appellants brief tutuban case

8/3/2019 Appellants Brief Tutuban Case

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Tutuban Properties, Inc. vs. CTA Charisse Mae V.MendozaGrounds for Appeal 3A, TaxI

The facts of the case, as gathered from the Partial Amended Decision of the Court of Tax Appeals1, are as follows:

Tutuban Properties, Inc. availed of the Tax Amnesty under Republic Act 9480 onMarch 6, 2008. As attached to the motion filed by Tutuban Properties for PartialWithdrawal of their petition before the Court of Tax Appeals, the petitioner filed withthe Bureau of Internal Revenue the following requirements2:

(1) Tax Amnesty Payment Form/Acceptance of Payment Form (BIR Form 0617)showing the tax amnesty payable in the amount of P500,000.00

(2) Notice of Availment of Tax Amnesty indicating with previous SALN/ Balance

Sheet(3) Statement of Assets and Liabilites and Net worth as of June 30, 2005(received on March 6, 2008)

(4) Tax Amnesty Return (BIR Form 21-16) showing amnesty tax due P500,000.

According to the petitioner’s June 2005 SALN, its net worth amounts toP437,042,785.00 and the alleged increase in its net worth is P708,922.00. Petitioneronly paid the amount P500,000.00, as evidenced by Development Bank of thePhilippines BIR Tax Payment Deposit Slip amounting to P500,000.00 based on the

Tax Amnesty Payment Form (BIR Form 0617). According to the Partial AmendedDecision (page 7), the petitioner paid the tax amnesty using the amnesty rate underparagraph (d), Section 5 of RA 9480. The said provision provides the following:

Sec. 5. Grant of Tax Amnesty. – Except for the persons or casescovered in Section 8 hereof, any person, whether natural or juridical,may avail himself of the benefits of tax amnesty under this Act, andpay the amnesty tax due thereon, based on his net worth as of December 31, 2005 as declared in the SALN as of said period , inaccordance with the following schedule of amnesty tax rates andminimum amnesty tax payments required:Xxx(d) Taxpayers who filed their balance sheet/SALN, together withtheir income tax returns for 2005, and who desire to avail of thetax amnesty under this Act shall amend such previously filed

statements by including still undeclared assets and/or liabilities andpay an amnesty tax equal to five percent (5%) based on the resultingincrease in net worth: Provided , That such taxpayers shall likewise becategorized in accordance with, and subjected to the minimum

1 Promulgated April 21, 20082 Pages 6-7, Partial Amended Decision



amounts of amnesty tax prescribed under the provisions of thisSection. (italics provided)

According to the CTA3, petitioner only paid the amount of P500,000.00, whichis the higher amount vis-à-vis P35,446.10 (5% of the increase in net worthamounting to P708,922.00). However, the petitioner failed to attach with its

motion for partial reconsideration the 2005 income tax return which wasallegedly required under Sec. 5 (d) of the Tax Amnesty Law used todetermine the increase in the petitioner’s net worth. Therefore, CTA ruledthat petitioner should have paid P21,852,139.25 (5% of its net worth amounting toP437,042,785.00) instead of the P500,000.00 paid by the petitioner, in accordancewith paragraph (b), Section 5 of RA 94804. Therefore, the petitioner did not complywith the requirements of RA 9480 and should not be granted tax amnesty.

The following may be raised by the petitioners as errors of the Court of Tax Appeals (CTA):

I. The court erred in ruling that the income tax return is required to avail of the

tax amnesty under RA 9480

II. The court erred in ruling that the income tax return would be a basis of the

petitioner company’s net worth

Discussion

I .The court erred in ruling that theincome tax return is required toavail of the tax amnesty under RA9480

Under Section 2 of RA 9480 (further discussed in Section 6 of theImplementing Rules and Regulations of RA 9480), only the followingrequirements are required to be filed with the BIR for a person to be able toavail of the tax amnesty authorized and granted under RA 9480:

a. Notice of Availment in such forms as may be prescribed by the BIR

3 Page 8, Partial Amended Decision4 xxx(b) Corporations(1) With subscribed capital of above P50 Million5% or P500,000

whichever is higher(2) With subscribed capital of above P20 Million up to P50 Million5% or P250,000,

whichever is higher(3) With subscribed capital of P5 Million to P20 Million5% or P100,000,

whichever is higher(4) With subscribed capital of below P5 Million5% or P25,000,whichever is higher(c) Other juridical entities, including, but not limited to, cooperatives and foundations, that have become taxable as of

December 31, 20055% or P50,000,

whichever is higher

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b. Statement of Assets, Liabilities and Net worth (SALN) as of December31, 2005 in such forms as may be prescribed by the BIR

c. Tax Amnesty Return in such forms as may be prescribed by the BIR

An income tax return was not required to be filed under RA 9480, or in its

corresponding ITR. Therefore, the petitioner is not required to submit an ITRto avail of the tax amnesty under RA 9480.

