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THIRD DIVISION
KERRY FOOD INGREDIENTS
CEBU, INC.,
Petitioner,
- versus -
Promulgated:
COMMISSIONER OF INTERNAL
REVENUE,
Respondent.
)(-
FEB 0 9 2016
- - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - -
)(
DECISION
Fabon-Victorino, J.:
In this Petition for Review 1 filed on December 26, 2012,
petitioner Kerry Food Ingredients Cebu, Inc. prays for the
cancellation and withdrawal of assessment issued by
respondent Commissioner of Internal Revenue (CIR) for
deficiency Income Tax (IT), Value-Added Tax (VAT),
Expanded Withholding Tax (EWT), Withholding Tax on
Compensation (WTC), Final Withholding Tax (FWT), and
Documentary Stamp Tax (DST) for taxable year 2007, in the
total amount of P10,496, 763.36.
Petitioner is a domestic corporation, with principal
office located at P. Suico Street, Tabak, Mandaue City,
Cebu. 2
Respondent, on the other hand, is the Commissioner of
the Bureau of Internal Revenue (BIR), with the authority to
DECISION
CTA case No. 8593
Page 2 of 27
DECISION
CTA case No. 8593
Page 3 of 27
I. Income
Taxable Income- per return
Add: Disallowance
(1) Interest expense- interest arbitrage limitation
(2) Unexplained source of cash- Sal. and wages over per alpha list
(3) Rental expense- overclaimed
Taxable Income- per investigation
Income Tax
Normal Rate
434.19
6,151,861.21
776,094.49
6,928,389.89
2,424,936.46
2,424,936.46
2,424,936.46
1,898,725.25
25,000.00
4,348,661.71
25,000.00
Income Payment
W/holding Tax
55,079.40
733,920.00
236,267,373.09
237,056,372.49
2 753.97
73,392.00
2,362,673.73
2,438,819.70
2,048,608.55
10,000.00
4,497,428.25
0.84
7,483,687.97
928,783.52
927,881.46
902.06
757.73
1,659.79
0.84
4,411,327.00
10/o
441,132.70
370,551.47
811,684.17
DECISION
CTA Case No. 8593
Page 4 of 27
6,088,630.00
Sec. 179
30,444.00
3,225,087.00
Sec. 194
3,227.00
33,671.00
8,417.75
27,610.22
3,000.00
72,698.97
0.82
9,757,132.89
15
16
17
18
DECISION
CTA Case No. 8593
Page 5 of 27
DECISION
CTA Case No. 8593
Page 6 of 27
24
DECISION
CTA case No. 8593
Page 7 of 27
THE ISSUES
25
26
27
28
DECISION
CfA Case No. 8593
Page 8 of 27
the
following
issues 29
1.
2.
3.
4.
5.
for
the
29
DECISION
CfA Case No. 8593
Page 9 of 27
Income Tax
Value-added Tax
Expanded Withholding Tax
Withholding Tax- Compensation
v. Final Withholding Tax
VI.
Documentary Stamp Tax
TOTAL
30
31
32
Increment
Total
p 2 424 936.46
0.00
2 438 819.70
902.06
441,132.70
33,671.00
p 2 269,228.87
25,000.00
2,388,684.42
879.82
429 046.87
44 461.45
P5,339,461.92
P5,157,301.43
P10,496,763.36 32
4,694 165.33
25,000.00
4,827 504.12
1 781.88
870 179.57
78 132.45
Sec. 7.
Jurisdiction. -The CTA shall exercise:
(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges, penalties in
relation thereto, or other matters arising under the National Internal Revenue or
other laws administered by the Bureau of Internal Revenue; xxx
Exhibit "A", docket, p. 708
Should be P10,496,763.35
DECISION
CTA Case No. 8593
Page 10 of 27
p
p
434.19
6,151,861.21
776,094.49
6,928,389.89
p 6,928,389.89
p 2,424,936.46
p 2,424,936.46
P2,244,228.87
25,000.00
2,269,228.87
P4,694, 165.33
ACCOUNT
1. Interest Expense
2. Salaries and Wages Expense
3. Rental Expense
TOTAL
AMOUNT
p
434.19
6/151,861.21
776,094.49
P6,928,389.89
p
p
34,685.00
18,643.19
DECISION
CTA Case No. 8593
Page 11 of 27
(P34,685/.80 X 43%)
Total Interest Expense/Finance Cost
Less: Interest Arbitrage as Computed Above
P4,168,543.00
(18,643.19)
P4,149 899.81
4,150,334.00
p
(434.19)
Difference
34,685.00
18,209.63
P4 168,543.00
(18,209.63)
P4,150,333.38
4,150,334.00
p
(0.63)
and
Wages
Expense
DECISION
CTA Case No. 8593
Page 12 of 27
P4,909,160.00
139,412.00
344,001.00
759,288.00
P6,151,861.00
34.
