Indirect Taxes Such as VAT and Excise Tax

Distinguished from Withholding Tax (Asia

International vs CIR, 2012)

Asia International Auctioneers vs CIR

Case Digest GR 179115 Sept 26 2012
Full Text
Facts:
Asia International Auctioneers (AIA), a duly organized corporation operating within the Subic Special
Economic Zone, is engaged in the importation of used motor vehicles and heavy equipment which it sells to
the public through auction. When the BIR assessed AIA for deficiency taxes, AIA filed a protest which was
not acted upon by the BIR. AIA filed a petition for review before the CTA. BIR filed a motion to dismiss for
AIAs failure to timely appeal the protest, which was granted both by the CTA Division and En Banc.

While the case was pending before the SC, AIA availed of the Tax Amnesty Program under RA 9840 to which
it submitted a certificate of qualification issued by the BIR. The CIR contends however that AIA is
disqualified under Sec 8 (a) of the RA 9840 because it is deemed a withholding agent for the deficiency
taxes. Also, the CIR argues that AIA, being an accredited investor/taxpayer situated at the Subic Special
Economic Zone, should have availed of the tax amnesty granted under RA 9399 and not under RA 9480.

Issue 1: W/N AIA is deemed a withholding agent for the deficiency VAT and excise taxes
No. The CIR did not assess AIA as a withholding agent that failed to withhold or remit the deficiency VAT
and excise tax to the BIR under relevant provisions of the Tax Code. Hence, the argument that AIA is
deemed a withholding agent for these deficiency taxes is fallacious.
Indirect taxes, like VAT and excise tax, are different from withholding taxes. In indirect taxes, the incidence
of taxation falls on one person but the burden thereof can be shifted or passed on to another person, such as
when the tax is imposed upon goods before reaching the consumer who ultimately pays for it. On the other
hand, in case of withholding taxes, the incidence and burden of taxation fall on the same entity, the statutory
taxpayer. The burden of taxation is not shifted to the withholding agent who merely collects, by withholding,
the tax due from income payments to entities arising from certain transactions27and remits the same to the
government. Due to this difference, the deficiency VAT and excise tax cannot be deemed as withholding
taxes merely because they constitute indirect taxes.

Issue 2: W/N the tax amnesty under RA 9399 is the only available program for business enterprises operating
within special economic zones or freeports
No. RA 9399 was passed prior to the passage of RA 9480. RA 9399 does not preclude taxpayers within its
coverage from availing of other tax amnesty programs available or enacted in futuro like RA 9480. More so,
RA 9480 does not exclude from its coverage taxpayers operating within special economic zones. As long as it
is within the bounds of the law, a taxpayer has the liberty to choose which tax amnesty program it wants to
avail.
Notes
Nature and Effects of Tax Amnesty
Tax Amnesty Program Under RA 9840; Disqualifications

Prematurely Filed Judicial Claims Allowed

Only For Cases Filed On Dec 3 2003 Until Oct
6 2010 (Team Energy vs CIR, 2014)

Team Energy Corp vs CIR

Case Digest GR 197760 Jan 13 2014
Full Text
Facts:
Team Energy, formerly Mirant Pagbilao, is a registered VAT taxpayer, filed on December 20 2006, an
administrative claim for cash refund or issuance of tax credit certificate for the input VAT it paid for the first
three quarters of 2005. TEC appealed the CIRs inaction before the CTA on April 18, 2007. (The CTA
Division took cognizance of the judicial claim even if it was filed within the 120-day period, pursuant to DA-
489-03 which states that the taxpayer-claimant need not wait for the lapse of 120-day period before it could
seek judicial relief with the CTA. During that time, it was the rule applicable from its issuance on December 3,
2003 before the promulgation of the Aichi case on October 6, 2010.)

However, on Nov 26, 2010, the CTA Division reversed its earlier decision on the ground that the CTA has no
jurisdiction over the case for being prematurely filed. It based its ruling on the Aichi case which held that the
120-30 day rule in case of inaction under Section 112 (C) of the NIRC is mandatory and jurisdictional.

Issue 1: W/N the CTA has jurisdiction over the claim even if it was prematurely filed
Yes. As a rule laid down by the SC in the San Roque case, the CTA may take cognizance of judicial claims
filed during the interim period from the promulgation of the BIR RR DA-489-03 on Dec 3 2003 until the
adoption of the Aichi case on Oct 6 2010.
Since the Commissioner has exclusive and original jurisdiction to interpret tax laws, taxpayers acting in good
faith should not be made to suffer for adhering to general interpretative rules of the Commissioner interpreting
tax laws, should such interpretation later turn out to be erroneous and be reversed by the Commissioner or by
the SC. Section 246 of the Tax Code expressly provides that a reversal of a BIR regulation or ruling cannot
adversely prejudice a taxpayer who, in good faith, relied on the BIR regulation or ruling prior to its reversal.

Here, TEC filed its judicial claim on April 18, 2007 or after the issuance of BIR Ruling No. DA-489-03 on
December 10, 2003 but before October 6, 2010, the date when the Aichi case was promulgated. Thus, even
though TECs judicial claim was prematurely filed without waiting for the expiration of the 120-day
mandatory period, the CTA may still take cognizance of case as it was filed within the period exempted from
the 120-30-day mandatory period.

Issue 2: W/N DA-489-03 is a general interpretative rule applicable to all taxpayers

Yes. BIR Ruling No. DA-489-03 is a general interpretative rule because it is a response to a query made, not
by a particular taxpayer, but by a government agency tasked with processing tax refunds and credits, that is,
the One Stop Shop Inter-Agency Tax Credit and Drawback Center of the Department of Finance. This
government agency is also the addressee, or the entity responded to, in BIR Ruling No. DA-489-03. Thus,
while this government agency mentions in its query to the Commissioner the administrative claim of Lazi Bay
Resources Development, Inc., the agency was, in fact, asking the Commissioner what to do in cases like the
tax claim of Lazi Bay Resources Development, Inc., where the taxpayer did not wait for the lapse of the 120-
day period.
Clearly, BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all taxpayers can rely on BIR Ruling
No. DA-489-03 from the time of its issuance on 10 December 2003 up to its reversal by this Court in Aichi on
6 October 2010, where this Court held that the 120-130 day periods are mandatory and jurisdictional. ##

Notes
Exceptions to the Mandatory 120-30-Day Rule (CIR vs San Roque, 2013)
Section 246: Non-retroactivity of Rulings

Administrative Claim, Not Judicial Claim,

Must Be Filed Within the 2-Year Prescriptive
Period (CIR vs Mindanao, 2014)

CIR vs Mindanao II Geothermal Partnership

Case Digest GR 191498 Jan 15 2014
Full Text
Facts:
Mindanao II is a registered taxpayer whose sales to NAPOCOR are all zero-rated pursuant to the
EPIRA Law. On Oct 6 2005, it filed with the BIR an application for the refund or credit of
accumulated unutilized creditable input taxes for the second, third, and fourth taxable quarters of the
taxable year 2004. The administrative claim was not acted upon until Feb 3 2006, or 120 days after
Oct 6 2005. Believing that a judicial claim must be filed within the 2-year prescriptive period provided
under Sec 112 (A) and that it must be reckoned from the date of filing of its VAT returns, Mindanao
filed on July 26 2006 a petition for review before the CTA claiming inaction on the part of the CIR.

On Aug 12 2008, the CTA Division granted Mindanao IIs claim for refund/credit and held that
its judicial claim was timely filed within the 2-year prescriptive period. The CIR opposed the rulings
claiming that prescription had already set in when Mindanao II filed its judicial claim beyond the 30-
day period fixed in Section 112 (C).

CTA En Banc's Contentions

Issue 1: W/N Mindanao IIs administrative claim for refund/credit was timely filed
Yes. Pursuant to Section 112 (A) of the 1997 Tax Code, it is only the administrative claim which is to
be filed within the two-year prescriptive period, and the two-year prescriptive period begins to run
from the close of the taxable quarter when the sales were made. Here, Mindanao II filed its claim for
refund/credit for the second, third, and fourth quarters of 2004 on Oct 6 2005. Such date is well
within the two-year prescriptive period which runs from June 30 2004 (2nd Quarter), Sept 30 2004
(3rd Quarter) and Dec 31 2004 (4th Quarter).
[The Atlas and Mirant rulings are simply not applicable in this case because Mindanao IIs
application for refund/credit on Oct 6 2005 was filed before their promulgation. The Atlas ruling is
held to be applicable only on cases filed from June 8 2007, the date of its promulgation, and up to
Sept 12 2008, the date when the Mirant case was promulgated.

In Atlas, the court laid down a rule that the 2-year prescriptive period is reckoned from the date of
filing of the return and payment of taxes. In Mirant, such rule was abandoned. Following the verba
legis doctrine, Mirant held that in administrative claims for refund/credit of unutilized input VAT, the
2-year prescriptive period begins to run from the close of taxable quarter when the relevant sales
were made. This rule, which is obviously consistent with the plain wordings of Section 112 (A), was
also affirmed in the recent case of San Roque.]

Issue 2: W/N Mindanao IIs judicial claim for refund/credit was timely filed
No. Under Section 112 (C), the judicial claim must be filed by the taxpayer within 30 days after the
120-day waiting period if its administrative claim was not acted upon by CIR. Here, Mindanao II filed
its application for refund on Oct 6 2005. When it was not acted upon, it filed a judicial claim but only
on July 21 2006, or 138 days after the lapse of the 30-day period on 5 March 2006. Its petition for
review before the CTA was therefore filed late.
 Contrary to the erroneous contentions of the CTA En Banc, the correct interpretation of Section 112,
as held in San Roque, is that the 30-day period applies not only to instances of actual denial by the
CIR of the claim for refund or tax credit, but to cases of inaction by the CIR as well. Also, following
the verba legis doctrine, the 30-day period to appeal is both mandatory and jurisdictional. Section
112 (C) is clear, plain and unequivocal in expressly providing that the taxpayer has a 30-day period
to appeal the decision or inaction of the Commissioner. ##

