G.R. No. 125355 - COMMISSIONER OF INTERNAL REVENUE, VS. COURT OF APPEALS AND COMMONWEALTH MANAGEMENT AND SERVICES CORPORATION. D E C I S I O N - Supreme Court E-Library

Ruling

WHEREFORE, the decision of the Commissioner of Internal Revenue assessing petitioner deficiency value-added tax for the taxable year 1988 is AFFIRMED with slight modifications. Accordingly, petitioner is ordered to pay respondent Commissioner of Internal Revenue the amount of P335,831.01 inclusive of the 25% surcharge and interest plus 20% interest from January 24, 1992 until fully paid pursuant to Section 248 and 249 of the Tax Code. "The compromise penalty of P16,000.00 imposed by the respondent in her assessment letter shall not be included in the payment as there was no compromise agreement entered into between petitioner and respondent with respect to the value-added tax deficiency." [5] On July 26, 1995, respondent filed with the Court of Appeals, petition for review of the decision of the Court of Appeals. After due proceedings, on May 13, 1996, the Court of Appeals rendered decision reversing that of the Court of Tax Appeals, the dispositive portion of which reads: "WHEREFORE, in view of the foregoing, judgment is hereby rendered REVERSING and SETTING ASIDE the questioned Decision promulgated on 22 June 1995. The assessment for deficiency value-added tax for the taxable year 1988 inclusive of surcharge, interest and penalty charges are ordered CANCELLED for lack of legal and factual basis." [6] The Court of Appeals anchored its decision on the ratiocination in another tax case involving the same parties, [7] where it was held that COMASERCO was not liable to pay fixed and contractor's tax for services rendered to Philamlife and its affiliates. The Court of Appeals, in that case, reasoned that COMASERCO was not engaged in business of providing services to Philamlife and its affiliates. In the same manner, the Court of Appeals held that COMASERCO was not liable to pay VAT for it was not engaged in the business of selling services. On July 16, 1996, the Commissioner of Internal Revenue filed with this Court a petition for review on certiorari assailing the decision of the Court of Appeals. On August 7, 1996, we required respondent COMASERCO to file comment on the petition, and on September 26, 1996, COMASERCO complied with the resolution. [8] We give due course to the petition. At issue in this case is whether COMASERCO was engaged in the sale of services, and thus liable to pay VAT thereon. Petitioner avers that to "engage in business" and to "engage in the sale of services" are two different things. Petitioner maintains that the services rendered by COMASERCO to Philamlife and its affiliates, for a fee or consideration, are subject to VAT. VAT is a tax on the value added by the performance of the service. It is immaterial whether profit is derived from rendering the service. We agree with the Commissioner. Section 99 of the National Internal Revenue Code of 1986, as amended by Executive Order (E.O.) No. 273 in 1988, provides that: "Section 99. Persons liable. - Any person who, in the course of trade or business, sells, barters or exchanges