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  • CIR Vs Sony - Case Digest

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    Karen Mae Servan
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    Sony Philippines incurred advertising expenses that were covered by valid VAT invoices. The Commissioner of Internal Revenue issued a deficiency VAT assessment, disallowing Sony's input VAT credits for the advertising expenses. The Court of Tax Appeals ruled that the advertising expenses were a legitimate business expense under the Tax Code and that Sony was entitled to the input VAT credits. The CTA denied the CIR's petition to review the case. The Supreme Court upheld the CTA's ruling, finding that the deficiency VAT assessment was erroneous because Sony had properly claimed input VAT credits for the advertising expenses covered by VAT invoices.

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    Sony Philippines incurred advertising expenses that were covered by valid VAT invoices. The Commissioner of Internal Revenue issued a deficiency VAT assessment, disallowing Sony's input VAT credits for the advertising expenses. The Court of Tax Appeals ruled that the advertising expenses were a legitimate business expense under the Tax Code and that Sony was entitled to the input VAT credits. The CTA denied the CIR's petition to review the case. The Supreme Court upheld the CTA's ruling, finding that the deficiency VAT assessment was erroneous because Sony had properly claimed input VAT credits for the advertising expenses covered by VAT invoices.

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    96 views1 page

    CIR Vs Sony - Case Digest

    Uploaded by

    Karen Mae Servan
    Sony Philippines incurred advertising expenses that were covered by valid VAT invoices. The Commissioner of Internal Revenue issued a deficiency VAT assessment, disallowing Sony's input VAT credits for the advertising expenses. The Court of Tax Appeals ruled that the advertising expenses were a legitimate business expense under the Tax Code and that Sony was entitled to the input VAT credits. The CTA denied the CIR's petition to review the case. The Supreme Court upheld the CTA's ruling, finding that the deficiency VAT assessment was erroneous because Sony had properly claimed input VAT credits for the advertising expenses covered by VAT invoices.

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    of 1

    Topic: Input Tax

    G.R. No. 178697               November 17, 2010

    COMMISSIONER OF INTERNAL REVENUE, Petitioner,


    vs.
    SONY PHILIPPINES, INC., Respondent.

    Facts:

    CIR issued Sony LoA to examine its books of accounts and other accounting records regarding revenue
    taxes for "the period 1997 and unverified prior years. PAN was thereafter issued to which Sony protested.
    Eventually, FAN and FLD were issued finding Sony liable, among others, of deficiency VAT amounting to
    P11,141,014.41.

    After trial, the CTA-First Division disallowed the deficiency VAT assessment because the subsidized
    advertising expense paid by Sony which was duly covered by a VAT invoice resulted in an input VAT
    credit. CIR filed for Petition for Review with the CTA En Banc but said petition was later denied.

    Hence, this case.

    Issue:

     Whether or not respondent (Sony) is liable for the deficiency VAT

    Ruling:

    No.

    The deficiency VAT assessment due to the disallowance of the input VAT credits was erroneous.

    Under Section 110 of the 1997 Tax Code, an advertising expense duly covered by a VAT invoice is a
    legitimate business expense.

    In this case, Sony incurred and paid for advertising expense/ services. The Court did not agree that the
    subsidy should be subject to the 10% VAT. To begin with, the said subsidy termed by the CIR as
    reimbursement was not even exclusively earmarked for Sony’s advertising expense for it was but an
    assistance or aid in view of Sony’s dire or adverse economic conditions, and was only "equivalent to the
    latter’s (Sony’s) advertising expenses.

    Sony did not render any service to SIS at all. The services rendered by the advertising companies, paid for
    by Sony using SIS dole-out, were for Sony and not SIS. SIS just gave assistance to Sony in the amount
    equivalent to the latter’s advertising expense but never received any goods, properties or service from
    Sony.

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