By Dane Angelo M. Enerio
THE Court of Tax Appeals (CTA) ordered the Makati City treasurer to refund P6.8 million in erroneously collected local business taxes (LBT) to Metro Pacific Assets Holdings, Inc. (MPAHI).
In a 16-page July 2 decision penned by Associate Justice Catherine T. Manahan, the CTA Second Division reversed a Makati City Regional Trial Court (RTC) decision dated Nov. 4, 2016 that dismissed MPAHI’s claim for a refund from the Makati City treasurer.
To recall on Jan. 21, 2011, the Makati City treasurer assessed MPAHI for local business tax amounting to P6.8 million on the dividends the company allegedly earned in 2010.
Almost two years after it paid the amount on Jan. 31, 2011, MPAHI on Jan. 25, 2013 filed an administrative claim for refund to the treasurer but it was later elevated to Branch 58 of the Makati City Regional Trial Court due to apparent inaction from the office.
MPAHI, in its petition, argued it is a holding company and not an investment company nor a bank and or financial institution, hence should not be subject to local business tax on its dividend and interest income.
The CTA agreed with MPAHI, saying it “cannot be considered an investment company, nor a bank or other financial institution, hence (it is) not subject to the rate of tax imposed in Section 31.02(h) of the RMRC (Revised Makati Revenue Code.)”
The appellate court upheld its ruling in Michigan Holdings, Inc. vs the City Treasurer of Makati City which stated: “dividend income is not subject to LBT except when levied on banks and other financial institutions and it is clear that petitioner is a holding company cannot be classified as a bank or other financial institution.”
“The records of this case do not show that petitioner is an investment company, a bank or other financial intermediary as defined by pertinent regulations,” the CTA added.
“Its primary purpose as shown in the Articles of Incorporation neither shows that any of its activities are covered by the BSP (Bangko Sentral ng Pilipinas) Manual akin to functions pertaining to a financial intermediary,” it added.
Those who concurred with the decision were Associate Justices Juanito C. Castañeda, Jr. and Caesar A. Casanova.
Mr. Castañeda, in his separate concurring opinion, said he “(agrees) with the conclusion reached by the ponencia that petitioner is entitled to its claim for a refund” but noted he had reservations with the court’s conclusion saying “a holding company cannot be classified as a ‘bank or other financial institution.’”
“[T]he Court cannot hastily arrive at a generalization that a holding company cannot be classified as a bank or other financial institution, without examining the pieces of evidence involved in the case. It should not be dependent on the category or industry to which an entity belongs,” he said.
According to Mr. Castañeda, “the determination whether an entity performs acts of a bank or a financial institution should be purely based on evidence of such acts, and not on evidence, i.e. Articles of Incorporation, available before the happening of an event.”
Metro Pacific Investments Corp. is one of three key Philippine units of Hong Kong-based First Pacific Co. Ltd., the others being Philex Mining Corp. and PLDT, Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls.