Taxpayer Substantiation Fails: Can a Screenshot Not Uphold the Claim?  

In the dynamics of tax disputes, the issue surrounding the deductibility of expenses in calculating Corporate Income Tax (CIT/PPh Badan) is consistently a main focus. The Tax Court Decision regarding the case of PT KMHI provides a crucial affirmation on two matters: the principle of burden of proof and the fiscal treatment of specific types of costs. This decision serves as a stern reminder to Taxpayers (WP) that any argument against a fiscal correction, regardless of its nature, must be supported by strong, concrete evidence.

This dispute originated from a Positive Fiscal Adjustment correction by the DJP that PT KMHI disagreed with, amounting to over Rp9.1 billion. The primary corrections involved several expense accounts. However, this article will focus only on the expensing of Obsolate Stock Expense On Provision and Late Costs, which the DJP deemed to be a reserve or provision and thus non-deductible fiscally based on Article 9 paragraph (1) letter c of the Income Tax Law, and the correction on Government Duties & Levies, which the DJP argued lacked strong supporting documentation.

PT KMHI rejected the DJP’s assertion on both corrections, arguing that all expenses claimed by PT KMHI were in line with the 3M principle (Obtaining, Collecting, and Maintaining Income). However, the Panel concurred with the DJP. In its considerations, the Panel affirmed that the burden of proof to substantiate the truth and validity of the expenses rests entirely upon the Taxpayer.

The Panel confirmed that PT KMHI failed to substantiate the actual realization of the provision costs as claimed. Statements or screen shots from the company’s internal accounting system were considered by the Panel merely as recordings or entries of transaction evidence, and not the primary evidence of the cost's occurrence itself. The Panel concluded that these recordings could not prove the realization of the Obsolate Stock and Late Costs, thus the correction was upheld.

Meanwhile, concerning Government Duties & Levies, the Panel judged that throughout the trial process, PT KMHI failed to present any form of evidence to substantiate its appeal claim. Consequently, the Panel could not perform any further assessment of the material truth and decided to uphold the correction.

This decision re-emphasizes the importance for Taxpayers to understand that every expense recognized in the fiscal income statement must be supported by adequate evidence and must meet fiscal requirements. In disputes related to expense deductibility, the Taxpayer is obligated to prove that the cost genuinely occurred, is directly related to 3M activities, and complies with tax provisions. The failure to present concrete primary evidence before the Panel becomes the determining factor in the Taxpayer's loss, affirming the principle that whoever asserts a claim (in this case, the Taxpayer), must provide the proof.

Comprehensive and Complete Analysis of This Dispute is Available Here