High Court sides with LRTA in case vs BIR

THE Supreme Court (SC) has granted the appeal of Light Rail Transit Authority (LRTA) to set aside its deficiency tax liabilities totaling P9.28 million for the taxable year 2003.

The High Court reversed a ruling of the Court of Tax Appeals (CTA) which dismissed LRTA’s appeal for lack of jurisdiction over the commissioner of internal revenue’s (CIR) assessment, which was final and unappealable.

In a decision on June 20 and made public on July 22, the court’s second division said the CTA had jurisdiction over the disputed assessment.

“Apart from decisions on disputed assessments, inactions of the respondent (CIR) may likewise be appealed,” SC Associate Justice Marvic M.V.F Leonen said in the ruling.

“Here, there was inaction on the part of the respondent on the petitioner’s (LRTA) appeal of the final decision on a disputed assessment.”

The tax case was also remanded to the CTA to decide on the disputed assessment.

LRTA is the operator of the Manila Light Rail Transit System in the Philippines. It is also a state-owned corporation under the Department of Transportation.

The court added the train operator’s decision to await the CIR’s decision on its appeal on the assessment was “made in good faith.”

The CTA previously said LRTA’s argument that the tax court had jurisdiction to resolve its appeal was “only to circumvent the unappealable character of the assessment.”

Under the Bureau of Internal Revenue’s (BIR) regulations, if a protest is elevated to the CIR, “the latter’s decision shall not be considered final, executory and demandable, in which case, the commissioner shall decide the protest.”

The tribunal noted that the final decision on the disputed assessment was timely elevated to the CIR, which did not make the assessment final, executory, and demandable.

More importantly, all of these were missed on the premise that ‘delinquent taxes exist,’ an incorrect premise, said the High Court.

Since the assessment was still on appeal with the CIR, the preliminary collection letter, final notice before seizure, and the warrant of distraint/levy were all void and should be of no force and effect, it added. — John Victor D. Ordoñez