AGUAS, Marjorie Joyce B.
Aggrieved, P&G elevated the matter to the CTA En Banc insisting, among others, that the
2014-0137
PROCTER & GAMBLE ASIA VS. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 205652. September 6, 2017.
FACTS
P&G is a foreign corporation duly organized and existing under the laws of Singapore and is
maintaining a Regional Operating Headquarter in the Philippines.It provides management, marketing,
technical and financial advisory, and other qualified services to related companies as specified by its
Certificate of Registration and License issued by the Securities and Exchange Commission.It is a VAT-
registered taxpayer and is covered by BIR Certificate of Registration No. 9RC0000071787.
On March 22, 2007 and May 2, 2007, P&G filed applications and letters addressed to the BIR
RDO No. 49, requesting the refund or issuance of tax credit certificates (TCCs) of its input VAT
attributable to its zero-rated sales covering the taxable periods of January 2005 to March 2005, and April
2005 to June 2005.
On March 28, 2007, P&G filed a petition for review with the CTA seeking the refund or issuance
of TCC in the amount of P23,090,729.17 representing input VAT paid on goods or services attributable to
its zero-rated sales for the first quarter of taxable year 2005. On June 8, 2007, P&G filed with the CTA
another judicial claim for refund or issuance of TCC in the amount of P19,006,753.58 representing its
unutilized input VAT paid on goods and services attributable to its zero-rated sales for the second quarter
of taxable year 2005. On July 30, 2007, the CTA Division granted P&G’s Motion to consolidatethe two
cases inasmuch as the two cases involve the same parties and common questions of law and/or
facts.P&G presented testimonial and voluminous documentary evidence to prove its entitlement to the
amount claimed for VAT refund. The CIR, on the other hand, submitted the case for decision based on the
pleadings, as the claim for refund was still pending before the BIR RDO No. 40.
Meanwhile, on October 6, 2010, while P&G’s cases were pending, the Supreme Court
promulgated Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc. In that case, the
Court held that compliance with the 120-day period granted to the CIR, within which to act on an
administrative claim for refund or credit of unutilized input VAT, as provided under Section 112(C) of the
NIRC of 1997, as amended, is mandatory and jurisdictional in filing an appeal with the CTA.
On November 17, 2010, the CTA Division dismissed P&G’s judicial claim, for having been
prematurely filed.According to the CTA Division, P&G failed to observe the 120-day period granted to the
CIR.Its judicial claims were prematurely filed with the CTA on March 28, 2007 (CTA Case No. 7581) and
June 8, 2007 (CTA Case No. 7639), or only six (6) days and thirty-seven (37) days, respectively, from the
filing of the applications at the administrative level.
Court’s ruling in Aichishould not be given a retroactive effect. However, the CTA En Banc affirmed in toto
the CTA Division’s Decision and Resolution.
On September 21, 2012, the CTA En Banc rendered the assailed Decision affirming in toto the
CTA Division’s Decision and Resolution. It agreed with the CTA Division in applying the ruling
in Aichi which warranted the dismissal of P&G’s judicial claim for refund on the ground of prematurity.
In the meantime, on February 12, 2013, this Court decided the consolidated cases
of Commissioner of Internal Revenue v. San Roque Power Corporation, Taganito Mining Corporation v.
Commissioner of Internal Revenue, and Philex Mining Corporation v. Commissioner of Internal
Revenue(San Roque), where the Court recognized BIR Ruling No. DA-489-03 as an exception to the
mandatory and jurisdictional nature of the 120-day waiting period.
IHSUE:
Whether the CTA En Bancerred in dismissing P&G’s judicial claims for refund on the ground of
prematurity. – YES.
RULING:
Exception to the mandatory and jurisdictional 120+30-day periods under Section 112(C) of the
NIRC
Section 112 of the NIRC, as amended, provides for the rules on claiming refunds or tax credits of
unutilized input VAT, the pertinent portions of which read as follows:
SEC. 112. Refunds or Tax Credits of Input Tax. —
(A) Zero-rated or Effectively Zero-rated Sales. — Any VAT-registered person, whose
sales are zero-rated or effectively zero-rated may, within two (2) years after the close of
the taxable quarter when the sales were made, apply for the issuance of a tax credit
certificate or refund of creditable input tax due or paid attributable to such sales, except
transitional input tax, to the extent that such input tax has not been applied against
output tax: x xx
(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. — In proper
cases, the Commissioner shall grant a refund or issue the tax credit certificate for
creditable input taxes within one hundred twenty (120) days from the date of
submission of complete documents in support of the application filed in
accordance with Subsection (A) hereof.
In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of
the Commissioner to act on the application within the period prescribed above, the taxpayer affected may,
within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one
hundred twenty-day period, appeal the decision or the unacted claim with the Court of Tax Appeals.
Page 1 of 148
 There is no dispute that the 120-day period is mandatory and jurisdictional, and that the CTA
does not acquire jurisdiction over a judicial claim that is filed before the expiration of the 120-day period.
There are, however, two exceptions to this rule. The first exception is if the Commissioner, through a
specific ruling, misleads a particular taxpayer to prematurely file a judicial claim with the CTA. Such
specific ruling is applicable only to such particular taxpayer. The second exception is where the
Commissioner, through a general interpretative rule issued under Section 4 of the Tax Code, misleads all
taxpayers into filing prematurely judicial claims with the CTA. In these cases, the Commissioner cannot be
allowed to later on question the CTA’s assumption of jurisdiction over such claim since equitable estoppel
has set in as expressly authorized under Section 246 of the Tax Code.
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+30 day periods are mandatory and
jurisdictional.
For clarity and guidance, the Court deems it proper to outline the rules laid down in San
Roque with regard to claims for refund or tax credit of unutilized creditable input VAT. They are as follows:
1. When to file an administrative claim with the CIR:
a) General rule – Section 112(A) and Mirant,Within 2 years from the close of the taxable
quarter when the sales were made.
b) Exception – Within 2 years from the date of payment of the output VAT, if the
administrative claim was filed from June 8, 2007 (promulgation of Atlas) to September
12, 2008 (promulgation of Mirant).
2. When to file a judicial claim with the CTA:
1. General rule – Section 112(D); not Section 229
a) Within 30 days from the full or partial denial of the administrative claim by the CIR; or
b) Within 30 days from the expiration of the 120-day period provided to the CIR to decide
on the claim. This is mandatory and jurisdictional beginning January 1, 1998 (effectivity
of 1997 NIRC).
Exception – BIR Ruling No. DA-489-03
The judicial claim need not await the expiration of the 120-day period, if such was filed from
December 10, 2003 (issuance of BIR Ruling No. DA-489-03) to October 6, 2010 (promulgation
of Aichi).
In this case, records show that P&G filed its judicial claims for refund on March 28, 2007 and
June 8, 2007, respectively, or after the issuance of BIR Ruling No. DA-489-03, but before the date
when Aichi was promulgated. Thus, even though P&G filed its judicial claim without waiting for the
expiration of the 120-day mandatory period, the CTA may still take cognizance of the case because the
claim was filed within the excepted period stated in San Roque. In other words, P&G’s judicial claims were
deemed timely filed and should not have been dismissed by the CTA.
Application and validity of BIR Ruling No. DA-489-03
All taxpayers may rely upon BIR Ruling No. DA-489-03, as a general interpretative rule, from the
time of its issuance on December 10, 2003 until its effective reversal by the Court in Aichi.The Court
further held that while RR 16-2005 may have re-established the necessity of the 120-day period,
taxpayers cannot be faulted for still relying on BIR Ruling No. DA-489-03 even after the issuance of RR
16-2005 because the issue on the mandatory compliance of the 120-day period was only brought before
the Court and resolved with finality in Aichi.Accordingly, in consonance with the doctrine laid down in San
Roque, the Court finds that P&G’s judicial claims were timely filed and should be given due course and
consideration by the CTA.
AICHI FORGING COMPANY OF ASIA, INC., vs. COURT OF TAX APPEALS - EN BANC and
COMMISSIONER OF INTERNAL REVENUE
G.R. No. 193625. August 30, 2017.
FACTS
On 26 September 2002, AICHI filed with the BIR District Office in San Pedro, Laguna, a
written claim for refund and/or tax credit of its unutilized input VAT credits for the 3rd and 4th
quarters of 2000 and the four taxable quarters of 2001 in the total sum of P18,030,547.77 representing
VAT payments on importation of capital goods and domestic purchases of goods and services. As
respondent CIR failed to act on the refund claim, and in order to toll the running of the prescriptive period
provided under Sections 229 and 112 (D) of the Tax Code, AICHI filed, on 30 September 2002, a Petition
for Review before the CTA Division.
CTA Division partially granted the refund claim of AICHI. The CTA Division denied AICHI's refund
claim with respect to its purchase of capital goods for the period 1 July 2000 to 31 December 2001
because of the latter's failure to show that the goods purchased formed part of its Property, Plant and
Equipment Account and that they were subjected to depreciation allowance. As to the claim for refund of
input VAT attributable to zero-rated sales, the CTA only partially granted the claim due to lack of evidence
to substantiate the zero-rating of AICHI's sales. In particular, the CTA denied VAT zero-rating on the sales
to BOI-registered enterprises on account of non-submission of the required BOI Certification.
CIR claimed that the court did not acquire jurisdiction over the refund claim in view of AICHI's
failure to observe the 30-day period to claim refund/tax credit as specified in Sec. 112 of the Tax
Code, i.e., appeal to the CTA may be filed within 30 days from receipt of the decision denying the claim or
after expiration of 120 days (denial by inaction). However, AICHI filed its Petition for Review on 30
September 2002, or before the 30-day period of appeal had commenced. According to the CIR, this
period is jurisdictional, thus, AICHI's failure to observe it resulted in the CTA not acquiring jurisdiction over
its appeal.
CTA En Banc ruled that the law does not prohibit the simultaneous filing of the administrative and
judicial claims for refund. It declared that what is controlling is that both claims for refund are filed within
the two-year prescriptive period. CTA En Banc denied CIR’s motion for reconsideration and denied
AICHI’s for being filed out of time.
Page 2 of 148
 AICHI argues that it is entitled to the refund of unutilized input VAT because its sales to Asian
Transmission Corporation and Honda Philippines are qualified for zero-rating, the latter being a BOI-
registered enterprise, as evidenced by a Certification issued by the BOI. Said certification was attached
by AICHI in its motion for reconsideration from the CTA En Bane decision. On the other hand, the CIR
contends that the BOI Certification should not be considered at all as it was presented only during appeal.
In any event, the certification does not prove AICHI's claim for refund. In said certification, it is required
by the terms and conditions that AICHI must comply with the production schedule of 3,900 metric
tons or the peso equivalent of P257,400,000.00. However, this data is not verifiable from the petitioner's
Quarterly VAT Returns or from the testimonies of its witness.
ISSUE:
Whether the CTA division acquired jurisdiction over the claimed refund. – NO.
RULING:
CTA had no jurisdiction over the judicial claim as it was filed prematurely.
The judicial claim was filed before the CTA, through a petition for review, on 30 September
2002, or a mere four days after the administrative claim was filed.
The law contemplates two kinds of refundable amounts: (1) unutilized input tax paid on capital
goods purchased, and (2) unutilized input tax attributable to zero-rated sales. The claim for tax refund or
credit is initially filed before the CIR who is vested with the power and primary with jurisdiction to decide
on refunds of taxes, fees or other charges, and penalties imposed in relation thereto. In every case,
the filing of the administrative claim should be done within two years. However, the reckoning point of
counting such two-year period varies according to the kind of input tax subject matter of the claim. For
the input tax paid on capital goods, the counting of the two-year period starts from the close of the taxable
quarter when the purchase was made; whereas, for input tax attributable to zero-rated sale, from
the close of the taxable quarter when such zero-rated sale was made (not when the purchase was
made).
From the submission of the complete documents to support the claim, the CIR has a period of
one hundred twenty (120) days to decide on the claim. If the CIR decides within the 120-day period, the
taxpayer may initiate a judicial claim by filing within 30 days an appeal before the CTA. If there is no
decision within the 120-day period, the CIR's inaction shall be deemed a denial of the application. In the
latter case, the taxpayer may institute the judicial claim, also by an appeal, within 30 days before the CTA.
In a long line of cases, the Court had interpreted the 120-day period as both mandatory and
jurisdictional such that the taxpayer is forced to await the expiration of the period before initiating an
appeal before the CTA. This must be so because prior to the expiration of the period, the CIR still has the
statutory authority to render a decision. Otherwise stated, there is no cause of action yet as would justify
a resort to the court.
A premature invocation of the court's jurisdiction is fatally defective and is susceptible to
dismissal for want of jurisdiction. Such is the very essence of the doctrine of exhaustion of
administrative remedies under which the court cannot take cognizance of a case unless all
available remedies in the administrative level are first utilized.
Reconciling the pronouncements in the Aichi and San Roque cases, the rule must therefore
be that during the period December 10, 2003 (when BIR Ruling No. DA-489-03 was issued) to October 6,
2010 (when the Aichi case was promulgated), taxpayers-claimants need not observe the 120-day period
before it could file a judicial claim for refund of excess input VAT before the CTA. Before and after the
aforementioned period (i.e., December 10, 2003 to October 6, 2010), the observance of the 120- day
period is mandatory and jurisdictional to the filing of such claim.
Here, it is not disputed that AICHI had timely filed its administrative claim for refund or tax credit
before the BIR. The records show that the claim for refund/tax credit of input taxes covering the six
separate taxable periods from the 3rd Quarter of 2000 up to the 4th Quarter of 2001 was made on 26
September 2002. Both the CTA Division and CTA En Bane correctly ruled that it fell within the two-
year statute of limitations. However, its judicial claim was filed a mere four days later on 30 September
2002, or before the window period when the taxpayers need not observe the 120-day mandatory and
jurisdictional period. Consequently, the general rule applies.
AICHI is similarly situated as San Roque Power Corporation in San Roque both filed their
appeals to the CTA without waiting for the 120-day period to lapse and before the aforesaid window
period. As in San Roque, AICHI failed to comply with the mandatory 120-day waiting period, thus, the
CTA ought to have dismissed the appeal for lack of jurisdiction.
There may be two possible scenarios when an appeal to the CTA is considered fatally
defective even when initiated within the two-year prescriptive period: first, when there is no decision and
the appeal is taken prior to the lapse of the 120-day mandatory period, except only the appeal within
the window period from 10 December 2003 to 6 October 2010;46 second, the appeal is taken
beyond 30 days from either decision or inaction "deemed a denial." In contrast, an appeal outside the 2-
year period is not legally infirm for as long as it is taken within 30 days from the decision or inaction on the
administrative claim that must have been initiated within the 2-year prescriptive period. In other
words, the appeal to the CTA is always initiated within 30 days from decision or inaction
regardless whether the date of its filing is within or outside the 2-year period of limitation.
The rule is that where there is want of jurisdiction over a subject matter, the judgment is
rendered null and void. A void judgment is in legal effect no judgment, by which no rights are divested,
from which no right can be obtained, which neither binds nor bars anyone, and under which all acts
performed and all claims flowing out are void. Since the judgment of the CTA Division is void, it becomes
futile for any of the parties to question it. It, therefore, does not matter whether AICHI had timely filed
a motion for reconsideration to question either the decision of the CTA En Banc or the CTA Division.
Likewise, SC find no need to pass upon the issue on whether petitioner AICHI had substantiated
its claim for refund or tax credit. Indisputably, SC must deny AICHI's claim for refund.
Page 3 of 148
EDISON (BATAAN) COGENERATION CORPORATION v. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 201665, August 30, 2017
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE COMMISSIONER OF INTERNAL
REVENUE v. EDISON (BATAAN) COGENERATION CORPORATION
G.R. No. 201668, August 30, 2017
FACTS
On February 2, 2004, Edison (Bataan) Cogeneration Corporation [EBCC] received from the CIR
a Formal Letter of Demand and Final Assessment Notice dated January 23, 2004 assessing EBCC of
deficiency for taxable year 2000, they are as follows:
Deficiency Tax Amount
Income Tax P65,571,268.01
Value-Added Tax 168,866.15
Withholding Tax on Compensation 128,087.84
Expanded Withholding Tax 79,066.13
Final Withholding Tax 18,921,102.03
TOTAL P84,868 390.165
EBCC filed with the CIR a letter-protest dated March 2, 2004 and furnished the CIR with the
required documents but due to CIR’s inaction, EBCC elevated the matter to the CTA via a Petition for
Review and raffled to the Second Division of the CTA. While the case was pending, EBCC availed itself of
the Tax Amnesty Program under RA No. 9480.
Ruling of the Court of Tax Appeals Former Second Division
CTA Former Second Division partly granted the Petition, EBCC was found to have paid the
correct amount of EWT and withholding tax on compensation of its employees. As to the deficiency FWT,
EBCC was found liable to pay FWT in a reduced amount of P2,232,146.91. The CTA Former Second
Division agreed with EBCC that it was not liable for the deficiency FWT assessment of P7,707,504.96 on
interest payments on loan agreements with Ogden Power International Holdings, Inc. for taxable year
2000 since its liability for interest payment became due and demandable only on June 1, 2002. Likewise
cancelled and set aside were the deficiency tax assessments on loan interest payment of EBCC to
Philippine National Bank and Security Bank Corporation in the amounts of P346,988.77 and P387,411.46,
respectively, as these had already been remitted by EBCC.
CIR filed a Motion for Reconsideration while EBCC filed a Motion for Partial Reconsideration
and/or Clarification, both were denied. Parties appealed to the CTA En Banc. CTA En Banc denied both
appeals.
ISSUES:
G.R. No. 201665
Whether the CTA En Banc erred in not recognizing [the CIR's] judicial admission that she
reduced her assessment for deficiency FWT for taxable year 2000 from [P]10,227,622[.]72 to
[P]7,384,922.52. - NO.
G.R. No. 201668
1. Whether EBCC is liable for deficiency final withholding tax for the year 2000. – NO, Ogden
loan. YES, syndicated loans.
2. Whether Revenue Regulation No. 12-01 should be applied in this case. – NO.
RULING:
G.R. No. 201665
The CIR made no judicial admission that EBCC remitted the amount of P2,842,630.20 as
payment for its FWT for the year 2000. Section 4 of Rule 129 of the Rules of Court states:
SEC. 4. Judicial Admissions. - An admission, verbal or written, made by a party in the
course of the proceedings in the same case, does not require proof. The admission
may be contradicted only by showing that it was made through palpable mistake or
that no such admission was made.
Memorandum reveals that the remittance of P2,842,630.20 was based on a Report prepared by
the revenue officers recommending the denial of EBCC's protest, which was issued prior to EBCC's filing
of its Petition for Review before the CTA.
Besides, the CTA Former Second Division, in its April 7, 2011 Resolution already explained how
it computed EBCC's deficiency FWT, to wit:
Although EBCC is not liable to pay FWT on interest payment on loan from Ogden in the amount
of P7,707,504.96; however, as regards the deficiency assessment of FWT on Interest Payments on
Syndicated Loan in Dollars, in the amount of P2,520,117.76, the Court found that EBCC failed to present
proof of withholding and/or remittance of FWT on its interest payments to UCPB and Sung Hung Kai
Bank. Likewise, BIR Forms No. 2306 (Certificates of Final Income Tax Withheld), pertaining to petitioner's
alleged interest payments to First Metro Investment Corporation and United Overseas Bank/Westmont
Bank, were not considered by the Court.
Therefore, EBCC's contention that the amount of P2,842,630.20 should still be deducted from
the deficiency assessment, as found by this Court in the amount of P1,785,717.53 is misplaced. As
heretofore discussed, out of P2,520,117.76 deficiency FWT assessment on Interest Paid on Syndicated
Loan in US Dollars, [EBCC] was able to substantiate FWT remittance in the total amount of P734,400.23
Page 4 of 148
only. Thus, we found [EBCC] liable to pay basic deficiency FWT for the year 2000 in the amount of
P1,785,717.53.42
In addition, it is a basic rule in evidence that the person who alleges payment has the burden of
proving that payment has indeed been made. More so, in cases filed before the CTA, which are litigated
de novo, party-litigants must prove every minute aspect of their case.
G.R. No. 201668
RR No.02-98 provides that the term payable refers to the date the obligation becomes due,
demandable or legally enforceable. Section 2.57.4 of Revenue Regulations No. 2-98 provides:
SEC. 2.57.4. Time of Withholding. - The obligation of the payor to deduct and withhold the tax
under Section 2.57 of these regulations arises at the time an income is paid or payable, whichever comes
first, the term 'payable' refers to the date the obligation becomes due, demandable or legally enforceable.
EBCC's loan agreement with Ogden stated that:
3. Repayment and Interest
3.1 The BORROWER shall repay the Loan to the LENDER in sixteen (16) consecutive
semi-annual installments of US$881,250.00 commencing on 1 June 2002 and thereafter
on June 1 and December 1 of each year.
Clearly, EBCC's liability for interest payment became due and demandable starting June 1, 2002.
Retroactive application of RR No. 12-01
This issue was never raised before the CTA. Thus, we cannot rule on this matter now. It is a
settled rule that issues not raised below cannot be pleaded for the first time on appeal because a party is
not allowed to change his theory on appeal; to do so would be unfair to the other party and offensive to
rules of fair play, justice and due process.
Moreover, as aptly pointed out by EBCC, whether it omitted to state a material fact or acted in
bad faith in failing to present documents on its interest payments to show the exact date of payment is a
factual issue, which is not allowed under Rule 45.
In any case, even if the first payment was due on January 4, 2001 as claimed by the CIR, EBCC
would still not be liable, as the tax assessment pertained to taxable year 2000 and not 2001.
WHEREFORE, the Petitions are hereby DENIED. The assailed January 30, 2012 Decision and
the April 17, 2012 Resolution of the Court of Tax Appeals in CTA EB Case Nos. 766 and 769 are hereby
AFFIRMED.
LANAO DEL NORTE ELECTRIC COOPERATIVE, INC. v. PROVINCIAL GOVERNMENT OF LANAO
DEL NORTE
G.R. No. 185420, August 29, 2017
FACTS:
Pursuant to R.A. No. 6038, otherwise known as the National Electrification Administration Act,
LANECO was granted a franchise on January 8, 1972 to distribute electricity over the several
municipalities. NEA expanded the coverage of LANECO's franchise by including two barangays in Balo-i,
Lanaodel Norte.
In order to finance its operations, LANECO contracted several loans from NEA from 1972-1991,
secured by real estate mortgage contracts over its properties. The NEA also gave LANECO grants and
subsidies from 1996-2006 to fund its various rural electrification programs in the countryside. LANECO's
total loans from the NEA amounted to P117,645,358.00, a substantial portion of which, however, had
already been paid.
Upon the enactment of R.A. No. 9136, or the Electric Power Industry Reform Act of 2001,
PSALM assumed LANECO's loan balance of P32,507,813.70 to the NEA.
Meanwhile, Congress enacted the Local Government Code of 1991 (LGC), which conferred
power to LGUs to impose taxes on real properties located within their territories. Thus, on January 7,
1993, and in accordance with Sections 232 and 233 of the LGC, the SangguniangPanlalawigan of the
PGLN enacted Provincial Tax Ordinance No. 1, Series of 1993.
On January 26, 2006, LANECO received a letter from Provincial Treasurer of the PGLN,
demanding payment of real property taxes assessed against the cooperative for the period of 1995-2005.
On several occasions, LANECO allegedly requested the PGLN for the original or a certified true copy of
the Provincial Revenue Code to be used by the ERC as basis to allow LANECO to pay its real property
taxes and subsequently pass it on to its member-consumers, but the PGLN supposedly refused to do so.
Aggrieved, LANECO questioned the validity of the real property tax assessments and the Provincial
Revenue Code in a Petition for Declaratory Relief with Preliminary Prohibitory Injunction before RTC of
Lanao del Norte. However, on ex-parte motion by LANECO, the case was dismissed as the parties
agreed to resolve the issues before the Bureau of Local Government Finance, instead of pursuing court
action.
Nevertheless, the PGLN continued to demand payment from LANECO through a letter. LANECO
reiterated its claim that it attempted to secure an original or certified true copy of the Provincial Revenue
Code for submission to the ERC on several occasions but was unable to do so. The
SangguniangPanlalawigan, in turn, issued a certification on November 25, 2008 stating that its Legislative
Building was gutted by fire, including all the records/documents of its offices, on December 7, 2003.
On December 9, 2008, LANECO filed a Petition for Declaratory Relief with prayer for the
issuance of a TRO and/or preliminary prohibitory injunction against the PGLN before the RTC of Tubod,
Page 5 of 148
Branch 7, assailing the validity and constitutionality of the franchise tax provisions of the Provincial
Revenue Code contained in Sections 84 to 87 thereof.
On April 3, 2009, LANECO learned that the PGLN, through its Provincial Treasurer, issued a
Memorandum, directing the Municipal Treasurers of Baroy, Kolambugan, Bacolod, Kapatagan,
Magsaysay, Maigo, Lala, and Tubod to issue warrants of levy on its properties thereat. Consequently,
LANECO received the warrants of levy from the Municipality of Tubod and Baroy for deficient real property
tax.
Thus, on August 14, 2009, LANECO filed yet another Petition for Prohibition with prayer for the
issuance of a TRO and/or preliminary prohibitory injunction against the PLGN, including the Provincial
Treasurer and its deputized municipal treasurers, with the RTC of Tubod, Branch 7. Docketed as Special
Civil Case No. 015-07-2009, LANECO prayed for the annulment of the provisions imposing real property
tax in the Provincial Revenue Code, and for the court to prohibit the PGLN from continuously
implementing the real property tax provisions of the Provincial Revenue Code, and collecting real property
tax from it.
RTC: The Provincial Revenue Code is invalid and unconstitutional. Consequently, the court
ordered the cancellation of the warrants of levy issued against LANECO and directed the Provincial
Treasurer and her deputized municipal treasurers, the Provincial Assessor, and his assessors, to cease
and desist from assessing, imposing, and collecting real property taxes on LANECO.
ISSUES:
1. Whether or not the rule on exhaustion of administrative remedy applies; - YES.
2. Whether or not the PGLN gravely abused its discretion when it levied on the real properties of
LANECO to enforce payment of unpaid real property taxes, in violation of Section 60 of R.A. No.
9136 and EO 119; - NO
3. Whether or not the PGLN would commit grave abuse of discretion amounting to lack or excess of
jurisdiction if it proceeds to auction the delinquent real properties of LANECO. - NO
RULING:
Violation of the principle of hierarchy of courts
True, the Court, the CA and the RTC have original concurrent jurisdiction to issue writs of
certiorari, prohibition and mandamus. The concurrence of jurisdiction, however, does not grant the party
seeking any of the extraordinary writs the absolute freedom to file a petition in any court of his choice. The
petitioner has not advanced any special or important reason which would allow a direct resort to this
Court. Under the Rules of Court, a party may directly appeal to this Court only on pure questions of law. In
the case at bench, there are certainly factual issues as Vivas is questioning the findings of the
investigating team.
Strict observance of the policy of judicial hierarchy demands that where the issuance of the
extraordinary writs is also within the competence of the CA or the RTC, the special action for the
obtainment of such writ must be presented to either court.
As for the claim that direct resort to this Court is the most speedy and adequate remedy available
to the LANECO, the same is belied by the fact that LANECO had previously filed several cases before the
RTC, questioning the PGLN's right to assess it with both real property and franchise taxes. LANECO's act
of filing these cases before the RTC betrays its cognizance of the RTC's power to settle questions
regarding the rights of local government units to impose and collect real property tax from electric
cooperatives.
The Provincial Government of Lanao del Norte did not commit grave abuse of discretion in
levying on the real properties of LANECO
While LANECO does not dispute its liability to the PGLN for real property tax, it nevertheless
advances that its properties cannot be the subject of an administrative action thru levy pursuant to Section
60 of R.A. No. 9136, which purportedly prohibits electric cooperatives from disposing, transferring, and
conveying its assets and properties within the period of the rehabilitation and modernization program. In
support of its position, LANECO refers to Sections 1 to 5, Rule 31 of the IRR of R.A. No. 9136, as well as
the pertinent provisions of EO 119. These provisions respectively state:
Section 60. Debts of Electric Cooperatives. - Upon the effectivity of this Act, all outstanding
financial obligations of electric cooperatives to NEA and other government agencies incurred for the
purpose of financing the rural electrification program shall be assumed by the PSALM Corp. The ERC
shall ensure a reduction in the rates of electric cooperatives commensurate with the resulting savings due
to the removal of the amortization payments of their loans. Within five (5) years from the condonation of
debt, any electric cooperative which shall transfer ownership or control of its assets, franchise or
operations thereof shall repay PSALM Corp. the total debts including accrued interests thereon.
Contrary to LANECO's stand, the provisions of law cited do not prohibit local government units
from resorting to the administrative remedy of levy on real property. Nothing in the provisions of the law
withdrew the remedy of tax collection by administrative action from the LGUs. Instead, these provisions
merely ascribe limitations on, and lay down the consequences of, any voluntary transfer and disposition of
assets by the electric cooperatives themselves. They do not limit the LGUs' remedies against electric
cooperatives to judicial actions in collecting real property taxes.
Furthermore, LANECO failed to establish how the administrative remedy of levy on real
properties will impair the rights of NEA and PSALM. Instead, it merely reiterated its argument that R.A.
No. 9136 prohibits the disposition of its assets and properties during the period of rehabilitation and
modernization program. In fact, it failed to differentiate how exclusive resort to judicial action as opposed
to the administrative remedy of levy would be a better option to preserve the rights of NEA and PSALM. It
is the option of the LGU to choose which remedy to avail.
To constitute contract impairment, the law must affect a change in the rights of the parties with
reference to each other and not with respect to non-parties.
Page 6 of 148
 It bears to stress that, regardless of whether the mortgages constituted on LANECO's properties
constitute as lien thereon, these cannot defeat the right of the PGLN to make those properties answerable
for delinquent real property taxes, since local government taxes serve as superior lien over the property
subject of the tax, as clearly laid out in Section 257 of the LGC:
SECTION 257. Local Governments Lien. - The basic real property tax and any other tax levied
under this Title constitutes a lien on the property subject to tax, superior to all liens, charges or
encumbrances in favor of any person, irrespective of the owner or possessor thereof, enforceable by
administrative or judicial action, and may only be extinguished upon payment of the tax and the related
interests and expenses.
The PGLN, therefore, is well within its right to assess LANECO with real property taxes, and to
exercise its remedies under Section 256 of the LGC for the collection thereof, including by administrative
action thru levy on its real properties.
POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT CORPORATION vs. COMMISSIONER
OF INTERNAL REVENUE
G.R. No. 198146. August 8, 2017.
FACTS:
PSALM is a GOCC created under RA 9136, also known as the Electric Power Industry Reform
Act of 2001 (EPIRA). Section 50 of RA 9136 states that the principal purpose of PSALM is to manage the
orderly sale, disposition, and privatization of the National Power Corporation (NPC) generation assets,
real estate and other disposable assets, and Independent Power Producer (IPP) contracts with the
objective of liquidating all NPC financial obligations and stranded contract costs in an optimal manner.
PSALM conducted public biddings for the privatization of the Pantabangan-Masiway
Hydroelectric Power Plant and Magat Hydroelectric Power Plant. First Gen Hydropower Corporation with
its $129 Million bid and SN Aboitiz Power Corporation with its $530 Million bid were the winning bidders
for the PantabanganMasiway Plant and Magat Plant, respectively.
On 28 August 2007, the NPC received a letter dated 14 August 2007 from BIR demanding
immediate payment of ₱3,813,080,472 deficiency VAT for the sale of the power plants. The NPC indorsed
BIR's demand letter to PSALM. On 30 August 2007, the BIR, NPC, and PSALM executed MOA, wherein
they agreed that:
 NPC/PSALM shall remit under protest to the BIR the amount of Php 3,813,080,472.00, upon
execution of this MOA.
 This remittance shall be without prejudice to the outcome of the resolution of the Issues before
the appropriate courts or body.
 BIR shall waive any and all interests and surcharges on the aforesaid BIR letter, except when the
case is elevated by the BIR before an appellate court.
 Any resolution in favor of NPC/PSALM by any appropriate court or body shall be immediately
executory without necessity of notice or demand from NPC/PSALM. A ruling from the
Department of Justice (DOJ) that is favorable to NPC/PSALM shall be tantamount to the filing of
an application for refund (in cash)/tax credit certificate (TCC), at the option of NPC/PSALM. BIR
undertakes to immediately process and approve the application, and release the tax refund/TCC
within fifteen (15) working days from issuance of the DOJ ruling that is favorable to NPC/PSALM.
PSALM filed with the DOJ a petition for the adjudication of the dispute with the BIR to resolve the
issue of whether the sale of the power plants should be subject to VAT. The DOJ ruled in favor of PSALM.
ISSUES:
1. Whether the Secretary of Justice has jurisdiction over the case. – YES.
2. Whether the sale of the power plants should be subject to VAT. – NO.
RULING:
Jurisdiction of the DOJ
Under PD 242, it is mandatory that disputes and claims "solely" between government agencies
and offices, including GOCCs, involving only questions of law, be submitted to and settled or adjudicated
by the Secretary of Justice. PD 242 is only applicable where no private party is involved. Since this case is
a dispute between PSALM arid NPC, both GOCCs, and the BIR, a National Government office, PD 242
clearly applies and the Secretary of Justice has jurisdiction over this case. In fact, the MOA executed by
the BIR, NPC, and PSALM explicitly provides that "[a] ruling from the DOJ that is favorable to
NPC/PSALM shall be tantamount to the filing of an application for refund (in cash)/tax credit certificate
(TCC), at the option of NPC/PSALM." Such provision indicates that the BIR and petitioner PSALM and the
NPC acknowledged that the Secretary of Justice indeed has jurisdiction to resolve their dispute.
Furthermore, under the doctrine of exhaustion of administrative remedies, it is mandated that
where a remedy before an administrative body is provided by statute, relief must be sought by exhausting
this remedy prior to bringing an action in court in order to give the administrative body every opportunity to
decide a matter that comes within its jurisdiction. A litigant cannot go to court without first pursuing his
administrative remedies; otherwise, his action is premature and his case is not ripe for judicial
determination. PD 242 (now Chapter 14, Book IV of Executive Order No. 292), provides for such
administrative remedy.
The first paragraph of Section 4 of the 1997 NIRC provides that the power of the CIR to interpret
the NIRC provisions and other tax laws is subject to review by the Secretary of Finance, who is the alter
ego of the President. Thus, the constitutional power of control of the President over all the executive
departments, bureaus, and offices is still preserved. The President's power of control, which cannot be
limited or withdrawn by Congress, means the power of the President to alter, modify, nullify, or set aside
the judgment or action of a subordinate in the performance of his duties.
Page 7 of 148
 The second paragraph of Section 4 of the 1997 NIRC, providing for the exclusive appellate
jurisdiction of the CTA as regards the CIR's decisions on matters involving disputed assessments, refunds
in internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters
arising under NIRC, is in conflict with PD 242. Under PD 242, all disputes and claims solely between
government agencies and offices, including government-owned or controlled corporations, shall be
administratively settled or adjudicated by the Secretary of Justice, the Solicitor General, or the
Government Corporate Counsel, depending on the issues and government agencies involved.
To harmonize Section 4 of the 1997 NIRC with PD 242, the following interpretation should be
adopted: (1) As regards private entities and the BIR, the power to decide disputed assessments, refunds
of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising
under the NIRC or other laws administered by the. BIR is vested in the CIR subject to the exclusive
appellate jurisdiction of the CTA, in accordance with Section 4 of the NIRC; and (2) Where the disputing
parties are all public entities (covers disputes between the BIR and other government entities), the case
shall be governed by PD 242.
Privatization of assets by PSALM is not subject to VAT
Pursuant to Section 105 in relation to Section 106, both of the Tax Code of 1997, a value-added
tax equivalent to ten percent (10%) of the gross selling price or gross value in money of the goods, is
collected from any person, who, in the course of trade or business, sells, barters, exchanges, leases
goods or properties, which tax shall be paid by the seller or transferor. The phrase "in the course of trade
or business" means the regular conduct or pursuit of a commercial activity, including transactions
incidental thereto.
Since the disposition or sale of the assets is a consequence of PSALM's mandate to ensure the
orderly sale or disposition of' the property and thereafter to liquidate the outstanding loans and obligations
of NPC, utilizing the proceeds from sales and other property contributed to it, including the proceeds from
the Universal Charge, and not conducted in pursuit of any commercial or profitable activity, including
transactions incidental thereto, the same will be considered an isolated ,transaction, which will therefore
not be subject to VAT.
Under the EPIRA law, the ownership of the generation assets, real estate, IPP contracts, and
other disposable assets of the NPC was transferred to PSALM. Clearly, PSALM is not a mere trustee of
the NPC assets but is the owner thereof. Precisely, PSALM, as the owner of the NPC assets, is the
government entity tasked under the EPIRA law to privatize such NPC assets. The sale of the power plants
cannot be considered as an incidental transaction made in the course of NPC's or PSALM's business.
Therefore, the sale of the power plants should not be subject to VAT.
Hence, SC agree with the Decisions dated 13 March 2008 and 14 January 2009 of the Secretary
of Justice in OSJ Case No. 2007-3 that it was erroneous for the BIR to hold PSALM liable for deficiency
VAT in the amount of ₱3,813,080,472 for the sale of the Pantabangan-Masiway and Magat Power Plants.
The ₱3,813,080,472 deficiency VAT remitted by PSALM under protest should therefore be refunded to
PSALM.
AMOLATO, REGINE B.
2017-0219
Commissioner of Internal Revenue vs. Systems Technology Institute, Inc.
G.R. No. 220835. July 26, 2017
ANTECEDENTS:
STI filed its Amended Income Tax return for fiscal year 2003 on August 15, 2003. STI’s Amiel C.
Sangalang Signed a Waiver of the Defense of Prescription under The Statute of Limitations of the
National Internal Revenue Code, with the proviso that the assessment and collection of taxes of fiscal
year 2003 shall come “no later than December 31, 2006”, of which said waiver was accepted by the CIR.
A second and third waiver were executed by the same signatories extending the period to June 30, 2007.
However, on June 28, 2007, STI received a Formal Assessment Notice from the CIR, and a Final
Decision Assessment (FDDA) dated August 17, 2009 finding STI liable for deficiency income tax, VAT and
EWT in the lesser amount of P124, 257, 764.20.
STI filed an appeal before the CTA, the latter found the waivers executed by STI defective for failing to
comply with the requirements provided by the RMO No. 20-90. Consequently, the periods for the CIR to
assess or collect internal revenue taxes were never extended; and the subject assessment for deficiency
income tax, VAT and EWT against STI, which the CIR issued beyond the three-year prescriptive period
provided by law, was already barred by prescription.
CIR asserts that prescription had not set in on the subject assessments because of the following:
1. The waivers executed by the parties are valid.
2. The STI’s active participation in the administrative investigation by filing a request for
reinvestigation, amount to estoppel that prescription can no longer be invoked.
ISSUE:
1. Whether prescription had set in against the assessment for deficiency income tax, VAT and
expanded withholding tax?
RULING:
The Waivers of Statute of Limitations, being defective and invalid, did not extend the CIR’s period
to issue the subject assessments. Thus, the right of the government to assess or collect the
alleged taxes is already barred by prescription.
Citing Section 203 of the National Internal Revenue Code (NIRC), as amended, limits the CIR’s period to
assess and collect internal revenue taxes to three (3) years counted from the last day prescribed by law
for the filing of the return or from the day the return was filed, whichever comes later. Thus, assessment
issued after the expiration od such period are no longer valid and effective.
As to the contention of the CIR that prescription had not set in because the parties validly executed a
waiver of statute of limitations under Section 222 (b) of the NIRC is without merit.
The Court ruled that the requirements laid down under RMO 20-90 and RDAO 05-01 for the proper
execution of a valid waiver are mandatory and must be strictly followed. To wit:
Page 8 of 148
 1. The waiver must be in the proper form prescribed by RMO 20- 90. The phrase "but not
after __________ 19 _”, which indicates the expiry date of the period agreed upon to
assess/collect the tax after the regular three-year period of prescription, should be filled
up.
2. The waiver must be signed by the taxpayer himself or his duly authorized
representative. In the case of a corporation, the waiver must be signed by any of its
responsible officials. In case the authority is delegated by the taxpayer to a
representative, such delegation should be in writing and duly notarized.
3. The waiver should be duly notarized.
4. The CIR or the revenue official authorized by him must sign the waiver indicating that
the BIR has accepted and agreed to the waiver.The date of such acceptance by the BIR
should be indicated. However, before signing the waiver, the CIR or the revenue official
authorized by him must make sure that the waiver is in the prescribed form, duly
notarized, and executed by the taxpayer or his duly authorized representative.
5. Both the date of execution by the taxpayer and date of acceptance by the Bureau
should be before the expiration of the period of prescription or before the lapse of the
period agreed upon in case a subsequent agreement is executed.
6. The waiver must be executed in three copies, the original copy to be attached to the
docket of the case, the second copy for the taxpayer and the third copy for the Office
accepting the waiver. The fact of receipt by the taxpayer of his/her file copy must be
indicated in the original copy to show that the taxpayer was notified of the acceptance of
the BIR and the perfection of the agreement.
In the case at bar, the Court ruled that the waivers subject of this case suffered from the following defects:
1. At the time when the first waiver took effect, on June 2, 2006, the period for the CIR to assess
STI for deficiency EWT and deficiency VAT for fiscal year ending March 31, 2003, had already
prescribed.
2. STI's signatory to the three waivers had no notarized written authority from the corporation's
board of directors.
3. The waivers in this case did not specify the kind of tax and the amount of tax due.
Verily, considering the foregoing defects in the waivers executed by STI, the periods for the CIR to
assess or collect the alleged deficiency income tax, deficiency EWT and deficiency VAT were not
extended. The assessments subject of this case, which were issued by the BIR beyond the three-year
prescriptive, are therefore considered void and of no legal effect.
CE Luzon Geothermal Power Company, Inc., vs. Commissioner of Internal Revenue
G.R. No. 197526. July 28, 2017
ANTECEDENTS:
CE Luzon (VAT-registered taxpayer) owns and operates the CE Luzon Geothermal Power Plant, which
generates power for sale to the Philippine national Oil Company-Energy Development Corporation by
virtue of an energy conversion agreement. The sale of generated power by generation companies is a
zero-rated transactions under Section 6 of RA No. 9163.
In the course of its operations, CE Luzon incurred creditable input tax amounting to 26, 574, 388.99 for
taxable year 2003. This amount was duly reflected in its amended quarterly VAT returns. CE Luzon then
filed before the Bureau of Internal Revenue an administrative claim for refund of its unutilized creditable
input tax.
Without waiting for the Commissioner of Internal Revenue to act on its claim, or for the expiration of 120
days, CE Luzon instituted before the Court of Tax Appeals a judicial claim for refund of its first quarter
unutilized creditable input tax on March 30, 2005.
June 24, 2005, CE Luzon received the Commissioner of Internal Revenue's decision denying its claim for
refund of creditable input tax for the second quarter of 2003.
June 30, 2005, CE Luzon filed before the Court of Tax Appeals a judicial claim for refund of unutilized
creditable input tax for the second to fourth quarters of taxable year 2003.
In the Decision, the CTA partially granted CE Luzon claim. It ruled that both the administrative and judicial
claims of CE Luzon were brought within the two (2) year prescriptive period. However, the CTA allowed
only P22,647,638.47 to be refunded as CE Luzon was only able to substantiate the said amount.
CE Luzon and CIR then filed their respective Petitions for Review before the Court of Tax Appeals En
Banc. CTA En Banc partially granted CE Luzon’s petition, it ordered the CIR to issue a tax credit
certificate or to refund CE Luzon the amount of 23, 489,514.64 representing CE Luzon’s duly
substantiated creditable input tax for taxable year 2003.
However, the CTA En banc rendered an Amended Decision setting aside its first decision. It ruled that
CE Luzon failed to observe the 120-day period under 112 (C) of the NIRC. Further, that CE Luzon’s
judicial claims were prematurely filed, it should have waited either for the CIR to render a decision or for
the 120-day period to expire before instituting its judicial claim for refund.
CE Luzon moved for partial consideration, thereafter the CTA En Banc rendered a Second Amended
Decision partially granting CE Luzon’s claim but only for the second quarter of taxable year 2003 and
only up to the extent of P3, 764,386.47.
Both CE Luzon and CIR filed Petition for review and were consolidated.
CE Luzon contends that:
1. Its judicial claims for refund of input VAT attributable to its zero-rated sales were timely filed,
since the two (2) year prescriptive period under Section 229 of the NIRC governs both the
administrative and judicial claims for refund of creditable input tax.
2. That the prescriptive periods in Section 112 (c) of the NIRC are merely permissive, it should yield
to Section 229. Moreover, Section 112 (c) does not state that a taxpayer is barred from filling a
judicial claim for non-compliance with the 120-day period.
On the other hand, the CIR argues that:
1. Sections 112 (c) and 229 of the NIRC need not be harmonized because they are clear and
explicit. The tax covered in Section 112 is different from the tax in Section 229. Section 112(C)
covers unutilized input tax. In contrast, Section 229 pertains to national internal revenue tax that
is erroneously or illegally collected.
Page 9 of 148
ISSUE:
2. Whether CE Luzon’s judicial claims for refund of input Value Added Tax for taxable year 2003
were filed within the prescriptive period.
3. Whether CE Luzon is entitled to refund of input VAT for the second quarter of taxable year 2003.
RULING:
No. Only the CE Luzon’s second quarter claims was filed on time.
Its claims for refund of creditable input tax for the first, third and fourth quarters of taxable year 2003 were
filed prematurely. It did not wait for the Commissioner of Internal Revenue to render a decision or for the
120-day period to lapse before elevating its judicial claim with Court of Tax Appeals.
Excess input tax or creditable input tax is not an erroneously, excessively, or illegally collected tax. Hence,
it is Section 112(C) and not Section 229 of the National Internal Revenue Code that governs claims for
refund of creditable input tax.
Section 229 of the National Internal Revenue Code, in relation to Section 204(C), pertains to the recovery
of excessively, erroneously, or illegally collected national internal revenue tax. The procedure outlined
under Section 229 provides that a claim for refund of excessively or erroneously collected taxes should be
made within two (2) years from the date the taxes are paid. Both the administrative and judicial claims
should be brought within the two (2)-year prescriptive period. Otherwise, they shall forever be barred.
