THE Court of Tax Appeals (CTA) has ordered SM Residences Corp. to pay its 2009 deficiency income and value-added tax to the Bureau of Internal revenue (BIR) amounting to P19 million.
In a 41-page decision on April 10, the CTA special first division also ordered the company to pay a delinquency interest rate of 12%, amounting to P13.6 million.
The court, however, partially granted the petition of SM Residences, cancelling P46,626.25 representing documentary stamp tax, out of the total P49.5 million tax assessment it sought to be nullified.
In denying SM Residences’ bid to nullify the full tax assessment, the CTA rejected the argument that the tax assessment has prescribed since it was issued beyond the three-year period allowed as the waivers which should have extended it were invalid.
“If petitioner was really convinced that the subject Waivers were invalid or ineffective and thus, the said tax assessments were issued beyond the three (3)-year prescriptive period to assess, then it should not have paid the deficiency DST for TY 2009. Such payment of petitioner belie its stance that the same Waivers are invalid,” the CTA said.
The tax liabilities of SM Residences were reduced upon examination of the Court but still include a 25% surcharge, 20% deficiency interest, and 20% delinquency interest.
The deficiency income tax was also cut from P25.3 million to P456,899.70 which was due to the adjustment of the taxable income of SM Residences as found by the court.
The BIR claimed that SM Residences has underdeclared income of more than P36 million supposedly from taxable sales of Sea Residences Project per audit worth P909 million.
However, the court said the Schedule of collections which was the basis of the BIR was not fully supported compared to the Schedule of collections for 2009 of SM Residences which showed that the company only had revenue of P100.2 million from the project which is 15% of the total, or its share, in the collection of P668.3 million, as supported by SMDC.
“Correspondingly, respondent’s finding of Undeclared Income in the amount of P36,130,552.57 was not fully shown to be with foundation. As a consequence, the computation of the Adjusted Taxable Income, as found by respondent, is reduced to P178,583.01,” the Court said.
The Court also upheld the disallowance of SM Residences’ Net Operating Loss Carry Over worth P1.3 million for “being unsupported” by pertinent documents.
The deficiency value-added tax (VAT) was reduced to P4.9 million from the BIR assessment of P24 million.
The decision was written by Associate Justice Erlinda P. Uy. — Vann Marlo M. Villegas