***When reading the full text of this case, please note the difference in letterings of Section 112
particularly Section 112 (C) and (D) of the NIRC as amended by RA 9337 of 2005. In this digested
version, Section 112 (C) is used to refer to Section 112 (D) of the old NIRC. ***
Summary of Rules on Prescriptive Periods for Claiming Refund or Credit of Input Tax
Two-Year Prescriptive Period
1. It is only the administrative claim that must be filed within the two-year prescriptive period. (Aichi)
2. The proper reckoning date for the two-year prescriptive period is the close of the taxable quarter when the
relevant sales were made. (San Roque)
3. The only other rule is the Atlas ruling, which applied only from 8 June 2007 to12 September 2008. Atlas states
that the two-year prescriptive period for filing a claim for tax refund or credit of unutilized input VAT
payments should be counted from the date of filing of the VAT return and payment of the tax. (San Roque)
120 + 30 Day Period
1. The taxpayer can file an appeal in one of two ways:
(1) file the judicial claim within thirty days after the Commissioner denies the claim within the 120-day
period, or
(2) file the judicial claim within thirty days from the expiration of the 120-day period if the
Commissioner does not act within the 120-day period.

2. The 30-day period always applies, whether there is a denial or inaction on the part of the CIR.
3. As a general rule, the 30-day period to appeal is both mandatory and jurisdictional. (Aichi and San Roque)
4. As an exception to the general rule, premature filing is allowed only if filed between 10 December 2003 and 5
October 2010, when BIR Ruling No. DA-489-03 was still in force. (San Roque)
5. Late filing is absolutely prohibited, even during the time when BIR Ruling No. DA-489-03 was in force. (San
Roque)
*** See also: BIR Revenue Regulation 54-2014 (RR 54-2014) ***
Notes
Only the Administrative Claim Under Section 112 May Be Filed Within the 2-Year Prescriptive Period (CIR
vs Aichi, 2010)
Distinctions Between Section 229 and Section 112 of the Tax Code (CIR vs San Roque, 2013)
Section 112 Does Not Prohibit Cash Refund or
Tax Credit of Transitional Input Tax (Fort
Bonifacio vs CIR, 2013)

Fort Bonifacio vs CIR

Case Digest GR 173425 Jan 22 2013
Full Text
Facts:
In 1995, Fort Bonifacio Development Corporation purchased from the national government a portion of the
Fort Bonifacio reservation. On January 1, 1996, the enactment of RA 7716 extended the coverage of VAT to
real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business.
Thus, FBDC sought to register by submitting to BIR an inventory of all its real properties, the book value of
which aggregated to about P71 B.

In October 1996, FBDC started selling Global City lots to interested buyers. For the first quarter of 1997, it
paid the output VAT by making cash payments to the BIR and credited its unutilized input tax credit on
purchases of goods and services. Realizing that its 8% transitional input tax credit was not applied in
computing its output VAT for the first quarter of 1997, FBDC filed with the BIR a claim for refund of the
amount erroneously paid as output VAT for the said period.

The CTA denied refund on the ground that the benefit of transitional input tax credit comes with the condition
that business taxes should have been paid first. It contends that since FBDC acquired the Global City property
under a VAT-free sale transaction, it cannot avail of the transitional input tax credit. The CTA likewise pointed
out that under RR 7-95, implementing Section 105 of the old NIRC, the 8% transitional input tax credit should
be based on the value of the improvements on land such as buildings, roads, drainage system and other similar
structures, constructed on or after January 1, 1998, and not on the book value of the real property.
Issue 1: W/N prior payment of taxes is required in availing of the transitional input tax credit
No. First, nothing in Sec 105 of the NIRC indicates that prior payment of taxes is necessary to avail of the
transitional input tax credit. Clearly, all it requires is for the taxpayer to file a beginning inventory with the
BIR. Courts cannot limit the application or coverage of a law nor can it impose conditions not provided therein
because to do so constitutes judicial legislation.
Second, prior payment of taxes is not required to avail of the transitional input tax credit because it is not a tax
refund per se but a tax credit. Tax credit is not synonymous to tax refund. Tax refund is defined as the money
that a taxpayer overpaid and is thus returned by the taxing authority. Tax credit, on the other hand, is an
amount subtracted directly from ones total tax liability. It is any amount given to a taxpayer as a subsidy, a
refund, or an incentive to encourage investment. Thus, unlike a tax refund, prior payment of taxes is not a
prerequisite to avail of a tax credit.

Lastly, the fact that FBDC acquired the Global City property under a tax-free transaction makes no difference
as prior payment of taxes is not a pre-requisite.

Issue 2: W/N the transitional input tax credit applies only to the value of improvements
No. Section 4.105-1 of RR 7-95, insofar as it limits the transitional input tax credit to the value of
the improvement of the real properties, is a nullity. The 8% transitional input tax credit should not be limited to
the value of the improvements on the real properties but should include the value of the real properties as well.
Hence, since FBDC is entitled to the 8% transitional input tax credit which is more than sufficient to cover its
output tax for the first taxable quarter, the amount of VAT output taxes erroneously paid must be refunded.

