“Stream-Heat” is active in the production of steam, heat and electricity, which it sells to its parent company on a cost recovery basis. By agreement between the parent company and Stream-Heat, the consideration for the supply of energy was fixed in the form of a RÁD (availability fee) and an energy fee. Stream-Heat’s results for 2017 were affected by the outcome of the administrative lawsuit and the subsequent Courts review of the findings for 2013. According to the decision in relation to the assessment paid by Stream-Heat to the tax authority on the basis of the final decision, Stream-Heat included the refund in other income for the year and as income from taxes on profits, which resulted in a profit in the applicant’s taxable result, compared to losses in previous years. In order to settle the payment obligation arising from the previous proceedings, Stream-Heat entered into an agreement with the parent company on 31 December 2015, on the basis of which Stream-Heat invoiced its parent company for an extraordinary RÁD of HUF 422,885,000. The parties have agreed that if the assessment is cancelled and the tax authority refunds the above amount to Stream-Heat, Stream-Heat will credit this amount to the parent company. Following the refund, the amount credited to the parent company as part of the GST in 2017 was not adjusted as a credit, but Stream-Heat used the amount refunded to prepay the loan granted by the parent company to finance the investment in December 2017, at the parent company’s discretion. In its transfer pricing records, Stream-Heat determined the arm’s length price using the transactional net profit method. Stream-Heat calculated the arm’s length profit range on the basis of an index using data from comparable companies for the years 2014-2016, which it determined by comparing its return on equity (ROE) (7.95%) with the return on equity (ROE = profit after tax/equity) of comparable companies. The companies included in the analysis achieved an average ROE of between 2.03% and 15.45% during the period under review. Stream-Heat used a different formula for the calculation of the own ROE ratio, namely the corporate tax base/equity ratio, as opposed to the formula used for the calculation of the comparable company ratio. The tax authority accepted the methodology used by Stream-Heat, the comparative database search and the interquartile range, but recorded that the revenue items recognised as a result of the curia judgment could not be considered as revenue from ordinary economic activities, either for the period in question or for the nature of the applicant’s business, nor as sales revenue, because of the one-off, non-recurring, exceptional and extraordinary event. In the case of Stream-Heat, the return on capital invested has been negative for several years, as a result of the fact that the pricing between the parties does not cover the return on capital. The tax authority carried out a tax audit of the applicant for the year 2017, covering all taxes and budgetary support except VAT, in which it examined Stream-Heat’s transfer pricing practices. On the basis of the above facts, it found that Stream-Heat’s ROE ratio, with no amount refunded under the Court decision and calculated using the transfer pricing documentation formula, was below the lower end of the interquartile range after adjustment. The Tax Court considered the income recognized as a result of the Court judgment to be an extraordinary item that materially affects comparability, and thus adjusted Stream-Heat’s earnings for the resulting gain. The tax authority was of the opinion that Stream-Heat should have achieved a profit on equity of 2.03%, which is the lower limit of the interquartile range of comparable companies’ data, even without taking into account the income from the remittance, and therefore increased Stream-Heat’s corporate tax base by this difference, with the result that Stream-Heat was charged 31. 875,000.00Ft, and, in addition, realising the effect of the above findings in the tax category of the income tax of energy suppliers, calculated a further tax difference of 29,841,000.00Ft for Stream-Heat. Thus, in total, the first instance decision No 6103467240 of 17 February 2020 assessed a tax overpayment of 61,716,000 HUF against Stream-Heat, of which 57,781,000 HUF was considered a tax deficit. A tax penalty and a late payment surcharge were charged on the tax deficit discovered. By decision No 4317986856 of 26 May 2020, the Court issued a decision in favour of Stream-Heat. It pointed out that the tax authority had not challenged the accounting treatment of the taxpayer’s accounts on the basis of the Curia judgment, but that the refund was a one-off, exceptional and extraordinary event, the result of which was to be adjusted when determining the net profit indicator. The finding was not that Stream-Heat should have credited the amount of the rebate to the GGE, since the parties are free to form their civil law relationship, but that the tax law consequence was linked to the fact that the applicant’s energy service invoiced to its parent company did not cover its profitable operation for several years. In the period covered by the tax audit, this indicator did not turn into a positive pre-tax result because of the market basis of the service, but only because the tax authority made a significant refund to Stream-Heat. In that regard, the tax authorities emphasised that the reimbursement is essentially entirely devoid of any quid pro quo, since there is no direct causal link between the service provided by the applicant and the amount of the reimbursement. With regard to the calculation of the ROE ratio, the tax authorities explained that Stream-Heat’s practice does not ensure objective comparability on a level playing field, since profit after tax is a measure of the profitability and profitability of an undertaking, which is the difference between profit before tax and tax liability, whereas corporation tax is the basis, the sum of the profit before tax and the tax base adjusted for tax adjustments. Stream-Heat has not provided any reasonable justification for determining its own ROE ratio using a different ...