No P70.67M tax for MCWD

CEBU, Philippines - The Court of Appeals (CA) has affirmed an earlier ruling exempting the Metropolitan Cebu Water District (MCWD) from paying income taxes.

In a two-page resolution signed by Associate Justice Eduardo Peralta Jr., the Appelate Court denied the motion for reconsideration filed by the Commissioner of Internal Revenue (CIR).

It said that entertaining the CIR’s petition would just mean going over what has already been extensively discussed.

“While we are mindful of counsel for petitioner’s disquisition on the motion for reconsideration, to engage on an extensive discourse anew on each item aired on petitioner’s current supplication will simply be a reiteration of our extensive disposition on the challenged decision of Jan. 23, 2013,” the resolution reads.

“Accordingly, we resolve to deny the subject Motion for Reconsideration,” it added.

Last Jan. 23, Peralta denied the petition for certiorari the CIR filed against MCWD and the Secretary of Justice, whose decision favored MCWD.

In rejecting the petition for certiorari, which sought to have the Secretary of Justice’s decision nullified, Peralta cited as basis Republic Act 10026 (An Act Granting Income Tax Exemption to Local Water Districts).

 â€œMCWD is exempt from paying income taxes, as explicitly declared in RA 10026, and the law further condoned unpaid taxes of the local water districts for the period starting Aug. 13, 1996, provided that the conditions were complied with,” the CA said.

“Consequently, it was futile for us to discuss the interpretation of Section 32(B)(7)(b) in relation to MCWD’s claim for income tax exemption,” it added.

In 2010, the CIR filed a petition before the CA questioning the Secretary of Justice’s pronouncement that MCWD is exempted from payment of taxes from gross income, pursuant to Section 32 (B)(7)(b) of the National Internal Revenue Code of 1997 as amended by RA 10026.

The CIR said the Secretary of Justice unlawfully claimed he has jurisdiction in disputing the validity of a Bureau of Internal Revenue (BIR) tax assessment against MCWD and in exempting it from paying taxes.

However, Peralta said it was clear that MCWD’s petition before the Secretary of Justice did not question the validity of the assessment for internal revenue tax deficiencies; instead, it inquired about the application of Section 32 (B)(7)(b) of the National Internal Revenue Code of 1997 on its case.

Under Sections 66, 67 and 68 of Executive Order 292, the Secretary of Justice actually has jurisdiction over cases involving controversies among government offices and corporations.

On March 30, 2004, MCWD received a copy of a BIR preliminary assessment that the firm has tax deficiencies for year 2000 totaling P70,660,389.  The amount allegedly represented deficiency income, franchise and value added taxes with surcharge, interest, and compromise penalties.

MCWD said it received a demand letter and assessment from the BIR on April 14, 2005, prompting it to file a formal protest before the BIR.

However, according to MCWD, the CIR failed to act on their protest within 180 days. Hence, it filed a petition for review before the Court of Tax Appeals.

The BIR then filed an opposition to the petition, arguing that the issue should be adjudicated by the Secretary of Justice, considering that MCWD was a government-owned or controlled corporation, according to Sections 66, 67, chapter 14, Book IV of Executive Order 292.— (FREEMAN)