Republic of Philippines Court of Appeals Quezon City: THE TAX
Republic of Philippines Court of Appeals Quezon City: THE TAX
Republic of Philippines Court of Appeals Quezon City: THE TAX
COMMISSIONER OF INTERNAL
REVENUE, Promulgated:
Respondent.
DECISION
This is an appeal from the Final Decision on Disputed Assessment dated July
14, 2002, of herein respondent holding petitioner liable for deficiency income tax,
withholding tax, expanded withholding tax and value-added tax, in the amounts of
P353 ,079.42, P7,796.69, P64,584.94 and P309,203 .63, respectively, for calendar year
1996.
The facts of the case as culled from the records are as follows:
ferti lizers, with principal office at Ritz Tower 5028, Ayala Avenue, Makati City.
City, issued Letter of Authority No. 169638, authorizing Revenue Officers Rosemarie
Talaman and Group Supervisor Evelyn Dinglasan to examine the books of accounts
and other accounting records of Energrow Trading Corporation for all internal
a Jetter and Assessment Notices all numbered 00530-96-00-564 and dated January 20,
2000, assessing petitioner the amounts of P353 ,079.42, P7,796.69, P64,584.94 and
and value-added tax, respectively, all for calendar year 1996 (Exhibits 9, I 0, 11, 12,
Petitioner then filed a letter dated February 1, 2000, with the Bureau of
Internal Revenue (BIR) protesting the subject assessments, except for the deficiency
On July 19, 2000, petitioner duly received a copy of the Final Decision on
Disputed Assessment dated July 14, 2000, denying with finality petitioner's protest on
In order to comply with the prescription period, petitioner filed with this court
The parties likewise stipulated the issues to be resolved by the court, namely:
withholding tax.
Value-Added Tax.
(Page 120, CTA Records, Statement of Issues, Joint Stipulations of Facts and
Issues.)
After considering the attending facts, the evidence adduced and the applicable
Section 244 of the National Internal Revenue Code, as amended affords the
(CIR) with the authority "to promulgate all needful rules and regulations in
connection with the implementation of the provisions of the Internal Revenue laws."
And needless to say, the questioned regulation was promulgated by the Secretary of
which is authorized by statute, has the force and effect of law (Article 7, Civil Code;
taxation that the interpretation placed upon a statute by executive officers, whose duty
is to enforce it, is entitled to great respect by any courts of law. And courts will not
agencies entrusted with the regulation of activities coming under the special technical
knowledge and training of such agencies (Sta. lnes Melale Forest Products
Corporation vs. Macaraig, Jr., 299 SCRA 491). Accordingly, such rules will always
questioned regulation the court upholds the same as valid and legal.
The second and third issues shall be discussed jointly as they are interrelated.
expanded withholding tax, since it is not a "rent" but a casual and arbitrary
contribution of petitioner for maintenance in exchange for the goodness of the owner
of the condominium unit who allegedly allowed petitioner usage of a small office
space without rent. Still, this allegation is nothing but self-serving and lacking in
"(c) Rentals. - Where the gross rental paid or payable for the
continued use of or possession of real property to which the payor or
obligor has not taken or is not taking title or in which he has no equity,
amounts to at least five hundred pesos (P500.00) - five per centum
(5%)."
From the foregoing, it is correct to surmise that since petitioner is not taking
title or equity for the continued use of the small office space in furtherance of its
the owner of the said office space, partakes the nature of a "rent". No amount of
withholding tax.
allowances/expenses in his added capacity as salesman of the company, and that the
Salaries and Wages of petitioner's employees are not subject to expanded withholding
tax or, is exempt from withholding tax are again self-serving claims devoid of any
Section 21 of the NIRC, as amended, clearly provides that income tax shall
be imposed upon taxable compensation, business and other income received during
each taxable year from all sources, by every individual, whether a citizen of the
defmition of the term "gross compensation income" which includes all income
wages, emoluments, honoraria, bonus and the like fringe benefits (monetary and non-
director's fees, taxable pensions and retirement pay and other income of similar
Moreover, for purposes of withholding tax, the term "compensation" means all
specifically exempted under Sections 27, 28 (b) and 71 of the Tax Code, as
Ruling No. 217-90 dated November 22, 1990; BIR Ruling No. 066-84 dated April 3,
1984).
compensation income", and the Salaries and Wages of petitioner's employees fall
within the category of the income, allowances and salaries sought to be covered by
petitioner just brought suppliers and buyers together and close the transaction
between them, for which petitioner is given a share in the seller's margin. However,
from these transactions is not subject to VAT. Unfortunately, the same is again
BIR Ruling No. 051-89, dated March 30, 1989, where it is ruled that a person acting
as commission agent or broker, like herein petitioner, shall fall within the purview of
a "commercial broker", where its gross receipts shall be subject to 10% value-added
tax pursuant to Section 102 of the Tax Code, as amended by E.O. No. 273 and as
Although petitioner tried to make it appear that its share in the seller's margin
was not VAT-taxable income, the facts and the law clearly point to the contrary. And
no confusing title or terminology to describe it would exempt the same from the tax
coverage.
Issues that it failed to withhold the corresponding withholding tax due on the Office
this makes said income payments not deductible from its gross income for failure to
comply with the conditions set forth under the aforequoted Section 9 of Revenue
Regulations No. 6-85 (now Section 2.58.5 of Revenue Regulations No. 2-98).
Accordingly, the petitioner is liable for the withholding taxes under said regulation.
are highly disfavored in law, and the party claiming exemption must justify his claim
Internal Revenue vs. Manila Jockey Club, Inc., 98 Phil. 670; House vs. Posada,
53 Phi/.338; Asiatic Petroleum Co., vs. Llanes, 49 Phil. 466, cited in Philippine
payment of taxes cannot just be granted unless it is expressly provided for by law.
The burden of proof is upon petitioner who claims a tax exemption in his favor to
point out some provisions of law granting the exemption and to bring himself within
As correctly pointed out by the respondent, the fact that petitioner failed to
identify any statutory provision explicitly granting exemption from payment of the
subject tax assessments for calendar year 1996, the presumption that the said
deficiency tax assessments were made in accordance with law and regulations are
maintained.
Decision
CTA Case No. 6152
Page9
and value-added tax, respectively, for calendar year 1996, plus 25% surcharge and
20% interest per annum from July 19, 2000 until fully paid.
SO ORDERED.
Ll9- c~
ERNESTO D. ACOSTA
Presiding Judge
We concur:
~A1Jio @_,~~ Q
CiuANiTo c. CASTANEDA, JR~(/' '
Associate Judge
Associate Judge
CERTIFICATION
I hereby certify that the above decision was reached after due consultation
with the members of the Court of Tax Appeals in accordance with Section 13, Article
~U> QA-
ERNESTO D. ACOSTA
Presiding Judge