CTA upholds cancellation of P45-million BIR tax assessment on Xylem Water Systems

THE COURT of Tax Appeals (CTA) has rejected a petition by the Commissioner of Internal Revenue (CIR) to review the CTA Special Third Division’s cancellation in 2019 of a P45-million tax assessment and Warrant of Distraint and/or Levy against Xylem Water Systems International, Inc.

The warrant would have authorized the Bureau of Internal Revenue (BIR) to seize personal and real properties over the taxpayer’s failure to pay the assessed taxes for the taxable year 2004 within the required period.

The CTA ruling, dated March 12, denied the CIR’s petition for lack of merit due to the failure to prove that Xylem received its demand letter, as required by law.

Under Section 228 of the Tax Code and Revenue Regulations 12-99 as amended, any assessment failing to comply with the due process requirements are void.

Xylem claimed that it found out about the BIR’s demand letter only when it requested a copy, after receiving the BIR’s preliminary collection letter that had referred to the demand letter.

Associate Justice Catherine T. Manahan issued a dissenting opinion which held that Xylem’s request for a copy of the demand letter and BIR’s compliance with the request satisfied the requirement of the law.

Xylem is a US company that makes, repairs and maintains pumps. — Bianca Angelica D. Añago