You are on page 1of 21

-

":

REPUBLIC

OF

COURT

THE

OF

QUEZON

MANILA

MANDARIN

HOTELS,

PHILIPPINES

TAX

APPEALS

CITY

INC. ,

Petitioner,
THE

versus

C.T.A.

OF

COMMISSIONER

Promulg

INTERNAL

REVENUE,
Respondent.
X

- -

;. 2 4 1997
R

CASE

NO.

5046

d'

DECISION

This
respondent

1988

1993,

deficiency

percentage tax

assessment
in

Petitioner
business

as

registered

denying

the

is

hotel

the

and

enterprise

sum

for

VAT

on

the

tax

and

engaged

in

value-added

corporation

restaurant
with

protest

P12,211,987.53.

of

domestic

dated

Revenue,

petitioner's

issued

the

of

decision

Internal

of

total

the

from

appeal

Commissioner

25,

October

an

Is

It

operator .
Registration

is
No.

VAT

32-0<

000281 .
On
notice,

July

dated

deficiency
taxab Ie

8,

June

1988,

thus:

petitioner

22, )1992,

value-added

year

hereunder,

1992,

the

and

received

demanding
percentage

deta I Is

of

which

an
the

assessment
payment

taxes
are

for

of
the

enumerated

DECISION

C.T.A. CASE

NO.

5046
-

Deficiency

Basic
Add:

Tax

V a I ue .. Added

Tax

fr.

to

In
Office

52,097.66

4,774,801.35

179,445.19

50,000.00

16,000.00

Due

P11,756,054.03

P455,933.50

letter,

of

the

respondent

the

assessments

Petitioner alleged
respondent's

protest
of

four

percentage

tax

imposed

As
as
a

by

as

waiver

of

respect

to

the

collection

of

which
the

July

30,

issued

by

tax

of

received

1992,

the

of

by

respondent.
stemmed

various

tax

and

claims

to

from
laws
This

assessment.

value-added tax

the

petitioner

1992,

deficiencies

petitioner

one

item

have

been

noted

that

respondent.

information,
28,

Issuance

1991,

It

the

Is

assessment

business taxes

be

has

signed

for

the

running

the

Tax

Code

provided by
of

to

petitioner

of IImitations

period

its

27,

interpretation

statute

prescriptive

on

the

items

November
the

July

I ega I I y-f I awed

collateral

early

the

that

in

cited

wrongly

dated

erroneous

resulted

which

Tax

1-20-89

protested

Percentage

P208,390.65

6-30-92

Amount

1988

5,545,002.13

Compromise
Total

1,386,250.53

p
surcharge

Int.

Business

Tax

25%

and

(see

the

of

with

consequent

page

211,

BIR

records).
Petitioner
on

November 10,

received
1993

in

the
a

final

Ietter,

denial

dated

of

Its

October

protest
25,

1993,

DECI S ION C. T . A.

CA SE NO .

5046
-

which

prompted the

review

by

this

This

Court on
for

review

O riental

Hotels,

Internal

Revenue"

but

Revenue"
the

in

an

Inc.

amended

latter title

S ecurities

and

is

to

file

December 1 0,

"Mandarin

Hotels,

petitioner

petition

Mandarin

was

petition

initially

vs.

The

vs. The

Commissioner

petition

fi I ed

Exchange

on

to

of

(see

"Mani I a
I nternal

of

1994

June 9 ,

registered

Commission

entitled

Commissioner

changed

later

petitioner's

for

199 3 .

was

Inc.

name
page

as

with the
64,

CT A

records).
Respondent filed
January 2 8,
the

its

Answer

(p.

2 8 - 31 ,
wherein

1994 by registered mai I,

following

S pecial and Affirmative

3.

Petitioner

deficiency
year 19 8 8

V AT
in

the

was

and

rec.)

she

Defenses,

taxes

amount of

on

proposed

thus:

assessed

Percentage

total

CTA

for

for

the

P1 2 , 211 ,9 8 7 .3 3

I!

a s f o I I ows:
I 1
Valu e Added Tax
(ASS. NO.

FAS-488-92-002804)

Basic Tax
Add:

p 5,545,002.13

P208,390.65

1,386,250.53

52,097.66

4,774,801.35

179,445.19

50,000.00

16,000.00

P11,756,054.03

P455,933.50

25% surcharge

Percentage Tax

(ASS. NO. FAS-4- 88-92-002805)

Int. fr. 1-20-89


to 6-30-92
Compromise
TOTAL AMOUNT DUE

4.
business
its

Petitioner
of

hotel

services.

is

a common

guests merely
Hence,

Its

not

carrier
as

engaged
as

part

It

in

the

transports

of

transp ortation

its

hotel

services

DECISION
C.T.A.

CASE

NO.

5046
-

extended
under

to

the

Section
5.

hotel

102

of

guests

the

Tax

Reimbursement

biIIings
gross

of the

receipts

for

tax

must

of

form

incIude

activity

rendered

fees

due

of

VAT

of

the

Therefore,

computing

the handIing

to

to

to

telephone

part

purposes.

purpose

profit from petitioners

toI I

subject

cost

VAT

base for the

due

is

Code.

petitioner

the tax
gross

the

fees,

the

telephone service

hotel

guests,

Ph II Ipp Ine

plus

Long

the

Distance

Telephone Company.
6.

The

(Furniture
to

sale of

the financing

personal

property

and Fixture)
company

from
is

and

equipment

company/borrower

considered

property subject

to

10%

The

tax

sale

value

of

added

tax.
7.

P455,933.50
justified
Sec.

113

In
of

8.
tax

in

good

prove

this

The taxpayer

has

Inc.

145

Co. ,

Aveline,

year

CIA,

SCRA

dispute
tax

has

validity

Inc. vs.
8

of

BIR

of

to

are
the

the

in
tax

burden

of

98

Phil.

290;

290;

kinds

of

570).

centers
(VAT)

Deficiency

P11,756,054.03,

records)

made

duty

(Interprovincial

on

and

VAT on

two

the

is

computed

taxes

percentage

other

1988, per examination of the revenue

amount
216,

of

and

Resources

presumptions

taxpayer
Its

Autobus

the

Construction

all

The

CIA

Schedule

vs.

correctness

impugn

value-added

of

SCRA 671).

the

The present

The

(CIA

Likewise,

to

and

assessments

faith.

of

vs.

tax

correct

assessments.

namely:

jurisdiction,
are presumed

9.

of

legal

examiners

of Asia,

proof

is

Tax Code.

otherwise

favor

assessment

percentage tax

accordance with the provisions


the

In

by

deficiency
for

tax.

income for

the

officer, in

the

as

follows:

(p.

DEC ISION C.T.A. C ASE NO.

5046
-

MANILA MANDAR IN HOTEL,


SCHEDULE

INC.

OF DEFICIENCY VAT ON OTHER


FOR THE YEAR

TotaI

Department

Income

4,988,665. 83
893,554. 58

Health Center
Business Center

4,662, 142. 87

Garage

3, 149,239. 37

Rent and Other Income

6,219,940. 10

TOTAL

P65,760,496. 13

p 6,576,049. 6 1

7,609,725. 36

69 1,793. 2 1

Disposal of Assets

Total Subject to VAT

P73,370,22 1. 49
7,267,842. 82

VAT Due thereon


Less:

Output Tax

P45,847,628. 69

Telephone
Guest Laundry

Add:

INCCJ.E

1988

Payment
Percentage tax payments
Garage

Other Income
p

Total

84,954. 06
241!4 10. 8 1
326!364. 87

VAT Payments
p

1st Qtr.

545,135. 44

3rd Qtr.

382,927. 03

4th atr.

481! 137.42

Total

p 2,000,364. 6 1
p 2,326,729. 48

TOTAL
Less:

Disallowed

Total Claimed
Less:

591,164. 72

2nd atr.

AI lowed

Input Tax
P808,095.40
204,206. 6 1

Total A I towable Payment


Deficiency Value Added Tax

603!888. 79
1,722!840. 69
p 5,545,002. 13

25% Surcharge

1,386,250. 53

Interest

4,774,801. 35

( 1-20-89 to 6-30-92)

Compromise
Total VAT Due and Payable

50,000. 00
P 1 1,756,054. 03

DECIS ION
C.T.A.

CAS E

NO. 5046
-

The

Schedule of
in

1988

year

hereunder

as

Deficiency

the amount

follows:

P455,933.50,

of
215,

(p.

Percentage

BIR

Roo Revenue

Reservations

Total

!Receipts)

Taxable

Banquet

is

computed

I NC.

1988

Deficiency
Tax Due

Receipts

Pl55,083,830.66

Food Revenue

the

OF DEFICIENCY PE RCENTAGE TAX


FOR THE YEAR

Gross Receipt

for

records)

MANILA MANDARIN HOTEL,


SCHEDULE

Tax

Tax Paid

Tax

155,083,830.66 18,610,059.68 18,610,059.68 P

76,215,586.95 1,436,725.39

71,652,312.28

2,866,092.49

2,808,623.49

57,469.01

19,094,305.19

_.;.19-L..
__
19
'- _... 4,-'-305
_ .
I 09

1,527,544, 42

1,376,622, 78

1501921.64

Beverage
Revenue
TOTAL

____

P244,393,722.80 1,436,725.33 245,830,448.13 23,003,696.59 22,795,305.94 P208,390.65

25\ Surcharge

52,097.66.
179,445.19

Interest fro 1-20-89 to 6-30-92


(.68888)

16,000.00

Coproise
Total Deficiency Percentage Tax

The
I terns.

assessment
This

of clarity

VALUE-ADDED

Court

of

an additional

assessment

gross receipts

PLOT

each

contends

VAT

of

VAT

is

into

subdivided

appropriate in the

item

four

Interest

Individually.

T AX

the

of

for

finds it

to discuss

Petitioner

amount

P455,933.50

stems
sum

of

subject

to

P35,900,388.53

that
from

substantial portion

the respondent's

P35,900,388.53
the

10%

represents

on the overseas cal Is of the

VAT.
the

as

inclusion

part of

The

its

additional

tol Iing

guests of

of

charges

petitioner

DECISION
C.T.A.

CASE

NO.

5046
-

paid to
of

PLOT

and

which

the petitioner's
Petitioner

that

only

the

accrued in
base for
the

amount

with

fees

the

usage
to

(the

should include
petitioner's

its

the

and

which
the

actually
proper

service

and

represent
it

and

because

to

such

not petitioner's.
theorizes

that

revenue,

thus,

gross
the

plus

tax

petitioner pays
I ines

other hand,
or

opines

petitioner,

the

handling fees,

telephone

respondent

should be

PLOT

part

VAT.

telephone

gross sales
the

form

the handling fees

revenues of
the

should

amount

amount that

of

on

based on

the

receipts of
the

claims

for

of petitioner)

gross

pertains

is

base

VAT purposes since

Respondent,
VAT

taxable

handling

should not include


for

respondent

disagrees

favor

actual

PLOT

gross

the

tolI

the
It

profit
fees

from

due

to

PLOT.
The

petitioner

paid

to

receipts subject to
Section

whether

Is

issue

102

PLOT
the

should

10%

not

the

amount

that

form

part

of the

gross
. (

or

VAT.

of

the

Tax

Code

which

served

VAT

on the sale of services

as

the
( ,)

basis

of the

10%

provides

as
'

fo I I ows:
Sec.

102.

Va I ue-added
(a)

services.
There

value-added
receipts
sale

Rate

shall be levied,

of

services'

tax

derived

equivalent

the

on

sa I e

base

of

tax.

assessed

by any

services.
means

and

tax
and

to

collected a
of

10%

gross

person engaged in
The

phrase

performance

qf

of

'sale

alI

the
of

kinds of
.,

DECISION
C.T.A.

CASE

NO.

5046
-

services

for

others

consideration,
rendered

for

customs

immigration

property;

cinematographic
goods

for

thereof

or

or

contract

exercise

the

performed

person,

of

basis

Regulation

No.

manner

as

the

to

excluding

provision

the

10%

5-87

defines

and

of
the

fee,

materials

deposits

or

constructively

quarter

speaks

for

the

performed

for

of

Section

Section

amount

service

be

gross

the

X .

for

value-added

VAT.

of

that

or

or

taxable
or

total

charged

services

during

of

representing

actually

services

abovecited

the

compensation
the

use

means

services

performance

or

amount

received

The

the

in

repacking

xxx.

equivalent

payments

another

not

faculties:

receipts'
its

engaged
or

similar

for

mental

with

advance

of
of

or

the

supplied

lessors

persons
and

service

commercial,

or distributors

whether

price,

including

and

manufacturing

'Gross

or

brokers;

fi I ms;

money

or

performed

estate

lessors

others;
of

ca I Is

physical
X

real

processing,

regardless

remuneration

those

construction

stock,

and

fee,

including

by

milling,

same

contractors;
personal

the

tax.

gross

receipts

2(m)

of

receipts
102(a)

of

in

Revenue

exactly

the

Tax

thus:

"Gross

(m)
amount

of

money

receipts"
or

its

the

contract

price,

fee,

including

the

supplied
advance

with

charged

services
actua I I y

received

during

services

performed

another person,

compensation

amount

the

payments

means

equivalent

the

taxable
or

to

and
or

the
or

service
materials

deposits

or

constructive I y

quarter
be

total

representing
for

for

the

performed

for

excluding value-added tax.

as

the

Code,

DECISION C.T.A.

CASE

NO.

5046
-

amount
the

of

money

petitioner
calls

actua I Iy

The

taxpayer.
to

as

its

by

made

facts

PLOT

constructively received
but

were

why

the

instead

petitioner's gross
In

Commissioner) of
and

Inc.,

Internal
13887

and

Supreme

ruled,

In

to

money

Revenue vs.
Appeals,

SCRA

402)'

the
gross

say,

so

there

include

these

nor

service
is

reason

no

as

fees

part

CoIIector

The

Mani Ia

(formerly
Jockey
1960

of

Jockey

(now
Club,

Collector)
Inc.,

Club,
(108

gross

amusement
which

or

recent

of Tax

of

overseas

actually
as

the

Phil.

of

Nos.

Lthe

821),

receipts
place

although
has

of

the

should

not

delivered

been

regulation

for

to

especiaIIy
some

person

proprietor . "

Court

concept

30,

pIace

law

the

more

Internal

by

than

Mani Ia

the

amusement

other

by

thus:

of

any

earmarked

PLOT

Revenue vs.

June

"Needless

the

of

the

not

petitioner

entitled

vs.

proprietor
include

the

paid

by

receipts.

L-13890,

Court

were

for

the

to

received

amount

guests

Commissioner

Revenue

the

charges

Internal

The

that

tal Iing

by

refers

receipts

constructive Iy

show

should

cases

the

or

charges

respondent

gross

of

definition

The

case

Tours
G.R.

Supreme
receipts

No.

Specialists,
66416,

Court
in

Commissioner

entitled,

March

again
broader

of

Inc.,

and

The

21'

1990

(183

into

the

delved
sense

than

what

DECISION
C.T.A.

CASE

NO.

5046
- 10

was

enunciated

earlier,

in

the

"As

demonstrated

Code

do

entrusted
to

them

be

to

and

benefit;
must

include

the

taxpayer
not

it

law

<Underscoring

Therefore,

receipts

The

to

in

imposition

of

VAT

Petitioner

the

percentage tax
of

VAT.

the

that

there

would

exempt

meaning

Tax

of

Code."

by

the

the

under

and

the
gross

therefore

gross

that
are

the

receipts
on the

the

to

must

be

Section 103(j)
rendered

Title

are

of

of
by

It

subject
of

the

Tax

persons
from

of

the

received
to

the

subject

exempt

petitioner

guests

revenues

already

longer

respondent's

transportation

the

under Section 115


no

services

of

petitioner's

is

petitioner

service

in

Issue

received

argues

should

inclusion

of

part

in

carriers

clearly provided

taxpayer's

necessary
which

belong

not

the

the

receipts

the petitioner.

amount

type of

that

of

on

hate I .

these

do

VAT erroneous

Item

extended

common

to

under

or

respondent's

as

10%

favor

services

mentions

not

find

to

from

hence,

quoted

supp I ied)

stemming

this

which

under

PLOT

second

monies

receipts within the

We

subject

cancelled

on

case

above-mentioned
to tax

redound

Is

receipts

paid

the

regulation

or

such monies and

amount

In

not
do

and
a

gross

tax

Jockey C I ub

receipts subject

gross

Tax

from

Mani I a

thus:

case,

be

to

the

Tax Code
VAT

Code

as

which

subject
the

3%

to

payment

DECISION

C.T.A. CASE

NO.

5046

Respondent
petitioner
not
It

and

engaged

transports

hotel

respondent
falls
Tax

falls

carrier

instead

of

VAT

the

to

by

to

to

in

guests

can

the

common

be

to

of

the

as

of

its

to

to

insists

the
but

Section 115

Section

service

of

102

the

VAT.
It

that

commtin

3%

part

according

of

ambit

resolved

accordance

Corollary

3%

be

service

petitioner

sale

because

activity

petitioner

subject

received

in

the

is

is

carrier's

tax

VAT.

issue

transport

10%

such

score,

common

revenues

particular

merely

petitioner

carrier

common

within the provision of

this

The

of

of

contention

argument that

guests

outside

subjecting

On

the

hotel

the

with

business

This

squarely

Code

the

its

service.

disagrees
proposes

in

11

its

hotel

guests

carrier's

Section 102
Is

transport

classified

whether

petitioner

issue

this

Is

the

with

extending

here

as

tax

of

in

the

services

Section 115

to

Tax

Code.

or

not

to

carrier

the

providing

subject

whether

common

under

are

not

or

Its

the
hotel

subject
of

the

the

to
Tax

Code.
We
carrier
Tax

find

petitioner's

subject

Code,

bereft of

Article 1732
carrier

to

as

the

3%

tax

under

that

It

Is

Section 115

common
of

the

merit.

of

follows:

contention

the

New

Civil

Code

defines

common

DECISION
C.T.A.

CASE

NO.

5046
-

ART.
the
air,
to

for

the

or

the

occasion
I ike
only

or

of

carrying

goods

or

both,

are

or

by

persons,

engaged

in

transporting

land,

offering

water,

their

or

services

public.
in

is engaged

business

of

when

petitioner

the

providing
for

carriers

associations

compensation,

Petitioner
in

firms

business

passengers

Common

1732.

corporations,

12

transporting

I imousine

business

and

not

On

the

passengers.

extends

service

guests

its hotel

the hotel

It

ike,

and the
not to

and

services

transport

the

does so

public

in

genera I.
In

the

case
No.

Quitoriano,

Supreme

entitled

Court

8686,

defined

"A

July

choose

or

carrier

<Underscoring

defines a

common

"Any
approved

carrier

the

or

fare

private

himself

out

property

from

and

who

generally.
Mich.,

130

person
Is

to

persons
him.

contract
the

by

the

or

carry

who

may

common

for

who
hire."

(Tilson
Supp.

1990,

Is

to

place

servIces
v.
676,

in

carrier.
public

Ford
678)"

to

refusal

paid

p.

thus:

law

without

transportation
place

ed.,

this manner,

charge

offers
F.

and

fo I I ows:

persons

6th

required

to

of

in

freight

or

or

business

189),

Phil.

corporation

or

Dictionary,
carrier

passengers

or

goods

Qulnajon

supp Iied)

Law

Black's

for

person

carry

as

business

and remunerate

to

vs.

(31

is

regular

property

Is

undertakes

1915

30,

carrier

common

to employ

States

common carrier

corporation whose
passengers

United

convey
if

the

contrast
One

who

to

holds

as

engaged

in

of

persons

or

for

compensation,

to
Motor

the
Co.,

pub Iic
D.C.

275,

DECISION
C.T.A.

CASE NO.

5046
-

The

petitioner

aforequoted
to

tr ansport
the T ax

T ax

Its

to

VAT

It w as

percent age

in

is

within

erroneous

receipts

Respondent

the

f at I

on

resulting

t ax

under

correct

accord ance

any

In

of

the

Its

p art

from

the

Section

115

subjecting
102

of

these

with

Section

of

the

ass ai led

by the

petitioner

which

respondent

Code.
The

third

rel ates

to

item

its

subjected to
T ax

to

not

and

gross

service

Code.

revenues

does

definitions

subject

13

of

VAT

dispos al

the

10%

VAT

of

assets

pursu ant

to

Section

100

of

the

Code.
dispos al

The
1988,

consists

BIR rec.;
R-23,

p.

of

R-4 ,
195,

of

p.
CTA

petitioner's

the

fo llowing:

177,

CTA

rec.;

assets
(see

R-1 6 ,

Historical cost
Increase

Exhs.
p.

the
U,

1 8 8,

year

p.

2 12,

CTA

rec.;

rec. )

Transportation

Appraisal

for

Operating

Bu ltd I ngs

Equipment

Equipment

P3,893,086

P106,621

P1,159,811

P5,159,518

P6,343,293

P106,621

P1,159,811

P7,609,725

P1,137,886

P106,621

P1,244,507

P1061621

P118151388-

2,450,207

Total

5,450,207

Accumulated
depreci ation:
On cost
On appraisal

570,881
P1,7081767

Net appraised value P4,634,526

570,881

P1,159,811

P5,794,337

DECISION

C.T.A. CASE

NO.

5046
-

The
subject
the

disposal

to

amount

appraisaI
of

the

o Id

The

was

is

therefore,

and

was

Iinen

that

the

considered sale

of

of

This

Court

its

property

of

the

hotel

been

fu I Iy

has

was

alleged

the

that

business

4%

the

which

caterer's

Code,
to

account

the

which

Tax

the

VAT.

catering
to

on

of

that

and

demolition

the

consisting

hateI

inventory
or

no
of

as
10%

tax

amended,
VAT

under

of

operations

count
longer

this

was

silverware,
amounting

found

useful.

equipment

to

to

have

In

view

can

not

be

transaction.

the

other
of

personal

believes
and

the

subjected

its

sale

performed

It

the

equipment

deemed sale
on

costs

be

Code.

retirement

Respondent,
theory

be

destroyed

the

considered

of

in

to

to

position

renovation

the

subjected

the Tax

after

to

1988.
In

the

The

equIpment

In

not

used

works

subject

114(1)

of

way

used

operating

lost,

thereof,

as

sold

should

P1,159,811.61
been

give

already

103(j)

The

to

transportation

Section

Section

civi I

made thereon.

considered

transportation

china

from

assessed

petitioner's

P6,343,293.00 represents

works

business

Is

were

of

depreciated

under

It

VAT.

assets

10%

renovations

be

these

the

increment

c ivI I

cannot

of

14

hand,

property

subscribes
and

the

equipment

petitioner's
after

the
Is

equipment

property subject to

that

to

10%

VAT.

disposal

taking

into

DECISION

C.T.A. CASE

NO.

5046
-

consideration
to

10%

the

bui Iding
thereof
The

the

se cannot

is

true

sale
the

sale

to

point

of

that

business

be

disposal
the

the

the

due

of

to

loss

or

transportation
asset

other

the

same

the

should

not

Supreme
011 Co.
1955

"In

vs.
(96

something
which

is

the

Is

it
or
to

be

engaging
a

Its

cases

vs. Commissioner

not

of

part

main

of

VAT.

reason

for

but

with

not

respect

noteworthy

fully

depreciated
business
the

of

catering

caterer's

tax

under

Tax

Code,

of

the

VAT.

case

entitled

et

al.,

Standard

No.

l-6931,

ru I ed:

909),

we

the

etc. ,

hold

already

may

to

the

Antigua,

conclusion,

merely

necessary

in

Ph II.

the

the

operating

is

that

In Title

sub j ect

Court

company

business,

be

been

it

catering

to

sub j ect

the

the

Now

further,

percentage taxes

The

AprII 30,

the

with

already

has

sold

to

obsolescence

equipment

in

renovation

sub j ect

because

sub j ect

not
works

for

retirement

etc. >

is

civi

way

considered

Considering

is

the

In

was

the

petitioner.

or

paving

with

connected

is

Vacuum

its

f1/lf' thereof sub j ect to the VAT.

to

and

for

( s I Iverwares,

retirement

demolition of

petitioner

per

equipment
their

manner

The

VAT.

of

same

the

15

that

taxed

further
In

of,

an

when
on

taxed

activity

Incidental

person

Its

main

for

doing

or

work

to

and

is

business. "

Insular

Internal

Life

Assurance

Revenue,

CTA Case

Co. ,
No.

ltd. '
2336,

DECISION

C.T.A. CASE

5046

NO.

and

Fi Iipinas

Internal
12,

Life

Revenue,

1973,

this

"We
view.
Is

Court

have

the

the

every

in

or

course
in

who

value-added

100

to

selling

102

be

of

of

trade

of

VAT.