Deductions
Income. - xxx
(A) Expenses. 36
from
Gross
DECISION
CTA Case No. 8593
Page 13 of 27
XXX
XXX
38
DECISION
CTA Case No. 8593
Page 14 of 27
rental
rental
Pesos
under
/
39
40
41
DECISION
CTA Case No. 8593
Page 15 of 27
Section 7 of
43
44
45
"Regulating the Use of Functional Currency Other than the Philippine Peso in the Financial
Statements that will be Submitted and in the Books of Accounts that will be Maintained for
Internal Revenue Tax Purposes", March 16, 2006
Exhibit "C", docket pp. 725 to 752
Par. A22, Exhibit "I", docket, p. 823
Pars. 36 to 37, petitioner's Memorandum, docket, pp. 907 to 908
DECISION
erA case No. 8593
Page 16 of 27
P 6,151,861.21
Basic Deficien
P2,153,151.42
II.
III. EXPANDED
WITHHOLDING
P4,827 ,504.12
TAX
(EWT)
/
46
47
Commissioner of Internal Revenue vs. Lianga Bay Logging Co., Inc., et a/., G.R. No. L35266, January 21, 1991
Exhibit "M-2", docket, pp. 833 to 835
DECISION
CTA case No. 8593
Page 17 of 27
Withholding
Tax
Income Payment
Income Payments not Subjected to Ewr
5%
10%
1%
Add:
Rentals
Professionals
Purchases from ToQ_ lOT (Goods)
TOTAL
Interest 01/16/2008 to 11/30/2012
Compromise Penalty
(No MAP Jan Feb, Mar, July, Dec 2007)
55,079.40
733,920.00
236,267,373.09
2_L753.97
73 392.00
2,362,673.73
P237,056 372.49
2,378,684.42
p 2 438 819.70
10 000.00
p 2,388,684.42
P4,827,504.12
Per F/5
Per Return
Difference
Withholding Tax Rate
Deficiency EWT
48
49
Rentals
P8, 127,136.00
8,072 056.40
55,079.60
5%
p
2,753.97
Professionals
P779,520.00
45,600.00
733,920.00
10/o
P73,392.00
Total
P8,906,656.00
8,117,656.40
788,999.60
p
76,145.97
DECISION
CTA Case No. 8593
Page 18 of 27
Total
by
P2,362,673.73
B. Purchases
Top
76,145.97
81,194.55
10,000.00
P167,340.52
10,000
Corporations
50
DECISION
CTA Case No. 8593
Page 19 of 27
XXX
XXX
XXX
XXX
DECISION
CfA Case No. 8593
Page 20 of 27
In relation thereto,
provides, thus:
Section 3 of RR No.
3-2004
,r
DECISION
CTA case No. 8593
Page 21 of 27
Commissioner of Internal Revenue vs. Michel J. Lhuillier Pawnshop, Inc., G.R. No. 150947,
July 15, 2003
DECISION
CTA case No. 8593
Page 22 of 27
IV. WITHHOLDING
P1,781.98
TAX
ON
COMPENSATION
P7,483,687.97
p 928,783.52
927,881.46
902.06
879.82
p
1,781.88
P4,411,327.00
10%
p 441,132.70
429,046.87
p 870,179.57
DECISION
CTA Case No. 8593
Page 23 of 27
DECISION
CTA Case No. 8593
Page 24 of 27
Tax Base
P6,088,630.00
DSTDue
P30,444.00
PNOC Shipping and Transport Corporation v. Honorable Court of Appeals and Maria Efigenia
Fishing Corporation, G.R. No. 107518, October 8, 1998.
58
Exhibit "A", docket, p. 708
DECISION
CTA Case No. 8593
Page 25 of 27
Operating Lease
3,225,087.00
3,227.00
P33 671.00
8,417.75
33,043.70
3,000.00
P44,461.45
P78,132.45
Total
BASIC
Income Tax
Final Withholding Tax
Total
P2,594,284.12
59
SURCHARGE
2,153,151.42 p
441,132.70
TOTAL
538,287.86 p
110,283.18
p 648,571.04
2,691,439.28
551,415.88
P3,242,855.16
DECISION
CTA Case No. 8593
Page 26 of 27
---
P2,153,151.42
p 441,132.70
DEFICIENCY INTEREST
COMPUTED FROM
April 15, 2008
January 14, 2008
We concur:
R~TISTA
LOVELL
Associate Justice
(/M.~J~
MA. BELEN M. RINGPIS-LIBAN
Associate Justice
DECISION
CTA Case No. 8593
Page 27 of 27
ATTESTATION
I attest that the conclusions in the above Decision were
reached in consultation before the case was assigned to the
writer of the opinion of the Court's Division.
LOV~UTISTA
Chairperson
CERTIFICATION
Pursuant to Article VIII, Section 13 of the Constitution,
and the Division Chairperson's Attestation, it is hereby
certified that the conclusions in the above Decision were
reached in consultation before the case was assigned to the
writer of the opinion of the Court.
Presiding Justice