce the amount of tax that must be paid due to his tax liability on his behalf. The difference between the value added tax declared by the cooperative and the total value added tax to be paid by the plaintiff and other shareholders is that when the value added tax to be paid by the cooperative is declared and paid, the value added tax to be deducted is deducted from the calculated value added tax, on the other hand, since the legal conditions are not fulfilled by the plaintiff, there is no legal possibility to deduct the value added tax to be deducted from the calculated value added tax, so there is no legal connection between the taxes paid by the cooperative and the taxes to be paid by the plaintiff.
In this case, since there is no contradiction to the law in the value added tax for the year 1995 and the defect and gross defect penalties imposed on the plaintiff, the Tekirdağ Tax Court insistence decision, which approved the penalized assessment subject to the lawsuit, is appropriate.
For the reasons explained, it is considered that the appeal request, which has no legal basis, should be rejected and the insistence decision of the Tekirdağ Tax Court should be approved.
ON BEHALF OF THE TURKISH NATION
The General Assembly of the Tax Appeals Departments of the Council of State, which rendered the judgment, discussed the necessity after examining the documents in the file:
The tax court rejected the lawsuit filed against the value added tax with defect and severe defect penalty imposed for the 1998 period based on the tax inspection report on behalf of the plaintiff.
In paragraph 1 of Article 1 of the Value Added Tax Law No. 3065, it is stipulated that the deliveries and services made within the framework of commercial, industrial, agricultural activities and self-employment activities are subject to value added tax, and in paragraph (a) of Article 8, it is stipulated that the value added taxpayer is those who make this transaction in cases of delivery of goods and performance of services.
In the case, the plaintiff, who was engaged in transportation activity but left this activity as of 31.12. As of 1994, the plaintiff, who deleted his taxpayer registration by leaving … After becoming a member of the Passenger Transportation Motor Carriers Cooperative, he carried out transportation activities with the bus he owned within the order and hours determined by the cooperative, during this activity, passenger tickets, passenger lists and invoices printed on behalf of the cooperative by contracted printing houses were used, revenue and expense accounts and deductible value added tax, It has been determined with the minutes issued before the plaintiff that the books certified in the name of the cooperative are monitored separately according to the bus license plates and that the value added tax declarations are submitted on behalf of and by the cooperative, and that the transportation is carried out by its partners, not by the cooperative, and it is understood that the taxpayer has been established on behalf of the plaintiff as of 1. 1.1995 and it was understood that value added tax with penalty was imposed.
It is in accordance with the above-mentioned rule of law that the plaintiff, who carries out the transportation activity within the cooperative, is the taxpayer of the value added tax in the face of the fact that he has carried out this activity on his own behalf. However, it is mandatory to determine whether there is a difference between the value added tax declared by the cooperative and the value added tax to be declared by the taxpayer.
The court, by conducting a research before the relevant tax office directorate and the cooperative, after determining whether the missing value added tax is paid in relation to the transportation activity carried out with the bus owned by the plaintiff during the disputed period, the decision to dismiss the case should be decided according to the result to be obtained, while the decision to dismiss the case was found to be contrary to the law.
CONCLUSION : For the reasons explained, the appeal request is accepted and the Tekirdağ Tax Court’s decision dated 30.5.2002, E: 2002/179, K: 2002/208 and it was decided on 13.6.2003 with majority of votes that there is no need to make a decision about the trial expenses since they will be covered in the decision to be given again.
VOTE AGAINST :
1 – It is undisputed that the records of the cooperative, of which the plaintiff is a shareholder, are organized according to the bus license plates, and the revenues and expenses of the vehicles belonging to each shareholder can be determined with the help of these records.
The ability of value added tax liable parties to deduct the tax incurred due to the commodities they deliver and the services they perform from the tax they calculate is based on the characteristics of the system and the purpose of keeping the tax burden on the final consumer. Although the deduction is subject to the condition that the tax incurred must be shown separately in the document and recorded in the books, and in the case, although the taxation was made on the revenue determined from these records according to the number of license plates of the vehicle belonging to each shareholder in the cooperative records, there was no contradiction to the law in accepting this amount as revenue, while the same records are deemed insufficient for the deduction of the tax incurred, contrary to the purpose of the lawmaker, will cause the said burden to remain on the plaintiff. In fact, there is no dispute that the tax is shown separately in the documents issued on behalf of the cooperative and that the documents are recorded in the cooperative books.
Since the decision of the tax court was reversed in order to determine whether the deficient value added tax was paid due to the transportation made by the plaintiff and to decide according to the result, we disagree with the opinion that the paragraph of the decision regarding the rejection of the case in this respect should also be reversed on the grounds that it is not possible to deduct the imposed tax, in order to investigate whether the imposed tax can be deducted without seeking formal conditions and to decide according to the result.
2 – From the examination of the file, it is understood that the plaintiff is engaged in transportation activities within the order and hours determined by the cooperative in which the plaintiff is a partner, passenger tickets, passenger lists and invoices printed on behalf of the cooperative are used during transportation, revenue and expense accounts and deductible value added tax are monitored separately according to bus license plates in the books certified on behalf of the cooperative and value added tax declarations are submitted by the cooperative, and there is no determination of the administration that the plaintiff has done any other transportation work unaware of the cooperative other than these account movements.
In this case, there is no determination that the plaintiff has paid deficient value added tax due to the transportation activity of the plaintiff, and the tax paid by the cooperative is requested from the plaintiff once again, since there is no tax loss, the tax assessment should be abandoned since it will cause duplication, but I disagree with the reasoning of the decision on the grounds that there is no accuracy in the court decision that rejects the case.