SC upholds ruling in Waterfront tax case

CEBU, Philippines - The Supreme Court has affirmed the decision of the Court of Tax Appeals that the Waterfront Cebu City Hotel and Casino, Inc has no deficiency income tax for the year 2006 as alleged by the Bureau of Internal Revenue.

Justice Roman del Rosario of the SC first division denied the petition filed by the BIR commissioner questioning CTA’s decision.

“After a judicious review of the records, the court resolves to deny the instant petition and affirm the January 29, 2014 Decision and May 27, 2014 Resolution of the Court of Tax Appeals   En Banc in CTA EB No. 991 for failure of the Commissioner of Internal Revenue to show that the CTA En Banc committed any reversible error in holding that Waterfront Cebu City Hotel and Casino, Inc. had no deficiency income tax,” the SC said.

The BIR alleged that the hotel has to pay P2.6 million representing deficiency income tax assessment for 2006. However, this was denied by the CTA.

The SC also ruled that Waterfront “did not derive any tax benefit in 2006 when it erroneously carried over the income tax credits in the amount of P12,785,033 to 2006, instead of the amount of P11,278,461.95.”

The high court affirmed the decision of the CTA dated December 12, 2012 and its assailed resolution dated March 1, 2013 cancelling the deficiency income tax assessment of the hotel in the amount of P2,579,289.48 for 2006.

The BIR had reportedly issued a letter of authority for the investigation of the hotel’s business operations and books of accounts for 2006.

The BIR then issued a demand letter, which the Waterfront protested.

A final decision was issued by the BIR seeking the collection of P2,579,289.48 deficiency income tax, P1,389,389.61 deficiency value-added tax  and P1,732.20 deficiency expanded withholding tax  against Waterfront.

The hotel has reportedly settled the VAT and EW, but appealed the deficiency income tax by filing a petition for review before the CTA on December 8, 2009.

Upholding the decision of the CTA, the SC ruled in favor of the hotel.

“As correctly found by the CTA En Banc, a deficiency income tax is the  amount by which the tax imposed by Title II of the National Internal Revenue Code  exceeds the amount shown as the tax by the taxpayer in his Income Tax Return. In the present case, respondent’s tax credits far exceed the income tax imposed by the NIRC. The overstatement by P1,506,576 of the excess tax credits carried over to taxable year 2006 and adjusted disallowed creditable tax withheld at source of P212,695.83 merely reduced respondent’s tax overpayment in 2006 to P7,770,597.92, and did not amount to a deficiency income tax,” the SC ruled. — (FREEMAN)