BIR Ruling [DA-239-98]

June 15, 1998 BIR RULING [DA-239-98] Anti-Graft League of the Philippines Suite 301, Manila Midtown Hotel Pedro Gil St., Ermita, Manila Attention: Mr . C . D . Guzman VP-Chief of Investigation Gentlemen : This refers to your letter dated March 13, 1997 requesting modification/amendment to BIR Ruling No. 048-93 dated January 22, 1993 in order to give retroactive application thereto and consequently assess Laguna Technopark, Inc. (LTI) for unpaid creditable withholding tax. prll Records show that a confidential information was filed by your League, thru a certain Ramon U. Cruz, relative to the non-payment of income and other taxes from 1991 to 1993 of LTI (formerly Ayala Land, Inc.). It appears that in BIR Ruling No. 206-91 dated October 4, 1991 addressed to LTI, this Office held that since LTI is enjoying an income tax holiday granted by the BOI as a preferred non-pioneer industrial estate developer, it need not pay the creditable withholding tax on the sale of its industrial lots within the industrial estate in Bian and Sta. Rosa, Laguna during the four years that said enterprise is enjoying an income tax holiday, effective February 28, 1991. Thereafter, the BIR issued BIR Ruling No. 048-93 revoking BIR Ruling No. 206-91 on the ground that this office believes that LTI is neither a producer nor manufacturer of specific products and commodities under Articles 16 and 18 in relation to Article 28 of the Omnibus Investments Code (Executive Order No. 226); and that the listing of its activity of selling industrial lots in the Investment Priorities Plan is doubtful because it is not related to the production of specific products and commodities, as indicated under Articles 26 and 28 of the same Code. It is understood, however, that the revocation is prospective; hence, it will not affect transactions between October 4, 1991 and the issuance of the ruling on January 22, 1993. After the issuance of BIR Ruling No. 206-91 and BIR Ruling No. 048-93, this Office issued BIR Ruling No. 085-93 dated March 8, 1993 addressed to the Philippine Industrial Estates Association revoking BIR Ruling No. 048-93, effectively restoring the exemption from the creditable withholding tax of the sale of industrial lots within the industrial estate subject to the following conditions imposed by the BOI for the enjoyment of the tax holidays, to wit: a) that industrial estates must register with the BOI for only three (3) more years; b) that such estates must be registered under pioneer status or must be located in less developed areas; and c) that the industrial estates will be set up only in areas that need them with the eventual removal of these estates in the listing (of the IPP) once it is seen that sufficient infrastructure of this nature is already in place. LLpr As it now stands, sale of industrial lots within the industrial estate in Bian and Sta. Rosa, Laguna are exempt from the creditable withholding tax subject to the aforementioned conditions imposed by the BOI for the enjoyment of the tax holidays. In reply thereto, please be informed that any revocation, modification or reversal of any rules and regulations promulgated in accordance with Section 245 of the Tax Code, as amended or any of the rulings or circulars promulgated by the Commissioner shall not be given retroactive application if the revocation, modification, or reversal will be prejudicial to the taxpayers except in the following cases: (a) where the taxpayer deliberately misstates or omits material facts from his return or in any document required of him by the Bureau of Internal Revenue; (b) where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the facts on which the ruling is based; or (c) where the taxpayer acted in bad faith. Such being the case, and since the modification of BIR Ruling No. 206-91 by BIR Ruling No. 048-93 would indeed be prejudicial to LTI with respect to their transactions entered into and perfected before the issuance and effectivity of the aforesaid modificatory ruling, then BIR Ruling No. 048-93 shall not be given retroactive application. (ABS-CBN Broadcasting Corporation vs. Court of Tax Appeals, et. al., 108 SCRA, p. 143; CIR vs. Burroughs Limited and CTA, L-66653, June 19, 1986) In other words, in the absence of any of the above-enumerated exceptions (Sec. 246, Tax Code), BIR Ruling No. 048-93 shall have prospective application, hence, it shall only apply to transactions effected on or after January 22, 1993. Moreover, in securing BIR Ruling No. 206-91 dated October 4, 1991, evidence gathered did not show the existence of fraud, misstatement, omission, bad faith on the part of LTI that may warrant revocation/modification of rulings mentioned in Section 246 of the Tax Code, as amended. In view of the foregoing, this Office is not constrained to give retroactive application to BIR Ruling No. 048-93 dated January 22, 1993 and your request to modify or amend BIR Ruling No. 048-93 is hereby denied for lack of legal basis. Finally, the BIR has motu propio issued a ruling on even date addressed to the Philippine Industrial Estate Association, 11th Floor, Solidbank Bldg., 777 Paseo de Roxas, Makati City, revoking BIR Ruling No. 085-93 dated March 8, 1993 on the ground that the conditions imposed by the BOI for the enjoyment of tax holidays by industrial estates are no longer relevant. Accordingly, sale of industrial lots within the industrial estates shall henceforth be subject to the creditable withholding tax imposed under Revenue Regulations No. 6-85 as amended by Revenue Regulations No. 12-94 otherwise known as the Expanded Withholding Tax Regulations implementing Section 50(b) of the Tax Code, as amended. casia Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue