CTA Case No. 4347 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY YOUNG HEN'S CHRISTIAN ASSOCIATION OF THE PHILIPPINES, INC., Petitioner, - versus - C.T.A. CASE NO. 4347 COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - - - - - - - - - - - X D E c ::r s ::r C> N This is a case involving disputed assessments is sued by the Respondent against Petitioner involving deficiency ~~come, fix e d, contractor 's and expanded withholding taxes and withholding tax on wages for taxable year 1980 in the total a mount of P410,918.~ J . It appears from the Petition for Review and as adm itted by the Respondent in his answer that the following facts are un controverted : ( 1) On July 2, 1984, the respondent notified the petitioner that there was found due from the petitioner for the yei.'\r 1980 the total - 80 4

DE CISIO N CTA CASE NO. 4347 - 2- amount of P415, 651.01 as deficiency inco me tax and intere st , expanded wi thhold ing taxes on rentals a nd prof~ssional fees , a nd withholdi ng tax on wages, surcharge an d interest. ( 2 ) Petitioner timely proteste d the above- stated deficiency tax assess ments, and under d ate of Oc tober 8, 1985, the petitioner filed a supple me n t to th e sai d basic protests. (3) On F bru ry 13, 1989, the petitio ner r ece ived a copy of t he respondent's lette r- decision of J a nuary 13, 1989, in reply to p ti ioner' s letter- pro es t da te d October 8, 1985. A xerox copy of the responden t ' s letter- decision of January 13, 1989 is a tac h ed hereto as Annex "A" . (4) In hi s letter of January 13, 1989, Annex "A" hereof, the responde nt cancelled the followi ng assessment, incl u sive of increments, to wit : 1980 De� . Fixed Tax (Real Estate Dealer) ... P 7,694.71 1980 Def. Expanded Withholding Tax (Professional Fees . ................. 8,215.06 Ho~1ever, respondent reiterated th e followi ng ass e. sment inclusive of increments thereon, nam el y:

DECISION CTA CASE NO. 4347 - 3- 1980 Def. Fixed Tax (as operator of parking p 353.15 lots) .... ....... ... ................. . 3,129.73 1980 Def. Contractor's Tax ............... . 372 , 578.20 1980 Def . Income Tax ..................... . 1980 Def. Expanded Withholding Tax (Rental 1,798. 93 33,058.82 of Pinsettler) ...................... . 1980 Def. Withholding Tax on Wages ....... . From the denial of Petitioner ' s protest, it filed the instant Petition for Review on March 14, 1989. Petitioner on � ts part alleged that it is a religious, charitable and educ ation a l institution and it is established primari 1y for the promotion of t h e social welfare, pleasure, recreation and oth e r non - p ofitable purposes primarily for the development of the youth into uprigh t and civic- mind ed and useful citizen s and that no part of the net income of which inures to the benefit of any private stockholder or member. Such being the case, the Petitioner is exe mpt from taxation pu rsuant to Section 27 (g) and (h) of the National Internal Revenue Code. It likewise denied liabilities over withholding taxes on wages and rentals on pinsetters. The truth being that the wag es whic h were not subjected to withholding tax p ertain to wages of casuals excepted from the - 8 06

DECISION CTA CASE NO. 4347 - 4- requirem e nts of \-li thhold in g by Revenue Regu lation No. 6-82. The rentals o n pinsetters a r e not actually r ntals ut repr � nt t he service f ee paid to Hr. Al do de Guz m n or main taining the pinset ing machin . Being not one of those enumerated und e R venue Regul tion No . 13-7 8 as amendPd, i is not sub'ec to exp nd ed withho lding ta x. Re pond nt on hi s par t a ll eged that notwithstan ding t o ner' s t ax exe mpt status under Se ction 27 (g) and ( h) of t h e Tax Code, the income derived by the P titio ner fr om le ase of the r eal properties and from operations of th e pa rk ing lot is subject to income tax p ursu ant to the last pa r graph of atd sect o n. Likewise, the Petiti one fail - d 0 withhold axes on sa la ries and wag es ai d to i emp y e s a s well as the withholding on th rent a s of pi n se tt ers in viol-tion f h e w:i. hhold ng tax law and regu lation. The issues presented for re sol ut ion by this court are as followst (1) Whether or not the co ll ection or earnings of rental income from lease of certain ., 80 7

DECISION CTA CASE NO. 4347 - 5- p r emis e s a nd inco me e a rned from parking f e es fall un der t he last para graph of Section 27 o f t h e NIRC ; (2 ) Whether or no t it i s liable to withhold i ng ax o n wa g e s and to e x panded wi hhol d in g X on rent als o f pinsetters. On th e f i rst i sue , n o doub t a s also admitted by the Respo ndent in h is me mor ndum, Pe titioner is a non - stoc k nd non - p ro f it domesti c co rporation organize d for t h e pr omot io n of soci al we lfa r e as well as f or p l e sure, ecre a on a nd other non- prof talJl urpo aes. Pe tit io n er will fall the re o u nd r S c o n 27 (g ) an ( l\) of the� NIRC. F or e sy f r n c h if:J r ti cul p ovis ion of law invol ved is qu oted he r unde r' SEC. 27. Exemptions f rom tax on c orporations. Th e fo llowing organizations sha ll not be taxed under this Title in respect to income received by them as such - (g) Civil league o r organization not organ ized for profit but operated exclusively for the promotion of social welfare ; (h) Club organized and operated exclusively for pleasure, recreation, and other non-profitable purposes, no part of the net income of v1hich inures to the benefit of any private stockholder or member; -80 8

DECISION CTA CASE NO. 4347 - 6- Notwithstanding the provisions in the preceding paragraphs, the income of whatever kind and character of the foregoing org ni zat ons from any of their properties, real or pe rsonal , or from any of their activities conducted for profit, regardless of the dispo sition made of such income, shall be s ubj ect to tax imposed under this Code. How ever , the question for resolution is whether o not the rental income in the amount of P649, 701 . ....~ an the parking ot fees in the amount of P44, 259 . .?. ~.' . may b e ns e e d s inco me fa ll i ng under � he a paragraph o f the aforequote d pr ov sion. Th t i s , wheth e r n ot said in come may be conside ed as "incom of wh ate ver kind and cha cter of the o regoin g organi zation from any of their prop ti real o personal, or from a ny of their act � v i s conducted for profi �t, regardless of the disposition made of such income" subject to income tax. Thi s wi 11 consequent! y also subje ct the said activities to fixed tax as operator of park ing lots a nd to contractor's tax. While it may appear that the last paragraph was introduced only on June 11, 1978 by Pre side ntial Decree No. 1457, the same provision has been part of the same Sec ion 27 from the very -80 8

DECISION CTA CASE NO. 4 3 47 - 7- st art of the e n a ctm e nt of our Na tional Int e rnal Re v e nu e Co de o n July 1 , 1 939 und e r Co mmonw ea lt h Ac t No. 46 6. I t was a pr oviso in s u b sec t io n (e ) of Se c tio n 27, quo e d here und e r: S EC . 27. Ex e mpti on ."> from tax o n corp ora tl o n s. The fol l ow in g orga ni z tion s s ha no t be taxed u nd er t h �s Tit e i n s e o i ncome r eceive d by t hem as s uch- XX X XXX XXX (e ) Corporation or association org a nized and o perate d e xclus i ve ly for r e ligious, c haritabl e , sc ien ti fic, a thleti c , c ultural, or educat i ona l purpose s , o r f o r the r e h ab ilitati on o f v e t era n s n o p art o f t h e n e t in c om e of whi c h i n u res to t h e be nefi t of a ny p ri vate s to c khol de r or indi v i du a l; Provi d e d h owe ver, That the ~ n come of wh at ver k i n d and c hara c ter fro m a n y o f it s propertie s , re al or p e r sona l, o r fro m a ny ac t i v ity onduc ted for p rofit, r e g a r d es s o f th e d s position ma d e o f su c h n c ome , s ha l l b e li a ble to t h e t a x i mp o e d under his Code, XX X XXX XXX Th e r e for e , the ju ri sp ud e n ce e s tab li s h e d i n the int erpreta t~ o n o f t h e s a d S e c i on 2 7 ev e n p rior to J u ne 1 1 1 1978 will apply i n o ur p a rt i c ul a r cas e . The Young Men 's Chr is ti a n Ass oci a t ion of t h e P hi lippine s ~ I n co r porated was e st abli sh e d p ri maril y wi t h the fo l owing object'v e s: As r e c ited in its Ar tic l e s of Inc orpora tion - - 810

