BIR Ruling [DA-478-98]

November 4, 1998 BIR RULING [DA-478-98] Atty. Dominador R. Santiago 22nd Floor, 6750 Ayala Avenue Makati City S i r : This refers to your letter dated August 17, 1998 stating that your client, Ms. Cleofe B. Ortega, is the widow of the late Joaquin Ortega who passed away a few years ago while serving as the Administrator of the National Tobacco Administration; that during his lifetime, the late Administrator Ortega organized the Ortega Realty & Development Corporation and being a lawyer himself, he personally handled the affairs of the said corporation without any active participation on the part of Ms. Ortega; that after his death, Ms. Ortega was informed that the corporation has an assessment for alleged deficiency income tax liability for the taxable year 1990 in the amount of P87,672.00; that when Ms. Ortega learned about the assessment, she tried with great difficulty to negotiate for the settlement of the deficiency income tax, since her records of the said corporation were incomplete; that she was informed about Revenue Memorandum Order No. 45-98 in which she could settle the deficiency income tax liability by paying only 50% of the basic tax; that on June 29, 1998, an Authority to Accept Payment was then issued to her for the amount of P17,640.00; that Ms. Ortega immediately proceeded to the Bank of Commerce in San Fernando, La Union, to pay the tax but the said bank refused to accept her payment because she could not produce the TIN of the corporation; that she also tried to make the payment at the Development Bank of the Philippines in San Fernando, La Union, but the latter bank likewise refused to accept the payment for the same reason given by the Bank of Commerce; that finally, on July 15, 1998, Ms. Ortega paid the amount of P17,640.00 to the Traders Royal Bank in San Fernando; that, however, the Regional Office in San Fernando, La Union refuses to issue the corresponding tax clearance certificate in favor of Ortega Realty & Development Corporation by reason of the delay. Based on the foregoing representations, you now request for a ruling to the effect that the payment of P17,640.00 as deficiency income tax due from Ortega Realty & Development Corporation is deemed substantial compliance with RMO No. 45-98 and therefore not subject to the corresponding penalties and interest. In reply, please be informed that under Sections 248 and 249 both of the Tax Code of 1997, the imposition of penalties and interest on delinquency is mandatory. Strong reasons of policy support a strict observance of the rule regarding the payment of tax. The laws imposing penalties for delinquencies are clearly intended to hasten tax payments or punish evasions or neglect of duty in respect thereof. If delays in tax payments are to be condoned for light reasons, the law imposing penalties for delinquencies would be rendered nugatory and the maintenance of the government and its multifarious activities would be as precarious as taxpayers are willing or unwilling to pay their obligations to the State on time. (Jamora vs. Meer, 74 Phil. 22) Considering that the basic tax due from Ortega Realty & Development Corporation for the taxable year 1990 is P87,620.00, the subsequent payment made by Ms. Ortega in the amount of P17,640.00 as deficiency income tax due from the said corporation is deemed substantial compliance with RMO No. 45-98. Such being the case and view of the aforestated justifiable reasons, this Office has decided to forego the imposition of the 25% surcharge and penalties imposed under Section 248(A)(1) of the Tax Code of 1997 but not the corresponding interest that has accrued thereon up to the time of the payment of 50% of the basic deficiency income tax in the aforesaid amount of P17,640.00. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue