Court of Tax Appeals
0~Epublic of T He PH I Lippine. Court of Tax Appeals Glue Zo N City Edward T. Marcelo vs. Commissioner of Internal Revenue
~epublic of t he Ph i lippine .
COURT OF TAX APPEALS
Glue zo n City
EDWARD T. MARCELO,
Petitioner.,
versus -
C.T.A. CASE NO. 4340
COMMISSIONER OF INTERNAL
REVENUE,
Respondent.
X ----------------------
X
This
petition
for
review
prays
for
the
rendition of judgment "declaring that petitioner is
not liable for any deficiency income taxes for
the
years
1982 to 1985 and ordering the respondent
to
withdraw hi s assessments against petitioner."
Petitioner.,
Edward
T. Marcelo, is
a
former
Director
of
the Philippine Amusement
and
Gaming
Corporation
<PAGCDR>.,
a
government - owned-and-
controllP.d
corporation .
He
i s
also
former
President
a nd
Director of the
Philippine
Casino
Operators
Corporation
<PCDC>
arid
the
Provident
International
Resources Corporation <PIRC>.
PCOC
is
the
grantee
of
a
concession
to
manage,
administer and supervise the operations of
PAGCOR,
while
PIRC is the owner of several
buildings
and
equipment
leased by PAGCOR an d used by it
in
the:,
conduct of its operations.
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D E C I S I 0 N -
C.T.A. Ca s e No. 4340
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2 -
On
July
1.,
1986., a confidential
report
was
r e c eived
by the Bureau of Internal
Revenue
<BIR>
from an unidentified inform a nt, to the effect
that
petitioner
and the corporations which
he
headed.,
i. e • .,
PCOC
and
PIRC, had
not
been
paying ' the
correct
am o unt of income t a xes.
Upon
receipt
of
said report, the BIR conducted an investigation
of
the fin a nc ia l reco r d s of P COC, PIRC and petitioner.
The
re s ult s of said in v e s tiga tion we r e
summarized
in
a
re po r t
d a ted March
10,
1 9 8 7
p re p are d
by
S upervi s ing
Revenue
Enforcement
Officer
Aur eleano
G. Si s on Jr.
The pertinent portions
said report a re quoted below as follow s :
Mr. Marc elo' s copies of the income
tax
returns he a ll egedly
fi l ed
s ho wed
co mpensation
inco me received
fro m the
PnGCOR
a n d
from
the
PCOC.
I t
a l so
s how e d interest income received .
He i s the majority stoc kh older
of
PIF~C .
<Encl. XIII>
He owns
dit~ectly
ot~
indirectly more than fift y
( 50 ~) perce n t
of its s hares of stock .
Th e
PIRC
made clean
loan s
fro m
certain loca l banks amount i ng t o
t hirty
million and ni n ety mi l lion pesos i n 1983
and
in
1984 ,
respective l y.
<See
financia l stat e ments of P IRC>
of
.I
-~- DECISION =
c.T.A.
Case No. 4340
Mr. Marcelo owns two pieces of
real preperties. A house and lot at 22
Coolidge St., Greenhills Subdivision,
San Juan, and another house and lot at
10 Madrigal Circle, Corinthian Garden,
Quezon City. (Enel. XILIT)
There were eight vans and cars) at
the latter place of residence, including
one Mercedes Benz 450 SL. Ownership
could not be verified at the LTC since
registration index are (sic) based on
plate numbers.
KKK xxx uM
The interest income reported by
Mr. Marcelo between the years 1983 and
1985 amounted from more than 2 million
to more than three million. With
interest rate ranging from a thigh of
nine percent (9%) on savings account to
eighteen percent (18%) on time deposits,
the conservative rate of ten percent
(10%) will reflect an investment of
twenty million pesos.
The FIRC obtained clean loans from
local banks amounting to thirty million
pesos in 1983 and ninety million pesos
in 1984, these could only have been
obtained with bank deposits as guarantee
or collateral on a one to one basis or
even higher. On a one to one basis, the
bank deposits would reach a total of not
less than one hundred twenty million
pesos (PLEO, O00, 000.00), Since, as
mentioned heretofore, Mr. Marcelo
directly or indirectly owned more than
fifty percent (50%) of the shares of
stock of the FIRC, (Encls. XIII) which
obtained the loan, the deposits used as.
Tclean collateral’ are considered, for
tax purposes, as belonging to hin.
XXX KKM , XK
Joo
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D E
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C.T.A.
Case No .
4340
The
house
and lot owned
by
Mr.
Marcelo located at No. 22 Coolidge
St.,
San
Juan are covered by
Real
Property
Tax
Declarations
Numbered
B-02 1- 02860
<:mel
B--021 --02861
< Enc 1 s. X I I I,
pp.
1+ &
5).
Said tax
c.h~clat·ations s how that the
b u i 1 d in g was dec 1 at' e d 1-Ji t h a fait' m a t'l< e t
value of P466,000.00, while the lot
was
declared
with
a fair market
value
of
19633, 000. 00,
ot~
a
tot al
of
about ·
191,000,000. 00.
