BIR disadvantaged, blunders 2nd tax case against SM Advantage Money talks

After losing last year a P1.9-billion tax case against the SM company that issues the popular SM Advantage loyalty card, the Bureau of Internal Revenue again dropped the ball on a P180-million case against the same company.

Like in the first case, the BIR’s large tax division changed the examiners combing through the accounting records of SM subsidiary Marketing Convergence without seeking a new Letter of Authority (LOA) for the replacement examiners from the BIR chief or his designated representative.

“Absent any prior authority on the part of the revenue officers who conducted the audit examination of taxpayer’s books of accounts and other accounting records, the deficiency tax assessment arising therefrom is a nullity,” said the Court of Tax Appeals in a decision released late last month.

As in the first dismissal, the tax appellate court cited a 2010 Supreme Court decision, Commissioner of Internal Revenue v. Sony Philippines, with now Chief Justice Diosdado Peralta as a signatory.

According to court records, the two cases against Marketing Convergence stemmed from a 2009 and 2010 assessments and were filed months before the Supreme Court handed down the Sony Philippines decision.

That 2010 SC decision stipulated that a LOA should cover a taxable period not exceeding one taxable year, prohibiting audit spanning “unverified prior years” as had been practiced by the BIR.

In both the Marketing Convergence/SM Advantage cases, the BIR had argued that there was no need to seek a new Letter of Authority for the replacement examiners since the audit examinations were continuing.

“There will be instances, as is present in this case, where the revenue officers would either retire, be reassigned, be taken ill, or die, prior to the completion of the audit investigation,” the BIR had argued. “In instances like these, the government should not be made to suffer for the natural occurrence of things.”

But that tax appellate court said even the disputed Revenue Memorandum Order No. 43-90 cited by both parties “provides that any reassignment or transfer of cases to another revenue officers shall require the issuance of a new LOA.”

In both cases against SM Advantage, only the officer-incharge of the large taxpayers’ division issued the replacement orders for the examiners.

The SM Group, for its part, had vigorously denied that it was deficient in its income, value-added, withholding, and expanded withholding taxes, as alleged by the BIR examiners.

Parent SM Investments even won last year a tax refund of nearly P180 million, representing overpayment of withholding tax for calendar year 2013.

• Central Azucarera de Tarlac, now controlled by partners Martin Lorenzo and Fernando Cojuangco, preterminated a P2.1-billion loan with BDO in 2018 because the sugar miller was paying up to 5.25 percent interest.

CAT also had to fork out P10.5 million for the pretermination penalty.

Then this September, the two partners tapped BDO again, availing of nearly P1 billion in short-term loan for CAT’s working capital, but at 6.5 percent interest.

• CB Richard Ellis Philippines has been ordered by the Court of Appeals to hand over to resigned officer, Daniel Lynch, his remaining pay and commission that CB Richard Ellis withheld after Lynch in 2016 transferred to a competitor, KMC Savills.

Heard through the grapevine

Taipan Lucio Tan has appointed a new trustee, Zedra Asia, for the private discretionary trust that controls over 37 percent of his family’s real estate empire in Hong Kong, Beijing, and Shanghai.

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