Issue 3: W/N the Tax Code allows either a cash refund or a tax credit for input VAT
Yes. First, a careful reading of Section 112 of the Tax Code shows that it does not prohibit cash refund or tax
credit of transitional input tax in the case of zero-rated or effectively zero-rated VAT registered taxpayers, who
do not have any output VAT.
The phrase except transitional input tax in Section 112 of the Tax Code was inserted to
distinguish creditable input tax from transitional input tax credit. Transitional input tax credits are input taxes
on a taxpayers beginning inventory of goods, materials, and supplies equivalent to 8% (then 2%) or the actual
VAT paid on such goods, materials and supplies, whichever is higher. It may only be availed of once by first-
time VAT taxpayers. Creditable input taxes, on the other hand, are input taxes of VAT taxpayers in the course
of their trade or business, which should be applied within two years after the close of the taxable quarter when
the sales were made.

As regards Section 110, while the law only provides for a tax credit, a taxpayer who erroneously or excessively
pays his output tax is still entitled to recover the payments he made either as a tax credit or a tax refund.

Here, since FBDC still has available transitional input tax credit, it filed a claim for refund to recover the
output VAT it erroneously or excessively paid for the 1st quarter of 1997. Thus, there is no reason for denying
its claim for tax refund/credit.

Notes
Prior Payment of Taxes Not Required In Availing Tax Credit (CIR vs Central Luzon Drug Corp, 2005)

Relevant Provisions
Section 105, old NIRC: Transitional Input Tax Credits
Section 112: Refunds or Tax Credits of Input Tax
Lack of the Required Zero-Rated Phrase on
Invoices or Receipts Covering Zero-Rated
Sales is Fatal (WMPC vs CIR, 2012)

Western Mindanao Power Corp vs CIR

Case Digest GR 181136 June 13 2012
Full Text
Facts:
WMPC, engaged in the production and sale of electricity, is registered as a VAT taxpayer. It sells
electricity solely to the National Power Corporation (NPC), which is in turn exempt from the payment
of all forms of taxes, duties, fees and imposts, pursuant to its charter. Also, pursuant to Section
108(B) (3) of the NIRC, WMPCs power generation services to NPC is zero-rated. Thus, WMPC tried
to file an application for tax credit certificates on input VAT paid to its zero-rated sales. However, its
application was denied because of WMPCs failure to comply with the invoicing requirements under
Section 113 of the NIRC in relation to Sec 4.108-1 of RR 7-95.

Issue: W/N denial of application for tax refund or tax credit on the ground that the taxpayers Official
Receipts do not contain the phrase zero-rated is proper
Yes. Failure to indicate the term zero-rated in the invoice or receipt for zero-rated transactions is
fatal.
In a claim for tax refund or tax credit, the taxpayer must prove not only entitled to the grant of claim
under substantive law, but must also show satisfaction of all the documentary and evidentiary
requirements for an administrative claim of a refund or tax credit. Hence, the mere fact that the
applicants zero-rating has been approved by the CIR does not, by itself, justify the grant of a refund
or tax credit. The taxpayer must further comply with the invoicing and accounting requirements
mandated by the NIRC, as well as the revenue regulations implementing them.

Under the NIRC, a creditable input tax should be evidenced by a VAT receipt or Official Receipt,
which may only be considered as such when it complies with the requirements of RR 7-95
particulary Section 4.108-1 thereof. This section requires, among others, that if the sale is subject to
zero-percent VAT, the term zero-rated sale shall be written or printed prominently on the invoice or
receipt. ##

Relevant Provisions
Section 112. Refunds or Tax Credits of Input Tax
SECTION 4.108-1. Invoicing Requirements
Petroleum Products Sold By Manufacturers
To International Carriers NOT Exempt From
Excise Tax (CIR vs Shell, 2012)

CIR vs Shell
Case Digest GR 188497 Apr 25 2012
Full Text
Facts:
Petron filed for a tax refund for the excise taxes it paid for petroleum products sold to international carriers of
foreign registry for their use or consumption outside the Philippines. Petron claims that it is entitled to a tax
refund because those petroleum products it sold to international carriers are not subject to excise tax as
provided for in Section 135 (a), hence the excise taxes it paid upon withdrawal of those products were
erroneously or illegally collected and should not have been paid in the first place. Petron argues that since the
excise tax exemption attached to the petroleum products themselves, the manufacturer or producer is under no
duty to pay the excise tax thereon.

Issue: W/N manufacturers or producers of petroleum products are exempt from the payment of excise tax on
petroleum sold to international carriers
No. The intent of Section 135 is to grant excise tax exemption to international carriers and exempt entities
as buyers of petroleum products and not to the manufacturers or producers of said goods. Since the excise
taxes are collected from manufacturers or producers before removal of the domestic products from the place of
production, Petron paid the excise taxes as manufacturer or producer of the petroleum products pursuant to
Sec. 148 of the NIRC. Thus, regardless of who the buyer/purchaser is, the excise tax on petroleum products
attached to the said goods before their sale or delivery to international carriers.
Sec. 135 (a) and (c) granting exemption from the payment of excise tax on petroleum products can only be
interpreted to mean that Petron cannot pass on to international carriers and exempt agencies the excise taxes it
paid as a manufacturer or producer. Hence, Petron is not entitled to a refund of the excise taxes it paid for the
petroleum products sold to international carriers.

