Filipinas Synthetic Fiber Corp. vs. The Commissioner of Internal Revenue

DECISION

Petitioner anchors its claim on the letters of the BOI dated October 10, 1980 and March 30, 1981 extending the tax exemption privileges granted to it, except the income tax, for a period of five (5) years beginning January 1, 1980. These letters are hereto forth reproduced in full, as follows:

October 10, 1980 Filipinas Synthetic Fiber Corporation BA-Lepanto Building Paseo de Roxas Makati, Metro Manila Attention: Mr. Cesar R. Concio, Jr, tov eeacohecrbaoneetdatenotavees nvytbinngnltnbbnetaetbasMTSGRFAAbAAREDs84s@NSNSUBEDOBOENELOEcherosiaton Gentlemen:

In connection with your request for extension of the period within which to avail yourself of incentives under R.A. 5186, please be advised that in its meeting of September 18, 1980, our Board gave you noreonepoveeswescesenuserabesesnensrcunytetcensecevunonres MMroresomsagtonevecsessssesMerressecoen an extension of five (5) years from January and the third to the fifth years being subject to review as to their compliance with the Guidelines on the Liberalization of Incentives under P.D. 1584:

Ml Full .exemption from. all taxes under the National Internal Revenue Code except income tax (Sec. 8-a);

2. Tax and duty-free importation of capital equipment (Sec. 7-d); and 3}. Tax credit on locally purchased equipment (Sec. 7-e).

te 044 ee ne

We wish to emphasize that the above extension is subject to the folllowing conditions:

a. That you will acquire full ownership of Lakeview Industrial Corporation, under conditions satisfactory to the BOI;

b. That you commit to expand to a world-sized unit, as may be mutually agreed with the BOI; and Ss That you agree to offer equity in your expanded company to the textile millers, under terms and conditions to be mutually agreed with the BOI.

Please be guided accordingly.

Very truly yours, (SGD) ROBERTO V. ONGPIN Chairman 30 March 1981 Filipinas Synthetic Fiber Corp. BA-Lepanto Building Paseo de Roxas, Makati Metro Manila Gentlemen:

Please be advised that the Board has. favorably considered your compliance with the conditions for extension of incentives stated in our letter to you dated October 10, 1980.

years beginning January 1, the third to the fifth years being subject to an annual review as to the need for the continued availment of the extension per the criteria set forth in Art. 7(14) of P.D. 1789.

Please be guided accordingly. Very truly yours, (SGD.) H. ZAYCO Governor Sec. 8(a)(1) of R.A. 5186, as amended, likewise provides for a one hundred per cent (100%) exemption from all taxes under the National Internal Revenue Code, except income tax, for the first five (5) years of the grant.

Petitioner paid advance sales taxes of P7,543,861.00 from January 1 to March 31, 1981 and P3,933,408.00 from April 1to June 30, 1981 or a total of P11,477,269.00.

On May 5, 1981, petitioner filed with the Bureau of Internal Revenue (herein referred to as_ the Bureau) an. application for tax credit amounting to P3,561,954.00, representing that portion of the P7,543,861.00 advance sales taxes paid for the first 046

- 5 - quarter of 1981.

(Exh. "B".)

One month later or on June 5, 1981, petitioner filed, in addition to the previous request for tax credit, a claim for the refund of P3,981,907.00, representing the other portion of P7,543,861.00. (Exh. "D".)

On August 18, 1981, another claim for refund was filed in the amount of P3,933,408.00 as advance sales tax erroneously paid for the second quarter of 1981.

(Exh.

"E".)

Without waiting for respondent's decision petitioner filed a petition for review on January 28, 1982.

Respondent filed his answer arguing that if at all petitioner would be entitled to a tax credit (not a refund as prayed for in the petition) the reckoning period should start on March 30, 1981, the date when the BOI confirmed petitioner's compliance with the c onditions set in its letter of October 10, 1980, and not on January 1, 1980 as requested. During the trial, petitioner manifested that the Bureau had already granted a tax credit on the advance sales taxes paid by petitioner covering the periods 1980, 1981 and 1982.

A Tax Credit Certificate No.

00194 was granted, pursuant to Ministry Order No. 19-79 dated May 18, 1979, in favor of petitioner, totalling P37,570,101.00.

.(See Exh.

"F".)

547 --- - ~

- 6 :....

An amended petition for review was filed on May 12, 1988 to conform with the evidence.

Petitioner maintains that the amount of P3,561,954.00 was not covered by the Tax Credit Certificate.

Only the amounts of P3,981,907.00, represeriting that portion of P7,543,861.00, for the first quarter of 1981 and P3,9 33 ,408.00 for the second quarter of 1981 were included in the tax credit issued by the Bureau. The only remaining issue is whether or not petitioner is entitled to a tax credit of P3 ,5 61,954.00.

Respondent posits, in his amended answer, that the c laim for refund [actually a tax credit as prescribed under Section 3(j) of R.A. 5186 and as prev iously applied by petitioner in its letter dated April 30, 1981 (See Exh.

"B") ]

on the remaining P3,5 61 ,954.00 has already prescribed since the a mended petition was filed only on Hay 12, 1988, beyond the two - year prescriptive period to file a suit for the recovery of an erroneously col lected tax co unted from the date of payment or from the first quarter of 1981.

Respondent waived his right to present any evidence.

Instead, he submits his case based on the . pleadings and the Bureau's records. We find for the petitioner. 548

- 7 - The l e tters of the BOI dated October 10, 1980 a nd Harch 30, 1981, without a ny doubt, should be inte rpre t ed in favor of petitioner.

Clearly, petitioner has been granted an exte nsion of its tax exemption privileges under R.A. 5186 for a period of five (Sl years beginning January 1, 1980.

We emphasi z e 1 as s tated with aff irmation by the BOI, that.

petition e r had favorably complied with the conditions of t he grant.

There can be no other in terp retation when the BOI, in its letter dated March 30, 1 981 , particularl y menti oned that "you ( referring to petitioner ) may therefore avail yourself of th e incentives administered by the Board and covered by your request, for five (5) years beginning January 1, 1980 x x x."

The tenor of s aid letter is plain and simple.

Therefore, it should be interpreted in its ordinary and commonly accepted meaning.

Thus, the tax e J emption privileges df petitioner, not including the income tax , should start from _g __ '3.: .. I.:l .. ':l .. '3.:.E . .¥........ 1 .......... ~ .. ~ .. ? . .<?.. and no t March 3 0 , 1 9 8 1 as vi e wed by respondent. With regard to the contention that the amount of P3,561,954.00 h as already prescribed since the amended petition was filed only on May 12, 1982, this Court is of the opinion that petitioner's cause of action did not change by reason of the amendment but 549

- 8 - rather the amended petition was filed in order to conform to the evidence.

A supervening event, that is the issuance of the Bureau of a Tax Credit 'Certificate granting a partial tax credit to petitioner , has transpired making it necessary to \ amend the original petition. Thus, the Supreme Court held in the case of Pangasinan Transportation Co. v. Phil.

Farming Co., Ltd., 81 Phil. 273, "(w)here the original declaration states a cause of action, but does it imperfectly, and afterward an amended decl aration is filed, correcting the defect, the plea of the statute of limitations will relate to the time of filing the original declaration."

(37 C.J., p.

1072.)

\'Te, therefore, uphold the timeliness of the petition counted from the date the original petition for review was filed or on January 28 , 1982. A thorough examination of the evidence presented by petitioner shows that indeed it is entitled to the remaining portion of the first quarter advance sales tax payments which was not covered by the tax credit already issued.

Th e following official receipts will support petitioner's additional claim for tax credit amounting to P3,561,954.00. 55-0

FILIPINAS SYNTHETIC FIBER CCRPORATION

SCHEDULE OF ADVANCE SALES TAXES PAID

AND TAX CREDIT STILL DUE

For the First Quarter of 1981 January 1 to March 31, 1981 Tax Credit Particular - Advance Cert. 00194 Amount Raw Material Sales Tax 100% §till Exhs, Imported QR. No, Date Paid = Bremption Returnable Dinethy] Terephthalate C-2 357045 01/05/81 P 446,917 P 224,415 P 222,502 C-3 977507 02/12/81 257,011 141,995 115,016 C-4 977229 02/02/81 257,011 141,995 115,016 C-§ 1037913 02/13/81 266,105) 430386 §©03/20/81 14,232} 147,020 132,317 C-6 1043758 02/20/81 642,838 855,059 287,679 C-7 405953 02/25/81 213,321 117,857 95,464 C-8 1046112 03/06/81 53,408 29,507 23,901 C-9 1043880 = 02/27/81 642,836 355,158 287,678 C-10 Entry Wo. 60763 430226 «03/19/81 4,394 - 3,995 60764 2,362 - 2,148 58104 4,449 - 4,045 62928 2,369 - 2,154 62880 2,186 - 1,988 1094653 03/25/81 375,577) C-12 438812 03/30/81 14,525} 207,501 182,601 C-13 1076252 03/26/81 357,715] C-14 438595 03/26/81 13,834) 197,632 173,917 C-15 1076578 04/08/81 356,565) 439877 = 04/09/81 13,790} 196,997 173,358 C-16 439113 04/01/81 = 347,862 192,182 155680 Monoethylene Glycol 296511 02/06/81 P 22,825) C-17 296419 01/23/81 408,058) P 226,780 P 204,103 C-18 296669 03/18/81 281,627 148,225 133,402 C-19 296670 3/18/81 293,637 194,546 139,091 C-20 296605 02/27/81 458,392 241,259 217,133 C-21 296753 04/03/81 223,148 117,446 105,702 C-22 296672 03/18/81 240,613 - 120 ,§29 C-23 296285 12/18/80 17,053) - C-24 133415 10/01/80 10,067) ool

= 10 “< Catalysts & Lubricating Oil C-25 370322 01/20/81 P103,920 P 46,079 Po 37,325 C-26 392846 02/10/81 29,347 16,214 13,133 C-27 393236 © 02/12/81 22,804 12,599 10,205 C-28 407003 03/05/81 38,290 54,304 43,986 C-29 439114 9 04/01/81 82,997) 440212 04/13/81 4,127) 45,855 41,269 Pure Terephthalic C-30 Acid 1070215 03/20/81 369,899 204,364 165,535 C-31 429590 03/13/81 365,078 201,700 163,378 c-32 429155 04/08/81 371,264 205,118) 166 146 TOTAL TAY CREDIT STILL DUE 3,561,954

WHEREFORE, in view of the foregoing, the amended petition is hereby GRANTED. Respondent Commissioner of Internal Revenue is ORDERED to issue the corresponding Tax Credit Certificate in favor of petitioner, Filipinas Synthetic Fiber Corporation, in the amount of P3,561,954.00, representing erroneously paid advance sales taxes for the first quarter of 1981.

Without pronouncement as to costs.

I CONCUR:

s~AfiiVAS-F ARrui4:s Acting Associate Judge CERTIFICATION I hereby certify that this decision was reached after due consultation between the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution. 553 '"-~~~ ERNESTO D. ACOSTA Presiding Judge , Court of Tax Appeals