Imposition of Penalties and Interest on Delinquency Mandatory

September 29, 1997 BIR RULING NO. 104-97 248 (a) (3) & (b) 249 000-00 104-97 De Guzman & Celis Law Office Suite C, 15th Floor, Strata 200 Building, Emerald Avenue Ortigas Center, Pasig City Attention: Atty . F . G . de Guzman Gentlemen : This refers to your letter dated July 7, 1997 requesting in effect, for reconsideration of BIR Ruling No. DA230-97 dated June 30, 1997 issued to RED RIBBON BAKE SHOP , where this Office held: LLphil "In reply, please be informed that your request cannot be granted for lack of legal basis. Under Sections 248(b) and 249, both of the Tax Code, as amended, 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)" Documentary evidence submitted to this Office disclosed that your client, RED RIBBON BAKE SHOP, granted a franchise to Red Ribbon, Inc., International Pastry Sales, Inc., Sunshine Pastry Sales, Inc. and RHM Sales, Inc.; that to show good faith in its failure to remit the value-added tax imposed on royalties it received for the use of its trade name, Red Ribbon Bake Shop voluntarily amended its monthly VAT Declaration for the period January to September 1996 and paid its deficiency VAT corresponding to the said royalties; and that the franchisees were able to claim the input tax in November 1996. After a careful restudy of the aforesaid ruling and since your client, Red Ribbon Bake Shop, has paid the amount of P1,849,715.32 representing deficiency value-added tax from January to September 1996, this Office has decided to forego the imposition of the 25% surcharge and penalties imposed under Section 248(a)(3) and (b) of the Tax Code, as amended. However, it shall be subject to the corresponding interest imposed under Section 249 of the same Code, which accrued thereon up to the time of payment of the value-added tax. It is of course understood that the acceptance by this Office of your client's payment of the aforesaid amount does not preclude us from conducting an investigation/verification of your client's VAT liability for the period January to September 1996 and for issuing an assessment notice against it if is found out that there be a deficiency in the payment made. aisadc Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue