The Court of Tax Appeals (CTA) has ordered Metro Rail Transit Line 3 (MRT-3) owners, Robert John and Melissa Louisa Sobrepeña, to pay at least P1.73 billion in income taxes for 2007.
The MRT Corp., which financed the construction of the railway under a 25-year build-lease-transfer agreement-had wrongfully underreported its income from the government’s rental payments by using different accounting and bookkeeping methods, which brought down the P4.28 billion income tax return to only P3.49 billion.
This was revealed in the recent 68-page decision released by the court’s Special 2ndDivision, after an audit by the Bureau of Internal Revenue of MRT Corp.
The MRT Corp. had cited Revenue Regulation No. 09-04 to achieve a more favorable tax treatment, considering the rentals as an “operating lease,” thus allowing the company to deduct ordinary expenses and depreciation costs. But the court had decided that this was not applicable to income tax, and MRT Corp.’s process of calculation was not in accordance with Philippine accounting standards.
In addition, MRT Corp. was found to have misreported interest income from the government’s payment of the company loans from Czech and Japanese banks. In following Section 32(A) of the National Internal Revenue Code (NIRC), the P269.16 million declared in the audited financial statement should be P333.68 million.
MRT Corp. has been notified of its misreporting, and will be made to pay for surcharges (25%), delinquency interests (20%) and other penalties for the taxes computed until Dec. 31, 2017.
Because of the Tax Reform for Acceleration and Inclusion (TRAIN) Act, another 12-percent delinquency interest would be imposed on the basic taxes of P968.75 million from Jan. 1, 2018, until full payment.