Case Digest (G.R. No. 72969-70) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
In Lapanday Foods Corporation v. Commissioner of Internal Revenue, G.R. No. 186155, decided January 17, 2023 under the 1987 Constitution, Lapanday Foods Corporation (Lapanday), a domestic entity engaged in rendering management services, was assessed by the Bureau of Internal Revenue (BIR) on January 21, 2004 for deficiency taxes covering taxable year 2000: PHP 8,561,775.88 for VAT, PHP 374,749.21 for EWT, PHP 5,815,233.36 for FWT, and PHP 1,578,579.59 for DST. Lapanday protested, and in its Final Decision on Disputed Assessment (FDDA) the BIR cancelled FWT but sustained VAT, EWT, and DST assessments, which totaled PHP 8,804,712.10 after surcharges and interest. Lapanday appealed to the Court of Tax Appeals (CTA) First Division, which in an October 18, 2007 decision cancelled the EWT and DST assessments but affirmed the VAT deficiency for the first and fourth quarters of 2000, using Section 105 of the National Internal Revenue Code (NIRC) to treat inter-company loan interest as i Case Digest (G.R. No. 72969-70) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Parties and Administrative Assessment
- Petitioner Lapanday Foods Corporation (Lapanday) is a domestic corporation engaged in rendering management services.
- Respondent Commissioner of Internal Revenue (CIR) assessed Lapanday for the 2000 taxable year:
- VAT – ₱8,561,775.88
- EWT – ₱374,749.21
- FWT – ₱5,815,233.36
- DST – ₱1,578,579.59
- CTA Proceedings
- CTA First Division (Oct. 18, 2007 Decision; Feb. 4, 2008 Resolution)
- Cancelled EWT and DST assessments for lack of basis.
- Sustained VAT deficiency for Q1 and Q4 2000, finding:
- Q1 amendment was “substantial.”
- Interest on intercompany loans VATable at 10%.
- CTA En Banc (Jan. 29, 2009 Decision)
- Affirmed Q1 and Q4 VAT assessments as timely and correct.
- Held interest income on loans incidental to Lapanday’s management business and taxable at 10%.
- Supreme Court Petition
- Lapanday filed a Petition for Review under Rule 45.
- Errors alleged:
- Q1 VAT assessment barred by prescription.
- Interest on loans not subject to VAT.
- If subject, VAT basis is 1/11, not 10%.
Issues:
- Did the three-year prescriptive period bar the Q1 2000 VAT assessment?
- Are interest incomes on intercompany loans subject to 10% VAT as incidental transactions?
- If subject, should VAT be computed at 1/11 of gross receipts instead of 10%?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)