CASE DIGEST: Tridharma vs. CTA (G.R. No. 215950; June 20, 2016)

CASE DIGEST: TRIDHARMA MARKETING CORPORATION, Petitioner, vs. COURT OF TAX APPEALS and the COMMISSIONER OF INTERNAL REVENUE, Respondents. (G.R. No. 215950; June 20, 2016)

FACTS:
BIR assessed T with various tax deficiencies amounting to more than 4.640 billion pesos. Protest was filed. T paid 5.8 million pesos for its assessment on WTC, DST and EWT and reiterated its interest to compromise alleged IT and VAT deficiencies. FDDA was issued at 4.473 billion pesos.

T appealed the CIR's decision to the CTA 2D and moved for the suspension of tax collection against it. However, the CTA 2D required T to post bond equivalent to 150% of the assessment within 15 days from notice. Hence, T was ordered to post 6.701 billion pesos as bond.

T petitioned for certiorari.

ISSUES:
[1] Did the CTA abuse its discretion in requiring bond that T is legally and physically incapable of procuring?
[2] Was the bond requirement properly issued considering T's allegation of illegal collection?
HELD:
[1] Yes, the CTA abused its discretion. Although the Tax Code empowers the CTA to suspend tax collection by requiring either the (1) deposit of the tax claimed or (2) surety bond for not more than double the amount, T was able to show that it is not capable of producing the amount of 6.701 billion pesos as its net worth is only almost 1 billion pesos. Plus, it is legally impossible to procure the bond from bonding companies that are limited in their risk assumptions.

What the CTA should have done is to conduct a preliminary hearing on T's ability to deposit or procure bond. While there is legal justification for the bond requirement, the power to tax is not the power to destroy. For the bond to equal the deficiency assessment would practically deny to the petitioner the meaningful opportunity to contest the validity of the assessments, and would likely even impoverish it as to force it out of business.

[2] The bond requirement was not properly issued. Section 11 of R.A. 1125, as amended, indicates that the requirement of the bond as a condition precedent to suspension of the collection applies only in cases where the processes by which the collection sought to be made by means thereof are carried out in consonance with the law, not when the processes are in plain violation of the law that they have to be suspended for jeopardizing the interests of the taxpayer.

The Court is not in the position to rule on the correctness of the deficiency assessment, which is a matter still pending in the CTA. The determination of whether the methods, employed by the CIR in its assessment, jeopardized the interests of a taxpayer for being patently in violation of the law is a question of fact that calls for the reception of evidence.

Popular Posts