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Tutuban Properties, Inc. vs.

CTA Mendoza Grounds for Appeal I

Charisse Mae V. 3A, Tax

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 on March 6, 2008. As attached to the motion filed by Tutuban Properties for Partial Withdrawal of their petition before the Court of Tax Appeals, the petitioner filed with the 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 petitioners June 2005 SALN, its net worth amounts to P437,042,785.00 and the alleged increase in its net worth is P708,922.00. Petitioner only paid the amount P500,000.00, as evidenced by Development Bank of the Philippines BIR Tax Payment Deposit Slip amounting to P500,000.00 based on the Tax Amnesty Payment Form (BIR Form 0617). According to the Partial Amended Decision (page 7), the petitioner paid the tax amnesty using the amnesty rate under paragraph (d), Section 5 of RA 9480. The said provision provides the following: Sec. 5. Grant of Tax Amnesty. Except for the persons or cases covered in Section 8 hereof, any person, whether natural or juridical, may avail himself of the benefits of tax amnesty under this Act, and pay the amnesty tax due thereon, based on his net worth as of December 31, 2005 as declared in the SALN as of said period, in accordance with the following schedule of amnesty tax rates and minimum amnesty tax payments required: Xxx (d) Taxpayers who filed their balance sheet/SALN, together with their income tax returns for 2005, and who desire to avail of the tax amnesty under this Act shall amend such previously filed statements by including still undeclared assets and/or liabilities and pay an amnesty tax equal to five percent (5%) based on the resulting increase in net worth: Provided, That such taxpayers shall likewise be categorized in accordance with, and subjected to the minimum

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Promulgated April 21, 2008 Pages 6-7, Partial Amended Decision

amounts of amnesty tax prescribed under the provisions of this Section. (italics provided) According to the CTA3, petitioner only paid the amount of P500,000.00, which is the higher amount vis--vis P35,446.10 (5% of the increase in net worth amounting to P708,922.00). However, the petitioner failed to attach with its motion for partial reconsideration the 2005 income tax return which was allegedly required under Sec. 5 (d) of the Tax Amnesty Law used to determine the increase in the petitioners net worth. Therefore, CTA ruled that petitioner should have paid P21,852,139.25 (5% of its net worth amounting to P437,042,785.00) instead of the P500,000.00 paid by the petitioner, in accordance with paragraph (b), Section 5 of RA 94804. Therefore, the petitioner did not comply with 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 companys net worth Discussion I .The court erred in ruling that the income tax return is required to avail of the tax amnesty under RA 9480 Under Section 2 of RA 9480 (further discussed in Section 6 of the Implementing Rules and Regulations of RA 9480), only the following requirements are required to be filed with the BIR for a person to be able to avail of the tax amnesty authorized and granted under RA 9480: a. Notice of Availment in such forms as may be prescribed by the BIR
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Page 8, Partial Amended Decision

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

b. Statement of Assets, Liabilities and Net worth (SALN) as of December 31, 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 ITR 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 companys net worth According to the CTA, the ITR is necessary to determine the increase in the petitioners net worth. It is important to determine the networth of the tax 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 as declared in the SALN as of the said period. RA 9480 expressly provides that the SALN shall contain the net worth of the taxpayer, which shall be the difference between the total assets and total liabilities5. Further, Section 5 (d) which was the alleged basis of petitioner for his tax amnesty application provides that the taxpayer shall amend the previously filed SALN including still undeclared assets and/or liabilities and pay an amnesty tax equal to five percent (5%) based on the resulting increase in networth. The ITR, on the other hand, is a sworn instrument in which the taxpayer discloses the nature and extent of his tax liability by formally making 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 payers net worth. Further, it was alleged that the petitioners increase in net worth was P708,922.00. Therefore, the court erred in requiring that the ITR be submitted to determine the petitioners net worth, as the increase in net worth was already 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 the basis for the amnesty tax to be paid, could be determined solely on the SALN submitted by the petitioner company, Tutuban Properties, Inc. could opt to appeal the said judgment of the Court of Tax Appeals.

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Section 3 (c), RA 9480 B. Teodoro (1998), The Law on Income Taxation, p.446

Disclaimer/ Dissenting Opinion Even if the class was asked to submit arguments that may be raised by Tutuban Properties, Inc. for appeal, I respectfully believe that the CTA decision is correct but its decision was not explained that well. Based on the facts from the partial amended decision, Tutuban Properties, Inc. did not submit their ITR, nor does it appear in their motion that they submitted an amended SALN. To my opinion, corporations may claim tax amnesty under Section 5 either under paragraph (b) or (d). Under Section 5(b), the corporation may avail of the tax amnesty and pay the amnesty tax due which is 5% of the corporations networth or the minimum amnesty tax payments enumerated, as determined in the SALN as of December 31, 2005. Under Section 5(d), the corporation who filed their balance sheets/SALN together with their income tax returns for 2005, and which desire to avail of the tax amnesty should amend such previously filed statements by including still undeclared assets and/or liabilities and 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 the minimum 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, their net worth amounts to P437,042,785.00. If under Section 5(b), the petitioner should pay either 5% of P437,042,785.00, or P500,000.00, whichever is higher. 5% of P437,042,785.00 is equivalent to P21,852,139.25, so under Section 5(b), the petitioner should have paid this amount instead of P500,000.00. As I understand it, Section 5(d) would require that the SALN would be amended, and the amnesty tax of 5% would be based on the increase in networth of the taxpayer. In the Partial Amended Decision, there was an alleged increase in the petitioners net worth amounting 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 no sufficient proof was presented that it was entitled to the computation, then no tax amnesty should be granted to the petitioner.