CTA rules in favor of APEC Plans on VAT

THE BUREAU of Internal Revenue (BIR) lost a P155-million tax case against pre-need firm Abundance Providers and Entrepreneurs Corporation (APEC Plans) after failing to collect before the lapse of a five-year prescription period, the Court of Tax Appeals (CTA) ruled.

In a 29-page decision, the CTA en banc said that the BIR only served its warrant of distraint and levy on Feb. 11, 2010, just under 10 months after the lapse of the five-year period.

At issue was a value-added tax deficiency amounting to P155.49 million for the tax year 2001.

The BIR served its formal letter of demand and audit result on April 26, 2004.

“Petitioner (Commissioner of Internal Revenue Kim S. Henares) had a period of five years to enforce collection from such date as required by law or until April 26, 2009..... The right of the petitioner to collect is deemed to have already prescribed,” the tax court said.

The tax court upheld its resolution dated Oct. 31, 2012 granting the motion for summary judgment filed by APEC Plans seeking to declare the Feb. 11, 2010 warrant as null and void.

The alleged VAT deficiency includes penalties, based on the alleged failure to indicate the amount of trust fund contributions in its official receipts.

However, APEC argued that its omission did not prejudice the government since it paid its VAT liabilities.

The CTA then sided with APEC Plans.

“The material facts relevant to the proper disposition of the issues in this case are undisputed, thereby leaving no genuine issues of fact which would require presentation of evidence in full-blown trial,” the CTA Third Division had said.

This prompted the BIR to file a petition for review before the CTA en banc, seeking to reverse the Third Division’s ruling, and ordering the firm to pay in full the alleged tax deficiency plus the accrued 25% surcharge for late payment and 20% interest per annum from April 26, 2004.

The BIR said it has the right to collect the deficiency. It argued that the CTA has no authority to issue an order nullifying the warrant of distraint and levy.

But the CTA said otherwise.

“The appellate jurisdiction of this court is not limited only to decisions of the Commissioner of Internal Revenue involving disputed assessments or claims for refunds, but also those involving other matters which include the authority to determine the validity of a warrant of distraint and levy issued by the Commissioner of Internal Revenue,” the court said. -- Reden D. Madrid

source:  Businessworld