Thermaprime Well Services, Inc., v. The Commissioner of Internal Revenue, CTA Case No.

8896,
March 26, 2019
Facts:
Petitioner Thermaprime Well Services, Inc. is duly registered with the Bureau of Internal Revenue
(BIR) as a VAT Zero Rated taxpayer. On March 21, 2012, petitioner filed Amended Quarterly VAT
Returns claiming to have unutilized input taxes. On September 24, 2013, petitioner filed an
application for tax credits/refund of input VAT for the 3rd and 4th quarters of 2011.
On February 28, 2014, petitioner received a Letter of Authority authorizing BIR representatives
to examine petitioner's books of accounts for VAT for the year 2011. After exchanges of letters,
petitioner submitted a copy of its Sale Invoice/Official Receipt covering the said period and
additional documents in support of its refund application. However, respondent did not act on
petitioner's administrative claim. As a result, petitioner filed a Petition for Review with the CTA
on September 22, 2014.
Issue: Whether or not the petitioner is entitled to a refund and/ or issuance of a tax credit
certificate representing its excess or unutilized input VAT payments
Decision:
In this case, petitioner was able to establish that its administrative claim for refund filed on
September 24, 2013 was well within the two (2) year period to apply for the issuance of a tax
credit certificate or refund of creditable input tax due or paid attributable (NIRC 1997).
From the date of filing of an administrative claim, a taxpayer has thirty (30) days within which to
submit the documentary requirements to support his claim, unless given further extension by
the CIR. Upon submission of the complete documents, or expiration of the period, the CIR has
120 days within which to decide the claim for tax credit or refund. In all cases, whatever
documents a taxpayer intends to file to support his claim must be completed within the two-year
period.
In the present case, petitioner, after filing its administrative application for VAT refund, no longer
submitted additional documents to support its claim within the 120-day period. Should the
taxpayer decide to submit only certain documents, or should the taxpayer fail or opt not to
submit any document at all in support of its application for refund, the 120-day period should be
reckoned from the filing of the said application.
The Court observes that it took petitioner 210 days more after the end of the 120+30 day period
before elevating the matter to this Court. Accordingly, failure to consider that the inaction of
respondent after the 120-day period is deemed a denial of its claim. The CTA is devoid of
jurisdiction to further act on petitioner's judicial claim which was belatedly filed.
To stress, a claim for tax refund or credit is strictly construed against the taxpayer, who must
prove that his claim clearly complies with all the conditions for granting the tax refund or credit.
Toledo Power Company v. CIR (CTA Case No. 8792 dated January 29, 2019)
Facts:
Petitioner’s Motion for Reconsideration: Petitioner submits that all of petitioner's sales to Cebu
Electric Cooperative III (CEBCO III) qualifies as VAT zero-rated sales was eventually distributed to
Balamban Enerzone Corporation (BEC) and Carmen Copper Corporation (CCC), which are PEZA
and BOI-registered entities, respectively. However, petitioner states that a portion of the sales
to CEBECO III was disallowed by the Court as the supporting official receipts are unreadable. It is
also argued that a notarized Certification issued by CEBECO III shows that the sales of power to
CEBECO III were eventually distributed to BEC and CCC.
Respondent’s Motion for Partial Reconsideration: Respondent claims that NIRC of 1997 uses the
word "directly attributable", thus, the fact of "direct attributability" must be established.
Respondent argues that the Court did not rule that the unutilized input tax was "directly
attributable" to the zero-rated sale and it does not necessarily follow that when a taxpayer has
zero-rated sales alone, all its input tax is automatically directly attributable to such zero-rated
sales. Respondent points out that there is nothing in the decision of the Court showing the direct
connection of the purchases or input tax to the finished product whose sale is zero-rated.
Issue:
Whether or not the motions of petitioner and respondent should be granted.
Decision:
The Court denies petitioner's motion to present additional evidence in order to correct evidence
previously offered. Petitioner failed to show that its motion is based on the specific grounds
provided under Rule 37 of the Rules of Court. Moreover, the Court cannot rely on the notarized
Certification issued by CEBECO III because of the discrepancies in the total amount of zero-rated
sales per said certification and per summary based on the sales invoice and official receipts.
Respondent's motion is likewise bereft of merit. NIRC of 1997 allows the tax credit/refund of
creditable input VAT attributable to zero-rated or effectively zero-rated sales. Moreover, the
Code provides that any input tax on the following transactions evidenced by a VAT invoice or
official receipt shall be creditable against the output tax. NIRC did not also limit input taxes to
those purchases that only form part of the finished product of the taxpayer.
The Code also provides "where the taxpayer is engaged in zero-rated or effectively zero-rated
sale and also in taxable or exempt sale of goods of properties or services, and the amount of
creditable input tax due or paid cannot be directly and entirely attributed to any one of the
transactions, it shall be allocated proportionately on the basis of the volume of sales".
Petitioner’s Motion for Reconsideration and respondent's Motion for Partial Reconsideration are
denied for lack of merit.
Toledo Power Company v. Commissioner of Internal Revenue, CTA Case Nos. 8450, 8512, 8547 &
8596 dated March 15, 2019.
Facts:
Both parties seek reconsideration of the Court's Decision on the denial of the petitioner’s claims
for refund on 1st, 2nd and 3rd quarters of 2010 and the grant of refund of excess input VAT for 4th
quarter of 2010.
Petitioner claims that the Petitioner's sale of power to CEBECO III, which was eventually
distributed to a PEZA-registered entity and a BOI-registered 100% export entity are subject to
VAT zero-rating.
Respondent argues that the Court correctly disallowed input VAT for not being properly
substantiated by VAT invoices or receipts and for failure to meet the substantiation requirements
under the NIRC, that Court correctly disallowed the input tax in the official receipt issued by Cebu
Energy Development Corporation (CEDC) on since the same does not contain the calendar year
of transaction and that CEBECO III is a non-PEZA registered or BOI -registered entity.
Issues:
Whether or not the motions of petitioner and respondent should be granted.
Decision:
The Court partially grants petitioner's motion. The Court finds that, out of the disallowed input
VAT, petitioner was able to prove the actual payment of 85% of the input VAT on importations
of goods. As regards the domestic purchase of service to Cebu Energy Development Corporation
(CEDC), a subsequent correction made by CEDC in the official receipt does not rectify the fact
that petitioner was issued an official receipt, which is not compliant with the invoicing
requirements provided by law.
Considering that petitioner is engaged both in taxable sales subject to zero percent and twelve
percent rates, as well as exempt sales, and its input VAT cannot be directly or entirely attributed
to any of the transactions, the Court shall allocate the adjusted valid input VAT proportionately
on the basis of the volume of its sales.
Moreover, if the end-user is subject to zero-rated sales, then the sale made by the power
generation company to the distribution company should also be subject to VAT zero-rating. In
the instant cases, petitioner sold power to CEBECO III which are pass through charges and are
eventually distributed to BEC and CCC, PEZA and BOl-registered entities, respectively, thus,
qualify for VAT zero-rating.
Respondent's motion is unmeritorious for for being a mere reiteration of their previous
arguments and for failure to raise matters substantially plausible or compellingly persuasive to
warrant the reversal of the assailed Decision
Trans-Asia Oil and Energy Development Corp. v. Commissioner of Internal Revenue, CTA Case No.
9078, September 28, 2018
Facts:
Petition for Review filed by Trans-Asia Oil and Energy Development Corporation prays for the
cancellation and withdrawal of the assessment that found petitioner liable for alleged deficiency
donor's tax arising from its distribution of property dividends to its stockholders.
