G.R. No. 183505 - COMMISSIONER OF INTERNAL REVENUE, VS. SM PRIME HOLDINGS, INC. AND FIRST ASIA REALTY DEVELOPMENT CORPORATION.D E C I S I O N - Supreme Court E-Library

Ruling

Accordingly, on October 20, 2004, First Asia filed a Petition for Review before the CTA, docketed as CTA Case No. 7085. [17] CTA Case No. 7111 On April 16, 2004, the BIR sent a PAN to First Asia for VAT deficiency on cinema ticket sales for taxable year 2000 in the amount of P35,840,895.78. First Asia protested the PAN through a letter dated April 22, 2004. [18] Thereafter, the BIR issued a Formal Letter of Demand for alleged VAT deficiency. [19] First Asia protested the same in a letter dated July 9, 2004. [20] On October 5, 2004, the BIR denied the protest and ordered First Asia to pay the VAT deficiency in the amount of P35,840,895.78 for taxable year 2000. [21] This prompted First Asia to file a Petition for Review before the CTA on December 16, 2004. The case was docketed as CTA Case No. 7111. [22] CTA Case No. 7272 Re: Assessment Notice No. 008-02 A PAN for VAT deficiency on cinema ticket sales for the taxable year 2002 in the total amount of P32,802,912.21 was issued against First Asia by the BIR. In response, First Asia filed a protest-letter dated November 11, 2004. The BIR then sent a Formal Letter of Demand, which was protested by First Asia on December 14, 2004. [23] Re: Assessment Notice No. 003-03 A PAN for VAT deficiency on cinema ticket sales in the total amount of P28,196,376.46 for the taxable year 2003 was issued by the BIR against First Asia. In a letter dated September 23, 2004, First Asia protested the PAN. A Formal Letter of Demand was thereafter issued by the BIR to First Asia, which the latter protested through a letter dated November 11, 2004. [24] On May 11, 2005, the BIR rendered a Decision denying the protests. It ordered First Asia to pay the amounts of P33,610,202.91 and P28,590,826.50 for VAT deficiency for taxable years 2002 and 2003, respectively. [25] Thus, on June 22, 2005, First Asia filed a Petition for Review before the CTA, docketed as CTA Case No. 7272. [26] Consolidated Petitions The Commissioner of Internal Revenue (CIR) filed his Answers to the Petitions filed by SM Prime and First Asia. [27] On July 1, 2005, SM Prime filed a Motion to Consolidate CTA Case Nos. 7085, 7111 and 7272 with CTA Case No. 7079 on the grounds that the issues raised therein are identical and that SM Prime is a majority shareholder of First Asia. The motion was granted. [28] Upon submission of the parties' respective memoranda, the consolidated cases were submitted for decision on the sole issue of whether gross receipts derived from admission tickets by cinema/theater operators or proprietors are subject to VAT. [29] Ruling of the CTA First Division On September 22, 2006, the First Division of the CTA rendered a Decision granting the Petition for Review. Resorting to the language used and the legislative history of the law, it ruled that the activity of showing cinematographic films is not a service covered by VAT under the National Internal Revenue Code (NIRC) of 1997, as amended, but an activity subject to amusement tax under