Case Digest (G.R. No. 226287)
Facts:
In Commissioner of Internal Revenue v. Shinko Electric Industries Co., Ltd., G.R. No. 226287, decided on July 6, 2021 by the First Division of the Supreme Court, the Commissioner of Internal Revenue (CIR) sought review under Rule 45 of the Rules of Court of the Court of Tax Appeals (CTA) En Banc Decision dated January 4, 2016 and Resolution dated August 1, 2016 in CTA EB No. 1180. The CTA En Banc affirmed the Special Third Division’s February 10, 2014 Decision and May 6, 2014 Resolution cancelling a Final Assessment Notice (FAN) issued against Shinko Electric Industries Co., Ltd. (Shinko), a Philippine‐registered representative office of the Japanese parent corporation. Shinko’s registration with the Securities and Exchange Commission (SEC Reg. No. AF095-164) authorized it to “undertake activities such as but not limited to information dissemination, promotion of the parent company’s products, quality control of products as well as all other activities which may be legally underCase Digest (G.R. No. 226287)
Facts:
- Parties and Background
- Shinko Electric Industries Co., Ltd. (Shinko) is the Philippine representative office of the Japanese parent corporation Shinko Electric Industries Co., Ltd. (SEC Reg. No. AF095-164), licensed to undertake information dissemination, promotion of parent-company products, quality control, and other lawful representative-office activities.
- The Commissioner of Internal Revenue (CIR) audited Shinko’s books and records for the period April 1, 2006 to March 31, 2007.
- Assessment and CTA Proceedings
- On April 12, 2010, the CIR issued a Preliminary Assessment Notice for alleged deficiency income tax and VAT; Shinko replied. On May 14, 2010, a Formal Assessment Notice was issued assessing:
- Deficiency income tax – ₱766,271.65 (incl. interest)
- Deficiency VAT – ₱343,930.04 (incl. surcharge and interest)
- Compromise penalty – ₱19,000.00
- In its February 10, 2014 Decision, the CTA Division canceled the assessments for lack of factual and legal basis, treating Shinko as a representative office akin to a Regional or Area Headquarters (RHQ) exempt from income tax and VAT under Sec. 28(A)(6)(a) and Sec. 109(p) of the NIRC. A May 6, 2014 Resolution denied reconsideration.
- CTA En Banc and Supreme Court Proceedings
- On January 4, 2016, the CTA En Banc affirmed the Division, holding that Shinko is not a Regional Operating Headquarters (ROHQ) because its “promotion” activities are non-income-generating and it lacks Articles of Incorporation. A denial of reconsideration followed on August 1, 2016.
- The CIR filed a Rule 45 Petition for Review on Certiorari with the Supreme Court; Shinko filed a Comment, and the CIR, through the OSG, filed a Reply.
Issues:
- Whether the CTA Division and En Banc erred in canceling the deficiency income tax and VAT assessments issued against Shinko for the fiscal year ending March 31, 2007.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)