Tax appeals court cancels URC’s P2-B assessment

THE Court of Tax Appeals (CTA) cancelled the P2-billion tax assessment against Universal Robina Corp. (URC) for lack of due date and exact amount in the assessment notices.

In a 23-page decision dated Jan. 14, the court’s first division said the formal letter of demand issued by the Bureau of Internal Revenue against URC lacked definite amount and due date for the payment of its tax liabilities.

It noted that the demand letter stated that the interest “will still be adjusted if paid beyond the date specified therein” but also does not include the due date.

“Correspondingly, the subject tax assessment is void, and thus, bears no valid fruit,” the decision penned by Associate Justice Catherine T. Manahan read.

“In view of the finding that the subject tax assessments are invalid, it becomes unnecessary to address the arguments raised by the parties,” it added.

The court noted a previous decision of the Supreme Court which ruled that a Final Assessment Notice is invalid for lack of definite amount due despite providing a computation because it meant that its liabilities is still subject to modification depending on payment date.

The lack of due date also “negates… demand for payment,” the High Court’s decision read.

URC was questioning its assessed liability for improperly accumulated earnings tax (IAET) for the year ending on Sept. 30, 2010 worth P2 billion.

It was assessed for the alleged deficiency of P2.5 billion, which consists of IAET, income tax, value-added tax, expanded withholding tax, documentary stamp tax, and withholding tax on compensation.

Section 29(B)(1) of the National Internal Revenue Code of 1997 states that IAET applies to “every corporation formed or availed for the purpose of avoiding the income tax with respect to its shareholders or the shareholders of any other corporation, by permitting earnings and profits to accumulate instead of being divided or distributed.”

URC said it does not have any IAET and that its additional paid-in capital is not earnings or profits. It also said that it is a publicly-held corporation exempt from IAET. BIR contends that it is liable to pay the assessed deficiency.

Presiding Judge Roman G. del Rosario and Associate Justice Esperanza R. Fabon-Victorino concurred in the decision.