However, Section 229 presupposes that the taxes sought to be refunded were wrongfully paid.
It is unnecessary to construe and harmonize Sections 112(C) and 229 of the National Internal Revenue
Code. Excess input tax or creditable input tax is not an excessively, erroneously, or illegally
collected taxbecause the taxpayer pays the proper amount of input tax at the time it is collected. That a
VAT-registered taxpayer incurs excess input tax does not mean that it was wrongfully or erroneously paid.
It simply means that the input tax is greater than the output tax, entitling the taxpayer to carry over the
excess input tax to the succeeding taxable quarters. If the excess input tax is derived from zero-rated or
effectively zero-rated transactions, the taxpayer may either seek a refund of the excess or apply the
excess against its other internal revenue tax.
Considering that creditable input tax is not an excessively, erroneously, or illegally collected tax, Section
112(A) and (C) of the National Internal Revenue Code govern: In case of full or partial denial of the claim
for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within
the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the
decision denying the claim or after the expiration of the one hundred twenty day-period, appeal the
decision or the unacted claim with the Court of Tax Appeals.
Section 112(C) of the National Internal Revenue Code provides two (2) possible scenarios.
1. First, is when the Commissioner of Internal Revenue denies the administrative claim for refund
within 120 days.
2. Second is when the Commissioner of Internal Revenue fails to act within 120 days.
Taxpayers must await either for the decision of the Commissioner of Internal Revenue or for the lapse of
120 days before filing their judicial claims with the Court of Tax Appeals. Failure to observe the 120-day
period renders the judicial claim premature.
However, despite its non-compliance with Section 112(C) of the National Internal Revenue Code, CE
Luzon's judicial claims are shielded from the vice of prematurity. It relied on the Bureau of Internal
Revenue Ruling DA-489-03, which expressly states that "a taxpayer-claimant need not wait for the lapse
of the 120-day period before it could seek judicial relief with the [Court of Tax Appeals] by way of a
Petition for Review."
The case is remanded to the Court of Tax Appeals for the proper computation of creditable input tax to
which CE Luzon is entitled.
Commissioner of Internal Revenue vs. Lancaster Philippines, Inc.
G.R. No. 183408. July 12, 2017
ANTECEDENTS:
In 1999, the Bureau of Internal Revenue (BIR) issued a Letter of Authority (LOA) No. 00012289
authorizing its revenue officers to examine Lancaster's books of accounts and other accounting records
for all internal revenue taxes due from taxable year 1998 to an unspecified date.
After the conduct of an examination the BIR issued a Preliminary Assessment Notice (PAN) which cited
Lancaster for:
1. Overstatement of its purchases for the fiscal year April 1998-1999;
2. Non-compliance with the Generally Accepted Accounting Principle (GAAP) for proper matching
of cost and revenue.
More concretely, the BIR disallowed the purchases of tobacco from farmers covered by Purchase Invoice
Vouchers for the month of February to March 1998 as deductions against income for the fiscal year of
April 1998- March 1999, amounting to P11, 496, 770.18.
Lancaster replied to the PAN, contending:
1. For the past decades it has used an entire “tobacco-cropping season” to determine its total
purchases covering a one (1) year period, (October 1- September 30 of the following year) as
against its fiscal year(April 1-March 31 of the following year);
2. That it has been adopting the six (6) month timing difference to conform to the matching of cost
and revenue and that it has long been installed as part of the company’s system and consistently
applied in its accounting books.
It maintained that the situation of farmers engaged in producing tobacco, like Lancaster is unique, that the
cost is taken of a different period and posted in the year in which the gross income from the crop is
realized. Lancaster, concluded that it correctly posted the subject purchases in the fiscal year ending
March 1999 as it was only in this year that the gross income from the crop was realized.
Lancaster filed a petition for review before CTA, the latter granted the petition and ordered the
cancellation and withdrawal of the deficiency assessment issued against Lancaster.
Hence, this Petition.
ISSUE:
4. Whether the revenue officers exceeded their authority to investigate the period not covered by
their Letter of Authority?
Page 10 of 148
 5. Whether CTA erred in ordering petitioner to cancel and withdraw the deficiency assessment
issued against Respondent?
RULING:
The BIR revenue officers had exceeded their
authority.
The audit proceed normally commences with the issuance by the CIR of a Letter of Authority. The LOA
gives notice to the taxpayer that it is under investigation for possible deficiency tax assessments; at the
same time, it authorizes or empowers a designated revenue officer to examine, verify and scrutinize a
taxpayer’s books and records, in relation to internal revenue tax liabilities for a particular period. In the
assailed decision of CTA Division, the trial court observed that LOA No. 00012289 authorized the BIR
officers to examine the books of account of Lancaster for the taxable year 1998 only, or since Lancaster
adopted fiscal year, for the period April 1 1997 to March 31, 1998. However, the deficiency income tax
assessment which the BIR eventually issued against Lancaster was based on the disallowance of
expenses reported in fiscal year 1999, or the period of April 1 1998 to March 31 1999. The taxable year
covered by the assessment being outside of the period specified in the LOA in the case, the assessment
issued against Lancaster is, therefore, void.
The CTA En Banc correctly sustained the order
cancelling and withdrawing the deficiency tax
assessment.
An accounting method is a “set of rules for determining when and how to report income and deductions.
Provisions under Chapter VIII of the NIRC, enumerate methods of accounting that the law expressly
recognizes, to wit: (1) Cash Basis Method; (2) Accrual Method; (3) Installment Method; (4) Percentage of
completion Method; and (5) Other accounting methods.
Other methods approved by the CIR, even when not expressly mentioned in the NIRC, may be adopted if
such method would enable the taxpayer to properly reflect its income. Section 43 of the NIRC authorizes
the CIR to allow the use of a method of accounting that in its opinion would clearly reflect the income of
the taxpayer. An example of such method not expressly mentioned in the NIRC, but duly approved by the
CIR, is the “CROP METHOD OF ACCOUNTING” authorized under RAM No. 2-95.The crop method
recognizes that the harvesting and selling of crops do not fall within the same year that they are planted or
grown. The rule enjoins the recognition of the expense (or the deduction of the cost) of crop production in
the year that the crops are sold (when income is realized).
In the present case, the Court find it wholly justifiable for the Lancaster as a business engaged in the
production and marketing of tobacco to adopt the crop method. Considering the crop year of Lancaster
starts from October – September of the following year, it follows that all of its expenses in the crop
production made within the crop year starting from October 1997- September 1998, including February
and March 1998 purchases covered by the purchase vouchers, hence were rightfully deductible for
income tax purposes in the year when the gross income from the crop are realized.
Asia Trust Development Bank Inc., vs. Commissioner of Internal Revenue
G.R. No. 201530. April 19, 2017
ANTECEDENTS:
Asiatrust Development Bank Inc. (Asiatrsut), received from the Commissioner of Internal Revenue (CIR)
three (3) Formal Letter of Demand (FLD) with assessment Notices of deficiency income tax, documentary
stamp tax (DST) - regular, DST - industry issue, final withholding tax, expanded withholding tax, and fringe
benefits tax issued against it by the CIR for the fiscal years ending June 30, 1996, 1997 and 1998,
respectively.
Asiatrust timely protested the assessment notices. Due to the inaction of the CIR on the protest, it filed a
Petition for Review before the CTA praying for the cancellation of the tax assessment. However,
sometime on December 28, 2001, the CIR issued a new assessment notice against Asiatrust. On the
same day, the latter partially paid deficiency tax assessments thus still leaving a balance.
During the trial, Asiatrust manifested that it availed of the Tax Abatement Program for its deficiency final
withholding tax for the fiscal years ending June 30, 1996 and 1998.
CTA Division rendered a Decision partially granting the Petition. It declared void the tax assessments for
the fiscal year ending June 30, 1996 for having been issued beyond the three (3) year prescriptive period.
However, due to the failure of Asiatrust to presentdocumentary and testimonial evidence to prove its
availment of the Tax Abatement Program it is still liable for the fiscal years ending June 30, 1997 and
1998.
The CTA Division refused to consider Asiatrust's availment of the Tax Abatement Program due to its
failure to submit a termination letter from the BIR. Asiatrust, however insisted that the Certification issued
by the BIR is sufficient proof of its availment of the Tax Abatement Program, considering that the CIR,
despite Asiatrust’s request, has not yet issued a termination letter.
On appeal, CTA En banc denied the same. It sustained the ruling of the CTA Division that in the absence
of a termination letter, it cannot be established that Asiatrust validly availed of the Tax Abatement
Program. As to the Certification issued by the BIR, the CTA En Banc noted that it only covers the fiscal
year ending June 30, 1996. As to the letter issued by RDO Nacar and the various BIR Tax Payment
Deposit Slips, the CTA En Banc pointed out that these have no probative value because these were not
authenticated nor formally offered in evidence and are mere photocopies of the purported
documents. Hence, this petition.
ISSUE:
1. Whether the tax assessments on Asiatrust’s final withholding for fiscal year ending June 30, 1998
was closed and terminated by reason of its application for tax abatement.
RULING:
NO. An application for tax abatement is
considered approved only upon the issuance of
a termination letter.
Section 204(B) pf the NIRC empowers the CIR to abate or cancel a tax liability. On September 27, 2006,
the BIR issued RR No. 15-06 prescribing the guidelines on the implementation of the one-time
administrative abatement of all penalties/ surcharges and interest on delinquent accounts and
assessments as of June 30, 2006. Based on the guidelines, the last step in the tax abatement process is
the issuance of the termination letter.
Page 11 of 148
The presentation of the termination letter is essential as it proves that the taxpayer's applicationfor should be reckoned not from April 25, 2001 when it remitted the tax to the BIR, but rather, from the time it
tax abatement has been approved. Thus, without a termination letter, a tax assessment cannot be filed its Final Adjustment Return or Annual Income Tax Return for the taxable year of 2001, or in April
considered closed and terminated. 2002, as it was only at that time when its right to a refund was ascertained.
In this case, Asiatrust failed to present a termination letter from the BIR. Instead, it presented a
Certification issued by the BIR to prove that it availed of the Tax Abatement Program and paid the basic ISSUE:
tax. It also attached copies of its BIR Tax Payment Deposit Slips and a letter issued by RDO Nacar.
These documents, however, do not prove that Asiatrust's application for tax abatement has been 6. Whether Metrobank’s claim for refund relative to its March 2001 final tax had already prescribed.
approved. If at all, these documents only prove Asiatrust's payment of basic taxes, which is not a ground
to consider its deficiency tax assessment closed and terminated.
Since no termination letter has been issued by the BIR, there is no reason for the Court to consider as
closed and terminated the tax assessment on Asiatrust's final withholding tax for fiscal year ending June RULING:
30, 1998. Asiatrust's application for tax abatement will be deemed approved only upon the issuance of a Metrobank’s claim for refund had already prescribed.
termination letter, and only then will the deficiency tax assessment be considered closed and terminated. Citing Section 204 in relation to Section 229 of the National Internal Revenue Code (NIRC), the Court
However, in case Asiatrust's application for tax abatement is denied, any payment made by it would be ruled that:
applied to its outstanding tax liability. For this reason, Asiatrust's allegation of double taxation must also
fail. a. A claimant for refund must first file an administrative claim for refund before the CIR,
prior to filing a judicial claim before the CTA;
Metropolitan Bank & Trust Company vs. The Commissioner of Internal Revenue b. Both the administrative and judicial claims for refund should be filed within the two (2)
G.R. No. 182582. April 17, 2017 year prescriptive period indicated therein;
c. that the claimant is allowed to file the latter even without waiting for the resolution of
ANTECEDENTS: the former in order to prevent the forfeiture of its claim through prescription.
Solidbank Corporation (Solidbank) entered into an agreement with Luzon Hydro Corporation (LHC),
In this regard, case law states that “the primary purpose of filing an administrative claim is to serve as a
whereby the former extended to the latter a foreign currency denominated loan. Pursuant to the
notice of warning to the CIR that court action would followunless the tax or penalty alleged to have been
Agreement, LHC is bound to shoulder all the corresponding internal revenue taxes required by law to be
collected erroneously or illegally is refunded.
deducted or withheld on the said loan, as well as the filing of tax returns and remittance of the taxes
Further, the Court said that final withholding taxes are considered as full and final payment of the income
withheld to the Bureau of Internal Revenue (BIR).
tax due, and thus, are not subject to any adjustments. Thus, the two (2)-year prescriptive period
In 2000, Metrobank acquired Solidbank, and consequently, assumed the latter’s rights and obligations
commences to run from the time the refund is ascertained, i.e., the date such tax was paid, and not upon
under the aforesaid Agreement.
the discovery by the taxpayer of the erroneous or excessive payment of taxes.
On March 2, 2001 and October 31, 2001, LHC paid Metrobank the total amounts of US$1,538,122.17 and
In the case at bar, it is undisputed that Metrobank’s final withholding tax liability in March 2001 was
US$1,333,268.31, respectively. Pursuant to the Agreement, LHC withheld, and eventually paid to the BIR,
remitted to the BIR on April 25, 2001. As such, it only had until April 25, 2003 to file its administrative and
the ten percent (10%) final tax on the interest portions of the its payments to Metrobank, on the same
judicial claims for refund. However, while Metrobank’s administrative claim was filed on December 27,
months that the respective payments were made. In sum, LHC remitted a total of US$106,178.69,or its
2002, its corresponding judicial claim was only filed on September 10, 2003. Therefore, Metrobank’s
Philippine Peso equivalent of P5,296,773.05,9 as evidenced byLHC’s Schedules of Final Tax and Monthly
claim for refund had clearly prescribed.
Remittance Returns for the said months.
AUSTRIA, Jane Zahren P.
According to Metrobank, it mistakenly remitted the aforesaid amounts to the BIR as well, thus:
2014-0132
1. On December 27, 2002, it filed a letter to the BIR requesting for the refund (administrative claim)
SECRETARY OF FINANCE CESAR V. PURISIMA AND COMMISSIONER OF INTERNAL REVENUE
thereof.
KIM S. JACINTO-HENARES VS. PHILIPPINE TOBBACCO INSTITUTE, INC.
2. On September 10, 2003, in view of respondent the Commissioner of Internal Revenue’s (CIR)
G.R. No. 210251, APRIL 17, 2017
inaction, Metrobank filed its judicial claim for refund via a petition for review filed before the CTA
FACTS:
In defense, the CIR averred that the claim for refundmust be filed within the prescriptive period laid down
by law which Metrobank failed to establish. Section 5 of RA 10351 (Sin Tax Reform Law), which amended Section 145(C) of the NIRC,
Metrobank insists that the filing of its administrative and judicial claims on December 27, 2002 and increased the excise tax rate of cigars and cigarettes and allowed cigarettes packed by machine to be
September 10, 2003, respectively, were well-within the two (2)-year prescriptive period – that the period packed in other packaging combinations of not more than 20.

Page 12 of 148
 On 21 December 2012, the Secretary of Finance, upon the recommendation of the
Commissioner of Internal Revenue (CIR), issued RR 17-2012. Section 11 of RR 17-2012 imposes an
excise tax on individual cigarette pouches of 5's and 10's even if they are bundled or packed in packaging
combinations not exceeding 20 cigarettes.
PMFTC, Inc., a member of respondent Philippine Tobacco Institute, Inc. (PTI), paid the excise
taxes required under RA 10351, RR 17-2012, and RMC 90-2012 in order to withdraw cigarettes from its
manufacturing facilities. However, on 16 January 2012, PMFTC wrote the CIR prior to the payment of the
excise taxes stating that payment was being made under protest and without prejudice to its right to
question said issuances through remedies available under the law.
As a consequence, on 26 February 2013, PTI filed a petition for declaratory relief with an
application for writ of preliminary injunction with the RTC. PTI sought to have RR 17-2012 and RMC 90-
2012 declared null and void for allegedly violating the Constitution and imposing tax rates not authorized
by RA 10351. PTI stated that the excise tax rate of either P12 or P25 under RA 10351 should be imposed
only on cigarettes packed by machine in packs of 20's or packaging combinations of 20's and should not
be imposed on cigarette pouches of 5's and 10's. RTC ruled in favor of respondent and declared some
provisions of RR 17-2012 and RMC 90-2012 null and void for allegedly violating the Constitution and
imposing tax rates not authorized by RA 10351. Hence, this petition.
ISSUE:
Whether or not excise tax shall be imposed on cigarettes packaging combinations of 5’s, 10’s,
etc. not exceeding 20 cigarette sticks packed by machine. (No)
RULING:
No. The confusion set in when RA 10351 amended the NIRC once again in 2012 and introduced
packaging combinations to cigarettes packed by machine, providing that "duly registered cigarettes
packed by machine shall only be packed in twenties and other packaging combinations of not more than
twenty."
Thereafter, RR 17-2012 followed, where the BIR, in Section 11, reiterated the provision in the
NIRC that cigarettes shall only be packed in 20's and in other packaging combinations which shall not
exceed 20 sticks. However, the BIR added "x xx That, in case of cigarettes packed in not more than
twenty sticks, whether in 5 sticks, 10 sticks and other packaging combinations below 20 sticks, the net
retail price of each individual package of 5s, 10s, etc. shall be the basis of imposing the tax rate x xx."
The basis of RR 17-2012 is RA 10351. RA 10351, in amending Section 145(C) of the NIRC
provided that "duly registered cigarettes packed by machine shall only be packed in twenties and other
packaging combinations of not more than twenty." However, nowhere is it mentioned that the other
packaging combinations of not more than 20 will be imposed individual tax rates based on its different
packages of 5's, 10's, etc. In such a case, a cigarette pack of 20's will only be subjected to an excise tax
rate of P12.00 per pack as opposed to packaging combinations of 5's or 10's which will be subjected to a
higher excise tax rate of P24.00 for 10's and P48.00 for 5's.
xxxxxxxxx
From the above discussion, it can be gleaned that the lawmakers intended to impose the excise
tax on every pack of cigarettes that come in 20 sticks. Individual pouches or packaging combinations of
5's and 10's for retail purposes are allowed and will be subjected to the same excise tax rate as long as
they are bundled together by not more than 20 sticks. Thus, by issuing Section 11 of RR 17-2012 and
Annex "D-1" on Cigarettes Packed by Machine of RMC 90-2012, the BIR went beyond the express
provisions of RA 10351.
In the present case, a reading of Section 11 of RR 17-2012 and Annex "D-1" on Cigarettes
Packed by Machine of RMC 90-2012 reveals that they are not simply regulations to implement RA 10351.
They are amendatory provisions which require cigarette manufacturers to be liable to pay for more tax
than the law, RA 10351, allows. The BIR, in issuing these revenue regulations, created an additional tax
liability for packaging combinations smaller than 20 cigarette sticks. In so doing, the BIR amended the law,
an act beyond the power of the BIR to do.
In sum, we agree with the ruling of the RTC that Section 11 of RR 17-2012 and Annex "D-1" on
Cigarettes Packed by Machine of RMC 90-2012 are null and void. Excise tax on cigarettes packed by
machine shall be imposed on the packaging combination of 20 cigarette sticks as a whole and not to
individual packaging combinations or pouches of 5's, 10's, etc.
MEDICARD PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 222743, April 05, 2017
FACTS:
MEDICARD is a Health Maintenance Organization (HMO) that provides prepaid health and
medical insurance coverage to its clients. Individuals enrolled in its health care programs pay an annual
membership fee and are entitled to various preventive, diagnostic and curative medical services provided
by duly licensed physicians, specialists and other professional technical staff participating in the group
practice health delivery system at a hospital or clinic owned, operated or accredited by it.
However, upon finding some discrepancies between MEDICARD's Income Tax Returns (ITR)
and VAT Returns, the CIR informed MEDICARD and issued a Letter Notice (LN) No. 122-VT-06-00-00020
dated September 20, 2007. Subsequently, the CIR also issued a Preliminary Assessment Notice (PAN)
against MEDICARD for deficiency VAT. A Memorandum dated December 10, 2007 was likewise issued
recommending the issuance of a Formal Assessment Notice (FAN) against MEDICARD.On January 4,
2008, MEDICARD received CIR's FAN dated December 10, 2007 for alleged deficiency VAT for taxable
year 2006 in the total amount of P196,614,476.69, inclusive of penalties.
The taxable base of HMOs for VAT purposes is its gross receipts without any deduction under
Section 4.108.3(k) of Revenue Regulation (RR) No. 16-2005.
Citing Commissioner of Internal Revenue v. Philippine Health Care Providers, Inc., the CIR
argued that since MEDICARD does not actually provide medical and/or hospital services, but merely
arranges for the same, its services are not VAT exempt.
In its defense,Medicard maintained the following:
Page 13 of 148
(1) the services it render is not limited merely to arranging for the provision of medical and/or hospital
services by hospitals and/or clinics but include actual and direct rendition of medical and laboratory
services; xxx
(3) the processing fees amounting to P11.5 Million should be excluded from gross receipts because P5.6
Million of which represent advances for professional fees due from clients which were paid by MEDICARD
while the remainder was already previously subjected to VAT;
(4) the professional fees in the amount of P11 Million should also be excluded because it represents the
amount of medical services actually and directly rendered by MEDICARD and/or its subsidiary company;
and
xxx
On February 14, 2008, the CIR issued a Tax Verification Notice authorizing Revenue Officer
RomualdoPlocios to verify the supporting documents of MEDICARD's Protest. MEDICARD also submitted
additional supporting documentary evidence in aid of its Protest thru a letter dated March 18, 2008.
On June 19, 2009, MEDICARD received CIR's Final Decision on Disputed Assessment dated
May 15, 2009, denying MEDICARD's protest.
Accordingly, Petition for Review was filed before the CTA reiterating its position before the CIR,
unfortunately, CTA rendered a Decision affirming with modifications the CIR’s deficiency VAT assessment
covering taxable year 2006.
Undaunted, MEDICARD filed a Motion for Reconsideration but it was denied. Hence,
MEDICARD elevated the matter to the CTA Enbanc.Likewise, a Decision was rendered against
MEDICARD. Thereafter, MEDICARD filed its Motion for Reconsideration which was denied. Hence,
MEDICARD now seeks to reverse and set aside the aforementioned decision.
ISSUE:
1. Whether the absence of the Letter of Authority is fatal; (YES) and
2. Whether the amounts that MEDICARD earmarked and eventually paid to the medical service
providers should still form part of its gross receipts for VAT purposes. (NO)
RULING:
1. THE ABSENCE OF AN LOA VIOLATED MEDICARD’S RIGHT TO DUE PROCESS
An LOA is the authority given to the appropriate revenue officer assigned to perform assessment
functions. It empowers or enables said revenue officer to examine the books of account and
other accounting records of a taxpayer for the purpose of collecting the correct amount of tax.
Section 6 of the NIRC clearly provides as follows:
SEC. 6. Power of the Commissioner to Make Assessments and Prescribe Additional
Requirements for Tax Administration and Enforcement. –
(A) Examination of Return and Determination of Tax Due. – After a return has been filed as
required under the provisions of this Code, the Commissioner or his duly authorized
representative may authorize the examination of any taxpayer and the assessment of the correct
amount of tax: Provided, however, That failure to file a return shall not prevent the Commissioner
from authorizing the examination of any taxpayer.
Among the objectives in the issuance of RMO No. 32-2005 is to prescribe procedure in the
resolution of LN discrepancies, conversion of LNs to LOAs and assessment and collection of
deficiency taxes.
IV. POLICIES AND GUIDELINES
x xxx
In the event a taxpayer who has been issued an LN refutes the discrepancy shown in the LN,
the concerned taxpayer will be given an opportunity to reconcile its records with those of the BIR
within One Hundred and Twenty (120) days from the date of the issuance of the LN. However,
the subject taxpayer shall no longer be entitled to the abatement of interest and penalties after
the lapse of the sixty (60)-day period from the LN issuance.
In case the above discrepancies remained unresolved at the end of the One Hundred and
Twenty (120)-day period, the revenue officer (RO) assigned to handle the LN shall
recommend the issuance of [LOA] to replace the LN. The head of the concerned
investigating office shall submit a summary list of LNs for conversion to LAs (using the herein
prescribed format in Annex "E" hereof) to the OACIR-LTS / ORD for the preparation of the
corresponding LAs with the notation "This LA cancels LN No. ___________"
In this case, there is no dispute that no LOA was issued prior to the issuance of a PAN and FAN
against MEDICARD. Therefore no LOA was also served on MEDICARD. The LN that was issued
earlier was also not converted into an LOA contrary to the above quoted provision. Surprisingly,
the CIR did not even dispute the applicability of the above provision of RMO 32-2005 in the
present case which is clear and unequivocal on the necessity of an LOA for the assessment
proceeding to be valid. Hence, the CTA's disregard of MEDICARD's right to due process warrant
the reversal of the assailed decision and resolution. As not having authority to examine
MEDICARD in the first place, the assessment issued by the CIR is inescapably void.
2. The amounts earmarked andeventually paid by MEDICARD tothe medical service providers do
notform part of gross receipts for VATpurposes
Since an HMO like MEDICARD is primarily engaged in arranging for coverage or designated
managed care services that are needed by plan holders/members for fixed prepaid membership
fees and for a specified period of time, then MEDICARD is principally engaged in the sale of
services. Its VAT base and corresponding liability is, thus, determined under Section 108(A) of
the Tax Code, as amended by Republic Act No. 9337.
Prior to RR No. 16-2005, an HMO, like a pre-need company, is treated for VAT purposes as a
dealer in securities whose gross receipts is the amount actually received as contract price
without allowing any deduction from the gross receipts. This restrictive tenor changed under RR
No. 16-2005. Under this RR, an HM:O's gross receipts and gross receipts in general were
defined, thus:
Section 4.108-3. x xx
x xxx
HMO's gross receipts shall be the total amount of money or its equivalent representing the
service fee actually or constructively received during the taxable period for the services
performed or to be performed for another person, excluding the value-added tax. The
Page 14 of 148
compensation for their services representing their service fee, is presumed to be the total amount
received as enrollment fee from their members plus other charges received.
Section 4.108-4. x xx. "Gross receipts" refers to the total amount of money or its equivalent
representing the contract price, compensation, service fee, rental or royalty, including the amount
charged for materials supplied with the services and deposits applied as payments for services
rendered, and advance payments actually or constructively received during the taxable period for
the services performed or to be performed for another person, excluding the VAT.
The CTA en banc overlooked that the definition of gross receipts under RR No. 16-2005 merely
presumed that the amount received by an HMO as membership fee is the HMO's compensation
for their services. As a mere presumption, an HMO is, thus, allowed to establish that a portion of
the amount it received as membership fee does NOT actually compensate it but some other
person, which in this case are the medical service providers themselves.Moreover, Congress
limited the scope of the term gross receipts for VAT purposes only to the amount that the
taxpayer received for the services it performed or to the amount it received as advance payment
for the services it will render in the future for another person.
Thus, in the course of its business as such, MEDICARD members can either avail of medical
services from MEDICARD's accredited healthcare providers or directly from MEDICARD.
In the former, MEDICARD members obviously knew that beyond the agreement to pre-arrange
the healthcare needs of its members, MEDICARD would not actually be providing the actual
healthcare service.
Thus, based on industry practice, MEDICARD informs its would-be member beforehand that
80% of the amount would be earmarked for medical utilization and only the remaining 20%
comprises its service fee. In the latter case, MEDICARD's sale of its services is exempt from VAT
under Section 109(G).
MEDICARD's act of earmarking or allocating 80% of the amount it received as membership fee
at the time of payment that weakens the ownership imputed to it.
By earmarking or allocating 80% of the amount, MEDICARD unequivocally recognizes that its
possession of the funds is not in the concept of owner but as a mere administrator of the same.
For this reason, at most, MEDICARD's right in relation to these amounts is a mere inchoate
owner which would ripen into actual ownership if, and only if, there is underutilization of the
membership fees at the end of the fiscal year.
Prior to that, MEDICARD is bound to pay from the amounts it had allocated as an administrator
once its members avail of the medical services of MEDICARD's healthcare providers.
It is significant to note in this regard that MEDICARD established that upon receipt of payment of
membership fee it actually issued two official receipts, one pertaining to the VATable portion,
representing compensation for its services, and the other represents the non-vatable portion
pertaining to the amount earmarked for medical utilization.
Therefore, the absence of an actual and physical segregation of the amounts pertaining to two
different kinds of fees cannot arbitrarily disqualify MEDICARD from rebutting the presumption
under the law and from proving that indeed services were rendered by its healthcare providers
for which it paid the amount it sought to be excluded from its gross receipts.
HON. KIM S. JACINTO-HENARES, in her official capacity as Commissioner of the BIR VS. ST.
PAUL COLLEGE OF MAKATI
G.R. No. 215383, March 08, 2017
FACTS:
Respondent St. Paul College of Makati (SPCM) isa non-stock, non-profit educational institution
organized and existing under Philippine laws, filed a Civil Action to Declare Unconstitutional [Bureau of
Internal Revenue] RMO No. 20-2013, "Prescribing the Policies and Guidelines in the Issuance of Tax
Exemption Rulings to Qualified Non-Stock, Non-Profit Corporations and Associations under Section 30 of
the National Internal Revenue Code of 1997, as Amended."
SPCM alleged that "RMO No. 20-2013 imposes as a prerequisite to the enjoyment by non-stock,
non-profit educational institutions of the privilege of tax exemption under Sec. 4(3) of Article XIV of the
Constitution both a registration and approval requirement, i.e., that they submit an application for tax
exemption to the BIR subject to approval by CIR in the form of a Tax Exemption Ruling (TER) which is
valid for a period of [three] years and subject to renewal." According to SPCM, RMO No. 20-2013 adds a
prerequisite to the requirement under Department of Finance Order No. 137-87, and makes failure to file
an annual information return a ground for a non-stock, non- profit educational institution to "automatically
lose its income tax-exempt status."
RTC ruled in favor of SPCM and declared RMO No. 20-2013 unconstitutional. It held that "by
imposing the x xx [prerequisites alleged by SPCM,] and if not complied with by non-stock, non-profit
educational institutions, [RMO No. 20-2013 serves] as diminution of the constitutional privilege, which
even Congress cannot diminish by legislation, and thus more so by the [CIR] who merely exercise[s]
quasi-legislative function."
ISSUE:
Whether RMO No. 20-2013 is unconstitutional as it imposes a prerequisite before a non-stock,
non-profit educational institution may avail of the tax exemption under Sec. 4 (3), Article XIV of the
Constitution and adds to the requirement under Department of Finance Order No. 137-87. (Yes)
RULING:
Yes. "Sec. 30. Exempt from Tax on Corporations. - The following organizations shall not be taxed
under this Title in respect to income received by them as such:x x x (H) A non-stock and non-profit
educational institution; x xx."
It is clear and unmistakable from the aforequoted constitutional provision that non-stock, non-
profit educational institutions are constitutionally exempt from tax on all revenues derived in pursuance of
its purpose as an educational institution and used actually, directly and exclusively for educational
purposes. This constitutional exemption gives the non-stock, non-profit educational institutions a distinct
Page 15 of 148
character. And for the constitutional exemption to be enjoyed, jurisprudence and tax rulings affirm the
doctrinal rule that there are only two requisites: (1) The school must be non-stock and non-profit; and (2)
The income is actually, directly and exclusively used for educational purposes. There are no other
conditions and limitations.
In this light, the constitutional conferral of tax exemption upon non-stock and non-profit
educational institutions should not be implemented or interpreted in such a manner that will defeat or
diminish the intent and language of the Constitution.
However, subsequently, RMO No. 44-2016 clarified that non-stock, non-profit educational
institutions are excluded from the coverage of RMO No. 20-2013. Consequently, the RTC Decision no
longer stands, and there is no longer any practical value in resolving the issues raised in this petition. SC
ruled for the denial of the petition on the ground of mootness.
COMMISSIONER OF INTERNAL REVENUE AND COMMISSIONER OF CUSTOMS VS. PHILIPPINE
AIRLINES, INC.
G.R. No. 215705-07, February 22, 2017
FACTS:
The controversy in the instant case, which gave rise to the present petition for review on
certiorari, revolves around the interpretation of the provisions of Presidential Decree No. 1590 (PD 1590),
otherwise known as "An Act Granting a New Franchise to Philippine Airlines, Inc. to Establish, Operate,
and Maintain Air Transport Services in the Philippines and Other Countries" vis-a-vis Republic Act No.
9334 (RA 9334), otherwise known as "An Act Increasing the Excise Tax Rates Imposed on Alcohol and
Tobacco Products, Amending for the Purpose Sections 131, 141, 142, 145, and 228 of the National
Internal Revenue Code of 1997." PD 1590 was enacted on June 11, 1978, while RA 9334 took effect on
January 1, 2005.
The amendment increased the rates of excise tax imposed on alcohol and tobacco products. It also
removed the exemption from taxes, duties and charges, including excise taxes, on importations of cigars,
cigarettes, distilled spirits, wines and fermented liquor into the Philippines.
Thereafter, PAL's importations of alcohol and tobacco products which were intended for use in its
commissary supplies during international flights, were subjected to excise taxes. For the said imported
articles, which arrived in Manila between October 3, 2007 and December 22, 2007, PAL was assessed
excise taxes amounting to a total of P6,329,735.21.
On September 5, 2008, PAL paid under protest. On March 5, 2009, PAL filed an administrative claim for
refund of the above excise taxes it paid with the Bureau of Internal Revenue (BIR) contending that it is
entitled to tax privileges under Section 13 of PD 1590.
ISSUE:
Whether or not PAL’s alcohol and tobacco importations for its commissary supplies are subject to
excise tax. (Alcohol - NO ;tobacco - YES)
RULING:
The Court affirmed the decision of the CTA Second Division which found that PAL was able to
sufficiently prove its exemption from the payment of excise taxes pertaining to its importation of alcoholic
products and since it already paid the disputed excise taxes on the subject importation, it is entitled to
refund. However, the tax court ruled that, with respect to its subject importation of tobacco products, PAL
failed to discharge its burden of proving that the said product were not locally available in reasonable
quantity, quality or price, in accordance with the requirements of the law. Thus, it is not entitled to refund
for the excise taxes paid on such importation.
Indeed, as things stand, PD 1590 has not been revoked by the NIRC of 1997, as amended. Or to
be more precise, the tax privilege of PAL provided in Sec. 13 of PD 1590 has not been revoked by Sec.
131 of the NIRC of 1997, as amended by Sec. 6 of RA 9334.While it is true that Sec. 6 of RA 9334 as
previously quoted states that "the provisions of any special or general law to the contrary
notwithstanding," such phrase left alone cannot be considered as an express repeal of the exemptions
granted under PAL's franchise because it fails to specifically identify PD 1590 as one of the acts intended
to be repealed.
Petitioners in the present petition again raise the issue regarding PAL's alleged failure to comply
with the conditions set by Section 13 of PD 1590 for its imported tobacco and alcohol products to be
exempt from excise tax. These conditions are: (1) such supplies are imported for the use of the franchisee
in its transport/non-transport operations and other incidental activities; and (2) they are not locally
available in reasonable quantity, quality and price. However, as this Court has previously held, the matter
as to PAL's supposed noncompliance with the conditions set by Section 13 of P.D. 1590 for its imported
supplies to be exempt from excise tax, are factual determinations that are best left to the CTA, which
found that PAL had, in fact, complied with the above conditions. The CTA is a highly specialized body that
reviews tax cases and conducts trial de novo. Thus, without any showing that the findings of the CTA are
unsupported by substantial evidence, its findings are binding on this Court.
COMMISSIONER OF INTERNAL REVENUE VS. ST. LUKE’S MEDICAL CENTER, INC.
G.R. No. 203514, February 13, 2017
FACTS:
On December 14, 2007, respondent SLMC was given assessment notice stating that the latter
incurred deficiency income tax under Sec. 27 (B) of 1997, NIRC.
SLMC filed with petitioner Commissioner of Internal Revenue (CIR) an administrative protestassailing the
assessments. SLMC claimed that as a non-stock, non-profit charitable and social welfare organization
under Section 30(E) and (G) of the 1997 NIRC, as amended, it is exempt from paying income tax.
SLMC received petitioner CIR's Final Decision on the Disputed Assessment dated April 9, 2008 increasing
the deficiency income for the taxable year 2005 tax to ₱82,419,522.21 and for the taxable year 2006 to
₱60,259,885.94
SLMC elevated the matter to the CTA via a Petition for Review. CTA rendered decision in favor of SLMC.
CIR moved for reconsideration but was denied. Thus, filing of an appeal before the CTA En Banc, which
affirmed the findings of CTA division. Motion for Reconsideration filed by CIR was denied, hence this
petition.
ISSUE:
Whether or not SLMC is exempt from payment of income tax. (YES)
RULING:
Page 16 of 148

Saint Luke’s Medical Center is liable for income tax under Section 27(B) of the 1997 NIRC
insofar as its revenues from paying patients are concerned.Section 27(B) of the NIRC does not remove
the income tax exemption of proprietary non profit hospitals under section 30 (E) and (G).
The effect of the introduction of Section 27 (B) is to subject the taxable income of two specific
institution namely, proprietary non-profit educational institutions and proprietary non-profit hospitals,
among the institution covered by Section 30, to the 10%preferential rate under section 27 (b) instead of
30% corporate rate under the last paragraph of Section 30 in relation to Section 27(A).
In 1998, St. Luke’s had total revenue of 1,730,367,965 from services to paying patients. It cannot
be disputed that a hospital which receives approximately 1.73 billion from paying patients is not an
institution ‘operated exclusively’ for charitable purposes.Clearly revenues from paying patients are income
received from ‘activities conducted for profit’.
The Court finds that St. Luke's is a corporation that is not 'operated exclusively' for charitable or
social welfare purposes insofar as its revenues from paying patients are concerned. This ruling is based
not only on a strict interpretation of a provision granting tax exemption, but also on the clear and plain text
of Section 30(E) and (G).
Section 30(E) and (G) of the NIRC requires that an institution be 'operated exclusively' for
charitable or social welfare purposes to be completely exempt from income tax.An institution under
Section 30(E) or (G) does not lose its tax exemption if it earns income from its for-profit activities. Such
income from for-profit activities, under the last paragraph of Section 30, is merely subject to income tax,
previously at the ordinary corporate rate but now at the preferential 10% rate pursuant to Section 27(B).
St. Luke's fails to meet the requirements under Section 30(E) and (G) of the NIRC to be
completely tax exempt from all its income. However, it remains a proprietary non-profit hospital under
Section 27(B) of the NIRC as long as it does not distribute any of its profits to its members and such
profits are reinvested pursuant to its corporate purposes. St. Luke's, as a proprietary non-profit hospital, is
entitled to the preferential tax rate of 10% on its net income from its for-profit activities.The Court finds that
SLMC is subject to 10% income tax insofar as its revenues from paying patients are concerned.
Sitel Philippines Corporation Vs. Commissioner of Internal Revenue;
G.R. No. 201326; February 8, 2017
This Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court filed by petitioner Sitel
Philippines Corporation (Sitel) against the Commissioner of Internal Revenue (CIR) seeks to reverse and
set aside the Decision dated November 11, 2011[2] and Resolution dated March 28, 2012[3] of the Court
of Tax Appeals (CTA) En Banc in CTA EB No. 644, which denied Sitel’s claim for refund of unutilized input
value-added tax (VAT) for the first to fourth quarters of taxable year 2004 for being prematurely filed.
Facts
Sitel, a corporation organized and extsting under the laws of the Philippines, is engaged in the business of
providing call center services from the Philippines to domestic and offshore businesses. It is registered
with the Bureau of Internal Revenue (BIR) as a VAT taxpayer, as well as with the Board of Investments on
pioneer status as a new information technology service firm in the field of call center.[4]
For the period from January 1, 2004 to December 31, 2004, Sitel filed with the BIR its Quarterly VAT
Returns as follows:
On March 28, 2006, Sitel filed separate formal claims for refund or issuance of tax credit with the One-
Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the Department of Finance for its
unutilized input VAT arising from domestic purchases of goods and services attributed to zero-rated
transactions and purchases/importations of capital goods for the 1st, 2nd, 3rd and 4th quarters of 2004 in
the aggregate amount of P23,093,899.59.
On March 30, 2006, Sitel filed a judicial claim for refund or tax credit via a petition for review before the
CTA, which was granted.
ISSUE: WHETHER OR NOT THE CLAIM FOR REFUND WAS FILED PREMATURED.
The records show that Sitel filed its administrative and judicial claim for refund on March 28, 2006 and
March 30, 2006, respectively, or after the issuance of BIR Ruling No. DA-489-03, but before the date
when Aichi was promulgated. Thus, even though Sitel filed its judicial claim prematurely, i.e., without
waiting for the expiration of the 120-day mandatory period, the CTA may still take cognizance of the case
because the claim was filed within the excepted period stated in San Roque. In other words, Sitel’s judicial
claim was deemed timely filed and should have not been dismissed by the CTA En Banc. Consequently,
the October 21, 2009 Decision of the CTA Division partially granting Sitel’s judicial claim for refund in the
reduced amount of P11,155,276.59, which is not subject of the instant appeal, should be reinstated. In this
regard, since the CIR did not appeal said decision to the CTA En Banc, the same is now considered final
and beyond this Court’s review.
G.R. No. 193381
COMMISSIONER OF INTERNAL REVENUE, Petitioner
vs.
APO CEMENT CORPORATION, Respondent
FACTS:
On September 1, 2003, the Bureau of Internal Revenue sent Apo Cement Corporation (Apo Cement) a
Final Assessment Notice (FAN) for deficiency taxes for the taxable year 1999, Apo Cement protested the
FAN. The Bureau issued the Final Decision on Disputed Assessment dated June 15, 2006 denying the
Apo Cement's protest.
In its Answer, the Commissioner of Internal Revenue admitted that Apo Cement had already paid the
deficiency assessments reflected in the Bureau's Final Decision on Disputed Assessment, except for the
documentary stamp taxes. The deficiency documentary stamp taxes were allegedly based on several real
property transactions of the corporation consisting of the assignment of several parcels of land with
mineral deposits to Apo Land and Quarry Corporation, a wholly owned subsidiary, and land acquisitions in
1999. According to the Commissioner, Apo Cement should have paid documentary stamp taxes based on
the zonal value of property with mineral/quarry content, not on the zonal value of regular residential
property.
On January 25, 2008, Apo Cement availed of the tax amnesty under Republic Act No. 9480, particularly
affecting the 1999 deficiency documentary stamp taxes.
ISSUE:
Page 17 of 148
The core issue is whether respondent had fully complied with all the requirements to avail of the tax
amnesty granted under Republic Act No. 9480.
HELD:
This Court has declared that submission of the documentary requirements and payment of the amnesty
tax is considered full compliance with Republic Act No. 9480 and the taxpayer can immediately enjoy the
immunities and privileges enumerated in Section 6 of the law.
The plain and straightforward conditions were obviously meant to encourage taxpayers to avail of the
amnesty program, thereby enhancing revenue administration and collection.
The Court explained that the documentary requirements and payment of the amnesty tax operate as a
suspensive condition, such that completion of these requirements entitles the taxpayer-applicant to
immediately enjoy the immunities and privileges under Republic Act No. 9480.
However, the Court further stated that Section 6 of the law contains a resolutory condition. Immunities and
privileges will cease to apply to taxpayers who, in their SALN, were proven to have understated their net
worth by 30% or more.
Thus, the amnesty granted under the law is revoked once the taxpayer is proven to have under-declared
his assets in his SALN by 30% or more.1âwphi1 Pursuant to Section 10 of the Tax Amnesty Law,
amnesty taxpayers who willfully understate their net worth shall not only be liable for perjury under the
Revised Penal Code, but, upon conviction, also subject to immediate tax fraud investigation in order to
collect all taxes due and to criminally prosecute for tax evasion.
Here, the requisites to overturn the presumption of correctness of respondent's 2005 SALN were not met.
Our judicial review under Rule 45 of the Rules of Court is confined only to errors of law and does not
extend to questions of fact. This Court is not a trier of facts. At any rate, petitioner's utter failure to refute
these material points constitutes an implied admission.
WHEREFORE, the Petition is DENIED.
G.R. No. 184450
JAIME N. SORIANO, MICHAEL VERNON M. GUERRERO, MARY ANN L. REYES, MARAH SHARYN
M. DE CASTRO and CRIS P. TENORIO, Petitioners,
vs.
SECRETARY OF FINANCE and the COMMISSIONER OF INTERNAL REVENUE, Respondents.
x-----------------------x
G.R. No. 184508
SENATOR MANUEL A. ROXAS, Petitioner,
vs.
MARGARITO B. TEVES, in his capacity as Secretary of the Department of Finance and LILIAN B.
HEFTI, in her capacity as Commissioner of the Bureau of Internal Revenue, Respondents.
x-----------------------x
G.R. No. 184538
TRADE UNION CONGRESS OF THE PHILIPPINES (TUCP), represented by its President,
DEMOCRITO T. MENDOZA, Petitioner,
vs.
MARGARITO B. TEVES, in his capacity as Secretary of the Department of Finance and LILIAN B.
HEFTI, in her capacity as Commissioner of the Bureau of Internal Revenue, Respondents.
x-----------------------x
G.R. No. 185234
SENATOR FRANCIS JOSEPH G. ESCUDERO, TAX MANAGEMENT ASSOCIATION OF THE
PHILIPPINES, INC. and ERNESTO G. EBRO, Petitioners,
vs.
MARGARITO B. TEVES, in his capacity as Secretary of the Department of Finance and SIXTO S.
ESQUIVIAS IV, in his capacity as Commissioner of the Bureau of Internal Revenue, Respondents.
DECISION
SERENO, CJ.:
Before us are consolidated Petitions for Certiorari, Prohibition and Mandamus, under Rule 65 of the 1997
Revised Rules of Court. These Petitions seek to nullify certain provisions of Revenue Regulation No. (RR)
10-2008. The RR was issued by the Bureau of Internal Revenue (BIR) on 24 September 2008 to
implement the provisions of Republic Act No. (R.A.) 9504. The law granted, among others, income tax
exemption for minimum wage earners (MWEs), as well as an increase in personal and additional
exemptions for individual taxpayers.
Petitioners assail the subject RR as an unauthorized departure from the legislative intent of R.A. 9504.
