The Court of Tax Appeals (CTA) has denied the plea by a low-cost mass housing developer to get P4.6 million refund from the Bureau of Internal Revenue (DIR) for the taxes paid in 2012.

In a decision promulgated last Aug. 24, the CTA’s special first division denied the petition filed by Havilah Properties, Inc.

Havilah was issued by the Board of Investments (BOI) a Certification of Registration (COR) No. 2011-119 as a new developer of low-cost mass housing project for Manna Residences in San Fernando, La Union on June 15, 2011.

The firm applied for Income Tax Holiday (ITH) with incentives on its four BOI-CORs, which included No. 2011-119 for ITH incentive for the year 2012. However, only two were approved.

COR No. 2011-119 was denied due to Havilah’s failure to comply with the terms and conditions under the said COR. It then sought reconsideration of the ruling.

During the pendency of the motion for reconsideration, the BIR issued a Preliminary Assessment Notice (PAN) stating Havilah's tax liabilities, specifically for income tax, including interest and compromise penalties for taxable year 2012.

On Nov. 24, 2016, Havilah filed with the BIR a letter requesting that the collection of the tax deficiencies be held in abeyance pending the resolution of their motion with the BOI. This was "favorably acted upon" by the BIR, but on May 19, 2017, the BIR issued a Final Notice Before Seizure (FNBS) which gave Havilah the opportunity to settle its P7,886,349.29 tax liabilities.

Havilah filed the basic income tax deficiency assessment of P4,618,440.76, but it later filed a Tax Amnesty Return on Delinquencies on Aug. 16, 2019.

On Sept. 23, 2019, the Court of Appeals (CA) granted the appeal of Havilah and ordered the BOI to grant its application for ITH in all four CORs.

Havilah argued before the CTA that it is entitled to the ITH for 2012 as confirmed by the CA in its case against the BOI, and it erroneously paid P4,618,440.76 to the BIR.

However, the CTA said there was no erroneous or illegal collection of tax to warrant the refund. It pointed out that Havilah has not shown that the subject refund claim covers an "erroneous or illegal" tax payment.

"Tax refunds are in the nature of tax exemptions. As such, they are regarded as in derogation of sovereign authority and to be construed strictissimi juris (according to the strictest implementation of the law) against the person or entity claiming the refund," the CTA said.

"Further, the prescriptive period under Section 229 of the 1997 National Internal Revenue Code, as amended, is fixed by law and this Court has no power to toll or stop the running of the same. Thus, such request cannot be granted," it added.

Associate Justice Catherine T. Manahan wrote the 16-page decision with the concurrence of Presiding Justice Roman G. Del Rosario.