SC junks P4.7M tax case vs Inquirer
MANILA, Philippines – The Supreme Court (SC) has dismissed the P4.7 million tax case filed against newspaper Philippine Daily Inquirer (PDI), affirming the earlier dismissal of the Court of Tax Appeals (CTA) in 2014.
The High Court's Second Division promulgated the decision on March 22, a copy of which was released to media on Tuesday, May 2.
PDI was absolved of faults in the SC decision, based mainly on the High Court's ruling that the Bureau of Internal Revenue (BIR) no longer had the authority to assess the newspaper's taxes when it did in 2008.
This comes amid attacks against the newspaper by President Rodrigo Duterte who vowed to go after the PDI owners for alleged unpaid taxes.
The taxes in question are from 2004, when PDI was said to have under-declared P4.679 million. The BIR took notice in 2006, or a year after the 2005 filing, when it issued a letter to PDI informing them that discrepancies were found in their declarations.
After investigations, the BIR issued in 2008 a formal letter of demand obliging the PDI to pay its deficiencies.
The issue was that according to the BIR, PDI under-declared its purchases.
"(PDI) under-declared its purchases that resulted to the underdeclared amount of Input VAT. If petitioner has under-declared its purchases, it would likewise have under-declared its Gross Income.." part of the SC decision reads.
The supposed under-declared purchases came mostly from marketing, communications and motoring companies. On the marketing companies, PDI explained that they did not earn advertising profit from these companies, instead they paid these companies to help them sell their advertising space.
Because of that, according to PDI, the purchases from the marketing companies cannot be considered as income but actually operational cost.
On one of the motoring companies, PDI explained that the purchase was actually a car loan for one of their employees.
In 2013, the CTA sided with PDI saying that the underdeclared purchases from the said companies could not be taken to mean as tax deficiencies.
"The CTA First Division ruled that in the imposition or assessment of income tax, it must be clear that there was an income and the income was received by the taxpayer...The CTA First Division rejected the CIR's theory that since there was an underdeclaration of the input tax and of purchases, it translates to taxable income for tax purposes and taxable gross receipts for VAT purposes," the SC decision quotes from CTA.
The tax court also ruled that BIR had lapsed on its allowable time to assess the PDI's taxes. According to the tax code, assessment can only be done within three years to protect the taxpayer.
It was a main point in PDI's protest that BIR only issued a formal letter of demand in 2008, exceeding the 3-year limit. BIR argued that the tax code also allows for an assessment within a 10-year period if the taxpayer falsely or fraudulently filed its returns.
The CTA ruled that whatever the discrepancy found in PDI's returns, they were not filed with the intent to evade tax liabilities. Because they were not false or fraudulent returns, the 3-year period rule applies.
Also under the tax code, the 3-year period can be extended if the BIR secures a waiver from the company its assessing. In the course of the assessments, PDI gave BIR 3 waivers. However, CTA said that the waivers were defective.
"The CTA First Division found that while the First and Second Waivers were executed in three copies, the BIR failed to provide the office accepting the waivers with their respective third copies. The CTA First Division found that the third copies were still attached to the docket of the case. The CTA First Division also found that the BIR failed to prove that the Third Waiver was executed in three copies. Further, the revenue official who accepted the Third Waiver was not authorized to do so," the SC quotes CTA.
The CTA junked the case in 2013 and again in 2014. After losing at the CTA, the BIR took the case to the SC.
In its March 22 decision, the SC said that PDI was not able to comprehensively deny BIR's allegations, but crucial factors in the case led them to give a nod to the earlier ruling of the CTA.
On the technicalities of the case, the SC said they will largely just go with what the CTA has already decided because of the court's expertise.
"The Court will not set aside lightly the conclusions reached by them, unless there has been an abuse or improvident exercise of authority," the SC said.
While it recognized the CTA's ruling favorable to PDI, the SC took note that even if PDI was hiring the services of the marketing companies, it is still counted as "cost of services" which is part of a company's taxable income.
The SC said: "Such finding would ordinarily call for a recomputation. However, we need to resolve first whether the BIR's assessment was made within the prescriptive period."
Just like the CTA, the SC ruled that the discrepancy in PDI's taxes were just accidental and not intentional and therefore they should have been assessed within the 3-year period. The High Court also ruled that the defects in the waivers mean that the BIR no longer had the right to assess PDI beyond the allowable period.
Finding that the BIR's letter of demand was issued too late, the SC denied their petition and cleared PDI.
The 24-page ruling was penned by Senior Associate Justice Antonio Carpio with Associate Justices Diosdado Peralta, Jose Mendoza, Marvic Leonen and Samuel Martires concurring. – Rappler.com