CA upholds tax ruling vs Perpetual Succour

CEBU, Philippines - The Court of Tax Appeals En Banc (CTA) dismissed the petition for review filed by the Commissioner of Internal Revenue (CIR) against the Perpetual Succour Hospital (PSH) over a tax issue.

The CIR sought the reversal of the earlier ruling of the CTA Former Second Division canceling and setting aside the deficiency assessment for Value Added Tax (VAT), reducing the deficiency income tax and deficiency expanded withholding tax (EWT) of the hospital for the year 2001.

In a 12-page decision penned by Associate Justice Caesar Casanova, the CTA En Banc concurred with other justices in dismissing the petition for lack of merit and affirmed the ruling of the Second Division.

“We observed that the arguments that the petitioner relied upon for review in the instant petition are mere reiteration, if not repetition of the very same arguments she had already raised in her memorandum,” decision reads.

Thus, the CTA En Banc found “no cogent reason to warrant a second look at the arguments raised in the instant petition.”

The PSH filed a petition before the Second Division after the CIR issued a preliminary assessment notice (PAN) on November 11, 2003 assessing them of deficiency income tax in the amount of P7,399,457.11; Vat in the amount of P7,609,200.17 and EWT in the amount of P7,512,748.14 or in the total amount of P22,521,405.42 all for taxable year 2001.

After receiving the notice, the hospital and former Cebu Archbishop Ricardo Cardinal Vidal filed a request for reconsideration but this was denied.

On March 11, 2005, the hospital received a formal letter demand with details of discrepancy and assessment notices, assessing them of deficiency income tax in the amount of P7,573,328.96, VAT in the amount of P9,423,551.72 and EWT in the amount of P8,533,851.11.

The hospital officials argued that they are a non-profit and non-stock entity.

In the reply of CIR, they argued that the PSH, being a non-profit hospital, is subject to a 10-percent income tax pursuant to Section 27 (B) of the NLRC of 1997.

The CIR claimed that since the hospital operates a pharmacy within its hospital building they should be subjected to VAT but they filed “no payment” VAT returns for taxable year 2001.

Based on the foregoing facts, the Second Division partly granted the petition filed by the hospital.

The Second Division cancelled and set aside the deficiency assessment for VAT in the amount of P9.4 million and ordered the hospital to pay the CIR P2,218,488.60 for income tax and P4,071,200.43 representing the deficiency EWT.

Because the CIR was not contended with the decision, they filed a petition for review. They claimed that the Second Division made a mistake when it cancelled and set aside the VAT and reduced the income tax and EWT. — (FREEMAN)