The regulation allegedly restricts the implementation of the MWEs income tax exemption only to the
period starting from 6 July 2008, instead of applying the exemption to the entire year 2008. They further
challenge the BIR's adoption of the prorated application of the new set of personal and additional
exemptions for taxable year 2008. They also contest the validity of the RR's alleged imposition of a
condition for the availment by MWEs of the exemption provided by R.A. 9504. Supposedly, in the event
they receive other benefits in excess of ₱30,000, they can no longer avail themselves of that exemption.
Petitioners contend that the law provides for the unconditional exemption of MWEs from income tax and,
thus, pray that the RR be nullified.
ISSUE:
Whether the increased personal and additional exemptions provided by R.A. 9504 should be applied to
the entire taxable year 2008 or prorated, considering that R.A. 9504 took effect only on 6 July 2008.
HELD:
There is no legal basis for the BIR to reintroduce the prorating of the new personal and additional
exemptions. In so doing, respondents overstepped the bounds of their rule-making power. It is an
established rule that administrative regulations are valid only when these are consistent with the
law. Respondents cannot amend, by mere regulation, the laws they administer. To do so would violate
the principle of non-delegability of legislative powers.
In this case, respondents went beyond enforcement of the law, given the absence of a provision in R.A.
9504 mandating the prorated application of the new amounts of personal and additional exemptions for
2008. Further, even assuming that the law intended a prorated application, there are no parameters set
forth in R.A. 9504 that would delimit the legislative power surrendered by Congress to the delegate. In
contrast, Section 23(d) of the 1939 Tax Code authorized not only the prorating of the exemptions in case
of change of status of the taxpayer, but also authorized the Secretary of Finance to prescribe the
corresponding rules and regulations.
G.R. No. 209776, December 07, 2016
COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. UNITED CADIZ SUGAR FARMERS
ASSOCIATION MULTI-PURPOSE COOPERATIVE, Respondent.
The Facts
By law, the CIR is empowered, among others, to act on and approve claims for tax refunds or credits.
Page 18 of 148
The respondent United Cadiz Sugar Farmers Association Multi-purpose Cooperative (UCSFA-MPC) is a
multi-purpose cooperative with a Certificate of Registration issued by the Cooperative Development
Authority (CDA) dated January 14, 2004.6
In accordance with Revenue Regulations (RR) No. 20-2001, the Bureau of Internal Revenue (BIR) issued
BIR Ruling No. RR12-08-2004, otherwise known as the "Certificate of Tax Exemption" in favor of UCSFA-
MPC.
In November 2007, BIR Regional Director Rodita B. Galanto of BIR Region 12 - Bacolod City required
UCSFA-MPC to pay in advance the value-added tax (VAT) before her office could issue the Authorization
Allowing Release of Refined Sugar (AARRS) from the sugar refinery/mill. This was the first instance that
the Cooperative was required to do so. This prompted the cooperative to confirm with the BIR whether it is
exempt from the payment of VAT pursuant to Section 109(1) of the National Internal Revenue Code
(NIRC).9
ISSUE
WHETHER OR NOT UCSFA-MPC as a tax exempt cooperative may validly claim for refund.
The Court's Ruling
The rule requires the claimant to prove not only his entitlement to a refund, but also his due observance of
the reglementary periods within which he must file his administrative and judicial claims for refund.Non-
compliance with these substantive and procedural due process requirements results in the denial of the
claim.lawred It is then essential for us to discuss each requirement and evaluate whether these have been
duly complied with in the present case.
In the present case, the court a quo found that while the judicial claim was filed merely five days after filing
the administrative claim, both claims were filed within the two-year reglementary period. Thus, the CTA
correctly exercised jurisdiction over the judicial claim filed by UCSFA-MPC.
In this case, the cooperative claims that it is exempted — based on Section 61 of R.A. 6938 and Section
109(1) of the NIRC — from paying advance VAT when it withdraws refined sugar from the refinery/mill as
required by RR. No. 6-2007. UCSFA-MPC thus alleges that the amounts of advance VAT it paid under
protest from November 15, 2007 to February 13, 2009, were illegally arid erroneously collected.
Being exempt from VAT on the sale of refined sugar and the requirement of advance payment of VAT, the
amounts that UCSFA-MPC had paid from November 15, 2007 to February 13, 2009, were illegally and
erroneously collected. Accordingly, a refund is in order.
WHEREFORE, we DENY the petition and accordingly AFFIRM the June 5, 2013 decision and the
October 30, 2013 resolution of the CTA en banc in CTA EB No. 846.
SO ORDERED.
G.R. No. 195876, December 05, 2016
PILIPINAS SHELL PETROLEUM CORPORATION, Petitioner, v. COMMISSIONER OF
CUSTOMS, Respondent.
Before the Court is a Petition for Review on Certiorari seeking to reverse and set aside the 13 May 2010
Decision and the 22 February 2011 Resolution rendered by the Court of Tax Appeals (CTA) Former En
Banc in C.T.A. EB No. 472 which dismissed petitioner's petition, and accordingly affirmed with
modification as to the additional imposition of legal interest the 19 June 2008 Decision of the CTA Former
First Division (CTA in Division) ordering petitioner to pay the amount of P936,899,883.90, representing the
total dutiable value of its 1996 crude oil importation, which was considered as abandoned in favor of the
government by operation of law.
The Facts
On 16 April 1996, Republic Act (R.A.) No. 8180, otherwise known as the "Downstream Oil Industry
Deregulation Act of 1996" took effect. It provides, among others, for the reduction of the tariff duty on
imported crude oil from ten percent (10%) to three percent (3%).
Prior to its effectivity, petitioner's importation of 1,979,674.85 U.S. barrels of Arab Light Crude Oil, thru
the Ex MT Lanistels, arrived on 7 April 1996 nine (9) days earlier than the effectivity of the liberalization
provision. Within a period of three days thereafter, or specifically on 10 April 1996, said shipment was
unloaded from the carrying vessels docked at a wharf owned and operated by petitioner, to its oil tanks
located at Batangas City.
Subsequently, petitioner filed the Import Entry and Internal Revenue Declaration and paid the import duty
of said shipment in the amount of P11,231,081.00 on 23 May 1996.
More than four (4) years later or on 1 August 2000, petitioner received a demand letter dated 27 July 2000
from the Bureau of Customs (BOC), through the District Collector of Batangas, assessing it to pay the
deficiency customs duties in the amount of P120,162,991.00 due from the aforementioned crude oil
importation, representing the difference between the amount allegedly due (at the old rate often percent
(10%) or before the effectivity of R.A. No. 8180) and the actual amount of duties paid by petitioner (on the
rate of 3%).
Petitioner protested the assessment on 14 August 2000, to which the District Collector of the BOC replied
on 4 September 20007 reiterating his demand for the payment of said deficiency customs duties.
On 11 October 2000, petitioner appealed the 4 September 2000 decision of the District Collector of the
BOC to the respondent and requested for the cancellation of the assessment for the same customs
duties.
However, on 29 October 2001, five years after petitioner paid the allegedly deficient import duty' it
received by telefax from the respondent a demand letter for the payment of the amount of
P936,899,885.90, representing the dutiable value of its 1996 crude oil importation which had been
allegedly abandoned in favor of the government by operation of law. Respondent stated that Import Entry
No. 683-96 covering the subject importation had been irregularly filed and accepted beyond the thirty-day
(30) period prescribed by law. Petitioner protested the aforesaid demand letter on 7 November 2001 for
lack of factual and legal basis, and on the ground of prescription.
ISSUE:
WHETHER OR NOT THE IMPORT ENTRY NO. 683-96 HAD BEEN FILED BEYOND THE THIRTY-DAY
(3) PERIOD PRESBRIBED BY LAW HAD ALREADY PRESCRIBED.
HELD:
The matters which become final and conclusive against all parties include the timeliness of filing the
import entry within the period prescribed by law, the declarations and statements contained therein, and
the payment or non-payment of customs duties covering the imported articles by the owner, importer,
consignee or interested party. Since the primordial issue presented before us focuses on petitioner's non-
compliance in filing its Import Entry and Internal Revenue Declaration within a non-extendible period of 30
days from the date of discharge of' the last package from the vessel, respondent may only look into it
within a limited period of one (1) year in accordance with the above-quoted provision.
In the case at bench, it is undisputed that petitioner filed its IEIRD and paid the remaining customs duties
due on the subject shipment only on 23 May 1996. Yet, it was only on 1 August 2000, or more than four
(4) years later, that petitioner received a demand letter from the District Collector of Batangas for the
alleged unpaid duties covering the said shipment. Thereafter, on 29 October 2001, or after more than five
Page 19 of 148
(5) years, petitioner received another demand letter from respondent seeking to collect for the entire
dutiable value of the same shipment amounting to P936,899,855.90.
The maxim applied, we read Sections 1301, 1801, and 1802, together with Section 1603 of the TCCP.
Thus, should there be failure on the part of the owner, importer, consignee or interested party, after due
notice of the arrival of its shipment (except in cases of knowledgeable owners or importers), to file an
entry within the non-extendible period of 30 days from the date of discharge of the last package
(shipment) from the vessel, such owner, importer, consignee or interested party is deemed to have
abandoned said shipment in favor of the government. As imperative, however, is the strict compliance
with Section 1603 of the TCCP, which should be read as we have ruled. Any action or claim questioning
the propriety of the entry and settlement of duties pertaining to such shipment made beyond the 1-year
prescriptive period from the date of payment of final duties, is barred by prescription. In the present case,
the failure on the part of respondent to timely question the propriety of the entry and settlement of duties
by petitioner involving the subject shipment, renders such entry and settlement of duties final and
conclusive against both parties. Hence, respondent cannot any longer have any claim from petitioner.
Sections 1301, 1801, and 1802 of the TCCP have been rendered inoperable by reason of the lapse of the
period stated in Section 1603 of the same Code.
Indeed, if the prescriptive period of one year specified in Section 1603 of the TCCP is not applied against
the respondent, the reality that the shipment has been unloaded from the carrying vessels to petitioner's
oil tanks and that import duty in the amount of P11,231,081.00 has been paid would be obliterated by the
application of the principle of deemed abandonment four years after the occurrence of the facts of
possession and payment, as a consequence of which application, the petitioner would be made to pay the
government the entire value of the shipment it had as vendee of the shipper already paid.
WHEREFORE, the petition is GRANTED. Accordingly, the Decision dated 13 May 2010 and Resolution
dated 22 February 2011 of the Court of Tax Appeals Former En Banc in C.T.A. EB No. 472 are
hereby REVERSED and SET ASIDE on the ground of prescription.
AYSON, ANNE LOUISE A.
20150633
Deutsche Knowledge Services Pte. Ltd. vs. Commissioner of Internal Revenue
G.R. No. 197980. December 1, 2016
Facts
On March 31, 2009, petitioner filed an application for Tax Credit/Refund of its allegedly excess and
unutilized input VAT for the 1st quarter of the calendar year 2007 in the amount of P12,549,446.30 with
respondent Commissioner of Internal Revenue.Due to inaction on the part of respondent, petitioner filed a
Petition for Review on April 17, 2009, (17) days after petitioner filed an application for tax credit/refund
with respondent based on Section 112 and 229 of the National Internal Revenue Code of 1997, as
amended.
Instead of an Answer respondent filed a Motion to Dismiss on June 8, 2009, on the ground of prescription.
Respondent alleged that the Petition for Review was filed out of time on the ground of having been filed
beyond the two-year prescriptive period citing the case of Commissioner of Internal Revenue v. Mirant
Pagbilao Corporation (Mirant Case).
June 9, 2009, respondent filed an Answer again citing the same grounds in the Motion to Dismiss in her
Special and Affirmative defenses. CTA Second Division resolved to grant said motion on October 28,
2009. Petitioner filed a motion for reconsideration thereon on November 16, 2009. The Court promulgated
a Resolution which denied petitioner's Motion for Reconsideration.
Petitioner then filed a petition for review with the CTA En Banc. However, the said tribunal merely affirmed
with modification the assailed resolutions and dismissed petitioner's suit for having been prematurely filed
prior to the expiration of the 120-day period granted to respondent to resolve the tax claim. Hence,
petitioner resorted to the present appeal, by way of a petition for review under Rule 45.
Issue: Whether the filing of petitioner's claim for refund/credit of input VAT before the CTA warrants a
dismissal as premature for non-compliance with the 120+30 day period.
Ruling
Yes. Petitioner filed its claim for refund/ tax credit on time.
Section 112(D) of the NIRC clearly provides that the CIR has "120 days, from the date of the submission
of the complete documents in support of the application [for tax refund/credit]," within which to grant or
deny the claim. In case of full or partial denial by the CIR, the taxpayer's recourse is to file an appeal
before the CTA within 30 days from receipt of the decision of the CIR. However, if after the 120-day period
the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the
inaction of the CIR to CTA within 30 days.
In the instant case, the administrative claim or application for tax credit/refund of its allegedly excess and
unutilized input VAT for the first quarter of taxable year 2007 was filed on March 31, 2009 or within the
two-year prescriptive period. Respondent had 120 days or until July 29, 2009 to determine the validity of
the claim. However, petitioner filed an appeal by way of a petition for review on April 17, 2009 or 17 days
after the filing of the administrative claim. Apparently, petitioner did not wait for the decision of the CIR or
the lapse of the 120-day period and this is in clear contravention of Section l 12(D) [now Section l 12(C)]
of the 1997 NIRC, as amended, and of the doctrine laid down in the Aichi case.
However, subsequent to the Aichi ruling and during the pendency of the case at bar, the Supreme Court
En Banc resolved the consolidated cases involved in Commissioner of Internal Revenue v. San Roque
Power Corporation (San Roque case) and stated that a judicial claim for refund of input VAT which was
filed with the CT A before the lapse of the 120-day period under Section 112 of the NIRC is considered to
have been timely made, if such filing occurred after the issuance of the Bureau of Internal Revenue (BIR)
Ruling No. DA-489-03 dated December 10, 2003 but before the adoption of the Aichi doctrine which was
promulgated on October 6, 2010.
Pursuant to the CIR's power to interpret tax laws under Section 4 of the NIRC, the CIR issued BIR Ruling
No. DA-489-03 which we considered in San Roque as a general interpretative rule that may be relied
upon by taxpayers from the time the rule was issued up to its reversal by the CIR or by this Court, thus,
providing a valid claim for equitable estoppel under Section 246 of the NIRC.
Page 20 of 148
In the present case, the records indicate that petitioner filed its administrative claim for tax credit/refund of
its allegedly excess and unutilized input VAT for the 1st quarter of the calendar year 2007 in the amount of
with respondent on March 31, 2009. Subsequently, petitioner filed its judicial claim on the same matter
through a petition for review with the CT A on April 17, 2009. It is undisputed that the aforementioned date
of filing falls within the period following the issuance of BIR Ruling No. DA-489-03 on December 10, 2003
but before the promulgation of the Aichi case on October 6, 2010. In accordance with the doctrine laid
down in San Roque, we rule that petitioner's judicial claim had been timely filed and should be given due
course and consideration by the CTA.
National Power Corporation vs. The Provincial Treasurer of Benguet, et. al.
G.R. No. 209303. November 14, 2016
Facts
NPC is a government-owned and controlled corporation created and existing under and by virtue of
Republic Act 6395, created to undertake the development of power generation and production from
hydroelectric or other sources, and may undertake the construction, operation and maintenance of power
plants, dams, reservoirs, and other works. It operates and maintains the Binga Hydro-Electric Power
Plant.a
Respondents Provincial Treasurer, Provincial Assessor, Municipal Treasurer and Municipal Assessor of
Itogon are representatives of the province of Benguet, a local government unit. Respondents issued the
subject assessment in their official capacities.
Sometime in May 2000, the Municipal Assessor of Itogon, Benguet assessed NPC the amount of
P62,645,668.80 real property tax for the following properties located within the Binga Hydro-Electric
Power Plant. On March 17, 2006, NPC received a letter dated February 16, 2006 from OIC- Provincial
Treasurer of Benguet demanding the payment of real property tax delinquency in the amount of
P62,645,668.80.
On April 20, 2006, NPC challenged before the Local Board of Assessment Appeals (LBAA) the legality of
the assessment and the authority of the respondents to assess and collect real property taxes from it
when its properties are exempt pursuant to Section 234 (b) and (c) of Republic Act (R.A.) No. 7160,
otherwise known as the Local Government Code (LGC) of 1991. In the letters dated September 3, 2000
and April 19, 2001, NPC filed its requests for exemption, which the respondent Municipal Treasurer of
Itogon, Benguet has not acted upon.
In their Answer dated June 30, 2006, respondents alleged that NPC's properties were not exempt from tax
since the properties were classified in their tax declarations as "industrial," "for industrial use," or
"machineries" and "equipment." There was no evidence that the properties were being used for
generation and transmission of electric power. Respondents alleged that the period to assess had not
prescribed as the demand letter in 2006 was for collection of delinquency taxes, and not an initial
assessment which was issued in 2003 but was not settled by NPC. Respondents also alleged that the
appeal to the LBAA was filed out of time.
LBAA deferred the proceedings upon NPC's payment under protest of the assessed amount, or upon filing
of a surety bond to cover the disputed amount of tax. NPC moved to reconsider the Order on the ground
of lack of legal basis, but the same was denied in a Resolution dated October 3, 2006.
NPC filed a petition for review before the Central Board of Assessment Appeals (CBAA) claiming that
payment under protest was not required before it could challenge the authority of respondents to assess
tax on tax exempt properties before the LBAA. CBAA dismissed the appeal for being filed out of time.
The CBAA, in an Order dated February 23, 2012, denied NPC's motion for reconsideration ruling that it is
incumbent upon NPC to pay under protest before the LBAA could entertain its appeal as provided under
Section 252 of the LGC. NPC appealed to the CTA En Banc by filing a Petition for Review dated April 13,
2012, which was denied for lack of merit. It ruled that as expressly provided in Section 252 of the LGC, a
written protest against the assessment may be filed before the LBAA within thirty (30) days from payment
under protest.
Issue
Whether such property of NPC was exempt from real property tax.
Ruling
No, such property is not exempt from real property tax.
Petitioner sent a letter dated September 5, 2000 to the respondent Municipal Treasurer seeking
clarification on the assessment levels used by the Assessor in the billing taxes, as well as claiming tax
exemption on certain properties. It reiterated its claim of exemption in its letter dated April 19, 2001. NPC
received the final demand for payment of tax delinquency issued by the Provincial Treasurer in a letter
dated February 16, 2006. Thereafter, petitioner filed a petition purportedly questioning the authority of the
respondents to assess and to collect taxes against some of its properties before the LBAA, without
payment under protest of the assessed real property taxes.
It raises the following issues, which involve a question of fact: 1.) the properties such as reservoir,
machineries and equipment which are actually, directly and exclusively used by NPC in the generation
and transmission of electricity, and the school buildings are exempt from taxation; and 2.) regarding the
escape revision which was made retroactive from 1994, said taxes could no longer be assessed and
collected since they should have been assessed within five (5) years from the date they became due.
Though couched in terms which challenge the validity of the assessment and authority of the respondents,
NPC, as a government-owned and controlled corporation engaged in the generation and transmission of
electric power, essentially anchors its petition based on a claim of exemption from real property tax.
NPC's failure to comply with the mandatory requirement of payment under protest in accordance with
Section 252 of the LGC was fatal to its appeal.
Page 21 of 148
 Provincial Assessor of Agusan del Sur vs. Filipinas Palm Oil Plantation
GR No. 183416, Oct 05, 2016
Facts
Filipinas Palm Oil Plantation Inc. (Filipinas) is a private organization engaged in palm oil plantation with a
total land area of more than 7,000 hectares of National Development Company (NDC) lands in Agusan
del Sur.Harvested fruits from oil palm trees are converted into oil through Filipinas' milling plant in the
middle of the plantation area.Within the plantation, there are also three (3) plantation roads and a number
of residential homes constructed by Filipinas for its employees.
After the Comprehensive Agrarian Reform Law was passed, NDC lands were transferred to
Comprehensive Agrarian Reform Law beneficiaries who formed themselves as the merged NDC-Guthrie
Plantations, Inc. - NDC-Guthrie Estates, Inc. (NGPI-NGEI) Cooperatives. Filipinas entered into a lease
contract agreement with NGPI-NGEI.
The Provincial-Assessor of Agusan del Sur (Provincial Assessor) is a government agency in charge with
the assessment of lands under the public domain, assessed Filipinas' properties found within the
plantation area,which Filipinas assailed before the Local Board of Assessment Appeals (LBAA).
The LBAA found that the P207.00 market value declared in the assessment by the Provincial Assessor
was unreasonable. It found that the market value should not have been more than P85.00 per oil palm
tree.The sudden increase of realty tax assessment level from P42.00 for each oil palm tree in 1993 to
P207.00 was confiscatory.
Filipinas appealed before the CBAA on July 16, 1999. On November 21, 2001, the CBAA rendered a
decision in favor of Filipinas.
The Provincial Assessor filed for a Motion for Reconsideration whihc was denied by the CBAA.The
Provincial Assessor filed a Petition for Review before the Court of Appeals, which, in turn, sustained the
CBAA's Decision.
The Court of Appeals held that the land owned by NGPI-NGEI, which Filipinas has been leasing, cannot
be subjected to real property tax since these are owned by cooperatives that are tax-exempt.
The Court of Appeals held that the pertinent provisions "neither distinguishes nor specifies" that the
exemption only applies to real properties used by the cooperatives.It ruled that "the clear absence of any
restriction or limitation in the provision could only mean that the exemption applies to wherever the
properties are situated and to whoever uses them.Therefore, the exemption privilege extends to Filipinas
as the cooperatives' lessee.
On the roads constructed by Filipinas, the Court of Appeals held that although it is undisputed that the
roads were built primarily for Filipinas' benefit, the roads should be tax-exempt since these roads were
also being used by the cooperatives and the public. It applied, by analogy, Bislig Bay Lumber Company,
Inc. v. Provincial Government of Surigao.
Issues
1. Whether the exemption privilege of NGPI-NGEI from payment of real property tax extends to
respondent Filipinas Palm Oil Plantation Inc. as lessee of the parcel of land owned by cooperatives
2. Whether respondent's road equipment and mini haulers are movable properties and have not been
immobilized by destination for real property taxation.
In arguing the first issue, petitioner hinges its claim on a misplaced reliance in Mactan, which refers to the
revocation of tax exemption due to the effectivity of the Local Government Code. However, Mactan does
not refer to the tax exemption extended to cooperatives. The portion that petitioner cited specifically
mentions that the exemption granted to cooperatives has not been withdrawn by the effectivity of the
Local Government Code:
[S]ection 232 must be deemed to qualify Section 133.
Thus, reading together Sections 133, 232, and 234 of the L[ocal] G[overnment] C[ode], we conclude that
as a general rule, as laid down in Section 133, the taxing powers of local government units cannot extend
to the levy of, inter alia, "taxes, fees and charges of any kind on the National Government, its agencies
and instrumentalities, and local government units"; however, pursuant to Section 232, provinces, cities,
and municipalities in the Metropolitan Manila Area may impose the real property tax except on, inter alia,
"real property owned by the Republic of the Philippines or any of its political subdivisions except when the
beneficial use thereof has been granted, for consideration or otherwise, to a taxable person," as provided
in item (a) of the first paragraph of Section 234.
As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons,
including government-owned and controlled corporations, Section 193 of the Local Government Code
prescribes the general rule, viz., they are withdrawn upon the effectivity of such law, except those granted
to local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit
hospitals and educational institutions, and unless otherwise provided in the same law. The latter proviso
could refer to Section 234 which enumerates the properties exempt from real property tax. But the last
paragraph of Section 234 further qualifies the retention of the exemption insofar as real property taxes are
concerned by limiting the retention only to those enumerated therein; all others not included in the
enumeration lost the privilege upon the effectivity of the same law. Moreover, even as to real property
owned by the Republic of the Philippines or any of its political subdivisions covered by item (a) of the first
paragraph of Section 234, the exemption is withdrawn if the beneficial use of such property has been
granted to a taxable person for consideration or otherwise.
Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the Local
Government Code, exemptions from payment of real property taxes granted to natural or juridical persons,
including government-owned or controlled corporations, except as provided in the said section, and the
petitioner is, undoubtedly, a government-owned corporation, it necessarily follows that its exemption from
such tax granted it in Section 14 of its Charter, R.A. No. 6958, has been withdrawn. Any claim to the
contrary can only be justified if the petitioner can seek refuge under any of the exceptions provided in
Page 22 of 148
Section 234, but not under Section 133, as it now asserts, since, as shown above, the said section is
qualified by Sections 232 and 234.
2. The road equipment and mini haulers shall be considered as real property, subject to real property tax.
Section 199(o) of the Local Government Code defines "machinery" as real property subject to real
property tax.
In Manila Electric Company v. City Assessor, a similar issue of which definition of "machinery" prevails to
warrant the assessment of real property tax on it was raised.
Manila Electric Company (MERALCO) insisted on harmonizing the provisions of the Civil Code and the
Local Government Code and asserted that "machinery" contemplated under Section 199(o) of the Local
Government must still be within the contemplation of immovable property under Article 415 of the Civil
Code. However, this Court ruled that harmonizing such laws "would necessarily mean imposing additional
requirements for classifying machinery as real property for real property tax purposes not provided for, or
even in direct conflict with, the provisions of the Local Government Code."Thus:
While the Local Government Code still does not provide for a specific definition of "real property," Sections
199(o) and 232 of the said Code, respectively, gives an extensive definition of what constitutes
"machinery" and unequivocally subjects such machinery to real property tax. The Court reiterates that the
machinery subject to real property tax under the Local Government Code "may or may not be attached,
permanently or temporarily to the real property"; and the physical facilities for production, installations, and
appurtenant service facilities, those which are mobile, self-powered or self-propelled, or are not
permanently attached must (a) be actually, directly, and exclusively used to meet the needs of the
particular industry, business, or activity; and (b) by their very nature and purpose, be designed for, or
necessary for manufacturing, mining, logging, commercial, industrial, or agricultural purposes.
Petitioner is correct in claiming that the phrase pertaining to physical facilities for production is
comprehensive enough to include the road equipment and mini haulers as actually, directly, and
exclusively used by respondent to meet the needs of its operations in palm oil production. Moreover,
"mini-haulers are farm tractors pulling attached trailers used in the hauling of seedlings during planting
season and in transferring fresh palm fruits from the farm or field to the processing plant within the
plantation area."The indispensability of the road equipment and mini haulers in transportation makes it
actually, directly, and exclusively used in the operation of respondent's business.
Takenaka Corporation-Philippine Branch vs. Commissioner of Internal Revenue
G.R. No. 193321, October 19, 2016
Facts
The petitioner as taxpayer appeals before the Court the adverse decision entered on March 29, 2010 and
the resolution issued on August 12, 2010 in C.T.A. EB No. 514, whereby the Court of Tax Appeals (CTA)
En Banc respectively denied its claim for refund of excess input value-added tax (VAT) arising from its
zero-rated sales of services for taxable year 2002, and denied its ensuing motion for reconsideration.
Respondent Takenaka, as a subcontractor, entered into an On-Shore Construction Contract with
Philippine Air Terminal Co., Inc. (PIATCO) for the purpose of constructing the Ninoy Aquino Terminal III
(NAIA-IPT3).
PIATCO is a corporation duly organized and existing under the laws of the Philippines and was duly
registered with the Philippine Economic Zone Authority (PEZA), as an Ecozone Developer/Operator under
RA 7916.
Respondent Takenaka filed its Quarterly VAT Returns for the four quarters of taxable year 2002 on April
24, 2002, July 22, 2002, October 22, 2002 and January 22, 2003, respectively. Subsequently, respondent
Takenaka amended its quarterly VAT returns several times.
On January 13, 2003, the BIR issued VAT Ruling No. 011-03 which states that the sales of goods and
services rendered by respondent Takenaka to PIATCO are subject to zero-percent (0%) VAT and requires
no prior approval for zero rating based on Revenue Memorandum Circular 74-99.
On April 11, 2003, respondent Takenaka filed its claim for tax refund covering the aforesaid period before
the BIR Revenue District Office No. 51, Pasay City Branch.
For failure of the BIR to act on its claim, respondent Takenaka filed a Petition for Review with this Court,
docketed as C.T.A. Case No. 6886.
After trial on the merits, on November 4, 2008, the Former First Division rendered a Decision partly
granting the Petition for Review and ordering herein petitioner CIR to refund to respondent Takenaka the
reduced amount of P53,374,366.52, with a Concurring and Dissenting Opinion from Presiding Justice
Ernesto D. Acosta.
Not satisfied, on November 26, 2008, respondent Takenaka filed a Motion for Reconsideration.
Consequently, the respondent filed a petition for review in the CTA En Banc to seek the reversal of the
March 16, 2009 decision and the June 29, 2009 resolution of the CTA Former First Division.
Issue
Whether the sales invoices presented by the petitioner were sufficient as evidence to prove its zero-rated
sale of services to Philippine Air Terminal Co., Inc. (PIATCO), thereby entitling it to claim the refund of its
excess input VAT for taxable year 2002.
Ruling
No
The Court deems it appropriate to determine the timeliness of the petitioner's judicial claim for refund in
order to ascertain whether or not the CTA properly acquired jurisdiction thereof. Well-settled is the rule
that the issue of jurisdiction over the subject matter may at any time either be raised by the parties or
Page 23 of 148
considered by the Court motu proprio. As such, the jurisdiction of the CTA over the appeal could still be
determined by this Court despite its not being raised as an issue by the parties.
The petitioner timely filed its administrative claim on April 11, 2003, within the two-year prescriptive period
after the close of the taxable quarter when the zero-rated sales were made. The respondent had 120
days, or until August 9, 2003, to decide the petitioner's claim. Considering that the respondent did not act
on the petitioner's claim on or before August 9, 2003, the latter had until September 8, 2003, the last day
of the 30-day period, within which to file its judicial claim. However, it brought its petition for review in the
CTA only on March 10, 2004, or 184 days after the last day for the filing. Clearly, the petitioner belatedly
brought its judicial claim for refund, and the CTA did not acquire jurisdiction over the petitioner's appeal.
The CTA did not err in denying the claim for refund on the ground that the petitioner had not established
its zero-rated sales of services to PIATCO through the presentation of official receipts. In this regard, as
evidence of an administrative claim for tax refund or tax credit, there is a certain distinction between a
receipt and an invoice. The Court has reiterated the distinction in Northern Mindanao Power Corporation
v. Commissioner of Internal Revenue.
Section 113 of the NIRC of 1997 provides that a VAT invoice is necessary for every sale, barter or
exchange of goods or properties, while a VAT official receipt properly pertains to every lease of goods or
properties; as well as to every sale, barter or exchange of services.
The petitioner submitted sales invoices, not official receipts, to support its claim for refund. In light of the
aforestated distinction between a receipt and an invoice, the submissions were inadequate for the
purpose thereby intended. The Court concurs with the conclusion of the CTA En Banc, therefore, that
"[w]ithout proper VAT official receipts issued to its clients, the payments received by respondent Takenaka
for providing services to PEZA-registered entities cannot qualify for VAT zero-rating. Hence, it cannot
claim such sales as zero-rated VAT not subject to output tax.
Under VAT Ruling No. 011-03, the sales of goods and services rendered by the petitioner to PIATCO
were subject to zero-percent (0%) VAT, and required no prior approval for zero rating based on Revenue
Memorandum Circular 74-99. This notwithstanding, the petitioner's claim for refund must still be denied for
its failure as the taxpayer to comply with the substantiation requirements for administrative claims for tax
refund or tax credit. The Court explains why in Western Mindanao Power Corporation v. Commissioner of
Internal Revenue
In a claim for tax refund or tax credit, the applicant must prove not only entitlement to the grant of the
claim under substantive law. It must also show satisfaction of all the documentary and evidentiary
requirements for an administrative claim for a refund or tax credit. Hence, the mere fact that petitioner's
application for zero-rating has been approved by the CIR does not, by itself, justify the grant of a refund or
tax credit. The taxpayer claiming the refund must further comply with the invoicing and accounting
requirements mandated by the NIRC, as well as by revenue regulations implementing them.
Bloomberry Resorts and Hotels, Inc. vs. Bureau of Internal Revenue
G.R. No. 212530, August 10, 2016
Facts
On April 8 2009, PAGCOR granted to petitioner a provisional license to establish and operate an
integrated resort and casino complex at the Entertainment City project site of PAGCOR. Petitioner and its
parent company, Sureste Properties, Inc., own and operate Solaire Resort & Casino. Thus, being one of
its licensees, petitioner only pays PAGCOR license fees, in lieu of all taxes, as contained in its provisional
license and consistent with the PAGCOR Charter or Presidential Decree (PD) No. 1869,which provides
the exemption from taxes of persons or entities contracting with PAGCOR in casino operations.
However, when Republic Act (R.A.) No. 9337 took effect, it amended Section 27(C) of the NIRC of 1997,
which excluded PAGCOR from the enumeration of government-owned or controlled corporations
(GOCCs) exempt from paying corporate income tax. The enactment of the law led to the case of
PAGCOR v. The Bureau of Internal Revenue, et al.,where PAGCOR questioned the validity or
constitutionality of R.A. No. 9337 removing its exemption from paying corporate income tax, and therefore
alleging the same to be void for being repugnant to the equal protection and the non-impairment clauses
embodied in the 1987 Philippine Constitution. Subsequently, the Court articulated that Section 1 of RA No.
9337, amending Section 27(C) of the NIRC of 1997, which removed PAGCOR's exemption from corporate
income tax, was indeed valid and constitutional.
Consequently, in implementing the aforesaid amendments made by R.A. No. 9337, respondent issued
RMC No. 33-2013 dated 17 April 2013 declaring that PAGCOR, in addition to the five percent (5%)
franchise tax of its gross revenue under Section 13(2)(a) of PD No. 1869, is now subject to corporate
income tax under the NIRC of 1997, as amended. In addition, a provision therein states that PAGCOR's
contractees and licensees, being entities duly authorized and licensed by it to perform gambling casinos,
gaming clubs and other similar recreation or amusement places, and gaming pools, are likewise subject to
income tax under the NIRC of 1997, as amended.
Petitioner immediately elevated the matter through a petition for certiorari and prohibition before the
Supreme Court.
Issues
1. Whether the assailed provision of RMC No. 33-2013 subjecting the contractees and licensees of
PAGCOR to income tax under the NIRC of 1997, as amended, was issued by respondent CIR with grave
abuse of discretion amounting to lack or excess of jurisdiction
2. Whether said provision is valid or constitutional considering that Section 13(2)(b) of PD No. 1869, as
amended (PAGCOR Charter), grants tax exemptions to such contractees and licensees.
Ruling
Failure to ask the CIR for a reconsideration of the assailed revenue regulations and RMCs should dismiss
the case. It is settled that the premature invocation of the court's intervention is fatal to one's cause of
action. If a remedy within the administrative machinery can still be resorted to by giving the administrative
officer every opportunity to decide on a matter that comes within his jurisdiction, then such remedy must
Page 24 of 148
first be exhausted before the court's power of judicial review can be sought. The party with an
administrative remedy must not only initiate the prescribed administrative procedure to obtain relief but
also to pursue it to its appropriate conclusion before seeking judicial intervention in order to give the
administrative agency an opportunity to decide the matter itself correctly and prevent unnecessary and
premature resort to the court.
Under P.D. No. 1869, as amended, [PAGCOR] is subject to income tax only with respect to its operation
of related services. Accordingly, the income tax exemption ordained under Section 27(c) of R.A. No. 8424
clearly pertains only to [PAGCOR's] income from operation of related services. Such income tax
exemption could not have been applicable to [PAGCOR's] income from gaming operations as it is already
exempt therefrom under P.D. No. 1869, as amended.
As the PAGCOR Charter states in unequivocal terms that exemptions granted for earnings derived from
the operations conducted under the franchise specifically from the payment of any tax, income or
otherwise, as well as any form of charges, fees or levies, shall inure to the benefit of and extend to
corporation(s), association(s), agency(ies), or individual(s) with whom the PAGCOR or operator has any
contractual relationship in connection with the operations of the casino(s) authorized to be conducted
under this Franchise, so it must be that all contractees and licensees of PAGCOR, upon payment of the
5% franchise tax, shall likewise be exempted from all other taxes, including corporate income tax realized
from the operation of casinos.
COMMISSIONER OF INTERNAL REVENUE v. GOODYEAR PHILIPPINES, INC.
G.R. No. 216130; Promulgated August 3, 2016
FACTS:
Respondent is a domestic corporation registered with Bureau of Internal Revenue (BIR) as a
large taxpayer. Consequently, all the preferred shares were solely and exclusively subscribed by
Goodyear Tire and Rubber Company (GTRC), which was a foreign company organized and existing
under the laws of the State of Ohio, United States (US) and is unregistered in the Philippines.
The Board of Directors of respondent authorized the redemption of GTRC’s preferred shares and
later filed an application for relief from double taxation before the International Tax Affairs Division of the
BIR to confirm that the redemption was not subject to Philippine Income Tax, pursuant to the Republic of
the Philippines (PH) – US Tax Treaty. Notwithstanding, respondent still withheld and remitted the sum of
Php 14,659,847.10 to BIR representing fifteen percent (15%) FWT. Later, respondent filed an
administrative claim for refund or issuance of TCC, representing 15% FWT before the BIR. Thereafter, it
filed a judicial claim by way of petition for review before the CTA.
Petitioner maintained that respondent’s claims must be denied considering that: (a) it failed to
exhaust administrative remedies by prematurely filing its petition before the CTA; and (b) it failed to submit
complete supporting documents before the BIR.
The CTA Division granted the petition and thereby ordered petitioner to refund or issue a TCC in
favor of the respondent for being erroneously withheld and remitted as FWT. CTA En Banc affirmed the
findings of CTA Division.
ISSUE:
Whether or not:
(a) The judicial claim of respondent should be dismissed for non-exhaustion of administrative
remedies; and
(b) The CTA En Banc correctly ruled that the gain derived by GTRC was not subject to 15% FWT
on dividends.
RULING:
On the first issue, the Court ruled that the judicial claim should not be dismissed.
Section 229 of the Tax Code stated that judicial claims for refund must be filed within two (2) years from
the date of payment of the tax or penalty, providing further that the same may not be maintained until a
claim for refund or credit has been duly filed with the Commissioner of Internal Revenue (CIR). To clarify,
Section 229 of the Tax Code does not mean that the taxpayer must await the final resolution of its
administrative claim for refund, since doing so would be tantamount to the taxpayer’s forfeiture of its right
to seek judicial recourse should the two (2) year prescriptive period expire without the appropriate judicial
claim being filed. Thus, respondent correctly and timely sought judicial redress, notwithstanding that its
administrative and judicial claims were filed only 13 days apart.
On the second issue, the Court ruled that the CTA En Banc properly ruled that the gain was not
subject to 15% FWT. It must be noted that GTRC is a non-resident foreign corporation. Thus pursuant to
the cardinal principle that treaties have the force and effect of law in this jurisdiction, the RP-US Tax
Treaty complementarily governs the tax implications of respondent’s transactions with GTRC. Section 73
(A) of the Tax Code provides that “dividend” means any distribution made by a corporation to its
shareholders out of its earnings or profits and payable to its shareholders, whether in money or in other
property. The Court therefore holds that the redemption price received by GTRC could not be treated as
accumulated dividends in arrears that could be subject to 15% FWT. Verily, respondent’s financial
statement show that it did not have unrestricted retained earnings and in fact operated from a position of
deficit. Thus, absent the availability of unrestricted retained earnings, the board of directors of respondent
had no power to issue dividends. All told, the amount received by GTRC from respondent for the
redemption of its preferred shares were not accumulated dividends in arrears. Contrary to petitioner’s
claims, it is therefore not subject to 15% FWT on dividends in accordance with Section 28 (B) (5) (b) of the
Tax Code.
COMMISSIONER OF INTERNAL REVENUE v. KEPCO CORPORATION
G.R. No. 199422; Promulgated June 21, 2016
FACTS:
For the first and second quarters of the calendar year 2000, respondent filed Quarterly Value-
Added Tax (VAT) returns with the Bureau of Internal Revenue (BIR). It also filed the Application for Zero
Rated Sales for calendar year 2000 which was duly approved by BIR. Thereafter, respondent filed with
the BIR its claim for refund representing input tax incurred for the first and second quarters of the calendar
year of 2000. However, petitioner did not act upon respondent’s claim for refund or issuance of tax credit
certificate. Thereafter, respondent filed a Petition for Review.
Page 25 of 148
 In her answer, petitioner alleged that (1) respondent is not entitled to the refund of the amounts
prayed for; (2) the petition was prematurely filed for respondent’s failure to exhaust administrative
remedies; (3) respondent failed to show that the taxes paid were erroneously or illegally collected; and (4)
respondent has no cause of action. The CTA First Division ruled in favor of the respondent. There being
no motion for reconsideration filed by the petitioner, the decision became final and executory.
Accordingly, petitioner filed a petition for annulment of judgment with the CTA En Banc but such
was dismissed. A motion for reconsideration was filed but was denied.
ISSUE:
Did the CTA En Banc correctly deny the petition for annulment of judgment filed by the
petitioner?
RULING:
Yes.
The proper remedy of the petitioner is to file a petition for certiorari under Rule 65, which would
have been filed as an original action before this Court and not before the CTA En Banc. Since the petition
below invoked the gross and palpable negligence of petitioner’s counsel which is allegedly tantamount to
its being deprived of due process and its day in court as party-litigant and, as it also invoked lack of
jurisdiction of the CTA First Division to entertain the petition filed by private respondent since the same
allegedly fails to comply with the reglementary periods for judicial remedies involving administrative claims
for refund of excess unutilized input VAT under the National Internal Revenue Code (NIRC), then the
proper remedy that petitioner should have availed of was indeed a petition for certiorariunder Rule 65.
TRIDHARMA MARKETING CORPORATION v. COURT OF TAX APPEALS
G.R. No. 215950; Promulgated June 20, 2016
FACTS:
Petitioner received a Preliminary Assessment Notice (PAN) from the Bureau of Internal Revenue
(BIR) assessing it with various deficiency taxes. Petitioner filed with Commissioner of Internal Revenue
(CIR) a protest through a Request for Reconsideration, however the latter denied such.
Petitioner appealed the CIR’s decision to the CTA by Petition for Review with Motion to Suspend
Collection of Tax. It was granted by the CTA. Petitioner filed its Motion for Partial Reconsideration praying
for the reduction of the bond to an amount it could obtain. Thus, CTA issued another resolution reducing
the amount of the petitioner’s surety bond which was equivalent of the BIR’s deficiency assessment for IT
and VAT.
ISSUE:
Did the CTA in Division commit grave abuse of discretion in requiring the petitioner to file a
surety bond despite the supposedly patent illegality of the assessment that was beyond the petitioner’s
net worth but equivalent to the deficiency assessment for IT and VAT?
RULING:
Yes.
The Court holds that CTA in Division gravely abused its discretion because it fixed the amount of
the bond at nearly five times the net worth of the petitioner without conducting a preliminary hearing to
ascertain whether there were grounds that such collection would jeopardize the interest of the taxpayer.
Simply prescribing such high amount of the bond like the initial 150% of the deficiency assessment or later
on even reducing the amount of the bond to equal the deficiency assessment would practically deny to the
petitioner the meaningful opportunity to contest the validity of the assessments, and would likely even
impoverish it as to force it out of business.
At this juncture, it becomes imperative to reiterate the principle that the power to tax is not the
power to destroy.
PHILIPPINE BANK OF COMMUNICATIONS v. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 194065; Promulgated June 20, 2016
FACTS:
Pursuant to Revenue Regulation (RR) No. 7-92, the Bureau of Internal Revenue (BIR) issued a
certificate authorizing petitioner to operate and use the On-line Electronic Documentary Stamp Metering
Machine (DS metering machine). Petitioner purchased documentary stamps from the BIR and loaded
them to its DS metering machine. Petitioner executed several repurchase agreements with the
BangkoSentralngPilipinas (BSP). The documentary stamps were imprinted on the Confirmation Letters
corresponding to those repurchase agreements through petitioner’s DS metering machine.
Petitioner claimed that the repurchase agreements were not subject to the documentary stamp
tax (DST). Thus it filed with the BIR an administrative claim for the issuance of tax credit certificates for
the alleged erroneous payment of DST. Later it filed a Petition for Review with the CTA due to the inaction
of the respondent, reiterating its claim. CTA Division ruled in favor of the petitioner, however, this was
reversed by the CTA En Banc.
ISSUE:
Whether the date of imprinting the documentary stamps on the document or the date of purchase
of documentary stamps for loading and reloading on the DS metering machine should be deemed as
payment of the DST contemplated under Section 200 (D) of the NIRC for the purpose of counting the two-
year prescriptive period for filing a claim for a refund or tax credit.
RULING:
Section 229 of the NIRC shows that payment of the DST may be done by imprinting the stamps
on the taxable document through a DS metering machine.
The payment of the DST and the filing of the DST Declaration Return upon loading/reloading of
the DS metering machine must not be considered as the date of payment when the prescriptive period to
file a claim for a refund/credit must commence. The liability for the payment of DST falls due only upon the
Page 26 of 148
occurrence of a taxable transaction. Therefore, it is only then that payment may be considered for the
purpose of filing a claim for refund or tax credit.
Since actual payment was already made upon loading/reloading of the DS metering machine and
the filing of the DST Declaration Return, the date of imprinting the documentary stamp on the taxable
document must be considered as the date of payment contemplated under Section 229 of the NIRC.
COMMISSIONER OF INTERNAL REVENUE v. PHILIPPINE NATIONAL BANK
G.R. No. 195147; Promulgated June 11, 2016
FACTS:
Petitioner issued a Letter of Authority to respondent authorizing the examination of PNB’s books
of accounts and other accounting records in relation to its internal revenue taxes for taxable year 1997.
Later, PNB received a Preliminary Assessment Notice (PAN) with details of discrepancies which indicated
that PNB had deficiency payments of documentary stamp taxes (DST). From the foregoing, petitioner
issued a formal assessment notice with a formal letter of demand and details of discrepancies.
PNB immediately paid but under protest. Petitioner denied the protest. Thus, PNB filed its
Petition for Review in the CTA, obtaining a favorable decision. The case was elevated by the petitioner
with the CTA En Banc but was denied for lack of merit.
ISSUE:
Whether or not the respondent bank’s interbank call loans transacted in 1997 were subject to
documentary stamp taxes.
RULING:
No.
PNB’s interbank call loans are not taxable under Section 180 of the 1977 NIRC. The provisions
of the 1997 NIRC, Section 22 (y), cannot be given retrospective effect to the prejudice of PNB. This is
because tax laws are prospective in application, unless their retroactive application is expressly provided.
An interbank call load is considered as a deposit substitute transaction by a bank performing
quasi-banking functions to cover reserve deficiencies. It does not fall under the definition of a loan
agreement. Even if it does, the DST liability under Section 180 will not attach if the loan agreement was
signed abroad but the object of the contract is located or used in the Philippines, which was not the case
in regard to PNB’s interbank call loans.
Vertine Paul Beler
Tax 2- Atty. Casasola
Commissioner of Customs vsPilipinas Shell Petroleum Corporation
Gr no. 205002
Facts:
Pilipinas Shell Petroleum Corporation (Shell) was assessed and issued a demand letter by the
District Collector of Customs in the Port of Batangas for deficiency excise and value-added tax (VAT)
payments plus penalties on its importation of catalytic cracked gasoline for the years 2006-2008 in the
amount of Php21,419,603,310.00.The District Collector issued another demand letter reiterating the
demand for payment of the assessed tax and penalties due. Shell appealed the same before the
Commissioner of customs who ordered the District Collector to observe the status quo.The Commissioner
of Customs later denied Shell’s appeal and ordered the latter to settle the unpaid taxes so that the Bureau
would not exercise its power to seize all imported articles by Shell and to sell the same in order to apply
the proceeds to the Shell’s outstanding balance with the Bureau. (Section 1508, TCCP)
Shell moved for the reconsideration of the Commissioner’s decision but the same was denied so
Shell was prompted to assail the Commissioner’s letter-decision file a Petition for Review with the Court of
Tax Appeals (CTA).Shell alsofiled with the CTA a Verified Motion for issuance of a Suspension Order to
enjoin the collection of taxes with issuance of a Temporary restraining Order (TRO).The CTA First
Division issued a resolution granting Shell a 60-day TRO. However, after due hearing on the Verified
Motion for issuance of a Suspension Order, the same was denied.Thus, the District Collector of the Port of
Batangas issued a Memorandum ordering the personnel of the BOC Port of Batangas to hold the delivery
of all import shipment of Shell to satisfy its excise tax liability. (Section 1508, TCCP)Shell filed with the
RTC of Batangas a complaint for Injunction with prayer for issuance of a 72-hour TRO to enjoin the
implementation of the District Collector’s Memorandum. In said complaint, it was disclosed by the VP for
Finance and the Treasurer of Shell that there is a pending appealed case with the CTA involving Shell and
the Bureau of Customs.The 72-hour TRO was granted by Branch 3 of RTC Batangas so the Bureau of
Customs filed cases against Shell’s officers (1) for Direct Contempt for engaging in forum-shopping and
(2) for Perjury.The CTA denied the motion to cite Shell’s officers in contempt so the Bureau of Customs
elevated the same to the Supreme Court.
Issue: Whether or not the Petition for Review case filed with the CTA and the case for Injunction
against the implementation of the District Collector’s Memorandum filed with the RTC involve the same
issues?
Held; no, The subject matter in the CTA case is the alleged unpaid taxes for the years 2006-2008 which is
sought to be collected by the Bureau of Customs while the subject matter of the Batangas injunction is the
13 importations/shipments of Shell which is being threatened to be seized (Sec. 1508, TCCP) by the
Bureau of Customs by virtue of the District Collector’s Memorandum.The cause of action in the CTA case
is based on the Letter-Decisions of the Commissioner of Customs denying Shell’s protest while the cause
of action in the RTC Batangas injunction case is the Memorandum dated Feb. 9, 2010, ordering the
personnel of BOC in the Port of Batangas to hold the delivery of all import shipments of Shell.
The issues are not the same. The Batangas injunction case is grounded upon the fact that the
Bureau of Customs no longer have jurisdiction over the importations as the same have been discharged
and placed in Shell’s Batangas refinery since 90% of the import duties have already been paid. This is on
the theory that for Section 1508 to apply, the BOC must have physical custody of the goods sought to be
held which is not present in the case.
The reliefs prayed for are not the same.
Page 27 of 148

a) The Petition for Review filed with the CTA prays for the nullification of the Letter-Decision
dated 11 November 2009 and Letter-Decision dated 26 November 2009 issued by the
Commissioner of Customs and render a new Decision finding Shell not liable for excise tax
and VAT demanded by the BOC.
b) The Verified Motion for Suspension Order prays for the issuance of an Order ordering,
commanding and directing the BOC, their officers, subordinates, personnel and agents
and/or any person acting on their behalf or authority, to refrain or stop from exercising any
action described in, under, or pursuant to, Sec. 1508 of the TCCP x xx
c) The RTC injunction case prays for the issuance of an Order restraining BOC, their assigns,
agents, employees, representatives or any person under their direction and/or control from
entering the Refinery or property of Shell and/or seize or confiscate or forcibly take
possession of the imported shipments of Shell that are already in Shell’s physical custody
and possession.
Since the subject matter, cause of action and issue raised and the reliefs prayed for are not the
same, Respondents are not guilty of forum-shopping. Accordingly the CTA did not err in denying the
Motion to Cite respondents in Direct Contempt of Court.
Capitol Wireless Inc, Vs Provincial Treasurer of Batangas
Facts
Provincial Assessor and Treasurer of Batangas issued Assessments of Real Property Tax
against Capitol Wireless Inc (Capwire) over a submarine cable system in NasugbuBatangas. Capwire
contested this assessment and argued that the cable system lies outside of Philippine territory (i.e. on
international waters). Capwire filed a petition for prohibition before RTC. Both RTC and CA dismissed the
petition and held that Capwire failed to follow the requisite of payment under protest and failed to avail of
remedies before administrative bodies (i.e. Local Board of Assessment Appeals).
The Court affirmed CA and held that:
(1) The petitioner raises factual issues (as the extent and status of Capwire’s ownership of the
system, the actual length of the cable/s that lie in Philippine territory, and the corresponding assessment
and taxes due because the assessors and treasurers imposed and collected the assailed real property tax
on the finding that at least a portion or some portions of the submarine cable system that Capwire owns or
co-owns lies inside Philippine territory). Since it is a case raising questions of fact, Capwire’s filing in a
judicial forum is improper because it is instead cognizable by local administrative bodies like the Board of
Assessment Appeals, which are the proper venues for trying these factual issues.
(2) Submarine or undersea communications cables are akin to electric transmission lines which
are "no longer exempted from real property tax" and may qualify as "machinery" subject to real property
tax under the Local Government Code
(3) The cable system in not entirely in international waters and some areas are considered
municipal waters; hence, portion of it is within the taxing jurisdiction of Batangas (Court took judicial notice
of UNCLOS provisions)
(4) Capwire failed to allege or provide any other privilege or exemption that were granted to it by
the legislature after the enactment of the Local Government Code. (LGC, Sections 193 and 234 expressly
withdrawn tax exemptions)
Issue: Whether the case is cognizable by the administrative agencies and covered by the requirements in
Sections 226 and 229 of the Local Government Code
Ruling: CA is correct. Petitioner’s case is one replete with questions of fact (instead of pure questions of
law) Since it is a case raising questions of fact, Capwire’s filing in a judicial forum is improper because it is
instead cognizable by local administrative bodies like the Board of Assessment Appeals, which are the
proper venues for trying these factual issues. What Capwire alleges as the “crux of the controversy” is
“whether or not an indefeasible right over a submarine cable system that lies in international waters can
be subject to real property tax in the Philippines.” – This is not the genuine issue that the case presents
because it is already obvious and fundamental that real property that lies outside of Philippine territorial
jurisdiction cannot be subjected to its domestic and sovereign power of real property taxation. Rather, it
raises factual issues as the extent and status of Capwire’s ownership of the system, the actual length of
the cable/s that lie in Philippine territory, and the corresponding assessment and taxes due because the
assessors and treasurers imposed and collected the assailed real property tax on the finding that at least
a portion or some portions of the submarine cable system that Capwire owns or co-owns lies inside
Philippine territory. Capwire’sdisagreement with such findings of the administrative bodies presents little to
no legal question that only the SC may directly resolve.
GR No. 213394. April 6, 2016
Spouses Emmanuel D. Pacquiao and Jinkee J. Pacquiao, Petitioners, vs. The Court of Tax Appeals –
First Division and the Commission of Internal Revenue
Mendoza, J.
Facts
Due to his success and fame as a world-class professional boxer Pacquiao was able to amass
income from both the Philippines and the United States of America (US). His income from the US came
primarily from the purses he received for the boxing matches he took part under Top Rank, Inc. While his
income from the Philippines consisted of talent fees received from various Philippine Corporations for
product endorsements, advertising commercials and television appearances.
On April 15, 2009, Pacquiao filed his 2008 income tax return reporting his Philippine sourced-
income. It was subsequently amended to include his US-sourced income.
On March 25, 2010, Pacquiao received a Letter of Authority (March LA) from the Regional
District Office NO. 43 (RDO) of the Bureau of Internal Revenue (BIR) for the examination of his books of
accounts another accounting records for the period covering January 1, 2008 to December 31, 2008.
On April 15, 2010, Pacquiao filed his 2009 income tax return however; he failed to include his
income derived from US. He also failed to file his Value Added Tax (VAT) returns for the years 2008 and
2009.
Commissioner on Internal Revenue (CIR) issued another Letter of Authority, dated July 27, 2010
(July LA), authorizing the BIR’s National Investigation Division (NID) to examine the books of accounts
and other accounting records of both Pacquiao and Jinkee for the last 15 years, from 1995 to 2009. On
September 21 and 22, 2010, the CIR replaced the July LA by issuing to both Pacquiao and Jinkee
Page 28 of 148
separate electronic versions of the July LA pursuant to Revenue Memorandum Circular (RMC) No. 56-
2010.
Due to these developments, petitioners wrote a letter questioning the propriety of the CIR
investigation as they were already subjected to an earlier investigation by the BIR for the years prior to
2007, and no fraud was ever found to have been committed.
The NID informed the counsel of the petitioners that the July LA issued by the CIR had effectively
cancelled and superseded the March LA issued by its RDO. The same letter also stated that fraud had
been established by the Commissioner, still spouses were given the opportunity to present documents as
part of their procedural rights to due process with regard to the civil aspect thereof. The CIR informed the
petitioners that its reinvestigation of years prior to 2007 was justified because the assessment thereof was
pursuant to a “fraud investigation” against the petitioners under the “Run After Tax Evaders” (RATE)
program of the BIR.
On January 5 and 21, 2011, the petitioners submitted various income tax related documents for
the years 2007-2009.18 As for the years 1995 to 2006, the petitioners explained that they could not
furnish the bureau with the books of accounts and other tax related documents as they had already been
disposed. Finally, the petitioners pointed out that their tax liabilities for the said years had already been
fully settled with then CIR Jose Mario Buñag, who after a review, found no fraud against them.
On June 21, 2011, on the same day that the petitioners made their last compliance in submitting
their tax-related documents, the CIR issued a subpoena ducestecum, requiring the petitioners to submit
additional income tax and VAT-related documents for the years 1995-2009.
After conducting its own investigation, the CIR made its initial assessment finding that the
petitioners were unable to fully settle their tax liabilities. Thus, the CIR issued its Notice of Initial
Assessment-Informal Conference (NIC), directly addressed to the petitioners, informing them that based
on the best evidence obtainable, they were liable for deficiency income taxes in the amount of
P714,061,116.30 for 2008 and P1,446,245,864.33 for 2009, inclusive of interests and surcharges.
The CIR then issued the Preliminary Assessment Notice (PAN), informing the petitioners that
based on third-party information (allowed under Section 5(B) and 6 of the NIRC), they found the
petitioners liable not only for deficiency income taxes in the amount of P714,061,116.30 for 2008 and
P1,446,245,864.33 for 2009, but also for their non-payment of their VAT liabilities in the amount
P4,104,360.01 for 2008 and P 24,901,276.77 for 2009.
The petitioners filed their protest against the PAN.
Then, on August 7, 2013, the BIR-ARMD sent Pacquiao and Jinkee the Final Notice Before
Seizure (FNBS), informing the petitioners of their last opportunity to make the necessary settlement of
deficiency income and VAT liabilities before the bureau would proceed against their property. Although
they no longer questioned the BIR’s assessment of their deficiency VAT liability, the petitioners requested
that they be allowed to pay the same in four (4) quarterly installments. Eventually, through a series of
installments, Pacquiao and Jinkee paid a total P32,196,534.40 in satisfaction of their liability for deficiency
VAT.
Proceedings at the CTA
Aggrieved that they were being made liable for deficiency income taxes for the years 2008 and
2009, the petitioners sought redress and filed a petition for review with the CTA contending that the
assessment of the CIR was defective because it was predicated on its mere allegation that they were
guilty of fraud. They also questioned the validity of the attempt by the CIR to collect deficiency taxes from
Jinkee, arguing that she was denied due process. According to the petitioners, as all previous
communications and notices from the CIR were addressed to both petitioners, the FDDA was void
because it was only addressed to Pacquiao. Moreover, considering that the PCL and FNBS were based
on the FDDA, the same should likewise be declared void. The petitioners added that the CIR assessment,
which was not based on actual transaction documents but simply on “best possible sources,” was not
sanctioned by the Tax Code. They also argue that the assessment failed to consider not only the taxes
paid by Pacquiao to the US authorities for his fights, but also the deductions claimed by him for his
expenses.
Pending the resolution by the CTA of their appeal, the petitioners sought the suspension of the
issuance of warrants of distraint and/or levy and warrants of garnishment. Meanwhile, the BIR-ARMD
informed the petitioners that they were denying their request to defer the collection enforcement action for
lack of legal basis.
A warrant of distraint and/or levy against Pacquiao and Jinkee was included in the letter.
Aggrieved, the petitioners filed the subject Urgent Motion for the CTA to lift the warrants of distraint, levy
and garnishments issued by the CIR against their assets and to enjoin the CIR from collecting the
assessed deficiency taxes pending the resolution of their appeal. As for the cash deposit and bond
requirement under Section 11 of Republic Act (R.A.) No. 1125, the petitioners question the necessity
thereof, arguing that the CIR’s assessment of their tax liabilities was highly questionable. At the same
time, the petitioners manifested that they were willing to file a bond for such reasonable amount to be
fixed by the tax court. The CTA issued the resolution granting the petitioner’s Urgent Motion, ordering the
CIR to desist from collecting on the deficiency tax assessments against the petitioners. In its resolution,
the CTA noted that the amount sought to be collected was way beyond the petitioners’ net worth, which,
based on Pacquiao’s Statement of Assets, Liabilities and Net Worth (SALN), only amounted to
P1,185,984,697.00. The CTA, however, saw no justification that the petitioners should deposit less than
the disputed amount. They were, thus, required to deposit the amount of P3,298,514,894.35 or post a
bond in the amount of P4,947,772,341.53. The petitioners sought partial reconsideration praying for the
reduction of the amount of the bond required or an extension of 30 days to file the same. CTA issued
resolution denying the petitioner’s motion to reduce the required cash deposit or bond, but allowed them
an extension of thirty (30) days within which to file the same
Issues
1. Whether or not Respondent Court acted with grave abuse of discretion amounting to lack or
excess of jurisdiction in presuming the correctness of a fraud assessment without evidentiary
support other than the issuance of fraud assessments themselves.
Whether or not Respondent Court acted with grave abuse of discretion amounting to lack or
excess of jurisdiction when it required Petitioners to post a bond even if the tax collection processes
employed by the Respondent Court against Petitioners was patently in violation of law thereby blatantly
breaching Petitioner’s constitutional right to due process Section 11 of R.A. No. 1125, as amended by
R.A. No. 9282, embodies the rule that an appeal to the CTA from the decision of the CIR will not suspend
the payment, levy, distraint, and/or sale of any property of the taxpayer for the satisfaction of his tax
liability as provided by existing law. When, in the view of the CTA, the collection may jeopardize the
interest of the Government and/or the taxpayer, it may suspend the said collection and require the
taxpayer either to deposit the amount claimed or to file a surety bond. The application of the exception to
the rule is the crux of the subject controversy. Specifically, Section 11 provides:
SEC. 11.Who May Appeal; Mode of Appeal; Effect of Appeal. - Any party
adversely affected by a decision, ruling or inaction of the Commissioner of Internal
Page 29 of 148
 Revenue, the Commissioner of Customs, the Secretary of Finance, the Secretary of
Trade and Industry or the Secretary of Agriculture or the Central Board of Assessment
Appeals or the Regional Trial Courts may file an appeal with the CTA within thirty (30)
days after the receipt of such decision or ruling or after the expiration of the period fixed
by law for action as referred to in Section 7(a)(2) herein. x xxx
No appeal taken to the CTA from the decision of the Commissioner of Internal
Revenue or the Commissioner of Customs or the Regional Trial Court, provincial, city or
municipal treasurer or the Secretary of Finance, the Secretary of Trade and Industry
and Secretary of Agriculture, as the case may be shall suspend the payment, levy,
distraint, and/or sale of any property of the taxpayer for the satisfaction of his tax liability
as provided by existing law: Provided, however, That when in the opinion of the Court
the collection by the aforementioned government agencies may jeopardize the interest
of the Government and/or the taxpayer, the Court at any stage of the proceeding may
suspend the said collection and require the taxpayer either to deposit the amount
claimed or to file a surety bond for not more than double the amount with the Court. x
xxx [Emphasis Supplied]
FACTS:
Liquigaz Philippine Corp received a copy of Letter of Authority (LOA) issuedby the CIR
authorizing investigation of all internal revenue taxes for 2005. It also received a copy of the PAN on May
20, 2008 and was assessed 23,931,708.72 PHP as deficiency tax. On June 25, 2008, it received a Formal
Assessment Notice (FAN) together with its attached details of discrepancies for December 31, 2005.
Liquigaz filed a protest on July 25, 2008 and submitted documents on September 23, 2008. It received the
copy of FDDA on July 1, 2010 and still liable for 22,380,025.19 PHP Liquigaz filed a petition for review to
the CTA division CTA division—partially granted Liquigaz’s petition to cancel EWT and FBT assessments.
CTA en banc-affirmed the CTA division. It is a requirement that the taxpayer should be informed in writing
of the law and the facts on which the
assessment was made applied to the FDDA—otherwise the assessment
shall be void.
ISSUE: W/N the assessment made by the CIR is valid
HELD: Under Section 228 of the NIRC, a taxpayer shall be informed in writing of the law and the facts on
which the assessment is made, otherwise it shall be void. Again, Section 3.1.4 of RR No. 12-99 requires
that the FLD must state the facts and law on which is it is based. Section 228 of the NIRC should not be
read restrictively as to limit the written notice only to the assessment itself. The written notice requirement
for both the FLD and the FAN is in observance of due process—to afford the taxpayer adequate
opportunity to file a protest on the assessment and file an appeal in case of an adverse decision.
However, a void FDDA does not ipso facto render the assessment void. A decision differs from an
assessment. An\ assessment becomes a disputed assessment after a taxpayer has filed its protest to the
assessment. The CIR either issues a decision on the disputed assessment or fails to act on it and is
considered denied. The taxpayer may then appeal the decision on the disputed assessment or the
inaction of the CIR. As such, the FDDA is not the only means that the final tax liability of a taxpayer is
fixed, which may then be appealed by the taxpayer. A decision of the CIR on a disputed assessment
differs from the
assessment itself. The invalidity of one does not necessarily result in the
invalidity of the other.
However the FFDA issued reveals that it merely contained a table of
Liquigaz’s supposed tax liabilities, without providing any details. The FDDA
must state the facts and law on which it is based to provide the taxpayer the opportunity to file an
intelligent appeal.
As established, an FDDA that does not inform the taxpayer in writingof the facts and law on
which it is based renders the decision void. Therefore, it is as if there was no decision rendered by the
CIR. It is tantamount to a denial by inaction by the CIR, which may still be
appealed before the CTA and the assessment evaluated on the basis
of the available evidence and documents. The merits of the EWT and
FBT assessment should have been discussed and not merely brushed aside on account of the void
FDDA.The Court agrees that the FDDA substantially informed Liquigaz of its taxliabilities with regard to its
WTC assessment.
Substantial compliance with the requirement under Section 228 of the
NIRC is permissible provided that the tax payer would be eventually apprised in writing of the factual and
legal bases of the assessment to allow him to file an effective protest against. It is imperative that the
FDDA contain details of the discrepancy. Failure to do so would deprive LIquigaz adequate opportunity to
prepare an intelligent appeal. It would have no way of determining what were considered by the CIR in the
defenses it had raised in the protest to the FLD.
Silicon Philippines Intel Philippines Manufacturing vs. CIR
Facts:
Silicon Philippines, Inc. is a corporation duly organized and existing under the laws of the
Philippines. It is registered with the BIR das a VAT-taxpayer and with the BOI as a preferred pioneer
enterprise.Then, on May, 1999, Silicon filed with the CIR an application for credit/refund of unutilized input
VAT for the period of Oct. 1, 1998 to Dec. 31, 1998. Due to the inaction of the CIR, Silicon, on Dec. 27,
2000, filed a Petition for Review with the CTA Division. Silicon alleged that the 4 th quarter of 1998, it
generated and recorded zero-rated export sales paid to Silicon in acceptable foreign currency and that for
the said period, Silicon paid input VAT in the total amount which have not been applied to any output
VAT.The CIR, on the other hand, raised the defenses that: 1. Silicon did not show that it complied with the
provisions of Sec. 229 of the Tax Code; 2. That claims for refund are construed strictly against the
claimant similar to the nature of exemption from taxes; and that Silicon failed to prove that is entitled for
refund. The CTA Division granted Silicon’s claim for refund of unutilized input VAT on capital goods.
However, it denied Silicon’s claim for credit/refund of input VAT attributable to its zero-rated export sales.
It is because Silicon failed to present an Authority to Print (ATP) from the BIR neither did it print on its
export sales invoices the ATP and the word zero-rated.
Silicon moved for reconsideration claiming that it is not required to secure an ATP since it has a
“Permit to Adopt Computerized Accounting Documents such as Sales Invoice and Official Receipts from
the BIR. And that the printing of the word “zero-rated” on its export sales invoices is not necessary
because all its finished products are exported to its mother company, Intel Corp., a non-resident
corporation and a non-VAT registered entity.
Page 30 of 148
ISSUE: W/N Silicon entitled to claim from refund of Input VAT attributable to its zero-rated sales.
Ruling: no.
There are two types of input VAT credits:
1. A credit/refund of input VAT attributable to zero-rated sales under Sec. 112(A) of the NIRC; and
2. A credit/refund of input VAT on capital goods pursuant to Sec. 112(B) of the same Code.
To claim for credit/refund of input VAT attributable to zero-rated sales, Sec. 112(A) laid down 4 requisites:
1. The taxpayer must be a VAT-registered;
2. The taxpayer must be engaged in sales which are zero-rated or effectively zero-rated;
3. The claim must be filed within 2 years after the close of the taxable quarter when such sales
were made; and
4. The creditable input tax due or paid must be attributable to such sales, except the transitional
input tax, to the extent that such input tax has not been applied against the output tax.
A. Printing the ATP on the invoices or receipts is not required.
In a case, the SC ruled that ATP need not be reflected or indicated in the invoices or receipts
because there is no law or regulation requiring it.
Thus, failure to print the ATP on the invoices or receipts should not result in the outright denial of a
claim or the invalidation of the invoices or receipts for purposes of claiming a refund.
B. ATP must be secured from the BIR
Sec. 238 of the NIRC expressly requires persons engaged in business to secure an ATP from the
BIR prior to printing invoices or receipts. Failure to do so, makes the person liable under Sec. 264 of
the Tax Code.
W/N a claimant for unutilized input VAT on zero-rated sales is required to present proof that it has secured
an ATP from the BIR prior to the printing of its invoices or receipts.
YES. Since ATP is not indicated in the invoices or receipts, the only way to verify whether the invoices or
receipts are duly registered is by requiring the claimant to present its ATP from the BIR. Without which,
the invoices would have no probative value for the purpose of refund.
Failure to print the word “zero-rated” on the sales invoices is fatal to a claim for refund of input VAT.
In compliance with Sec. 4.108-1 of RR 7-95, requiring the printing of the word “zero-rated” on the invoice
covering zero-rate sales is essential as this regulation proceeds from the rulemaking authority of the
Secretary of Finance under Sec. 244 of the NIRC.
In this case, Silicon failed to present its ATP and to print the word “zero-rated” on its export sales invoices.
Thus, the claim for credit/refund of input VAT attributable to its zero-rated sales must be denied.
Commissioner of Internal Revenue vs GJM Philippines Manufacturing, Inc.
G.R. No. 202695, Feb. 29, 2016
Peralta, J.:
Facts:
On April 12, 2000, GJM filed its Annual Income Tax Return for the year 1999. Thereafter, its parent
company, Warnaco (HK) Ltd., underwent bankruptcy proceedings, resulting in the transfer of ownership
over GJM and its global affiliates to Luen Thai Overseas Limited in December 2001. On August 26, 2002,
GJM informed the Revenue District Officer of TreceMartirez, through a letter, that on April 29, 2002, it
would be canceling its registered address in Makati and transferring to Rosario, Cavite, which is under
Revenue District Office (RDO) No. 54. On August 26, 2002, GJM's request for transfer of its tax
registration from RDO No. 48 to RDO No. 54 was confirmed through Transfer Confirmation Notice No.
OCN ITR 000018688.
On October 18, 2002, the Bureau of Internal Revenue (BIR) sent a letter informing GJM that it was liable
for an income tax deficiency amounting to P1,192,541.51. GJM refuted the said findings.
On February 12, 2003, the Bureau of Internal Revenue (BIR) issued a Pre-Assessment Notice and Details
of Discrepancies against GJM. On April 14, 2003, it issued an undated Assessment Notice, indicating a
deficiency income tax assessment in the amount of P1,480,099.29. On July 25, 2003, the BIR issued a
Preliminary Collection Letter requesting GJM to pay said income tax deficiency for the taxable year 1999.
Said letter was addressed to GJM's former address in Pio del Pilar, Makati. On August 18, 2003, although
the BIR sent a Final Notice Before Seizure to GJM's address in Cavite, the latter claimed that it did not
receive the same.
On December 8, 2003, GJM received a Warrant of Distraint and/or Levy from the BIR RDO No. 48-West
Makati. The company then filed its Letter Protest on January 7, 2004, which the BIR denied on January
15, 2004. Hence, G.JM filed a Petition for Review before the CTA.
On January 26, 2010, the CTA First Division rendered a Decision in favor of GJM that cancelled the
Formal Assessment Notiice and the Warrant of Distraint and/or Levy issued by BIR.
Issues:
1. Whether or not the Formal Assessment Notice (FAN) for deficiency Income Tax issued to GJM for
taxable year 1999 was released, mailed, and sent within the three (3) year prescriptive period.
2. Whether or not the BIR’s right to assess GJM for deficiency Income Tax for the taxable year 1999 has
already prescribed.
Held:
Section 203 of the 1997 National Internal Revenue Code (NIRC), as amended, specifically provides for
the period within which the CIR must make an assessment.It provides:
SEC. 203. Period of Limitation Upon Assessment and Collection. - Except as provide0 in Section 222,
internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the
filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be
begun after the expiration of such period: Provided, That in a case where a return is filed beyond the
period prescribed by law, the three (3)-year period shall be counted from the day the return was filed. For
purposes of this Section, a return filed before the last day prescribed by law for the filing thereof shall be
considered as filed on such last day.
Page 31 of 148
Thus, the CIR has three (3) years from the date of the actual filing of the return or from the last day
prescribed by law for the filing of the return, whichever is later, to assess internal revenue taxes. Here,
GJM filed its Annual Income Tax Return for the taxable year 1999 on April 12, 2000. The three (3) -year
prescriptive periods, therefore, was only until April 15, 2003. The records reveal that the BIR sent the FAN
through registered mail on April 14, 2003, well within the required period. The Court has held that when an
assessment is made within the prescriptive period, as in the case at bar, receipt by the taxpayer may or
may not be within said period. But it must be clarified that the rule does not dispense with the requirement
that the taxpayer should actually receive the assessment notice, even beyond the prescriptive
period.7 GJM, however, denies ever having received any FAN.
If the taxpayer denies having received an assessment from the BIR, it then becomes incumbent upon the
latter to prove by competent evidence that such notice was indeed received by the addressee. 8 Here,
the onus probandi has shifted to the BIR to show by contrary evidence that GJM indeed received the
assessment in the clue course of mail. It has been settled that while a mailed letter is deemed received by
the addressee in the course of mail, this is merely a disputable presumption subject to controversion, the
direct denial of which shifts the burden to the sender to prove that the mailed letter was, in fact, received
by the addressee.
The BIR's failure to prove GJM's receipt of the assessment leads to no other conclusion but that no
assessment was issued. Consequently, the government's right to issue an assessment for the said period
has already prescribed.
Commissioner of Internal Revenue vsPilipinas Shell Petroleum Corporation
G.R. No. 180402, February 10, 2016
Facts:
Pilipinas Shell sold and delivered petroleum products to various international carriers of the Philippines or
foreign registry for their use outside the Philippines for the period of November 2000 to March 2001. A
portion of these sales and deliveries was sourced by Pilipinas Shell from Petron Corporation (Petron) by
virtue of a "loan or borrow agreement" between them. The excise taxes paid by Petron were passed on to
Pilipinas Shell and the latter, in turn, sold these to international carriers net of excise taxes. Pilipinas Shell
sourced the other portion from its tax-paid inventories.
Pilipinas Shell subsequently filed two separate claims for the refund or credit of the excise taxes paid on
the foregoing sales, totaling P49,058,733.09. Due to the inaction of the Bureau of Internal Revenue (BIR)
on its claims, Pilipinas Shell decided to file a petition for review with the CTA.
On November 28, 2006, the CTA Second Division rendered its Decision granting Pilipinas Shell's claim
but at a reduced amount of P39,305,419.49. Said amount was computed based on Pilipinas Shell's sales
and deliveries of petroleum products to international carriers sourced from its own tax-paid inventories.
The claim for refund/credit of the excise taxes from the sales and deliveries coming from the portion
sourced from Petron was disallowed by the CTA on the ground that Pilipinas Shell is not the proper party
to claim the same.
Issue:
Whether or not Pilipinas Shell is entitled to a refund/credit for the excise taxes paid on its sales and
deliveries to international carriers.
Held:
Yes. Under the doctrine of stare decisis, the Court must adhere to the principle of law laid down in
Pilipinas Shell and apply the same in the present case, especially since the facts, issues, and even the
parties involved are exactly identical. Thus, the Court hereby holds that Pilipinas Shell's claim for
refund/tax credit must be granted pursuant to Pilipinas Shell, as its petroleum products sold to
international carriers for the period of November 2000 to March 2001 are exempt from excise tax, these
international carriers being exempt from payment of excise tax under Section 135(a) of the NIRC.
Pilipinas Shell already ruled that petroleum products sold by local manufacturers/sellers to international
carriers are exempt from the imposition of excise taxes as these international carriers enjoy exemption
from payment of excise taxes under Section 135(a) of the NIRC. For another, the CIR failed to state with
specificity the tenor of these issuances, except that these relate to the BIR's alleged grant of excise tax
exemption on petroleum products, without even making an effort to present an official copy of these
issuances, much less its contents. Moreover, the Court took upon itself the task of looking into these
issuances and discovered that BIR Ruling No. 051-9922 actually involves the petroleum product
withdrawals by Petron who is not even party to the present case. On the other hand, Revenue
Regulations No. 5-200023 does not pertain solely to refund/credit of excise taxes on petroleum products
but prescribes general regulations on the manner of the issuance of tax credit certificates and the
conditions for their use, revalidation and transfer. For these reasons, the Court cannot sanction the CIR's
"shotgun approach" and sustain its bare arguments without more.
Commissioner of Internal Revenue vsMirant Pagbilao Corporation (now Team Energy Corporation)
G.R. No. 180434, January 20, 2016
Facts:
MPC is a duly-registered Philippine corporation located at Pagbilao Grande Island in Pagbilao, Quezon,
and primarily engaged in the generation and distribution of electricity to the National Power Corporation
(NAPOCOR) under a Build, Operate, Transfer Scheme.
On November 26, 1999, the BIR approved MPC’s application for Effective Zero-Rating for the construction
and operation of its power plant.
Page 32 of 148
For taxable year 2000, the quarterly VAT returns filed by MPC on April 25, 2000, July 25, 2000, October
24, 2000, and August 27, 2001 showed an excess input VAT paid on domestic purchases of goods,
services and importation of goods in the amount of ₱127,140,331.85.
On March 11, 2002, MPC filed before the BIR an administrative claim for refund of its input VAT covering
the taxable year of 2000. Thereafter, or on March 26, 2002, fearing that the period for filing a judicial claim
for refund was about to expire, MPC proceeded to file a petition for review before the CTA, without waiting
for the CIR’s action on the administrative claim.
The CTA Second Division rendered a Decision partially granting MPC’s claim for refund, and ordering the
CIR to grant a refund or a tax credit certificate, but only in the reduced amount and also held that by virtue
of NAPOCOR’s exemption from direct and indirect taxes as provided for in Section 1311 of Republic Act
No. 6395, MPC’s sale of services to NAPOCOR is subject to VAT at 0% rate.
Meanwhile, the CIR filed a motion for reconsideration of the amended decision. However, the CTA
Second Division issued a Resolution denying the motion. Thereafter, the CIR filed a petition for review
before the CTA en banc but it sustained the decision of the CTA Second Division.
Issues:
1. Whether or not the CTA had jurisdiction to entertain MPC’s judicial claim.
2. Whether or not the CTA erred in granting MPC’s claim for refund of its excess input VAT payments on
domestic purchases of goods, services and importation of goods attributable to zero-rated sales for
taxable year 2000.
Held:
No. While the matter was not raised by the CIR in its petition, it is settled that a jurisdictional issue may be
invoked by either party or even the Court motuproprio, and may be raised at any stage of the proceedings,
even on appeal. Thus, the Court emphasized in Sales, et al. v. Barro, 573 SCRA 456 (2008):
It is well-settled that a court’s jurisdiction may be raised at any stage of the proceedings, even on appeal.
The reason is that jurisdiction is conferred by law, and lack of it affects the very authority of the court to
take cognizance of and to render judgment on the action. Even if a party did not raise the issue of
jurisdiction, the reviewing court is not precluded from ruling that it has no jurisdiction over the case. In this
sense, dismissal for lack of jurisdiction may even be ordered by the court motuproprio.
In CIR v. Aichi Forging Company of Asia, Inc., the Court cited the general rule that parties must observe
the mandatory 120-day waiting period to give the CIR an opportunity to act on administrative claims;
otherwise, their judicial claims are prematurely filed. In Team Energy Corporation (formerly MPC) v.
CIR, the Court again emphasized the rule stating that "the 120-day period is crucial in filing an appeal with
the CTA." "The 120-day period is mandatory and jurisdictional, and that the CTA does not acquire
jurisdiction over a judicial claim that is filed before the expiration of the 120-day period."
Clearly, MPC's failure to observe the mandatory 120-day period under the law was fatal to its immediate
filing of a judicial claim before the CTA. It rendered the filing of the CTA petition premature, and barred the
tax court from acquiring jurisdiction over the same. Thus, the dismissal of the petition is in order. "Tax
refunds or tax credits - just like tax exemptions - are strictly construed against taxpayers, the latter having
the burden to prove strict compliance with the conditions for the grant of the tax refund or credit."
With the CTA being barren of jurisdiction to entertain MPC's petition, the Court finds it unnecessary, even
inappropriate, to still discuss the main issue of MPC's entitlement to the disputed tax refund. The petition
filed by MPC with the CT A instead warrants a dismissal. It is settled that "a void judgment for want of
jurisdiction is no judgment at all."
Republic of the Philippines represented by Bureau of Customs vsPilipinas Shell Petroleum
Corporation G.R. No. 209324, December 9, 2015
Villarama, Jr. , J.:
Facts:
Pilipinas Shell Petroleum Corporation (PSPC), a domestic corporation registered with the Board of
Investments (BOI), is engaged in the importation, refining and sale of petroleum products in the country.
For its importations, PSPC was assessed and required to pay customs duties and internal revenue taxes.
On May 7, 1997, Filipino Way Industries (FWI) assigned its Tax Credit Certificates to PSPC. On the belief
that the TCCs were actually good and valid, the Bureau of Customs (BOC) accepted and allowed PSPC
to use the above TCCs to pay the customs duties and taxes due on its oil importations. But it was later on
found out that the TCCs have been fraudulently issued and transferred. Thus, the Republic of the
Philippines represented by the BOC filed the present collection suit in the RTC for the payment of
P10,088,912.00 still owed by PSPC after the invalidation of the subject TCCs.
During the pendency of the case, PSPC filed a motion for summary judgment arguing that there is no
basis for the Republic's claims considering that the subject TCCs were already fully utilized for the
payment of PSPC's customs duties and taxesand the basis of the cancellation of the TCCs, was declared
void and invalid in Pilipinas Shell Petroleum Corporation v. CIR, where the Court likewise ruled that the
subject TCCs cannot be cancelled on the basis of post-audit since a post-audit is not allowed and not a
suspensive condition. PSPC further contended that the Republic's cause of action had already prescribed
when it attempted to collect PSPC's customs duties and taxes only four years later, beyond the one-year
prescriptive period to file a collection case. Lastly, PSPC asserted that even assuming the TCCs were
fraudulently obtained by FWI, an innocent purchaser for value like PSPC cannot be prejudiced as held in
the aforementioned case.
In its Comment/Opposition, BOC argued that rendition of summary judgment is inappropriate in this case
in view of disputed facts that necessitate a full-blown trial where both parties can present evidence on
their respective claims. BOC pointed out that PSPC cannot rely on the Deed of Assignment as proof that it
had no participation in the issuance of the TCCs. PSPC should prove at the trial that there was a valid
transfer in good faith and for value of the subject TCCs. As to the rulings in the case of Pilipinas Shell
Petroleum Corporation v. CIR,17 these are inapplicable here because first, what is involved therein are
Page 33 of 148
taxes owed to the BIR and there was no finding of fraud against PSPC whereas in the present case the
BOC can readily prove during trial that PSPC committed fraud.
On April 28, 2010, RTC ruled in favor of PSPC citing the case of cited Pilipinas Shell Corporation v.
Republic which supposedly settled factual and legal issues raised by BOC in its pleadings and arguments,
specifically PSPC's not having committed fraud.
Issues:
1. Whether or not petitioner's claim is barred by prescription.
2. whether or not the ruling in Pilipinas Shell Petroleum Corporation v. CIR applies to this case under the
doctrine of stare decisis.
Held:
1.BOC's collection suit is not based on any new or revised assessment because the original assessments,
which had long become final and uncontestable, were already settled by PSPC with the use of the subject
TCCs.
With the cancellation of the TCCs, the tax liabilities of PSPC under the original assessments were
considered unpaid, hence BOC's demand letters and the action for collection in the RTC. To repeat, these
assessed customs duties and taxes were previously assessed and paid by the taxpayer, only that the
TCCs turned out to be spurious and hence worthless certificates that did not extinguish PSPC's tax
liabilities.
The applicable provision is Section 1204 of the Tariff and Customs Code, which states:
Section 1204. Liability of Importer for Duties. — Unless relieved by laws or regulations, the liability for
duties, taxes, fees and other charges attaching on importation constitutes a personal debt due from the
importer to the government which can be discharged only by payment in full of all duties, taxes, fees and
other charges legally accruing. It also constitutes a lien upon the articles imported which may be enforced
while such articles are in the custody or subject to the control of the government.
As we held in Pilipinas Shell Petroleum Corporation v. Republic:
Under this provision, import duties constitute a personal debt of the importer that must be paid in full. The
importer's liability therefore constitutes a lien on the article which the government may choose to enforce
while the imported articles are either in its custody or under its control.
When respondent released petitioner's goods, its (respondent's) lien over the imported goods was
extinguished. Consequently, respondent could only enforce the payment of petitioner's import duties in full
by filing a case for collection against petitioner.
2. No. The doctrine of stare decisis is based on the principle that once a question of law has been
examined and decided, it should be deemed settled and closed to further argument. Accordingly, when a
court has laid down a principle of law as applicable to a certain state of facts, it will adhere to that principle
and apply it to all future cases in which the facts are substantially the same. Thus, where the same
questions relating to the same event have been put forward by the parties similarly situated as in a
previous case litigated and decided by a competent court, the rule of stare decisis is a bar to any attempt
to relitigate the same issue.
In Pilipinas Shell Petroleum Corporation v. CIR involved TCCs used by PSPC that were also cancelled for
alleged fraud in their issuance and transfer. However, in the said case, there was a finding, on the basis of
evidence presented before the CTA, that PSPC is a transferee in good faith and for value and that no
evidence was adduced that it participated in any way in the issuance of the TCCs to the corporations who
in turn conveyed the same to PSPC.
PSPC's status as transferee in good faith of the TCCs assigned to it by FWI is yet to be established or
proven at the trial. In fact, this Court in upholding the jurisdiction of the RTC directed it to proceed with the
pre-trial and trial proper. Petitioner should be given the opportunity to substantiate its allegations of fraud
in the issuance and transfer of the TCCs which PSPC used to pay for the customs duties and taxes due
on its oil importations. Whether Pilipinas Shell Petroleum Corporation v. CIR applies squarely to the
present case may be determined only after such trial. If it is shown that PSPC was a party to the fraud as
when it did not obtain the TCC for value or has knowledge of its fraudulent issuance, it will be liable for the
taxes and for the fraud committed as provided for by law.
In sum, the CA erred in affirming the RTC orders granting summary judgment in favor of PSPC
considering that there exists a genuine issue of fact and that stare decisis finds no application in this case.
Pilipinas Total Gas, Inc. vs Commissioner of Internal Revenue
G.R. No. 207112, December 8, 2015
Facts:
Petitioner Pilipinas Total Gas, Inc. (Total Gas) is engaged in the business of selling, transporting and
distributing industrial gas. It is also engaged in the sale of gas equipment and other related businesses.
On April 20, 2007 and July 20, 2007, Total Gas filed its Original Quarterly VAT Returns for the First and
Second quarters of 2007, respectively with the BIR.
On May 20, 2008, it filed its Amended Quarterly VAT Returns for the first two quarters of 2007 reflecting
its sales subject to VAT, zero-rated sales, and domestic purchases of non-capital goods and services.
For the First and Second quarters of 2007, Total Gas claimed it incurred unutilized input VAT credits from
its domestic purchases of non¬capital goods and services in the total amount of P8,124,400.35. Of this
total accumulated input VAT, Total Gas claimed that it had P7,898,433.98 excess unutilized input VAT.
On May 15, 2008, Total Gas filed an administrative claim for refund of unutilized input VAT for the first two
quarters of taxable year 2007, inclusive of supporting documents.
On August 28, 2008, Total Gas submitted additional supporting documents to the BIR.
On January 23, 2009, Total Gas elevated the matter to the CTA in view of the inaction of the
Commissioner of Internal Revenue (CIR).
The CTA Division dismissed the petition for being prematurely filed. It explained that Total Gas failed to
complete the necessary documents to substantiate a claim for refund of unutilized input VAT on
purchases of goods and services enumerated under Revenue Memorandum Order (RMO) No. 53-98.
Page 34 of 148
Total Gas sought for reconsideration from the CTA Division, but its motion was denied for lack of merit in
a Resolution, dated April 19, 2011. In the same resolution, it reiterated that "that the complete supporting
documents should be submitted to the BIR before the 120-day period for the Commissioner to decide the
claim for refund shall commence to run. It is only upon the lapse of the 120-day period that the taxpayer
can appeal the inaction to the CTA."
Issues:
1. Whether the judicial claim for refund was belatedly filed on 23 January 2009, or way beyond the 30-day
period to appeal as provided in Section 112(c) of the Tax Code, as amended.
2. Whether the submission of incomplete documents at the administrative level (BIR) renders the judicial
claim premature and dismissible for lack of jurisdiction.
Held:
1. No. SEC. 112. Refunds or Tax Credits of Input Tax. -
x xxx
(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the
Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one
hundred twenty (120) days from the date of submission of complete documents in support of the
application filed in accordance with Subsections (A) and (B) hereof.
In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the
Commissioner to act on the application within the period prescribed above, the taxpayer affected may,
within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one
hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals.
x xxx
Indeed, the 120-day period granted to the CIR to decide the administrative claim under the Section 112 is
primarily intended to benefit the taxpayer, to ensure that his claim is decided judiciously and expeditiously.
After all, the sooner the taxpayer successfully processes his refund, the sooner can such resources be
further reinvested to the business translating to greater efficiencies and productivities that would ultimately
uplift the general welfare. To allow the CIR to determine the completeness of the documents submitted
and, thus, dictate the running of the 120-day period, would undermine these objectives, as it would
provide the CIR the unbridled power to indefinitely delay the administrative claim, which would ultimately
prevent the filing of a judicial claim with the CTA.
With the amended of Sec. 112, the Court finds that RMC No. 49-2003 should still be observed. Thus,
taking the foregoing changes to the law altogether, it becomes apparent that, for purposes of determining
when the supporting documents have been completed — it is the taxpayer who ultimately determines
when complete documents have been submitted for the purpose of commencing and continuing the
running of the 120-day period. After all, he may have already completed the necessary documents the
moment he filed his administrative claim, in which case, the 120-day period is reckoned from the date of
filing. The taxpayer may have also filed the complete documents on the 30th day from filing of his
application, pursuant to RMC No. 49-2003. He may very well have filed his supporting documents on the
first day he was notified by the BIR of the lack of the necessary documents. In such cases, the 120-day
period is computed from the date the taxpayer is able to submit the complete documents in support of his
application.
Except in those instances where the BIR would require additional documents in order to fully appreciate a
claim for tax credit or refund, in terms what additional document must be presented in support of a claim
for tax credit or refund — it is the taxpayer who has that right and the burden of providing any and all
documents that would support his claim for tax credit or refund. After all, in a claim for tax credit or refund,
it is the taxpayer who has the burden to prove his cause of action. As such, he enjoys relative freedom to
submit such evidence to prove his claim.
