BIR told to refund Stradcom

The Court of Tax Appeals (CTA) has ordered the Bureau of Internal Revenue (BIR) to refund the P325.38 million in tax paid by IT systems provider Stradcom Corp. on income that it could not actually receive from the government in 2011 due to a court dispute.

Ownership dispute

In a decision dated May 29, the CTA First Division cited BIR’s violation of the due process rights of Stradcom, the private operator of the Land Transportation Office’s (LTO) IT systems.

The LTO’s payments for Stradcom’s services were put in escrow because the company was engulfed at the time in an ownership dispute between the group of Cezar Quiambao (now mayor of Bayambang, Pangasinan) and the group of Bonifacio Sumbilla and Aderito Yujuico.

Stradcom later threatened to halt its vehicle registration services after the BIR on July 31, 2013, froze all of the company’s assets and bank accounts.

The company paid the taxes on Aug. 29, 2013, so the BIR would lift its seizure orders.

The CTA agreed with Stradcom that the BIR’s garnishment of its assets was null and void, because the agency failed to issue the preliminary and final assessment notices, as required by Section 228 of the National Internal Revenue Code.

Stradcom served as the LTO’s IT systems provider since 1998.

In 2011, the LTO filed an interpleader with the Quezon City Regional Trial Court (RTC) to settle the issue of which group should receive the payments for Stradcom’s services. The Quiambao group had consistently won the legal disputes.

But the intracorporate dispute affected the LTO’s plans for the procurement of a new IT system, as the RTC issued a temporary restraining order delaying the bidding process. The government had to extend Stradcom’s contract.

In December 2016, the Department of Transportation struck a yearlong phaseout agreement with Stradcom, in which the former agreed to pay the latter P8 billion in debts.