THE Court of Tax Appeals (CTA) upheld its decision granting P166.7-million tax refund to Dole Food Co., Inc. (DFCI) over its erroneously paid capital gains tax.
In a 13-page decision, the court en banc denied for lack of merit the petition for review of the Bureau of Internal Revenue (BIR), affirming its third division’s decision and resolution in granting refund to DFCI.
The case stemmed the shared transfer agreement of DFCI and Dole Asia Holdings Pte. Ltd. (DAHL) where the company sold and transferred all its rights and interest in Dole Philippines, Inc. (DPI) for P1.9 billion.
The company owns 11.87% of the shares in Dole Philippines.
The CTA junked the bureau’s claim that the court’s third division erred in considering the financial statements of DPI in 2012 despite DFCI’s failure to submit those during its administrative claim in the bureau.
It said the court is not limited from receiving pieces of evidence that were not submitted in the administrative filing.
“Thus, petitioner is totally mistaken in his assertion that only those evidence which respondent submitted in its administrative claim for refund may be presented before this Court. A claimant may also present new or additional evidence that will solidify and further corroborate its claim for refund,” the court said.
The BIR also alleged that the property values in the financial statement of DPI was stated at cost and not based on fair market value which it said should be used at the time of the sale of the stocks.
The court, however, said that the bureau did not provide evidence to support its claim that DFCI opted to use a revaluation model wherein it was supposed to carry its property, plant and equipment in its financial statement at fair market value.
“Thus, this Court cannot disturb the factual findings of the Court in Division which initially tried the case,” the court said.
“There being no allegation nor iota of evidence from petitioner of abuse, arbitrariness, or capriciousness being committed by the Court in Division, this Court has no reason to reverse the latter’s findings,” it added.
The court noted that the case is about whether the tax refund has legal basis and the admission of the financial statement “was material to the determination of the total assets profile of DPI.”
The shares of stocks of the company is covered by Article 14(2) in relation to Article 1 of the Reservation Clause of the RP-US Tax Treaty.
Article 14(2) states that gains from the alienation of property shall be taxable only in the contracting state “of which the alienator is a resident” while Article 1 states that both the Philippines and US may tax gains from the disposition of an interest of a corporation if the assets “consists principally of a real property interest located in that country.”
It also said that based on records, real property assets constituted only 17.8% of DPI’s total assets. “Thus, the gains from the sale of DPI shares by respondent to DAHL were taxable only in the United States where the alienator, i.e., respondent, is a resident.”
“The capital gains tax therefore paid by respondent to petitioner on the sale of share transaction was erroneous. Hence, the argument of the petitioner that the value of the Property Plant and Equipment must be based on the fair market value at the time of sale and not on cost is irrelevant and immaterial to the case at hand,” the court said.
The court noted that the Tax Treaty was the basis of the refund grant and not the Certification No. 16-016 dated Dec. 8, 2016, which the BIR claimed must not be given weight or credit as the DFCI failed to present the custodian of the document.
The decision was penned by Associate Justice Catherine T. Manahan. — Vann Marlo Villegas