THE Court of Tax Appeals affirmed the cancellation of the alleged deficiency improperly accumulated earnings tax (IAET) of Cebu Air, Inc. for 2010 worth P1.87 billion.
In a three-page resolution dated Nov. 3, the court, sitting en banc, denied for lack of merit the motion for reconsideration of the Bureau of Internal Revenue.
The court said the claims of the bureau were “mere recapitulation” of its arguments in its petition for review.
“Moreover, these issues have been amply considered, weighed, and resolved in the Assailed Decision. Thus, to discuss anew the explanation of the court on these matters is superfluity,” it said.
The bureau claimed in its motion for reconsideration that the company’s evidence attached to its motion should not have been admitted and that the court erred in ruling in matters not raised in administrative level, as well as cancelling the compromise penalty.
The court in a decision in June affirmed the ruling of the special second division, cancelling the assessment for deficiency IAET against Cebu Air.
The second division in 2018 denied the petition for review of Cebu Air, holding it liable for IAET worth P49.3 million, inclusive of 25% surcharge, deficiency and delinquency interests.
Upon appeal of both parties, the second division issued an amended decision, canceling the assessed deficiency IAET for Cebu Air, saying the company sufficiently proved that it declared and paid cash dividends to its shareholders within a year since the close of taxable year 2010.
IAET is the income tax imposed at a 10% rate on the improperly accumulated taxable income of a corporation if its earnings are accumulated and not distributed to stockholders, the court said in its ruling in June.
The court en banc in its duling upheld the decision of the division that the company has no IAET after Cebu Air was able to “fully substantiate” that it declared and paid cash dividends to its stockholders and it was established that additional paid-in capital is part of paid-up capital of the corporation, which is used to compute the IAET.
The court also said in its previous ruling that the compromise penalty applies only in the settlement of criminal liability and there should be mutual agreement between the parties. It said that the compromise penalty should be deleted because the company did not consent to it.
The BIR in its petition claimed that the company did not prove that it paid cash dividends to its shareholders and the documents should not have been considered by the division and that paid-up capital should not include the additional paid-in capital, among others, according to the June ruling.
Cebu Air, on the other hand, claimed that the bureau failed to raise valid grounds to reverse the decision. — Vann Marlo M. Villegas