The

sel Iing

to

renovation.
rea I

subject
In

the

of

or

same
it

not

to

merely

of

the

said

Tax

Code.

if

renders

of

be

imposed

(As

the

added

sale

business of

property

Code,

as

of

equipment

those

assets

Petitioner
1988

is

and

In

any
to

Sections
EO

273)"

goods

is "in

other

the

assets

not subject

merely
hotel

yet

the
The

taxpayer".

are

not

sells,

subject

and

are

in

are

person

services,

by

the

improvement

in

Any
business,

shal I

(VAT)

only

or

to

incidental
business.

included

among

VAT.

conclusion,

subjecting

is

transactions

goods

tax

property
to

intent

conduct

99

goods,

unserviceable
real

Besides,

the

business,

I iable.

trade

simI I ar

this

imposed

including

Its

of

imports

the

course

Section

Persons

99.

engages

shall

to

or exchanges

person

rule:

which

the

November

hereunder:

the

barters

of

supra.)"

pursuant

"SEC.
who,

to

dated

express

taxes

activity

7,

quoted

to

legislative

business.

amended,

to

Commissioner

both

occasion

law

necessary

(p.

vs.

2337,

occasion

be

tax

the

incidental or

Moreover,

those

had

to

separately

VAT

had

Company

No.

Case

Where

presumed

Assurance

CTA

xxx.

16

We

disposal

find
of

that

respondent

transportation

erred

equipment

in
and

DECISION
C.T.A.

CASE

NO.

5046
-

the

renovation of

taxes

the

last

The

which

building

item

equipment

to

value-added tax.

the

10%

to

VAT

claims

to

Involves

have

disallowance

was

arbitrary

findings.

The

Revenue

and

was

based

the disallowance

by

out

input

tax

in

the

P204,207.21

was

properly

claimed

the

P808,095.40,

only

thus,

of

the
the

total

An

analysis

BIR

records

working

reflected
instead
records).
to

the

submitted

by

prepared

P603,888.79,
In

was

summary,

the

deficiency

of

the
by

this

amount

(see

overall

revenue

taxes

pages

reveal

of

39

findings

assessment

that

P93.964.54

of
to

47,

with
for

BIR

respect
1988

FOR THE YEAR 1988

Business Center

that

examiner

MANILA MANDARIN HOTEL, INC.

Guest Laundry

the

including

case

SCHEDULE OF DEFICIENCY VAT ON OTHER INCOME

Health Center

such

documented,

hereunder:

Departent

by

factual

stating

respondent
the

Input

VAT

input

disallowed.

records

d isa I I owed

petitioner 's

deta I I ed

of

paper

the

of

P603,888.79

on

conducted

who

investigation explained
of

the

that

insists

not

Examiner

and

been disallowed

Petitioner

Examiner .

the

operating

relating

petitioner

Revenue

the

the

of

retirement

17

Total Incoe
p 4,988,665.83
893,554.58
4,66Z, 14Z.87

are

DECISION
C.T.A.

CASE

NO.

5046
-

18

Tota I Income

Department
Garage

3,149,239.37

Rent and Other Income

6,219,940.10

Total income subject to VAT

P19,913,542. 75

VAT Due thereon

p 1,991,354.27

Less: al Percentage tax payments


84,954.06

Garage

241,410.81

Other Income
Total

326,364.87

591,164.72

bl VAT payments
Output Tax Iiabi I ities
1st Otr.
2nd Otr.

545,135.44

3rd Otr.