Thus, for purposes of counting the 120-day period, it should be reckoned from August 28, 2008, the date
when Total Gas made its "submission of complete documents to support its application" for refund of
excess unutilized input VAT. Consequently, counting from this later date, the BIR had 120 days to decide
the claim or until December 26, 2008. With absolutely no action or notice on the part of the BIR for 120
days, Total Gas had 30 days or until January 25, 2009 to file its judicial claim.
Total Gas, thus, timely filed its judicial claim on January 23, 2009.
2. No. The alleged failure of Total Gas to submit the complete documents at the administrative level did
not render its petition for review with the CTA dismissible for lack of jurisdiction. First, the 120-day period
had commenced to run and the 120+30 day period was, in fact, complied with. As already discussed, it is
the taxpayer who determines when complete documents have been submitted for the purpose of the
running of the 120-day period. It must again be pointed out that this in no way precludes the CIR from
requiring additional documents necessary to decide the claim, or even denying the claim if the taxpayer
fails to submit the additional documents requested.
Second, the CIR sent no written notice informing Total Gas that the documents were incomplete or
required it to submit additional documents. As stated above, such notice by way of a written request is
required by the CIR to be sent to Total Gas. Neither was there any decision made denying the
administrative claim of Total Gas on the ground that it had failed to submit all the required documents. It
was precisely the inaction of the BIR which prompted Total Gas to file the judicial claim. Thus, by failing to
inform Total Gas of the need to submit any additional document, the BIR cannot now argue that the
judicial claim should be dismissed because it failed to submit complete documents.
Finally, it should be mentioned that the appeal made by Total Gas to the CTA cannot be said to be
premature on the ground that it did not observe the otherwise mandatory and juridictional 120+30 day
Page 35 of 148
period. When Total Gas filed its appeal with the CTA on January 23, 2009, it simply relied on BIR Ruling
No. DA-489-03, which, at that time, was not yet struck down by the Court's ruling in Aichi.
To repeat, a claim for tax refund or credit, like a claim for tax exemption, is construed strictly against the
taxpayer. One of the conditions for a judicial claim of refund or credit under the VAT System is compliance
with the 120+30 day mandatory and jurisdictional periods. Thus, strict compliance with the 120+30 day
periods is necessary for such a claim to prosper, whether before, during, or after the effectivity of the Atlas
doctrine, except for the period from the issuance of BIR Ruling No. DA-489-03 on 10 December
2003 to 6 October 2010 when the Aichi doctrine was adopted, which again reinstated the 120+30
day periods as mandatory and jurisdictional.
COMMISSIONER OF INTERNAL REVENUE VS. NIPPON EXPRESS (PHILS.) CORPORATION
GR No. 212920, Sep 16, 2015
FACTS:
Nippon is a domestic corporation duly organized and existing under Philippine laws which is primarily
engaged in the business of freight forwarding, namely, in the international and domestic air and sea freight
and cargo forwarding, hauling, carrying, handling, distributing, loading, and unloading general cargoes
and all classes of goods, wares, and merchandise, and the operation of container depots, warehousing,
storage, hauling, and packing facilities. It is a Value-Added Tax (VAT) registered entity with Tax
Identification No./VAT Registration No. 004-669-434-000. As such, it filed its quarterly VAT returns for the
year 2002 on April 25, 2002, July 25, 2002, October 25, 2002, and January 27, 2003, respectively. It
maintained that during the said period it incurred input VAT attributable to its zero-rated sales in the
amount of f 28,405,167.60, from which only P3,760,660.74 was applied as tax credit, thus, reflecting
refundable excess input VAT in the amount of P24,644,506.86.
On April 22, 2004, Nippon filed an administrative claim for refund of its unutilized input VAT in the amount
of P24,644,506.86 for the year 2002 before the Bureau of Internal Revenue (BIR).A day later, or on April
23, 2004, it filed a judicial claim for tax refund, by way of petition for review, before the CTA, docketed as
CTA Case No. 6967.
For its part, petitioner the Commissioner of Internal Revenue (CIR) asserted, inter alia, that the amounts
being claimed by Nippon as unutilized input VAT were not properly documented, hence, should be denied.
ISSUE:
Whether or not the CTA properly granted Nippon's motion to withdraw?
HELD:
No.
Rule 50 of the Rules of Court - an adjunct rule to the appellate procedure in the CA under Rules 42, 43,
44, and 46 of the Rules of Court which are equally adopted in the RRCTA states that when the case is
deemed submitted for resolution, withdrawal of appeals made after the filing of the appellee's brief may
still be allowed in the discretion of the court
Impelled by the BIR's supervening issuance of the July 27, 2011 Tax Credit Certificate, Nippon filed a
motion to withdraw the case, proffering that having arrived at a reasonable settlement of the issues with
the CIR/BIR, and to avoid incurring further legal and related costs, not to mention the time and resources
of the CTA, Nippon most respectfully moves for the withdrawal of its Petition for Review. Finding the
aforementioned grounds to be justified, the CTA Division allowed the withdrawal of Nippon's appeal
thereby ordering the case closed and terminated, notwithstanding the fact that the said motion was filed
after the promulgation of its August 10, 2011 Decision.
While it is true that the CTA Division has the prerogative to grant a motion to withdraw under the authority
of the foregoing legal provisions, the attendant circumstances in this case should have incited it to act
otherwise. August 10, 2011 Decision was rendered by the CTA Division after a full-blown hearing in which
the parties had already ventilated their claims. Thus, the findings contained therein were the results of an
exhaustive study of the pleadings and a judicious evaluation of the evidence submitted by the parties, as
well as the report of the commissioned certified public accountant. The Court has observed that based on
the records, Nippon's administrative claim for the first taxable quarter of 2002 which closed on March 31,
2002 was already time-barred for being filed on April 22, 2004, or beyond the two (2)-year prescriptive
period pursuant to Section 112(A) of the National Internal Revenue Code of 1997. Although prescription
was not raised as an issue, it is well-settled that if the pleadings or the evidence on record show that the
claim is barred by prescription, the Court may motu proprio order its dismissal on said ground. The CTA
committed a reversible error in granting Nippon's motion to withdraw. The August 10, 2011 Decision of the
CTA Division should therefore be reinstated, without prejudice, however, to the right of either party to
appeal the same in accordance with the RRCTA.
BUREAU OF CUSTOMS VS. DEVANADERA
G.R. No. 193253 | September 8, 2015
FACTS:
BOC Commissioner Morales issued Audit Notification Letter informing the President of OILLink that the
BOC will be conducting a compliance audit, including the examination, inspection, verification and/or
investigation of all pertinent records of OILLINK’s import transactions for the past three year period
counted from the said date. OILLINK failed to submit the remaining pertinent documents. Upon
recommendation, Commissioner Morales approved the filing of administrative case against OILLINK for
failure to comply with the requirements of Customs Administrative Order. The Legal Service of the BOC
rendered a decision finding that OILLINK violated Section IV.A.2(c) and (e) of CAO 4-2004 when it
refused to furnish the Audit Team copies of required documents, despite repeated demands.
Consequently, OILLINK failed to settle the administrative fine; hence, Hold Order was issued by the
District Collector against all shipments of OILLINK for failure to settle its outstanding account with the
BOC and to protect the interest of the government.
UNIOIL, on the other hand, requested the District Collector to allow it to withdraw the base oils from
OILLINK’s temporarily closed Terminal, citing the Terminalling Agreement with OILLINK. Commissioner
Morales granted the request of UNIOIL
Page 36 of 148
In a complaint-affidavit, Atty. Balmyrson M. Valdez, a member of the petitioner BOC’s Anti-Oil Smuggling
Coordinating Committee that investigated the illegal withdrawal by UNIOIL of oil products consigned to
OILLINK accused the private respondents of violation of Sections 3601 and 3602, in relation to Sections
2503 and 2530, paragraphs f and l(3), (4) and (5), of the TCCP. The State Prosecutor of the DOJ
recommended the dismissal of the complaint-affidavit for lack of probable cause. The resolution was
approved by the Assistant Chief State Prosecutors. On automatic review, the Resolution was affirmed by
then Secretary of Justice Raul M. Gonzales.
Dissatisfied, the BOC filed a motion for reconsideration which was denied by the Acting Secretary of
Justice Agnes VST Devanadera. The BOC filed a petition for certiorari with the CA. The CA dismissed the
petition as well as the motion for reconsideration for the non-submission of the certification against forum
shopping.
ISSUE:
Whether or not the CTA has the jurisdiction over the petition for certiorari assailing the DOJ resolution in a
preliminary investigation involving tax and tariff offenses
HELD:
Yes
The elementary rule is that the CA has jurisdiction to review the resolution of the DOJ through a petition
for certiorari under Rule 65 of the Rules of Court on the ground that the Secretary of Justice committed
grave abuse of his discretion amounting to excess or lack of jurisdiction. However, with the enactment of
Republic Act (R.A.) No. 9282, amending R.A. No. 112534 by expanding the jurisdiction of the CTA,
enlarging its membership and elevating its rank to the level of a collegiate court with special jurisdiction, it
is no longer clear which between the CA and the CTA has jurisdiction to review through a petition for
certiorari the DOJ resolution in preliminary investigations involving tax and tariff offenses.
Apropos is City of Manila v. Hon. Grecia-Cuerdo where the Court en banc declared that the CTA has
appellate jurisdiction over a special civil action for certiorari assailing an interlocutory order issued by the
RTC in a local tax case, despite the fact that there is no categorical statement to that effect under R.A. No.
1125, as well as the amendatory R.A. No. 9282.
If the Court were to rule that jurisdiction over a petition for certiorari assailing such DOJ resolution lies with
the CA, it would be confirming the exercise by two judicial bodies, the CA and the CTA, of jurisdiction over
basically the same subject matter - precisely the split-jurisdiction situation which is anathema to the
orderly administration of justice. The Court cannot accept that such was the legislative intent, especially
considering that R.A. No. 9282 expressly confers on the CTA, the tribunal with the specialized
competence over tax and tariff matters, the role of judicial review over local tax cases without mention of
any other court that may exercise such power.
Concededly, there is no clear statement under R.A. No. 1125, the amendatory R.A. No. 9282, let alone in
the Constitution, that the CTA has original jurisdiction over a petition for certiorari. By virtue of Section 1,
Article VIII of the 1987 Constitution, vesting judicial power in the Supreme Court and such lower courts as
may be established by law, to determine whether or not there has been a grave abuse of discretion on the
part of any branch or instrumentality of the Government, in relation to Section 5(5), Article VIII thereof,
vesting upon it the power to promulgate rules concerning practice and procedure in all courts, the Court
thus declares that the CA's original jurisdiction39 over a petition for certiorari assailing the DOJ resolution
in a preliminary investigation involving tax and tariff offenses was necessarily transferred to the CTA
pursuant to Section 7 of R.A. No. 9282, and that such petition shall be governed by Rule 65 of the Rules
of Court, as amended. Accordingly, it is the CTA, not the CA, which has jurisdiction over the petition for
certiorari assailing the DOJ resolution of dismissal of the BOC's complaint-affidavit against private
respondents for violation of the TCCR
CHEVRON PHILIPPINES INC. v. CIR
GR No. 210836, Sep 01, 2015
FACTS:
Chevron sold and delivered petroleum products to CDC in the period from August 2007 to December
2007.[5] Chevron did not pass on to CDC the excise taxes paid on the importation of the petroleum
products sold to CDC in taxable year 2007;[6]hence, on June 26, 2009, it filed an administrative claim
for tax refund or issuance of tax credit certificate in the amount of P6,542,400.00. [7] Considering that
respondent Commissioner of Internal Revenue (CIR) did not act on the administrative claim for tax refund
or tax credit, Chevron elevated its claim to the CTA by petition for review on June 29, 2009. The CTA First
Division denied Chevron's judicial claim for tax refund or tax credit through its decision dated July 31,
2012,[9] and later on also denied Chevron's Motion for Reconsideration on November 20, 2012.[10]
In due course, Chevron appealed to the CTA En Banc (CTA EB No. 964), which, in the decision dated
September 30, 2013,[11] affirmed the ruling of the CTA First Division, stating that there was nothing in
Section 135(c) of the NIRC that explicitly exempted Chevron as the seller of the imported petroleum
products from the payment of the excise taxes; and holding that because it did not fall under any of the
categories exempted from paying excise tax, Chevron was not entitled to the tax refund or tax credit.
ISSUE:
Whether Chevron was entitled to the tax refund or the tax credit for the excise taxes paid on the
importation of petroleum products that it had sold to CDC in 2007.
HELD:
Yes.
Excise tax is a tax on property, hence, the exemption from the excise tax expressly granted under Section
135 of the NIRC must be construed in favor of the petroleum products on which the excise tax was initially
imposed. Accordingly, the excise taxes that Chevron paid on its importation of petroleum products
subsequently sold to CDC were illegal and erroneous, and should be credited or refunded to Chevron in
accordance with Section 204 of the NIRC.
Under Section 129 of the NIRC, as amended, excise taxes are imposed on two kinds of goods, namely:
(a) goods manufactured or produced in the Philippines for domestic sales or consumption or for any other
disposition; and (b) things imported. Undoubtedly, the excise tax imposed under Section 129 of the NIRC
is a tax on property.
With respect to imported things, Section 131 of the NIRC declares that excise taxes on imported things
shall be paid by the owner or importer to the Customs officers, conformably with the regulations of the
Department of Finance and before the release of such articles from the customs house, unless the
imported things are exempt from excise taxes and the person found to be in possession of the same is
other than those legally entitled to such tax exemption. For this purpose, the statutory taxpayer is the
importer of the things subject to excise tax. Chevron, being the statutory taxpayer, paid the excise taxes
on its importation of the petroleum products.
Page 37 of 148
 of 2001 (EPIRA), value-added tax (VAT) on sales of generated power by generation companies are zero-
Pursuant to Section 135(c), petroleum products sold to entities that are by law exempt from direct and rated.
indirect taxes are exempt from excise tax. The phrase which are by law exempt from direct and indirect
taxes describes the entities to whom the petroleum products must be sold in order to render the The CIR filed a Petition before this Court assailing the Decision of the CTA En Banc in C.T.A. EB No. 589,
exemption operative. Section 135(c) should thus be construed as an exemption in favor of the petroleum docketed as G.R. No. 195175. The CIR mainly points out that the law requires the submission of
products on which the excise tax was levied in the first place. The exemption cannot be granted to the complete supporting documents to the BIR before the 120-day audit period shall apply, and before the
buyers - that is, the entities that are by law exempt from direct and indirect taxes - because they are not taxpayer can avail itself of the judicial remedies provided for by law. In this case, TPC failed to submit
under any legal duty to pay the excise tax. complete documents in support of its application for a tax refund. To the CIR, such disregard of a
mandatory requirement warranted the denial of TPC’s claim for a refund.
CDC was created to be the implementing and operating arm of the Bases Conversion and Development
Authority to manage the Clark Special Economic Zone (CSEZ).As a duly-registered enterprise in the On the other hand, TPC appealed the denial of its claim in C.T.A. EB No. 708, which was docketed as
CSEZ, CDC has been exempt from paying direct and indirect taxes pursuant to Section 24 of Republic Act G.R. No. 199645. TPC alleged that Section 229 of the NIRC of 1997, which gives taxpayers two years
No. 7916 in relation to Section 15 of Republic Act No. 9400 within which to claim a refund, should be applied to this case, considering that the prevailing rule at the
time the Petitions were filed was that the 120-30 day period was neither mandatory nor compulsory. Also,
Inasmuch as its liability for the payment of the excise taxes accrued immediately upon importation and TPC posits that Aichi should not be applied retroactively, and that there are differences between the
prior to the removal of the petroleum products from the customs house, Chevron was bound to pay, and factual milieu of this case and that of Aichi.
actually paid such taxes. But the status of the petroleum products as exempt from the excise taxes would
be confirmed only upon their sale to CDC in 2007 (or, for that matter, to any of the other entities or ISSUE:
agencies listed in Section 135 of the NIRC). Before then, Chevron did not have any legal basis to claim
the tax refund or the tax credit as to the petroleum products. Whether or not TPC is entitled to the refund of its alleged unutilized input VAT for the first and the second
quarters of taxable year 2003, as well as for the four quarters of taxable year 2004?
Consequently, the payment of the excise taxes by Chevron upon its importation of petroleum products
was deemed illegal and erroneous upon the sale of the petroleum products to CDC. Section 204 of the HELD:
NIRC explicitly allowed Chevron as the statutory taxpayer to claim the refund or the credit of the excise
taxes thereby paid. The consolidated cases involve a claim for input VAT pursuant to Section 112 of the National Internal
Revenue Code (NIRC) of 1997. Pursuant to this provision, the requisites for claiming unutilized/excess
The general rule applies here because Chevron did not pass on to CDC the excise taxes paid on the input VAT, except transitional input VAT, are as follows:
importation of the petroleum products, the latter being exempt from indirect taxes by virtue of Section 24 1) The taxpayer-claimant is VAT registered;
of Republic Act No. 7916, in relation to Section 15 of Republic Act No. 9400, not because Section 135(c) 2) The taxpayer-claimant is engaged in zero-rated or effectively zero-rated sales;
of the NIRC exempted CDC from the payment of excise tax. 3) There are creditable input taxes due or paid attributable to the zero-rated or effectively zero-rated sales;
4) This input tax has not been applied against the output tax; and
Accordingly, conformably with Section 204(C) of the NIRC, supra, and pertinent jurisprudence, Chevron 5) The application and the claim for a refund have been filed within the prescribed period.
was entitled to the refund or credit of the excise taxes erroneously paid on the importation of the With regard to the first and the second requisites, it is undisputed that TPC is VAT-registered and is
petroleum products sold to CDC. engaged in the sale of generated power, which is effectively zero-rated. The third and the fourth requisites
are purely factual and the CTA has the jurisdiction to determine compliance therewith.
COMMISSIONER OF INTERNAL REVENUE v. TOLEDO POWER COMPANY
G.R. No. 195175, August 10, 2015 As to the prescriptive period, the Court ruled that the observance of the 120+30 day period is mandatory
and jurisdictional. Summary of Rules on Prescriptive Periods Involving VAT:

FACTS:
Toledo Power Company (TPC) is engaged in the business of power generation and subsequent sale
thereof to the National Power Corporation (NPC), Cebu Electric Cooperative III (CEBECO), Atlas
Consolidated Mining and Development Corporation, and Atlas Fertilizer Corporation. Pursuant to Section
6, Chapter II of Republic Act (R.A.) No. 9136, otherwise known as the Electric Power Industry Reform Act
(1) An administrative claim must be filed with the CIR within two years after the close of the taxable
quarter when the zero-rated or effectively zero-rated sales were made.
(2) The CIR has 120 days from the date of submission of complete documents in support of the
administrative claim within which to decide whether to grant a refund or issue a tax credit certificate. The
120-day period may extend beyond the two-year period from the filing of the administrative claim if the

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claim is filed in the later part of the two-year period. If the 120-day period expires without any decision
from the CIR, then the administrative claim may be considered to be denied by inaction.
(3) A judicial claim must be filed with the CTA within 30 days from the receipt of the CIR’s decision
denying the administrative claim or from the expiration of the 120-day period without any action from the
CIR.
(4) All taxpayers, however, 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, as an exception to the
mandatory and jurisdictional 120+30 day periods.
In GR No. 195175, the filing of the administrative claim was done within the period where BIR Ruling No.
DA-489-03 was recognized valid, TPC is not compelled to observe the 120-day waiting period.
Nevertheless, it should have filed the Petition within 30 days after the expiration of the 120-day period.
TPC lost its right to claim a refund or credit of its alleged excess input VAT attributable to zero-rated or
effectively zero-rated sales for taxable year 2004 by virtue of its own failure to observe the prescriptive
periods.
In both C.T.A. Case Nos. 7233 and 7294, the administrative claim for the refund of unutilized input VAT
attributable to the zero-rated or effectively zero-rated sales was timely filed on 23 December 2004, which
was within two years from the close of the first and the second quarters of 2003 when the sales were
made.
CTA has jurisdiction over the Petition of TPC, but only in C.T.A. Case No. 7233 or the claim for refund of
unutilized input VAT attributable to zero-rated or effectively zero-rated sales for the first quarter of 2003.
However, considering that the original Decision of the CTA First Division did not separate the computation
of the refundable amount of input VAT for the first and the second quarters of 2003, we cannot determine
the actual amount that may be attributed to the first quarter of 2003. Thus, a remand of the case to the
CTA is necessary.
The Court finds, in view of the absence of jurisdiction of the Court of the Tax Appeals over the judicial
claims of TPC in C.T.A. Case Nos. 7471 and 7294, that there is no need to discuss the other issues
raised.
COMMISSIONER OF INTERNAL REVENUE v. STANDARD CHARTERED BANK.
G.R. No. 192173. July 29, 2015
FACTS:
Respondent received CIR's Formal Letter of Demand for alleged deficiency income tax, final income tax,
withholding tax - final and compensation, and increments for the taxable year worth P 33,326,211.37.
Respondent protested the said assessment by filing a letter-protest with the CIR requesting the
assessment to be withdrawn.
In the middle of things, respondent paid the BIR the assessed deficiency for both the withholding taxes.
Respondent then filed for a petition for the cancellation and setting aside of the assessments which the
CTA granted. The CTA held that it has already prescribed as it covered the taxable year of 1998.
The NIRC provides that the assessments should have been issued within the three-year prescriptive
period. The CIR also presented the Waivers of Statute of Limitations executed by the parties which
extended the period to assess respondent. The CTA held that the CIR failed to strictly comply and
conform with the provisions of Revenue Memorandum Order No. 20-90. The CTA held that the waivers
were invalid.
ISSUES:
1. Whether or not the assessments were already prescribed?
2. Whether or not the waiver was invalid?
HELD:
1.Yes
The NIRC is clear that in a case where a return is filed beyond the period prescribed by law, the three-
year period shall be counted from the day the return was filed.
2.Yes
The waiver, as also provided by the NIRC, is an exception to the three-day prescription. But, as the CTA
first held, the provisions of the RMO should have been strictly complied with. Failing to comply renders a
waiver defective and ineffectual.
COMMISSIONER OF INTERNAL REVENUE vs. COURT OF TAX APPEALS and CBK POWER
COMPANY LIMITED
G.R. Nos. 203054-55 July 29, 2015
FACTS:
On March 30, 2011, private respondent filed with the CTA a judicial claim for the issuance of a
tax credit certificate in the amount of Seventeen Million Seven Hundred Eighty-Four Thousand Nine
Hundred Sixty-Eight and 91/100 Pesos (P17,784,968.91), representing unutilized input taxes on its local
purchases and importations of goods other than capital goods, local purchases of services, payment of
services rendered by non-residents, including unutilized amortized input taxes on capital goods exceeding
one million for the period of January 1, 2009 to March 31, 2009, all attributable to zero rated sales for the
same period, pursuant to Section 112 (A) of the 1997 Tax Code.The case was docketed as CTA Case No.
8246.
On May 30, 2011, petitioner received summons requiring it to answer. Petitioner through
counsel, Atty. Christopher C. Sandico, complied and filed the Answer. On June 29, 2011, petitioner
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received a notice of pre-trial conference set on July 21, 2011. Petitioner filed its pre-trial brief. Earlier, on
June 28, 2011, private respondent filed another judicial claim for the issuance of a tax credit certificate in
the amount of Thirty-One Million Six Hundred Eighty Thousand Two Hundred Ninety and 87/100 Pesos
(P31,680,290.87), representing unutilized input taxes on its local purchasesand importations of goods
other than capital goods, local purchases of services, including unutilized amortized input taxes on capital
goods exceeding one million for the period of April 1, 2009 to June 30, 2009, all attributable to the zero
rated sales for the same period.The case was docketed as CTA Case No. 8302.
Subsequently, private respondent filed a motion for consolidation and postponement of the pre-
trial conference scheduled for CTA Case No. 8246. On July 19, 2011 petitioner received summons
requiring it to answer the petition for review on CTA Case No. 8302. Petitioner's lawyer, Atty. Leo D.
Mauricio, filed his Answer. The pre-trial conference for CTA Case No. 8302 was set on September 29,
2011. Thus, private respondent filed a motion for consolidation and postponement of the pre-trial
conference for CTA Case No. 8302. In a Resolution dated October 14, 2011, the CTA granted the motion
for consolidation and set the pre-trial conference on November 3, 2011.
Petitioner’s counsels failed to appear at pre-trial conference, thus private respondent moved that
petitioner be declared in default. On December 23, 2011, the CTA issued the first assailed Resolution
where petitioner is allowed to present its evidence ex parte. On January 6, 2012, petitioner filed a Motion
to Lift Order of Default.On April 19, 2012, the CTA issued the second assailed Resolution denying the
motion to lift order of default.
ISSUES:
1. Whether or not there is no plain, speedy and adequate remedy in the ordinary course of law but
the filing of a petition for certiorari under rule 65?
2. Whether or not public respondent gravely abused its discretion when it declared petitioner in
default when clearly petitioner's counsel has been actively depending her cause?
RULING:
1. YES. According to Section 1, Rule 41 of the Revised Rules of Court, governing appeals from the
Regional Trial Courts (RTCs) to the Court of Appeals, an appeal may be taken only from a
judgment or final order that completely disposes of the case or of a matter therein when declared
by the Rules to be appealable. Said provision, thus, explicitly states that no appeal may be taken
from an interlocutory order. It is, therefore, clear that the CTA en banc has jurisdiction over final
order or judgment but not over interlocutory orders issued by the CTA in division.CTA Order
dated December 23, 2011 granting private respondent's motion to declare petitioner as in default
and allowing respondent to present its evidence ex parte, is an interlocutory order as it did not
finally dispose of the case on the merits but will proceed for the reception of the former's
evidence to determine its entitlement to its judicial claim fortax credit certificates. Even the CTA's
subsequent orders denying petitioner's motion to lift order of default and denying reconsideration
thereof are all interlocutory orders since they pertain to the order of default.Hence, petitioner's
filing of the instant petition for certiorari assailing the interlocutory orders issued by the CTA is in
conformity with Section 1, Rule 41 of the Revised Rules of Court.
2. YES. In this case, there is no showing that petitioner intentionally disregarded the CTA's
authority. CTA Case Nos. 8246 and 8302 were filed on different dates and were handled by
different lawyers, i.e., Atty. Sandico and Atty. Mauricio, respectively. The cases were later on
consolidated per private respondent's motion and the pre-trial was set on November 3, 2011 but
petitioner's counsel, Atty. Mauricio, was not able to attend for health reasons; and Atty. Sandico
to whom the consolidated cases were later on assigned was not able to attend the pre-trial on
time on December 1, 2011 as he was attending another case in another division of the CTA. We
find nothing to show that petitioner had acted with the deliberate intention of delaying the
proceedings as petitioner had timely filed its pre-trial brief for the consolidated cases. Also, after
petitioner's receipt of the default Order dated December 23, 2011, petitioner, on January 6, 2012,
immediately filed a Motion to lift the order of default, i.e., 20 days before the scheduled ex-parte
presentation of private respondent's evidence on January 26, 2012. It appears, however, that the
CTA proceeded with the ex-parte reception of private respondent's evidence and had already
rendered its decision on the merits on June 10, 2014 ordering petitioner to issue a tax certificate
in favor of private respondent in the reduced amount of P22,126,419.93 representing unutilized
input VAT incurred in relation to its zero rated sales of electricity to the NPC for the first and
second quarters of 2009. Petitioner filed a motion for reconsideration which the CTA had also
denied. Petitioner then filed a petition for review ad cautelam with the CTA En Banc which is now
pending before it. Considering our foregoing discussions, we find a need to give petitioner the
opportunity to properly present her claims on the merits of the case without resorting to
technicalities.
WHEREFORE, the petition for certiorari is GRANTED. The Resolutions dated December 23, 2011, April
19, 2012 and June 13, 2012 issued by the Court of Tax Appeals in CTA Case Nos. 8246 and 8302 are
hereby SET ASIDE. The consolidated cases are hereby REMANDED to the CTA Third Division to give
petitioner the chance to present evidence, rebuttal and sub rebuttal evidence, if needed.
COMMISSIONER OF INTERNAL REVENUE vs. AIR LIQUIDE PHILIPPINES, INC.
G.R. No. 210646 July 29, 2015
FACTS:
Air Liquide Philippines, Inc. (ALPI) is a domestic corporation registered with the BIR as a VAT
entity. It sells chemical products and renders certain related services to the PEZA enterprises. On January
22, 2008, ALPI filed with the BIR its Quarterly VAT Return for the 4th quarter of 2007. Subsequently, on
December 23, 2009, ALPI filed with petitioner CIR, through BIR RDO No. 121, an application for issuance
of a tax credit certificate for its unutilized input VAT in the amount of P23,254,465.64 attributable to its
transactions with PEZA-registered enterprises for the 4th quarter of 2007. On December 29, 2009, or only
six (6) days later, ALPI filed its petition for review with the CTA Division, without awaiting the resolution of
its application for tax credit certificate or the expiration of the 120-day period under Section 112 (C) of the
National Internal Revenue Code (NIRC).
Page 40 of 148

The CTA Division noted that the CIR was given a period of one hundred twenty (120) days within
which to either grant or deny the claim for VAT refund or credit. ALPI, however, filed its judicial claim
before the CTA only 6 days after the filing of the administrative claim for tax credit with the CIR. The
failure of ALPI to observe the compulsory 120-day period warranted the dismissal of its petition. ALPI
moved for reconsideration, but the motion was denied by the CTA Division in its September 24, 2012
Resolution. ALPI filed a petition for review with the CTA En Banc which then reversed the ruling of the
CTA Division. ALPI filed its judicial claim for VAT credit on December 29, 2009, then it was covered by
BIR Ruling No. DA-489-03. ALPI need not wait for the lapse of the 120-day period before it could seek
judicial relief. The CTA En Banc remanded the case to the CTA Division for the determination of the
propriety of the VAT refund or credit claim.The CIR filed its motion for reconsideration, but it was denied
by the CTA En Banc in its December 17, 2013 Resolution.
ISSUE:
Whether or not the CTA Division acquired jurisdiction over ALPI's petition for review?
RULING:
YES. BIR Ruling No. DA-489-03, issued on December 10, 2003, stated that the taxpayer-
claimant need not wait for the lapse of the 120-day period before it could seek judicial relief with the CTA
by way of a petition for review. In the present case, ALPI can benefit from BIR Ruling No. DA-489-03. It
filed its judicial claim for VAT credit certificate on December 29, 2009, well within the interim period from
December 10, 2003 to October 6, 2010, so there was no need to wait for the lapse of 120 days prescribed
in Section 112 (c) of the NIRC. ALPI cannot be faulted for not specifically invoking BIR Ruling No. DA-
489-03 as the rules for its application were not definite until the San Roque case was promulgated
wherein the better approach would be to apply BIR Ruling No. DA-489-03 to all taxpayers who filed their
judicial claim for VAT refund within the period of exception from December 10, 2003 to October 6, 2010.
Consequently, this case must be remanded to the CTA Division for the proper determination of the
refundable or creditable amount due to ALPI, if any.
WHEREFORE, the petition is DENIED. The July 29, 2013 Decision and the December 17, 2013
Resolution of the Court of Tax Appeals En Banc in CTA EB Case No. 943 are AFFIRMED in toto.
Accordingly, the case is REMANDED to the CTA Second Division for the proper determination of the
refundable or creditable amount due to the respondent, if any.
ING BANK N.V., engaged in banking operations in the Philippines as ING BANK N.V. MANILA
BRANCH vs . COMMISSIONER OF INTERNAL REVENUE
G.R. No. 167679 July 22, 2015
FACTS:
This is a Petition for Review appealing the April 5, 2005 Decision of the CTA En Banc, which in
turn affirmed the August 9, 2004 Decision and November 12, 2004 Resolution of the CTA Second
Division. The August 9, 2004 Decision held petitioner ING Bank, N.V. Manila Branch (ING Bank) liable for
(a) deficiency documentary stamp tax for the taxable years 1996 and 1997 in the total amount of
P238,545,052.38 inclusive of surcharges; (b) deficiency onshore tax for the taxable year 1996 in the total
amount of P997,333.89 inclusive of surcharges and interest; and (c) deficiency withholding tax on
compensation for the taxable years 1996 and 1997 in the total amount of P564,542.67 inclusive of
interest. The Resolution denied ING Bank's Motion for Reconsideration. While this case was pending
before this court, ING Bank led a Manifestation and Motion stating that it availed itself of the government's
tax amnesty program under R.A. No. 9480 with respect to its deficiency documentary stamp tax and
deficiency onshore tax liabilities.
On January 3, 2000, ING Bank received a Final Assessment Notice dated December 3, 1999.
The Final Assessment Notice also contained the Details of Assessment and Assessment Notices. On
February 2, 2000, ING Bank "paid the deficiency assessments for the 1996 compromise penalty, 1997
deficiency documentary stamp tax and 1997 deficiency tax in the respective amounts of P1,000.00,
P1,000.00 and P75,013.25 [the original amount of P73,752.47 plus additional interest]." ING Bank,
however, "protested [on the same day] the remaining ten (10) deficiency tax assessments in the total
amount of P672,576,939.18." ING Bank filed a Petition for Review before the CTA on October 26, 2000.
This case was docketed as C.T.A. Case No. 6187. The Petition was led to seek "the cancellation and
withdrawal of the deficiency tax assessments for the years 1996 and 1997, including the alleged
deficiency documentary stamp tax on special savings accounts, deficiency onshore tax, and deficiency
withholding tax on compensation mentioned above." After trial, the Court of Tax Appeals Second Division
rendered its Decision that the assessments for 1996 and 1997 deficiency income tax, 1996 and 1997
deficiency branch profit remittance tax and 1997 deficiency documentary stamp tax are cancelled and
withdrawn. However, the assessments for 1996 and 1997 deficiency withholding tax on compensation,
1996 deficiency onshore tax and 1996 and 1997 deficiency documentary stamp tax on special savings
accounts are upheld.
On December 8, 2004, ING Bank led its appeal before the CTA En Banc which was dismissed
for lack of merit. Hence, ING Bank led its Petition for Review before this court. On December 20, 2007,
ING Bank filed a Manifestation and Motion informing this court that it had availed itself of the tax amnesty
authorized and granted under Republic Act No. 9480 covering "all national internal revenue taxes for the
taxable year 2005 and prior years, with or without assessments duly issued therefor, that have remained
unpaid as of December 31, 2005." ING Bank stated that it filed before the Bureau of Internal Revenue its
Notice of Availment of Tax Amnesty under Republic Act No. 9480 33 on December 14, 2007.
ISSUE:
1. Whether or not petitioner ING Bank may validly avail itself of the tax amnesty granted by RA No. 9480?
2. Whether or not petitioner ING Bank is liable for deficiency withholding tax on accrued bonuses for the
taxable years 1996 and 1997?
RULING:
1. YES. Taxpayers with pending tax cases may avail themselves of the tax amnesty program under
Republic Act No. 9480. Both R.A. 9480 and DOF Order No. 29-07 are quite precise in declaring that "tax
cases subject of final and executory judgment by the courts" are the ones excepted from the benefits of
Page 41 of 148
the law. The BIR's inclusion of "issues and cases which were ruled by any court (even without finality) in
favor of the BIR prior to amnesty availment of the taxpayer" as one of the exceptions in RMC 19-2008 is
misplaced. RA 9480 is specifically clear that the exceptions to the tax amnesty program include "tax cases
subject of final and executory judgment by the courts." Thus, petitioner ING Bank is not disqualified from
availing itself of the tax amnesty under the law during the pendency of its appeal before this court. The
effect of a qualified taxpayer's submission of the required documents and the payment of the prescribed
amnesty tax was immunity from payment of all national internal revenue taxes as well as all
administrative, civil, and criminal liabilities founded upon or arising from non-payment of national internal
revenue taxes for taxable year 2005 and prior taxable years. Finally, the documentary stamp tax and
onshore income tax are covered by the tax amnesty program under Republic Act No. 9480 and its
Implementing Rules and Regulations. Moreover, as to the deficiency tax on onshore interest income, it is
worthy to state that petitioner ING Bank was assessed by respondent Commissioner of Internal Revenue,
not as a withholding agent, but as one that was directly liable for the tax on onshore interest income and
failed to pay the same. Considering petitioner ING Bank's tax amnesty availment, there is no more issue
regarding its liability for deficiency documentary stamp taxes on its special savings accounts for 1996 and
1997 and deficiency tax on onshore interest income for 1996, including surcharge and interest.
2. YES. Under the NIRC, every form of compensation for personal services is subject to income tax and,
consequently, to withholding tax. The name designated to the remuneration for services is immaterial.
Thus, "salaries, wages, emoluments and honoraria, bonuses, allowances (such as transportation,
representation, entertainment, and the like), [taxable] fringe benets[,] pensions and retirement pay, and
other income of a similar nature constitute compensation income" that is taxable. Hence, petitioner ING
Bank is liable for the withholding tax on the bonuses since it claimed the same as expenses in the year
they were accrued. The tax on compensation income is withheld at source under the creditable
withholding tax system wherein the tax withheld is intended to equal or at least approximate the tax due of
the payee on the said income.
WHEREFORE, the Petition is PARTLY GRANTED . The assessments with respect to petitioner
ING Bank's liabilities for deficiency documentary stamp taxes on its special savings accounts for the
taxable years 1996 and 1997 and deficiency tax on onshore interest income under the foreign currency
deposit system for taxable year 1996 are hereby SET ASIDE solely in view of petitioner ING Bank's
availment of the tax amnesty program under Republic Act No. 9480. The April 5, 2005 Decision of the
Court of Tax Appeals En Banc, which affirmed the August 9, 2004 Decision and November 12, 2004
Resolution of the Court of Tax Appeals Second Division holding petitioner ING Bank liable for deficiency
withholding tax on compensation for the taxable years 1996 and 1997 in the total amount of P564,542.67
inclusive of interest, is AFFIRMED.
COMMISSIONER OF INTERNAL REVENUE v s . LA TONDEÑA . LA TONDEÑA DISTILLERS,
INC. (LTDI [now GINEBRA SAN MIGUEL]
G.R. No. 175188. July 15, 2015
FACTS:
On September 17, 2001, respondent La Tondeña Distillers, Inc. entered into a Plan of Merger
with Sugarland Beverage Corporation (SBC), SMC Juice, Inc. (SMCJI), and Metro Bottled Water
Corporation (MBWC). As a result of the merger, the assets and liabilities of the absorbed corporations
were transferred to respondent, the surviving corporation. Respondent later changed its corporate name
to Ginebra San Miguel, Inc. (GSMI). On September 26, 2001, respondent requested for a confirmation of
the tax-free nature of the said merger from the BIR. On November 5, 2001, the BIR issued a ruling stating
that pursuant to Section 40 (C) (2) and (6) (b) of the 1997 NIRC, no gain or loss shall be recognized by
the absorbed corporations as transferors of all assets and liabilities. However, the transfer of assets, such
as real properties, shall be subject to DST imposed under Section 196 of the NIRC. Consequently, on
various dates from October 31, 2001 to November 15, 2001, respondent paid to the BIR the following
DST. On October 14, 2003, claiming that it is exempt from paying DST , respondent led with petitioner
CIR an administrative claim for tax refund or tax credit in the amount of P14,140,980.00, representing the
DST it allegedly erroneously paid on the occasion of the merger. On the same day, respondent led with
the CTA a Petition for Review, docketed as C.T.A. Case No. 6796 and raffled to the 2nd Division of the
CTA. On January 6, 2006, the 2nd Division of the CTA rendered a Decision finding respondent entitled to
its claim for tax refund or tax credit in the amount of P14,140,980.00, representing its erroneously paid
DST for the taxable year 2001. CTA En Banc opined that Section 196 of the NIRC does not apply to a
merger as the properties subject of a merger are not sold, but are merely absorbed by the surviving
corporation
ISSUE:
Whether or not the CTA En Banc erred in ruling that respondent is exempt from payment of DST?
RULING:
No. The Supreme Court already ruled that Section 196 of the NIRC does not include the transfer
of real property from one corporation to another pursuant to a merger. A perusal of the subject provision
would clearly show it pertains only to sale transactions where real property is conveyed to a purchaser for
a consideration. The phrase "granted, assigned, transferred or otherwise conveyed" is qualified by the
word "sold" which means that documentary stamp tax under Section 196 is imposed on the transfer of
realty by way of sale and does not apply to all conveyances of real property. It is not proper to construe
the meaning of a statute on the basis of one part. Respondent is not liable for DST as the transfer of real
properties from the absorbed corporations to respondent was pursuant to a merger and having complied
with the provisions of Sections 204 (C) 41 and 229 42 of the NIRC, we agree with the CTA that
respondent is entitled to a refund of the DST it erroneously paid on various dates between October 31,
2001 to November 15, 2001 in the total amount of P14,140,980.00.
WHEREFORE, the Petition is hereby DENIED. The assailed September 26, 2006 Decision and
the October 31, 2006 Resolution of the Court of Tax Appeals in C.T.A. EB No. 178 are hereby
AFFIRMED.
Page 42 of 148
COMMISSIONER OF INTERNAL REVENUE vs. COURT OF TAX APPEALS (SECOND DIVISION) and
PETRON CORPORATION
G.R. No. 207843. July 15, 2015
FACTS:
Petron, which is engaged in the manufacture and marketing of petroleum products, imports
alkylate as a raw material or blending component for the manufacture of ethanol-blended motor gasoline.
For the period January 2009 to August 2011, as well as for the month of April 2012, Petron transacted an
aggregate of 22 separate importations for which petitioner CIR issued Authorities to Release Imported
Goods (ATRIGs), categorically stating that Petron's importation of alkylate is exempt from the payment of
the excise tax because it was not among those articles enumerated as subject to excise tax under Title VI
of R.A. No. 8424, as amended, or the 1997 NIRC. In June 2012, Petron imported 12,802,660 liters of
alkylate and paid VAT in the total amount of P41,657,533.00 as evidenced by Import Entry and Internal
Revenue Declaration (IEIRD) No. SN 122406532. Based on the Final Computation, said importation was
subjected by the Collector of Customs of Port Limay, Bataan, upon instructions of the Commissioner of
Customs (COC), to excise taxes of P4.35 per liter, or in the aggregate amount of P55,691,571.00, and
consequently, to an additional VAT of 12% on the imposed excise tax in the amount of P6,682,989.00.
Imposition of the excise tax was supposedly premised on Customs Memorandum Circular (CMC) No. 164-
2012 dated July 18, 2012, implementing the Letter dated June 29, 2012 issued by the CIR, which states
that: Alkylate which is a product of distillation similar to that of naphta, is subject to excise tax under
Section 148(e) of the NIRC of 1997. CTA granted the CIR's motion and dismissed the case. However, on
Petron's motion for reconsideration, it reversed its earlier disposition in a Resolution. CTA gave due
course to Petron's petition, finding that: (a) the controversy was not essentially for the determination of the
constitutionality, legality or validity of a law, rule or regulation but a question on the propriety or soundness
of the CIR's interpretation of Section 148 (e) of the NIRC which falls within the exclusive jurisdiction of the
CTA under Section 4 thereof, particularly under the phrase "other matters arising under [the NIRC]"; and
(b) there are attending circumstances that exempt the case from the rule on non-exhaustion of
administrative remedies, such as the great irreparable damage that may be suffered by Petron from the
CIR's final assessment of excise tax on its importation. The CIR sought immediate recourse to the Court,
through the instant petition, alleging that the CTA committed grave abuse of discretion when it assumed
authority to take cognizance of the case despite its lack of jurisdiction to do so.
ISSUE:
Whether or not the CTA properly assumed jurisdiction over the petition assailing the imposition of excise
tax on Petron's importation of alkylate based on Section 148 (e) of the NIRC?
RULING:
No. The CTA is a court of special jurisdiction, with power to review by appeal decisions involving
tax disputes rendered by either the CIR or the COC. Conversely, it has no jurisdiction to determine the
validity of a ruling issued by the CIR or the COC in the exercise of their quasi-legislative powers to
interpret tax laws. These observations may be deduced from a reading of Section 7 of RA 1125, as
amended by RA 9282, entitled "An Act Creating the Court of Tax Appeals," enumerating the cases over
which the CTA may exercise its jurisdiction.
In this case, Petron's tax liability was premised on the COC's issuance of CMC No. 164-2012,
which gave effect to the CIR's June 29, 2012 Letter interpreting Section 148 (e) of the NIRC as to include
alkylate among the articles subject to customs duties, hence, Petron's petition before the CTA ultimately
challenging the legality and constitutionality of the CIR's aforesaid interpretation of a tax provision. In line
with the foregoing discussion, however, the CIR correctly argues that the CTA had no jurisdiction to take
cognizance of the petition as its resolution would necessarily involve a declaration of the validity or
constitutionality of the CIR's interpretation of Section 148 (e) of the NIRC, which is subject to the exclusive
review by the Secretary of Finance and ultimately by the regular courts. Besides, Petron prematurely
invoked the jurisdiction of the CTA. Under Section 7 of RA 1125, as amended by RA 9282, what is
appealable to the CTA is the decision of the COC over a customs collector's adverse ruling on a
taxpayer's protest. Notably, Petron admitted to not having filed a protest of the assessment before the
customs collector and elevating a possible adverse ruling therein to the COC, reasoning that such a
procedure would be costly and impractical, and would unjustly delay the resolution of the issues which,
being purely legal in nature anyway, were also beyond the authority of the customs collector to resolve
with finality. This admission is at once decisive of the issue of the CTA's jurisdiction over the petition.
There being no protest ruling by the customs collector that was appealed to the COC, the filing of the
petition before the CTA was premature as there was nothing yet to review. Verily, the fact that there is no
decision by the COC to appeal from highlights Petron's failure to exhaust administrative remedies
prescribed by law.
WHEREFORE, the petition is GRANTED. The Resolutions dated February 13, 2013 and May 8,
2013 of the Court of Tax Appeals (CTA), Second Division in CTA Case No. 8544 are hereby REVERSED
and SET ASIDE. The petition for review filed by private respondent Petron Corporation before the CTA is
DISMISSED for lack of jurisdiction and prematurity.
CATIPAY, Jan Kriezl M.
2015-0196
Hedcor, Inc. Vs. Commissioner of Internal Revenue
G.R. No. 171766, July 29, 2010
FACTS:
Petitioner is a domestic corporation primarily engaged in the operation of hydro-electric power plants and
the generation of hydro-electric power. It is a value-added tax (VAT) payer duly registered with the
Bureau of Internal Revenue (BIR).