DECISION CTA CASE NO. 4347 - 8- (a ) �ro develop the Chr istian charac t er and usef uln ess of its memb ers and to improve the spiritual, i nte llectual, social a nd physical c ondi c tion of the you t h. And as recited i n its Co nst it ution and By- Laws, the association has the fo ll owi ng objectives: Section 2. The conti nuing ba s is of t h e work and wittness of the YMCA of the Phil ippines , Inc. is Christ- oriented in nature. Th e Movement endeavor as it does to encou rag e an d inspire the se arch for unity i n Christ and th e mission to work tog e ther for the e x tension of His Kingdo m among a ll the peoples of the wo rld. Section 3. The enduring objectives of the Fe d eration s h all be: ( a ) To develop we ll - balanced Christian persona lity, mi ssion in life , u sefulnes s o f indivi dual s, a n d he pr o mo t i on of u n i t y a mo ng Ch ist ians and und er s tan ding a mo ng peop les of all f aiths , t o th e e nd t hat th e Brot h er h ood o f Man un de r h e Fat h e r h ood of God may be fostere d in an at mo s ph e e of mutual re spect a nd un de r s t a ndi n g, (b) To p ro mo t e on e qu a l ba s is th e ph ysic al, me n tal , and s p i ritual we l fa re o f the you t h, with e mp h asis on re v ere n ce for God, soci a l d isc i p line , res pons i bility for h e co mmo n good , res p ect for hum a n d igni t y, a n d t he ob serva n ce o f th e Go ld e n Ru le ; -811

DECISION CTA CASE NO. 4347 - 9- (c) To e ncourage members of the Young Men's Christian Asso ciation s in the Philippines to participate loyally in t h e life of their res pective c hurches; to b rin g the s e churches clo se together, and to partie pate in the effort to realize the church Universal ; ( d) 'l'o s r ng t hen and coordinate the work of the You ng Me n ' s Chris ti a n �Assoc iation s . in the Philip pi n ~s and to f os ter t h e exte ns ion of the Youn g Me n ' s Chr st i an A so ciations to new a reas, (e ) �ro h elp its Me mb er Association s de velo p and ad pt their progr am s to t he n eds of the you t h 1 (f) To ass st t he Member Associations in developing and ma i nt ain ing an high standard of management, operation and prac tice; and (g) To undert a ke and sponsor nation a l and international prog ra ms a nd activities in pursuan c e of its purposes and objectives. In furtherance of these objectives, the ) association has s ponsored continuing programs towards the developme nt of the welfare of the youth as good Christians. Actual workshop, seminars, - 81 2

DECISION CTA CASE NO. 4347 - 10 - training, sports ca mp s , c onf er ences, s ummer ca mps and other programs or s uch ma tters like developing C hrl st. ian valu es , drug addJctions, unskilled and out. - o.f -sc hool youth, h andicapped working youth a nd you t.h alcoholism were held throughout the Philippines through its various branches. (Exhibit s F, G, H, I). To s upport these multifa rio us activities and to attai n the various objectives of the association funding is necessary. As gathered from the various testimonies, fundings are derived from various sources such as membership dues, charges on the use of f aci 1 i ties 1 ike bowling and bi lli.ards, lodging, small shop rentals, interest income, parking fees, re s taurant and canteen. Unlike other clubs, the memb ershi p dues in the association are very minimal. It is only P.50 for elementary students, Pl. 00 for high school students, P3. 00 for college students and PlOO. o o for professionals and other corporate members. With these minimal dues its multifarious activitie s have to be supported by other sources. Two of these sources are rentals derived from small shops, restaurant and taka canteen and parking fees. For taxable year ended 81 ~

