Hotel cleared from income tax liability

CEBU, Philippines -  The Court of Tax Appeals Second Division granted the petition for review filed by the Waterfront Cebu City Hotel and Casino, Incorporated against the Commissioner of Internal Revenue.

Associate Justice Caesar Casanova cancelled the respondent’s assessment for deficiency income tax against the petitioner in the amount of P2,579,289.48 for taxable year 2006.

“After considering the foregoing adjustments, this court finds that petitioner is not liable for any deficiency income tax. In fact, petitioner will still have a tax overpayment of P7,770,596.92 as computed below, which may be carried over the succeeding taxable year. In sum, respondent’s deficiency income tax assessment against petitioner should be cancelled and/or withdrawn,” the decision reads.

The respondent is vested with the authority to authorize the examination of taxpayer’s books of accounts, to issue and decide deficiency of internal revenue taxes.

On August 31, 2007, the petitioner said the Bureau of Internal Revenue (BIR) sent a letter of authority for the investigation of their business operations and books of accounts for year 2006.

The petitioner said they received a formal letter of demand issued by the BIR Large Taxpayers District Office-Cebu on April 30, 2009.

On October 31, 2009, petitioner added that respondent issued its final decision on disputed assessment directing them to pay the assessment or to appeal the decision before this court.

“Petitioner received the decision on November 9, 2009 seeking collection of deficiency assessments as follows: income tax for P2,579,289.48; value added tax for P1,389,389.61 and expanded withholding tax for P1,732.20,” the case documents read.

On December 1, 2009, the petitioner paid the deficiency value added tax through the BIR’s Electronic Filing and Payment System (EFPS) and the expanded withholding tax.

However, on December 8, 2009, petitioner filed a petition for review asking for the cancellation of the income tax.

In its answer, the respondent said the petitioner’s protest on the assessment has no “factual basis.”

For 2006, petitioner had a discrepancy on prior year’s excess credits claimed for P1,506,576 and the disallowed creditable tax withheld at source for P212,950.27 and the interest of P859,763.16 amounting to P2,579,289.48 income tax assessment.

However, Casanova ruled that based on the annual income tax returns for the taxable year 2005 and 2006 of the petitioner, he found the assessed amount of P1,506,576 on the previous year’s excess credits would not give rise to a deficiency income tax liability on the part of the petitioner.

“The assessed amount does not in any way pertain to an expense or income account which could affect petitioner’s income tax due (before deduction for tax credits/payments is made) for the taxable year 2006.”

“Had petitioner been able to declare in its 2006 annual ITR the prior year’s excess tax credit of P11,278,461.95 instead of P12,785,038, it would still have an overpayment of P7,983,293.75 as of December 31, 2006,” the decision reads. — MIT (FREEMAN)