The Court of Tax Appeals (CTA) has ruled in favor of property developer JTKC Land, Inc., voiding a P51.59-million deficiency withholding tax assessment issued by the Bureau of Internal Revenue (BIR).
The CTA Special Third Division granted JTKC Land's petition and canceled deficiency withholding tax-other (ONETT) assessments totaling P51.59 million, inclusive of interest and penalties, for taxable years 2008, 2009, and 2010. The court also set aside a P375,000 compromise penalty.
The assessments were issued due to the BIR's finding that JTKC Land failed to withhold taxes on condominium units transferred to investors under Project Investment Agreements (PIAs). However, the CTA ruled that these assessments lacked legal basis.
The court found that the Letter of Authority (LoA) issued by the BIR was invalid for taxable years 2008 and 2009, as it only authorized the examination of JTKC Land's books for taxable year 2010. A subsequent reinvestigation was also deemed invalid due to the lack of a new or amended LoA.
For taxable year 2010, the CTA ruled that the BIR improperly disregarded a relevant BIR ruling, which recognized that the allocation of condominium units to investors under JTKC Land's PIAs did not give rise to a withholding tax obligation.
The CTA also found that the BIR failed to state the facts and the law on which the 2010 assessment was based, as required under Section 228 of the National Internal Revenue Code (NIRC). Additionally, the tax court pointed out that the BIR's own assessment treated JTKC Land as the income payee, indicating that its investors were the parties that could be liable as withholding agents under Section 57 of the Tax Code.
The CTA canceled the assessments, reversed the Final Decision on Disputed Assessment (FDDA), and barred the BIR from enforcing or collecting the deficiency taxes and penalties.