- DECISIO N CTA CASE NO . 4347 - 11 - De cember 1980, Petitioner earned gross rental income of P676,829.?�. ~. and P44 , 259 . .?...?.. fro m parking fees which is he subject of the assessme nt . In a similar case inv olv ng Petitioner's pre dec sso , Young Men � s Christ:tan Associ ati on of Manila vs. The Co lector of I nterna l Revenue (No . 7 988, January 19, 1916) , the Supreme Court held th at "YMC A is exempt from taxation on the ground that it is a combination of religious, charitable and educatio n al institution a n d not founded a n d co nduc e d for profit ". Ag ainst the argument th at YHCA uns a business because i t keeps lodgin g and boarding ho us es, the Supreme Co~r t s t ates, as follows: "These facts, however, are far from const. i tuting a bus ness in the ordin ar y a c pt n e he word. In the first pl ce , n o it is ealize d b y the association se n In the second place, � t s ndoubted as it is undisputed that the urp ose of t h e ssociation is not prima r ily to obtain money wh i c h comes f m the lodgers a nd board e r s . .'l.'.h.~......!:.~.~.+.....J?.~.F..P.9.. ~.~-�-.... :!:. ~......~..9............~.~. ~- I?. .....h.~.........IJI.~.l,ll.R~. ~.!.'i. h.AP........~. 9..I.}..!::.:i:. D.:.~.~.!.J.Y...... ...~.~.~.h. ~l}..........!::.Q~. .~. P~.~.F.~.... .9...~ ..... ~. ~.t+..~.~-.~~. ~ . ... .9.. f.......!:.h.~..... ..!.n.!3..~~.!::.'::1. !::.~. 9..1.}...~.. .~ n d......!-.~.~.E.~ I?Y.. . .!::.9....1?.F~. Y..~.P:.!::.....~.l!J........~ .~ .!:. .....~ ~ .....1?.9...;> ~ !.9..1. ~ .~..~ e .......PP.P..9..... !::.~.I.}..t!::.t~. ~......~.h.!C?.h.....Y..A.9..~.... P..!:.~ ~.~ !}..!:..~ ......!::.9. .�...9..':1.~. 9........~ .~.l}........J!l.. . . . .~.9..J;.~.i.9...!l..... C.9.':l.l}.!:.!:. t~. ~.....~.~-.9...........!.~.~.~ .. .h......o......m......e..............o.......r..............o.......t....h...,..e.....r. .........s... i m il a r....... ......i...n.....f...l...u.....e.....n. ....c.....e........s... . We �-' regard this fe a tu e of the in stitution not as a bu s ness or me ans of making money, but, rather, as a very eff icien t -

- ......... DF.CISION CTA CASE NO. 4347 - 12 - means of maintaining the influence of the institution over its members 1 as we held in the case of Columbia Club 1 religious and moral teachings do not always stop with the spoken word; but to be effective 1 the highest degree they must follow the young through as many moments of his l ife as possible. To t.his end 1 the feature of the Young Men's Christian As s ociation to which objection is made lends itself with great effect; and we are __ c:_tg _c:::.<?. r.:c:l~f.l:9 .~. �... forced . ~<? .....1::.~. 9..~!:.<:1..... _ t:}~i!'l .? c_t:-~ .'!A!:y ......... g .t ...........~ h-~ i .rl .~ ~ J .!:.~.!:.i ..<?.rl..............11.<:>...!:.... a s l?~?~f.l:. ~::;::; _ . !?~~ - ~~ c::t ..... ~E:!.!:hC>c:l ........!?.�.. which the i n s t i t u...t....i....o.......n..................m ..... ...a.......i...n.......t....a....i...n..............i....t...s........... ..i....n......f.....l....u......e.....n.......c.....e.......,..,...... and the benefits which its g_:r:gaf.)~~.c::t..!:Jc:>.f.l.. . was . g~~-~9.l.1~~~9 . to cc:>.f.l..f. e..E. " (Underscoring supplied.) In the case of Jesus Sacred Heart College vs. Collector of Internal Revenue (No. L- 6807 1 May 24 1 1954, 95 Phil 16) which involves the. interpretation of Section 27(e) the taxpayer maintains that it is exempt from taxation under the first part of the said p a ragraph(e) which th e Collector asserts that the income in question (net income from tuition and other fees) was derived from an "activity conducted for prof i t" and a c cordingly it is taxable under the prov iso of the same paragraph. The Supreme Court states, as follows: 1. Section 27 (e) of the National Internal Revenue Code, as amended by Republic Act No. 82 (section 5), exempts from taxation tne "net income" of corporations "organized and operated exclusively for � � � educational - 81