Petitioner alleged that in the course of operating its business, it purchased domestic goods and services,
as well as capital goods, and paid the corresponding VAT as part of the purchase price. For the period
covering taxable year 2008, its purchases amounted to P35,467,773.00 on which the corresponding input
VAT was P4,256,132.80. However, after deductions of output tax due from the accumulated input tax,
petitioner still had an unused or excess input VAT in the total amount of P4,217,955.84.
Page 43 of 148

Being in the business of generating of renewable sources of energy through hydro power, petitioner
maintained that it was entitled to zero-percent (0%) VAT, as the sales of electric power to National Power
Corporation (NPC) qualified as zero-rated sales pursuant to Section 108(B) (7) of the National Internal
Revenue Code (NIRC).
Petitioner filed with the BIR an administrative claim for the refund of excess and unused input VAT for the
second quarter of taxable year 2008.
The CTA denied the Petition and ruled that the judicial claim had been filed out of time. It held that, under
Section 112(C) of the NIRC, the 120-day period for the BIR to act on the claim should be reckoned from
28 December 2009 or the date of filing of petitioner's administrative claim with the tax agency. Counting
120 days from 28 December 2009, the BIR had until 27 April 2010 to decide the administrative claim.
Thereafter, petitioner had until 27 May 2010 or 30 days to appeal to the CTA either the decision or the
inaction of the BIR. Thus, the filing of the Petition for Review with the CTA Division on 6 July 2010 was
clearly beyond the period allowed by law.
ISSUE:
Whether or not the CTA has no authority to deviate from the clear and literal meaning of Section 112 (D)
of the NIRC by counting the 120-day period from the filing of the administrative claim and not from the last
submission of complete documents in the administrative proceedings with the BIR.
RULING:
The requirements for a taxpayer be able to claim a refund or credit of its input tax are found in Section 112
of the NIRC.
Pursuant to Section 112(C) of the NIRC, respondent had 120 days from the date of submission of
complete documents in support of the application within which to decide on the administrative claim.
Thereafter, the taxpayer affected by the CIR' s decision or inaction may appeal to the CTA within 30 days
from the receipt of the decision or from the expiration of the 120-day period. Compliance with both periods
is jurisdictional, considering that the 30-day period to appeal to the CTA is dependent on the 120-day
period. The period of 120 days is a prerequisite for the commencement of the 30-day period to appeal.
Strict compliance with the 120+30 day period is necessary for a claim for a refund or credit of input VAT to
prosper. An exception to that mandatory period was, however, recognized in San Roque during the period
between 10 December 2003, when BIR Ruling No. DA-489-03 was issued, and 6 October 2010, when the
Court promulgated Aichi declaring the 120+ 30 day period mandatory and jurisdictional, thus reversing
BIR Ruling No.DA-489-03.
Since the claim of petitioner fell within the exception period, it did not have to observe the 120+30 day
mandatory period under the San Roque doctrine. The present case, though, is not a case of premature
filing.
To allow petitioner's allegations to prevail would set a dangerous precedent, as the reckoning period for
the 120 days would be at the mercy of taxpayers. They will then submit complete supporting documents
even after the two-year prescriptive period for filing an administrative claim has lapsed. This is obviously
not the intention of the law.
It is worth emphasizing at this point that the burden of proving entitlement to a tax refund is on the
taxpayer. It is logical to assume that in order to discharge this burden, the law intends the filing of an
application for a refund to necessarily include the filing of complete supporting documents to prove
entitlement for the refund. Otherwise, the mere filing of an application without any supporting document
would be as good as filing a mere scrap of paper. Besides, the taxpayer was already given two (2) years
to determine its refundable taxes and complete the documents necessary to prove its claim. The alleged
completion of supporting documents after the filing of an application for an administrative claim - and
worse, after the filing of a judicial claim - is tantamount to legal maneuvering, which this Court will not
tolerate.
WHEREFORE, premises considered, the instant Petition is DENIED.
e City of Davao represented by the City Treasurer of Davao City Vs. The intestate Estate of Amado
S. Dalisay, represented by Special Administrator Atty. Nicasio B. Paderna
G.R. No. 207791, July 15, 2015
FACTS:
The Estate of Amado Dalisay owned several properties in Davao City(1) Lot 1, Pcs11001298, covered by
Transfer Certificate of Title (TCT) No. T202211 withTax Declaration No. E13410484; (2) Lot 6,
Pcs11001298, covered by TCT No. T202215with Tax Declaration No. E13410488; (3) Lot 7,
Pcs11001298, covered by TCT No. T-202216 with Tax Declaration No. E13410489; (4) Lot 2,
Pcs11001298, covered by TCTNo. T202212 with Tax Declaration No. E13410492; and (5) Building
erected in Lot No.26B and covered by Tax Declaration No. E13410480.
These properties were advertised for sale at a public auction for non-payment of real estate taxes. No
bidders appeared on the date of the public auction, thus the properties were acquired by the City
Government of Davao pursuant to Section 263 of the LocalGovernment CodeSection 263. Purchase of
Property By the Local Government Units for Want of Bidder.
In case there is no bidder for the real property advertised for sale as provided herein, the real property tax
and the related interest and costs of sale, the local treasurerconducting the sale shall purchase the
property in behalfof the local government unit…Within one (1) year from the date of such forfeiture,
the taxpayer or any of hisrepresentative, may redeem the property by paying to the local treasurer the full
amount of the real property tax and the related interest and the costs of sale. If the property is not
redeemed as provided herein, the ownership thereof shall be vested on the local government unit
concerned.
Page 44 of 148
The Declaration of Forfeiture was issued by the City Treasurer when the delinquent taxpayer did not use
the one year period to redeem the property. The City caused theannotation of the 5 Declarations of
Forfeiture on the TCTs of the properties.
Subsequently the respondent estate inquired to the City Treasurer the amount of theredemption price and
it showed an aggregate total of 4,996,534.67 PHP
The Estate delivered a written tender of payment of the redemption price. However the petition refused to
accept it which prompted the Estate to consign the amount to the
RTC. An action for redemption was then initiated by the respondent against petitioner.
RTC—ruled in favor of respondent
CA—affirmed decision of the RTC. The City has been remiss in its duty to immediatelyissue the
Declaration of Forefieture within 2 days from purchase of the property as mandated by Section 263 of the
LGC.
ISSUE:
Whether or not the 1 year redemption period of forfeited tax delinquent properties purchased bythe local
government for want of a bidder is reckoned from the date of the auction orsale or from the date of
issuance of the declaration of forfeiture.
RULING:
A valid redemption of property must be based on law which is the very source of this right. It is necessary
that compliance with the rules set forth by law and jurisprudence should be shown in order to render
validity to the exercise of this right.
The right acquired by the purchaser at an execution sale is inchoate and does not become absolute until
after the expiration of the redemption period without the right of redemption having been exercised.
Section 263 of the LGC lacks the definiteness as to the reckoning point for the redemption of tax
delinquent properties. It merely employees the phrase “within 1 year from the date of such forfeiture”. The
City avers that the period commences from the date of forfeiture—date of auction. The Estate insists that
the redemption period begins from the date when the declarations of forfeiture were issued.
However the argument of Petitioner City point toward a more just a fair resolution of the vagueness of the
law.
(1) Forfeiture: refers to the date when the tax delinquent properties were sold at public auction. Section
263 of the LGC takes into effect when there is an absence of a bidder in a public auction for tax delinquent
properties. The absence of public impels the City
Treasurer to purchase such property in behalf of the city. Reason would dictate that this purchase by the
city is the forfeiture mandated by law. The forfeiture is the situation where the local government ipso facto
forfeits the property for want of a bidder. This happens on the date of the sale and not upon the issuance
of the declaration of forfeiture. If the court were to rule otherwise then the right of the local government to
purchase would be from the time of declaration of forfeiture—which is absurd.
(2) In the case of City Mayor v. RCBC, even though it involved Section 261 of the LGC, itpassed upon the
reckoning period of the redemption period for auction tax delinquent properties. The court ruled pursuant
to the amendments made by RA 7160 to PD No.
464, the owner of the delinquent real property or person having legal interest or hisrepresentative has
right to redeem the property within 1 year from the date of sale upon payment of the delinquent tax and
other fees. The period of redemption of tax delinquent properties should be counted not from the date of
registration BUT the DATE
OF SALE OF THE TAX DELINQUENT PROPERTY as provided by Section 261 of RA
7160.
Considering the fact that neither parties invokes the externes of an ordinance of similar import, the general
law would apply. The usage of the term sale and forfeiture in RA
7160 is connoted as the point in time when the owner is divested of certain attributes of ownership over
the property albeit only until the redemption of the property. This translates to no other event but to the
date of the public auction.
(3) Regarding the belated issuance of the Declarations of Forfeiture, the general rule is that the State
cannot be put in estoppel by the mistakes or errors of its officials or agents. However, it may only apply in
special cases where the interest of justice clearly require it. The delay on the part of the Estate to at least
inquire into the outcome of the auction and its misplaced reliance on a curious document heightens the
belief of the
Court that the City may not be deprived of a right that has long been vested in its favor.
This hinders the Court from applying the exceptions to the rule on estoppel, when doing this would result
in more impropriety. It is the City that would suffer an injustice if it were to be bound by its officer’s suspect
actions. The policy of enabling local governments to fully utilize the income potentialities of the real
property tax would be put at a losing end if tax delinquent properties could be recovered by the sheer
expediency of a document erroneously or, perhaps fraudulently, issued by its officers
The failure of the Estate to validly exercise its right of redemption within the statutory period had already
resulted in the consolidation of ownership over the properties by the
City.
Batangas City, Maria Teresa Geron, In her capacity as City Treasurer of Batangas City, et al. Vs.
Pilipinas Shell Petroleum Corporation
G.R. No. 187631, July 08, 2015
FACTS:
Petitioner Batangas City is a local government unit (LGU) with the capacity to sue and be sued under its
Charter and Section 22(a)(2) of the Local Government Code (LGC) of 1991. Petitioners Teodulfo A.
Deguito and Benjamin E. Pargas are the City Legal Officer and City Treasurer, respectively, of Batangas
Page 45 of 148
City.
Respondent Pilipinas Shell Petroleum Corporation operates an oil refinery and depot in Tabagao,
Batangas City, which manufactures and produces petroleum products that are distributed nationwide.
In 2002, respondent was only paying the amount of P98,964.71 for fees and other charges which include
the amount of P1,180.34 as Mayor's Permit. However, on February 20, 2001, petitioner Batangas City,
through its City Legal Officer, sent a notice of assessment to respondent demanding the payment of
P92,373,720.50 and P312,656,253.04 as business taxes for its manufacture and distribution of petroleum
products. In addition, respondent was also required and assessed to pay the amount of P4,299,851.00 as
Mayor's Permit Fee based on the gross sales of its Tabagao Refinery. The assessment was allegedly
pursuant of Section 134 of the LGC of 1991 and Section 23 of its Batangas City Tax Code of 2002.
Respondent filed a protest on April 17, 2002 contending among others that it is not liable for the payment
of the local business tax either as a manufacturer or distributor of petroleum products.
On October 29, 2004, the RTC of Batangas City rendered a Decision[5] sustaining the imposition of
business taxes by petitioners upon the manufacture and distribution of petroleum products by respondent.
However, the RTC withheld the imposition of Mayor's Permit Fee in deference to the provisions of Section
147 of the LGC, in relation to Section 143(h) of the same Code, which imposed a limit to the power of
petitioners to collect the said business taxes.
ISSUES:
1. THE COURT OF TAX APPEALS EN BANC ERRED IN NOT RULING THAT THE POWER OF
LOCAL GOVERNMENT UNITS TO TAX BUSINESS IS SOLELY GOVERNED BY SEC. 143
AND 143(h) OF THE LOCAL GOVENRMENT CODE OF 1991.
2. THE COURT OF TAX APPEALS EN BANC ERRED IN NOT RULING THAT THE WORD
"TAXES" IN SEC. 133(h) DOES NOT INCLUDE BUSINESS TAXES.
3. THE COURT OF TAX APPEALS EN BANC ERRED IN DISREGARDING THE DISTINCTION
BETWEEN TAXES ON ARTICLES AND TAXES ON BUSINESS.
4.
THE COURT OF TAX APPEALS EN BANC INCORRECTLY CONSTRUED A CLEAR
PROVISION OF LAW, SPECIFICALLY SECTION 133(h) OF THE LOCAL GOVERNMENT
CODE OF 1991, AS AN EXPRESS LIMITATION ON THE POWER OF LOCAL GOVENRMENT
UNITS TO IMPOSE TAXES ON THE BUSINESS OF MANUFACTURE AND DISTRIBUTION OF
PETROLEUM PRODUCTS."
RULING:
At the outset, it must be emphasized that although the power to tax is inherent in the State, the same is
not true for LGUs because although the mandate to impose taxes granted to LGUs is categorical and long
established in the 1987 Philippine Constitution, the same is not all encompassing as it is subject to
limitations as explicitly stated in Section 5, Article X of the 1987 Constitution.
It is already well-settled that although the power to tax is inherent in the State, the same is not true for the
LGUs to whom the power must be delegated by Congress and must be exercised within the guidelines
and limitations that Congress may provide. The Court expounded in Pelizloy Realty Corporation v. The
Province of Benguet that:
The power to tax "is an attribute of sovereignty," and as such, inheres in the State. Such, however, is not
true for provinces, cities, municipalities and barangays as they are not the sovereign; rather, there are
mere "territorial and political subdivisions of the Republic of the Philippines."
Per Section 5, Article X of the 1987 Constitution, "the power to tax is no longer vested exclusively on
Congress; local legislative bodies are now given direct authority to levy taxes, fees and other charges."
Nevertheless, such authority is "subject to such guidelines and limitations as the Congress may provide."
In conformity with Section 3, Article X of the 1987 Constitution, Congress enacted Republic Act No. 7160,
otherwise known as the local Government Code of 1991. Book II of the LGC governs local taxation and
fiscal matters.
Relevant provisions of Book II of the LGC establish the parameters of the taxing powers of LGUs found
below.
First, Section 130 provides for the following fundamental principles governing the taxing powers of LGUs:
1. Taxation shall be uniform in each LGU.
2. Taxes, fees, charges and other impositions shall:
a. be equitable and based as far as practicable on the taxpayer's ability to pay;
b. be levied and collected only for public purposes;
c. not be unjust, excessive, oppressive orconfiscatory;
d. not be contrary to law, public policy, national economic policy, or in the restraint of
trade.
3. The collection of local taxes, fees, charges and other impositions shall in no case be left to any
private person.
4. The revenue collected pursuant to the provisions of the LGC shall inure solely to the benefit of,
and be subject to the disposition by, the LGU levying the tax, fee, charge or other imposition
unless otherwise specifically provided by the LGC.
5. Each LGU shall, as far as practicable, evolve a progressive system of taxation.
Second, Section 133 provides for the common limitations on the taxing powers of LGUs.
From the foregoing, Section 133(h) clearly specifies the two kinds of taxes which cannot be imposed by
LGUs: (1) excise taxes on articles enumerated under the NIRC, as amended; and (2) taxes, fees or
charges on petroleum products.
It is likewise irrefutable that the specific exemption provided under Section 133 of the LGC prevails over
Section 143 of the same Code.
First, Section 133 of the LGC is a specific provision that explicitly withhold from LGUs the power to impose
taxes, fees and charges on petroleum products.
Page 46 of 148
Second, Article 232(h) of the Implementing Rules and Regulations (IRR) of the LGC of 1991 states:
ARTICLE 232. Tax on Business. - The Municipality may impose taxes on the following businesses:
xxxx
On any business not otherwise specified in the preceding paragraphs which the sanggunian
concerned may deem proper to tax provided that that on any business subject to the excise tax.
VAT or percentage tax under the NIRC, as amended, the rate of tax shall not exceed two
(h) percent (2%) of gross sales or receipts of the preceding calendar year and provided further,
that in line with existing national policy, any business engaged in the production,
manufacture, refining, distribution or sale of oil, gasoline, and other petroleum products
shall not be subject to any local tax imposed in this Article.
Article 232 defines with more particularity the capacity of a municipality to impose taxes on businesses.
However, it admits of certain exceptions, specifically, that businesses engaged in the production,
manufacture, refining, distribution or sale of oil, gasoline, and other petroleum products, shall not be
subject to any local tax imposed by Article 232.
WHEREFORE, in view of the foregoing, the Court hereby resolves to DENY present petition. The
Decision dated January 22, 2009 and Resolution dated April 13, 2009 of the Court of Tax Appeals En
Banc in CTAEB No. 350 are AFFIRMED.
Clark Investors and Locators Association, Inc. Vs. Secretary of Finance and Commissioner of
Internal Revenue
G.R. No. 200670, July 6, 2015
FACTS:
Clark Investors and Locators Association (petitioners) assail the validity of RR 2-2012 via petition for
certiorari (Rule 65) promulgated by the Secretary ofFinance upon the recommendation of the CIR. RR 2-
2012 imposes VAT, and excise tax on the importation of petroleum and petroleum products from abroad
into theFreeport or Economic Zones (former Clark and Subic MilitaryConservations). By virtue of RA
7227, the said military conservations wereconverted into Freeport or Economic zones. RA 7227 provided
that the zone shall beoperated and managed as a separate customs territory, therefore exempt from
VAT,and in lieu of national and local taxes, all businesses and enterprises operatingwithin the Subic
Special Economic Zone shall pay a preferential gross income taxrate of 5%. The said provisions were
extended to the Clark Economic Zone. It is alsoexempt from the payment of all taxes and duties on the
importation of rawmaterials, capital and equipment.
Thus, the petitioners assailed the validity of RR 2-2012. It argues that by imposingthe VAT and excise tax
on the importation of petroleum and petroleum productsfrom abroad and into the Freeport or Economic
Zones, RR 2-2012 unilaterallyrevoked the tax exemption granted by RA No. 7227 and RA No. 9400 to
thebusinesses and enterprises operating within the Subic Special Economic Zone andClark Freeport
Zone.
The Respondents however attacked the remedy resorted to by the petitioners.
According to respondents, Certiorari (via Rule 65) was not the proper remedybecause: (a) RR 2-2012 was
issued by the respondents in the exercise of quasilegislativepowers, not quasi- judicial powers; (b)
violated the doctrine of hierarchyof courts. On the merits, it argued that it did not unilaterally revoke the
law becauseSec. 3 of the RR provides for tax refund, upon sufficient proof that the importedpetroleum
were used within the zones.
ISSUES:
1. Whether a Special Civil Action via Certiorari under Rule 65 was the properremedy;
2. Whether or not RR 2-2012 is valid.
RULING:
The petition for Certiorari under Rule 65 was NOT the proper remedy.
Firstly, respondents did not act in any judicial or quasi-judicial capacity. A petitionfor certiorari under Rule
65 of the 1997 Rules of Civil Procedure, as amended, is aspecial civil action that may be invoked only
against a tribunal, board, or officerexercising judicial or quasi-judicial functions. For a special civil action
for certiorarito prosper, the following requisites must concur: (1) it must be directed against atribunal,
board, or officer exercising judicial or quasi-judicial functions; (2) thetribunal, board, or officer must have
acted without or in excess of jurisdiction or withgrave abuse of discretion amounting to lack or excess of
jurisdiction; and (3) thereis no appeal or any plain, speedy, and adequate remedy in the ordinary course
oflaw.
A respondent is said to be exercising judicial function where he has the power todetermine what the law is
and what the legal rights of the parties are, and thenundertakes to determine these questions and
adjudicate upon the rights of theparties.Quasi-judicial function, on the other hand, is "a term which applies
to theaction, discretion, etc., of public administrative officers or bodies x x x required toinvestigate facts, or
ascertain the existence of facts, hold hearings, and drawconclusions from them, as a basis for their official
action and to exercise discretionof a judicial nature."
RR 2-2012 was issued in the exercise of Quasi- Legislative or Rule- MakingPowers
Respondents do not fall within the ambit of a tribunal, board, or officer exercisingjudicial or quasi-judicial
functions. They issued RR 2-2012 in the exercise of theirquasi-legislative or rule-making powers, and not
judicial or quasi-judicial functions.Verily, respondents did not adjudicate or determine the rights of the
parties. In orderto determine whether a Revenue Regulation is quasi-legislative in nature, we
mustexamine the legal basis of the Secretary of Finance in the issuance thereof. In BPILeasing
Corporation v. Court of Appeals, we ruled that Revenue Regulation 19-86was quasi-legislative in nature
because it was issued by the Secretary of Finance inthe exercise of his rule-making powers under Section
Page 47 of 148
244 of the National InternalRevenue Code (NIRC). Similarly, in the case at bar, RR 2-2012 was also
issued bythe Secretary of Finance based on Section 244 of the NIRC.
The proper remedy is a Petition for Declaratory ReliefWhile this case is styled as a petition for
certiorari, there is, however, no denyingthe fact that, in essence, it seeks the declaration by this Court of
theunconstitutionality and illegality of the questioned rule, thus partaking the nature, inreality, of one for
declaratory relief over which this Court has only appellate, notoriginal jurisdiction.Accordingly, this petition
must fail because this Court does not have originaljurisdiction over a petition for declaratory relief even if
only questions of law areinvolved. The special civil action of declaratory relief falls under the
exclusivejurisdiction of the Regional Trial Courts.9 The Rules of Court is explicit that suchaction shall be
brought before the appropriate Regional Trial Court.
The petition violated the Doctrine of Hierarchy of Courts
This Court's original jurisdiction to issue writs of certiorari is not exclusive. It isshared by this Court with
Regional Trial Courts and with the Court of Appeals. Thisconcurrence of jurisdiction is not, however, to be
taken as according to partiesseeking any of the writs an absolute, unrestrained freedom of choice of the
court towhich application therefor will be directed. There is after all a hierarchy of courts.That hierarchy is
determinative of the venue of appeals, and also serves as ageneral determinant of the appropriate forum
for petitions for the extraordinarywrits. A becoming regard for that judicial hierarchy most certainly
indicates thatpetitions for the issuance of extraordinary writs against first level ("inferior") courtsshould be
filed with the Regional Trial Court, and those against the latter, with theCourt of Appeals.
A direct invocation of the Supreme Court's original jurisdiction to issue these writsshould be allowed only
when there are special and important reasons therefor,clearly and specifically set out in the petition. This
is [an] established policy. It is apolicy necessary to prevent inordinate demands upon the Court's time and
attentionwhich are better devoted to those matters within its exclusive jurisdiction, and toprevent further
over-crowding of the Court's docket.
Republic of the Philippines, rep. by the Commissioner of Customs Vs. Philippine Airlines, Inc.
(PAL) / Commissioner of Internal Revenue Vs. Philippine Airlines, Inc. (PAL)
G.R. Nos. 209353-54 July 6, 2015
FACTS:
Philippine Airlines, Inc. (PAL) claim for a refund representing the alleged erroneously paid excise tax.
The CTA consolidated the two Petitions and tried them jointly and rendered a decision granting the
Petitions and ordered the CIR and the Commissioner of Customs (COC) to refund PAL.
The CIR, in its Petition for Review before the CTA en bane, raised the issue of whether PAL is entitled to
a tax refund of the alleged erroneously paid excise tax. The CIR argued that Presidential Decree (P.D.)
No. 1590, particularly Section 13 thereof, had already been expressly amended by Republic Act (R.A.)
No. 9334.4 Moreover, PAL failed to prove that the alleged commissary supplies were not locally available
in reasonable quantity, quality and price considering that no independent credible evidence was presented
but merely PAL' s own employee where testimony was self-serving and not comprehensive.
The CTA en banc denied ruled that R.A. 9334 was not expressly repealed by P.D. 1590. The tax court
also emphasized that P.D. 1590 is a special law that governs the franchise of PAL, while R.A. 9334 is a
general law, and therefore P.D. 1590 must prevail. The CTA held that reliance by petitioners on Cagayan
Electric Power Light Co. Inc. v. CIR is also misplaced. In that case, there was an express repeal of R.A.
5431, as all corporate taxpayers not expressly exempted under that law and under Section 27 of the Tax
Code were subjected to income tax.
The CTA ruled that respondent PAL was entitled to a refund of excise taxes paid on the latter's
commissary supplies. The appellate court explained that the exemption granted to PAL under P.D. 1590
was not expressly repealed by R.A. 9334. The CTA found that PAL had opted to pay the latter's basic
corporate income tax for the fiscal year ending 31 March 2006. The court also found that the articles
imported were intended for the operations of PAL and were not locally available in reasonable quantity,
quality or price. The latter is therefore entitled to a refund of erroneously paid excise tax.
ISSUE:
Whether or not Sections 6 and 10 of Republic Act 9334 repealed Section 13 of Presidential Decree 1590.
RULING:
It is a basic principle in statutory construction that a later law, general in terms and not expressly repealing
or amending a prior special law, will not ordinarily affect the special provisions of the earlier statute. A
reading of the pertinent provisions of P.D. 1590 and R.A. 9334 shows that there was no express repeal of
the grant of exemption.
PD 1590 has not been revoked by the NIRC of 1997, as amended. Or to be more precise, the tax privilege
of PAL provided in Sec. 13 of PD 1590 has not been revoked by Sec. 131 of the NIRC of 1997, as
amended by Sec. 6 of RA 9334.
That the Legislature chose not to amend or repeal [PD] 1590 even after PAL was privatized reveals the
intent of the Legislature to let PAL continue to enjoy, as a private corporation, the very same rights and
privileges under the terms and conditions stated in said charter.
Noteworthy is the fact that PD 1590 is a special law, which governs the franchise of PAL. Between the
provisions under PD 1590 as against the provisions under the NIRC of 1997, as amended by 9334, which
is a general law, the former necessary prevails. This is in accordance with the rule that on a specific
matter, the special law shall prevail over the general law, which shall be resorted only to supply
deficiencies in the former. In addition, where there are two statutes, the earlier special and the later
general - the terms of the general broad enough to include the matter provided for in the special - the fact
that one is special and other general creates a presumption that the special is considered as remaining an
exception to the general, one as a general law of the land and the other as the law of a particular case.
The CTA found that PAL had paid basic corporate income tax for fiscal year ending 31 March 2006.
Consequently, PAL may now claim exemption from taxes, duties, charges, royalties, or fees due on all
importations of its commissary and catering supplies,provided it shows that 1) such articles or supplies or
Page 48 of 148
materials are imported for use in its transport and nontransport operations and other activities incidental
thereto; and 2) they are not locally available in reasonable quantity, quality, or price.
WHEREFORE, premises considered, both Petitions are DENIED for lack of merit.
FORTUNE TOBACCO ORPORATION vs. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 192024, July 01, 2015
FACTS:
Petitioner is the manufacturer/producer of cigarette brands with tax rate classification based on
net retail price prescribed by Republic Act (R.A.) No. 4280. Immediately prior to January 1, 1997, such
cigarette brands were subject to ad valorem tax pursuant to then Section 142 of the Tax Code of 1977, as
amended. However, on January 1, 1997, R.A. No. 8240 took effect causing a shift from the ad valorem tax
(AVT) system to the specific tax system.To implement the provisions for a twelve percent (12%) increase
of excise tax on cigars and cigarettes packed by machines by January 1, 2000, the Secretary of Finance
issued Revenue Regulations No. 17-99, dated December 16, 1999 which provides "that the new specific
tax rate for any existing brand of cigars, cigarettes packed by machine, distilled spirits, wines and
fermented liquor shall not be lower than the excise tax that is actually being paid prior to January 1, 2000."
On 31 March 2005, petitioner filed a claim for tax credit or refund under Section 229 of the
National Internal Revenue Code of 1997 (1997 NIRC) for erroneously or illegally collected specific taxes
covering the period June to December 31, 2004 in the total amount of Php219,566,450.00.After trial on
the merits, the Former First Division of this Court rendered the assailed Decision, dated April 30, 2009,
which consistently ruled that RR 17-99 is contrary to law and that there is insufficiency of evidence on the
claim for refund.Petitioner elevated its claim to the CTA En Banc, but was rebuffed after the tax tribunal
found no cause to reverse the findings and conclusions of the CTA Division.
ISSUE:
Whether or not there is sufficient evidence to warrant the grant of petitioner's claim for tax refund.
RULING:
No. The question of sufficiency of petitioner's evidence to support its claim for tax refund is a
question of fact. The settled rule is that only questions of law may be raised in a petition under Rule 45 of
the Rules of Court. It is not this Court's function to analyze or weigh all over again the evidence already
considered in the proceedings below, the Court's jurisdiction being limited to reviewing only errors of law
that may have been committed by the lower court.Significantly, it bears noting that Section 5, Rule 45 of
the Rules of Court provides that the failure of petitioner to comply with the requirements on the contents of
the petition shall be sufficient ground for its dismissal. While jurisprudence provides exceptions to these
rules, the subject petition does not fall under any of those so excepted. Thus, for this reason alone, the
petition must fail.
Granting that the Court could take a second look and review petitioner's evidence, the result
would be the same.
CHINA BANKING CORPORATIONvs. CITY TREASURER OF MANILA
G.R. No. 204117, July 01, 2015
FACTS:
On January 15, 2007, respondent CBC paid the amount of P267,128.70 and protested, thru a
Letter dated January 12, 2007, the imposition of business tax under Section 21 of the Manila Revenue
Code in the amount of P154,398.50, on the ground that it is not liable of said additional business tax and
the same constitutes double taxation.On February 8, 2007, petitioner acknowledged receipt of respondent
CBC 's payment under protest of the assessed amount and further informed respondent that she will await
for respondent’s formal protest.On March 27, 2007, respondent CBC wrote a letter-reply to petitioner’s
Letter dated February 8, 2007. In the same Letter, respondent averred that pursuant to Section 195 of the
Local Government Code, petitioner had until March 16, 2007 within which to decide the protest, and
considering that respondent received the Letter dated February 8, 2007, four days after the deadline to
decide and petitioner did not even resolve the protest, respondent formally demanded the refund of the
amount of P154,398.50, representing the business tax collected under Section 21 of the Manila Revenue
Code.
On April 17, 2007, respondent CBC filed a Petition for Review with the RTC of Manila, Branch
173,raising the sole issue of whether or not respondent is subject to the local business tax imposed under
Section 21 of the Manila Revenue Code. RTC rendered its decision granting the petition filed by CBC. On
October 1, 2010, the CTA Divisionreversed the decision of the RTC, effectively dismissing CBC’s protest
against the disputed assessment.
ISSUE:
Whether or not theCTA gravely erred in disregarding the law and interest of substantial justice by
reversing the ruling of the trial court solely because of its assumed pronouncement that the original
petition was filed one (1) day beyond the reglementary period.
RULING:
No. In this case, the Court finds that the City Treasurer’s contention that CBC was not able to
properly protest the assessment to be without merit. The Court is of the view that CBC was able to
properly file its protest against the assessment of the City Treasurer when it filed its letter on January 15,
2007, questioning the imposition while paying the assessed amount.The Court, however, is of the view
that the period within which the City Treasurer must act on the protest, and the consequent period to
appeal a “denial due to inaction,” should be reckoned from January 15, 2007, the date CBC filed its
protest, and not March 27, 2007. Consequently, the Court finds that the CTA En Banc did not err in ruling
that CBC had lost its right to challenge the City Treasurer’s “denial due to inaction.”
Page 49 of 148
 Time and again, it has been held that the perfection of an appeal in the manner and within the
period laid down by law is not only mandatory but also jurisdictional.At any rate, even if the Court
considers CBC’s appeal from the “denial due to inaction” by the City Treasurer to have been timely filed,
the same must be dismissed because it was not filed with a court of competent jurisdiction.
OMMISSIONER OF INTERNAL REVENUE vs. PUREGOLD DUTY FREE, INC.
G.R. No. 202789, June 22, 2015
FACTS:
As an enterprise located within CSEZ and registered with the CDC, Puregold had been issued
Certificate of Tax Exemption No. 94-4, later superseded by Certificate of Tax Exemption No. 98-54, which
enumerated the tax incentives granted to it, including tax and duty-free importation of goods.
In Coconut Oil Refiners v. Torres, however, this Court annulled the adverted Sec. 5 of EO 80, in
effect withdrawing the preferential tax treatment heretofore enjoyed by all businesses located in the
CSEZ.Deputy Commissioner for Special Concerns/OIC-Large Taxpayers Service of the Bureau of Internal
Revenue (BIR) Kim Jacinto-Henares then issued a Preliminary Assessment Notice regarding unpaid VAT
and excise tax on wines, liquors and tobacco products imported by Puregold from January 1998 to May
2004. In due time, Puregold protested the assessment.Pending the resolution of Puregold's protest,
Congress enacted RA 9399, specifically to grant a tax amnesty to business enterprises affected by this
Court's rulings in John Hay People's Coalition v. Lim and Coconut Oil Refiners. Under RA 9399, availment
of the tax amnesty relieves the qualified taxpayers of any civil, criminal and/or administrative liabilities
arising from, or incident to, nonpayment of taxes, duties and other charges.Puregold availed itself of the
tax amnesty under RA 9399, filing for the purpose the necessary requirements and paying the amnesty
tax.Nonetheless, Puregold received a formal letter of demand from the BIR for the payment of
₱2,780,610,17 4.51, supposedly representing deficiency VAT and excise taxes on its importations of
alcohol and tobacco products from January 1998 to May 2004. In its response-letter, Puregold requested
the cancellation of the assessment on the ground that it has already availed of the tax amnesty under RA
9399.
Puregold filed a Petition for Review with the CTA questioning the timeliness of the assessment
and arguing that the doctrines of operative fact and non-retroactivity of rulings bar the Commissioner of
Internal Revenue (CIR) from assessing it of deficiency VAT and excise taxes. More importantly, Puregold
asserted that, by virtue of its availment of the tax amnesty granted by RA 9399, it has been relieved of any
civil, criminal and/or administrative liabilities arising from or incident to nonpayment of taxes, duties and
other charges.
Following an exchange of motions, the CTA 2nd Division issued a Resolution ordering the cancellation of
the protested assessment against Puregold in view of its availment of tax amnesty under RA 9399.
ISSUE:
Whether or not the CTA’s ruling is contrary to the intent of RA 9399 which excludes deficiency
tax; thus, Puregold remains to be liable for excise taxes on its wine, liquors, and tobacco importations.
RULING:
No. The issue on the coverage and applicability of RA 9399 to Puregold has already been
addressed and disposed of by the CTA when it pointed out that RA 9399 covers all applicable tax and
duty liabilities, inclusive of fines, penalties, interests and other additions thereto. Consequently, the
government, through the enactment of RA 9399, has expressed its intention to waive its right to collect
taxes, which in this case is the tax imposed under Sec. 131 (A) of the 1997 NIRC, subject to the condition
that Puregold has complied with the requirements provided therein.Furthermore, a tax amnesty, by nature,
is designed to be a general grant of clemency and the only exceptions are those specifically
mentioned.We cannot now deflect from the foregoing decision by reading into a law granting tax amnesty
a qualification that is simply not there.We agree with both the Court of Appeals and Court of Tax Appeals
that Executive Order No. 41 is quite explicit and requires hardly anything beyond a simple application of
its provisions.
MITSUBISHI MOTORS PHILIPPINES CORPORATIONvs. BUREAU OF CUSTOMS
G.R. No. 209830, June 17, 2015
FACTS:
Respondent alleged that from 1997 to 1998, petitioner was able to secure tax credit certificates
(TCCs) from various transportation companies; after which, it made several importations and utilized said
TCCs for the payment of various customs duties and taxes in the aggregate amount of
P46,844,385.00.Believing the authenticity of the TCCs, respondent allowed petitioner to use the same for
the settlement of such customs duties and taxes. However, a post-audit investigation of the Department
of Finance revealed that the TCCs were fraudulently secured with the use of fake commercial and bank
documents, and thus, respondent deemed that petitioner never settled its taxes and customs duties
pertaining to the aforesaid importations. Thereafter, respondent demanded that petitioner pay its unsettled
tax and customs duties, but to no avail. Hence, it was constrained to file the instant complaint.
Initially, the RTC dismissed the collection case due to the continuous absences of respondent’s
counsel during trial. On appeal to the CA, and eventually the Court, the said case was reinstated and trial
on the merits continued before the RTC.The RTC granted petitioner’s Demurrer to Plaintiff’s Evidence,
and accordingly, dismissed respondent’s collection case on the ground of insufficiency of evidence. The
CA, on appeal, referred the records of the collection case to the CTA for proper disposition of the appeal
taken by respondent. While the CA admitted that it had no jurisdiction to take cognizance of respondent’s
appeal, as jurisdiction is properly lodged with the CTA, it nevertheless opted to relax procedural rules in
not dismissing the appeal outright.
ISSUE:
Whether or not the CA correctly referred the records of the collection case to the CTA for proper
disposition of the appeal taken by respondent.
RULING:
Page 50 of 148
 No. The Court finds that the CA erred in referring the records of the collection case to the CTA
for proper disposition of the appeal taken by respondent.In the instant case, the CA has no jurisdiction
over respondent’s appeal; hence, it cannot perform any action on the same except to order its dismissal
pursuant to Section 2, Rule 50 of the Rules of Court. Therefore, the act of the CA in referring respondent’s
wrongful appeal before it to the CTA under the guise of furthering the interests of substantial justice is
blatantly erroneous, and thus, stands to be corrected.
In view of respondent’s availment of a wrong mode of appeal via notice of appeal stating that it
was elevating the case to the CA – instead of appealing by way of a petition for review to the CTA within
thirty (30) days from receipt of a copy of the RTC’s August 3, 2012 Order, as required by Section 11 of RA
1125, as amended by Section 9 of RA 928243 – the Court is constrained to deem the RTC’s dismissal of
respondent’s collection case against petitioner final and executory. It is settled that the perfection of an
appeal in the manner and within the period set by law is not only mandatory, but jurisdictional as well, and
that failure to perfect an appeal within the period fixed by law renders the judgment appealed from final
and executory.
MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY (MCIAA)vs. CITY OF LAPU-LAPU AND
ELENA T. PACALDO
G.R. No. 181756, June 15, 2015
FACTS:
Petitioner Mactan-Cebu International Airport Authority (MCIAA) was created by Congress on July
31, 1990 under Republic Act No. 6958. Upon its creation, petitioner enjoyed exemption from realty taxes
under the a provision of Republic Act No. 6958. On September 11, 1996, however, this Court rendered a
decision in Mactan-Cebu International Airport Authority v. Marcos4 (the 1996 MCIAA case) declaring that
upon the effectivity of Republic Act No. 7160 (The Local Government Code of 1991), petitioner was no
longer exempt from real estate taxes.
Respondent City issued to petitioner a Statement of Real Estate Tax assessing the lots
comprising the Mactan International Airport which included the airfield, runway, taxi way and the lots on
which these are built. Petitioner contends that these lots, and the lots to which they are built, are utilized
solely and exclusively for public purposes and are exempt from real property tax. Petitioner based its
claim for exemption on DOJ Opinion No. 50.
Respondent issued notices of levy on 18 sets of real properties of petitioners. Petitioner filed a
petition for Prohibition, TRO, and a writ of preliminary injunction with RTC Lapulapu which sought to enjoin
respondent City from issuing the warrant of levy against petitioner’s properties from selling them at public
auction for delinquency in realty tax obligations.
Petitioner claimed before the RTC that it had discovered that respondent City did not pass any
ordinance authorizing the collection of real property tax, a tax for the special education fund (SEF), and a
penalty interest for its nonpayment. Petitioner argued that without the corresponding tax ordinances,
respondent City could not impose and collect real property tax, an additional tax for the SEF, and penalty
interest from petitioner.
RTC granted the writ of preliminary injunction which was later on lifted upon motion by the
respondents. The CA ruled that petitioner’s airport terminal building, airfield, runway, taxiway, and the lots
on which they are situated are not exempt from real estate tax.
ISSUE:
Whether or not petitioner is a government instrumentality exempt from paying real property tax.
RULING:
Yes. MIAA is not a government-owned or controlled corporation under Section 2(13) of the
Introductory Provisions of the Administrative Code because it is not organized as a stock or non-stock
corporation. Neither is MIAA a government-owned or controlled corporation under Section 16, Article XII
of the 1987 Constitution because MIAA is not required to meet the test of economic viability. MIAA is a
government instrumentality vested with corporate powers and performing essential public services
pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. As a government
instrumentality, MIAA is not subject to any kind of tax by local governments under Section 133(o) of the
Local Government Code. The exception to the exemption in Section 234(a) does not apply to MIAA
because MIAA is not a taxable entity under the Local Government Code. Such exception applies only if
the beneficial use of real property owned by the Republic is given to a taxable entity.
Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are
properties of public dominion. Properties of public dominion are owned by the State or the Republic.
SILICON PHILIPPINES, INC. (formerly INTEL PHILIPPINES MANUFACTURING,
INC.)vs.COMMISSIONER OF INTERNAL REVENUE
G.R. No. 173241March25, 2015
FACTS:
Petitioner is engaged in the business of designing, developing, manufacturing, and exporting advance and
large-scale integrated-circuit components, commonly referred to in the industry as Integrated Circuits. SPI
filed on May 6, 1999 with the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the
Department of Finance an Application for Tax Credit/Refund of Value-Added Tax Paid covering the Third
Quarter of 1998. SPI sought the tax credit/refund of input VAT for the said tax period in the sum of
P25,531,312.83.The CTA Division rendered a Decision only partially granting the claim of SPI for tax
credit/refund. The CTA Division disallowed the claim of SPI for tax credit/refund of input VAT for failure of
SPI to properly substantiate the zero-rated sales to which it attributed said taxes.As for the claim of SPI for
tax credit/refund of input VAT on its purchases of capital goods, the CTA Division held that Section 112(B)
of the 1997 Tax Code did not require that such a claim be attributable to zero-rated sales; and that SPI
was able to comply with all the requirements under said provision.
Page 51 of 148
ISSUE:
Whether petitioner filed the petition for review on time.
RULING:
No. SPI belatedly filed its judicial claim. It filed its Petition for Review with the CTA 391 days after the
lapse of the 120-day period without the CIR acting on its application for tax credit/refund, way beyond the
30-day period under Section 112 of the 1997 Tax Code.
EASTERN TELECOMMUNICATIONS PHILIPPINES, INC.vs.COMMISSIONER OF INTERNAL
REVENUE
G.R. No. 183531March 25, 2015
FACTS:
As a telecommunications company, ETPI entered into various international service agreements with
international telecommunications carriers and handles incoming telecommunications services for non-
resident foreign telecommunication companies and the relay of said international calls within and around
other places in the Philippines. Consequently, to broaden its distribution coverage of telecommunications
services throughout the country, ETPI entered into various interconnection agreements with local carriers
that can readily relay the said foreign calls to the intended local end-receiver.
The non-resident foreign corporations pays ETPI in US dollars inwardly remitted through the Philippine
local banks, Metropolitan Banking Corporation, Hong Kong and Shanghai Banking Corporation and
Citibank through the manner and mode of payments based on an internationally established standard
which is embodied in a Blue Book, or Manual, prepared by the Consultative Commission of International
Telegraph and Telephony and implemented between the contracting parties in consonance with a set of
procedural guidelines denominated as Traffic Settlement Procedure.
ETPI seasonably filed its Quarterly Value-Added Tax Returns. Both ETPI and respondent CIR confirmed
the veracity of the entries under Excess input VAT. Believing that it is entitled to a refund for the unutilized
input VAT attributable to its zero-rated sales, ETPI filed with the BIR an administrative claim for refund
and/or tax credit derived from its zero-rated sales for the period from January 1999 to December 1999.
Without waiting for the decision of the BIR, ETPI filed a petition for review before the CTA-Division. CTA-
Division denied the petition for lack of merit, finding that ETPI failed to imprint the word “zero-rated” on the
face of its VAT invoices or receipts.
ISSUE:
Whether the CTA erred in denying ETPI’s claim for refund of input taxes from its zero-rated sales.
RULING:
No. Tax refunds, being in the nature of tax exemptions, are construed in strictissimi juris against the
taxpayer and liberally in favor of the government. Accordingly, it is a claimant’s burden to prove the factual
basis of a claim for refund or tax credit. The word “zero-rated” is required on the invoices or receipts
issued by VAT-registered taxpayers. Also, ETPI failed to substantiate its claim for refund or tax credit.
CARGILL PHILIPPINES, INC. vs. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 203774 March 11, 2015
FACTS:
Cargill, a VAT-registered domestic corporation, filed two petitions in the Court of Tax Appeals for the
refund of unutilized input taxes attributable to zero-rated sales. On June 27, 2003, Cargill filed an
administrative claim for refund of unutilized input taxes with the BIR. Three days after, on June 30, 2003,
Cargill filed the first petition with the Court of Tax Appeals. The second petition was filed on May 31, 2005,
which was the same date when Cargill filed an administrative claim with the BIR.
ISSUE:
Whether the CTA En Banc correctly affirmed the CTA Division’s outright dismissal of Cargill’s claims for
refund of unutilized input VAT on the ground of prematurity.
RULING:
The first petition was filed prematurely while the second petition was properly filed because it was
exempted from the mandatory 120-day period. The first petition, which was filed on June 30, 2003, was
prematurely filed because Cargill did not wait for the lapse of the 120-day period before seeking relief with
the CTA. The first petition is not covered by the exception based on estoppel because it was filed before
the BIR issued Ruling No. DA-489-03. The CTA did not have jurisdiction over the first petition. The second
petition, however, fell within the exemption from the 120-day period because it was filed within the
effectivity of BIR Ruling No. DA-489-03 (within Dec. 10, 2003 to Oct. 6, 2010). Since the second petition
was timely filed, it was reinstated and remanded to the CTA for its resolution on the merits.
NORTHERN MINDANAO POWER CORPORATIONvs. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 185115February 18, 2015
FACTS:
On 20 June 2000, NMPC filed an administrative claim for a refund for the 3 rd and the 4th quarters of
taxable year 1999, and on 25 July 2001 for taxable year 2000. Alleging that there was inaction on the part
of CIR, it filed a Petition with the CTA on 28 September 2001.
Page 52 of 148
ISSUE:
Whether the CTA has acquired jurisdiction over the claim for refund.
