Copyright © 2019 by Du-Baladad and Associates (BDB Law). All rights reserved. No part of this issue covered by this copyright may be produced and/or used in any form or by any means – graphic, electronic and mechanical without the written permission of the publisher.
What's Inside ...
- Tax Case Digest
- Court Issuances
- CTA
- Court Issuances
The CTA has authority to rule on issues not raised by the parties in their pleadings.
The taxpayer was assessed for alleged deficiency internal revenue taxes. It assailed the propriety of the assessment but it failed to raise in its Petition the lack of Letter of Authority (LOA) of the Revenue Officers who conducted the audit examination. The CTA, motu proprio took cognizance of the issue despite the failure of the Taxpayer to raise the same. The BIR challenged the act of the CTA.
The CTA ruled that while the taxpayer did not raise the issue of lack of authority of the revenue officers to conduct the audit, the Court could nevertheless can take cognizance of issues that are essential to carry out its mandate, that is, to secure a just disposition of cases brought before it. It is well within the Court's authority to consider in its decision the question on scope of authority of revenue officers who were named in the LOA, even though the parties had not raised the same in their pleadings. There was no valid LOA in this case. Thus, the CTA ruled in favor of the taxpayer. (Misamis Oriental Rural Electric Service Cooperative I, Inc. (MORESCO I), vs. Commissioner of Internal Revenue, CTA Case No. 9700, November 4, 2019)
A Letter of Authority issued by the Revenue Regional Director is necessary before a Revenue Officer can examine any taxpayer in order to collect the correct amount of tax or to recommend the assessment of any deficiency tax due; Without a Letter of Authority, a Revenue Officer cannot examine any taxpayer or recommend the assessment of any deficiency tax due; Grant of authority is indispensable before a Revenue Officer can conduct an examination or assessment, and that absence thereof results to the nullity of the examination or the tax assessment itself.
The BIR assessed the taxpayer for deficiency internal revenue tax for 2008. Through a Memorandum of Assignment, the Revenue District Officer (RDO) referred the matter to a Revenue Officer (RO), who continued the assessment process by virtue of the aforesaid Memorandum. Eventually, the CTA, in division, rendered a decision cancelling all tax assessments, except for the deficiency income tax.
The Court En Banc held that a grant of authority is indispensable before an RO can conduct an examination or assessment, and that absence thereof results to the nullity of the examination or the tax assessment itself. Court records show that the authority of the RO emanated not from an LOA, but from a Tax Verification Notice (TVN) issued to another RO by the RDO. To prove the RO’s authority, BIR merely offered in evidence a Memorandum of Assignment which was issued under the same TVN. Since the examination or assessment was done while being devoid of authority, it follows that the subject deficiency taxes are also inescapably void. (Salcedo Ristorante Italiano, Inc., vs Commissioner of Internal Revenue, CTA EB No. 1774, CTA Case No. 8880 Nov. 4 2019)
The Rules of Court places upon the movant, and not with the court, the obligations both to secure a particular date and time for the hearing of his motion and to give a proper notice thereof on the other party. It is precisely the failure of the movant to comply with these obligations, which reduces an otherwise actionable motion to a mere scrap of paper not deserving of any judicial acknowledgment.
This is a Resolution issued by the Honorable CTA in view of the Motion for Reconsideration filed by the BIR. The Court observed that the questioned Motion for Reconsideration lacks the necessary Notice of Hearing.
The CTA denied the Motion for Reconsideration filed by the BIR stating that the deficiency is fatal to BIR’s cause since a motion without a notice of hearing is considered a mere scrap of paper. Jurisprudence had been categorical in treating a litigious motion without a valid notice of hearing as a mere scrap of paper. Even if the Court disregards the aforesaid procedural infirmity, perusal of the Motion would reveal that the arguments presented therein are patently without merit; hence, there is no cogent reason to modify the assailed Decision. (Barrio Fiesta Manufacturing Corporation vs. Commissioner of Internal Revenue, CTA Case No. 9880, November 5, 2019).
VAT does not apply to services performed inside the Subic Special Economic and Freeport Zone (SSEFZ) and the area where the latter operates, nor is it applicable to payments of cash dividends, dividends and per diem payments.
This Resolution denies the BIR’s Motion for Partial Reconsideration, stating that the income payments received by the taxpayer from services rendered, under the Franchise Agreement with SBMA, as well as the per diems paid for attending the taxpayer’s board meetings, are not subject to VAT because these were performed on a separate customs territory. VAT is levied only on the sale, barter, exchange or lease of goods or properties in the Philippines and on importation of goods in the Philippines. Thus VAT is not applicable or not imposed on distribution made by a corporation to its shareholders out of earnings or profits which may be payable in money or property. Finally, the imposition of compromise penalty without conformity of the taxpayer is illegal and unauthorized. (Subic Water & Sewerage Co, Inc., v. Commissioner of Internal Revenue, C.T.A. Case No. 9074, November 5, 2019)
An authority emanating from the BIR or his duly authorized representative is required before an examination and an assessment may be made against a taxpayer.
