May 13, 2019 | 12:03 am
THE Court of Tax Appeals (CTA),
sitting en banc, affirmed the cancellation of the P292-million tax deficiency
assessment against energy firm Conal Holdings Corp. (CHC) arising from its 2013
purchase of two diesel power plants from the Iligan City government.
In a 13-page decision, the court
denied for lack of merit the appeal of the Bureau of Internal Revenue (BIR) and
upheld the July 2017 decision and October 2017 resolution of its second division,
saying CHC’s acquisition of diesel power plants from Iligan City is not subject
to withholding tax as stated in Revenue Regulation (RR) No. 2-98.
“(P)ursuant to Section 2.57.5(A) of
RR No 2-98, implementing Section 57 (B) of the NIRC of 1997, as amended, income
payments made to the City Government of Iligan (are) exempt from the payment of
creditable withholding tax,” the court said.
“Consequently, petitioner is not
liable to the deficiency EWT (expanded withholding tax) assessed by respondent
on its income payments made to the City Government of Iligan,” it added.
The Court noted that under Section
2.57.5(A) of RR No. 2-98, withholding of creditable withholding tax shall not
apply to income payments to national government including provincial, city or municipal
governments and barangays.
The CTA also ruled that the Iligan
government is “exercising its governmental functions when it sold the power
plants.”
It said the local government
foreclosed on the Northern Mindanao Power Corp. (NMPC) power plants for failure
to pay real property tax. It then sold the power plants to CHC to recover the
taxes from NMPC and “increase power supply in Mindanao.”
“The findings of fact by the CTA in
Division are not to be disturbed without any showing of grave abuse of discretion
considering that the members of the Division are in the best position to
analyze the documents presented by the parties,” it added.
The decision was written by
Associate Justice Ma. Belen M. Ringpis-Liban and concurred in by Presiding
Judge Roman G. Del Rosario and Associate Justices Juanito C. Castañeda, Jr.,
Erlinda P. Uy, Esperanza R. Fabon-Victorino, Cielito N. Mindaro-Grulla, and
Catherine T. Manahan. — Vann Marlo M. Villegas
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