RULING:
No. Although the question of jurisdiction was never raised as an issue by the parties, it is well-settled rule
that the issue of jurisdiction over the subject matter may, at any time, be raised by the parties or
considered by the Court motupropio. Counting 120 days from 20 June 2000, the CIR had until 18 October
2000 within which to decide on the claim for an input VAT refund for the 3 rd and the 4th quarters of taxable
year 1999. If after the expiration of that period, there is inaction, petitioner could elevate the matter to the
court within 30 days or until 17 November 2000. Therefore, NMPC belatedly filed its judicial claim with the
CTA on September 28, 2001. With regard the claim for refund for taxable year 2000, petitioner did not wait
for the expiration of the 120-day period since barely 64 days had lapsed when the judicial claim was filed
with the CTA. Thus, the judicial claim was prematurely filed.
INE NATIONAL BANK vs. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 206019 March 18, 2015
FACTS:
Gotesco entered into a loan agreement with PNB. The loan was secured by a real estate mortgage of a
six-hectare property known as Ever Ortigas Commercial Complex. Gotesco subsequently defaulted on its
loan obligations and PNB foreclosed the mortgaged. On October 20, 2000, Gotesco filed a civil case
against PNB before the RTC of Pasig, Branch 168 for the annulment of the foreclosure proceedings,
specific performance and damages with prayer for temporary restraining order (TRO) and/or preliminary
injunction. As PNB prepared to consolidate its ownership over the foreclosed property, PNB withheld and
remitted to the BIR withholding taxes amounting to P74,400,028.49, or 6% of the bid price. Realizing that
it made a mistake, PNB filed an administrative claim for refund of excess withholding taxes on October 27,
2005. The next day, PNB filed its petition for review for the claim for refund before the tax court.
PNB claimed that it inadvertently applied the 6% creditable withholding tax rate on the sale, when it should
have applied the 5% creditable withholding tax rate on the sale of ordinary asset under Section
2.57.2(J)(B) of RR No. 2-98, as amended by RR No. 6-01. PNB claimed that it erroneously withheld and
remitted an excess P12,400,004.71. The Court of Tax Appeals First Division denied PNB’s claim for the
refund of excess creditable withholding tax for insufficiency of evidence. The CTA division agreed that the
applicable rate is 5% and not 6% but it held that PNB failed to produce evidence that Gotesco did not
utilize or credit the withheld taxes from its tax liabilities.
ISSUE:
Whether PNB is entitled to the refund of creditable withholding taxes erroneously paid to the BIR.
RULING:
Yes.Although PNB was not able to submit Gotesco’s BIR Form No. 2307, PNB submitted evidence
sufficiently showing Gotesco’s non-utilization of the taxes withheld subject of the refund.
The SC held that Gotesco’s relentless refusal to recognize PNB’s ownership over the property constitutes
proof that Gotesco will not do any act inconsistent with its claim of ownership over the property, including
claiming the creditable tax imposed on the sale.
All in all, the evidence presented by PNB sufficiently proved its entitlement to the claimed refund. There is
no need for PNB to present Gotesco’s BIR Form No. 2307 because the information contained in the said
form may be very well gathered from other documents already presented by PNB, such as BIR Form
1606.
CHINA BANKING CORPORATION, Petitioner, v. COMMISSIONER OF INTERNALREVENUE,
Respondent.
G.R. No. 172509, February 04, 2015
Facts:
China Banking Corporation (“CBC”) is a universal bank duly organized under the laws of the Philippines. It
is engaged in transactions involving sales of foreign exchange to the Central Bank of the Philippines"
commonly known as SWAP TRANSACTIONS. CBC did not pay tax on the SWAP transactions for the
years 1982- 1986.
On 19 April 1989, petitioner CBC received an assessment from the Bureau of Internal Revenue (BIR)
finding CBC liable for deficiency DST on the sales of foreign bills of exchange to the Central Bank
amounting to P11, 383,165.50 CBC protested asserting five defenses; double taxation, absence of
liability, due process violation, validity of assessment and tax exemption. The Commissioner of Internal
Revenue (CIR) rendered a decision reiterating the deficiency DST assessment and ordered the payment
thereof plus increments within 30 days from receipt of the Decision, CBC filed a Petition for Review with
the CTA, but it was denied. The CTA ruled that a SWAP arrangement should be treated as a telegraphic
transfer subject to documentary stamp tax. Thus, CBC is liable to pay such assessed deficiency. On
appeal, CBC raised the issue of prescription, but the BIR did not answer in its comment.
Issue:
Whether the right of the BIR to collect the assessed DST from CBC is barred by prescription?
Ruling:
Yes, the right of the BIR to collect the assessed DST is barred by the statute of limitations. In this case,
the records do not show when the assessment notice was mailed, released or sent to CBC. Nevertheless,
the latest possible date that the BIR could have released, mailed or sent the assessment notice was on
the same date that CBC received it, 19 April 1989. Assuming therefore that 19 April 1989 is the reckoning
date, the BIR had three years to collect the assessed DST. However, the records of this case show that
there was neither a warrant of distraint or levy served on CBC's properties nor a collection case filed in
court by the BIR within the three-year period.
NIPPON EXPRESS (PHILIPPINES) CORP., Petitioner, v. COMMISSIONER OFINTERNAL REVENUE,
Respondents.
Page 53 of 148
G.R. No. 185666, February 04, 2015
Facts:
Petitioner Corporation applied for a tax credit/refund based on section 112 of the Tax Code in the amount
of P24, 826.667.61 representing the value of input VAT paid by the Corporation in relation to sales
attributable to zero-rated sales. Petitioner corporation filed an administrative claim with the One-stop Shop
Inter-Agency Tax Credit and Duty Drawback Center of the Department of Finance (OSSAC-DOF) on
September 24, 2001. Having no resolution from OSSAC-DOF, petitioner corporation filed a petition for
review to CTA. The CTA denied the claim for tax credit/refund for petitioner’s failure to comply with the
receipt and invoicing requirements provided by the Tax Code for refund based on zero-rated transactions.
Issues:
Whether or not petitioner is entitled to a TCC in the amount of P24,826,667.61 allegedly representing its
excess and unutilized input VAT for the taxable year 2000?
Ruling:
No, In the present case, although it appears that petitioner has indeed complied with the required two-year
period within which to file a refund/tax credit claim with the BIR (OSSAC-DOF in this case) by filing all its
administrative claims on 24 September 2001 (within the period from the close of the taxable quarters for
the year 2000, when the sales were made), this Court finds that petitioner’s corresponding judicial claim
was filed beyond the 30-day period Section 112(D) of the NIRC of 1997 categorically states that in case of
failure on the part of the respondent to act on the application within the 120day period prescribed by law,
petitioner only has 30 days after the expiration of the 120day period to appeal the unacted claim with the
CTA. Since petitioner’s judicial claim for the aforementioned quarters for taxable year 2000 was filed
before the CTA only on 24 April 2002,32 which was way beyond the mandatory 120+30 days to seek
judicial recourse, such non-compliance with the mandatory period of 30 days is fatal to its refund claim on
the ground of prescription. Consequently, the CTA had no jurisdiction over the instant claim of petitioner
as the petition was belatedly filed.
WINEBRENNER & IÑIGO INSURANCE BROKERS, INC., vs. COMMISSIONER OFINTERNAL
REVENUE,
G.R. No. 206526, January 28, 2015
Facts:
Winebrenner & Ifiigo Insurance Brokers, Inc. (petitioner) seeks the review of the March 22, 2013
Decision1of the Court of Tax Appeals En Banc (CTAEn Banc)which affirmed the denial of petitioner's
judicial claim for refund or issuance of tax credit certificate for excess and unutilized creditable withholding
tax (CWT) for the 1st to 4th quarter of calendar year (CJ} 2003 amounting to P4,073,954.00. It held that
petitioner failed to prove that the excess CWT for CY 2003 was not carried over to the succeeding
quarters of the subject taxable year. Under the 1997 National Internal Revenue Code (NIRC), a taxpayer
must not have exercised the option to carryover the excess CWT for a particular taxable year in order to
qualify for refund.
Issue:
Whether the submission and presentation of the quarterly ITRs of the succeeding quarters of a taxable
year is indispensable in a claim for refund?
Ruling:
Yes. The respondent misused the ruling in Philam. Quarterly ITRs are of succeeding taxable years is not
required. Further the court ruled that, what Section 76 requires, just like in all civil cases, is to prove the
prima facie entitlement to a claim, including the fact of not having carried over the excess credits to the
subsequent quarters or taxable year. It does not say that to prove such a fact, succeeding quarterly ITRs
are absolutely needed. Moreso, it stated that the rule that was underscored is that any document, other
than quarterly ITRs may be used to establish that indeed the noncarry over clause has been complied
with, provided that such is competent, relevant and part of the records. Thus, the Court is yet to be
prepared to make a pronouncement as to the indispensability of the quarterly ITRs in a claim for refund for
no court can limit a party to the means of proving a fact for as long as they are consistent with the rules of
evidence and fair play. The means of ascertainment of a fact is best left to the party that alleges the same.
The Court’s power is limited only to the appreciation of that means pursuant to the prevailing rules of
evidence. To stress, what the NIRC merely requires is to sufficiently prove the existence of the non-carry
over of excess CWT in a claim for refund.
The petitioner in this case failed to submit and offer as part of its evidence the first, second, and third
Quarterly ITRs for the year 2004. Consequently, petitioner was not able to prove that it did not exercise its
option to carry-over its excess CWT. As such, claims for refund are civil in nature and, petitioner, as
claimant, though having a heavy burden of showing entitlement, need only prove preponderance of
evidence in order to recover excess credit in cold cash.
PANAY POWER CORPORATION (formerly AVON RIVER POWER HOLDINGSCORPORATION),
Petitioner, vs. COMMISSIONER OF INTERNALREVENUE, Respondent.
G.R. No. 203351, January 21, 2015
Facts:
A petition for review on certiorari1are the Decision2dated May 17, 2012 and the Resolution dated August
29, 2012 of the Court of Tax Appeals (CTA) En Banc in CTA EB No. 709, which affirmed the Amended
Decision4dated December 6, 2010 of the CT A Special First Division (CTA Division) in CTA Case No.
7402 and dismissed the claim for refund/credit of excess input value-added tax (VAT) of petitioner Panay
Power Corporation, formerly Avon River Power Holdings Corporation (petitioner), for being prematurely
filed.
Issue:
Whether the CTA En Banc correctly affirmed the CTA Division’s outright dismissal of petitioner’s claim for
tax refund/credit on the ground of prematurity?
Ruling:
In the case at hand, the Court ruled that the dismissal of the petitioner’s claim is improper. It cited,
Taganito Mining Corporation v. CIR, which states that the rule must therefore be that during the period
December 10, 2003 (when BIR Ruling No. DA-48903 was issued) to October 6, 2010 (when the Aichi
case was promulgated), taxpayersclaimants need not observe the 120-day period before it could file a
judicial claim for refund of excess input VAT before the CTA. Before and after the aforementioned period
(i.e., December 10, 2003 to October 6, 2010), the observance of the 120-day period is mandatory and
jurisdictional to the filing of such claim.
The petitioner filed its administrative and judicial claims for refund/credit of its input VAT on December 29,
2005 and January 20, 2006, respectively, or during the period when BIR Ruling No. DA-489-03 was in
place, i.e., from December 10, 2003 to
October 6, 2010. As such, it need not wait for the expiration of the 120-day period before filing its judicial
claim before the CTA, and hence, is deemed timely filed. Thus, the erroneous ruling of the CTA En Banc.
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COMMISSIONER OF INTERNAL REVENUE, vs. TEAM (PHILS.) ENERGY CORPORATION
(formerlyMIRANT (PHILS.) ENERGY CORPORATION),
G.R. No. 188016, January 14, 2015
Facts:
The case is an appeal from the decision promulgated by the Court of Tax Appeals En Banc which upheld
the decision of the CTA in Division rendered on May 15, 2008 ordering the Commissioner of Internal
Revenue to refund or to issue a tax credit certificate in favor of the respondent in the modified amount of
P16,366,412.59 representing the respondent's excess and unutilized creditable withholding taxes for
calendar years 2002 and 2003.
Respondent Mirant (Philippines) Energy Corporation, a domestic corporation, filed with the Securities and
Exchange Commission (SEC) its Amended Articles of Incorporation stating its intent to change its
corporate name from Mirant (Philippines) Mobile Corporation to Mirant (Philippines) Energy Corporation;
and to include the business of supplying and delivering electricity and providing services necessary in
connection with the supply or delivery of electricity. The SEC approved the amendment. Subsequently, it
filed its annual income tax return (ITR) for calendar years 2002 and 2003 on April 15, 2003 and April 15,
2004, respectively, reflecting overpaid income taxes or excess creditable withholding taxes which also
indicated in the ITRs its option for the refund of the tax overpayments for calendar years 2002 and 2003.
The respondent then filed an administrative claim for refund or issuance of tax credit certificate with the
Bureau of Internal Revenue (BIR) in the total amount of P16,366,413.00, representing the overpaid
income tax or the excess creditable withholding tax of the respondent for calendar years 2002 and 2003.6
Due to the inaction of the BIR and in order to toll the running of the two-year prescriptive period for
claiming a refund under Section 229 of the National Internal Revenue Code (NIRC) of 1997, the
respondent filed a petition for review in the Court of Tax Appeals (CTA).7
Issue:
Whether or not the respondent proved its entitlement to the refund?
Ruling:
Yes, the petitioner is entitled to a refund. The court ruled that the submission of the quarterly returns is not
mandatory for as long as it was able to establish prima facie its right to the refund via testimonial and
object evidence, which would give the petitioner an opportunity to rebut to shift the burden of evidence
back to the respondent. The BIR's failure to present such vital document during the trial in order to bolster
the petitioner's contention against the respondent's claim for the tax refund was fatal.
ROHM APOLLO SEMICONDUCTOR PHILIPPINES, Petitioner VS. COMMISSIONER OF INTERNAL
REVENUE, Respondent (G.R. No. 168950, January 14, 2015)
FACTS:
Petitioner (Rohm Apollo) is a domestic corporation registered with the Securities and Exchange
Commission. It is also registered with the Philippine Economic Zone Authority as an Ecozone Export
Enterprise. Petitioner is in the business of manufacturing semiconductor products, particularly microchip
transistors and tantalium capacitors. Further, it is registered with the Bureau of Internal Revenue (BIR) as
a valueadded taxpayer. Sometime in June 2000, prior to the commencement of its operations on 1
September 2001, Rohm Apollo engaged the services of Shimizu Philippine Contractors, Inc. (Shimizu) for
the construction of a factory. For services rendered by Shimizu, petitioner made initial payments of
P198,551,884.28 on 7 July 2000 and P132,367,923.58 on 3 August 2000.
Petitioner treated the payments as capital goods purchases and thus filed with the BIR an administrative
claim for the refund or credit of accumulated unutilized creditable input taxes on 11 December 2000. As
the close of the taxable quarter when the purchases were made was 30 September 2000, the
administrative claim was filed well within the two-year prescriptive period.
Pursuant to Section 112(D) of the 1997 Tax Code, the Commissioner of Internal Revenue (CIR) had a
period of 120 days from the filing of the application for a refund or credit on 11 December 2000, or until 10
April 2001, to act on the claim. The waiting period, however, lapsed without any action by the CIR on the
claim.
Instead of filing a judicial claim within 30 days from the lapse of the 120-day period on 10 April, or until 10
May 2001, Rohm Apollo filed a Petition for Review with the CTA docketed as CTA Case No. 6534 on 11
September 2002. It was under the belief that a judicial claim had to be filed within the two-year
prescriptive period ending on 30 September 2002.
On 27 May 2004, the CTA First Division rendered a Decision denying the judicial claim for a refund or tax
credit. The CTA First Division held, among others, that petitioner must have at least submitted its VAT
return for the third quarter of 2001, since it was in that period that it began its business operations. The
purpose was to verify if indeed petitioner did not carry over the claimed input VAT to the third quarter or
the succeeding quarters.
On 14 July 2004, petitioner filed a Motion for Reconsideration, but the tax court stood by its Decision. On
18 January 2005, the taxpayer elevated the case to the CTA En Banc via a Petition for Review. On 22
June 2005, the CTA En Banc rendered its Decision denying Rohm Apollo’s Petition for Review. Petitioner
filed this Rule 45 Petition, arguing that it has satisfied all the legal requirements for a valid claim for refund
or tax credit of unutilized input VAT.
ISSUE:
Whether or not the CTA acquired jurisdiction over the claim for the refund or tax credit of unutilized input
VAT?
RULING:
The court denied the Petition on the ground that the petitioner’s judicial claim for a refund/tax credit was
filed beyond the prescriptive period. Section 112(D) of the 1997 Tax Code states the time requirements for
filing a judicial claim for the refund or tax credit of input VAT. The legal provision speaks of two periods:
the period of 120 days, which serves as a waiting period to give time for the CIR to act on the
administrative claim for a refund or credit; and the period of 30 days, which refers to the period for filing a
judicial claim with the CTA. It is the 30-day period that is at issue in this case. The landmark case of
Commissioner of Internal Revenue v. San Roque Power Corporation has interpreted Section 112 (D). The
Court held that the taxpayer can file an appeal in one of two ways: (1) file the judicial claim within 30 days
after the Commissioner denies the claim within the 120-day waiting period, or (2) file the judicial claim
within 30 days from the expiration of the 120-day period if the Commissioner does not act within that
period. On 11 December 2000, petitioner filed with the BIR an application for the refund or credit of
accumulated unutilized creditable input taxes. Thus, the CIR had a period of 120 days from 11 December
2000, or until 10 April 2001, to act on the claim. It failed to do so, however. Rohm Apollo should then have
treated the CIR’s inaction as a denial of its claim. Petitioner would then have had 30 days, or until 10 May
2001, to file a judicial claim with the CTA. But Rohm Apollo filed a Petition for Review with the CTA only
on 11 September 2002. The judicial claim was thus filed late.
As a general rule, the 30-day period to appeal is both mandatory and jurisdictional. The only exception to
the general rule is when BIR Ruling No. DA489-03 was still in force, that is, between 10 December 2003
Page 55 of 148
and 5 October 2010, The BIR Ruling excused premature filing, declaring that the taxpayer-claimant need
not wait for the lapse of the 120-day period before it could seek judicial relief with the CTA by way of
Petition for Review. Premature filing is allowed for cases falling during the time when BIR Ruling No. DA-
489-03 was in force; nevertheless, late filing is absolutely prohibited even for cases falling within that
period. The petitioner filed its judicial claim with the CTA on 11 September 2002. This was before the
issuance of BIR Ruling No. DA489-03 on 10 December 2003. Thus, Rohm Apollo could not have
benefited from the BIR Ruling. Besides, its situation was not a case of premature filing of its judicial claim
but one of late filing. To repeat, its judicial claim was filed on 11 September 2002 – long after 10 May
2001, the last day of the 30-day period for appeal. The case thus falls under the general rule – the 30-day
period is mandatory and jurisdictional. Hence, the CTA lost jurisdiction over Rohm Apollo’s claim for a
refund or credit.
CBK POWER COMPANY LIMITED, Petitioner VS. COMMISSIONER OF INTERNAL REVENUE,
Respondent (G.R. Nos. 193383-84, January 14, 2015) COMMISSIONER OF INTERNAL REVENUE,
Petitioner VS. CBK POWER COMPANY LIMITED, Respondent (G.R. Nos. 193407-08)
FACTS:
CBK Power is a limited partnership duly organized and existing under the laws of the Philippines, and
primarily engaged in the development and operation of the Caliraya, Botocan, and Kalayaanhydro electric
power generating plants in Laguna (CBK Project).
To finance the CBK Project, CBK Power obtained in August 2000 a syndicated loan from several foreign
banks, i.e., BNP Paribas, Dai-ichi Kangyo Bank, Limited, Industrial Bank of Japan, Limited, and Societe
General (original lenders), acting through an InterCreditor Agent, Dai-ichi Kangyo Bank, a Japanese bank
that subsequently merged with the Industrial Bank of Japan, Limited (Industrial Bank of Japan) and the
Fuji Bank, Limited (Fuji Bank), with the merged entity being named as Mizuho Corporate Bank (Mizuho
Bank). One of the merged banks, Fuji Bank, had a branch in the Philippines, which became a branch of
Mizuho Bank as a result of the merger.
Certain portions of the loan were subsequently assigned by the original lenders to various other banks,
including Fortis Bank (Nederland) N.V. (FortisNetherlands) and RaiffesenZentral Bank Osterreich AG
(Raiffesen Bank). Fortis-Netherlands, in turn, assigned its portion of the loan to Fortis Bank S.A./N.V.
(FortisBelgium), a resident of Belgium. Fortis Netherlands and Raiffesen Bank, on the other hand, are
residents of Netherlands and Austria, respectively.
In February 2001, CBK Power borrowed money from Industrial Bank of Japan, Fortis-Netherlands,
Raiffesen Bank, Fortis-Belgium, and Mizuho Bank for which it remitted interest payments from May 2001
to May 2003. It allegedly withheld final taxes from said payments based on the following rates, and paid
the same to the Revenue District Office No. 55 of the Bureau of Internal Revenue (BIR): (a) fifteen percent
(15%) for Fortis-Belgium, Fortis-Netherlands, and Raiffesen Bank; and (b) twenty percent (20%) for
Industrial Bank of Japan and Mizuho Bank.On April 14, 2003, CBK Power filed a claim for refund of its
excess final withholding taxes allegedly erroneously withheld and collected for the years 2001 and 2002
with the BIR Revenue Region No. 9. The claim for refund of excess final withholding taxes in 2003 was
subsequently filed on March 4, 2005.
CTA Case No. 6699 was filed by CBK Power on June 6, 2003 seeking the refund of excess final
withholding tax in the total amount of P6,393,267.20 covering the year 2001 with respect to interest
income derived by [Fortis-Belgium], Industrial Bank of Japan, and [Raiffesen Bank].
CTA Case No. 6884 was filed by CBK Power on March 5, 2004 seeking for the refund of the amount of
P8,136,174.31 covering the year 2002 with respect to interest income derived by [Fortis- Belgium],
Industrial Bank of Japan, [Mizuho Bank], and [Raiffesen Bank].
CTA Case No. 7166 was filed by CBK [Power] on March 9, 2005 seeking for the refund of [the amount of]
P1,143,517.21covering the year 2003 with respect to interest income derived by [Fortis Belgium], and
[Raiffesen Bank].
CTA Case Nos. 6699 and 6884 were consolidated first on June 18, 2004. Subsequently, however, all
three cases – CTA Case Nos. 6699, 6884, and 7166 – were consolidated in a Resolution dated August 3,
2005.
The CTA First Division Rulings: In a Decision dated August 28, 2008, the CTA First Division granted the
petitions and ordered the refund of the amount of 15,672,958.42 upon a finding that the relevant tax
treaties were applicable to the case. The CTA First Division categorically declared in the August 28, 2008
Decision that the required International Tax Affairs Division (ITAD) ruling was not a condition sine qua non
for the entitlement of the tax relief sought by CBK Power, however, upon motion for reconsideration filed
by the Commissioner, the CTA First Division amended its earlier decision by reducing the amount of the
refund from P15,672,958.42 to P14,835,720.39 on the ground that CBK Power failed to obtain an ITAD
ruling with respect to its transactions with Fortis Netherlands.
CBK Power elevated the matter to the CTA En Banc on petition for review, docketed as C.T.A E.B. No.
494. The Commissioner likewise filed his own petition for review, which was docketed as C.T.A. E.B. No.
469. Said petitions were subsequently consolidated.
CBK Power raised the lone issue of whether or not an ITAD ruling is required before it can avail of the
preferential tax rate. On the other hand, the Commissioner claimed that CBK Power failed to exhaust
administrative remedies when it filed its petitions before the CTA First Division, and that said petitions
were not filed within the two-year prescriptive period for initiating judicial claims for refund.
The CTA En Banc Ruling: The CTA En Banc affirmed the ruling of the CTA First Division that a prior
application with the ITAD is indeed required by Revenue Memorandum Order (RMO) 1-2000, which
administrative issuance has the force and effect of law and is just as binding as a tax treaty.
CBK Power’s motion for partial reconsideration and the Commissioner’s motion for reconsideration of the
foregoing Decision were both denied in a Resolution dated August 16, 2010 for lack of merit; hence, the
present consolidated petitions.
ISSUE:
Whether or not the BIR may add a requirement prior application for an ITAD ruling that is not found in the
income tax treaties signed by the Philippines before a taxpayer can avail of preferential tax rates under
said treaties?
RULING:
- G.R. Nos. 193383-84: The Court holds that the CTA En Banc committed reversible error in affirming the
reduction of the amount of refund to CBK Power from 15,672,958.42 to P14,835,720.39 to exclude its
transactions with Fortis-Netherlands for which no ITAD ruling was obtained. CBK Power’s petition in G.R.
Nos. 193383-84 is therefore granted. The obligation to comply with a tax treaty must take precedence
over the objective of RMO No. 1-2000. Logically, noncompliance with tax treaties has negative
implications on international relations, and unduly discourages foreign investors. While the consequences
sought to be prevented by RMO No. 1-2000 involve an administrative procedure, these may be remedied
through other system management processes, e.g., the imposition of a fine or penalty. But we cannot
totally deprive those who are entitled to the benefit of a treaty for failure to strictly comply with an
administrative issuance requiring prior application for tax treaty relief. CBK Power could not have applied
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for a tax treaty relief 15 days prior to its payment of the final withholding tax on the interest paid to its
lenders precisely because it erroneously paid said tax on the basis of the regular rate as prescribed by the
NIRC, and not on the preferential tax rate provided under the different treaties. As stressed by the Court,
the prior application requirement under RMO No. 1-2000 then becomes illogical. Since CBK Power had
requested for confirmation from the ITAD on June 8, 2001 and October 28, 2002 before it filed on April 14,
2003 its administrative claim for refund of its excess final withholding taxes, the same should be deemed
substantial compliance with RMO No. 1-2000. -G.R. Nos. 193407-08: The petition of the Commissioner in
G.R. Nos. 193407- 08 is denied for lack of merit. CBK Power’s administrative and judicial claims for refund
of its excess final withholding taxes covering taxable year 2003 were filed within the two-year prescriptive
period. Commissioner argues that the failure on the part of CBK Power to give him a reasonable time to
act on said claim is violative of the doctrines of exhaustion of administrative remedies and of primary
jurisdiction. CBK Power maintains that it would be prejudicial to wait for the Commissioner’s ruling before
it files its judicial claim since it only has 2 years from the payment of the tax within which to file both its
administrative and judicial claims. DISPOSITIVE: The petition in G.R. Nos. 193383-84 is GRANTED. The
Decision dated March 29, 2010 and the Resolution dated August 16, 2010 of the Court of Tax Appeals
(CTA) En Banc in C.T.A. E.B. Nos. 469 and 494 are hereby REVERSED and SET ASIDE and a new one
entered REINSTATING the Decision of the CTA First Division dated August 28, 2008 ordering the refund
in favor of CBK Power Company Limited the amount of Pl5,672,958.42 representing its excess final
withholding taxes for the taxable years 2001 to 2003, and the petition in G.R. Nos. 193407-08 is DENIED
for lack of merit.
BANCO DE ORO, et al. V. REPUBLIC OF THE PHILIPPINES AND THE COMMISSIONER OF
INTERNAL REVENUE G.R. No. 198756, 13 January 2015, EN BANC (Leonen, J.)
Should there have been a simultaneous sale to 20 or more lenders/investors, the PEACE Bonds are
deemed deposit substitutes within the meaning of Section 22(Y) of the 1997 National Internal Revenue
Code and RCBC Capital/CODE-NGO would have been obliged to pay the 20%final withholding tax on the
interest or discount from the PEACE Bonds.
Facts:
A notice by the Bureau of Treasury (BTr) to all Government Securities Eligible Dealer (GSED) entitled
Public Offering of Treasury Bonds denominated as the Poverty Eradication and Alleviation Certificates or
the PEACE Bonds, announced that P30 Billion worth of 10-year Zero-Coupon Bonds will be auctioned on
Oct. 16, 2011. The notice stated that the Bonds “shall be issued to not more than 19 buyers/lenders.
Lastly, it stated that “while taxable shall not be subject to the 20% final withholding tax” pursuant to the
BIR Revenue Regulation No. 020 2001. After the auction, RCBC which participated on behalf of CODE-
NGO was declared as the winning bidder having tendered the lowest bids. On October 7, 2011, “the BIR
issued the assailed 2011 BIR Ruling imposing a 20% FWT on the Government Bonds and directing the
BTr to withhold said final tax at the maturity thereof. Furthermore the Bureau of Internal Revenue issued
BIR Ruling No. DA 378-201157 clarifying that the final withholding tax due on the discount or interest
earned on the PEACE Bonds should “be imposed and withheld not only on RCBC/CODE NGO but also
on all subsequent holders of the Bonds. Banco de Oro, et al. filed a petition for Certiorari, Prohibition and
Mandamus under Rule 65 to the Supreme Court contending that the assailed 2011 BIR Ruling which ruled
that “all treasury bonds are ‘deposit substitutes’ regardless of the number of lenders, in clear disregard of
the requirement of twenty (20) or more lenders mandated under the NIRC. Furthermore it will cause
substantial impairment of their vested rights under the Bonds since the ruling imposes new conditions by
“subjecting the PEACE Bonds to the twenty percent (20%) final withholding tax notwithstanding the fact
that the terms and conditions thereof as previously represented by the Government, through respondents
BTr and BIR, expressly state that it is not subject to final withholding tax upon their maturity.” The
Commissioner of the Internal Revenue countered that the BTr has no power to contractually grant a tax
exemption in favour of Banco de Oro, et al.. Moreover, they contend that the word “any” in Section 22(Y)
of the National Internal Revenue Code plainly indicates that the period contemplated is the entire term of
the bond and not merely the point of origination or issuance.
ISSUE:
Is the 10-year zero-coupon treasury bonds issued by the Bureau of Treasury subject to 20% Final
Withholding Tax?
RULING:
Under Sections 24(B)(1), 27(D)(1), and 28(A)(7) of the 1997 National Internal Revenue Code, a final
withholding tax at the rate of 20% is imposed on interest on any currency bank deposit and yield or any
other monetary benefit from deposit substitutes and from trust funds and similar arrangements. Under
Section 22(Y), deposit substitute is an alternative form of obtaining funds from the public (the term 'public'
means borrowing from twenty (20) or more individual or corporate lenders at any one time). Hence, the
number of lenders is determinative of whether a debt instrument should be considered a deposit substitute
and consequently subject to the 20% final withholding tax. Furthermore the phrase “at any one time” for
purposes of determining the “20 or more lenders” would mean every transaction executed in the primary
or secondary market in connection with the purchase or sale of securities. In the case at bar, it may seem
that there was only one lender — RCBC on behalf of CODE-NGO — to whom the PEACE Bonds were
issued at the time of origination. However, a reading of the underwriting agreement and RCBC term sheet
reveals that the settlement dates for the sale and distribution by RCBC Capital (as underwriter for CODE-
NGO) of the PEACE Bonds to various undisclosed investors. At this point, however, we do not know as to
how many investors the PEACE Bonds were sold to by RCBC Capital. Should there have been a
simultaneous sale to 20 or more lenders/investors, the PEACE Bonds are deemed deposit substitutes
within the meaning of Section 22(Y) of the 1997 National Internal Revenue Code and RCBC
Capital/CODE-NGO would have been obliged to pay the 20%final withholding tax on the interest or
discount from the PEACE Bonds. Further, the obligation to withhold the 20% final tax on the
corresponding interest from the PEACE Bonds would likewise be required of any lender/investor had the
latter turned around and sold said PEACE Bonds, whether in whole or part, simultaneously to 20 or more
lenders or investors.
CITY OF MANILA, et. al. v. HON. ANGEL VALERA COLET, et. al. G.R. No. 120051, G.R. No. 121613,
G.R. No. 121675, G.R. No. 121704, G.R. Nos. 121720-28, G.R. Nos. 121847-55, G.R. No. 122333, G.R.
No. 122335, G.R. No. 122349, G.R. No. 124855, December 10, 2014, EN BANC, (Leonardo- De
Castro, J.)
The omnibus grant of power to municipalities and cities under Section 143(h) of the LGC cannot
overcome the specific exception/exemption in Section 133(j) of the same Code.
Facts:
The Manila Revenue Code was enacted by the City Council of Manila. Section 21(B) of said Code stated
that, a tax of three percent (3%) per annum on the gross sales or receipts of the preceding calendar year
is hereby imposed on the gross receipts of keepers of garages, cars for rent or hire driven by the lessee,
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transportation contractors, persons who transport passenger or freight for hire, and common carriers by
land, air or water, except owners of bancas and owners of animal-drawn two-wheel vehicle. Shortly
thereafter, Ordinance No. 7807 was enacted by the City Council of Manila which imposed a lower tax rate
on the businesses from THREE PERCENT 3% to a tax of FIFTY PERCENT (50%) of ONE PERCENT
(1%) per annum. Various businesses that were covered by the ordinance assailed the constitutionality of
the ordinance. They claim that one of the common limitations on the power to tax of LGUs is Section
133(j) of the Local Government Code which states that the taxing powers of the LGUs shall not extend to
the transportation business. It was further claimed that in case of any doubt, any tax ordinance or revenue
measure shall be construed strictly against the LGU enacting it and liberally in favor of the taxpayer, for
taxes, being burdens, are not to be presumed beyond what the applicable statute expressly and clearly
declares. The City of Manila contended that it is irrelevant which of Sections 133(j) and 143(h) of the LGC
is the special or general provision since there is an exempting clause in Section 133, that is, “Unless
otherwise provided herein,” which means that even if the businesses enumerated therein are exempted
from the levy of local tax, if there is a provision to the contrary, such as Section 143(h), the Sanggunian
concerned could still impose the local tax. To rule otherwise and adopt the construction put forward by the
opposing parties would render Section 143(h) of the LGC a hollow provision.
ISSUE:
Is the tax imposed by the ordinance valid?
RULING:
No. Among the common limitations on the taxing power of LGUs is Section 133(j) of the LGC, which
states that “unless otherwise provided herein,” the UST Law Review, Vol. LIX, No. 1, May 2015 taxing
power of LGUs shall not extend to “taxes on the gross receipts of transportation contractors and persons
engaged in the transportation of passengers or freight by hire and common carriers by air, land or water,
except as provided in this Code.” Section 133(j) of the LGC clearly and unambiguously proscribes LGUs
from imposing any tax on the gross receipts of transportation contractors, persons engaged in the
transportation of passengers or freight by hire, and common carriers by air, land, or water. Yet, confusion
arose from the phrase “unless otherwise provided herein,” found at the beginning of the said provision. In
contrast, Section 143 of the LGC defines the general power of the municipality (as well as the city, if read
in relation to Section 151 of the same Code) to tax businesses within its jurisdiction. The omnibus grant of
power to municipalities and cities under Section 143(h) of the LGC cannot overcome the specific
exception/exemption in Section 133(j) of the same Code. This is in accord with the rule on statutory
construction that specific provisions must prevail over general ones. In the case at bar, the sanggunian of
the municipality or city cannot enact an ordinance imposing business tax on the gross receipts of
transportation contractors, persons engaged in the transportation of passengers or freight by hire, and
common carriers by air, land, or water, when said sanggunian was already specifically prohibited from
doing so. Any exception to the express prohibition under Section 133(j) of the LGC should be just as
specific and unambiguous. Section 5(b) of the LGC itself states that in case of doubt, any tax ordinance or
revenue measure shall be construed strictly against the local government unit enacting it, and liberally in
favor of the taxpayer.
PHILIPPINE AMUSEMENT AND GAMING CORPORATION v. THE BUREAU OF INTERNAL
REVENUE, et. al. G.R. No. 215427, December 10, 2014, EN BANC, (Peralta, J.)
PAGCOR is subject to income tax only with respect to its operation of related services. Accordingly, the
income tax exemption ordained under Section 27(c) of R.A. No. 8424 clearly pertains only to petitioner’s
income from operation of related services.For clarity, it is worthy to note that under P.D. 1869, as
amended, PAGCOR’s income is classified into two: (1) income from its operations conducted under its
Franchise, pursuant to Section 13(2) (b) thereof (income from gaming operations); and (2) income from its
operation of necessary and related services under Section 14(5) thereof (income from other related
services).
Facts:
Under P.D. 1869, as amended, PAGCOR is subject to income tax only with respect to its operation of
related services. Accordingly, the income tax exemption ordained under Section 27(c) of R.A. No. 8424
clearly pertains only to petitioner’s income from operation of related services. The Bureau of Internal
Revenue (BIR) issued a Revenue Memorandum Circular (RMC) No. 33-2013 on April 17, 2013 pursuant
to a decision regarding the present parties dated March 15, 2011 and the Resolution dated May 31, 2011,
which clarifies the income tax and franchise tax Due from the Philippine Amusement and Gaming
Corporation (PAGCOR), its Contractees and Licensees. The RMC stated that PAGCOR is no longer
exempt from corporate income tax as it has been effectively omitted from the list of government-owned or
controlled corporations (GOCCs) that are exempt from income tax. Accordingly, PAGCOR’s income from
its operations and licensing of gambling casinos, gaming clubs and other similar recreation or amusement
places, gaming pools, and other related operations, are subject to corporate income tax under the NIRC.
Further, PAGCOR is also subjected to a franchise tax of five percent (5%) of the gross revenue or
earnings it derives from its operations and licensing of gambling casinos. PAGCOR filed a Motion for
Clarification alleging that RMC No. 33-2013 is an erroneous interpretation and application of the aforesaid
decision.
ISSUE:
Is the RMC issued by the BIR constitutional?
RULING:
No, in our Decision dated March 15, 2011, the Court have already declared PAGCOR’s income tax liability
in view of the withdrawal of its tax privilege under R.A. No. 9337. However, the Court made no distinction
as to which income is subject to corporate income tax, considering that the issue raised therein was only
the constitutionality of Section 1 of R.A. No. 9337, which excluded PAGCOR from the enumeration of
GOCCs exempted from corporate income tax. UST Law Review, Vol. LIX, No. 1, May 2015 For clarity, it is
worthy to note that under P.D. 1869, as amended, PAGCOR’s income is classified into two: (1) income
from its operations conducted under its Franchise, pursuant to Section 13(2) (b) thereof (income from
gaming operations); and (2) income from its operation of necessary and related services under Section
14(5) thereof (income from other related services). In the RMC, BIR further classified the aforesaid
income. Under P.D. 1869, as amended, PAGCOR is subject to income tax only with respect to its
operation of related services. Accordingly, the income tax exemption ordained under Section 27(c) of R.A.
No. 8424 clearly pertains only to petitioner’s income from operation of related services. Such income tax
exemption could not have been applicable to petitioner’s income from gaming operations as it is already
exempt therefrom under P.D. 1869. There was no need for Congress to grant tax exemption to petitioner
with respect to its income from gaming operations as the same is already exempted from all taxes of any
kind or form, income or otherwise, whether national or local, under its Charter, save only for the five
percent (5%) franchise tax. The exemption attached to the income from gaming operations exists
independently from the enactment of R.A. No. 8424. To adopt an assumption otherwise would be
downright ridiculous, if not deleterious, since petitioner would be in a worse position if the exemption was
granted (then withdrawn) than when it was not granted at all in the first place.
Page 58 of 148
 SAMAR-I ELECTRIC COOPERATIVE vs.COMMISIONER OF INTERNAL REVENUE
G.R. No. 193100 December 10, 2014
FACTS:
Samar-I Electric Cooperative, Inc. is an electric cooperative in Calbayog City.On July 13, 1999
and April 17, 2000, petitioner filed its 1998 and 1999 income tax returns, respectively. Petitioner filed its
1997, 1998, and 1999 Annual Information Return of Income Tax Withheld on Compensation, Expanded
and Final Withholding Taxes on February 17, 1998, February 1, 1999, and February 4, 2000, in that
order.On November 13, 2000, respondent issued a duly signed Letter of Authority (LOA) No. 1998
00023803, covering the examination for income and withholding taxes for the period 1997 to 1999.On
October 19, 2001, respondent sent a Notice for Informal Conference indicating the allegedly income and
withholding tax liabilities of petitioner for 1997 to 1999. In response, petitioner sent a letter dated
November 26, 2001 to respondent maintaining its indifference to the latter’s findings and requesting
details of the assessment.On February 28, 2002, respondent issued a Preliminary Assessment Notice
(PAN). The PAN was received by petitioner on April 9, 2002, which was protested on April 18, 2002.
Respondent’s Reply dated May 27, 2002, contained the explanation of the legal basis of the issuance of
the questioned tax assessments.However, on July 8, 2002, respondent dismissed petitioner’s protest and
recommended the issuance of a Final Assessment Notice.Consequently, on September 15, 2002,
petitioner received a demand letter and assessments notices (Final Assessment Notices) for the alleged
1997, 1998, and 1999 deficiency withholding tax in the amount of PhP3,760,225.69, as well as deficiency
income tax covering the years 1998 to 1999 in the amount of PhP440,545.71, or in the aggregate amount
of PhP4,200,771.40. Petitioner filed its protest and Supplemental Protest to the Final Assessment Notices
on October 14, 2002 and November 4, 2002, respectively. But on the Final Decision on Disputed
Assessment issued on April 10, 2003, petitioner was still held liable for the alleged tax liabilities.
ISSUES:
Whether the 1997 and 1998 assessments on withholding tax on compensation were issued
within the prescriptive period provided by law; and
Whether the assessments were issued in accordance with Section 228 of the NIRC of 1997.
RULING:
As to the first issue, relying on Section 203, petitioner argues that the subject deficiency tax
assessments issued by respondent on September 15, 2002 was issued beyond the three-year
prescriptive period.While petitioner is correct that Section 203 sets the three-year prescriptive period to
assess, the following exceptions are provided under Section 222(a) of the NIRC of 1997:
SEC. 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes.
–
(a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a
return, the tax may be assessed, or a proceeding in court for the collection of such tax
may be filed without assessment, at any time within ten (10) years after the discovery of
the falsity, fraud or omission: Provided, That in a fraud assessment which has become
final and executory, the fact of fraud shall be judicially taken cognizance of in the civil or
criminal action for the collection thereof. xxx
In the case at bar, it was petitioner’s substantial under declaration of withholding taxes in the
amount of PhP2,690,850.91 which constituted the "falsity" in the subject returns – giving respondent the
benefit of the period under Section 222 of the NIRC of 1997 to assess the correct amount of tax "at any
time within ten (10) years after the discovery of the falsity, fraud or omission.A careful examination of the
evidence on record yields to no other conclusion but that petitioner failed to withhold taxes from its
employees’ 13th month pay and other benefits in excess of thirty thousand pesos (PhP30,000.00)
amounting to PhP2,690,850.91for the taxable years 1997 to 1999 – resulting to its filing of the subject
false returns.
As to the second issue, the Court agreed with the respondent that petitioner was sufficiently
apprised of the nature, factual and legal bases, as well as how the deficiency taxes being assessed
against it were computed. Records reveal that on October 19, 2001, prior to the conduct of an informal
conference, petitioner was already informed of the results and findings of the investigations made by the
respondent and was duly furnished with a copy of the summary of the report. Said summary report
contained an explanation of Findings of Investigation stating the legal and factual bases for the deficiency
assessment. Also, attached to the PAN was the detailed explanation of the particular provision of law and
revenue regulation violated, thus:
DETAILS OF DISCREPANCIES:
1. Deficiency income taxes for 1998 and 1999 respectively result from non-payment of the
minimum corporate income tax (MCIT) imposed pursuant to Section 27(E) of the 1997 Tax
Reform Act.
2. Deficiency Withholding Taxes on Compensation for 1997-1999 are the total withholding taxes
on compensation of all employees of SAMELCOI resulting from failure of employer to withhold
taxes on the taxable 13th month pay and other benefits in excess of PhP30,000.00 threshold
pursuant to Revenue Regulation 2-98.
The above information provided to petitioner enabled it to protest the PAN by questioning
respondent's interpretation of the laws cited as legal basis for the computation of the deficiency
withholding taxes and assessment of minimum corporate income tax despite petitioner's position that it
remains exempt therefrom.Although the FAN and demand letter issued to petitioner were not
accompanied by a written explanation of the legal and factual bases of the deficiency taxes assessed
against the petitioner, the records showed that respondent in its letter dated April 10, 2003 responded to
petitioner's October 14, 2002 letter-protest, explaining at length the factual and legal bases of the
deficiency tax assessments and denying the protest.Petitioner's right to due process was thus not
violated.
Page 59 of 148
 MINDANAO II GEOTHERMAL PARTNERSHIP VS. COMMISSIONER OF INTERNAL REVENUE
Gr. No. 204745 December 8 2014
FACTS:
Petitioner, a partnership duly registered with the Securities and Exchange Commission, is a VAT-
registered entity, and is engaged in the generation, collection, and distribution of electricity.On April 24,
2008, July 25, 2008, October 24, 2008, and January 2, 2009, petitioner filed its quarterly VAT returns for
the four (4) quarters of 2008 reflecting the amount of PhP6,149,256.25 as unutilized/excess input VAT.On
December 28, 2009, petitioner filed before the Bureau of Internal Revenue (BIR) District Office No. 108 of
Kidapawan City, Cotabato an administrative claim for refund/credit of its unapplied and unutilized input
VAT for the year 2008 in the aforesaid amount.Thereafter, or on March 30, 2010, petitioner filed its judicial
claim for refund/credit of its unutilized/excess input VAT for the first quarter of 2008 in the amount of
PhP1,624,603.3311 before the CTA. About two (2) months later, oron May 27, 2010, petitioner filed its
judicial claim for refund/credit of its unutilized/excess input VAT for the second to fourth quarters of 2008
in the amount of PhP4,524,652.9213 before the CTA. Eventually, the two cases were consolidated by the
CTA.On December 7, 2010, respondent Commissioner of Internal Revenue (CIR) filed a Motion to
Dismiss, praying for the dismissal of the case. The CTA Division and the CTA En Banc ruling in favor of
the CIR.
ISSUE:
Whether or not the CTA En Banc correctly affirmed the CTA Division’s dismissal of petitioner’s
judicial claim for refund/credit of input VAT in CTA Case No. 8082 for being prematurely filed.
