CTA.JUDICIARY.GOV.PHTHE Court of Tax Appeals (CTA) has ordered the City of Makati to refund over P800,000 in local business taxes to a professional architectural partnership firm, ruling the city had erroneously collected taxes from the company.
The tax court en banc affirmed the ruling of the CTA Special Second Division, saying Casas+ Architects was entitled to a refund of erroneously paid local business taxes because the firm is engaged purely in the practice of architecture and related services.
It found that the firm’s activities fall under the definition of a professional partnership and therefore should not be taxed as a contractor.
“As the Court in Division already found that [Casas+ Architects] is engaged in interior design and landscaping, which are encompassed by the practice of architecture, it ruled that respondent is purely engaged in the practice of profession,” Justice Corazon G. Ferrer-Flores wrote in a 15-page ruling promulgated and publicized on Jan. 27.
In junking Makati’s petition, the tax court ruled the applicable provision for the case was Section 196 of the Local Government Code (LGC), which deals with claims for refunds of erroneously or illegally collected taxes.
The city had argued that Section 195 of the LGC applied, which requires a protest within 60 days of a notice of assessment.
However, the court determined that the city did not issue a formal “notice of assessment” for deficiency taxes but rather billing statements. Thus, Section 195 and its protest requirement did not apply.
The case stemmed from the assessment of Casas+ Architects as a contractor, requiring it to pay the Makati City government P2.5 million in local business taxes from the second quarter of 2014 to the fourth quarter of 2015.
Casas+ Architects filed an administrative claim for a refund on March 15, 2016, within two years of the payment of the local business taxes. The city denied this claim.
It filed a Petition for Review before the regional trial court (RTC), which initially ruled in favor of the architectural firm. However, the RTC later reversed its decision and denied the refund.
Casas+ Architects elevated the case to the CTA, which reversed the RTC decision and ordered a refund of P835,000, representing taxes paid for the third and fourth quarters of 2015.
Makati City then filed a Petition for Review with the CTA En Banc. — Chloe Mari A. Hufana
