THE Supreme Court has struck an attempt by the Bureau of Internal Revenue (BIR) to collect about P70.66 million in supposed tax deficiencies from the Metropolitan Cebu Water District (MCWD).

The High Court affirmed the decision of the Court of Appeals, which dismissed the petition for certiorari filed by the Commissioner of Internal Revenue (CIR) in 2002.

“The petition should be dismissed for failure of the CIR to exhaust administrative remedies,” reads the SC’s First Division decision.

The case stemmed from the petition for review filed by the CIR against MCWD and the Department of Justice (DOJ) after the MCWD received a preliminary assessment notice from the BIR for its alleged tax deficiencies amounting to P70,660,389 in 2000.

The tax deficiencies represent deficiency income, franchise and value-added taxes with surcharge and interest, as well as compromise penalties.

The MCWD, a government-owned and -controlled corporation, filed a petition for arbitration before the DOJ. In its decision dated April 23, 2010, DOJ ruled that MCWD is exempted from payment of income tax from gross income pursuant to Section 32(B)(7)(b) of the National Internal Revenue Code of 1997.

In denying the petition, the SC said that the justice department did not commit any grave abuse of discretion when it ruled in favor of MCWD.

The tax agency, SC added, failed to avail of legal remedies prior to the filing of the petition, such as appealing the case before the Office of the President. (GMD)