PICOP VS CIR

Paper Industries Corporation of the Philippines (PICOP) is a Philippine Corporation registered with Board of Investment (BOI) as preferred pioneer enterprise with respect to its integrated pulp and paper mill, and as preferred non-pioneer enterprise with respect to its integrated plywood and veneer mills.

PICOP received from CIR two (2) letters of assessment (a) for deficiency transaction tax and for documentary and science stamp tax (b) deficiency income tax for 1977.

PICOP maintains that it is not liable at all to pay any of the assessments or any part thereof.  PICOP questions the imposition by the CA of the deficiency income tax resulting from disallowance of certain claimed financial guarantee expense and claimed year-end adjustment of sales and cost of sales.

ISSUE: Whether PICOP is liable for: (1) the 35% transaction; (2) interest and surcharge on unpaid transaction tax.

HELD:

PICOP is liable for the 35% transaction tax due in respect of interest payments on its money market borrowings.

The transaction tax maybe levied only in respect of the interest earnings of PICOP money market lenders accruing after PD No. 1154 went into effect, and not in respect of all the 1977 interest earning of such lenders.