On the basis of a Tax Verification Notice, a revenue examiner was authorized to verify the taxpayer’s supporting documents and pertinent records relative to its internal revenue tax liabilities for the taxable year 2008.
The taxpayer was found liable for deficiency taxes. The matter was elevated to court, with the taxpayer assailing the validity of the Letter of Authority, among others. The BIR contended that a TVN issued for the purpose of audit and examination of books of accounts and accounting records has the same force and effect as the LOA issued for same purpose.
In finding for the taxpayer, the Court held in this wise, “revenue examiner’s must be authorized, through a LOA, in order that said officers may validly examine the books of accounts and accounting records of a taxpayer. In the absence of a LOA, the tax assessments issued by the BIR against such taxpayer shall be void.”. It was clear that the revenue examiner derived his authority to conduct assessment from a TVN. Moreover, this TVN was only signed by the Regional District Officer, and not by a Revenue Regional Director. Correspondingly, the revenue examiner is without any authority to assess or examine. Thus, the subject deficiency assessments for the taxable year 2008 is void. (Jinzai Experts, Inc. v. Commissioner of Internal Revenue, CTA Case No. 9473, November, 6 2019)
Service Agreements alone are not sufficient to prove that services were rendered in the Philippines for purposes of VAT refund.
The taxpayer filed for administrative claim for VAT refund before the BIR. Due to the inaction of BIR, it filed a Petition for Review before the CTA. The BIR alleged that the taxpayer is not entitled to the refund for the latter allegedly failed to prove that it had zero-rated sales transactions. The taxpayer on the other hand countered that it sufficiently proved that sale of business process and contact center services to its sole client, a non-resident foreign corporation, is VAT zero-rated.
The CTA ruled that the taxpayer failed to show that it was engaged in zero-rated or effectively zero-rates sales. Although the Service Agreements showed that services to be rendered by the former to the latter shows that the same is other than "processing, manufacturing or repacking goods", it was not proven that the subject services were performed in the Philippines. Taxpayer did not present any evidence to prove the same. Thus, since it was never established that the place of performance of the subject services is in the Philippines. The CTA ruled against the claims of the Taxpayer. (Ibex Philippines Inc., vs. Commissioner of Internal Revenue, CTA Case No. 9546, November 7, 2019)
Any tax assessment issued without an LOA is a violation of the taxpayer's right to due process and therefore void.
The taxpayer in this case received a Letter of Authority from the BIR authorizing Revenue Officer (RO) Enguerra to conduct the audit examination. The case was subsequently transferred to RO Bisares by virtues of a MOA but no new LOA was issued in his favor. The taxpayer then assailed the validity of the assessment for lack of valid LOA. The BIR alleged that the MOA is sufficient to authorize the RO to continue the audit investigations.
The CTA ruled that any tax assessment issued without an LOA is a violation of the taxpayer's right to due process and therefore void. Here, there was no valid LOA, authorizing the ROs to conduct the audit investigation of Taxpayer. Thus, the assessment arising from such investigation is a nullity. (Republic of the Philippines, vs. Robiegie Corporation, CTA OC No. 024, November 7, 2019)
It should be noted that a denial of the claim for refund made after the 120+30 day period is not considered in counting the period for judicial appeal. This is because the inaction of the CIR during the 120-day period is "deemed a denial", and without a timely appeal, said inaction which is "deemed a denial" becomes final and unappealable.
Taxpayer seeks reconsideration of the Court's Decision dismissing the Petition for Review filed by the taxpayer for lack of jurisdiction.
CTA denied the Motion for Reconsideration filed by the taxpayer stating that counting 120 days from the date of filing of the administrative claims, or on February 1, 2013 and August 1, 2013, the CIR had until June 1, 2013 and November 29, 2013 within which to act on the claim for refund. Considering that the BIR failed to act within the 120-day period, the taxpayer had thirty (30) days after the lapse of the 120- day period or until July 1, 2013 and December 29, 2013 within which to file its judicial appeals before the CTA. Here, taxpayer's Petition for Review was filed only on September 9, 2019, clearly, several years after the lapse of the 120+30 day period to file a judicial claim. (Lepanto Consolidated Mining Company vs. Commissioner of Internal Revenue, CTA Case No. 10163 November 7, 2019)
In case the criminal offender is a corporation, the penalty shall be imposed on the Partner, President, General Manager, et.al., responsible for the violation.
The CTA dismissed the instant criminal case for lack of probable cause as the People failed to comply with the Court’s Resolution which will establish the personal identity and personal circumstances of the accused, Roland P. Vasquez, under Section 4 of Rule 110 of the Revised Rules of Criminal Procedure (People of the Philippines Vs. RPV Electro Technology Philippines Corporation/ Roland P. Vasquez (President), CTA Crim. Case No. 0-713, November 7, 2019)
A demurrer to evidence is an objection of one of the parties in an action, to the effect that the evidence which his adversary produced is insufficient in point of law, whether true or not, to make out a case or sustain the issue. The court, in passing upon the sufficiency of the evidence raised in a demurrer, is merely required to ascertain whether there is competent or sufficient evidence to sustain the indictment or to support a verdict of guilt.
The accused was charged for the violation of Section 255 of the 1997 National Internal Revenue Code (1997 NIRC), as amended for failure to pay deficiency taxes for taxable year 2006. After the People presented its pieces of evidence and rested its case, the accused filed a Motion for Leave of Court to file Demurrer to Evidence and Demurrer to Evidence.
The Court granted the Motion and dismissed the instant case on the ground of insufficiency of evidence stating that the People did not present evidence to disclose the names of the responsible officers of the corporation at the time the crime was allegedly committed. People did not present the Articles of Incorporation (AOI) and the General Information Sheet (GIS) of accused FDI Forefront II Trading Corp. to show that the accused Joseph Derrick B. Yambao is its responsible officer at the time the crime was allegedly committed in the year 2012 nor in 2006, the taxable year from which the alleged deficiency taxes arose. Further, the sole witness of the People failed to identify or pinpoint the accused Joseph Derrick B. Yambao as a responsible officer of the corporation FDI Forefront II Trading Corp.
Further, the pieces of evidence adduced by the People do not also prove the existence of the element of willful failure to pay a tax under Section 255 of the 1997 NIRC, as amended, because they did not sufficiently establish that the corporation is required to pay the assessed deficiency income and value-added taxes for taxable year 2006. Overall, the evidence presented by the People is weak and cannot be used to establish the guilt of the accused. (People of the Philippines Vs. Joseph Derrick B. Yambao, CTA Crim. Case No. 0-674 & 0-675, November 7, 2019)
The law mandates that PEZA shall manage and operate the ecozones as a separate customs territory, thus, creating the legal fiction that the ecozone is a foreign territory. As a result, sales made by a supplier from the customs territory to a purchaser in the ecozone shall be treated as exportation from the customs territory. Conversely, sales made by a supplier from the ecozone to a purchaser in the customs territory shall be considered as an importation into the customs territory.
The taxpayer filed a claim for refund of unutilized creditable input tax attributable to its zero-rated sales for taxable year 2013. It is engaged in the business of manufacturing and exporting of nickel/cobalt mixed sulfide and it is also registered with the Philippine Economic Zone Authority (PEZA) as an Ecozone Export Enterprise.
The Court partially granted the claim of the taxpayer stating that the VAT zero-rating on the sales of goods, properties or services by a VAT-registered entity to a PEZA-registered entity applies only when such goods, properties or services are consumed, used or rendered within the Ecozone and in connection with the registered activities of the said PEZA-registered entity. Stated simply, if the sales of goods, properties or services are consumed, used or rendered within the customs territory, i.e., outside the ecozone, such sales by a VAT- registered entity to a PEZA-registered entity shall be then subject to the regular twelve percent (12%) VAT.
Based on the pieces of evidence it presented, the taxpayer was able to establish that only its local purchases of services from SMCC Philippines, Inc. and the lease expenses incurred in Manila office were consumed and rendered outside the PEZA zone. (Taganito HPAL Nickel Corporation vs. Commissioner of Internal Revenue, CTA Case No. 9128, November 8, 2019)
Assessment is a preliminary step, essential to a warrant of distraint and/or levy and to proceed heedlessly with tax collection without first establishing a valid assessment is evidently violative of the cardinal principle in administrative investigations.
The taxpayer paid its basic deficiency taxes for Taxable Years 2005 to 2006 but received a Notice of Denial of its application for abatement. BIR issued a Warrant of Distraint and/or Levy to enforce collection of increments incident to the deficiency taxes. When the matter was elevated to the Court of Tax Appeals, the Court, in Division, decided against the Warrant and the Notice of Denial, rendering both null and avoid. Aggrieved, BIR sought recourse with the Court En Banc, assailing the jurisdiction of the Court, in Division, as well as the propriety of decision nullifying the Warrant and the Notice.
The Court En Banc, in deciding that the same Court, in Division, has jurisdiction over the denial of an application for abatement held that, under Section 7(a)(1) of RA 1125, as amended, other than decisions of petitioner pertaining to assessments or refunds, decision of petitioner relating to “other matters” may be taken cognizance of by the Court of Tax Appeals, for as long as the said “other matters, arose under the NIRC or other laws administered by the BIR. Without a doubt, the Notice of Denial of a taxpayer’s application for abatement is a matter, which arose under the NIRC of 1997. The power or the CIR to abate taxes is specifically granted therein.
The Court En Banc is not convinced of BIR’s position that an assessment is not necessary for purposes of collecting delinquent taxes pertinent to a delinquent taxpayer. As held herein, an assessment is a step preliminary, but essential to a warrant of distraint; and the BIR may summarily enforce collection, only when it has accorded the taxpayer administrative due process, which vitally includes the issuance of a valid assessment. When there is no assessment, the BIR cannot validly proceed to exercise the summary administrative remedy of distraint and/or levy as provided by law. (Commissioner of Internal Revenue vs. Pacific Hub Corporation CTA EB No. 1837 (CTA Case No. 8895) Nov 8, 2019)
CTA has jurisdiction to review BIR's Notice of Denial of the taxpayer’s application for abatement.
The taxpayer had deficiency taxes and sent a letter to the BIR indicating its willingness to pay the said amounts, with a request for abatement of penalties, surcharges and interests incident thereto, due to its alleged continued financial losses. It filed an Application for Abatement or Cancellation of Tax, Penalties and/or Interest and paid the basic deficiency. The BIR then denied its application for abatement of the penalties, surcharge and interest on the EWT and WTC and issued a Warrant of Distraint and/or Levy to enforce collection. This prompted the taxpayer to file Petition for Review before the CTA. BIR challenged the jurisdiction of the CTA to entertain the same alleging that since there is no decision on disputed assessment which could be the subject of review by the CTA, the latter has no jurisdiction.
The CTA ruled that it has jurisdiction to review the Notice of Denial of Taxpayer's application for abatement. The CTA has jurisdiction over other cases that arise out of the NIRC or related laws administered by the BIR. Thus, other than decisions of BIR pertaining to assessments or refunds, decisions of BIR relating to "other matters" may be taken cognizance of by the CTA, for as long as the said "other matters" arose under the NIRC or other laws administered by the BIR. Here, the Notice of Denial of Taxpayer's application for abatement is a matter, which arose under the NIRC of 1997. Thus, CTA has jurisdiction. (Commissioner of Internal Revenue, vs. Pacific Hub Corporation, CTA EB No. 1837 (CTA Case No. 8895), November 8, 2019)
A prior TTRA is not necessary to avail of the benefits granted under the tax treaties.
The taxpayer withheld and remitted final withholding taxes on income payments to nonresident cinematographic films owner, lessor, distributor at the rate of 25%. The taxpayer filed an administrative claim for refund with the BIR for the excess taxes withheld from royalty payments, in view of various Tax Treaties applicable. The BIR denied the claim for refund on the ground that the taxpayer unjustifiably disregarded Revenue Memorandum Order ("RMO") Nos. 1-2000 and 72-2010 which requires a prior application and grant of TTRA necessary to avail of the benefits granted under the tax treaties.
The CTA ruled that a prior TTRA is not necessary to avail of the benefits granted under the tax treaties. TTRAs merely operate to confirm the entitlement of the taxpayer to the relief as held by various jurisprudential pronouncements. The prior application requirement under RMO No. 1-2000 and 72-2010 is not only illogical, but also not found at all in the applicable tax treaties. Clearly, the BIR should not impose additional requirements that would negate the availment of the reliefs provided under international agreements. Thus, the Court ruled in favor of the taxpayer. (Sky Cable Corporation vs. Commissioner of Internal Revenue, CTA Case No. 9069, November 8, 2019)
The filing of the Complaint Affidavit with the DOJ is the reckoning point in the counting of the 5-year prescriptive period for criminal cases arising from the Tax Code.
The accused was charged for alleged violations of Section 255 of the NIRC, as amended. He filed a Motion to Quash the Information on the ground of prescription. He alleged that the date of discovery of the alleged crime is on January 30, 2014, the day BIR filed its Complaint-Affidavit with the DOJ. Counting five (5) years from January 30, 2014, the prescriptive period lapsed on January 30, 2019. Here, the Information was filed only on March 18, 2019. Thus, prescription had allegedly set in.
