COMMISSIONER OF INTERNAL REVENUE v. ORIENTAL ASSURANCE CORPORATION

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC COMMISSIONER OF INTERNAL CTA EB No. 1482 REVENUE, (CTA Case No. 8582) Petitioner, -versus- ORIENTAL ASSURANCE CTA EB No. 1487 CORPORATION, (CTA Case No. 8582) Respondent. x------------------------------------------------x ORIENTAL ASSURANCE CORPORATION, Petitioner, Present: -versus- Del Rosario, P.J, Castaneda, Jr., Bautista, Uy, Casanova, Fabon-Victorino, Mindaro-Grulla, Ringpis-Liban, and Manahan,JJ COMMISSIONER OF INTERNAL REVENUE, Respondent. Promulgated: JUN 2 t 2018 ..:J. -s.- ~~. X----------------------------------------------------------------------------------------- RESOLUTION CASTANEDA, JR., J.: For resolution are the "Motion for Reconsideration" 1 filed by the Commissioner of Internal Revenue (CIR) on December 22, 2017 and the jk:- 1 Rollo, pp. 249-258.

RESOLUTION CTA EB Nos. 1482 & 1487 (CTA Case No. 8582) Page 2 of6 "Motion for Partial Reconsideration (Of the Decision dated 29 November 2017)"2 filed by Oriental Assurance Corporation (OAC) on January 24, 2018. The dispositive portion of the November 29, 2017 Decision reads: WHEREFORE, the Petition for Review of Oriental Assurance Corporation in CTA EB No. 1487, and the Petition for Review of Commissioner of Internal Revenue in CTA EB No.1482 are DISMISSED. SO ORDERED. In its motion, OAC states: 1. The Amended Decision is not a new or different Decision as far as OAC is concerned. It is simply a reconsideration of the same issues and matters resolved in the Original Decision. The Asiatrust case does not apply to OAC. 2. Application of the ruling in the Asiatrust Cases by requiring a motion for reconsideration of an Amended Decision that is not a new or different decision, will lead to oppressive and absurd results. A never- ending motion for reconsideration rule will arise. 3. The Asiatrust SC Decision applies to the CIR. The Amended Decision, as far as it modified the Original Decision, is new and unfavorable to the CIR. 4. This Honorable Court has the power and jurisdiction to cancel and set aside the deficiency tax assessments against OAC for being void. No Letter of Authority ("LOA") was issued in favor of Revenue Officer Saidamen T. Marohombsar and Group Supervisor Melinda Ann Perez authorizing them to conduct the audit and investigation of OAC for taxable year 2005. 5. Even assuming for the sake of argument that the disputed assessments were issued in accordance with a valid letter of authority, the said assessments against OAC must still be cancelled. a) Revenue Regulation No. 4-2007 ("RR No. 4-07") expressly excludes reinsurance premiums from the gross receipts of a non- life insurance company that is subject to VAT. That exclusion and the non-withholding by OAC of another 10% on premiums paid to !'--- 2 Rollo, pp. 276-308.

RESOLUTION CTA EB Nos. 1482 & 1487 (CTA Case No. 8582) Page 3 of6 reinsurance companies, cannot be considered wrong on the basis alone that RR 4-07 cannot be given retroactive application. b) The deficiency tax assessments are arbitrary and must be cancelled even without evidence from OAC. The basis of the assessments lack foundation and defies logic. This cannot be cured by the presumption of validity of assessments. c) The imposition of deficiency interest applies only to income tax, estate tax and donor's tax, none of which are supposedly due from OAC on the basis of disputed assessments. CIR in his motion submits that the proper remedy to assail the Amended Decision of the Third Division is through a petition for review before the CTA En Bane. According to CIR, to file a motion for reconsideration of the Amended Decision would constitute a violation of Section 7 of Rule 15 of Revised Rules of the Court of Tax Appeals ("RRCTA") and Section 2 ofthe Rule 52 ofthe Revised Rules of Court. CIR also states that to file a motion for reconsideration of the Amended Decision would be an exercise in futility since he will just be raising the same arguments already passed upon by the Third Division when it rendered the Amended Decision. CIR also reiterates its position that OAC should be ordered to pay the deficiency DST assessment and should not be allowed to avail of the Tax Amnesty Program (TAP) under R.A. 9480. On March 8, 2018, OAC filed its "Comment/Opposition (To Motion for Reconsideration dated 22 December 201 7 of the Commissioner of Internal Revenue)"3 via registered mail and received by the Court on March 15, 2018. "Opposition (Re: Motion for Partial Reconsideration)"4 filed by CIR on March 13, 2018 was admitted by the Court. On March 26, 2018, motions were submitted for resolution. After a careful review of the grounds raised and arguments presented by OAC and CIR, We find no valid or cogent reason to deviate from our findings and conclusions reached in our Decision dated November 29, 2017, thus, the motions are denied. We reiterate that the CTA En Bane cannot take cogmzance of Petitions for Review assailing the amended decision without prior motions for reconsideration or new trial filed with the CTA Third Division that jk- 3 Rollo, pp. 323-331. 4 Rollo, pp. 318-322.

RESOLUTION CTA EB Nos. 1482 & 1487 (CTA Case No. 8582) Page 4 of6 issued the assailed Amended Decision. This was emphasized by the Supreme Court (SC) in Asiatrust Development Bank, Inc. v. Commissioner of Internal Revenue, 5 and Commissioner of Internal Revenue v. Asiatrust Development Bank, Inc. 6("Asiatrust" case). Pertinent portions of the Asiatrust case state: Thus, in order for the CTA En Bane to take cognizance of an appeal via a petition for review, a timely motion for reconsideration or new trial must first be filed with the CTA Division that issued the assailed decision or resolution. Failure to do so is a ground for the dismissal of the appeal as the word 'must' indicates that the filing of a prior motion is mandatory, and not merely directory. The same is true in the case of an amended decision. Section 3, Rule 14 of the same rules defines an amended decision as ' [a]ny action modifying or reversing a decision of the Court en bane or in Division.' As explained in CE Luzon Geothermal Power Company, Inc. v. Commissioner ofInternal Revenue, an amended decision is a different decision, and thus, is a proper subject of a motion for reconsideration. In this case, the CIR's failure to move for a reconsideration of the Amended Decision of the CTA Division is a ground for the dismissal of its Petition for Review before the CTA En Bane. Thus, the CTA En Bane did not err in denying the CIR's appeal on procedural grounds. Due to this procedural lapse, the Amended Decision has attained finality insofar as the CIR is concerned. The CIR, therefore, may no longer question the merits of the case before this Court. Accordingly, there is no reason for the Court to discuss the other issues raised by the CIR. (Emphases Supplied.) In Asiatrust case, the SC did not distinguish whether the Amended Decision partially or totally modified the previous decision. The SC quoted the definition of the amended decision from Section 3, Rule 14 of the Revised Rules of the CTA, as "[a]ny action modifying or reversing a decision of the Court en bane or in Division." The modifier word is "any". To reiterate, the parties cannot directly appeal the amended decision to the CTA En Bane as ruled in the Asiatrust case. The assailed Amended Decision has attained finality because of this procedural lapse. ?z-- 5 G.R. No. 201530, April19, 2017. 6 G.R. Nos. 201680-81, April19, 2017.

RESOLUTION CTA EB Nos. 1482 & 1487 (CTA Case No. 8582) Page 5 of6 Anent the allegation that no LOA was issued in favor of the Revenue Officer and Group Supervisor on authorizing them to conduct the audit and investigation of OAC for taxable year 2005, it is only now in this motion that OAC raised this issue. Based on the records, Revenue Officer (RO) Marohombsar and Group Supervisor (GS) Perez who continued the audit of all internal revenue taxes for taxable year 2005 of OAC were duly named in the Memorandum/ Referral No. D-61-05-08 dated May 27, 2008.7 Further, in the Judicial Affidavit ofRO Marohombsar,8 it was stated that: 9Q Under what authority you conducted the audit of all internal revenue taxes of the petitioner? 9A I was authorized through a Memorandum of Assignment with Referral No. D-61-05-08 dated May 27, 2008. It was assigned to me following the re-assignment per LTAID Industry Grouping as of April 16, 2008, whereby the revenue officers who were authorized under the Letter of Authority (LOA) to conduct the audit on all the revenue taxes of petitioner was transferred to another Industry Grouping. (Underline Ours) In Revenue Memorandum Order No. 8-2006,9 "where both the RO and the GS have resigned/retired or transferred to another RR, the case shall be reassigned to another RO under the supervision of another GS within the same RDO. In case of reassignment, a memorandum to that effect shall be issued by the head of the investigating office to the concerned taxpayer and the concerned taxpayer and the concerned RO and/or GS." (Emphasis Supplied) In this case, there was a re-assignment of the case to another RO and GS thru a Memorandum, thus, the continuation of the audit investigation by RO Marohombsar and GS Perez were valid. Based on the foregoing discussions, We maintain our findings and conclusion in the November 29, 2017 Decision in this case. WHEREFORE, premises considered, "Motion for Reconsideration" filed by the Commissioner ofinternal Revenue (CIR) on December 22, 2017 and the "Motion for Partial Reconsideration (Of the Decision dated 29 Jz.- 7 Exhibit "1", BIR Records, p. 433. 8 Exhibit "12". 9 "Prescribing Guidelines and Procedures in the Implementation of the Letter of Authority Monitoring System (LAMS)", February I, 2006, signed by Commissioner Jose Mario C. Buftag.

RESOLUTION CTA EB Nos. 1482 & 1487 (CTA Case No. 8582) Page 6 of6 November 2017)" filed by Oriental Assurance Corporation (OAC) on January 24, 2018 are DENIED for lack of merit. SO ORDERED. ~C-~IQ~ .rtJANITO C. CASTANEDArJR. Associate Justice WE CONCUR: (I maintain oncurring a issenting Opinion.) ROMAN G. DEL ROSARIO Presiding Justice LOVM R. BAUTISTA E~P.UY Associate Justice Associate Justice I CAESAR A. CASANOVA . '-'- Associate Justice (bf. ~-- ~ ~~M~~i~ (I maintain my Concurring and Dissenting Opinion.) Associate Justice MA. BELEN M. RINGPIS-LIBAN Associate Justice (On Leave) CATHERINE T. MANAHAN Associate Justice