II. The court erred in ruling that theincome tax return would be a basisof the petitioner company’s networth

According to the CTA, the ITR is necessary to determine the increase inthe petitioner’s net worth. It is important to determine the networth of thetax payer since Section 5 of RA 9480 provides that the tax payer should pay

the amnesty tax due based on his networth as of December 31, 2005 asdeclared in the SALN as of the said period. RA 9480 expressly provides thatthe SALN shall contain the net worth of the taxpayer, which shall be thedifference between the total assets and total liabilities5. Further, Section 5(d) which was the alleged basis of petitioner for his tax amnesty applicationprovides that the taxpayer shall amend the previously filed SALN includingstill undeclared assets and/or liabilities and pay an amnesty tax equal to fivepercent (5%) based on the resulting increase in networth.

The ITR, on the other hand, is a sworn instrument in which thetaxpayer discloses the nature and extent of his tax liability by formallymaking a report of his income and allowable deductions for the taxable year

in the prescribed form.6

The ITR does not provide for the total assets and total liabilities of a

taxpayer which is necessary to determine the tax payer’s net worth. Further,it was alleged that the petitioner’s increase in net worth was P708,922.00. Therefore, the court erred in requiring that the ITR be submitted todetermine the petitioner’s net worth, as the increase in net worth wasalready determined.

Conclusion

Based on the grounds that the ITR is not required under RA 9480 for

the petitioner to avail of tax amnesty and that the networth, which is thebasis for the amnesty tax to be paid, could be determined solely on the SALNsubmitted by the petitioner company, Tutuban Properties, Inc. could opt toappeal the said judgment of the Court of Tax Appeals.

5 Section 3 (c), RA 94806 B. Teodoro (1998), The Law on Income Taxation, p.446

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Disclaimer/ Dissenting Opinion

Even if the class was asked to submit arguments that may be raised by TutubanProperties, Inc. for appeal, I respectfully believe that the CTA decision is correct but itsdecision was not explained that well.

Based on the facts from the partial amended decision, Tutuban Properties, Inc. didnot submit their ITR, nor does it appear in their motion that they submitted an amendedSALN. To my opinion, corporations may claim tax amnesty under Section 5 either underparagraph (b) or (d).

Under Section 5(b), the corporation may avail of the tax amnesty and pay theamnesty tax due which is 5% of the corporation’s networth or the minimum amnesty taxpayments enumerated, as determined in the SALN as of December 31, 2005.

Under Section 5(d), the corporation who filed their balance sheets/SALN together withtheir income tax returns for 2005, and which desire to avail of the tax amnesty shouldamend such previously filed statements by including still undeclared assets and/or liabilitiesand pay an amnesty tax equal to 5% based on the resulting increase in networth. Further,the taxpayers shall likewise be categorized in accordance with, and subjected to theminimum amounts of amnesty tax prescribed under the provisions of the said Section, i.e.the rates enumerated in Section 5(b).

Based solely on the SALN as of December 31, 2005 submitted by the petitioner, theirnet worth amounts to P437,042,785.00. If under Section 5(b), the petitioner should payeither 5% of P437,042,785.00, or P500,000.00, whichever is higher. 5% of P437,042,785.00is equivalent to P21,852,139.25, so under Section 5(b), the petitioner should have paid thisamount instead of P500,000.00.

As I understand it, Section 5(d) would require that the SALN would be amended, andthe amnesty tax of 5% would be based on the increase in networth of the taxpayer. In thePartial Amended Decision, there was an alleged increase in the petitioner’s net worthamounting to P708,922.00. However, the said amount was not substantiated in the decision,as there was no proof that the petitioner filed an amended SALN with the BIR. Therefore,since it is the duty of the taxpayer to prove that it is entitled to a tax amnesty, and since nosufficient proof was presented that it was entitled to the computation, then no tax amnestyshould be granted to the petitioner.

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appellants brief tutuban case

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