COMMISSIONER OF INTERNAL REVENUE v. PENN PHILIPPINES INC.

.. I REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC COMMISSIONER OF CTA EB NO. 2512 (CTA CASE NO. 7457) INTERNAL REVENUE, Present: Petitioner, -vers us- DEL ROSARIO, P.J. , RINGPIS-LIBAN, MANAHAN, BACORRO-VILLENA, MODESTO-SAN PEDRO, REYES-FAJARDO , CUI-DAVID, FERRER-FLORES, and ANGELES,]]. P ro mulgated : PENN PHILIPPINES, INC., Respondent. X- - - - - - - - - -- - - - - - -- - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - . RESOLUTION RINGPIS-LIBAN,J: For resolution is petitioner's Motionfor Reconsideration, which was flied by registered mail on February 20, 2024, without a comment from respondent despite notice. The motion seeks to reverse the J anuary 31 , 2024 Decision, which denied the Petition for Review for lack of merit and affirmed the assailed decision and resolution of the court a quo. The Ad Cautelam Manifestation (Re: Notice dated 4 March 2024) posted on March 8, 2024, which reiterated the manifestation that Ma. Elizabeth E. Peralta- Loriega is not connected with respondent in any way whatsoever and, thus, will no t ftle any comment on petitioner's Motion f or Reconsideration, is NOTED. In the Motion for Reconsideration, petitioner repeats the argument that respondent's unsupported zero-rated sales in the amount of PhP16,640,256.91 /

RESOLUTION CTA EB NO. 2S12 (CTA CASE NO. 7457) should be subject to 12% output Value-Added Tax (VAT). This matter was already resolved at length by the Court in its decision, thus: "The CIR contends that these unsupported zero-rated sales of PhP16,640,256 should be subject to 12% output V,-\T. The CIR's position is untenable as it finds no basis in law. t!rst, as already discussed, the sales ofPhP16,640,256 are zero-rated by virtue of the explicit provision in Section 106(J\)(2)(a)(5) of the NIRC, as amended, and as interpreted in Rc'\IC 74-99 and RR 16-2005 as amended by RR 4-2007. The disallowance bv the Second Di,�ision stems from the non- compliance of the sales with the im�oicing requirements of the NIRC, as amended,jorpmpom oftbe refund daim. This non-compliance with Sections 113 and 237 twmot, howe\Ter, change the nature of these transactions as zero-rated sales, which is provided by law. In other words, non-compliance with the invoicing requirements of Sections 113 and 237 does 110/ render these zero- rated sales subject to 12% under Section 105 of the NIRC, as amended. Second, in Commissioner o{ Intema/ Re~Je;ltle IJ. Eum-PbilippineJ Airline Sen1ice.r, Inc., the Supreme Court upheld the finding of the CL-\ En Bane that the transaction sale made bY a taxpaver is entitled to the benefit of zero-rated V;\T de.rpite it.rfaillll~ to mmpl)' with im�oidng "quimmn!J as mandated by law: XXX XXX XXX Tbird, the CIR failed to raise the point that there was deficiency assessment against the taxpayer that is intimately related to and inextricably intertwined with its right to claim for a tax refund for the same year. It bears emphasis that the CL\ does no/ hm�e assessment powers. The term 'assessn1ent' refers to the determination of amounts due frotn a person obligated to make payments. In the context of national internal revenue collection, it refers to the detennination of the taxes due fron1 a taxpayer under the NIRC. The power and dutv to assess national internal revenue taxes arc lodged with the BIR as stated in Sections 2 and 6 of the NIRC, as amended. If the CJH. were of the opinion that the unsubstantiated sales should haY�e been subjected to 12% VAT, the BIR could haYe initiated an investigation against the taxpayer once the taxpayer flied the administrati,�e refund claim by issuing a Letter of Authority. After investigation, it could have issued an assessment based on the findings of the revenue examiners. But in the An.rwer as well as the Join! Stipulation o{Fru'l.r and !JJueJ and e\�en during the trial, the CIR 11eilher manifested, in general, that a deficiencv \'AT was found due from the taxpaver after an assessment nor raised, in particular, that a deficiency VAT was due on those disallowed sales. "\pparently, without its own assessment, the CIR merely relied upon the findint~-: in the :1'~s:1ilcd clcci"ion to hold the t~xp~ycr liable for 12�/o V.:\Ton the disallowed sales. Prescription to issue an assessn1cnt based on the taxpayer's 2004 \'AT returns had already set in/

RESOLUTION ITA EB NO. 2512 (ITA CASE NO. 7457) Fom1b, as discussed in the assailed resolution, the Supreme Court has ruled, in Commissioner of Intemal Re11enue v. Toledo Power Company, that while the offsetting of taxes due against the taxes covered by the refund claim was allowed in claims under Section 229, the same does not apply in claims under Section 112 of the NIRC, as amended: XXX XXX XXX Finally, the CIR's reliance on /1ir Canada ?J. Commirsioner of Intemal ReJ!e/1/le is misplaced. Air Canada is a claim for refund of alleged erroneously paid income taxes based on the revised defmition of Gross Philippine Billings under Section 28(A)(3)(a) in relation to Section 229 of the NIRC, as amended. As already pointed out, this case involves a refund claim under Section 112 in relation to Section 106(A)(2)(a)(5) of the NJRC, as amended. Thus, the facts obtaining in the Air Canada cases are not on all fours \Vith the case at bar." (dtationJ omitted) In fine, there being no new issues or arguments raised in the motion, this Court finds no compelling reason to disturb or overturn the assailed decision. WHEREFORE, premises considered, the Motion for Reconsideration is DENIED for lack of merit. SO ORDERED. ~- ~ '-?' '--- MA. BELEN M. RINGPIS-LIBAN Associate Jus rice WE CONCUR: Presiding Jus rice ~~7-~ CATHERINE T. MANAHAN Associate Jus rice

� ' RESOLUTION -VILLENA CTA EB NO. 2512 (CTA CASE NO. 7457) JEANMA MARIARO ~ ~ f. ~ ~t~'c:r-Jtl MARIAN 1&. REYES-FAJARDO "\ssociate Jus rice LA~~~VID :\s sociate Jus rice Associate Justice HENRJ~NGELES .\ssociatc Justice