CASE DIGEST
Commissioner of
Internal Revenue v. Commission on Elections
G.R. Nos. 244155 & 247508, [May 11, 2021]
EN BANC, LOPEZ, M.V
Withholding taxes
from the purchase of COMELEC of the Electronic Voting Machines; Deficiency Tax
Assessment; Liability of withholding agent
One may be exempt from the obligation to
pay income tax but may still be liable for withholding the tax on income
payments made to taxable entities. The first is based on personal tax
liability, while the second is premised on its duty as a withholding agent to
withhold the taxes paid to the payee.
The Commission on Elections (COMELEC)
entered into a contract with Smartmatic Sahi Technology, Inc. and Avante
International Technology, Inc. for the lease of electronic voting machines for
the August 2008 elections. COMELEC did not withhold Expanded Withholding Tax
(EWT) on payments to the suppliers, believing it was exempt under Section 126
of Republic Act No. 8436. Following a BIR investigation, COMELEC received
deficiency EWT assessments, leading to a dispute. The COMELEC contends trial it
is exempt from all taxes, direct or indirect, personal or impersonal, relative
to the conduct of automated elections as authorized by law. The CTA Division
partly granted COMELEC's petition but found it not liable for deficiency
interest. The CIR appealed, arguing COMELEC's liability. The CTA En Banc
affirmed the Division's decision. COMELEC filed a petition with the Supreme
Court, disputing its tax liability and procedural matters related to the case.
[PROCEDURAL] Whether or not the CTA has
exclusive appellate jurisdiction to decide the dispute between the COMELEC and
the BIR on the deficiency tax assessment.
YES. The CTA has exclusive appellate
jurisdiction to decide the dispute between the COMELEC and the BIR on the
deficiency tax assessment; PD No. 242 does not apply. PD No. 242 is not the law
applicable for the settlement or adjudication of disputes, claims, and
controversies between a constitutional office, like the COMELEC, and a
government office, agency, or bureau, such as the BIR. Accordingly, the
COMELEC, being a constitutional office independent from the three branches of
the government, is not required to go through the procedure prescribed in PD
No. 242 and EO No. 292; instead exclusive appellate jurisdiction of the CTA
shall apply. Since the issue here is the disputed assessment for deficiency
basic EWT for the year 2008 against the COMELEC, arising from its failure to
withhold the tax on income payments made to Smartmatic and Avante under the
lease contracts, the CTA has the exclusive appellate jurisdiction to take
cognizance of the COMELEC's petition.
[PROCEDURAL] Whether or not the COMELEC
properly filed its petition for review with the CTA En Banc without first
filing a motion for reconsideration of the CTA Division's Amended Decision.
YES. The Amended Decision is a mere
clarification, a correction at best, of the amount due from the COMELEC. In the
instant case, the Amended Decision of the CTA Division is not a "new"
decision, but a reiteration of the Decision dated August 2, 2016. It was not
based on a re-evaluation or re-examination of documentary exhibits presented by
the parties. The CTA Division, without any modification, repeated in toto its
discussion and ruling in the original decision. Accordingly, we hold that the
COMELEC properly brought an appeal to the CTA En Banc without first seeking to
reconsider the Amended Decision of the CTA Division.
[SUBSTANTIVE] Whether or not the
COMELEC is exempt from the obligation to withhold EWT.
NO. The withholding tax is not an
internal revenue or local tax, but a mode of collecting income tax in advance. Therefore,
unless the income recipient is exempt from income tax, the payor is generally
required to deduct, and withhold EWT on income payments made. Here, the lease
contract payments to Smartmatic and Avante are not exempt from the requirement
of withholding under Section 2.57.5 of Revenue Regulations. Smartmatic and
Avante also do not enjoy exemption from payment of income tax under any
provision of law. On the other hand, the COMELEC's
exemption from taxes and import duties on the lease of election voting machines
is distinct from its liability as a withholding agent for the government. One
may be exempt from the obligation to pay income tax but may still be liable for
withholding the tax on income payments made to taxable entities. The first is
based on personal tax liability, while the second is premised on its duty as a
withholding agent to withhold the taxes paid to the payee. Therefore, the
COMELEC is not exempt from the obligation to withhold EWT for the lease of
electronic voting machines.
[SUBSTANTIVE] Whether the COMELEC is
liable for the deficiency basic EWT on the income payments made to Smartmatic
and Avante for the lease contracts.
YES. Tax
Code makes the agent personally liable for the tax not withheld, or not
accounted for and remitted, and applicable penalties. The COMELEC admitted that
it did not withhold EWT on the payments made to Smartmatic and Avante for the
lease contracts. It failed to perform its duty as a withholding agent required
to deduct, withhold and remit the tax to the government. Consequently, the
COMELEC becomes personally liable for deficiency tax equivalent to the amount
not withheld. Therefore, Commission on Elections is ORDERED TO PAY the amount
of P30,645,542.62, representing the deficiency basic expanded withholding tax
for the taxable year 2008 but COMELEC is
not liable for any deficiency interest.
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