a . ., DECISION CTA CASE NO. 4347 - 13 - purposes � � no part of th~ net inc o me of which inures to the benefit of any private stockholder or i ndividual, " and it is conceded that plaintiff corporation belongs to this class. �ro hold that an ed uc t onal nstitution i s subject to income tax whenever i t is so ~dministered as to reas onable assure t hat it will not incur in deficit, is t o nullify and defeat the aforemen tioned exemption. Indeed 1 the effect, n genera l, of the interpretation advoca ed by appellant would be to deny the exe mpti on "7henever th , e is a ru~t incom e, cont ra ry to the te nor of s aid s ect ion 27 ( e ) which positivly xempts from ta xation those co porat'ona or assoc iations which, ot he wise, wou ld be a ubject thereto, be use of he existen e of s id net income. Needless to say , every responsible o ganization must be so run as to, at le ast insure its existen c e, by operating within the limits of it s ow n resources, especially its regular in come.� In other words, it should always st i ve, whenever possible , to have a surplus . Upon the other hand, a ppellant's pretense would limi he benefi s of the exemption, under sa id section 27(e), to institutions which do not hope, or propose, to have such su plus. Unde r this view, the exemption would apply only to schools which are on the verge of bankruptcy, for - unlike the United State s , where a substantial number of institutions of learning are dependent upon voluntary contributions and still enjoy economic stability , such as Harvard, the trust fund of which has been steadily in creas ing with the years-there are, and there have always been, very few educational enterprise s in the Philippines which are supporte d by donations , a nd these organizations usually have a very precarious existence. - 81 6

-- - DF.CI!>ION CTA CASE NO. 4347 - 14 - The final result of appellant's contention, if adopted, would be to discourage the establishment o f colleges in the Philippines, which is precis e ly the opposite of the obj ective consiste ntly sought by our laws . In other words, the making of profit does not destroy tax exe mption of charitable, benevolent or education 1 institution. '!'his de cision was rei~e at d in s veral othe decisio n s of the Supr m Court , to w "The me e charging of medical and hosp t a e s for those who can affo rd to pay , did not mak e he institution estab ' s hed f or profi t or g in. It had o meet xpe n ses for op era ~ion and main nano - , in o .der o carry its lofty pu po es t a rve h ma ni ty". ( UST Hasp al Employees v. s anto Tomas Ho spita , G.R . N . L-69SB, Oc ober 29, 1955 i Collector of !nternal Revenue vs. St. P u Hospital in I oilo, L- 12127, May 2 5, 19 58 , University of San Agustin vs. CIR, et al., No, L- 1222 2. May 26, 1958). Other decision on t he m t e a re w 1 1 re cited in the Petition or Rev�ew and memorandum of t h e Petitioner. An a lyzing the particular income involved in the instant case, namely, rental income and parking fees, the question would be whether or not the n e t income for said activities would be subject to income tax considering that they are derived from -( 817

DECISIO N CTA CASE NO . 4347 - 15 - op e ation 0 eal p ope y . Fol l owing t he afo e m ~ n ioned deci Rions of the Supreme Co u r t, a s long as no r r o i � i nu e A to t he be n e fj t of a ny p ri vate i ndiv idu 1 r enti ty a nd tha t i t is i n p ursuant to t h e benevo lent obj ec tive s of the org a n iza � io n, t h n it r rna n s n o t t a xabl e . However , t h is court wish to go furthe r and d 's ting uis h, fo oth e rwis the bs o l ute applicati on of t h e a b o v e ju r i s prudenc e \-to u d re nde r n u gat o ry a n d effect he � proviso und e Sect ion 27 o f the NIR C. I f we ma y borrow fr om US aut horit ies o n t he u se o f prope t y, the j u ri s prud en ce i s as foll ow s 1 " Th xemptio n vo r of . r operty x c u sive ly c ha itable o r � anal ur ose s not ,1 m t ed to y c tu lly ind ispe nsable the refore y o n Taxatio n, Vol . 2, 14 30) b ut o t c li i e s which are an d re a o n b y n ecessa ry fo . ceo m ~ i shm en , f sai d pu rp oses , suc h as in the of hospi tal s , 'a s c h ool 50r n rses, a nu rses' h o me, pr op ert y t o provide housi ng facilities for interns, r e s ide nt doctors , s uperintendents and other members of the hospital staff, and recreation facilities for student nurses, interns and residents' ( 84 C. J. S. 621) such as n athletic field, s including 'a farm used for the inmates of the institution" (Cooley on Taxation, Vol. 2, p. 14 30); cited in the case of Jose V. Herrera et al. vs. The Quezon City Board of Assessment Appeals (L-15270 September 30, 1961). -818

DECISION CTA CASE NO. 4347 - 16 - Under the a bove guidelines, the leasing of Petitioner's faci 1 i ties to small shop owners, to restaur a nt and canteen operators and the operation of the parking lot are reasonably incidental to and reasonably necessary for the accomplishment of the objectives of the Petitioners. It appears from the testimonies of the witnesses for the Petitioner partic ularly Mr. Jame s C. Delate, former accountant of YMCA, that these facilities were leased to members and that they have to service the needs of its members a nd their guests. The rentals were minimal as for example, the Barbershop was only charged P300 per month. He also testified that there was actua lly no lot devoted for parking space but the parking was done at the sides of the building. The parking was pri marily for members with stickers on the windshields of their ca rs and they charged P.50 for non-members . The rentals and parking fees were just enough t o cover the co sts of operation and maintenance only. The earnings from these rental s and parking charg es including those from l odging and other charges for the use of the recreationa l facilities const itute bulk of its income which are channeled to support its many -819

Df:C[SJON CTA CASE NO. 4347 - 17 - activities a nd attainment of its objectives. As pointed out ea l ier , the membe r s h i p dues are very ins u f f icie n t to s upport its programs . We find it reasonably necessary therefore for petitioner to make mo st out its existing facilities to earn some income. It would have been different if under the c rc ms nces, - i tione wi l u rc hase a lot and convert 't 0 parkin g 0 to cate r to the needs of h n ~ 1 public: fo r a f@ � , or construct a ' build ng n d lease it out to h~ hig he st bidder or at th ma ke te f or eomm erci 1 purpo se s, or should it inve t its funds n the buy and sell of properties, real or e sona l. Under these circumstances, we could c on d lude th at the act ivities are already profit oriented, not incidental and reasonably necessary to the pursuit of the objectives of the association and therefore, will fall under the last paragraph of Section 27 of the Tax Code and any income derived therefrom shall be taxable. Considering our findings that Petitioner was not engaged in the business of operating or co ntr acting parking lot, we find no legal basis also for the imposition of deficiency fixed tax and -82CI

DECI SION CTA CASE NO . 4347 - 18 - contractor's tax i n t h e amount of P353.1 5 and P3,129 . ~~ . respect' v ely . On he alleged def io ncy exp a nd e d wit hho l ding t x n h am ou n o � Pl,79 .~~ , we gi ve cr e d e n ce to th inding of Re p n d n a s s upp orted by t he audi d ti n a r& o n. �h t th e re ntal on t h e pin set t rs n h e o a moun of 75 ,1 17 . .~..c'.. s h o uld hav e been s ub ecte d to expande d wi t hhold i ng tax pursur~nt to Re v e n ue R gu tio n No . 13 - 78 , as s u ppleme nte d by Reve nu e Regula tion No. 6 - 79. It appeari n g th a t o n ly t h e a mou n t of P54 ,300 paid to Car l os Antonio Disno s , Inc. out of the total payment of P75,117 h a s been � subjected to withhold i ng tax, the balance 0 f p 2 0 , 8 1 7 . .?.. ~. i s therefore subj e ct to withholding tax. The alleg a tion by Petitioner that the said amount of P20, 8 17 represents service fee paid to certain Alfre do de Guzman on a contractual basis for the ma int e nance service of the pinsetting machine is not support ed by any evidence. On the alleged deficiency withholding tax on wag e s, Petitioner alleged in its memorandum that the payme nts for salaries being subjecte d to wi t hholding tax pertain to casual laborers employed -821

