CTA Case No. 5528 (Decision)

REPUBLIC OF THE PHILIPPI NES COURT OF TAX APPEALS QUEZON CITY ANNABELLE Y. PUEY, C.T.A. CASE NO. 5528 Petit i onet~, Pt~omulgated: /1 " vet~sus JUN 25 1999 ~5-- COMMISSIONER OF INTERNAL REVENUE, - - -- X Respondent. X- - DECISION This case i nv olves an appeal from the decision of Respondent Commissioner of Internal Revenue regarding the deficiency income tax assessment of the Petitioner for the year 1989 in the total amount of P1,470,BBO.OO. Petitioner is a Filipino citizen with residence at 408 Bougainvilla St. Ayala Alabang Village, Alabang Muntinlupa, Metro Manila. The antecedent facts of the case are as follows: a judicial order dissolving the conjugal partnership of gains between spouses Manuel Puey and Annabelle Puey, Petitioner was adjudged the sole owner of one residential house located at 2116 Paraiso St., Village, tr1akat i City, which was ot~iginally thei-r~ conjugal home <E><hs. "A", "A-:l II).

DECISION - C.T.A. CASE NO. 5528 .�.:..�. After the separation, Petitioner decided to go to the United States with her children and stayed there for In the meantime, the subject property was leased to the Secretary of State of the United States of vir-tue of a "Contt~act of Lease" executed by her husband, Manuel Puey, for and in her behalf on August 12, 1':385 (pp. 19 to 21, CTA t~ecot~ds). When Petitioner returned to the Philippines, she decided to sell the subject property on March 3, 198':3, with the lease constituted thereon still subsisting, hence, said lease was allegedly stipulated in the Deed of Absolute Sale. Petitioner paid the five percent (5%) capital gains tax and documentary stamp taxes on sa id sale in the sum of P175, 000.00 <Exhs. "B", "C" and "D"). On March 25, 1993, Petitioner received a Notice of Assessment for alleged deficiency income tax in the total amount of P1,470,880.00, inclusive of surcharge and intet~est, on the basis of Respondent's claim that the subject property sold was not a capital asset but an ordinary asset, thus subjecting said sale to the 35% income tax instead of only 5% capital gains tax. Petitioner protested the assessment in a lettet~J dated l'r1at~ch 25, 1993 <Exh. "F").

DECISION - C.T.A. CASE NO. 5528 3 -� On Apt~ i 1 23, 1997, Petitioner received a final decision of the Commissioner of Internal Revenue, dated 1997' denying t~econsidet~ation <Exh. "I"). Hence, Petitioner filed the instant Petition for Review with this Court on f'r1ay 19, 1997. The issue in this case is whether or not Petitioner is liable to pay the deficiency income tax assessment in the amount of P1,470,880.00. scrutiny of the records of this case, this Co'-wt finds it unnecessary to delve on the issue of the correctness of the assessment in view of the compromise agreement that has been entered into by both Records show that during the trial of this case, Petitioner submitted an application for the settlement of her pending tax assessment in line with the program of the Bureau of Internal Revenue for the acceleration of collection of taxes through compromise under Section 204 of the Tax Code, as amended, pur�s uant to Revenue Memor~andum Ot~det~ No. 51-97, dated Novembet~ 15, 1997 (p. 125, CTA records). The application has been accepted by the BIR with the issuance of Authority to Accept Payment <ATAP>. Petitioner paid the amount of P367,720 .. 00 representing 50~ of the basic tax assessed for the year

DECISION - C.T.A. CASE NO. 5528 4 1.989 (pp. 127 to 128, CTA records). This Court holds that by accepting Petitioner's offer of settlement and having received the compromise amount, as evidenced by the Authority to Accept Payment, Respondent has indicated his willingness to dissolve Petitioner's liability for alleged deficiency income tax by compr~om i se. In fact, Respondent has already withdrawn the BIR presumably for the purpose of issuing the corresponding Authority to Cancel Assessment <ATCA> for the completion of the compromise settlement under the aforementioned Revenue Memorandum Order No. 61-97. However~ for one reason or another, the ATCA is still pending with the office of the Regional Director for~ s i gnat twe, per~ Petitioner's manifestation <Minutes of the Session, April 13, 1998, p. 142, CTA r~ecor~d s) . Dm~ing the hear~ing held on March 9, 1998, counsel for Respondent confirmed the fact of compromise and further manifested that what is 1eft to be done is the issuance of the authority to cancel the assessment. counsel for Respondent no longer made any appearance in court and, as stated earlier, withdrew the BIR records of the above-entitled case in connection with the issuance of the authority to cancel assessment. Neither did counsel for Respondent offer any evidence or~ submit his memorandum in support of his case.

DECISION - C.T.A . CASE NO. 5528 5 Fro m t h e aforementio n ed circumstances, as well as a scrutiny of the records of this case, We can conclude that a comp~~omise between Petitioner and Respo n den t has been finally reached in so fa~~ as the former's income tax deficiency for 1989 is concerned. Compt~ o m ise is a cont r act whereby the parties by making reciprocal concessions, avoid a litigation or put an end to one already commenced <Godoy vs. Court of Appeals, 250 SCRA 629) . It should be stressed that the sett l ement of disput e s by way of compromise is an accepted, nay, d esirable practice encouraged by the courts of l a w and ad ministrative tribunals (Jag and Haggar Jeans and Sportswear Corporation vs. NLRC, 241 SCRA 635). WHEREFORE, in view of the foregoing, assessment no . FAS-2-89-93-000922 is hereby CANCELLED, by reason of the compromise agreement reached by Respondent and Petitioner with respect to the latter's income tax deficiency for the taxable year 1989. SO ORDERED. I

DECISION - C.T.A. CASE NO. 5528 - 5- WE CONCUR: ~ () Q __,.~ ERNESTO D. ACOSTA Pt'esiding Judge CERTIFICATION I hereby certify that this decision was reached after due consultationwith the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution. ~ o.O~ ERNESTO D. ACOSTA Pt~esiding Judge Court of Tax Appeals