While this property
is
located within the Greenhills area which
i s
considered
a
first - class
neighborhood,
we
had
granted
the
t a xpayer a con s ervative valuation of 36%
above
declared market value,
of
about
f"t ., , ~ -:; oo, ooo. no.
We
w~re informed tha t
Mr.
Mat~ c r! 1 o
v c.~ c c.~t!>. d hi!;
t~ !? t; id!?n c r->.
c-::d; Gr!>.nnhill<; ,
B iH l
.J u '''"'
~; om
r.~ t i m f.'
ill 1 '38~::: a" d
m o v £~ d t o
1\1 o.
10 Madrigal Circle , Corinthian
Gardens,
Quezon
City, a high class
residential-
commercial
~omplex along
E.
de
los
S~nto s Avenue near Camp Aguinaldo.
X X><
XX>< X><X
In
our visual in s pection
of
the
sa id
address, we noticed
the
c oncrete
p er ime t er
feQce
and
building
improvements
occupying
not
less
tha n
s i><ty
percent
of
the
lot
areas,
or
approximately
about
1,400 sq .
m.
In
19 82 ,
the
contractor's
construction
price for high cost materials was
about
P 3 ,000.00
per square meter, making
the
improvement
cost
not
less
than
194,000,000.00.
It is generally known in
c onstruction
business
that
interior
paneling, decora t ions and fixture s
cost
a lot more than the superstructures upon
which
the s e
are attached;
because
of
t hi s ,
the
total
cost
of
the
lot,
improvements, interior fixtures as
well
as
fu r ni s hings
and
app~iances
would
e as ily co s t
a total of not, less than ten
million
pesos <PlO,OOO,OOO.OO>
a
very
c onser vative valuation.
XX X
><XX XXX
.)
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D E C I S I 0 N -
C.T.A. Cas e No.
4 340
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In o ur vi sit to the address a t
No.
10 Ma d r ig a l Circle upon the service of a
L.e tt et~ o f
(-) u thot~ ity fot~
!Yi r~ .
tvlat~ce lo,
i t
was just before noon time and there
wa s
appare n t ly
no socia l
a c tiv ity going
o n
n or
any
v isitor s
aroun d .
We ob serv e d
a b out
e ight ve h ic l es par k e d
i nsid e
the
c omp o und
cons i s t in g of vans
an d
cars ,
includ i n g a Merce d es Ben z 450 SL..
It is
we ll k n own t h at brand new ve h icles
co s t
fr om
more t han t wo hundred thous a nd
to
a lmo s t
a ha l f
a mi ll io n each ,
e s pec i a ll y
th a t
of th e Merce d es Ben z .
The
ei ght
ve hi c le s wou l d h ave co s t
Mr .
Ma rc elo not
l ess
t h a n
two
mi l l io n
pe s os
(f'I2 , 000 , 000.00).
)(){ )(
X XX
){ ){ ){
On October 29, 1986, petitioner filed his
Amnesty Return on his "accumulated increase in
worth
from
1981
to 1985,
inclusive,
under
provisions
of
Executive
Order
No.
41
Tax
net
the
dated
August 2 2 ,
1986 and its impl e menting
regulations."
On October 30, 1986, petitioner paid the amount
of
P508,536.00
to
the BIR a s amnesty ta x
unde r
the
return,
as
evidenced by
Confirmation
Re c eipt
No.
B- 10126835
and
BIR
P a ym e nt
Order
No.
B- 865057.
Petitioner was not inc luded in
t h e
Presidenti a l
Commission
on
Good
Government's
<PCGG's>
"Freeze
Order
Compil e d
List
As
of
August
18, 1986", whi c h was the li s t
in effec t
in
October, 1986 when petitioner filed his amne s ty T a x
Retur n.
95
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D E C I S I 0 N -
C.T.R. Case No. 4340
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6
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Ta x assessment notices were issued by the BIR
against
p eti tion e r
on
Mat~ch 1 5 ,
1987,
demanding
payment
of deficiency income taxes for
the
years
1982 to 19.85, inclusive, in the following
a mounts:
1.982
1. r::30 3
1 '3f31•
1985
TOTAL
p
<7:, 7~i1' LIA9. ItO
•V+ , 3 0'+, <:::GO. 00
G0,83'3 , 8E9.00
;:~ 1. 2' E.88. 27
P108, 10'3, 267.37
Petitioner,
through his counsel,
filed
on
May
8,
1'387
a
formal
p r otest
from
the
March 15, 1987 assessments
contending that: <1> he
had
availed
of
tax
amnesty
for
the
period
1'381
to
1985
und er
the
p r ov is ions
of
Executive
Order
No. 41;
<2 >
under
Presidential
Decree
No .
1399, the
compensati on
a nd/or
other
renumet~ at ion
he
received as Director
of
P RGCOR,
PCOC
and
PIRC
were
tax-exempt;
and
(3)
the
assess ment had no legal a nd/or factual basis.
On
March 2, 1'388, Warrants of Distra int
and
Levy
were
issued
aga inst
petitioner.
