CTA allows inspection of Smart’s books in P3.2-B tax case

FILE: Court of Tax Appeals of the Philippines located at Agham Road, National Government Center, Diliman, Quezon City in Metro Manila. (Photo By Judgefloro – Own work, Public Domain)

MANILA — The Court of Tax Appeals (CTA) has upheld a lower court’s order allowing the inspection of corporate finance records of telecommunications giant Smart Communications Inc. in connection with the Makati City government’s assessment of PHP3.246 billion for deficiency franchise taxes and fees for the years 2012 to 2015 against the firm.

In its 13-page decision dated February 5, the CTA’s Second Division through Associate Justice Jean Marie A. Bacorro-Villena denied for lack of merit the firm’s petition questioning the Makati City Regional Trial Court (RTC) Branch 133’s resolution on the controversy.

Associate Justices Juanito C. Castaneda Jr. and Cielito N. Mindaro-Grulla concurred in the ruling.

The CTA’s ruling affirmed the June 28, 2019 resolution by RTC Judge Augusto Jose Y. Arreza against Smart on the petition for certiorari it filed against the city government and city treasurer Jesusa E. Cuneta.

The Makati court had granted the city’s motion for the production or inspection of documents. The telco giant claimed the lower court’s actions would be tantamount to permitting Makati City to a second audit in relation to its franchise tax payments for the years 2012 to 2015.

It claims opening its books is “improper” since this would allow Makati City “to take inconsistent stances since the latter already upheld the validity and correctness of its NOA (Notice of Assessment) yet it could take another look at it to validate the assessment’s accuracy”.

The firm also questioned the “relevancy” of some of the documents sought particularly those pertaining to its nationwide revenues, including revenues from other localities which Smart said, “contain information referring to matters outside respondent Makati City’s territorial jurisdiction and pertain to the taxable period that it can no longer be assessed for”.

The Makati City government insisted that the documents sought are not confidential in nature to warrant their non-production in court and pointed out that the documents are necessary following the firm’s failure to provide the city with a breakdown of gross sales/receipts of its branches.

“The Court does not…perceive any injury of such magnitude if the assailed resolutions are allowed to stand. Neither can grave abuse of discretion be attributed to the actions of the public respondent (Makati City),” the CTA ruled.

Sought for production was the firm’s general ledger, particularly the consolidated book for the years 2011 to 2014 and Makati branches and sales offices.

Likewise sought were the sales book for the same year and cash register book, general journal book, application form and billing assessment from other LGUs, schedule, and summary of payments, breakdown of gross sales, quarterly and monthly value-added tax (VAT) returns and summary/breakdown of other income of branches and offices from other localities.