On Sep. 11.2012, the 4th Chamber, 2nd Ordinary Panel, of the 1st Judgment Section of the CARF dismissed, by majority of votes, the appeal filed by Viação Joana D’Arc that discussed the assessment by the Brazilian Revenue Service in connection with the amortization of a goodwill consequent of the corporate restructuring carried out by the group.
In summary, Viação Joana D’Arc was assessed because it carried out the following operations with a supposed shelf company and reverse merger: (1) the holding, controlling Viação Joana D’Arc S/A, incorporated SODAM Empreendimentos e Participações S/A; (2) the same holding subscribed and paid up capital in SODAM Empreendimentos e Participações S/A, using shares of Viação Joana D’Arc S/A; (3) with the payment, SODAM Empreendimentos e Participações S/A recorded a goodwill based on the assessment report on the grounds of expected future profitability; and (4) SODAM Empreendimentos e Participações S/A (controlling company) was merged into Viação Joana D’Arc S/A (controlled company) and began to account the goodwill amortization.
The company alleged that the reason of the corporate restructuring in the group was to unite procedures, corporate governance, synergy of operations and management centralization so that the merger of SODAM Empreendimentos e Participações S/A only occurred to the extent that its purpose was not achieved.
Board member Leonardo Henrique Magalhães de Oliveira, reviewer of the proceeding, however, rejected the arguments that were presented and argued that, taking into account the conclusions established in the judgment of the Santander Case (Panel Decision n. 1402-00.802, of October 21.2011), the operations carried out by Viação Joana D’Arc lacked the two first basic premises to prove the business purposes of the operation, that would ensure the amortization of the premium, namely: (i) effective payment of the total cost of the acquisition, including the goodwill; (ii) accomplishment of the operations between non-associated parties; and (iii) legitimacy of the accounting assessment of the acquired company.
Finally, it should be mentioned that the CARF also reduced the ex officio fine from the percentage of 150% to 75%, because there was no demonstration of any “fraud to the law” that could support the imposition of the qualified fine.
The opinion handed down by the reviewer´s vote was accompanied by the other board members who participated of the judgment, and the decision was unanimous with respect to the portion of the goodwill amortization. The divergence in this case occurred in connection with (i) the reduction of the increased fine, and one vote was defeated, that of the board member who voted for upholding it; and (ii) the requirement of delinquent interest over the ex officio fine, the two board members who voted for excluding it were defeated.
Like other decisions handed down by the CARF, this decision reflects the position of the Administrative Court to the effect of rejecting the corporate restructuring of economic groups aimed solely and exclusively at producing a goodwill that could be amortized for the purposes of reducing the tax burden.
(Panel Decision n. 1402-001.180. Available at: <http://carf.fazenda.gov.br/sincon/public/pages/ConsultarJurisprudencia/listaJurisprudenciaCarf.jsf>. Access in: Jan. 2013).