YAP Vs. BIR, CTA NO. 10019
March 9, 2023
HIGHLIGHTS
Implied Denial
In instance when respondent (BIR) without categorically deciding the taxpayer's protest or request for reconsideration or reinvestigation, proceeds with distraint and levy or institutes an action for collection in the ordinary courts, the Supreme Court has considered this an implied denial.
Commissioner of Internal Revenue vs. Algue, Inc. , 241 Phil. 829 ( 1988) [Per J . Cruz,
First Division]
Remedy of the Taxpayer
The taxpayer's remedy then was to appeal to this Court within thirty (30) days from the date that it was notified of the warrant or collection suit.
Commissioner of Internal Revenue vs. South Entertainment Gallery, Inc., G.R. No.
225809, March 17, 2021.
A Collection Letter having the character of finality. Same character on Warrant of Distraint and Levy.
Undeclared Purchases and Expenses Should Not Be Treated As Income
The said undeclared purchases and expenses, even when the same are truly undeclared, should not be automatically treated as income, to which income tax should be imposed.
Income in tax law is an amount of money coming to a person within a specified time, whether as payment for services, interest, or profit from investment. It means cash or its equivalent. It is gain derived and severed from capital, from labor or from both combined. Income is profit or gain or the flow of wealth. The determining factor for the imposition of income tax is whether any gain or profit was
derived from a transaction.
It is apparent that in a purchase or expense transaction, no amount of money comes to a taxpayer; instead, money is spent out by the latter. In other words, the said taxpayer does not derive any gain or profit from the transaction.
Deduction from Income Tax
It must be emphasized that for income tax purposes, a taxpayer is free to deduct from its gross income a
lesser amount, or not to claim any deduction at all. What is prohibited by the income tax law is to claim a deduction beyond the amount authorized therein.
Commissioner of Internal Revenue vs. Phoenix Assurance Co. Ltd., et seq. , G.R. Nos. L-
19727 and L-19903, May 20, 1965.
Thus, even when a taxpayer has not claimed purchases and expenses, or declared a lesser amount thereof, in the Income Tax Return, such action is allowed, and shall not necessarily result in the imposition of income tax on the undeclared or underdeclared purchases.
In the same vein, just as no income tax should be imposed on the supposed undeclared purchases and expenses of petitioner, no VAT should likewise be imposed thereon.
VAT
VAT is a tax on transactions, imposed at every stage of the distribution process on the sale, barter, exchange of goods or property, and on the performance of services, even in the absence of profit attributable thereto. It is a tax imposed on each sale of goods or services in the course of trade or business, or importation of goods as they pass along the production and distribution chain. The VAT is a tax on consumption, an indirect tax that the provider of goods or services may pass on to his/her customers. The seller is the one statutorily liable for the payment of the VAT. In other words, the party directly liable for the payment of the tax is the seller, not the purchaser.
Moreover, it must be stressed that VAT is imposed on the "gross selling price or gross value in money of the goods or properties sold, bartered or exchanged" and is "to be paid by the seller or transferor.
For sure, when one purchases or spends, such person is deemed the buyer of the goods and/ or services, and logically not the seller of the same. Such being the case, no VAT imposition should likewise arise from petitioner's supposed undeclared purchases and expenses for taxable years 2011, 2012, and 2013.
March 9, 2023
HIGHLIGHTS
Implied Denial
In instance when respondent (BIR) without categorically deciding the taxpayer's protest or request for reconsideration or reinvestigation, proceeds with distraint and levy or institutes an action for collection in the ordinary courts, the Supreme Court has considered this an implied denial.
Commissioner of Internal Revenue vs. Algue, Inc. , 241 Phil. 829 ( 1988) [Per J . Cruz,
First Division]
Remedy of the Taxpayer
The taxpayer's remedy then was to appeal to this Court within thirty (30) days from the date that it was notified of the warrant or collection suit.
Commissioner of Internal Revenue vs. South Entertainment Gallery, Inc., G.R. No.
225809, March 17, 2021.
A Collection Letter having the character of finality. Same character on Warrant of Distraint and Levy.
Undeclared Purchases and Expenses Should Not Be Treated As Income
The said undeclared purchases and expenses, even when the same are truly undeclared, should not be automatically treated as income, to which income tax should be imposed.
Income in tax law is an amount of money coming to a person within a specified time, whether as payment for services, interest, or profit from investment. It means cash or its equivalent. It is gain derived and severed from capital, from labor or from both combined. Income is profit or gain or the flow of wealth. The determining factor for the imposition of income tax is whether any gain or profit was
derived from a transaction.
It is apparent that in a purchase or expense transaction, no amount of money comes to a taxpayer; instead, money is spent out by the latter. In other words, the said taxpayer does not derive any gain or profit from the transaction.
Deduction from Income Tax
It must be emphasized that for income tax purposes, a taxpayer is free to deduct from its gross income a
lesser amount, or not to claim any deduction at all. What is prohibited by the income tax law is to claim a deduction beyond the amount authorized therein.
Commissioner of Internal Revenue vs. Phoenix Assurance Co. Ltd., et seq. , G.R. Nos. L-
19727 and L-19903, May 20, 1965.
Thus, even when a taxpayer has not claimed purchases and expenses, or declared a lesser amount thereof, in the Income Tax Return, such action is allowed, and shall not necessarily result in the imposition of income tax on the undeclared or underdeclared purchases.
In the same vein, just as no income tax should be imposed on the supposed undeclared purchases and expenses of petitioner, no VAT should likewise be imposed thereon.
VAT
VAT is a tax on transactions, imposed at every stage of the distribution process on the sale, barter, exchange of goods or property, and on the performance of services, even in the absence of profit attributable thereto. It is a tax imposed on each sale of goods or services in the course of trade or business, or importation of goods as they pass along the production and distribution chain. The VAT is a tax on consumption, an indirect tax that the provider of goods or services may pass on to his/her customers. The seller is the one statutorily liable for the payment of the VAT. In other words, the party directly liable for the payment of the tax is the seller, not the purchaser.
Moreover, it must be stressed that VAT is imposed on the "gross selling price or gross value in money of the goods or properties sold, bartered or exchanged" and is "to be paid by the seller or transferor.
For sure, when one purchases or spends, such person is deemed the buyer of the goods and/ or services, and logically not the seller of the same. Such being the case, no VAT imposition should likewise arise from petitioner's supposed undeclared purchases and expenses for taxable years 2011, 2012, and 2013.