CTA: Comelec should pay over P1B in deficiency withholding tax

The Court of Tax Appeals has ruled that the Commission on Elections is liable to pay over P1 billion in deficiency withholding tax, including interest, for 2015.

In a 22-page decision, the CTA junked Comelec’s Petition for Review of the Bureau of Internal Revenue’s (BIR) December 2019 ruling affirming its March 2019 Final Decision on Disputed Assessment (FDDA).

The FDDA indicated that the BIR was liable to pay at least P1 billion deficiency withholding tax on compensation (WTC), expanded withholding tax (EWT) and withholding tax on government money payments, inclusive of interest for taxable year 2015.

The CTA said that based on the records, the Final Assessment Notice (FAN)/Formal Letter of Demand (FLN) attached to the Comelec’s Petition for Review showing the P1-billion withholding tax dues was duly received by the Comelec's Finance Service Department because the FAN and FLD both had the rubber stamp of the said office.

The CTA said that even if the court accepted the Comelec’s reasoning that the person who received the notice was a casual employee, the CTA said the poll body failed to provide evidence that the person had no authority to receive documents for the Comelec.

“Truth to tell, Jai Conde's status as a mere casual employee or an employee on a Job Order basis has nothing to do with Jai Conde's authority to receive the FLD /FAN," the CTA said.

"What is glaring is that Jai Conde was stationed in petitioner's Finance Service Department, yet there is nothing on record which would show that the authority of said Department to receive the FLD/FAN was raised or questioned by petitioner [Comelec],” it added.

The court said that the Comelec did not raise the issue of the propriety of BIR’s service of FLD/FAN in Comelec's Protest Letters dated February 19, 2019, and February 28, 2019, and that the Comelec even apologized for the delay in responding to the FLD/FAN.

“Thus, the petitioner's failure to file its protest letters on time renders the FLD /FAN final, executory, and demandable,” the CTA said.

Comelec spokesman Rex Laudiangco said the poll body would appeal the ruling before the Supreme Court.

"The COMELEC had put forward positive defenses and justifications which we would be elevating to the Honorable Supreme Court. We will be incorporating justifications and defenses in our Petition for Review on Certiorari," Laudiangco told GMA News Online.

In protesting the FLD/FAN, the Comelec cited the following defenses:

a significant part of the P329,196,954.32 alleged under  remittance as of 2015 was already paid;

a significant component of the P329,196,954.32 which  amounts to P211,392,925.47 may no longer be  assessed by the BIR as the authority to assess such has already prescribed;

the basis of withholding tax due on compensation  amounting to P292, 113,895.04 was an erroneous  Alphabetical List of Employees submitted to the BIR;

the EWT amounting P176,866,742.45 was wrongfully  assessed; and

Comelec may not be deemed to have received the assessment.

The CTA, however, said that the Comelec's defenses in its February 2019 protests of the FLD/FAN were not considered by the BIR when it issued the FDDA.

Further, the CTA said the Details of Discrepancies attached to the said FDDA merely reiterated or copied verbatim what was indicated in the Details of Discrepancies attached to the subject FLD.

The CTA said that while jurisprudence dictated that BIR’s FDDA was invalid since the BIR did not consider Comelec’s defenses in coming up with an FDDA, jurisprudence in the Commissioner of Internal Revenue vs. Liquigaz Philippines Corporation also stated that the invalidity of the FDDA did not affect the validity of the FAN/FLN.

“Under the law, inaction on the part of the Commissioner of [Bureau of] Internal Revenue may likewise result in the finality of a taxpayer's tax liability as it is deemed a denial of the protest filed by the latter, which may also be appealed before the CTA.  Clearly, a decision of the Commissioner of Internal Revenue on a disputed assessment differs from the assessment itself. Hence, the invalidity of one does not necessarily result in the invalidity of the other—unless the law or regulations otherwise provide,” the CTA said.

“Hence, the assessment in the FLD stands and its validity is not affected by the invalidity of the FDDA. Wherefore, in light of the foregoing considerations, the present Petition for Review is denied. Accordingly, the FLD, with Details of Discrepancies, and Assessment Notice, both dated December 21, 2018, are hereby affirmed,” it added. —NB, GMA Integrated News