Notes
Distinction Between Section 134 and Section 135 of the NIRC
Exemption from Tax Given to International Carriers under Section 135 (a) of the NIRC
Exemption from Indirect Taxation Enjoyed by the National Power Corporation (NPC)

Relevant Laws
Section 148, NIRC
Section 134, NIRC
Section 135, NIRC

Tax Credit Certificates are Valid and Effective

From Issuance and Not Subject to Suspensive
Conditions (CIR vs Petron, 2012)

CIR vs Petron
Case Digest GR 185568 March 12 2012
Full Text
Facts:
For the taxable years of 1995-1998, Petron Corp paid its tax liabilities with the Tax Credit Certificates (TCC)
it received from different BOI-registered companies as consideration for the delivery of petroleum products to
these companies. Petrons acceptance and use of the TCCs has been continuously approved by the Department
of Finance as well as the BIR Collection Program Division through its surrender and subsequent issuance of
Tax Debit Memos (TDMs). In a post-audit conducted by the DOF, it was found out that the TCCs issued to the
TCC transferors were fraudulently obtained and fraudulently transferred to Petron. Thus, the TCCs and TDMs
issued to Petron were cancelled by the DOF.

Now, the CIR issued an assessment against Petron for deficiency excise taxes for the taxable years 1995-1998,
inclusive of surcharges and interests, on the ground that the TCCs which Petron used to pay its taxes were
cancelled and therefore has the effect of nonpayment of taxes. The CIR also alleged that Petron has the intent
to evade its taxes, thus making the returns it filed fraudulent.

In the stipulation of facts between the parties, one of the judicial admissions was that Petron never participated
in the procurement and issuance of the TCCs to its transferors. Also, before the CTA En Banc, it was held that
Petron was an innocent purchaser in good faith and for value.

Issue: W/N the post-audit report has the effect of a suspensive condition that would determine the validity of
the TCCs
No. It is a well-settled rule in jurisprudence that TCCs are valid and effective from their issuance and are not
subject to a post-audit as a suspensive condition for their validity. Thus, Petron has the right to rely on the
validity and effectivity of the TCCs that were assigned to it. In finally determining their effectivity in the
settlement of Petrons excise tax liabilities, the validity of those TCCs should not depend on the results of the
DOFs post-audit findings.
As an exception, the transferee/assignee may be held liable if proven to have been a party to the fraud or to
have had knowledge of the fraudulent issuance of the subject TCCs. But here, the parties entered into a joint
stipulation of facts stating that Petron did not participate in the procurement or issuance of those TCCs. Thus,
the exception to the rule is not applicable as Petron was an innocent transferee for value of the TCCs.

Issue 2: W/N the doctrine of non-applicability of estoppel to the government apply in this case
No. As a general rule, the principle of estoppel does not apply to the government, especially on matters of
taxation. Taxes are the nations lifeblood through which government agencies continue to operate and with
which the State discharges its functions for the welfare of its constituents. The exception however is that this
rule cannot be applied it if it would work injustice against an innocent party.
Petron has not been proven to have had any participation in or knowledge of the CIRs allegation of fraudulent
transfer and utilization of the TCCs. Petrons status as an innocent purchaser for value has been established
and even stipulated upon by the CIR. Petron was thereby amply protected from the adverse findings
subsequently made by the DOF agency. ##

Relevant Laws
Petron vs CIR, 2007

Taxpayer May Appeal After the Lapse of 180-

Day Period or Await CIRs Decision In Case of
Inaction (Lascona vs CIR, 2012)

Lascona vs CIR
Case Digest GR 171251 March 5 2012
Full Text
Facts:
On March 27 1998, the CIR issued an assessment notice against Lascona Land Co., Inc informing
the latter of its deficiency income tax for the year 1993. On March 27 1998, Lascona filed a letter
protest. In its letter dated March 3, 1999, which was received by Lascona on March 12, 1999, the
Commissioner denied the protest on the ground that the assessment has become final and
executory when Lascona did not appeal before the CTA within 30 days after the lapse of 180-day
period as mandated by Sec 228 of the NIRC.
On April 12 1999, Lascona appealed the Commissioners decision before the CTA. Lascona averred
that the Commissioner erred in ruling that failure to file a timely appeal before the CTA resulted to
the finality of the assessment.

Issue: W/N the taxpayers failure to appeal before the CTA within 30 days after the lapse of the 180-
day reglementary period pursuant to Sec 228 resulted to the finality of the assessment
No. First, it must be clarified that the word decision does not signify the assessment itself. It is well-
established in jurisprudence that the word decision in the CTA Charter has been interpreted to
mean the decisions of the Commissioner on the protest of the taxpayer against the assessments.
Second, the filing of an appeal within 30 days after the lapse of 180-day period is not the only
remedy available in case of inaction by the CIR on the protested assessment. It is a well-settled rule
in jurisprudence, which is consistent with the Revised Rules of the CTA, that the taxpayer may also
opt to await the final decision of the Commissioner on the disputed assessment and appeal such
decision to the CTA within 30 days after the receipt of a copy of such decision. These options are
mutually exclusive and resort to one bars the application of the other.

