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    1smied Vs Cir

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    Bam Bathan
    The petitioner SMI-ED Philippines sold buildings, machinery, and equipment after closing its factory operations. It paid 5% final tax on these sales as a PEZA-registered corporation. SMI-ED filed for a refund, which was denied by the BIR. The Supreme Court ruled that: 1) Only the presumed gain from land and building sales could be taxed at the 6% capital gains rate. Proceeds from machinery and equipment sales were subject to normal corporate income tax. 2) SMI-ED was entitled to a refund of the 5% final tax paid, less any 6% capital gains tax owed on land and building sales, as SMI-ED reported a net loss for the

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    1smied Vs Cir

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    Bam Bathan
    428 views2 pages
    The petitioner SMI-ED Philippines sold buildings, machinery, and equipment after closing its factory operations. It paid 5% final tax on these sales as a PEZA-registered corporation. SMI-ED filed for a refund, which was denied by the BIR. The Supreme Court ruled that: 1) Only the presumed gain from land and building sales could be taxed at the 6% capital gains rate. Proceeds from machinery and equipment sales were subject to normal corporate income tax. 2) SMI-ED was entitled to a refund of the 5% final tax paid, less any 6% capital gains tax owed on land and building sales, as SMI-ED reported a net loss for the

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    1smied vs Cir

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    The petitioner SMI-ED Philippines sold buildings, machinery, and equipment after closing its factory operations. It paid 5% final tax on these sales as a PEZA-registered corporation. SMI-ED filed for a refund, which was denied by the BIR. The Supreme Court ruled that: 1) Only the presumed gain from land and building sales could be taxed at the 6% capital gains rate. Proceeds from machinery and equipment sales were subject to normal corporate income tax. 2) SMI-ED was entitled to a refund of the 5% final tax paid, less any 6% capital gains tax owed on land and building sales, as SMI-ED reported a net loss for the

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    428 views2 pages

    1smied Vs Cir

    Uploaded by

    Bam Bathan
    The petitioner SMI-ED Philippines sold buildings, machinery, and equipment after closing its factory operations. It paid 5% final tax on these sales as a PEZA-registered corporation. SMI-ED filed for a refund, which was denied by the BIR. The Supreme Court ruled that: 1) Only the presumed gain from land and building sales could be taxed at the 6% capital gains rate. Proceeds from machinery and equipment sales were subject to normal corporate income tax. 2) SMI-ED was entitled to a refund of the 5% final tax paid, less any 6% capital gains tax owed on land and building sales, as SMI-ED reported a net loss for the

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    SMI-ED Philippines vs. CIR SEC. 39. Capital Gains and Losses.

    -
    G.R. No. 175410 11/12/14
    (A) Definitions.- As used in this Title -
    Facts:
    (1) Capital Assets.- the term ‘capital assets’ means property held by
    SMI-ED Philippines, a PEZA-registered corporation, constructed the taxpayer (whether or not connected with his trade or business),
    buildings and purchased machineries and equipment after its but does not include stock in trade of the taxpayer or other
    registration; however, it failed to commence operations. Its factory property of a kind which would properly be included in the
    closed and later on sold its buildings and some machineries and inventory of the taxpayer if on hand at the close of the taxable year,
    equipment. In November 2000, it was dissolved. In its quarterly or property held by the taxpayer primarily for sale to customers in
    income tax return for year 2000, it subjected the entire gross sales the ordinary course of his trade orbusiness, or property used in the
    of its properties to 5% final tax on PEZA registered corporations and trade or business, of a character which is subject to the allowance
    paid taxes amounting to more than 44 million pesos. SMI-Ed then for depreciation provided in Subsection (F) of Section 34; or real
    filed an administrative claim for the refund of more than 44 million property used in trade or business of the taxpayer.
    pesos with the BIR which did not act on said claim. Hence, SMI-Ed
    filed a petition for review before the CTA which denied the claim for The properties involved in this case include petitioner’s buildings,
    refund and instead even subjected the sales of SMI-Ed’s assets to equipment, and machineries. Based on the definition of capital
    6% capital gains tax under Sec. 27(D)(5) of NIRC and Sec. 2 of assets under Section 39 of the National Internal Revenue Code of
    Revenue Regulations No. 8-98. 1997, they are capital assets. Respondent insists that since
    petitioner’s machineries and equipment are classified as capital
    ISSUES: assets, their sales should be subject to capital gains tax. Respondent
    is mistaken. For corporations, the National Internal Revenue Code
    1. WON SMI-Ed’s sale of properties is subject to capital gains of 1997 treats the sale of land and buildings, and the sale of
    tax machineries and equipment, differently. Domestic corporations are
    2. WON SMI-Ed Philippines is entitled to its claim for refund imposed a 6% capital gains tax only on the presumed gain realized
    3. WON the BIR can still assess SMI-Ed for deficiency capital from the sale of lands and/or buildings. The National Internal
    gains taxes Revenue Code of 1997 does not impose the 6% capital gains tax on
    RULING: the gains realized from the sale of machineries and equipment.

    1. Only the presumed gain from the sale of petitioner’s land 2. The Bureau of Internal Revenue is ordered to refund
    and/or building may be subjected to the 6% capital gains petitioner SMI-Ed Philippines Technology, Inc. the
    tax. The income from the sale of petitioner’s machineries amount of 5% final tax paid to the BIR, less the 6%
    and equipment is subject to the provisions on normal capital gains tax on the sale of petitioner SMI-Ed
    corporate income tax. Philippines Technology, Inc.'s land and building.
    pleadings filed before this court. There is, therefore, no reason
    to doubt the truth that petitioner indeed suffered a net loss in
    To determine, therefore, if petitioner is entitled to refund, the 2000.
    amount of capital gains tax for the sold land and/or building of
    petitioner and the amount of corporate income tax for the sale Since petitioner had not started its operations, it was also not
    of petitioner’s machineries and equipment should be deducted subject to the minimum corporate income tax of 2% on gross
    from the total final tax paid. Petitioner indicated, however, in its income. Therefore, petitioner is not liable for any income tax.
    March 1, 2001 income tax return for the 11-month period
    ending on November 30, 2000 that it suffered a net loss of
    ₱2,233,464,538.00. This declaration was made under the pain 3. No. Section 203 of the National Internal Revenue Code of
    of perjury. Section 267 of the National Internal Revenue Code 1997 provides that as a general rule, the BIR has three (3)
    of 1997 provides: years from the last day prescribed by law for the filing of a
    return to make an assessment. The BIR did not initiate any
    SEC. 267. Declaration under Penalties of Perjury. - Any assessment for deficiency capital gains tax.78 Since more
    declaration, return and other statement required under this than a decade have lapsed from the filing of petitioner's
    Code, shall, in lieu of an oath, contain a written statement return, the BIR can no longer assess petitioner for deficiency
    that they are made under the penalties of perjury. Any
    capital gains taxes, if petitioner is later found to have capital
    person who willfully files a declaration, return or statement
    containing information which is not true and correct as to gains tax liabilities in excess of the amount claimed for
    every material matter shall, upon conviction, be subject to refund.
    the penalties prescribed for perjury under the Revised
    Penal Code. Moreover, Rule 131, Section 3(ff) of the Rules
    of Court provides for the presumption that the law has
    been obeyed unless contradicted or overcome by other
    evidence, thus:

    SEC. 3. Disputable presumptions.— The following


    presumptions are satisfactory if uncontradicted, but may be
    contradicted and overcome by other evidence:

    ....

    (ff) That the law has been obeyed;

    The BIR did not make a deficiency assessment for this


    declaration. Neither did the BIR dispute this statement in its

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