382,927.03
481,137.42

4th Otr.

p 2,000,364.61

Total VAT liabilities


Less: Allowable input tax
Total input tax per return

808,095.40

714,130.86

Less: unallowable

93,964.54

Total allowable input tax


Tota I VAT payents

p 1,286,233.75

1,612,598.62

TOTAL
Deficiency Value Added Tax

378,755.65

94,688.91

Plus : al 25\ Surcharge

326,093.05

b) 20\ Interest 11-20-89 to 6-30-92)

PERCENTAGE
It

the
the

TAX

Is

percentage
tax

on

hotel

petitioner's
tax

deposits

made

faci Iities.
if

subject to

percentage

the

nature

classified as

analysis

that

arose

to

assessment

deposits,

of

799,537.61

Total VAT Due and Payable

not

of

by

income.

tax

against
because

security

the

cIients

Petitioner

applied

Its

due

the

Imposition

for

contends
hotel

these

deposit

deficiency

the

that

biIIs

deposits
which

use

of
of

these

is

not

partake

cannot

be

DECISION
C.T.A.

CASE

NO.

5046

This

Court

assessment
because
should

of

the

not

the

genera I I y

earned
in

advance

which
period

are

future

not

to

in

contract.
faci I ities

in

the
It
or

41-42).

by

the

the
other

is
the

cancel

the

clearly

convertible

nature
party

only

to

wi I I

upon

default

reservation

of

on

the

of

revenues.

period

future

in

deposit

perform

end

his

the

reserving

that
Since

the
the

the

Accounting

Fernando,

of

Is,

complete.

is

a security

use

in

These

services

Ms.

be

received

that

Financial

the

time

must

the

revenue,

witness

taken

earned.

render

of

complete

has

the

of

process

earning

pp.

of

are

unearned
or

is

amounts

revenue

they

Statements

explained

that

as

revenue

as

which

the

1-22,

is

but

fo I I owing

revenue

the

Thus,
as

process

that

is

revenue

an exchange

requires

transfer goods

of

No.

co I Iection

(b)

treated

carried

(Campilation

As

and

received

unt I I

Standards

earning

recorded.

periods

I iabi Iities

ensure

is

are

or

amounts

It

income.

the

of

both

the

principle

are

they

(a)

gross

clients

hotel

principle,

when

complete,

before

Its

the

primarily

tax,

petitioner 's
of

in

respondent

percentage

by

part

the

realization

met:

This

place.

as

recognized

virtually

with

made

treated

conditions are

deficiency

the

Under

or

disagrees

deposits

be

19

of

its
to
the

reserved
guest

to

deposit

is

deposits

are

DECISION
C.T.A.

CASE

NO.

5046
-

payment
of

for

its

future

services

income

gross

20

it

unti

cannot
the

be

treated

earning

as

part

process

Is

complete.
From
deficiency
should

above

the

percentage

be therefore be

WHEREFORE,

its

value-added

plus

20%

pursuant
It

to

there

parties.
Revenue,

1988

Section

was

no

(Ben

L.

Case

assessment

of

the

the

sum

foregoing,

of

from

22,

1992

June

249(c)

of

noted
the

mutual

that

the

agreement

et

for

Tax

respondent

vs.

al.

promulgated

assessment

the

In

of

RAMON

is

16,

QQ'

ERNESTO

D.

Presiding

ACOSTA

Judge

1988,
paid

amended.

compromise
deleted

penalty
inasmuch

between
of

the

Internal

1958).

percentage
merit.

-J!
-r.

Associate
CONCUR:

year

fully

as

reached

July

ORDERED.

until

Code,

is

representing

taxable

Collector

deficiency
lack

petitioner

P799,573.61
the

Chuy,

and

erroneous

is

for

by

the

that

find

cancelled.

is hereby CANCELLED for


SO

We

deficiency

be

imposed

CTA

The

PAY

tax

should

tax

view

interest

originally
as

in

ORDERED to

hereby

discussion,

Ju

tax

for

DECISION
C.T.A.

CASE

NO.

5046
-

21

CERTIFICATION

hereby
after
Tax
of

due

Appeals
the

certify

that

consultation

with

in

accordance

this
the

with

decision

members
Section

of
13,

was
the

reached
Court

Article

Constitution.

Ul
ERNESTO

D.

Presiding
Court

of

Tax

ACOSTA
Judge
Appeals

of
VI I I