Lapanday V Cir
Lapanday V Cir
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FIRST DIVISION
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DECISION
CASANOVA, J.:
THE CASE
This case is a Petition for Review seeking the cancellation of the deficiency value-
added, expanded withholding, and documentary stamp tax assessments for the taxable year
Petitioner is a corporation duly organized and existing under and by virtue of the
laws of the Republic of the Philippines and with principal office address at 2263 Lapanday
services
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DECISION ) )
C.T.A. CASE N0.7097
Page 2 of 14
I
Respondent is the duly appointed Commissioner of Internal Revenue and holds office
Notice, together with several Assessment Notices all dated January 21, 2004, covering the
taxable year 2000 for alleged deficiency value added tax, expanded withholding tax, final
On February 20, 2004, petitioner filed a protest against the assessments. And on
March 23, 2004, petitioner filed its supplemental protest against the assessments.5
On April 20, 2004, petitioner completed the submission of all the relevant documents
it deemed necessary to prove the defenses raised in its protest and supplemental protest.6
On October 29, 2004, petitioner received from respondent the Final Decision on
Disputed Assessment dated October 28, 2004, with accompanying Amended Assessment
Notices. In the Final Decision, the VAT and DST assessments were reduced, the final
withholding tax assessment was cancelled, and the Ewr assessment was reiterated. The
G43
DECISION
}
C.T.A_ CASE N0.7097
Page 3 of 14
'On November 16, 2004, not amenable to pay the revised assessments, petitioner
THE ISSUES
Both parties stipulated on the following issues for the Court to decide:9
"VAT Assessment
1. Whether or not the deficiency VAT assessments for the first, second
and third quarters of 2000 are barred by prescription.
EWT Assessment
DST Assessment
9. Whether or not the due to/due from affiliates, which are evidenced by
check vouchers, are subject to documentary stamp tax on loan
agreements
I
DECISION ) ol
The modified deficiency VAT assessment in the amount of fl7,879,593.84 arose from
petitioner's VAT returns and the taxable receipts of P144,800,564.59 per examiner's
affiliates for the year 2000 in the amount of fl35,223,097.48, broken down as follows:10
J45
.,.
l
DECISION )
VAT, but not included in the BIR computation and the BIR's under take-up of proceeds from
No. 42-2003, petitioner posits that since it does not qualify as a "lending investor, dealer in
securities, financial institution as defined in Revenue Regulations ("RR'') No. 12-2003, or any
other entity performing similar financing activities/' the interest income on loans it granted
Respondent, on the other hand, argues that such interest income is subject to VAT
pursuant to Section 105 of the Tax Reform Act of 1997 ("Tax Code''), which clearly imposes
VAT on any person who renders service in the course of its business. The term "in the
"SEC. 105. Persons Liable.- Any person who, in the course of trade
or business, sells, barters, exchanges, leases goods or properties, renders
services, and any person who imports goods shall be subject to the value
added tax (VAT) imposed in Sections 106 to 108 of this Code.
"The phrase 'in the course of trade or business means the regular
conduct or pursuit of a commercial or an economic activity, including
transactions incidental thereto, by any person regardless of whether or not
the person engaged therein is a nonstock, nonprofit private organization
(irrespective of the disposition of its net income and whether or not it sells
exclusively to members or their guests), or government entity.
(Underscoring supplied.)
11
Exhibit "0", par. Q-27.
u CTA Case No. 6520, January 4, 2007. See also Deoferio, Jr. and Mamalateo, The Value Added Tax in the Philippines, 1'1 ed.,
pp. 81-85.
S4G
DECISION
.I
C.T.A. CASE N0.7097
Page 6 of 14
In the present case, petitioner was incorporated primarily "[t]o engage in the
partnerships, association, individual or firms xxx."13 Thus, in extending loans to its affiliates,
affiliates.
As petitioner is legally liable to pay 10% VAT thereon, the taxable gross receipts
Interest on Loans to
3rd 4th
Affiliates 1st Quarter 2"d Quarter Quarter Quarter Total
Interest Rec. Beg. p p p 471,276.26 p 5,975,386.68 p
petitioner for taxable year 2000. Pursuant to Section 108(A) of the Tax Code, the VAT on
sale of services is imposed on gross receipts, which is defined as "the total amount of
money or its equivalent representing the contract price, compensation, service fee, rental
or loyalty, including the amount charged for materials supplied with the services and
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.. ... . . n '" ' * 1
DECISION
C.T.A. CASE N0.7097
Page 7 of 14
The same section of the Tax Code also provides that: "[t]here shall be levied,
assessed, and collected, a value-added tax equivalent to ten percent (10%) of gross receipts
derived from the sale or exchange of services, including the use or lease of properties."15
Inasmuch as no VAT official receipts were presented corresponding to the interest income
collected, the deficiency VAT shall be computed by multiplying P26,753,063.52 by 10%, not
On the issue of prescription, petitioner maintains that pursuant to Section 203 of the
NIRC of 1997, the right of respondent to assess it of deficiency VAT for the first,. second and
Respondent, however, counters that the undeclared receipts of petitioner for taxable
year 2000 in the amount of P34,737,721.49 exceeds 30% of its reported taxable receipts of
P110,062,843.10, thereby rendering its VAT returns false or fraudulent under Section
248(8) of the NIRC of 1997 and granting him ten years to assess in accordance with Section
U48.
DECISION
c.T.A. CASE N0.7097
Page 8 of 14
each taxable quarter prescribed for each taxpayer: Provide howeve That
VAT-registered persons shall pay the value-added tax on a monthly basis.
Pursuant to Section 203 of the Tax Code, the three-year period to assess commences
from the date of actual filing of the return or from the last date prescribed by law for the
filing of such return, whichever comes later. In the case of VAT, it is twenty-five (25) days
following the close of each taxable quarter. Hence, if the return was filed earlier than the
last day allowed by law, the period to assess shall be counted from the last day prescribed
for filing of the return. However, if the return was filed beyond the period prescribed by
. . ..
.
law, the three-year period shall be counted from the day the return was filed. Therefore,
respondent had until the following dates within which to assess petitioner for deficiency VAT
Quarterly VAT
Returns(BIR Form
2550Q)
Exhibit C-4 Sept. 4, 2001 Apr. 25, 2000 Sept. 3, 2004
16
1st qtr-amended
2nd quarter Page 633, BIR Rec. July 25, 2000 July 25, 2000 Jul. 25, 2003
3rd quarter Page 632, BIR. Rec. Oct. 25, 2000
3rd qtr-amended Page 631, BIR Rec. Nov. 24, 2000 Oct. 25, 2000 Nov. 24, 2003
Page 630, BIR Rec. Jan. 25, 2001 Jan. 25, 2001 Jan. 26, 2004
17
4th quarter
Petitioner claims that it made a mistake when it used BIR Form 2550M for filing the
18
quarterly VAT return for the first quarter of 2000 on April 25, 2000. To allegedly correct
the mistake, petitioner filed another return using BIR Form 2550Q on September 4, 2001.19
According to petitioner, other than the form used, there is no substantial difference betwe
16
Year 2004 being a leap year.
17 January 25, 2004 fell on a Sunday.
18
Exhibit "C."
1
9 Exhtbit "C -4."
49
DECISION
C.T.A. CASE N0.7097
Page 9 of 14
the two returns as the VAT due is the same.20 Hence1 the three year prescriptive period
should allegedly be counted from April 251 20001 the date of filing of the original return
since the amendment made in the amended return was not substantial.
The Court disagrees. The two forms and the figures contained therein are
completely different.21 The Monthly VAT Declaration [BIR Form 2550M] filed by petitioner
on April 251 2000 refers to petitioner's VAT transactions for the month of March 2000. On
the other hand1 the Quarterly VAT Return [BIR Form 2 550Q] filed by petitioner on
September 41 2001 pertains to petitioner's VAT transactions for the months of January1
While the final amounts of VAT payable in both returns filed for the month of March
2000 and first quarter of 2000 are the same/ this does not mean that petitioner's VAT
declarations in both returns are the same. The reported figures in the Monthly VAT
Declaration are only for the month of March; while the amounts reported- in Quarterly VAT
Return are cumulative figures for the months of January/ February and March1 2000. In its
Quarterly VAT return for the first quarter of 20001 petitioner had the same amount of VAT
payable of P2701412.86 as that reflected in its VAT return for the month of March 2000.
