THE Court of Tax Appeals (CTA) has stood by its decision to grant First Philippine Utilities Corp.’s refund claim worth P100.88 million representing its tax liabilities for the year 2012.

In a 16-page decision on May 24 and made public on May 26, the CTA full court said its Third Division did not commit an error when it ruled the firm’s investments on money market placements to various banks were not subject to regular corporate income tax.

“Interest income earned from any money market placement and bank deposit is considered as passive income subject to final withholding tax pursuant to section 24 (B) (1) of the National Internal Revenue Code,” CTA Associate Justice Roman G. Del Rosario said in the ruling.

The court said the commissioner of internal revenue (CIR) made a mistake when it subjected the taxes to the same corporate income tax at the rate of 30% under another provision of the Tax Code, instead of a final withholding tax subject to a 20% rate.

It also enjoined the CIR or anyone representing the official from enforcing the collection of the 2012 tax assessment.

“All told, the court en banc finds no justifiable reason to reverse or set aside the assailed Decision and assailed Resolution of the court in division,” the tribunal said.

It noted that the CIR changed its argument as it claimed that First Philippines Utilities failed to prove that it was passive income subject to final withholding tax.

The tax court disagreed, saying the official effectively “admitted that the said interest income was passive income” when it supplied this argument.

“When a party deliberately adopts a certain theory and the case is decided upon that theory in the court below, he will not be permitted to change the same on appeal… because it would be unfair to the adverse party,” it added.

The CTA also affirmed the division’s cancellation of the firm’s deficiency value-added tax (VAT) as it said there was no basis for the CIR to do so. It also upheld the canceled minimum corporate income tax and deducted net operating losses.

“There is nothing on record which would show that First Philippine Utilities is a lending company that earned aforesaid interest income in the ordinary course of business, thus there is no basis to assess the deficiency VAT on the aforesaid interest income,” according to the ruling.

The tribunal acknowledged the firm as validly claiming its net operating loss as a deduction from its gross income.

“Truth to tell, it is not [the] respondent’s (First Philippine Utilities) duty to pay the final withholding tax,” the CTA said. — John Victor D. Ordoñez