The Court of Tax Appeals (CTA) has voided for late assessment the P1.65 billion alleged tax deficiencies levied by the Bureau of Internal Revenue (BIR) against the City of Manila for land purchase in 2008.

In a decision handed down by its second division, the CTA granted the petition of Mayor Francisco "Isko" Moreno Domagoso who argued that the assessment was made beyond the prescriptive period.

The CTA cited Section 203 of the National Internal Revenue Code (NIRC) which states that the BIR has three years to assess a taxpayer, counted from either the last day prescribed by law for the filing of a return or the day of the return's filing when the same is filed beyond the period prescribed by law.

In this case, the CTA said the BIR issued the Formal Letter of Demand/Final Assessment Notice (FLD/FAN) on Dec. 17, 2018 and clearly beyond the three-year prescriptive period.

In his Oct. 28, 2021 petition, Mayor Domagoso asked the CTA to declare null and void the FLD/FAN and the Final Decision on Disputed Assessment (FDDA) issued by the BIR which taxed the City of Manila P1,650,772,865.80 for alleged deficiency income tax (IT), withholding tax on compensation (WTC), expanded withholding tax (EWT), value added tax (VAT), final withholding value added tax (FWVAT), and withholding tax on purchase of land for 2008.

Details of the purchased land were not mentioned in the CTA decision.

Mayor Domagoso pointed out that the FLD/FAN and the FDDA failed to state the facts, laws, rules, and regulations, or jurisprudence upon which the assessments were based, therefore violating the city's right to due process.

He also said the tax assessments were issued beyond the prescriptive period prescribed by law.

In its decision, the CTA said: "Based on the foregoing, the FLD/FAN dated Dec. 17, 2018 is void for being issued beyond the prescriptive period allowed by law. Given that the FLD/FAN is void due to prescription, the legal consequence is: there is no valid assessment to serve as the substance of the dispute.”

It added: "The taxpayer's protest, therefore, challenges a legal nullity; and being that the FDDA inherently depends upon the validity of the FLD/FAN, the FDDA is rendered entirely devoid of legal basis. It cannot resurrect or validate a tax liability that was extinguished by the lapse of the statutory period.”

The 16-page decision was written by Associate Justice Maria Rowena Modesto-San Pedro with the concurrence of Associate Justices Ma. Belen M. Ringpis-Liban and Corazon G. Ferrer-Flores.