Tax appeals court rules against BIR on firm’s P12.9-million VAT deficiency

THE Court of Tax Appeals has granted a petition filed by Process Machinery Company, Inc. (PMCI) to set aside a value-added tax (VAT) deficiency assessed by the Bureau of Internal Revenue.
In a decision dated Aug. 17, 2018, the CTA said: “The VAT assessment issued by respondent against petitioner PMCI for the taxable period, from January 1, 2013 to June 30, 2013, in the aggregate amount of Twelve Million Nine Hundred Seventeen Thousand Eight Hundred Five and 78/100 Pesos (P12,917,805.78) is hereby CANCELLED.”
The VAT deficiency assessment contested by PMCI was computed, according to the BIR, based on undeclared sales, disallowed input tax, and input tax carrying over to succeeding periods.
The BIR claimed that PMCI had undeclared sales worth P29,750,076.39 based on its official receipts subject to VAT.
PMCI, on the other hand, said sales from clients listed by the BIR were earlier declared in VAT returns “for which the correct taxes were paid.” Further payments, it said, would compel the company to pay for the same transactions twice, first on the VAT sales invoice and then when the VAT official receipt is issued.
The Court cited Sec. 113 (A) of the National internal Revenue Code of 1997 which states that VAT invoices are issued for “every sale, barter or exchange of goods and properties” while official receipts are issued for “every lease of goods or property, and for every sale, barter or exchange of services.”
“It is not disputed that PMCI is engaged in the distribution of crushing, screening, wear protection, conveying and minerals processing equipment, service and systems solutions. In essence, petitioner is primarily engaged in the sale of goods. The issuance of a VAT invoice for its sales is, therefore, in accordance with the law,” the decision read.
The excess input tax worth P3,196,364.31 which was disallowed by the BIR as credit for the period as it claimed it should be carried over to the next quarters was cancelled by the Court due to lack of factual and legal basis.
The undeclared sales and disallowed input tax were retained by the court. — Vann Marlo M. Villegas