Respondent assessed petitioner for donor's tax pursuant to RR Nos. 6-2008 and 6-2013,
classifying the declaration and distribution of TAPC's shares to petitioner's stockholders as "other
disposition" of shares of stock held as capital assets. Petitioner argues that the provisions of RR
Nos. 6-2008 and 6-2013 apply only to sales, barter, exchange or other disposition which give rise
to the realization of net capital gains subject to capital gains tax. Petitioner maintains that its
declaration and/ or distribution of shares as property dividends was not a sale, barter, exchange
or other disposition that would give rise to any realized net capital gains on its part, because it
received no consideration for such distribution of dividends.
Issue:
Whether or not the petitioner is liable for donor's tax arising from its distribution of property
dividends to its stockholders
Decision:
The CTA finds that Petitioner's declaration and distribution of property dividend is not within the
ambit of the term "other disposition of shares of stock" that would recognize gain or loss from
such disposal, as contemplated in RR No. 6-2008, as amended by RR No. 6-2013.
Dividends comprise any distribution whether in cash or other property in the ordinary course of
business, even though extraordinary in amount, made by a domestic or resident corporation to
the stockholders out of its earnings or profits. Property dividend consists of a portion of corporate
property paid to shareholders instead of cash or corporate stock. Petitioner declared and
distributed property dividends to its stockholders out of its earnings or profits. The said property
dividends distributed were comprised of petitioner's shares of stock/investment in its wholly-
owned subsidiary, TAPC, and were recorded in Petitioner's books at its carrying/book value. In
recording the property dividends at their carrying/book value, there was no profit or gain realized
or recognized in the transaction.
Petitioner's declaration and distribution of property dividends to its shareholders in the form of
TAPC shares of stock is not within the ambit of the term "other disposition of shares of stock" in
RR No. 6-2008, as amended by RR No. 6-2013.
Hence, Petition for Review is granted.
Trans-Asia Oil and Energy Development Corporation v. CIR (CTA Case No. 9078 dated January 18,
2019)
Facts:
Respondent seeks reconsideration of this Court's Decision which cancelled and withdrawn the
Formal Letter of Demand and Assessment issued by respondent.
Respondent argues that the Court erred in ruling that petitioner's declaration and distribution of
property dividends is not within the ambit of the term "other disposition of shares of stock" that
would recognize gain or loss from such disposal as contemplated in Revenue Regulations (RR)
No. 6-2008, as amended by RR No. 6-2013. Respondent contends that the realization of net
capital gains as a result of the distribution of shares of stock is immaterial. Thus, respondent
maintains that "other disposition of shares of stock" also covers distribution of shares of stock as
property dividend by petitioner. Respondent maintains that the difference between the total fair
market value and the book value of the property dividend should be deemed a gift, which is
subject to donor's tax and that the deficiency interest should be calculated from the declaration
date. Respondent claims that the assessed deficiency donor's tax has bases in fact and in law,
hence, the same should not be cancelled and withdrawn.
Issue:
Whether or not the petitioner is liable for donor's tax arising from its distribution of property
dividends to its stockholders
Decision:
The Court maintains its ruling that petitioner's declaration and distribution of property dividend
is not within the ambit of the term "other disposition of shares of stock" that would recognize
gain or loss from such disposal, as contemplated in RR No. 6-2008, as amended by RR No. 6-2013.
The International Financial Reporting Standards (IFRS) 10 provides that changes in a parent's
ownership in a subsidiary that do not result in the parent losing control of the subsidiary are
equity transactions. Hence, the transaction in this case is mere equity transaction and no gain or
loss is recognized.
Moreover, since there was no consideration given to nor received by petitioner in the distribution
of property dividends, which was only declared and distributed out of its earnings or profits, then,
Section 100 of the NIRC of 1997, as amended, is not applicable where the transfer of property is
for a "consideration" although for less than adequate and full consideration.
In sum, the Court finds that respondent failed to raise a new or substantial matter, or compelling
reason to justify the reversal or modification of the Court's findings in the assailed Decision.
Transnational Plans, Inc. v. CIR CTA Case No. 8291 dated 20 February 2015
Facts:
On income tax deficiency, respondent charged petitioner of an alleged undeclared income based
on the comparison made between Bond Placements per Documentary Stamp Tax Returns of
P62.3M versus the increase in bond placement per FS of P57.4M showed a difference of P4.9M.
