CTA Case No. 3420 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALLS QUEZON CITY FILIPINAS SYNTHETIC FIBER CORP. , Petitioner, - versus - C.T.A . CASE NO. 3420 THE COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - - - - - - -x DE CI S I 0 N This case involves petitioner's claim for tax credit of alleged erroneously paid and collected advance sales tax for the first quarter of 1981. Petitioner is a domestic corporation duly registered , as a preferred pioneer enterprise, with the Board of Investment (BOI), under Certificate of Registration No. 74-314 (Exh. "A"). By virtue of the provision of Section 8(a) of Republic Act No. 5186 (otherwise known as the Investment Incentives Act), as amended by Article 46(a) of Presidential Decree No. 1789 (also known as the Omnibus Investment Code), petitioner relies on the tax exemption privileges granted to it as a preferred pioneer enterprise. 543

I i DECISION C.T.A. CASE NO. 3420 - 2- Petitioner anchors its claim on the letters of the BOI dated October 10, 1980 and March 30, 1981 e xtending the tax ex emption privileges granted to it, except the income tax, f o r a pe riod of five (5) years beginning January 1, 1980. These l e tters are hereto forth r eproduced in full, as follows: Oc tober 10, 1980 Filipi na s Syn t h etic Fiber Co rporation BA- Le pa nt o Building Paseo de RoKas Maka ti, Me tro Manila Atte n t ion: Mr. Cesar R. Cancio, Jr . .~.~.~..9..~.!-..!.Y.:.~. -.Y.-~.�.~.::..!?....:!:.~~-~.! .4.~.~.!: Ge ntlemen ; In connection with your request for e xtension of the period within which to avail yourself of incentives under R.A. 5186, please be advised that in its meeting o f Septem be r 18 , 1 9 8 0 , 2.~.!:............~.9..~.E.9....9.~.Y..~.......Y..9..~. ~.~.. .....~.~.!.~.~. ~. ~.2.!!.......2. ~... ~. ~.Y.:.~.........L?.J.....Y..~.~E. ~.... .~.E.9..~. .. .~.?.:~.~.~.E..Y. .!...l ! ............... .~.~.9.. ..~-~.! .h. ~.!!.......~.h. ~.g.h....~.9.. ....~.~..t2.Y.....! .h.~.... ~.2.~ .~.�.~.~.~..9. .~ n..c .~.~-t.:.i..Y~. :3..I .~.!.! .h.. . .~.~.9... . ... J..?..J....Y..~.?.:E.:3.....!?.':..! .~.9... ....~.~.E~. , and the third to the fifth years being subject to review as to their compliance with the Guidelines on the Liberalization of Incentives under P.O. 1584: 1. Full exemption from all taxes under the National Internal Revenue Code except income tax (Sec. 8-a); 2. Tax and duty-free importation of capital equipment (Sec. 7-d); and 3. Tax credit on locally purchased equipment (Sec. 7-e). 544

--. \ I' DECISION C.T.A. CASE NO. 3 4 2 0 - 3- We wish to emphasize that the above extension is subject to the folllowing conditions: a. That you will acquire full ownership of Lakeview Industrial Corporation, under conditions satisfactory to the BOI; b. That you commit to expand to a world-si ze d unit, as may be mutually agreed with the BOI; and c. That you agree to offer equity in your expanded company to the textile millers, under terms and conditions to be mutually agreed with the BOI . .\.!.~ ....... ~.~. ~. h. . ..!,:.'?.... ~.l!l.J?..h.�:l..~. ~ -~-.......!,:.h.�:l..!,:.....!,:.h.~.....~- ~--!,:-~.I.:l. ~A.'?..I.:l .9...~..............~..I.:l.<:::..~..I.:l.~.~-Y.~.~-������9.E. �:l.I.:l.~.~--9......l.=>.Y.....!,:.h.~ ....~.9..�:l.!'.9.. . .9..9.~..~---...I.:l..9...~ take effect unless and until the above- mentioned conditions have been met. Please be guided accordingly. Very truly yours, (SGD) ROBERTO V. ONGPIN Chairman 30 March 1981 Filipinas Synthetic Fiber Corp. SA - Lepanto Building Paseo de Roxas, Makati Metro Manila Gentlem.en: Please be advised that the Board .h.�:l. ~.......... . t~Y..9.!'.~.l.=>. l.Y. .........<:::..9.I.:l. ~. ~ -9..~. ~-~.9.. ... .. J:'..9.Y...!'. .. ........<:::..9.~.J?...l.t�:l..I.:l..<:::..~. with the conditions for extension of 545