This is because from the accumulated VAT Payable of P5411823.171 petitioner's VAT
payments for the months of January and February in the amounts of P2441357.88 Jn
20
Exh:'Jit "0", pars. Q16 to Q19.
n Exhiits "C" and "C-4."
DECISION
C.TA CASE N0.7097
Page 10 of 14
P27,052.43, respectively, or in the sum of P271,410.31, were deducted; and, thus, leaving
only the amount of P270,412.86 as VAT payable as of the end of the first quarter of 2000.
In fine, the reckoning of the three-year prescriptive period within which respondent
may assess petitioner of deficiency VAT for the first quarter of 2000 should be counted from
September 4, 2001, the date when petitioner filed its VAT return for the first quarter of
2000 and not from April 25, 2000, the date when petitioner filed its VAT return for the
month of March 2000. Since the Formal Assessment Notice for deficiency VAT covering the
year 2000 was issued only on January 21, 2004, the VAT assessments pertaining to the
. ., .
second and third quarters of 2000 are already barred by prescription. Only the VAT
assessments corresponding to the first and fourth quarters of 2000 were timely issued.
Now, contrary to respondent's assertion and pursuant to Section 248(B) of the Tax
Cod, there is no substantial under-declaration of petitioner's gross receipts for taxable year
2000 that would warrant the extension of the prescriptive period to ten (10) years and the
imposition of the 50% surcharge. The percentage of petitioner's undeclared receipts to the
I
total receipts per VAT return is less than 30%, as shown in the following:
p 26,753,063.52
24.31%
p 110,062,843.10
Hence, this Court finds petitioner liable to pay deficiency VAT in the amount of
Respondent assessed petitioner of deficiency EWT for taxable year 2000 in the
Respondent claims that petitioner withheld just 1% on its payments to TUV Products
Service Asia Pacific PTE Ltd. C'TUV'') instead of 5%. The deficiency tax assessment was
based on the Alphalist, wherein the income payment to TUV was presented as follows:
Petitioner, on the other hand, contends that the deficiency EWT assessment is
.
barred by prescription.
from the date of actual filing of the return or from the last date prescribed by law for the
filing of such return, whichever comes later. In the case of EWT, under Section
filed within ten (10) days after the end of each month for creditable taxes withheld during
the months of January until November, while the return for creditable taxes withheld for the
DECISION
c.T.A. CASE N0.7097
Page 12 of 14
The subject EWT were withheld in July and November 2000 and the corresponding
returns were filed/EWT remitted on August 10, 2000 and December 11, 2000, respectively.22
Hence, respondent had only until August 10, 2003 and December 11, 2003 within which to
issu the deficiency EWT for the months of July and November, 2000, respectively. Since
the FAN was issued only on January 21, 2004, the deficiency Ewr assessment in the
The Court finds that there is no basis for the application of the ten-year prescriptive
period as petitioner was able to explain and establish that an error was inadvertently made
. . .. : .-.::--.
in the preparation of the alpha list which can be traced from the documents submitted. 23
As the right to assess deficiency EWT has prescribed, there is no basis to hold
"As we have held in the case of APC Group, Inc. vs. CIR, CTA Case
No. 615 March 11, 2002:
Thus, the assessment for documentary stamp tax in the amount of P514,881.47
WHEREFORE, the Petition for Review is granted as regards the assessment for
deficiency EWT and DST for the taxable year 2000. The deficiency EWT and DST
assessments for the respective amounts of P410,236.79 and P514,881.47 are hereby
P3,464,253.56 computed from November 29, 200-:4 until full payment thereof pursuant to
SO ORDERED.
CAESAR A. CASANOVA
Associate Justice
DECISION
C.T.A. CASE N0.7097
Page 14 of 14
WE ONCUR:
t\e-
ERNESTO D. ACOSTA
CERTIFICATION
Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the
conclusions in the above Decision were reached in consultation before the case was
t-A .
ERNESTO D. ACOSTA
Presiding Justice
Chairman, First Division
(' 1 r
"JJ..I