HAWAIIAN-PHILIPPINE COMPANY v. COMMISSIONER OF INTERNAL REVENUE

CTA Form No. 8 (For DCC) lllll/111111111111111111111 1111111111 1111111111111111111111111111111111111111111 22 -000016-0062 REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FIRST DIVISION CTA CASE N0.10726 HAWAIIAN-PIDLIPPINE COMPANY, Petitioner, -versus- NOTICE OF RESOLUTION COMMISSIONER OF INTERNAL REVENUE, Respondent. To: OFFICE OF THE SOLICITOR GENERAL 134 Amorsolo St., Legaspi Village, Makati City ATTY. FELIX PAUL R. VELASCO ill ATTY. AYESHA RANIA B. GUILING-MATANOG Bureau of lntenral Revenue Room 703, Litigation Division, BIR National Office Building Sen. Miriam P. Defensor-Santiago Avenue Diliman, Quezon City BANIQUED AND BELLO Suite 803, 8th Floor, Jollibee Centre San Miguel Avenue, Ortigas Center 1605 Pasig City GREETINGS: You are hereby notified by these presents that on February 25, 2025, a Resolution was rendered in the above-entitled case, copy of which is attached hereto. Quezon City, Philippines, February 27, 2025. ... AttyE. xMecaurtiiav~ ~af F. Chan-Te Court II

REPUBLIC OF THE PHILIPPINES . COURT OF TAX APPEALS QUEZON CITY FIRST DIVISION HAWAllAN-PHILIPPINE CTA CASE NO. 10726 COMPANY, Members: Petitioner, -versus- DEL ROSARIO, P.J., Chairperson, BACORRO-VILLENA, and COMMISSIONER OF CUI-DAVID, JJ. P r o m u l g at e d : INTERNAL REVENUE, Respondent. RESOLUTION CUI-DAVID, J.: This resolves respondent's Motion for Reconsideration Re: Decision dated 13 November 2024 (Motion), filed personally on December 4, 2024, and by electronic mail (e-mail) on December 5, 2024, with petitioner's Comment [to Respondent's Motion for Reconsideration Re: Decision dated 13 November 2024], filed personally on January 2, 2025, and by e-mail on January 3, 2025. Respondent seeks r econsideration of the� Decision promulgated on November 13, 2024 (assailed Decision), which disposed of the case as follows: WHEREFORE, in light of the foregoing considerations, the instant Petition for Review is GRANTED. Accordingly, t h e Formal Letter of Demand and Fii).al Assessment Notice Nos. IT-2017-00047, VT-2017-00014, WG- 20 17-00011, WE-20 17-00049, and administrative penalties a re CANCELLED and SET ASIDE. Furthermore, the Final Decision on Disputed Assessment issued on September 10, 2021, assessing petitioner of deficiency income tax, value- added tax, final withholding VAT, and expanded withholding

RESOLUTION CTA Case No. 10726 Hawaiian-Philippine Company v. Commissioner of Internal Revenue X---------------------------------------------------------------X tax for the fiscal year ending September 30, 2017, are REVERSED and SET ASIDE. SO ORDERED. Respondent argues that the assessments for value-added tax (VAT) covering the second quarter of fiscal year (FY) ending September 30, 2017, expanded withholding tax (EWT) for March and April2017, and final withholding VAT (FWV) for the same periods, had not yet prescribed when the Formal Letter of Demand (FLD) and Final Assessment Notices (FAN) were issued and served on petitioner on December 22, 2020, pursuant to Revenue Memorandum Circular (RMC) Nos. 136- 2020,1 52-2021,2 80-2021,3 and 93-2021.4 Respondent further argues that there was no violation of petitioner's right to due process because petitioner was informed of the legal and factual bases of the assessments and was given the opportunity to respond by filing a Reply to the PAN and a Protest against the FLD. Respondent insists that petitioner remains liable for the deficiency income tax (IT), VAT, FWV, EWT, and compromise penalty, as stated in the Final Decision on Disputed Assessment (FDDA). On the other hand, petitioner argues that the assessments are partially prescribed, as the original prescriptive period expired before the declaration of the community quarantine on March 16, 2020. Petitioner further contends that its right to due process was violated because it was unable to determine how the revenue officers arrived at their computations of tax deficiencies. While it filed a Reply to the PAN and a Protest against the FLD/FAN, these submissions merely provide an intelligent guess based on the documents available at hand and that petitioner, in contesting the assessments, was faced with the risk that failure to do so would result in the Bureau of Clarification on the Suspension of the Statute of Limitation Provided Under Revenue Regulations (RR) No. 11- 2020, December 7, 2020. , Suspension of the Running of the Statute of Limitations on Assessment and Collection ofTaxes Pursuant to Section 223 of the National Internal Revenue Code of 1997, as Amended, Due to the Declaration of Enhanced Community Quarantine in Metro Manila. Bu\acan. Cavite. Laguna. and Rizal (NCR Plus). and Other Applicable Jurisdictions, April 14, 2021. Clarifying the Suspension of the Statute of Limitations on Assessment and Collection of Taxes Due to the Declaration of Quarantine in Various Areas in the Country, June 25. 2021. Suspension of the Running of the Statute of Limitations on Assessment and Collection of Taxes Pursuant to Section 223 of the National Internal Revenue Code of 1997, as Amended, Due to the Declaration of Enhanced Community Quarantine (ECQ) and Modified ECQ (MECQ) in the National Capital Region (NCR) and Other Areas of the Country. August 6. 2021.

RESOLUTION CTA Case No. 10726 Hawaiian-Philippine Company v. Commissioner of Internal Revenue x---------------------------------------------------------------x Internal Revenue (BIR) retaining the items of assessments and treating them as final, executory, and unappealable. Petitioner further emphasizes that it is not liable for deficiency IT, VAT, FWV, or EWT for FY ending September 30, 2017. Petitioner also claims that respondent's arguments in this Motion merely repeat those raised in his Answer, which have already been thoroughly addressed in the assailed Decision. As such, petitioner contends that this Motion is pro forma and should be denied outright by the Court. The instant Motion is without merit. As outlined in the assailed Decision, the extended period for tax assessments under RMC No. 136-2020 -covering VAT for the second quarter of FY ending September 30, 20 17, as well as EWT and FWV for March and April 2017- had already prescribed between November 12, 2020, and December 12, 2020.5 This occurred before the issuance and service of the FLD/FAN to petitioner on December 22, 2020. Respondent cannot invoke RMC Nos. 52-2021 and 80- 2021, as these were issued after the FLD /FAN had already been served on petitioner. These circulars were issued in response to the declaration of Enhanced Community Quarantine (ECQ) in Metro Manila, Bulacan, Cavite, Laguna, and Rizal (collectively referred to as the "NCR Plus" bubble) from March 29, 2021, to April4, 2021, and subsequently extended from AprilS, 2021 to April 11, 2021. Similarly, RMC No. 93-2021, which declared ECQ in Metro Manila from August 6, 2021, to August 20, 2021, is also inapplicable. The extended oeriods to assess are as follows: Tax Type Last Day Actual filing End of3-year Extended Prescribed Prescribed date of tax period to assess period to assess when FAN/FLD for filing of return (RMC No. 136- was deemed tax return 2020) made on 1212212020 VAT 2nd auarter I 0412512017 I 0412412017 I 0412512020 I 1112312020 I Yes EWT Mar.2017 I 0411412017 I 0411112017 0411412020 I 11/1212020 I Yes Aor.2017 0511412017 I 0511212017 I 0511412020 I 12/1212020 I Yes FWV Mar.2017 I 04/10/2017 I None I 04110/2020 I 11/08/2020 I Yes Aor. 2o17 05/10/2017 None 05110/2020 12/0812020 I Yes

RESOLUTION CTA Case No. 10726 Hawaiian-Philippine Company v. Commissioner of Internal Revenue x---------------------------------------------------------------x RMC Nos. 52-2021, 80-2021, and 93-2021 explicitly state that the suspension of the statute of limitations for assessing and collecting deficiency taxes applies only in areas under ECQ or Modified Enhanced Community Quarantine (MECQ). is in effect. These suspensions were necessary because ECQ and MECQ restricted movement within these jurisdictions, effectively preventing the service of assessment nQtices- whether personally or by substituted service-as well as the issuance of Warrants of Distraint or Levy and Warrants of Garnishment needed to enforce tax collection.6 Significantly, the NCR was not under ECQ or MECQ from November 12, 2020, to December 12, 2020.7 As such, the extensions provided under RMC Nos. 52-2021, 80-2021, and 93-2021 do not apply in this case. Respondent's assertion that the cancellati~n of the assessment is unwarranted because petitioner's right to due process had not been violated lacks merit. As established in Commissioner of Internal Revenue v. Avon Products Manufacturing, Inc. (Avon),8 due process in tax assessments encompasses two fundamental elements: (1) providing taxpayers with a fair and reasonable opportunity to present their case; and (2) ensuring that the BIR gives due consideration to the arguments and evidence submitted by taxpayers. Failure to comply with the second element renders any explanation ineffective and may lead to wasted time and resources for all parties involved. Thus, it is essential for the BIR to carefully consider the taxpayer's response to the PAN before issuing a final assessment rather than proceeding without adequately evaluating those arguments. Furthermore, upon examining the assessments, the Court noted that the persistent absence of specific factual bases was a critical factor in the cancellation of the deficiency assessments. Respondent has failed to address these detailed findings in the present Motion. RMC Nos. 80-2021 & 93-2021. President Duterte retains Metro Manila's GCQ status from December 1 to 3/, December 1, 2020, PRESIDENTIAL COMMUNICATIONS OFFICE, available at https://pco.gov. ph/news_releases/president-dutcrte-retains-metro-mani las- gcq-status-from-deccmber-1-to-311 (last accessed on FcbrUaJ)' 3, 2025); Announcement, November I, 2020, available at https://nationalarchives.gov.ph/5815-2/ (last accessed on February 3, 2025): Azer Parrocha, Metro Manila, 6 other areas to remain under GCQ until .Nov. 30, October 27, 2020, PHIL. NEWS AGENCY, available at https://www.pna.gov.ph/articles/1119801 (last accessed on February 3, 2025). G.R. Nos. 201398-99 & 201418-19, October 3, 2018 [Per J. Leonen, Third Division].

RESOLUTION CTA Case No. 10726 Hawaiian-Philippine Company v. Commissioner of Internal Revenue x---------------------------------------------------------------x WHEREFORE, premises considered, the instant Motion for Reconsideration Re: Decision dated 13 November 2024 is DENIED for lack of merit. SO ORDERED. LAN~~AVID Associate Justice WE CONCUR: Presiding Justice JEAN MA ' ~' . BACORRO-VILLENA