BIR Ruling [UN-055-95]

February 8, 1995 BIR RULING [UN-055-95] MEMORANDUM FOR: The Commissioner This refers to the protested internal revenue tax case of Philippine Appliance Corporation (Philacor) involving the amounts of P3,034,670.00 and P97,068.05 representing deficiency sales taxes, inclusive of surcharge, interest and compromise for the 1st semester of 1987. cd The deficiency sales tax assessment in the aforesaid amount of P3,034,670.00 arose on account of the disallowance of the following items which Philacor-Paraaque claimed as allowable tax credits; viz: 1. Billings made by National Steel Corporation (NSC); 2. Tax credit applicable to sale of non-moving materials; and 3. Tax credit applicable to product warranty. On the other hand, the amount of P97,068.05 pertains to the alleged unpaid sales tax liability of Philacor-North Service Center, Caloocan City, for the months of May, June and July, 1987 computed as follows: Deficiency sales tax P48,321.06 ADD: 25% surcharge 12,080.27 20% int. fr. 07-31-87 to 03-30-90 32,166.72 Compromise penalty 4,500.00 Total Amount Due and Collectible P97,068.05 ========= Upon request of Philacor, a reinvestigation was conducted by Revenue Enforcement Officer Gabriel Villaluz who recommended the cancellation of the deficiency sales tax assessment issued against Philacor-Paraaque. As a consequence, a new assessment was issued against Philacor-Paraaque in the amount of P263,029.46, which amount was paid by the taxpayer on April 1, 1992 as evidenced by the attached xerox copy of Confirmation Receipt No. B 22666797. Regarding the alleged unpaid sales tax liability of Philacor-North Service Center in the amount of P97,068.05, it was found out by the reinvestigating examiner that the basic tax P48,321.06 had already been paid by the taxpayer under Confirmation Receipt No. B 12767189 dated August 21, 1987. Apparently, the fact of said payment was overlooked by the examiner who conducted the original investigation of Philacor's internal revenue tax case. The case was subsequently referred to the Law Division for resolution of the question concerning the allowability of the billings made by National Steel Corporation vis-a-vis the letter-ruling dated July 15, 1988 of former Commissioner Bienvenido A. Tan, Jr. to former Secretary of Trade & Industry Jose Concepcion. However, before we could resolve the issue, Philacor presented a xerox copy of the letter dated January 20, 1992 issued by then Assistant Commissioner Pedro C. Aguillon of the now defunct Special Operations Service terminating the income, business, withholding and documentary stamp tax cases of Philacor for the fiscal years 1986, 1987 and 1988 for having fully paid the total amount of P5,106,975.73. The resolution of the said issue has, therefore, become moot and academic since the deficiency sales tax liability in question of Philacor was among those already terminated. In view of the foregoing, it is respectfully recommended that Assessment Notice Nos. FAS-4-87-90-001106 and FAX-4-87-90-001107 requiring Philippine Appliance Corporation to pay the respective amounts of P3,034,670.00 and P97,068.05 as deficiency sales tax, inclusive of increments for the 1st semester of 1987 be cancelled and withdrawn and this case considered closed. Respectfully submitted: MILAGROS V. REGALADO Chief, Law Division I CONCUR: ALICIA P. CLEMENO Assistant Commissioner (Legal Service) APPROVED: LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue