CTA affirms canceled P1.3-B tax assessment on Fonterra Brands

THE COURT of Tax Appeals (CTA) affirmed the cancellation of the tax assessment on Fonterra Brands Philippines, Inc. for 2019 to 2010 worth P1.3 billion, inclusive of interest.

In a ruling on Apr. 11 and made public on Apr. 18, the CTA en banc said it agreed with the decision of the court in division, which said the Bureau of Internal Revenue’s (BIR) formal letter of demand did not say when the payment of deficiency taxes was due.

“Indeed, the Formal Letter of Demand’s failure to state when the payment of the deficiency taxes shall become due violates respondent’s right to be informed of the determinable amount for which it is liable to pay,” the tax court said in the ruling written by CTA Associate Justice Juanito C. Castañeda, Jr.

“Petitioner (Commissioner of Internal Revenue) failed to raise meritorious arguments to justify the reveal of the assailed Decision and Resolution, as such the denial of the instant Petition for Review is in order.”

The petitioner is the Commissioner of Internal Revenue (CIR), who has the authority to decide disputed assessments and to cancel tax liabilities based on the country’s revenue code.

Fonterra Brands Philippines, the respondent, is engaged in the business of manufacturing, importing, and distributing on a wholesale basis of dairy and other food products under the Anchor brand.

“A final assessment notice must not only indicate the legal and factual bases of the assessment but must also state a clear and categorical demand for payment of the computed tax liabilities within a specific period,” CTA Associate Justice Roman G. del Rosario noted in his separate concurring opinion.

HARTE-HANKS PHILIPPINES
Meanwhile, the Supreme Court (SC) has reversed a CTA decision dismissing the appeal of Harte-Hanks Philippines, Inc.’s P2.54-million excess input value-added tax (VAT) on zero-rated sales for the second quarter of 2008.

In its ruling on Mar. 7 and made public on Apr. 18, the high court said the CTA Second Division and en banc made an error in denying the company’s claim, as it had jurisdiction over the claim for refund.

Harte-Hanks Philippines, the petitioner, is a domestic corporation engaged in outsourcing customer relationship management solutions by inbound or outbound call services to its clients. The CIR is the respondent for the case.

The CTA en banc previously affirmed the Second Division’s ruling favoring the CIR’s motion to dismiss the claim due to premature filing.

“By way of exception, judicial claims filed during the window period from 10 Dec. 2003 to 6 Oct. 2010, need not to wait for the exhaustion of the required 120-day period,” the SC said, citing previous jurisprudence.

It added that the petitioner filed the judicial claim with the CTA Second Division on June 29, 2010, which was within the period of the cited exception.

“As a final note, the court emphasized that, although the petitioner did not actually invoke BIR Ruling No. DA-489-03 in any of its pleadings to justify the timeliness of its judicial claim with the CTA, the BIR ruling applies to all taxpayers who filed their judicial claims within the window period of Dec. 10, 2003, to Oct. 6, 2010,” the high court said in its ruling written by SC Associate Justice Ramon Paul L. Hernando. — John Victor D. Ordonez