BIR Ruling

March 12, 1997 Centennial Realty Corporation LPI Mansions, 122 Alfaro Street Salcedo Village, Makati, Metro Manila Attention: Mr . Amadeo A . Tugbo Jr . Auditor Gentlemen : This refers to your request for reconsideration of the Assessment Notice No. FAN-1-87-91-001283, dated April 5, 1991, requiring you to pay the amount of P524,160.00 as deficiency capital gains tax for the year 1987, inclusive of surcharge and interest. LexLib The request is grounded on the assertion that your corporation is not liable to any capital gains tax and that the period within which to assess has already prescribed. In reply, please be informed that the tax sought to be collected by this Office is corporate income tax and not capital gains tax as insinuated in your letter. Thus, Assessment Notice No. FAN-1-87-91-001283 reflected a tax due of P26,080.90 (exclusive of surcharge and interest) which is 35% of the taxable income of P748,800.00, shown as follows: NET CAPITAL GAINS PER INVESTIGATION P1,200,000.00 LESS: Cost of Improvements P439,200.00 Documentary Stamp tax P12,000.00 P451,200.00 NET CAPITAL GAINS AFTER REVIEW P748,800.00 TAX DUE THEREON P262,080.00 DEDUCT TAX PREVIOUSLY PAID CR./ROR NO. DEFICIENCY TAX DUE P262,080.00 ADD: Surcharge 25% 65,520.00 Interest from 4/15/88 to 4/15/91 196,560.00 TOTAL AMOUNT DUE P524,160.00 It is correct to allege that as a corporation, you are not liable to the 5% capital gains tax under Section 21(e) of the Tax Code. The BIR however is not assessing the 5% capital gains tax but the 35% corporate income tax under Section 24(a) of the same Code, due to your failure to declare, for income tax purposes, the income earned on your sale of a condominium unit in the sum of P1,200,000.00 sometime on July 1, 1987. It is for this reason that in a letter dated September 18, 1992, we required you to submit your Income Tax Return for the year 1987. It is sad to state however that you failed and/or refused to comply with our request. In taxation, the burden of proof is on the taxpayer to present evidence to show the incorrectness of the assessment and such failure to do so is fatal in view of the well-accepted principle that the assessment issued by the Commissioner is presumed to be prima facie correct unless controverted (Collector of Internal Revenue vs. Bohol Land Transportation Company, L-13099, April 26, 1960). LLpr Your contention that our assessment was issued after the lapse of the three (3) year prescriptive period is not tenable because the period to assess the deficiency income tax for the year 1987 shall start from April 16, 1988 up to April 15, 1991. It must be noted that Assessment Notice No. FAN-187-91-001283 was issued on April 15, 1991, hence, it is clear that the same was still issued within the 3-year period prescribed by law. In view thereof, your request for reconsideration is hereby denied. Consequently, it is requested that you pay the amount of P524,160.00 as deficiency corporate income tax for the year 1987, plus interest that may have accrued thereon to the Revenue District Office nearest your place of business, within ten (10) days from receipt hereof, in order that this case may be closed and terminated. This constitutes the final decision of this Office on the matter. prll Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue