THE Court of Tax Appeals (CTA) affirmed the cancellation of the tax assessment on Meridien East Realty & Development Corp. worth P35.67 million inclusive of penalties and interest for the fiscal year 2010.
In a 26-page decision on July 14 and made public on July 18, the CTA full court said the commissioner of internal revenue (CIR) acted in bad faith by failing to prove the company misstated or withheld facts from the Bureau of Internal Revenue (BIR).
“He (CIR) merely alleged that respondent committed misrepresentation and bad faith in obtaining BIR Ruling No. DA-245-05 without even presenting any documentary evidence proving such factual matter,” according to the ruling written by CTA Associate Justice Maria Rowena Modesto-San Pedro.
The court ruled that the company did not misrepresent or provide materially different facts in the issuance after the issuance of a BIR ruling.
CIR, the petitioner, is tasked by the government to enforce revenue laws and collect tax in accordance with the country’s revenue code.
The respondent is a domestic firm primarily engaged in the purchasing, selling, and leasing of real estate properties.
It added that the CIR violated the country’s revenue code when it retroactively overturned a BIR ruling, which ruled in favor of the real estate company.
Under the BIR ruling, the company is not subject to 10% value-added in cases of conveyance of land and common areas not in connection with a sale.
The CIR then authorized an examination of the company’s books of accounting and records for tax deficiencies.
The official argued that retroactive application of BIR rulings may be made if taxpayers acted in bad faith by misrepresenting facts.
“The reversal of the BIR Ruling was merely due to a change of opinion by petitioner on the tax consequences of the same set of facts which respondent presented in obtaining BIR Ruling No. DA-245-05,” said the tribunal.
It noted that a taxpayer has the right to rely on the BIR Ruling as long as it did not misrepresent, provide materially different facts, or commit bad faith after the issuance. — John Victor D. Ordoñez