DECISION CTA CAS E NO . 4 34 7 - 19 - in t.he past years but not in 1980. Respon de nt assumed that in 1980, P e titioner wo ul d have t h e same number of employees as i n p r evious y ears . Petitioner alleged that this as sumpt io n i s con trary to the jurisprudenc e laid down b y t h is Court in Benipayo v. Coll cto r o f Intern a l Re venu e ( CT A Cas e No. 251 , J u ne 23, 1958 ) t hat "assess ment sh ould not b e b ase d on pres um ptio n s no matter ho w r easo n a ble or logical sai d , pre sump ti on s may be" . We be g to disagree with th e Peti tioner becau s e the records show that aside fro m t h e regular BIR Form W-3 covering withholding taxes on salarie s of re gul a r employees , i t likewise filed f or ta~ abl e year 1980 BIR Fo r m 1701 - B cove rin g payme n ts of salaries to casual employees wit h o u t the correspon d i ng withholding tax withh eld (pp. 20 -25 of the BIR record s ). Co n trary to t he a ll egation of Petit io n er , t he a larie s of t he casua l l a bo rers are s ubject to wi thhol ding taxe s pursuant t o Section 90 (a) ( 3 ) of the NIRC ef fective as of 1980 because their empl o y ment were in the c ours e of the employer's ope r ation of the bowl ing a l le y s . Also, as against th co mputation ma d e by the Respo ndent, Peti.tioner failed o refute or s ho w th e co rrect -

-- DECIS ION CTA CASE NO. 4 3 4 7 - 20 - computa t i on. On this ground this court believe s that the rule that "all presumptions in f avor of th e co rrectn ess of ta x a s s es s me nts" (J p rovinci al Auto bu s Co., In c! vs . Ca ll. of In t � I 98 Phi l 29 0 959 ], Co mm. of I n t . Re v. v s. ' i na, 8 SCRA 572 [ 196 3 ] 1 Mi nd a n ao Bu s Co . v s. r f n t. Rev . , 1 S CRA 538 [ 1 96 1]) ci t e d b y Re p a n < �1h 1 app l y. WIH E , i.n view of al l t h e foregoi n g, the fo l lowl r ~ ss m e n ts are h ereb y d i s mis s ed f o r lack of me rit = 1980 De 1 � y Fi x ed Ta x - P 353, ~ .~ J �r Con tractor 's T a x - 3 , 12 9 . .~. ~- ~ 1980 D I nc ome Tax - 372 , 5 78 . .~..~. � 1 980 Def i t Whi le t h e :( i ng a sse s s ments are he r eby sus tain ed: 19 80 Def i c Expanded Withho lding Tax 1 980 Def i ci ( � , 798 . ~:. ; Wi t h holdi ng Ta x o n Wages : 3. 0 5 8 . .0.~ pl u s lOt s u r chargP 1 20\ inte res t pe r annum from J uly 2 , 1984 unti u l I v paid but no t to exceed t hree (3) years p u \ ~ t.o S e c tion 51 ( e) (2 ) & (3 ) of the Nat "onal In ' Reve n u e Co de e f fecti v e as o f 1984.

w -- -- DECISION CTA CASE NO. 4347 - 21 - SO ORDERED. Quezon City, Metro Manila, Aug. 11, 1993. <;?._.c:;;- Q, G:.'vrA ERNESTO D. ACOSTA Presiding Judge ~, 0. p<Dl~,-'EI ~ RAMON Associate Jud e CERTI F I CATI 0 N I hereby certify that this decision was r eac he d af ter due c onsultation among the members of th e Co u r t of Tax Appeals in accordance with Sec tion 13 , Article VIII of the Constitution. �e.. M;;--62--~ ERNESTO D. ACOSTA Pre s iding Judge Court of Tax Appeals - 82Ll