Philippine Amusement and Gaming Corporation v. Bureau of Internal Revenue
REITERATIONFacts
The Antecedents: Philippine Amusement and Gaming Corporation (PAGCOR) provides a car plan program to its qualified officers, where PAGCOR shoulders 60% of the cost and the officer the remaining 40%, payable over five years. The Bureau of Internal Revenue (BIR), through its Regional Director, issued a Post Reporting Notice to PAGCOR regarding deficiencies in Value Added Tax (VAT), Withholding Tax on VAT (WTV), Expanded Withholding Tax (EWT), and Fringe Benefits Tax (FBT) for the year 2004. While the claims for VAT, WTV, and EWT were later abandoned by the BIR based on existing jurisprudence exempting PAGCOR, the assessment for deficiency FBT remained. Procedural History: PAGCOR received a Final Assessment Notice (FAN) dated January 14, 2008, demanding payment of P48,589,507.65 for deficiency FBT in 2004. PAGCOR filed a protest with the Regional Director on January 24, 2008. Due to the lack of action on this protest, PAGCOR elevated its concern to the Commissioner of Internal Revenue (CIR) on August 14, 2008. After receiving communication indicating the protest was being processed but without a definitive resolution, PAGCOR filed a Petition for Review with the Court of Tax Appeals (CTA) on March 11, 2009, alleging inaction on its protest. The CTA First Division dismissed PAGCOR's petition, ruling it was filed out of time. The CTA En Banc affirmed this decision, also finding the petition to be filed beyond the reglementary period. PAGCOR then filed the present petition for review before the Supreme Court. The Petition: PAGCOR filed a petition for review under Rule 45 of the Rules of Civil Procedure and Rule 16 of the Revised Rules of the Court of Tax Appeals. The core issues raised by PAGCOR were whether the CTA En Banc erred in affirming the dismissal of its Petition for Review for being filed out of time, and whether the CTA erred in failing to decide the case on its substantive merits, particularly concerning PAGCOR's alleged tax exemption under its charter. PAGCOR argued that its charter exempts it from fringe benefits tax and, alternatively, that the car plan inured to its benefit and was necessary for its business operations. The respondents, the BIR and its officials, argued that the CTA correctly dismissed PAGCOR's petition as it was filed beyond the periods provided by law.
Issue(s)
Whether or not the CTA En Banc gravely erred in affirming the CTA 1st Division's Decision dismissing the Petition for Review for having been filed out of time. Whether or not the CTA En Banc seriously erred when it affirmed the CTA 1st Division's failure to decide the case on substantive matters, i.e., the full import of PAGCOR's tax exemption under its charter which necessarily includes its exemption from the fringe benefits tax (FBT); Assuming that PAGCOR is not exempt from the FBT, whether or not the car plan extended to its officers inured to its benefit and it is required or necessary in the conduct of its business. Assuming that PAGCOR is subject to the alleged deficiency FBT, whether or not it is only liable for the basic tax, i.e., excluding surcharge and interest.
Ruling
The petition is denied. The Decision promulgated on 18 February 2013 and the Resolution promulgated on 23 July 2013 by the Court of Tax Appeals - En Banc in CTA EB No. 844 are affirmed with the modification that the denial of Philippine Amusement and Gaming Corporation's petition is due to lack of jurisdiction because of premature filing. The case is remanded to the Court of Tax Appeals for the determination of the final amount to be paid by PAGCOR after the imposition of surcharge and delinquency interest.
Ratio Decidendi
On the timeliness and jurisdiction of the Petition before the CTA: The Court held that PAGCOR's petition for review before the CTA was prematurely filed. Section 228 of the National Internal Revenue Code (NIRC) of 1997 and Section 3.1.5 of Revenue Regulations No. 12-99 provide specific remedies for taxpayers disputing an assessment. These remedies include filing an administrative protest within 30 days from receipt of the assessment, and if the protest is denied in whole or in part, or not acted upon within 180 days, the taxpayer may appeal to the CTA within 30 days from receipt of the denial or from the lapse of the 180-day period. PAGCOR filed its protest on January 24, 2008, and subsequently filed a petition before the CTA on March 11, 2009, without waiting for a decision on its protest from either the Regional Director or the Commissioner of Internal Revenue. The Court emphasized that a petition before the CTA may only be made after a whole or partial denial of the protest by the CIR or the CIR's authorized representative. Since there was no denial when PAGCOR filed its petition, it was premature, and the CTA lacked jurisdiction. The Court cited Surigao Mine Exploration Co., Inc. v. Harris for the principle that a cause of action must exist at the commencement of the suit, and a defect of premature filing cannot be cured by subsequent events. On the substantive issues of tax exemption and liability for FBT; and the nature of the car plan: The Court found it unnecessary to delve into the substantive issues regarding PAGCOR's tax exemption and its liability for FBT because the petition was dismissed on procedural grounds (premature filing). The Court noted that the failure to comply with the procedural requirements for disputing an assessment renders the assessment final, executory, and demandable. Therefore, PAGCOR was precluded from disputing the correctness of the assessment. The Court reiterated that the procedural lapses made the BIR's assessment final, obviating the need to discuss the propriety of the imposition of fringe benefits tax. The Court's affirmation of the CTA's dismissal, albeit on the ground of premature filing rather than late filing, meant that the substantive issues were not resolved on their merits by the Supreme Court. On the liability for basic tax, excluding surcharge and interest: The Court did not rule on this issue because the petition was dismissed on procedural grounds. The failure to comply with the procedural requirements for disputing an assessment renders the assessment final, executory and demandable.
Main Doctrine
A petition for review before the Court of Tax Appeals may only be filed after a whole or partial denial of the protest by the Commissioner of Internal Revenue or the Commissioner's authorized representative. Filing such a petition before any denial has been issued renders the petition prematurely filed, depriving the CTA of jurisdiction.