CTA dismisses PSALM's P3.3-billion tax appeal for lack of jurisdiction

Adrian Ayalin, ABS-CBN News

Posted at Aug 30 2018 05:46 PM

MANILA - The Court of Tax Appeals (CTA) has dismissed a P3.311-billion tax appeal the Power Sector Assets and Liabilities Management Corporation (PSALM) filed against the Bureau of Internal Revenue (BIR) for lack of jurisdiction on disputes between a government corporation and another state agency.

In a decision promulgated on August 28, the CTA dismissed for lack of jurisdiction PSALM's petition for review filed on January 22, 2016.

“In the instant case, petitioner PSALM is a GOCC (Government-Owned and Controlled Corporation), while respondent represents the Bureau of Internal Revenue, which is a government agency. Clearly, the instant petition involves a dispute solely between a government corporation and another government agency, as such this court is bereft of jurisdiction to take cognizance of the present case,” the CTA said. 

The decision was penned by Associate Justice Catherine Mahanan, with the concurrence of Associate Justices Juanito Castañeda and Caesar Casanova.

The case stemmed from the supposed liability of PSALM for deficiencies from the expanded withholding tax and final value added tax, inclusive of compromise penalty for taxable year 2009.

PSALM is a GOCC mandated to take ownership of all existing National Power Corporation generation assets and liabilities, as well as Independent Power Producer (IPP) contracts, real estate and all other disposable assets. 

Under the Electric Power Industry Reform Act, it manages the orderly sale, disposition and privatization of NPC generation assets, real estate and other disposable assets, and IPP contracts with the objective of liquidating all NPC financial obligations and stranded contract costs.

On December 11, 2015, the tax deficiencies stated on the Final Decision on the Disputed Assessment received by PSALM grew to P3.773 billion. 

The PSALM, however, argued before the CTA that the BIR erred in assessing its expanded withholding tax and that together with the NPC, it has already paid taxes for income payments as well as value added tax subject of the deficiency assessment.

But the BIR counter-argued that the CTA has no jurisdiction over the petition and that PSALM should have made the appeal before the Department of Justice. 

This is pursuant to the Supreme Court decision on PSALM vs Commissioner on Internal Revenue, which stated that the Department of Justice Secretary, the Solicitor General and the Government Corporate Counsel have jurisdiction on government-to-government disputes according to Presidential Decree No. 242 or the Act Prescribing the Procedure for Administrative Settlement or Adjudication of Disputes, Claims and Controversies Between or Among Government Offices, Agencies and Instrumentalities, including GOCCs.

“If the court has no jurisdiction over the nature of an action, its only jurisdiction is to dismiss the case. The court could not decide the case on the merits,” the CTA said. 

The CTA also ruled that a copy of the decision be furnished to the Office of the Solicitor General, one of the agencies cited by the Supreme Court as arbiters of disputes involving government agencies.