BIR Ruling No. 014-10

June 10, 2010 BIR RULING NO. 014-10 Pag-ibig Fund Mandaue Branch Office A.S. Fortunar St., Mandaue City Attention: Atty. Lovella L. Albina Branch Attorney Gentlemen : This has reference to your letter dated December 3, 2009 seeking to reconsider the ruling dated October 3, 2009 issued by the Regional Director of Revenue Region No. VII, Cebu City which denied the request of Home Development Mutual Fund (Pag-ibig Fund) for condonation or abatement of the penalties, surcharge and interest imposed on the payment of the Expanded Withholding Tax (EWT) on the sale of acquired asset by Pag-ibig Fund to Mrs. Jonna A. Batucan. The facts, as represented, are as follows: Mrs. Jonna A. Batucan purchased an acquired property of Pag-ibig Fund located at Lot 8658-B, Sal-ing, Balilihan, Bohol, through the "Maagang Pabahay, Disenteng Buhay" program pursuant to Memorandum Circular 112 of the President of the Philippines dated September 7, 2006. A Deed of Sale was executed between Pag-ibig Fund and the buyer which was notarized on November 6, 2007. On December 5, 2007, they brought a manager's check issued by the Land Bank of the Philippines from Cebu to Tagbilaran because cash are not allowed to be hand-carried for payment of Creditable Withholding and Documentary stamp taxes. The said payment was coursed through Pag-ibig Tagbilaran Extension Office on December 6, 2007, however, the said manager's check was denied by LBP the following day because any form of check payment with regional clearing are not accepted. The issue was later on resolved through Automatic Debit Account, using funds for the extension office to pay-off said taxes due. It is argued that prior to the above transaction, two (2) other similar transactions through LBP manager's check was received by LBP Tagbilaran. Hence, it may be assumed that the same mode of payment will apply to the account of Mrs. Batucan. But due to the changes in LBP's payment practices, the check payment was not accepted which resulted to a delay in the payment of taxes and imposition of surcharges and interests. aDcTHE In support of your case, Revenue Regulations No. 13-2001 was cited, to wit: "Section 2. Instances When the Penalties and/or Interest Imposed on the Taxpayer may be Abated or Cancelled on the Ground that the Imposition Thereof is Unjust or Excessive. xxx xxx xxx 2.5 When taxpayer fails to file the return and pay the correct tax on time due to circumstances beyond his control, provided, however, that abatement shall cover only the surcharge and the compromise penalty and not the interest; 2.6 Late payment of the tax under meritorious circumstances such as those provided hereunder: xxx xxx xxx 2.7 Other cases similar or synonymous thereto". Considering the facts provided, this office rules that the present case does not fall within the circumstances where penalties and/or interest imposed on the taxpayer may be abated or cancelled. It should be noted that the taxes were due on December 10, 2007 but were paid only on March 26, 2008. The delay for more than three months negates the justification that the reason for the delay was LBP's refusal to accept the check payment. Pag-ibig Fund was aware of LBP's refusal to accept the check payment even before the December 10, 2007 deadline. Hence, it could have paid the taxes on time and not incur any penalty. Pag-ibig Fund did not have to wait for more than three months to pay its tax obligations. cDIHES Very truly yours, (SGD.) JOEL L. TAN-TORRES Commissioner of Internal Revenue