The BIR countered that under Section 281 of the NIRC, tax cases are "practically imprescriptible" as long as the period from the discovery of the offense and institution of judicial proceedings does not exceed five years. Thus, the reckoning period of 5 years is allegedly interrupted upon the filing of the Complaint Affidavits on January 30, 2014. As such, the filing of the criminal Information on March 18, 2019 was well within the 5-year period.
The CTA ruled that the period of prescription commences to run from the day of the perpetration of the offense, and if not known, from its discovery and the institution of judicial proceedings for its investigation and punishment. Citing the Lim Case, the SC interpreted the commencement of the prescriptive period under Section 281 of the NIRC, as amended, stating that in addition to the fact of discovery, there must be a judicial proceeding for the investigation and punishment of the tax offense before the five-year limiting period begins to run. Here, the filing of the Complaint Affidavit with the DOJ on January 30, 2014 is the reckoning point in counting the 5-year prescriptive period provided under Section 281 of the NIRC, as amended. Thus, the Motion to Quash was granted on the ground of prescription. (People of the Philippines vs. Ulysses Palconet Consebido, CTA Crim. Case Nos. 0-700, 0-702, & 0-703, November 8, 2019)
Co-venturers are liable for VAT if the MOA they executed shows that they never intended for the joint venture to have a separate and distinct personality.
Two corporate taxpayers entered into a Joint Venture Agreement (JVA) to develop a residential condominium building. It sold condo units to its buyers and the BIR assessed both corporations for VAT. The taxpayers assailed the validity of the assessment alleging that since there is an existing JVA and that they are co-venturer, the joint venture itself is the one liable for the payment of VAT. The BIR alleged otherwise citing the provision of the JVA which shows the intention that no separate personality will be created by virtue of the JVA.
The CTA ruled that taxpayers are liable to VAT for their respective share. According to the Court, upon careful reading of the taxpayer’s Memorandum of Agreement, the provisions would readily reveal that the parties never intended for the joint venture to have a separate and distinct personality. Several provisions of the Agreement with respect to the reservation, marketing, fixing the sales and payment terms are subject to the mutual agreement of both co-venturers. Thus, there was no separate business organization that was formed by virtue of the JVA. The CTA also noted that the Quarterly VAT Returns and the payment of the corresponding VAT were made under the name of SM Development Corporation and not under a separate entity. Thus, both taxpayers are subject to VAT. (SM Residences Corp., vs. Commissioner of Internal Revenue, CTA Case No. 9395, November 11, 2019)
In order to be entitled to a refund or issuance of a TCC for unutilized input VAT on the cancellation of registration due to retirement from or cessation of business, or due to changes in or cessation of status, taxpayer must show that it has no internal revenue tax liabilities against which the TCC may be utilized.
The taxpayer filed a claim for refund praying for the issuance of a tax credit certificate representing its alleged accumulated unused/excess input Value-Added Tax (VAT) as of the cancellation of its VAT registration.
The Court denied the claim of the taxpayer stating that upon examining the records of the case, the taxpayer failed to present the tax clearance certificate issued by the BIR, to show that it has no internal revenue tax liabilities. It merely alleges that it filed an application for tax clearance and presented a Delinquency Verification Report for Tax Clearance issued by the BIR. Such document cannot be considered as tax clearance as it does not clearly state that the taxpayer has no pending tax liabilities, but merely verifies and checks the status of the taxpayer (e.g., compliance with the requirements of the BIR, filing of tax returns, existence of open cases or outstanding tax liabilities and on-going assessments). (Deltek Systems (Philippines) Ltd., vs. Commissioner of Internal Revenue, CTA Case No. 9445, November 11, 2019)
The issuance of a valid formal assessment is a substantive prerequisite to tax collection, for it contains not only a computation of tax liabilities but also a demand for payment. This demand for payment signals the time when penalties and interests begin to accrue against the taxpayer and enabling the latter to determine his remedies. Thus, it must be sent to and received by the taxpayer and must demand payment of the taxes described therein within a specific period.
The taxpayer seeks for the cancellation of the deficiency taxes for taxable year 2010. The Court cancelled and set aside the deficiency tax assessments issued against the taxpayer stating that after careful scrutiny of the Audit Result/Assessment Notices referred to in the FLD reveals that there is no definite period or date certain within which taxpayer must pay the alleged deficiency tax assessments. Remarkably, the due dates on the enclosed Audit Result/Assessment Notices were left blank.
Apparently, the Supreme Court has already ruled that the date certain for the payment of tax liabilities is indispensable in an assessment as it dictates the time when the penalties, surcharges and interest begin to accrue thereon. Accordingly, the Supreme Court held that the Final Assessment Notice is not valid if it does not contain a definite due date for payment by the taxpayer. (Kultura Store, Inc., vs. Commissioner of Internal Revenue, CTA Case No. 9315, November 11, 2019)
A compromise is a contract whereby the parties, by making reciprocal concessions, avoid litigation or put an end to one already commenced. It is an accepted and desirable practice in courts of law and administrative tribunals.
This is a resolution of the Court for the Joint Motion for Approval of Judicial Compromise Agreement, filed by the parties on May 29, 2019. After submitting the documentary evidence supporting the approval of the offer of comprise the taxpayer to the BIR, the court found that the stipulations in the Judicial Compromise Agreement are not contrary to law, morals, good customs, public order and public policy.
The Court stated that parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided that these are not contrary to law, morals, good customs, public order, or policy. Corollary thereto, once submitted to the Court and stamped with judicial approval, a compromise agreement becomes more than mere private contract binding upon the parties. Having the sanction of the Court and entered as its determination of the controversy, it has the force and effect of any judgment. (Splash Corporation, Inc., vs. Commissioner of Internal Revenue, CTA Case No. 9370, November 11, 2019)
Failure to raise new matters in the Motion for Reconsideration is a ground for the denial of the same.
The BIR in its MR argued that it need not prove that the PAN and FLD were actually received by the taxpayer since the taxpayer’s witness only made a self-serving testimony. The taxpayer countered that the BIR has the burden of proof to prove the same and that the latter failed to raise new matters in the MR.
The CTA ruled that arguments raised by the BIR in its Motion for Reconsideration are not new. Not only are they a mere rehash of the arguments he raised but they have also been previously discussed and considered in the Decision previously rendered by the Court. In La Bttgal B'Laan Tribal Association, Inc. vs. Ramol, the Supreme Court, noting that the arguments and positions raised in the Motion for Reconsideration therein were already raised and discussed extensively, held that a further discussion of the same issues would not serve any useful purpose. Thus, the MR of the BIR is denied. (Commissioner of Internal Revenue, vs. Clark Water Corporation, CTA EB No. 1693 (CTA Case No. 8572), November 12, 2019)
Criminal infractions under the Tax Code shall prescribe after five (5) years, reckoned from the commission of tax offense and if not known, from discovery thereof and institution of judicial proceedings for investigation and punishment.
BIR lodged complaint-affidavits against Accused for tax evasion under Section 254 of the NIRC, as amended and failure to supply correct and accurate information in the Tax Returns under Section 255 of the same Code. DOJ dropped the tax evasion for lack of probable cause but charged Accused for violation of Sec. 255 of the Tax Code. The Accused then raised the defense of prescription alleging that the charges brought by the BIR was done beyond the 5-year prescriptive period.
The CTA ruled that the case must be dismissed. Criminal infractions under the Tax Code shall prescribe after five (5) years, reckoned from the commission of the tax offense and if not known, from discovery thereof and institution of judicial proceedings for investigation and punishment. Here, the BIR referred the Joint Complaint-Affidavits to DOJ on September 23, 2010, hence, the five (5)-year prescriptive period begun to run on said date. BIR had until September 23, 2015 to file the requisite Information with the Court. However, the Information was only filed on June 18, 2019. Thus, the case should be dismissed on the ground of prescription. (People of the Philippines vs. Juanchito D. Bernardo, Chairperson Praxedes P. Bernardo and JDBEC Incorporated, CTA Crim. Case No. 0-733, November 12, 2019)
Deficiency tax assessments issued against Taxpayer without a valid LOA is void ab initio.
In this case, the taxpayer received a LOA authorizing Revenue Officer (RO) Taylo and Group Supervisor (GS) Rase to examine its books of accounts and other accounting records for all internal revenue taxes for 2011. However, by virtue of a Memorandum of Assignment (MOA), RO Guerzon and GS Rase continued the audit investigation of the Taxpayer. Taxpayer then challenged the validity of the assessment on the ground of lack of valid LOA of the RO who conducted the investigation.
The CTA ruled in favor of the taxpayer. No LOA was issued naming and authorizing RO Guerzon to conduct the tax audit against Taxpayer. Her action was merely based on the MOA directing her to continue the tax audit. Hence, the deficiency tax assessments issued against the taxpayer, based on her finding and recommendation after audit, is void ab initio. (Hobbies of Asia, Inc., vs. Commissioner of Internal Revenue, CTA Case No. 9476, November 12, 2019)
The corporation must signify in its annual corporate adjustment return (by marking the option box provided in the BIR form) its intention either to carry over the excess credit or to claim a refund. To facilitate tax collection, these remedies are in the alternative and the choice of one precludes the other. However, once the carry over option is taken actually or constructively, it becomes irrevocable for that taxable period. The phrase "for that taxable period" merely identifies the excess income tax, subject of the option, by referring to the taxable period when it was acquired by the taxpayer.
The taxpayer filed a claim for refund representing its excess payment of creditable withholding taxes for the taxable year 2014.
The Court partially granted the claim for refund stating that in addition to its choice to be refunded under Section 76 of the NIRC of 1997, taxpayer must also prove compliance with the following requirements, namely: 1) The claim must be filed with the CIR within the two-year period from the date of payment of the tax; 2) The fact of withholding must be established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of the tax withheld; and 3) It must be shown on the return that the income received was declared as part of the gross income. In fine, the taxpayer was able to prove its entitlement for refund/tax credit, albeit in the reduced amount (Wells Fargo Philippines Solutions Inc., vs. Commissioner of Internal Revenue, CTA Case No. 9578, November 12, 2019)
If the sale is subject to zero-percent VAT, the term "zero-rated sale" shall be written or printed prominently on the invoice or receipt and non-compliance therewith entails that the said sales cannot qualify for VAT zero rating.
In this case, the taxpayer’s claim for VAT Refund was denied by the BIR because the ORs for its export sales of services did not bear the pre-printed words "zero-rated sales". The taxpayer alleged otherwise and argued that it strictly complied with the new invoicing requirements and format prescribed under Revenue Regulations (RR) No. 18-2012 and Revenue Memorandum Order (RMO) No. 12-2013.
The CTA ruled that the NIRC of 1997 mandates that if the sale is subject to zero-percent VAT, the term "zero-rated sale" shall be written or printed prominently on the invoice or receipt and non-compliance therewith entails that the said sales cannot qualify for VAT zero rating. To reiterate, Section 113 of the NIRC of 1997 provides the mandatory invoicing requirement for purposes of VAT refund, as enunciated by the Supreme Court in several cases, as opposed to RR No. 18-2012 and RMO No. 12-2013, which are mere regulations intended to govern the Processing of Authority to Print (ATP), ORs, Sis and Other Commercial Invoices (Cis) in the Interim Period until the Online ATP System pursuant to RR No. 18-2012 is fully developed. Thus, the Motion for Reconsideration of the taxpayer is denied. (Maersk Global Services Centres (Philippines), Ltd., vs. Commissioner of Internal Revenue, CTA EB No. 1804 CTA Case No. 9015 and Commissioner of Internal Revenue vs. Maersk Global Services Centres (Philippines), Ltd., CTA EB No. 1805 (CTA Case No. 9015), November 14, 2019)
The Implementing Rules and Regulations of PEZA Law did not limit, but merely enumerated the allowable deductions. Thus, other items not enumerated may be claimed as deductions.
The taxpayer is a foreign corporation organized and existing under the laws of Ohio, USA. It is also a PEZA-registered export enterprise, entitled to the five percent (5%) preferential tax regime on gross income earned pursuant the PEZA law. It was assessed for alleged deficiency taxes arising from the denial by the BIR its “Repairs and Maintenance” as claim for deductions. The BIR countered that the allowable deductions from gross income in Rule XX of the Implementing Rules and Regulations of PEZA Law and RR No. 11-2005, is exclusive. And since “Repairs and Maintenance” costs are not included, the same should be disallowed.
The CTA ruled that Repairs and Maintenance" should form part of Moog's costs of sales in the determination of its taxable income subject to the 5% preferential tax rate on gross income earned. The Implementing Rules and Regulations of PEZA Law did not limit, but merely enumerated the allowable deductions. Subsequently, RR No. 2-2005 limited the direct costs to the enumeration of allowable deductions therein. As it stands, RR No. 11-2005 removed the exclusivity of the allowable deductions from gross income. Thus, the allowable deductions from gross income of PEZA-registered enterprises enumerated in the IRR of the PEZA Law and RR No. 2-2005, as amended by RR No. 112005, are not exclusive. Thus, if a particular cost or expense is directly related to the PEZA-registered activity, it should be treated as a direct cost and includible in the allowable deductions from the gross income. (Moog Controls Corporation-Philippine Branch, vs. Commissioner of Internal Revenue, CTA EB No. 1809 (CTA Case No. 9077) and Commissioner of Internal Revenue, vs. Moog Controls Corporation-Philippine Branch, CTA EB No. 1810 (CTA Case No. 9077), November 14, 2019)
A FAN that does not contain a fixed and definite amount of tax to be paid is void.