Respondent claims that said cost and expenses were not supported by any documentary proof.
On VAT deficiency, respondent subjected the trust fund contributions to VAT, notwithstanding
that under existing regulations applicable, the gross receipts of pre-need companies is net of the
actual trust fund contribution. As such, VAT is imposed only on the premiums collected.
On withholding tax-compensation deficiency, respondent simply compared the amount stated in
the alphalist and the alleged claimed salaries and wages.
On EWT deficiency, respondent found that petitioner had income payments for professional fees
which were not subjected to EWT. Also, in arriving at the total "Professional fees" subject to EWT,
respondent deducted the SGV and Co.'s professional fees portion.
On DST deficiency, Petitioner's accountant then in-charge erroneously arrived at the tax base for
DST on loans. Instead of using the tax rate of 1"1/1"200, the rate of P0.30/P200 was used in
electronically filed returns.
Issues:
Whether petitioner is liable for deficiency income tax, VAT, withholding tax-compensation, EWT,
and DST for taxable year 2006
Decision:
On deficiency income tax: Considering that the trustee banks were the ones responsible for the
increase in Financial Assets at FVPL of the trust funds' investments, it was erroneous for
respondent to compare the said amount with the value of the bonds and loan agreements
entered into by petitioner itself and, thereafter, conclude the difference between the two
amounts as petitioner's unaccounted source of income. For lack of factual basis, the deficiency
income tax assessment corresponding to the alleged P4.9M unaccounted source of income
should be cancelled. Moreover, presentation of discounts as part of its "Other Direct Costs and
Expenses" instead of presenting “sales net of discounts” and would not affect the income tax due
of the taxpayer as long as the discounts was also presented as part of the taxpayer's gross sales.
In the instant case, petitioner failed to establish that discounts claimed formed part of its
declared premium collections for the year. Hence, the entire claimed discounts shall be
disallowed. Disallowance of interest and bank charges is also upheld since petitioner failed to
substantiate it.
On VAT deficiency, a BIR Ruling states that gross receipts of a pre-need company should be net
of actual trust fund contributions for VAT purposes. Since petitioner relied in good faith on the
said ruling, the amounts it collected from plan holders shall be excluded from petitioner's
VATable gross receipts, following the rationalization of the Supreme Court that taxpayers may
rely upon a rule or ruling issued by the Commissioner from the time the rule or ruling is issued
up to its reversal by the Commissioner or the Supreme Court. Petitioner likewise asserts that its
main clients are seamen or seafarers who are considered overseas contract workers for all intents
and purposes and classified as non-residents. Hence, the said premium payments and the trust
fund contributions are subject to zero-rated VAT. However, petitioner failed to adduce evidence
in support of its assertion.
On withholding tax-compensation deficiency, petitioner failed to present sufficient evidence to
explain the actual nature of accounts alleged not subject to withholding tax. Thus, in the absence
of proof that these are not subject to withholding tax on compensation, petitioner shall be held
liable for the corresponding deficiency withholding tax on compensation for taxable year 2006.
On EWT deficiency, petitioner is found liable for basic deficiency. However, it is improper for
respondent to deduct the professional fees pertaining to SGV and Co. when, in the first place, it
has never been part of subject professional fees filed by petitioner. Moreover, rental income
from TESI which was registered with the Board of Investments (BOI) are exempt from the
payment of said withholding tax. The payments to U-Bix Corporation cannot be traced from the
alphalist the alleged EWT payment. Hence, it is liable for EWT on rentals from U-Bix.
On deficiency DST, petitioner's premium collections for the year 2006 as reflected in its trial
balance and audited FS for the year 2006 amounted to P104.6M. Hence, this amount shall be the
reference in determining petitioner's DST liability. Assessments are prima facie presumed correct
and made in good faith. The burden of proof to rebut the presumption of correctness in the
assessment is on the taxpayer. Petitioner herein failed on that task.