Here, considering that Lascona opted to await the final decision of the Commissioner on the
protested assessment, it then has the right to appeal such final decision to the CTA by filing a
petition for review within 30 days after receipt of copy of such decision or ruling, even after the
expiration of the 180-day period fixed by law for the CIR to act on the disputed assessments. Thus,
Lascona, when it filed an appeal on April 12 1999 before the CTA, after its receipt of the Letter dated
March 3 1999 on March 12 1999, the appeal was timely made as it was filed within 30 days after
receipt of copy of the decision. #

Note ***RMC 54-2014

In the filing of administrative claims for refund or tax credit of input taxes, the option for the taxpayer
to wait for the Commissioners decision on its claim before filing an appeal may not be available.

Under the new rule promulgated by the BIR in 2014, if the claim for VAT refund or credit is not acted
upon by the Commissioner within the 120-day period as required by law, such inaction shall
be deemed a denial of the application for tax refund or credit. Further, the new regulation provides that
the taxpayer can appeal in one of the two ways: (1) File the judicial claim within 30 days after the
Commissioner denies the claim within the 120-day period, or (2) File the judicial claim within 30 days
after the expiration of the 120-day period if the Commissioner did not act on the claim.
This will have to mean that, unlike in the case of appealing before the CTA for disputed
assessments, the remedy of the taxpayer to wait for the Commissioners decision even after the
120-day period is not available when it comes to claiming refund or tax credit of VAT input
taxes.Thus, if the taxpayer failed to file an appeal or judicial claim within 30 days after the lapse of
the 120-day period of the Commissioners inaction, the taxpayer loses its right to appeal to the CTA.
Relevant Laws
Assessment vs Decision (CIR vs Villa, 1968)
Taxpayer's Courses of Action In Case of CIR's Inaction on Its Disputed Assessment (RCBC vs CIR, 2007)
Section 228, NIRC
Rule 4, Sec 3 A (2) of the Revised Rules of the CTA

Persons Found in Possession of Smuggled

Items are Presumed Guilty of Smuggling
(Rieta vs People, 2004)

Full Text
Rieta vs People
GR 147817, 436 SCRA 273, August 12, 2004
Taxation Law, Criminal Law
Facts:
The authorities intercepted a cargo truck containing 305 cases of blue-seal or untaxed cigarettes, which was
escorted by a toyota car loaded with firearms. The cargo truck was driven by a civilian who managed to
escape. Among those caught in the act and charged with violations were two policemen who accompanied the
driver in the cargo truck, and another civilian and three policemen manning the toyota car. Some of the
policemen were found to be personnel of COSAC or Constabulary Off-Shore Anti Crime battalion who have
no mission orders. They were apprehended, charged with smuggling, and the confiscated cigarettes were
entrusted to the custody of the Bureau of Customs.

On appeal, the accused contended that the existence of the blue-seal cigarettes was not established because the
prosecution had not presented them as evidence, and that there was no crime because the corpus delicti was
never proven during the trial.

Issue 1: W/N the fact of the crime was sufficiently established

Held:
Yes. Corpus delicti may be proven by credible testimony of witnesses, not necessarily by physical
evidence. This means that the confiscated blue-seal cigarettes need not be presented as evidence in court to
prove smuggling. In this case, a custody receipt issued by the BOC was presented and the testimonies of the
apprehending authorities identifying the contraband items were found credible. Such are sufficient to prove
the fact of the crime.

Issue 2: W/N the accused committed smuggling

Held:
Yes. Under Section 3601 of the Tariff and Customs Code, persons found to be in possession of smuggled
items are presumed to be engaged in smuggling. In this case, the defendants were shown to have had
possession of illegally imported merchandise without offering any satisfactory explanations. Hence,
conviction is proper since they were not able to rebut the presumption. ##

BIR Must Strictly Follow the Procedures in

Executing a Waiver for Extending the Period
of Assessment (Commissioner vs Kudos Metal,
2010)

Full Text
Commissioner vs Kudos Metal Corporation
GR 178087, May 5, 2010
Facts:
The BIR reviewed and audited Kudos Metals records after the latter filed its income tax return. Meanwhile,
Pasco, the corporations accountant, executed two waivers of raising the defense of prescription so that the
BIR may complete its investigation even after the 3-year period of assessment expires. The waivers,
however, were executed with the following defects: first, Pasco was not duly authorized to sign the waiver in
behalf of Kudos; second, the date of acceptance by the Commissioner were not indicated in the first waiver;
and lastly, the fact of receipt by Kudos Metal of its file copy was not indicated in the original copies of the
waivers.

When BIR issued a PAN for the taxable year 1998, followed by FAN, which was dated September 3, 2003 and
received by Kudos Metal on November 3, 2003, the latter protested the assessments. The BIR insisted on
collecting the tax so Kudos Metal brought the issue before the CTA, claiming that the governments right to
assess taxes had prescribed.

