April 2016 - Philippine Supreme Court Decisions/Resolutions
Philippine Supreme Court Jurisprudence
G.R. No. 215534, April 18, 2016 - COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. LIQUIGAZ PHILIPPINES CORPORATION, Respondent.; G.R. NO. 215557 - LIQUIGAZ PHILIPPINES CORPORATION, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
SECOND DIVISION
G.R. No. 215534, April 18, 2016
COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. LIQUIGAZ PHILIPPINES CORPORATION, Respondent.
G.R. NO. 215557
LIQUIGAZ PHILIPPINES CORPORATION, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
D E C I S I O N
MENDOZA, J.:
Presented before us is a novel issue. When may a Final Decision on Disputed Assessment (FDDA) be declared void, and in the event that the FDD A is found void, what would be its effect on the tax assessment?
Assailed in these consolidated petitions for review on certiorari filed under Rule 45 of the Rules of Court are the May 22, 2014 Decision1 and the November 26, 2014 Resolution2 of the Court of Tax Appeals (CTA) En Banc which affirmed the November 22, 2012 Decision3 of the CTA Division, Second Division (CTA Division).
Liquigaz Philippines Corporation (Liquigaz) is a corporation duly organized and existing under Philippine laws. On July 11, 2006, it received a copy of Letter of Authority (LOA) No. 00067824, dated July 4, 2006, issued by the Commissioner of Internal Revenue (CIR), authorizing the investigation of all internal revenue taxes for taxable year 2005.4
On April 9, 2008, Liquigaz received an undated letter purporting to be a Notice of Informal Conference (NIC), as well as the detailed computation of its supposed tax liability. On May 28, 2008, it received a copy of the Preliminary Assessment Notice5 (PAN), dated May 20, 2008, together with the attached details of discrepancies for the calendar year ending December 31, 2005.6 Upon investigation, Liquigaz was initially assessed with deficiency withholding tax liabilities, inclusive of interest, in the aggregate amount of P23,931,708.72, broken down as follows:
Expanded Withholding Tax (EWT) P5,456,141.82Withholding Tax on Compensation (WTC) P4,435,463.97Fringe Benefits Tax (FBT) P14,040,102.93TOTAL P23,931,708.72
Thereafter, on June 25, 2008, it received a Formal Letter of Demand7 (FLD)/Formal Assessment Notice (FAN), together with its attached details of discrepancies, for the calendar year ending December 31, 2005. The total deficiency withholding tax liabilities, inclusive of interest, under the FLD was P24,332,347.20, which may be broken down as follows:
EWT P 5,535,890.38 WTC P 4,500,169.94 FBT P 14,296,286.88 TOTAL P 24,332,347.20
On July 25, 2008, Liquigaz filed its protest against the FLD/FAN and subsequently submitted its supporting documents on September 23, 2008.
Then, on July 1, 2010, it received a copy of the FDDA8 covering the tax audit under LOA No. 00067824 for the calendar year ending December 31, 2005. As reflected in the FDDA, the CIR still found Liquigaz liable for deficiency withholding tax liabilities, inclusive of interest, in the aggregate amount of P22,380,025.19, which may be broken down as follows:
EWT P 3,479,426.75 WTC P 4,508,025.93 FBT P14,392,572.51 TOTAL P 22,380,025.19
Consequently, on July 29, 2010, Liquigaz filed its Petition for Review before the CTA Division assailing the validity of the FDDA issued by the CIR.9
The CTA Division Ruling
In its November 22, 2012 Decision, the CTA Division partially granted Liquigaz's petition cancelling the EWT and FBT assessments but affirmed with modification the WTC assessment. It ruled that the portion of the FDDA relating to the EWT and the FBT assessment was void pursuant to Section 228 of the National Internal Revenue Code (NIRC) of 1997, as implemented by Revenue Regulations (RR) No. 12-99.
The CTA Division noted that unlike the PAN and the FLD/FAN, the FDDA issued did not provide the details thereof, hence, Liquigaz had no way of knowing what items were considered by the CIR in arriving at the deficiency assessments. This was especially true because the FDDA reflected a different amount from what was stated in the FLD/FAN. The CTA Division explained that though the legal bases for the EWT and FBT assessment were stated in the FDDA, the taxpayer was not notified of the factual bases thereof, as required in Section 228 of the NIRC.
On the other hand, it upheld the WTC assessment against Liquigaz. It noted that the factual bases used in the FLD and the FDDA with regard thereto were the same as the difference in the amount merely resulted from the use of a different tax rate.
The CTA Division agreed with Liquigaz that the tax rate of 25.40% was more appropriate because it represents the effective tax compensation paid, computed based on the total withholding tax on compensation paid and the total taxable compensation income for the taxable year 2005. It did not give credence to Liquigaz's explanation that the salaries account included accrued bonus, 13th month pay, de minimis benefits and other benefits and contributions which were not subject to withholding tax on compensation. The CTA Division relied on the report prepared by Antonio O. Maceda, Jr., the court-commissioned independent accountant, which found that Liquigaz was unable to substantiate the discrepancy found by the CIR on its withholding tax liability on compensation. The dispositive portion of the CTA Division decision reads:
WHEREFORE, the Petition for Review is hereby PARTIALLY GRANTED. Accordingly, the assessments for deficiency expanded withholding tax in the amount of P3,479,426.75 and fringe benefits tax in the amount of P14,392,572.51 issued by respondent against petitioner for taxable year 2005, both inclusive of interest and compromise penalty is hereby CANCELLED and WITHDRAWN for being void.
However, the assessment for deficiency withholding tax on compensation for taxable year 2005 is hereby AFFIRMED with MODIFICATIONS. Accordingly, petitioner is hereby ORDERED to PAY respondent the amount of P2,958,546.23, inclusive of the 25% surcharge imposed under Section 248(A)(3) of the NIRC of 1997, as amended, computed as follows:
Salaries per ITR P52,239,313.00 Less: Salaries per Alphalist P42,921,057-16 Discrepancy P9,318,255-84 Tax rate 25.40% Basic Withholding Tax on Compensation P2,366,836.98 Add: 25% Surcharge P591,709.5 Total Amount Due P2,958,546.23
In addition, petitioner is liable to pay: (a) deficiency interest at the rate of twenty percent (20%) per annum of the basic deficiency withholding tax on compensation of P2,958,546.23 computed from January 20, 2006 until full payment thereof pursuant to Section 249(B) of the NIRC of 1997, as amended; and (b) delinquency interest at the rate of twenty percent (20%) per annum on the total amount due of