The CTA ruled that the FAN issued by the BIR in this case must be struck down since it is not an assessment contemplated by law and jurisprudence. The term "assessment" refers to the determination of amounts due from a person obligated to make payments. It must contain not only a computation of tax liabilities, but also a demand for payment within a prescribed period, the purpose of which is to determine the amount that a taxpayer is liable to pay. Here, the FAN does not contain a fixed and definite amount of tax to be paid, rendering it legally infirm. Thus, the Court ruled in favor of the Taxpayer. (Linde Philippines, Inc. (Formerly Consolidated Industrial Gases, Inc.), vs. Commissioner of Internal Revenue, CTA Case No. 8783, November 15, 2019)
In a claim for tax refund or tax credit, the applicant must prove not only entitlement to the claim but also compliance with all the documentary and evidentiary requirements therefor.
This is a Resolution on the two Motion for Partial Reconsideration filed by the respective parties assailing the Decision of the Court promulgated on March 4, 2019. Taxpayer contends that that it was able to comply with all the essential basic conditions to prove its entitlement to its claim for refund. While, BIR posits that the taxpayer is not entitled to refund of excess and unutilized creditable withholding tax for calendar year ended 31 December 2013.
The Court denied the Motion filed by the BIR for lack of merit while it partially granted the Motion filed by the taxpayer as the taxpayer was able to convince the Court that it is partially entitled to its claim. Further, SMIC was able to establish the compliance with the requisite that the income upon which the taxes were withheld should be included in the return of the recipient. (SM Investments Corporation. vs. Commissioner of Internal Revenue, CTA Case No. 9322, November 18, 2019)
There is no rule that the taxpayer is estopped due to the receipt of an LOA beyond 30 days from date of its issuance.
The assailed Decision held that the LOA issued by the CIR is invalid for having been served beyond thirty (30) days from date of issuance. Thus, the conduct of audit examination was without authority and the assessment therefrom was in violation of the taxpayer’s due process rights.
The Court, in maintaining that the deficiency assessment should be cancelled and withdrawn, ruled that, the power of the revenue officers to conduct audit examination of taxpayers through an LOA, being a mere delegated power, must be exercised strictly in accordance with the terms of delegation. The court does not agree that taxpayer is estopped due to the receipt of the LOA beyond the reglementary period to serve the same. There is no basis for that rule of estoppel. Neither is the taxpayer estopped from denying the receipt of the PAN and the FAN because the taxpayer allegedly admitted receipt of the Collection Letter as stated in the Joint Stipulation of Facts and Issues. (Kokoloko Network Corporation vs Commissioner of Internal Revenue, C.T.A. Case No. 9574, November 18, 2019)
Section 228 of the NIRC, as amended, cannot be interpreted in the same manner as Section 195 of the LGC, because the period for the local treasurer to decide on the protest is not the same mandate as the Commissioner of Internal Revenue.
The taxpayer was assessed business tax delinquencies from the years 2009 to 2019. According to the taxpayer, the amount sought to be collected pertains to local business tax assessment for different years. However as already decided, the CTA, as well as the Regional Trial Court, has no jurisdiction to entertain the appeal on the ground that the appeal was filed out of time.
In the construction of Section 195 of the Local Government Code(LGC), the filing of an appeal should be made within thirty (30) days from either receipt of the decision issued before the lapse of the sixty (60) day period or from the lapse of the said period, whichever comes earlier. The taxpayer’s appeal was filed on February 22, 2018 with the RTC, when it should have been filed on March 26, 2016. Thus, it was filed out of time, which as a result, deprives the said court of jurisdiction.
The CTA rejects the taxpayer’s contention that the interpretation of Section 195 of LGC should be interpreted the same as Section 228 of the NIRC of 1997, as amended. In comparing the two provisions, Section 195 of the LGC provides for a period for the local treasurer to decide on the protest while Section 228 of the NIRC, as amended, has no such mandate to the Commissioner of Internal Revenue. Section 195 of the LGC clearly states that when a notice of assessment is received by the taxpayer, he may file a written protest within sixty (60) days from the receipt of such notice. Otherwise, the assessment becomes conclusive and unappealable. Since it was admitted that there was no protest filed, the assessment has therefor become conclusive and unappealable. (Public Safety Mutual Benefit Fun, Inc., represented by its President, Maria A. Avenido vs Rosette F. Laquian, Acting City Treasurer, San Juan City C.T.A. A.C. No. 214 November 22 2019)
Copyright © 2019 by Du-Baladad and Associates (BDB Law). All rights reserved. No part of this issue covered by this copyright may be produced and/or used in any form or by any means – graphic, electronic and mechanical without the written permission of the publisher.