Simultaneously,
tax
liens
issued
against
petitioner's
properties were also sent by th e
BIR
to
th e
Register
of Deeds of
Caloocan
City
and
Malabon.
958
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D E C I S I 0 N -
C.T.A. Case No. 4340
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7
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On
January 3, 1989, respondent
Commissioner
of
Internal Revenue rendered a decision
modifying
the questioned assessments by reducing the assessed
amount
from
P108,109,267.37,
to
P9,320,383.70.
On
September
1,
1 989,,
a
Warrant
of
Garnishment
was
issued
against
petitioner,
followed
by
notices
of
tax
lien
sent
to
the
Register
of
Deeds of San Juan, Metro
Manila
and
Quezon
City,
and
Cebu City, and
Warrants
of
Distraint
and
Levy, dated Se ptember 18, 1989.
On
February
7, 1989,
petitioner
requested
reconsi deration
of
the
decision
of respondent Commissioner, dated January 1989.
He reiterated his contention that he was absolved of any liability for deficiency income taxes by virtue of his availment of tax amnesty under the provisions of E. D.
41, and further claimed that respondent Commissioner had used the wrong method in computing hi s income tax liability. The instant petition was filed on February 25, 1 '389.
Two issues are raised by petitioner for Us to resolve:
whether his availment of tax amnesty under E.D. 41 was valid I and absolved him from liability.for any income tax deficiencies for 1981 to 1985;
and, in case of a 958 ·'
-~- DECISION -
negative resolution on the first issue, whether respondent Commissioner erred in computing petitioner’s net worth used as basis for determining the questioned deficiency income tax assessments against him. We shall first discuss the first issue. Petitioner contends that his availment of amnesty under E.0O. 41 was valid for two reasons, namely, thats: he complied with all the conditions of amnesty under said law, and paid the corresponding amnesty taxs and he was not ineligible for amnesty. Further to the second reason, petitioner claims that: "xxx (a) he was not covered by the disqualification provision of Section 4(a) of E—.Q0. No. 41, as amended, in relation to Executive Order Nos. 1, c and 14; Cb) he was not among the . supposedly tainted persons listed by the Fresidential Commission on Good Government <“FCGG’) in its Freeze Order list dated 18 August 1986 and which was the Gurrent jlist at the time the petitioner filed his tax amnesty; and (ec) when the petitioner filed his tax amnesty return and paid the amnesty tax on 30 October 1986, the BIR readily accepted his application without any question about his eligibility. In fact, the Commissioner. of Internal Revenue, issued a Certification of Availment of the tax amnesty dated January &O, 1987 xxx." (Memorandum For The Petitioner, p. Ss; Rollo, p. 214) (Underscoring supplied) va ¢ é 960 ·"!"-- -~- - D E C I S I 0 N - - 9 - On the other hand, respondent Commissioner contend s that:
11 As pt' e vi o us 1 y e >< p 1 a in e d in respondent's letter-dec ision cited earlier, petitioner' s name appears among th ose in the updated PCGG Freeze Order li s t as of May_ 31, 1987.
It is of no moment that at the time petition er avail ed of the tax amnesty undet' E.O. # Lt1 on Octobet' 31, 1986 h is name was not in the PCGG Freeze Ord er list. Neithe r can it be co n sidered error on the part of the implementors of E.O # 41 in respondent's Bureau that the petitioner's eligibility to avail of the benefits thereof was not first verifi ed by them considering the urgency to r aise as well as the need for more revenues of the gov ern ment a t that time whose coffers the previous administration virtually de p leted and the enormity of its foreign debt s which it had to a ddt•ess and settle. 11 We find for petitioner. It is not disputed that when petitioner filed hi s Tax Amnesty Return under E.O. No. 41 and paid hi s amnesty tax thereon, on October 29 and , 30, 1986, respectively, he had no disqualification inasmuch a~ his alleged disqualification occurred seven months later when his name was among those 1 i st ed in the PCGG's freeze order dated May 31, 1987.
Petitioner has thus validly availed of the E.O. No. 41 amnesty and the sa~e could no longer be adversely affected by his subsequent disqualification.
86 - pkEossygnon — C.T.Af. Case No. 4340 Having found that petitioner validly availed of tax amnesty under E.0. No. 41, We find no need toa discuss the issue regarding the correctness of tlre anount of tA. deficiency assessed against pekreioner.
Accordingly, the instant petition is GRANTED. RPespondent Commissitaner is hereby ordered toa J withdraw the deficiency income tar assessments, Sated March 16, 1987, filed against petitioner eavering the years 19862 to 19AS, inclusive.
SO ORDERED.
Quezan City, Metro Manila, September 10, 1993.
MNANUE Assaciatte Judge
WE CONCUR:
f ( RAMON O.
Associate Pe) K 96 - DEC I] b&b J ON C.T.A. Case Ho. 4340 I hereby certify that this decision was reached after due consultation among the members of the Court of Tax Appeals in according with Section 13, Article VIII of the Constitution.
eliza CQ ERNESTO DPD. ACOSTA Presiding Judge Court of Tax Appeals ~ 965