Tax court allows Makati to inspect Smart documents in P3.2-B tax case | Inquirer News

Tax court allows Makati to inspect Smart documents in P3.2-B tax case

/ 07:12 PM February 11, 2020

Updated @ 10:10 p.m., Feb. 11, 2020

MANILA, Philippines —  The Court of Tax Appeals (CTA) affirmed the decision of the Makati City Regional Trial Court (RTC) that allows the inspection of a telecom company’s corporate financial records in connection with the City of Makati’s P3.246B assessment for deficiency franchise taxes and fees for the years 2012 to 2015.


In a 13-page decision dated Feb. 5, the CTA 2nd division, through Associate Justice Jean Marie A. Bacorro-Villena, said Smart Communication’s petition for certiorari should be denied for lack of merit.

“Petition for certiorari is denied of lack of merit. Accordingly, the resolution on 28 June 2019 and on 07 August 2019 issued by Branch 133 of the Regional Trial Court of Makati are hereby affirmed,” read the CTA ruling.


The case stemmed from a Notice of Assessment by the City of Makati finding the telecom firm liable for deficiency franchise tax and fees for taxable years 2012 to 2015 worth P3.246 billion.

In a statement, Smart said it contested the “erroneous” local franchise tax (LFT) assessment to the Makati Court because the city’s assessment was based on the total nationwide revenues of Smart.

During the hearing, the city then sought the production of financial documents such as general ledger, particularly the consolidated book for the years 2011 to 2014 and Makati branches and sales offices.

Likewise sought were the sales book for the same year and cash register book, general journal book application form and billing assessment from other LGUs, schedule and summary of payments, breakdown of gross sales, quarterly and monthly VAT returns and summary/breakdown of other income of branches and offices from other localities.

The Makati court granted the city’s motion. The company filed a motion for reconsideration which was denied on Aug. 7, 2019, prompting it to take the case to the CTA.

It claims opening its books is “improper” since this  would allow Makati City “to take inconsistent stances since the latter already upheld the validity and correctness of its NOA (Notice of Assessment) yet it could take another look at it to validate the assessment’s accuracy”

The firm also questioned the “relevancy” of some of the documents sought particularly those pertaining to its nationwide revenues, including revenues from other localities which Smart said, “contain information referring to matters outside respondent Makati City’s territorial jurisdiction and pertain to taxable period that it can no longer be assessed for.”


In affirming the lower court’s ruling, the CTA noted that the lower court only granted the city’s motion after it has “showed the relevancy of these documents.”

“As to whether these documents are indeed relevant and material to the disposition of petitioner’s case is one best determined in the course of trial,” the CTA said, adding that the documents have yet to be actually offered in court.

“This Court finds that it would be too early and premature to disallow their production in court…Relevancy of the latter kind can only be determined after the court has been given an opportunity to appreciate the evidence presented before it,” the CTA said.

“It is impossible either for this Court or the lower court to determine the materiality of the subject documents prior to their production,” it added.

Associate Justices Juanito C. Castaneda, Jr. and Cielito N. Mindaro-Grulla concurred in on the ruling.

“It is important to note that the CTA has not decided on the LFT liability of Smart to the City of Makati. It only pertains to the ruling of the RTC granting Makati City’s motion for production of records and various documents in connection with the main LFT case pending with the RTC,” read Smart’s statement.

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TAGS: court of tax appeals, CTA, Makati, Smart
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