CTA voids P1.12-B tax assessment vs. Mercury Drug franchisee

The Court of Tax Appeals (CTA) upheld its earlier decision in favor of a drug company over alleged tax deficiencies worth PHP1.12 billion in 2009.


In a 15-page decision dated Sept. 18 and made public Tuesday, the tax court, through Associate Justice Maria Rowena Modesto-San Pedro, affirmed its November 2018 decision and denied the petition filed against Central Luzon Drug Corporation.


The company operates 52 drug stores under the name “Mercury Drug”, with each store covered by a franchise agreement with Mercury Drug Corporation.


The CTA, in its decision, upheld the ruling of its Third Division, which canceled and set aside the assessment against Central Luzon Drug Corporation for lack of authority of the revenue officer who conducted the examination of the respondent.


The court noted that the BIR in 2010 issued a letter of authority (LOA) authorizing the examination of the corporation’s books of accounts and other accounting records for the year 2009.


The said LOA authorized six revenue officers to examine the corporation’s books but it was revenue officer Josa Gomez, who had not been among those named in the LOA who actually conducted the audit.


The court, citing precedents, said deficiency tax assessments issued without a valid LOA are void.


It noted that since Gomez proceeded with the examination of the respondent’s books of accounts and other accounting records without any authority, “the deficiency tax assessments issued based on her examination are void”.


Source: Philippines News Agency

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