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Case:
Dr. fisc. 1998, 398 Case Société de distribution de chaleur de Meudon et Orléans (SDMO), Société Gras Savoye, Société Essences et Carburants de France, Société anonyme NSC Groupe
Date:
08 April 1998
Translated by:
Tony Weir
Copyright:
Professor Sir B. S. Markesinis

[The following question was referred to the Conseil d’État by the administrative tribunal of Orleans, seised of a demand by the Société de distribution de chaleur de Meudon et Orléans for a reduction in the increase in its company tax assessment for 1989: May the administration’s powers to prevent abuse of rights be deployed against a taxpayer who has applied literally an interpretation of the law contained in a circular published and not withdrawn at the time of the transactions in question?]

Article L.64 of the book on fiscal procedures concerns the prevention of abuse of rights and lays down that “Where documents conceal the true purpose of a contract or agreement by means of terms: .. which hide the realisation or transfer of assets or income… the administration may treat the transaction in question according to its true tenor. In the event of disagreement the taxpayer may submit the matter to the consultative committee for the prevention of abuses of right. The administration may likewise submit the matter to the committee, whose opinions will be published annually. The administration need not follow the opinion of the committee, but if it does not, it must prove that the charge is properly levied.” It follows from these provisions that if in the exercise of the powers they confer on it the administration can satisfy the burden of proof which rests on it, it can disregard even genuine documents submitted by the taxpayer if their sole purpose must have been to avoid or reduce the taxes otherwise payable;

Article L. 80A of the book of fiscal procedures lays down that “If a taxpayer is in good faith, taxes already assessed against him may not be raised on the basis of the administration’s interpretation of a fiscal text if it is shown that the interpretation underlying the original assessment had been accepted by the administration. If the taxpayer’s reading of a text is based on an interpretation which the administration had published in instructions or circulars, not withdrawn at the date of the transactions in question, the administration may not raise the taxes on the basis of any other interpretation.” It follows that these provisions offer a mechanism whereby even if the interpretation of a text given in instructions and circulars is contrary to law the taxpayer who invokes it may rely on it;

If the taxpayer was consciously following the interpretation contained in an instruction or circular rather than the legal text with which it conflicts, the administration is bound by the guarantee given to the taxpayer by article L. 80A of the book on fiscal procedures and may not revert to its powers to prevent abuses of the law by asserting that though the taxpayer had hewn to the very terms of the instruction or circular he had gone beyond the scope which the administration really intended its derogation from the tax law to have; in an appropriate case it can only question whether the taxpayer satisfied the conditions laid down in the instruction or circular for the application of the interpretation contained therein;

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