DECISION C.T.A. CASE NO. 3420 - 4- incentives stated in our letter to you dated October 10, 1980. Y..<?.~...l!l..�l�.....!:.h.~.E. ~ .~<?.E.~ . . �l..Y.�l~ .~ ... ..Y<? .~.:r;.~. ~- ~- ~- 9 ~-- ... ...!:.h.~...... ~..I.:l5:. .~.1)..!:.~ .Y..~ .~ . ...�l.~~-~ -1) ~ ~..!:. ~ .:r:::..~..~.......I?..Y.... .!:.h.~.. ?..<?.�t.E.~ .�l I)_~ . ...5:.<?.Y..~. :r;..~. ~-� ..1?..�........ ..�.<?.~ :r:::. ..E.~. Sl.~. ~. ~.!:..t . ....... ~.<?E....~. ~.Y..~.......J.?.J. �..~ �l�~ ...........1?..~ 9. ~..1). 1)_~..1).9.. ....:f..?.l:I)..~. �l.:t::..Y...........! ..t ........!. ~.!?...Q. wi t h t h e third to the fifth years being subject to an annual review as to the need for the conti nued availment of the extension per the criteria set forth in Art. 7(14) of P.D. 1789 . Please be guided accordingly. Very truly yours, (,SGD.) H. ZAYCO Governor Sec. 8(a) (1) of R.A. 5186, as amended, likewise provides for a one hundred per cent (100%) exemption from all taxes under the National Internal Revenue Code, except income tax, for the first five (5) years of the grant. Petitioner paid advance sales taxes of P7,543,861.00 from January 1 to March 31, 1981 and P3,933,408.00 from April 1 to June 30, 1981 or a total of P11,477,269.00. On May 5, 1981, petitioner filed with the Bureau of Internal Revenue (herein referred to as the Bureau) an application for tax � credit amounting to P3,561,954.00, representing that portio.n of the P7,543,861.00 advance sales taxes paid for the first 546

DECISION C.T.A. CASE NO. 3420 - 5- quarter of 1981. (Exh. "B".) One month later or on June 5, 1981, petitioner filed, in addition to the previous request for tax credit, a claim for the refund of P3,981,907.00, representing the other portion of P7,543,861.00. (Exh. "D".) On August 18, 1981, another claim for refund was filed in the amount of P3,933,408.00 as advance sales tax erroneously paid for the second quarter of 1981. (Exh. "E".) Without waiting for respondent's decision petitioner filed a petition for review on January 28, 1982. Respondent filed his answer arguing that if at all petitioner would be entitled to a tax credit (not a refund as prayed for in the petition) the reckoning period should start on March 30, 1981, the date when the BOI confirmed petitioner's compliance with the c onditions set in its letter of October 10, 1980, and not on January 1, 1980 as requested. During the trial, petitioner manifested that the Bureau had already granted a tax credit on the advance sales taxes paid by petitioner covering the periods 1980, 1981 and 1982. A Tax Credit Certificate No. 00194 was granted, pursuant to Ministry Order No. 19-79 dated May 18, 1979, in favor of petitioner, totalling P37,570,101.00. .(See Exh. "F".) 547

--- - ~ DECISION C.T.A. CASE NO. 3420 - 6 :.... An amended petition for review was filed on May 12, 1988 to conform with the evidence. Petitioner maintains that the amount of P3,561,954.00 was not covered by the Tax Credit Certificate. Only the amounts of P3,981,907.00, represeriting that portion of P7,543,861.00, for the first quarter of 1981 and P3,9 33 ,408.00 for the second quarter of 1981 were included in the tax credit issued by the Bureau. The only remaining issue is whether or not petitioner is entitled to a tax credit of P3 ,5 61,954.00. Respondent posits, in his amended answer, that the c laim for refund [actually a tax credit as prescribed under Section 3(j) of R.A. 5186 and as prev iously applied by petitioner in its letter dated April 30, 1981 (See Exh. "B") ] on the remaining P3,5 61 ,954.00 has already prescribed since the a mend ed petition was filed only on Hay 12, 1988, beyond the two - year prescriptive period to file a suit for the recovery of an erroneously col lected tax co unt ed from the date of payment or from the first quarter of 1981. Respondent waived his right to present any evidence. Instead, he submits his case based on the . pleadings and the Bureau's records. We find for the petitioner. 548

DECISION C.T.A. CASE NO. 3420 - 7- The l e tt ers of the BOI dated October 10, 1980 a nd Harch 30, 1981, without a ny doubt, should be inte rpre t ed in favor of petitioner. Clearly, petitioner has been granted an exte nsion of its tax exemption privil eges under R.A. 5186 for a period of five (Sl years b eginning January 1, 1980. We emphasi z e 1 as s tated with aff irmation by the BOI, that. petit ion e r had favorably complied with the conditions of t he grant. Th ere can be no other in terp retation when the BOI, in its letter dated March 30, 1 981 , particul arl y menti oned that "you ( referring to petit ioner ) may therefore avail yourself of th e incentives administered by the Boa rd and covered by your request, for five (5) years beginning January 1, 1980 x x x." The tenor of s aid letter is plain and simple. Therefore, it should be interpreted in its ordinary and commonly accepted meaning. Thus, the tax e J emption privileges df petitioner, not including the income tax , should start from _g_ '3.:.I.:l.':l.'3.:.E..�........ 1 .. ........~..~.?..<?.. and no t March 3 0 , 1 9 8 1 as vi e wed by respondent. With regard to the contention that the amount of P3,561,954.00 h as already prescribed since the amended petition was filed only on May 12, 1982, this Court is of the opinion that petitioner's cause of action did not change by reason of the amendment but 549

DECISION C.T.A. CASE NO. 3420 - 8- rather the amended petition was filed in order to conform to the evidence. A supervening event, that is the issuance of the Bureau of a Tax Credit 'Certificate granting a partial tax credit to petitioner , has transpired making it necessary to \ amend the original petition. Thus, the Supreme Court held in the case of Pangasinan Transportation Co. v. Phil. Farming Co., Ltd., 81 Phil. 273, "(w)here the original declaration states a cause of action, but does it imperfectly, and afterward an amended decl aration is filed, correcting the defect, the plea of the statute of limitations will relate to the time of filing the original declaration." (37 C.J., p. 1072.) \'Te, therefore, uphold the timeliness of the petition counted from the date the original petition for review was filed or on January 28 , 1982. A thorough examination of the evidence presented by petitioner shows that indeed it is entitled to the remaining portion of the first quarter advance sales tax payments which was not covered by the tax credit already issued. Th e following official receipts will support petitioner's additional claim for tax credit amounting to P3,561,954.00. 55-0

DECISION C. T.A. CASE NO. 3420 -9- FILIPINAS SYNTHETIC FIBER CORPORATION SCHEDULE OF ADVANCE SALES TAXES PAID AND TAX CREDIT STILL DUE For the First Quarter of 1981 January 1 t o Karc h 31 1 1981 Tax Credit Particular - Advance Cert. 00194 Amount Raw Material Sales Tax 100% Still Exbs. ....... ~~P9..~.t..~.~..... Paid ..O.......R.............N....o..... .........D.....a...t..e......... .J.~.~.~E.~.!.~.n.. ...R.....e....t.u....r...n....a...b....l..e.. Di me thyl Terephthalate 357045 01105/81 p 4461917 p 2241415 p 2221502 977507 02/12 /81 2571011 1411995 1151016 C-2 977229 02/02/81 2571011 1411995 115 10 16 C-3 1037913 02/13/81 2661105) C-4 430386 03/20/81 131232) 1471020 1321317 C-5 1043758 02/20 /81 6421838 3551159 2871679 405953 02 /2 5/81 2131321 1171857 951464 C-6 1046112 03/06/81 531408 291507 231901 C-7 1043880 02/27/81 6421836 3551158 2871678 C-8 430226 03/ 19/81 41394 C-9 2071501 31995 C- 10 Entry No. 60763 1054653 21362 1971632 21148 438812 41045 60764 1076252 41449 1961997 21154 58104 438595 11988 62928 1076578 21369 .. ....J.9..?. r.~.S..~. 62880 439877 21186 .P..~./}9.?. 1..~..~~ 1821601 C-11 439113 03/25/81 3751577) C-12 03 /30/8 1 14 152 5) 1731917 C-13 03/26 /81 3571715) C-14 03/2 6/81 131834) 1731358 C-15 04/08/81 3561565) 04/09/81 131790) ...... .J.S..~,. ~S..Q C-16 04/01/81 3471862 .P.J..~..9...7..9...t..~..S..9.. Monoethylene 296511 02/06/81 p 221825) p 2261780 p 2041103 Gl yco l 296419 01/23/81 4081058) 1481225 133 1402 296669 03/18/81 2811627 1541546 1391091 C-17 2'9 6670 03/18/81 2931637 2411259 2171133 C-18 296605 02/27/81 4581392 1171446 105 1702 C-19 296753 04/03/81 2231148 1201529 C-20 296672 03/18/81 2401613 . .P.. ...J.S..~ .r .? S..~. C-21 296285 12/18/80 17 1053) . .?J..~..~. S..~. C-22 133415 10/01/80 101067) C-23 .P........ 9..~}!51.~ C-24 551

- - ~ -- � ~ DECISION C.T . A. CASE NO. 3420 - 10 - Catal ysts & 370322 01/20/81 P103,920 46 ,079 37,32 5 392846 02 / 10 /81 29,347 16 ,2 14 13,133 Lub ricating Oil 393236 02112/81 22,804 12,599 10,205 C-25 407 003 03/05/8 1 98,290 54 1 30 4 43, 986 C-26 439 114 04/0 1/8 1 82,997) C-27 440212 04113/81 4,127) 45,855 41,269 C-2 8 C-29 1070 21 5 03/20/81 369,899 204,364 165 ,535 429590 03/13/81 365,078 201 ,70 0 163 ,378 Pure Tere phth al ic 429155 04/08/81 37 1,26 4 ..... 2.9.~.~.U~. .......) .6..�. ,..1..4..�. c- 30 Acid .P.........!.~.~-.1~..3.} .P.........~. 4..9. r..9..U C-31 C-32 TOTAL TAX CREDIT STI LL DUE . ..P.....}......~..~...6.....~....!.....9....5.....~.. WHEREFORE, in view of the foregoing, the amended petition is hereby GRANTED. Respondent Commissioner of Internal Revenue is ORDERED to issue the corresponding Tax Credit Certificate in favor of petiti oner, Filipinas Synthetic Fiber Corporation , in the amount of P3,561,954.00, representing erroneously pa id advance sales taxes for the first quarter of 1981. Without pronouncement as to costs. SO ORDERED. Quezon City, Metro Manila, August 7, 1~92. ~~Q.. ~ ERNESTO D. ACOSTA Presiding Judge 552

- .- - - - - - ....r DECISION C.T.A . CASE NO. 3420 - 11 - I CONCUR: s~AfiiVAS-FARrui4:s Acting Associate Judge CERTIFICATION I hereby certify that this decision was reached after due consultation between the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution. '"-~~~ ERNESTO D. ACOSTA Presiding Judge , Court of Tax Appeals 553