CTA voids P1.65-B tax case vs Manila

THE Court of Tax Appeals (CTA) has ruled in favor of the City of Manila, voiding the bureau of internal revenue’s (BIR) tax deficiency assessments worth P1.65 billion for alleged unpaid income, withholding, and value-added taxes for taxable year 2008.

In a 16-page decision made public on Nov. 12, the CTA second division granted Manila’s petition and declared the contested assessments, including the Final Letter of Demand and Final Decision on Disputed Assessment, as issued beyond the allowable prescriptive period.

The city government, represented by Mayor Francisco “Isko” M. Domagoso, earlier challenged the BIR findings covering deficiency Income Tax, Withholding Tax on Compensation, Expanded Withholding Tax, VAT, Final Withholding VAT, and withholding tax on land purchases.

The local government argued the assessments amounting to P1.65 billion, inclusive of surcharges and interest, were void for failure to state legal and factual bases, for violating due process, and for being issued outside the three-year period mandated under the National Internal Revenue Code (NIRC).

The CTA rejected the BIR’s position that the case fell under the 10-year prescriptive period for fraudulent returns. The fraud must be proven with “clear and convincing evidence” and cannot be presumed, the ruling read.

Citing jurisprudence, the CTA said that mere allegations or assumptions of fraud do not extend the prescriptive period, and that any deviation must be supported by concrete proof of deliberate tax evasion. With the lapse of three years, the assessments were deemed void.

The tax court’s decision settles the long-running dispute that began in 2009 when the BIR first issued a Letter of Authority to review the city’s financial records. — Erika Mae P. Sinaking