Case Digest (G.R. No. 247737)
Facts:
McDonald’s Philippines Realty Corporation v. Commissioner of Internal Revenue, G.R. No. 247737, August 08, 2023, the Supreme Court En Banc, Inting, J., writing for the Court.Petitioner McDonald’s Philippines Realty Corporation (MPRC) is a Delaware corporation licensed to do business in the Philippines; it operated a Philippine branch that made long‑term advances to and leased sites to Golden Arches Development Corporation (GADC). The Bureau of Internal Revenue (BIR) audited MPRC’s books for calendar year (CY) 2007 and, after an audit, issued a Preliminary Assessment Notice (PAN) on September 15, 2010 finding deficiencies in income tax, VAT and documentary stamp tax. MPRC executed two waivers extending the assessment period (First Waiver, December 29, 2010 to December 31, 2011; Second Waiver, December 27, 2011 to March 31, 2012). On March 30, 2012 MPRC received a Formal Letter of Demand with attached Details of Discrepancies and Audit/Assessment Notice (FLD/FAN) in which the Commissioner of Internal Revenue (CIR) deleted its prior IT and DST assessments and assessed deficiency VAT only, asserting MPRC failed to subject interest/rental receipts to VAT.
The CIR issued a Final Decision on Disputed Assessment (FDDA) dated January 16, 2014 assessing deficiency VAT and related penalties and interest. MPRC filed a judicial protest before the Court of Tax Appeals (CTA), docketed CTA Case No. 8766 (CTA EB No. 1638). The CTA Third Division (Decision dated December 15, 2016) held that MPRC’s interest income arose from transactions incidental to its leasing business and therefore was VATable, found the VAT returns false under the doctrine in Aznar v. Court of Tax Appeals, applied the ten‑year assessment period, reduced the assessed amount to reflect a Q4 overpayment and declined to sustain a 50% surcharge (finding no deliberate evasion). The case was elevated to the CTA En Banc.
In its Decision dated October 11, 2018 the CTA En Banc affirmed the Division’s finding of falsity and likewise applied the ten‑year prescriptive period under Section 222(a) of the NIRC (relying on Aznar), but modified interest/delinquency computations (including application of the TRAIN law rate from January 1, 2018). The CTA En Banc Judgment ordered MPRC to pa...(Pro-only)
Issues:
- Did the CIR satisfy the requirements to avail itself of the extraordinary ten‑year assessment period under Section 222(a) of the 1997 NIRC?
- If the CIR was not entitled to the ten‑year assessment period, alternatively, was the assessment issued within the basic three‑year period under Section...(Pro-only)
Ruling:
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Ratio:
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Doctrine:
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