By Dane Angelo M. Enerio
THE Court of Tax Appeals (CTA) has granted San Miguel Holdings Corp. (SMHC) a partial tax refund of P50.61 million for “excessive” taxes collected by the Bureau of Internal Revenue (BIR).
In a 28-page June 6 decision penned by Associate Justice Caesar A. Casanova, CTA Second Division ordered the BIR to refund or to issue a tax credit certificate to SMHC over documentary stamp taxes (DST) collected for taxable year 2011.
According to the CA, the BIR’s tax claims stemmed from a July 19, 2011 Supreme Court (SC) decision between the BIR and Filinvest Development Corp. that ruled, among others, that instructional letters, and journal and cash vouchers extended to companies’ affiliates qualified as loan agreements upon which DST may be imposed.
Following the SC decision, the tax collecting agency issued Revenue Memorandum Circular (RMC) No. 48.2011 instructing all officials and employees engaged in the audit and reviews of cases to assess deficiency DST on similar transactions, if warranted.
“On July 21, 2014, SMHC received an undated Preliminary Assessment Notice (PAN) issued by the BIR for… deficiency taxes in connection with the examination of it internal revenue tax liabilities for the taxable year 2011,” the decision read.
It pointed out: “Based on the Details of Discrepancy attached to the PAN, the alleged deficiency DST assessment amounting to P110,623,457.19 was based on two transactions, which are; (1) Advances from SMC (San Miguel Corp.) and to related parties; and (2) Other Non-Current Assets under Finance Lease.”
SMHC paid P110.62 million, which includes interest up to July 31, 2014, surcharge and penalty, to the BIR under protest and “with a view of filing a claim of refund.”
On June 28, 2016, SMHC filed a letter for refund for P109.94 million, “allegedly representing DST erroneously and/or illegally collected from it by the BIR for taxable year 2011.”
Since the BIR did not act on its letter, SMHC filed the refund petition before the CTA.
The tax court ruled in favor of the BIR, saying, “intercompany loans and advances covered by mere office memo, instruction letter, and or/cash and journal vouchers qualify as loan agreements that are subject to DST.”
“It is clear that respondent is correct in applying the rule enunciated in the Filinvest case to determine petitioner’s deficiency DST,” the court said.
The CTA also ruled that the BIR’s right to assess had not prescribed and that SMHC’s administrative and judicial claims to refund were timely filed.
The tax court, however, agreed with SMHC’s argument that “assuming that it is liable for deficiency DST, its liability is only for the basic tax of P59,324,528.73, without the imposition of surcharge, interest, and penalty since it relied on existing court decision and BIR rulings at the time the advances were made.”
Citing the SC’s ruling on Michael J. Lhuillier Pawnshop, Inc. vs the BIR, the CTA said in the decision, “the settled rule is that good faith and honest belief that one is not subject to tax on the basis of previous interpretation of government agencies tasked to implement the tax law, are sufficient justification to delete the imposition of surcharges and interest.”
“Applying the foregoing, the Court is convinced that petitioner acted in good faith when it believed that intercompany advances are not subject to DST prior to the 2011 Filinvest case. After all, it was based on numerous rulings of the BIR that intercompany advances are not subject to DST. Moreover, the CA and CTA, the specialized body handling tax cases, also had similar rulings. Hence, petitioner cannot be faulted if it relied in good faith on these rulings,” the CTA added.
“Based on the above-cited case, and considering petitioner’s good faith in relying on previous court decisions and BIR rulings and its payment of the deficiency DST albeit under protest, the deletion of the imposition of surcharge and interest in the instant case is also proper,” the court ruled.
Those who concurred with Mr. Casanova’s decision were Associate Justices Juanito C. Castañeda, Jr. and Catherine T. Manahan.

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