Issue 1: W/N the notices of assessment were issued by BIR beyond the 3-year prescriptive period
Held:
Yes. The period for assessment prescribed already because the waivers allowing the extension of the period
were void. Section 222 of the NIRC and RMO-20-90, which lays down the procedure for the proper execution
of waivers, were not complied with. Most importantly, the date of acceptance by the BIR was not indicated so
there is no way to determine if the suspension was made within the prescriptive period. The BIR as a result is
now barred from collecting the unpaid taxes from Kudos Metal.

Issue 2: W/N Kudos Metal is estopped from claiming prescription by executing the waivers
Held:
No. The doctrine of estoppel, which is predicated on equity, is not applicable here because there is a detailed
procedure for the proper execution of a waiver. The BIR failed to comply with the requirements of such law,
plain and simple. It cannot now use estoppel to make up for its failure most especially because a waiver of the
statute of limitations, which derogates a taxpayers right to security against prolonged and unscrupulous
investigations, must be carefully and strictly construed.

Corporate Fiction may be Disregarded in

Transactions Designed to Evade Taxes
(Koppel vs Yatco, 1946)

Full Text
Koppel Philippines, Inc. vs Alfredo Yatco (Collector of Internal Revenue)
GR L47673, 77 Phil 496, October 10, 1946
Facts:
Koppel Industrial Car and Equipment company (KICE), a foreign company not doing business in the
Philippines, owned 995 shares out of the 1000 shares that comprise the capital stock of KPI, a domestic
corporation licensed as commercial broker in the Philippines. The remaining 5 shares were owned by each of
the officers of KPI. KICE is in the business of selling railway materials, machineries and supplies. Buyers in
the Philippines, when interested, asked for price quotations from KPI, and KPI then cabled for the quotation
desired from KICE. However, KPI quoted to the purchaser a selling price above the figures quoted by
KICE. On the basis of these quotations, orders were placed by the local buyers. Between KICE and KPI, the
arrangement nonetheless was that KICE controls how much share of the profits goes to KPI. For these
transactions, the BIR treated KPI as a subsidiary of KICE and collected from KPI the merchants sales tax,
which was a revenue law in force at the time the sales took place.
KPI paid the taxes under protest, demanded for refund and contended that KPI could not be liable for
merchants sales tax because it was only acting as broker between KICE and the local buyers. The lower court
dismissed the complaint and ruled in favor of the government.

Issue 1: W/N KPI did business with the local buyers as an agent of KICE and not as broker
Held:
Yes. The facts that KICE unilaterally controls the amount of so-called share in the profits of KPI and that
KICE owns an overwhelming majority (99.5%) of the capital stock of the KPI are sufficient to conclude that
the latter is a mere dummy, agent or wholly-owned subsidiary of KICE. Such conclusion is based on the
doctrine that courts may pierce the corporate veil to uncover the true intents of these corporations.

Issue 2: W/N the application of piercing the corporate veil doctrine is proper
Held:
Yes. With regards only to the transactions involved, KPI and KICE were treated as one and the same so that
taxes could be rightly collected. The court has to disregard this corporate fiction to prevent KICE / KPI
from evading its taxes by contravening the local internal revenue laws.

The court did not deny legal personality to KPI; in fact, it had no power to hold so. The doctrine was used
only to adjudge the rights and liabilities of each parties in these kind of transactions.

That There is No Other Person in the Locality

Exercising a Locally Taxed Occupation Does
Not Make An Ordinance Discriminatory
(Shell vs Vano, 1954)

Full Text
Shell Corporation v. Vano (As Municipal Treasurer)
GR L-6093, 94 Phil 387, February 24, 1954
Facts:
The Municipal Council of Cordova, Cebu adopted Ordinance 10 which imposes an annual tax on occupation
or the exercise of the privilege of installation manager and Ordinance 11 imposing an annual tax on tin can
factories having a maximum output capacity of 30,000 tin cans. Shell, a foreign corporation, disputed the
ordinances and contended that: first, installation manager is a designation made by the company and such
designation cannot be deemed to be a calling as defined in Sec 178 of NIRC and that the installation
manager employed by Shell is a salaried employee which may not be taxed by the municipal council under the
provisions of NIRC; second, the ordinance is discriminatory and hostile because there is no other person in the
locality who exercises such designation or calling; and third, the imposition of tax on tin can factories having a
30,000 maximum output capacity is unlawful because it is a percentage tax and falls under the exceptions
provided in the Tax Code.

Issue: W/N an installation manager, although a salaried employee, is liable for occupation tax
Ruling:
Yes. Even if the installation manager is a salaried employee of the corporation, still it is an
occupation. Further, one occupation or line of business does not become exempt by being conducted with
some other occupation or business for which such tax has been paid. The occupation tax must be paid by each
individual engaged in a calling subject to it.

Issue 2: W/N the ordinance is unconstitutional because it is hostile and discriminatory

Ruling:
No. The fact that there is no other person in the locality who exercises such a designation or calling does not
make the ordinance discriminatory and hostile, inasmuch as it is and will be applicable to any person or
firm who exercises such calling or occupation named or designated as installation manager.

Issue 3: W/N the annual tax imposition on tin can factories having an annual output capacity of 30,000
is valid
Ruling:
Yes. It is not a percentage tax because the maximum annual output capacity is not a percentage. It is not a
share or a tax based on the amount of the proceeds realized out of the sale of the tin cans manufactured therein
but on the business of manufacturing tin cans having a maximum annual output capacity of 30,000 tin cans.
Issue 4: W/N the Municipal Treasurer should have been impleaded in this case
Ruling:
No. In an action for refund of municipal taxes claimed to have been paid and collected under an illegal
ordinance, it is not the municipal treasuer who is the real party-in-interest but the municipality concerned that
is empowered to sue and be sued.

Fraud as Basis of 50% Surcharges Must be

Actual and Constructive (Commissioner v
Javier, 1991)
 Full Text
Commissioner of Internal Revenue v. Melchor Javier
GR 78953, July 31, 1991
Taxation Law
Facts:
Javiers wife received from Prudential Bank an amount of about $ 1M remitted by her sister abroad through a
US bank. It turned out that the amount of $ 1M was a clerical error and should have been $1K only. The US
bank sued the Javiers, one of which is estafa for failing to return what was not theirs. Meanwhile, Javier filed
his income tax return for that taxable year of 1977, stating his usual gross and net income. Concerning the
excess income, he added a footnote in his return stating that: Taxpayer was recipient of some money
received from abroad which he presumed to be a gift but turned out to be an error and is now subject of
litigation.

The BIR, however, assessed him for deficiency income and demanded that the tax for the amount mistakenly
received and which he was able to dispose be paid. A 50% fraud penalty for filing a fraudulent return was
likewise imposed.

Issue 1: W/N the remittance or income received by error and subject to litigation is taxable
Ruling:

Issue 2: W/N Javier is liable for 50% fraud penalty for merely stating in a footnote in his return an
income as erroneously received and not declaring it as his income
Ruling:
No. Javier is not liable for the 50% fraud penalty because he did not conceal the fact that he received an
income although it was subject of litigation. Fraud must be actual and constructive. This means that there must
be an intentional wrongdoing in order to evade taxes. Not declaring a certain income but indicating it in a
footnote for the BIR to investigate and determine if it is taxable is clearly not fraudulent.

20% Final Withholding Tax on Interest

Income Forms Part of Taxable Gross Receipts
in Computing the 5% Gross Receipts Tax
(CIR v. Solidbank, 2003)
 Full Text
Commissioner of Internal Revenue v. Solidbank Corporation
GR 148191, November 25, 2003
Facts:
In a Court of Tax Appeals case (Asian Bank v. CIR), the CTA decided that the 20% final withholding tax on a
banks interest/passive income should not form part of its taxable gross receipts in computing the taxable gross
receipts. On the strength of such decision, Solidbank sent a letter-request to the BIR claiming for refund or
issuance of tax credit for the amount that was allegedly overpaid as gross receipts tax. Without waiting for the
BIRs decision, Solidbank filed a petition for review before the CTA in order to toll the running of 2-year
prescriptive period. The CTA ruled in favor of Solidbank; the CA affirmed the ruling. The Commissioner
questioned the rulings before the SC via Rule 45.
Commissioner's Contention

Issue1:
W/N the 20% final withholding tax on a banks interest income forms part of the taxable gross receipts
in computing the 5% gross receipts tax
Held:
Yes. Under Sec 119, the earnings of banks from passive income are subject to a 20% FWT. This tax is
withheld at source and is thus not actually and physically received by the banks, because it is paid directly to
the government by the entities from which the banks derived the income. Apart from the 20% FWT, banks are
also subject to a 5% GRT which is imposed by Sec 24 (a)(1) on their gross receipts, including the passive or
interest income.

Since the 20% FWT is constructively received by the banks and forms part of their gross receipts or earnings,
it follows that it is subject to the 5% GRT. That they do not actually receive the amount does not alter the fact
that it is remitted for their benefit in satisfaction of their tax obligations.

Issue 2:
W/N there is double taxation
Held:
No. Subjecting interest income to a 20% FWT and including it in the computation of the 5% GRT is not
double taxation.
First, the taxes are imposed on two different subject matters. The subject matter of the FWT is the passive
income generated in the form of interest on deposits and yield on deposit substitutes, while the subject matter
of the GRT is the privilege of engaging in the business of banking.
A tax based on receipts is a tax on business rather than on the property; it is an excise rather than a property
tax. It is not an income tax, unlike the FWT. In fact, one can be taxed for engaging in business and further
taxed differently for the income derived therefrom. These two taxes are entirely distinct and are assessed under
different provisions.

Second, although both taxes are national in scope because they are imposed by the same taxing authority
the national government under the Tax Code and operate within the same Philippine jurisdiction for the
same purpose of raising revenues, the taxing periods they affect are different. The FWT is deducted and
withheld as soon as the income is earned, and is paid after every calendar quarter in which it is earned. On the
other hand, the GRT is neither deducted nor withheld, but is paid only after every taxable quarter in which it is
earned.
Lastly, these two taxes are of different kinds or characters. The FWT is an income tax subject to withholding,
while the GRT is a percentage tax not subject to withholding.