RULING:
The petition is meritorious. In the Aichi case cited by both the CTA Division and the CTA En
Banc, the Court held that the observance of the 120-day period is a mandatory and jurisdictional requisite
to the filing of a judicial claim for refund/credit of input VAT before the CTA. Consequently, its non-
observance would lead to the dismissal of the judicial claim on the ground of lack of jurisdiction. Aichi also
clarified that the two (2)-year prescriptive period applies only to administrative claims and not to judicial
claims. Succinctly put, once the administrative claim is filed within the two (2)-year prescriptive period, the
claimant must wait for the 120-day period to end and, thereafter, he is given a 30-day period to file his
judicial claim before the CTA, even if said 120-day and 30-day periods would exceed the aforementioned
two (2)-year prescriptive period.However, in CIR v. San Roque Power Corporation (San Roque),the Court
recognized an exception to the mandatory and jurisdictional nature of the 120-day period. It ruled that BIR
Ruling No. DA-489-03 dated December 10, 2003 provided a valid claim for equitable estoppel under
Section 24635 of the NIRC.
In essence, the aforesaid BIR Ruling stated that the "taxpayer-claimant need not wait for the
lapse of the 120-day period before it could seek judicial relief with the CTA by way of Petition for
Review."Recently, in Taganito Mining Corporation v. CIR,reconciling the pronouncements in the Aichi and
San Roque cases, the rule must therefore be that during the period December 10, 2003 (when BIR Ruling
No. DA-489-03 was issued) to October 6, 2010 (when the Aichi case was promulgated), taxpayers-
claimants need not observe the 120-day period before it could file a judicial claim for refund of excess
input VAT before the CTA. Before and after the aforementioned period (i.e., December 10, 2003 to
October 6, 2010), the observance of the 120-day period is mandatory and jurisdictional to the filing of such
claim.In this case,records disclose that petitioner filed its administrative and judicial claims for
refund/credit of its input VAT in CTA on December 28, 2009 and March 30, 2010, respectively, or during
the period when BIR Ruling No. DA-489-03 was in place, i.e., from December 10, 2003 to October 6,
2010. As such, it need not wait for the expiration of the 120-day period before filing its judicial claim before
the CTA, and hence, is deemed timely filed. In view of the foregoing, both the CTA Division and the CTA
EnBanc erred in dismissing outright petitioner’s claim on the ground of prematurity.
LG ELECTRONICS PHILIPPINES, INC vs. COMMISSION OF INTERNAL REVENUE
GR. No. 165451 December 3, 2014
FACTS:
LG Electronics Philippines, Inc. (LG) is a corporation duly organized and existing under the laws
of the Philippines. On March 21, 1998, LG received a formal assessment notice and demand letter from
the Bureau of Internal Revenue. LG was assessed deficiency income tax of 267,365,067.41 for the
taxable year of 1994. The deficiency was computed on the basis of (a) disallowed interest expenses for
being unsupported; (b) disallowed salary expenses for not being subjected to withholding tax on
compensation; (c) imputation of alleged undeclared sales; and (d) disallowed brokerage fees for not being
subjected to expanded withholding tax.
Petitioner filed a Manifestation dated January 29, 2008 stating that it availed itself of the tax
amnesty provided under Republic Act No. 948028 by paying the total amount of ₱8,647,565.50.However,
according to the respondent, petitioner cannot claim the tax amnesty provided under Republic Act No.
9480 for the following reasons: (1) accounts receivable by the Bureau of Internal Revenue as of the date
of amnesty are not covered since these constitute government property; (2) cases that have already been
favorably ruled upon by the trial court or appellate courts prior to the availment of tax amnesty are not
covered; and (3) petitioner’s case involves withholding taxes that are not covered by the Tax Amnesty Act.
ISSUE:
Whether petitioner LG Electronics Philippines, Inc. is entitled to the immunities and privileges
granted under Tax Amnesty Act of 1997.
RULING:
The Courtdenied the petition for being moot and academic.It appears that LGE initially paid the
amount of PhP500,000.00on October 26, 2007 when it first availed of the tax amnesty and it subsequently
paid the amount of PhP8,147,565.50 on January 11, 2008 when it amended its tax amnesty returns. As
such, LGE has fully paid its liabilities under the Act.Considering that LGE has paid the amnesty tax due for
corporation and has submitted its tax amnesty forms to Revenue District Office No. 47 of the BIR of Pasig
City, there is deemed full compliance with the provisions of the Act. As such, LGE is entitled to the
immunities and privileges provided for under Section 6 of the Act and Section 10 of RMC No. 55-2007
which provides, among others, immunity from payment of tax liabilities, as well as additions thereto, and
the appurtenant civil, criminal or administrative penalties under the National Internal Revenue Code of
1997, as amended, arising from its failure to pay any and all internal revenue taxes for taxable year2005
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and prior years. This includes immunity from payment of any internal revenue tax liability except those
provided for under Section 5 of the Act.
The court finds that petitioner has properly availed itself of the tax amnesty granted under
Republic Act No. 9480. In this case, petitioner showed that it complied with the requirements laid down in
Republic Act No. 9480. Pertinent documents were submitted to the Bureau of Internal Revenue and
attached to the records of this case. Petitioner’s compliance was also affirmed by the Bureau of Internal
Revenue in its ruling dated January 25, 2008. Petitioner is, therefore, entitled to the immunities and
privileges granted under Section 6 of Republic Act No. 9480.
POWER COMPANY LIMITED vs. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 198928 December 3, 2014
FACTS:
On April 24, 2003, July 25, 2003, October 24, 2003, and January 26, 2004, CBK Power
submitted its quarterly VAT returns for the period covering January 1, 2003 to December 31, 2003.
Subsequently, CBK Power amended its April 24, 2003 VAT return on June 10, 2003 and March 23, 2005.
Similarly, CBK Power made amendments in its July 25, 2003, October 24, 2003, and January 26, 2004
VAT returns on March 23, 2005. These amendments reflected unutilized/excess input VAT in the amount
of 298,430,362.42. On March 29, 2005, CBK Power filed before the Bureau of Internal Revenue (BIR)
District Office No. 55 of Laguna an administrative claim for the issuance of a tax credit certificate for a total
amount of ₱295,994,518.00, representing unutilized input VAT on its purchase of capital goods, as well as
unutilized input VAT on its local purchase of goods and services other than capital goods, all for the
calendar year 2003. Thereafter, on April 18, 2005, CBK Power filed its judicial claim for tax refund/credit
before the CTA, docketed as CTA Case No. 7220. For its part, respondent Commissioner of Internal
Revenue (CIR) claimed, inter alia, that the amount being claimed by CBK Power as alleged unutilized
input VAT for the period January 1, 2003 to December 31, 2003 must be denied for not being properly
documented.
ISSUE:
Whether or not the CTA En Banc correctly denied CBK Power’s claim for refund for
beingprematurely filed.
RULING:Petition is meritorious. In the case of Taganito Mining vs. CIR,reconciling the pronouncements in
the Aichi and San Roque cases, the rule must therefore be that during the period December 10, 2003
(when BIR Ruling No. DA-489-03 was issued) to October 6, 2010 (when the Aichi case was promulgated),
taxpayers-claimants need not observe the 120-day period before it could file a judicial claim for refund of
excess input VAT before the CT A. Before and after the aforementioned period (i.e., December 10, 2003
to October 6, 2010), the observance of the 120-day period is mandatory and jurisdictional to the filing of
such claim.In this case, records disclose that CBK Power filed its administrative and judicial claims for
issuance of tax credits on March 29, 2005 and April 18, 2005, respectively or during the period when BIR
Ruling No. DA-489-03 was in place, i.e., from December 10, 2003 to October 6, 2010. As such, it need not
wait for the expiration of the 120-day period before filing its judicial claim before the CTA, which was
timely filed. In view of the foregoing, the CTA En Banc erred in dismissing CBK Power's claim on the
ground of prematurity and, thus, its ruling must be corrected accordingly.
Commissioner of Internal Revenue vs The Stanley Works Sales (Phils.) Inc.
G.R. No. 187589 December 3, 2014
FACTS:
Stanley Works Sales Phils., Incorporated is a domestic corporation. Stanley Works filed its
Annual Income Tax Return for taxable year 1989 with the BIR.On March 19, 1993, the BIR issued to
Stanley Works a Pre-Assessment Notice No. 002523 for 1989 deficiency income tax.It was received by
the corporation on April 21, 1993.On May 19, 1993, Stanley Works filed a protest letter and requested
reconsideration and cancellation of the assessment.On November 16, 1993, a certain Mr. John Ang, on
behalf of the corporation, executed a "Waiver of the Defense of Prescription Under the Statute of
Limitations of the National Internal Revenue Code" (Waiver).The Waiver was not signed by Stanley Works
or any of its authorized representatives and did not state the date of acceptance as prescribed under
Revenue Memorandum Order No. 20-90.Under the terms of the Waiver, Stanley Works waived its right to
raise the defense of prescription under Section 223 of the NIRC of 1977 insofar as the assessment and
collection of any deficiency taxes for the year ended December 31, 1989, but not after June 30, 1994.On
March 4, 2002, Stanley Works submitted a Supplemental Memorandum alleging that CIR’s right to collect
the alleged deficiency income tax has prescribed. The CTA Division ruled that the request for
reconsideration did not suspend the running of the prescriptive period to collect deficiency income tax.
This decision was affirmed by the CTA En Banc.
ISSUES:
Whether or not the right of CIR to collect the deficiency income tax of Stanley Works for taxable
year 1989 has prescribed; and
Whether or not Stanley Works’ repeated requests and positive acts constitute "estoppel" from
setting up the defense of prescription under the NIRC.
RULING:
As to the first issue, the right of CIR has already prescribed.The period to assess and collect deficiency
taxes may be extended only upon a written agreement between the CIR and the taxpayer prior to the
expiration of the three-year prescribed period in accordance with Section 222 (b) of the NIRC.
Jurisprudence is replete with requisites of a valid waiver:
1. The waiver must be in the proper form prescribed by RMO 20-90. The phrase "but not after ___ 19
___", which indicates the expiry date of the period agreed upon to assess/collect the tax after the regular
three-year period of prescription, should be filled up.
2. The waiver must be signed by the taxpayer himself or his duly authorized representative. In the case of
a corporation, the waiver must be signed by any of its responsible officials. In case the authority is
delegated by the taxpayer toa representative, such delegation should be in writing and duly notarized.
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3. The waiver should be duly notarized.
4. The CIR or the revenue official authorized by him must sign the waiver indicating that the BIR has
accepted and agreed to the waiver. The date of such acceptance by the BIR should be indicated.
However, before signing the waiver, the CIR or the revenue official authorized by him must make sure that
the waiver is in the prescribed form, duly notarized, and executed by the taxpayer or his duly authorized
representative.
5. Both the date of execution by the taxpayer and date of acceptance by the Bureau should be before the
expiration of the period of prescription or before the lapse of the period agreed upon in case a subsequent
agreement is executed.
6. The waiver must be executed in three copies, the original copy to be attached to the docket of the case,
the second copy for the taxpayer and the third copy for the Office accepting the waiver. The fact of receipt
by the taxpayer of his/her file copy must be indicated in the original copy to show that the taxpayer was
notified of the acceptance of the BIR and the perfection of the agreement.
The law prescribing a limitation of actions for the collection of the income tax is beneficial both to
the Government and to its citizens; to the Government because tax officers would be obliged to act
promptly in the making of assessment, and to citizens because after the lapse of the period of prescription
citizens would have a feeling of security against unscrupulous tax agents who will always find an excuse
to inspect the books of taxpayers, not to determine the latter's real liability, but to take advantage of every
opportunity to molest peaceful, law-abiding citizens.
As to the second issue, Stanley Works is not barred from setting up the defense of
prescription.The Supreme Court does not agree with petitioner that respondent is now barred from setting
up the defense of prescription by arguing that the repeated requests and positive acts of the latter
constituted estoppels, as these were attempts to persuade the CIR to delay the collection of respondent’s
deficiency income tax.True, respondent corporation filed a Protest and asked for a reconsideration and
cancellation of the assessment on 19 May 1993; however, it is uncontested that petitioner failed to act on
that Protest until 29 November 2001, when the latter required the submission of other supporting
documents. In fact, the Protest was denied only on 22 March 2004.Since the Waiver in this case is
defective and therefore invalid, it produces no effect; thus, the prescriptive period for collecting deficiency
income tax for taxable year 1989 was never suspended or tolled. Consequently, the right to enforce
collection based on Assessment Notice No. 002523-89-6014 has already prescribed.
City of Lapu-Lapu vs PEZA
G.R. No. 184203 November 26, 2014
FACTS:
The City of Lapu-Lapu assessed the Philippine Economic Zone Authority, 86,843,503.48 as real
property taxes for the period from 1992 to 2002.the PEZAfiled a petition for declaratory Relief with the
Regional Trial Court of Pasay City, praying that the trial court declare it exempt from payment ofreal
property taxes. The City cited a legal opinion dated September 6, 1999 issued by the Department of
Justice, which stated that the PEZA is not exempt from payment of real property taxes. RTC decided that
the PEZA, therefore, is not liable for real property taxes on the land it owns. The RTC held that
Characterizing the PEZA as an agency of the National Government, the trial court ruled that the City had
no authority to tax the PEZA under Sections 133(o) and 234(a) of the Local Government Code of
1991.The CAdismissed the petition of the City. City of Lapu-lapu filed a Petition for Review on Certiorari
with the Supreme Court.
ISSUE:
WON the PEZA is not exempt from real property taxes in favor of the City of Lapu-lapu.
HELD:
No. The PEZA is exempt from real property taxes.
The general rule is that real properties are subject to real property taxes. Except that local
government units have no power to levy taxes of any kind on the national government, its agencies and
instrumentalities.
Exemptions from real property taxes into are classified into: Ownership;Character;and usage
exemptions.
Ownership exemptions are exemptions based on the ownership of the real property. The
exemptions of real property owned by the Republic of the Philippines, provinces, cities, municipalities,
barangays, and registered cooperatives fall under this classification.
Character exemptions are exemptions based on the character of the real property. Thus, no real
property taxes may be levied on charitable institutions, houses and temples of prayer like churches,
parsonages, or convents appurtenant thereto, mosques, and non-profitor religious cemeteries.
Usage exemptions are exemptions based on the use of the real property. Thus, no real property
taxes may be levied on real property such as: (1) lands and buildings actually, directly, and exclusively
used for religious, charitable or educational purpose; (2) machineries and equipment actually, directly and
exclusively used by local water districts or by government-owned or controlled corporations engaged in
the supply and distribution of water and/or generation and transmission of electric power; and (3)
machinery and equipment used for pollution control and environmental protection.
PEZA is an instrumentality of the national government. The lands owned by the PEZA are real
properties owned by the Republic of the Philippines. The City of Lapu-Lapu and the Province of Bataan
cannot collect real property taxes from the PEZA.
Metro Manila Shopping Mecca Coordinator vs Toledo
G.R. No. 190818 November 10, 2014
FACTS:
The City of Manila and the SM Group entered into a Universal Compromise Agreement to settle
amicably settle all cases between them involving claims for tax refund/credit, including the instant case.
For the City of Manila, it argued that the UCA does not include the taxes to be paid under this case.
ISSUE:
WON the refund and/or issuance of tax credit covering the local business taxes payments they
paid to respondent City of Manila pursuant to Section 21 of the latter’s Revenue Code is not covered by
the Universal Compromise Agreement
HELD
No. The refund and/or issuance of tax credit covering the local business taxes payments they
paid to respondent City of Manila pursuant to Section 21 of the latter’s Revenue Code is covered by the
Universal Compromise Agreement.
When given judicial approval, a compromise agreement becomes more than a contract binding
upon the parties. Having been sanctioned by the court, it is entered as a determination of a controversy
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and has the force and effect of a judgment. It is immediately executory and not appealable, except for
vices of consent or forgery.
Taganito Mining Corporation vs CIR
G.R. No. 201195 November 26, 2014
FACTS:
Taganito Mining a claim for credit/refund of input VAT paid on its domestic purchases of taxable
goods and services and importation of goods amounting to ₱22,421,260.26, for the period covering
January 1, 2006 to December 31, 2006.Taganito filed a judicial claim before the CTA Division with the
intention oftolling the running of the two-year period to judicially claim a tax credit/refund under Section
229 of the National Internal Revenue Code of 1997 (NIRC).
CTA Division denied Taganito’s petition for review and its supplemental petiton for review for lack
of merit.5 It held that the official receipts did not prove Taganito’s actual payment of the claimed input
VAT. Specifically, no year was indicated in OR No. 0028847. It further held that the claim should be
denied for failure to meet the substantiation requirements under Section 4.110-8(a)(1) of Revenue
Regulation (R.R.) No. 16-05, providing that input taxes for the importation of goods must be substantiated
by the import entry or other equivalent document showing actual payment of VAT on the imported goods.It
also ruled that Taganito failed to prove that the importations pertaining to the input VAT claim werein the
nature of capital goods or properties, and assuming arguendo that they were capital goods, the input VAT
was not amortized over the estimated useful life of the said goods, all in accordance with Sections 4.110-3
and 4.113-3 of R.R. No. 16-05, as amended by R.R. No. 4-2007.
ISSUES:
WON a taxpayer need not wait for the decision of the CIR on its administrative claim for refund
before filing its judicial claim.
WON the official receipts issued by the authorized agent banks acting as collection agents of the
respondent, constituted more than sufficient proof of payment of the VAT.
HELD:
Yes. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the
part of the Commissioner to act on the application within the period prescribed above, the taxpayer
affected may, within thirty (30)days from the receipt of the decision denying the claim or after the
expiration of the one hundred twenty day period, appeal the decision or the unacted claim with the Court
of Tax Appeals.
Accordingly, the general rule is that the 120+30 day period is mandatory and jurisdictional from
the effectivity of the 1997 NIRC on January 1, 1998, up to the present. As an exception, judicial claims
filed from December 10, 2003 to October 6, 2010 need not wait for the exhaustion of the 120-day period
CIR vs Basf Coating
G.R. No. 198677 November 26, 2014
FACTS:
Basf Coating, a company located in Las Pinas City, dissolved itself and relocated to Laguna. It
submitted notices to BIR RDO Alabang, Muntinlupa. BIR, in a Formal Assessment Notice (FAN) dated
January 17, 2003,assessed respondent the aggregate amount of ₱18,671,343.14. It appeared that Basf
was not able to notify BIR of its change of address. The notices sent by BIR was returned to sender. Basf
protested the assessment on the grounds of lack of due process and prescription. For BIR it argued that
Section 11 of RR No. 12-85 and Sections 203 and 222 of the Tax Code of 1997, stating that such change
of address without prior notice to the BIR would suspend the running of the three-year prescriptive period
to assess. CTA ruled that since petitioner was actually aware of respondent's new address, the former's
failure to send the Preliminary Assessment Notice and FAN to the said address should not be taken
against the latter. Consequently, since there are no valid notices sent to respondent, the subsequent
assessments against it are considered void.
ISSUE:
WON there was due process in the assessment and the claim has not yet prescribed.
HELD:
Suspension of the 3-year period to assess is applicable if the CIR is not aware of the
whereabouts of the taxpayer. Even if there is an absence of a notice of the Basf change of address, BIR
was with knowledgeof Basf new address as shown by documents replete in its records.As a
consequence, the running of the 3-year period to assess was not suspended and has already prescribed.
BIR vs Manly
G.R. No. 197590 November 24, 2014
FACTS:
BIR engaged in an investigation over the tax liabilities of Spouses Manly. Spouses Manly bought
a 17 million pesos property in Tagaytay, BIR ought Spouses Manly to identify the source of the cash
payment made to buy the said property. Spouses Manly failed to answer the BIR. Under such
circumstances, BIR posited that such properties and other motor vehicles are undeclared income that
were more than 30% of their declared income. According to the BIR, this is prima facie evidence to
defraud the government and criminal cases are filed. However, DOJ reversed the decision over criminal
suits since there was no intent not to pay. According to DOJ, BIR did not send Deficiency Tax
Assessment, as a condition precedent to file a case against spouses Manly. On appeal to the CA, it held
that there is no ground to file a criminal action against Spouses Manly where no taxes are proved already
due.
ISSUE:
WON there is probable cause to charge Spouses Manly.
HELD:
Yes. If the expenses are overstated and the income is underdeclared by more than 30% of the
reported or declared expenses or income, this constitutes as prima facie evidence of false or fraudulent
return.But the computation, as well as the method used in determining the tax liability, should be clearly
explained and it should be shown that the under declaration exceeded 30% of the reported or declared
income.
DIMANAHAN, Maria Del O.
2015-0227
THE PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE COMPANY vs. THE SECRETARY
OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE
G.R. No. 210987 November 24, 2014
FACTS:
Philam Life sold its shares in Philam Care Health Systems to STI Investments Inc., the highest
bidder. After the sale was completed, Philam life applied for a tax clearance and was informed by BIR
Page 63 of 148
that there is a need to secure a BIR Ruling due to a potential donor’s tax liability on the sold shares.
Petitioner contends, the transaction cannot attract donor’s tax liability since there was no donative intent
and, ergo, no taxable donation, citing BIR Ruling [DA-(DT-065) 715-09] dated November 27, 2009; that
the shares were sold at their actual fair market value and at arm’s length; that as long as the transaction
conducted is at arm’s length––such that a bonafide business arrangement of the dealings is done in the
ordinary course of business––a sale for less than an adequate consideration is not subject to donor’s tax;
and that donor’s tax does not apply to sale of shares sold in an open bidding process. CIR denying the
request, stating that, through BIR Ruling No. 015-12. As determined by the Commissioner, the selling
price of the shares thus sold was lower than their book value based on the financial statements of Philam
Care as of the end of 2008. The Commissioner held donor’s tax became imposable on the price
difference pursuant to Sec. 100 of the National Internal Revenue Code (NIRC): SEC. 100. Transfer for
Less Than Adequate and full Consideration. - Where property, other than real property referred to in
Section 24(D), is transferred for less than an adequate and full consideration in money or money’s worth,
then the amount by which the fair market value of the property exceeded the value of the consideration
shall, for the purpose of the tax imposed by this Chapter, be deemed a gift, and shall be included in
computing the amount of gifts made during the calendar year.
ISSUE:
WON the sales of shares sold for less than an adequate consideration be subject to donor’s tax?
RULING:
The price difference is subject to donor’s tax. Petitioner’s substantive arguments are unavailing. The
absence of donative intent, if that be the case, does not exempt the sales of stock transaction from
donor’s tax since Sec. 100 of the NIRC categorically states that the amount by which the fair market value
of the property exceeded the value of the consideration shall be deemed a gift. Thus, even if there is no
actual donation, the difference in price is considered a donation by fiction of law.
Moreover, Sec. 7(c.2.2) of RR 06-08 does not alter Sec. 100 of the NIRC but merely sets the parameters
for determining the “fair market value” of a sale of stocks. Such issuance was made pursuant to the
Commissioner’s power to interpret tax laws and to promulgate rules and regulations for their
implementation. Lastly, petitioner is mistaken in stating that RMC 25-11, having been issued after the
sale, was being applied retroactively in contravention to Sec. 246 of the NIRC.26 Instead, it merely called
for the strict application of Sec. 100, which was already in force the moment the NIRC was enacted.
FORT BONIFACIO DEVELOPMENT CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 175707/G.R. NO. 18003/G.R. No. 181092 November 19, 2014
FACTS:
Petitioner was a real estate developer that bought from the national government a parcel of land that used
to be the Fort Bonifacio military reservation. At the time of the said sale there was yet no VAT imposed so
Petitioner did not pay any VAT on its purchase. Subsequently, Petitioner sold two parcels of land to Metro
Pacific Corp. In reporting the said sale for VAT purposes (because the VAT had already been imposed in
the interim), Petitioner claimed transitional input VAT corresponding to its inventory of land. The BIR
disallowed the claim of presumptive input VAT and thereby assessed Petitioner for deficiency VAT.
ISSUE:
Is Petitioner entitled to claim the transitional input VAT on its sale of real properties given its nature as a
real estate dealer and if so (i) is the transitional input VAT applied only to the improvements on the real
property or is it applied on the value of the entire real property and (ii) should there have been a previous
tax payment for the transitional input VAT to be creditable?
RULING:
YES. Petitioner is entitled to claim transitional input VAT based on the value of not only the improvements
but on the value of the entire real property and regardless of whether there was in fact actual payment on
the purchase of the real property or not.
The amendments to the VAT law do not show any intention to make those in the real estate business
subject to a different treatment from those engaged in the sale of other goods or properties or in any other
commercial trade or business. On the scope of the basis for determining the available transitional input
VAT, the CIR has no power to limit the meaning and coverage of the term "goods" in Section 105 of the
Tax Code without statutory authority or basis. The transitional input tax credit operates to benefit newly
VAT-registered persons, whether or not they previously paid taxes in the acquisition of their beginning
inventory of goods, materials and supplies.
IMANAHAN, Maria Del O.
2015-0227
AT&T COMMUNICATIONS SERVICES PHILIPPINES, INC. v. CIR
G.R. No. 185969 November19, 2014
FACTS:
Petitioner filed with the respondent an application for tax refund and/or tax credit of its excess/unutilized
input VAT from zero-rated sales. To prevent the running of the prescriptive period, petitioner subsequently
filed a petition for review with the CTA.
The CTA held that since petitioner is engaged in sale of services, VAT Official Receipts should have been
presented in order to substantiate its claim of zero-rated sales, not VAT invoices which pertain to sale of
goods or properties.
ISSUE:
WON a Sales Invoice would suffice as a proof for entitlement to a refund of unutilized input VAT from
zero-rated sales, even for seller of services
RULING:
Yes. Section 113 of the Tax Code does not create a distinction between a sales invoice and an official
receipt. Parenthetically, to determine the validity of petitioner’s claim as to unutilized input VAT, an invoice
would suffice provided the requirements under Sections 113 and 237 of the Tax Code are met.Sales
invoices are recognized commercial documents to facilitate trade or credit transactions. They are proofs
Page 64 of 148
that a business transaction has been concluded, hence, should not be considered bereft of probative
value Only the preponderance of evidence threshold as applied in ordinary civil cases is needed to
substantiate a claim for tax refund proper.
A taxpayer engaged in zero-rated transactions may apply for tax refund or issuance of tax credit certificate
for unutilized input VAT, subject to the following requirements: (1) the taxpayer is engaged in sales which
are zero-rated (i.e., export sales) or effectively zero-rated; (2) the taxpayer is VAT-registered; (3) the claim
must be filed within two years after the close of the taxable quarter when such sales were made; (4) the
creditable input tax due or paid must be attributable to such sales, except the transitional input tax, to the
extent that such input tax has not been applied against the output tax; and (5) in case of zero-rated sales,
the acceptable foreign currency exchange proceeds thereof have been duly accounted for in accordance
with BSP rules and regulations.
TAGANITO MINING CORPORATION v. CIR
G.R. No. 197591 June 18, 2014
FACTS:
Taganito is a duly-registered Philippine corporation and a VAT-registered entity primarily engaged in the
business of exploring, extracting, mining, selling, and exporting precious metals and their byproducts. For
the 1st, 2nd, 3rd, and 4th quarters of the year 2004, Taganito filed its Quarterly VAT Returns. Taganito
filed before the Bureau of Internal Revenue (BIR) an administrative claim for the refund of input VAT paid
on its domestic purchases of taxable goods and services and importation of goods during the entire year
of 2004, in accordance with Section 112, subsections (A) and (B) of the National Internal Revenue Code
(NIRC). Thereafter, fearing that the period for filing a judicial claim for refund was about to expire,
Taganito proceeded to file a petition for review before the CTA Division.
The CTA Division partially granted Taganito’s claim for refund of the amount representing its unutilized
input VAT for the period January 1, 2004 to March 9, 2004. It found that Taganito’s export sales qualified
as VAT zero-rated sales. However, the amount claimed for excess input VAT was disallowed by the CTA
Division for being based on non-VAT official receipts. The CIR filed a motion for reconsideration praying
for the reversal of the partial refund granted in Taganito’s favor, which was, however, denied.
Taganito did not appeal the CTA Division's partial denial of its claim for refund. The CIR elevated the
matter to the CTA En Banc which reversed and set aside the Decision of the CTA Division, and ordered
that Taganito’s claim of refund be denied in its entire amount. It found that Taganito filed its judicial claim
for refund 93 days after it filed its administrative claim. Explaining that the observance of the 120-day
period provided under Section 112(D) of the NIRC is mandatory and jurisdictional to the filing of a judicial
claim for. It held that Taganito’s filing of a judicial claim was premature, and, thus, the CTA Division had
yet to acquire jurisdiction over the same. Taganito moved for reconsideration, which was, however,
denied. Hence, this petition.
ISSUES:
1. WONTaganito’s judicial claim for refund of excess input VAT should be allowed.
2. WONTaganito should be entitled to its entire claim for refund.
RULING:
1. Yes. Since Taganito’s claim for refund covered periods before the effectivity of Republic Act No. 9337,
Section 112 of the NIRC, as amended by RA 8424, should apply. The Supreme Court ruled in the Achi
case that the observance of the 120-day period is a mandatory and jurisdictional requisite to the filing of a
judicial claim for refund before the CTA. The non-observance thereof would lead to the dismissal of the
judicial claim due to the CTA’s lack of jurisdiction. The two-year prescriptive period applies only to
administrative claims and not to judicial claims. Once the administrative claim is filed within the
prescriptive period, the claimant must wait for the 120-day period to end and, thereafter, he is given a 30-
day period to file his judicial claim before the CTA, even if said 120-day and 30-day periods would exceed
the two-year prescriptive period.
The Court, however, in the San Roque case, recognized an exception to the mandatory and
jurisdictional treatment of the 120-day period. BIR Ruling No. DA-489-03 stated that the taxpayer-claimant
need not wait for the lapse of the 120-day period before it could seek judicial relief with the CTA by way of
Petition for Review provided taxpayers-claimants the opportunity to raise a valid claim for equitable
estoppel under Section 24624 of the NIRC. The first exception is if the Commissioner, through a specific
ruling, misleads a taxpayer to prematurely file a judicial claim with the CTA. Such specific ruling is
applicable only to such taxpayer. The second exception is where the Commissioner, through a general
interpretative rule issued under Section 4 of the Tax Code, misleads all taxpayers into filing prematurely
judicial claims with the CTA. In these cases, the Commissioner cannot be allowed to later question the
CTA’s assumption of jurisdiction over such claim since equitable estoppel has set in.
During the period December 10, 2003 when BIR Ruling No. DA-489-03 was issued to October 6,
2010 when the Aichi case was promulgated, taxpayers-claimants need not observe the 120-day period
before it could file a judicial claim for refund of excess input VAT before the CTA. Before and after the
period, the observance of the 120-day period is mandatory and jurisdictional to the filing of such claim.
In this case, records disclose that Taganito filed its administrative and judicial claims for refund
on December 28, 2005 and March 31, 2006, respectively or during the period when BIR Ruling No. DA-
489-03 was in place. As such, it need not have waited for the expiration of the 120-day period before filing
its judicial claim for refund before the CTA. In view of the foregoing, the CTA En Banc, thus, erred in
dismissing Taganito's claim on the ground of prematurity.
2. No. Taganito did not appeal the CTA Division's partial denial of its claim for refund onthe ground that it
failed to provide sufficient evidence that its suppliers did not avail of the benefits of zero-rating. It is well-
settled that a party who does not appeal from a judgment can no longer seek modification or reversal of
the same. For this reason, Taganito may no longer question the propriety and correctness of the said
partial disallowance as it had lapsed into finality and may no longer be modified. In fine, Taganito is only
entitled to the partial refund of its unutilized input VAT as was originally granted to it by the CTA Division.
SMI-ED TECHNOLOGY v. CIR
G.R. No. 175410 November 12, 2014
FACTS:
Page 65 of 148
SMI-Ed Philippines is a PEZA-registered corporation authorized "to engage in the business of
manufacturing ultra high-density microprocessor unit package.” After its registration on June 29, 1998,
SMI-Ed Philippines constructed buildings and purchased machineries and equipment.SMI-Ed Philippines
"failed to commence operations." Its factory was temporarily closed, effective October 15, 1999. On
August 1, 2000, it sold its buildings and some of its installed machineries and equipment to Ibiden
Philippines, Inc., another PEZA-registered enterprise. SMI-Ed Philippines was dissolved on November
30, 2000.In its quarterly income tax return for year 2000, SMI-Ed Philippines subjected the entire gross
sales of itsproperties to 5% final tax on PEZA registered corporations. SMI-Ed Philippines paid taxes
amounting to P44,677,500.00.On February 2, 2001, after requesting the cancellation of its PEZA
registration and amending its articles of incorporation to shorten its corporate term, SMI-Ed Philippines
filed an administrative claim for the refund of P44,677,500.00 with the Bureauof Internal Revenue (BIR).
SMIEd Philippines alleged that the amountwas erroneously paid. The BIR did not act on SMI-Ed
Philippines’ claim, which prompted the latter to file a petition for review before the Court of Tax Appeal.
CTA denied SMI-ED claim for refund. It held that: (1) fiscal incentives given to PEZA-registered
enterprises may be availed only by PEZA-registered enterprises that had already commenced operations.
Since SMI-Ed Philippines had not commenced operations, it was not entitled to the incentives of either the
income tax holiday or the 5% preferential tax rate. Payment of the 5% preferential tax amounting to
P44,677,500.00 was erroneous; (2) It found that the properties sold by SMI-ED were capital assets under
Section 39(A)(1) of the National Internal Revenue Code of 1997, hence it subjected the sale of SMIEd
Philippines’ assets to 6% capital gains tax. It was found liable for capital gains tax amounting to
P53,613,000.00.20. Therefore, SMIEd Philippines must still pay the balance of P8,935,500.00 as
deficiency tax. SMI-ED filed a petition for review with the CTA en banc. CTA en banc affirmed the CTA
second division.SMI-Ed Philippines filed a petition for review before the Supreme Court praying for the
grant of its claim for refund and the reversal of the Court of Tax Appeals En Banc’s decision.
ISSUE:
WON the government can still collect for the deficiency taxes.
RULING:
Not anymore.Section 203 of the National Internal Revenue Code of 1997 provides that as a general rule,
the BIR has three (3) years from the last day prescribed by law for the filing of a return to make an
assessment. If the return is filed beyond the last day prescribed by law for filing, the three-year period
shall run from the actual date of filing.
This court said that the prescriptive period to make an assessment of internal revenue taxes is provided
"primarily to safeguard the interests of taxpayers from unreasonable investigation." This court explained in
Commissioner of Internal Revenue v. FMF Development Corporation, the reason behind the provisions on
prescriptive periods for tax assessments: Accordingly, the government must assess internal revenue
taxes on time so as not to extend indefinitely the period of assessment and deprive the taxpayer of the
assurance that it will no longer be subjected to further investigation for taxes after the expiration of
reasonable period of time.
Thus, the law on prescription, being a remedial measure, should be liberally construed to afford such
protection. As a corollary, the exceptions to the law on prescription should perforce be strictly construed.
The BIR had three years from the filing of petitioner’s final tax return in 2000 to assess petitioner’s taxes.
Nothing stopped the BIR from making the correct assessment. The elevation of the refund claim with the
Court of Tax Appeals was not a bar against the BIR’s exercise of its assessment powers.The BIR,
however, did not initiate any assessment for deficiency capital gains tax.78 Since more than a decade
have lapsed from the filing of petitioner's return, the BIR can no longer assess petitioner for deficiency
capital gains taxes, if petitioner is later found to have capital gains tax liabilities in excess of the amount
claimed for refund.The Court of Tax Appeals should not be expected to perform the BIR's duties of
assessing and collecting taxes whenever the BIR, through neglect or oversight, fails to do so within the
prescriptive period allowed by law.
DIWA, Andrea Marciana B.
2014-0681
DUTY FREE PHILIPPINESvs.BUREAU OF INTERNAL REVENUE
G.R. No. 197228 October 08, 2014
FACTS:
Petitioner is a merchandising system which sought clarification of its exemption from the EWT. It
argued that should not be subjected to the 1.1/2% expanded withholding taxes on certain income
payments that were withheld by credit card companies in compliance with R.R. No. 6-94. The BIR issued
BIR Ruling No. 136-95 and opined that E.O. No. 93 withdrew all the tax and duty incentives granted to
government and public entities, including petitioner. The DOF affirmed the ruling while the DOT intervened
and maintained that petitioner was exempt from IT and VAT. The CTA Special First Division found that
petitioner was not a tax-exempt entity in the absence of an express grant of tax exemption. Having their
Motions for Reconsideration denied, petitioner directly appealed to the Supreme Court under Rule 45 of
the 1997 Rules of Civil Procedure, assailing theaforesaid Decision and Resolution of the CTA Division.
ISSUE:
Whether petitioner chose the wrong mode of appeal?
RULING:
Yes. The Rules of Court provides that a party adversely affected by a resolution of a Division of
the CTA on a motion for reconsideration or new trial, may file a petition for review with the CTA en banc.
Section 2, Rule 4 of the Revised Rules of the CTA reiterates the exclusive appellate jurisdiction of the
CTA en banc relative to the review of the court divisions’ decisions or resolutions on motion for
reconsideration or new trial in cases arising from administrative agencies such as the BIR. Hence, the SC
is without jurisdiction to review decisions rendered by a division of the CTA, exclusive appellate
jurisdiction over which is vested in the CTA en banc.
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 COMMISSIONER OF INTERNAL REVENUEvs. BURMEISTER AND
WAIN SCANDINAVIAN CONTRACTOR MINDANAO, INC.
G.R. No. 190021 October 22, 2014
FACTS:
Respondent is a corporation primarily engaged inthe business of constructing, erecting,
assembling, commissioning, operating, maintaining, rehabilitating, andmanaging industrial and power-
generating plants and related facilities for the conversion intoelectricity of coal distillate, and other fuels. It
applied with the BIR a Tax Credit/Refund of VAT Paid for the period July toDecember 1998 in the amount
of 4,154,969.51 which was denied due to insufficiency of evidence. However, the CTA First Division
rendered a decision ordering the CIR to refund or issue a tax credit certificate infavor of respondent. The
CIR raised for the first time on appeal with the CTA the issue of respondent’s alleged failure to comply
with the periods mandated under Section 112 of the NIRC. Respondent on the other hand countered that
the CIR could not raisefor the first time on appeal the issue of prescription since more than eight years
havelapsed already.
ISSUE:
Whether the CTA En Banc correctly dismissed the petition forreview on the ground that the issue
of prescription was belatedly raised
RULING:
No. notwithstanding the fact that the CIR, for his part, failed to raise the issue of non-compliance
with themandatory periods at the earliest opportunity, the Court should have given due course to the
appeal. The 120+30-day period under Section 112(A) of the NIRC is jurisdictional. The issue on such
compliance with the said time frame may be raised at anystage, even on appeal. Well-settled is the rule
that the question of jurisdiction over the subject matter can be raisedat any time during the proceedings.
Jurisdiction cannot be waived because it is conferred by law and is notdependent on the consent or
objection or the acts or omissions of the parties or any one of them. Therefore, considering that
respondent failed to file its judicial claim within the prescribed period, its contention on this score is of no
moment and accordingly, the claimfor refund/tax credit must be denied.
COMMISSIONER OF INTERNAL REVENUEvs.AICHI FORGING COMPANY OF ASIA, INC.
G.R. No. 183421 October 22, 2014
FACTS:
Respondent is engaged in the business of manufacturing, producing, andprocessing all kinds of
steel and steel by-products, such as closed impression die steel forging, and all automotivesteel parts.
Respondent filed with the BIR an application for tax credit/refund amounting to ₱5,057,120.95
representing the former’s paid input VAT for the first quarter of taxable year 2003. The administrative
claim being un-acted, respondent filed a Petition with the CTA which partly granted the Petition and
ordered the refund. On appeal, the CTA En Bancaffirmed the CTA First Divisiondeciaion after finding no
reversible error. Petitioner questions the grant of refund holding that the judicial claim is prematurely filed
considering that it was filed barely twodays after respondent had filed the administrative claim with the
BIR. Allegedly, petitioner was not given the chanceto properly address the administrative claim. The CTA,
however, held that the judicial claim clearly fell within thetwo-year prescriptive period for filing claims for a
refund of input VAT.
ISSUE:
Whether the judicial claim of respondent pertaining to the application for refund of its unutilized
input VAT is prematurely filed
RULING:
Yes. Respondent filed on29 March 2005 complete supporting documents necessary to prove its
entitlement to a refund. Thus, the 120-dayperiod for the CIR to act on the administrative claim
commenced on that date. However, the judicial claim was prematurely filed on 31 March 2005, since
respondent failed toobserve the mandatory 120-day waiting period to give the CIR an opportunity to act on
the administrative claim.To repeat, a claim for tax refund or credit, like a claim for tax exemption, is
construed strictly against the taxpayer. One of the conditions for a judicial claim of refund or credit under
the VAT System is with the 120+30 day mandatoryand jurisdictional periods. Thus, strict compliance with
the 120+30 day periods is necessary for such a claim toprosper, whether before, during, or after the
effectivity of the Atlas doctrine, except for the period from the issuanceof BIR Ruling No. DA-489-03 on 10
December 2003 to 6 October 2010 when the Aichi doctrine was adopted, whichagain reinstated the
120+30 day periods as mandatory and jurisdictional.
NATIONAL POWER CORPORATIONvs.CITY OF CABANATUAN, REPRESENTED
BY ITS CITY MAYOR, HON. HONORATO PEREZ
G.R. No. 177332 October 01, 2014
FACTS:
Respondent assessed the NAPOCOR a franchise taxamounting to P808,606.41, representing
75% of 1% of its gross receipts for 1992. NAPOCOR refused topay, arguing that it is exempt from paying
the franchise tax. Consequently, theCity filed a complaint before the Regional Trial Court of Cabanatuan
City, demanding NAPOCOR to paythe assessed tax due plus 25% surcharge and interest of 2% per
month of the unpaid tax, and costs of suit. The trial court dismissed the case for lack of merit which the
Court of Appeals reversed holding that petitioner is liable for franchise tax. The decision then became final
and executory which the City sought for the execution of the judgment and the subsequent payment of the
tax liability. However, NAPOCOR disputes the interpretation of the City when it imposed the 25%
surcharge penalty on a yearly basis instead of imposing it on the total basic tax due for the taxable years
1992 to 2002. Petitioner holds that in doing such, the trial court have allegedly varied and/or exceeded the
terms of the judgment sought to be executed.
ISSUE:
Page 67 of 148
 What did the Court of Appeals meant by the phrase "in all cases, topay a surcharge of 25% of
the tax due and unpaid" in the dispositive portion.
RULING:
The surcharge is a civil penalty imposed once to late payment of a tax. The yearly accrual of the
25% surcharge is unconscionable. There is nothing in the Court of Appeals' decision that would justify the
interpretation that the statutorypenalty of 25% surcharge should be charged yearly from due date until full
payment. If that was theintention of the Court of Appeals, it should have so expressly stated in the
dispositive portion of itsdecision.It is a fundamental rule that the execution cannot be wider in scope or
exceed the judgment or decisionon which it is based; otherwise, it has no validity. We cannot impose a
penalty for nonpaymentof a tax greater than what the law provides, to do so would amount to a
deprivation ofproperty without due process of law.
Taxes and its surcharges and penalties cannot be construed in such a way as to become
oppressive andconfiscatory. Taxes are implied burdens that ensure that individuals and businesses
prosper in aconducive environment assured by good and effective government. A healthy balance should
bemaintained such that laws are interpreted in a way that these burdens do not amount to a
confiscatoryoutcome. Taxes are not and should not be construed to drive businesses into insolvency. To a
certainextent, a reasonable surcharge will provide incentive to pay; an unreasonable one delays payment
andengages government in unnecessary litigation and expense.
LA SUERTE CIGAR & CIGARETTE FACTORYvs.COURT OF APPEALS
AND COMMISSIONER OF INTERNAL REVENUE
G.R. No. 125346November11, 2014
FACTS:
This is a consolidated case which involves the taxability of stemmed leaf tobacco imported and
locally purchased by cigarette manufacturers for use as raw material in the manufacture of their
cigarettes. The Court of Tax Appeals rendered a decision and held petitioner La Suerte liable for
deficiency specific tax on its purchase of imported and locally produced stemmed leaf tobacco and sale of
stemmed leaf tobacco to Associated Anglo-Tobacco Corporation during the period from January 1, 1986
to June 30, 1989.
ISSUE:
Whether stemmed leaf tobacco is subject to excise tax.
RULING:
Yes. Stemmed leaf tobacco is subject to excise tax.Excise tax is a tax on the production, sale, or
consumption of a specific commodity in a country. Section 110 of the 1986 Tax Code explicitly provides
that the "excise taxes on domestic products shall be paid by the manufacturer or producer before the
removal of those products from the place of production." "It does not matter to what use the articles
subject to tax is put; the excise taxes are still due, even though the articles are removed merely for
storage in some other place and are not actually sold or consumed." The excise tax based on weight,
volume capacity or any other physical unit of measurement is referred to as "specific tax." If based on
selling price or other specified value, it is referred to as "ad valorem" tax.
Stemmed leaf tobacco is subject to the specific tax under Section 141 (b). It is a partially
prepared tobacco. The removal of the stem or midrib from the leaf tobacco makes the resulting stemmed
leaf tobacco a prepared or partially prepared tobacco. Since the Tax Code contained no definition of
"partially prepared tobacco," then the term should be construed in its general, ordinary, and
comprehensive sense. RR No. 17-67, as amended, supplements the law by delineating what products of
tobacco are "prepared or manufactured" and "partially prepared or partially manufactured." Section 2 (m)
states that partially manufactured tobacco includes “Stemmed leaf" — handstripped tobacco, clean, good,
partially broken leaf only, free from mold and dust.
The onus of proving that stemmed leaf tobacco is not subject to the specific tax lies with the
cigarette manufacturers. Taxation is the rule, exemption is the exception. Accordingly, statutes granting
tax exemptions must be construed in strictissimi juris against the taxpayer and liberally in favor of the
taxing authority. The cigarette manufacturers must justify their claim by a clear and categorical provision in
the law. Otherwise, they are liable for the specific tax on stemmed leaf tobacco found in their possession
pursuant to Section 127 of the 1986 Tax Code, as amended.
DOLLESIN, Jouvani I.
2015 – 0410
Commissioner of Internal Revenue vs. Pilipinas Shell Petroleum Corporation
G.R. No. 192398. September 29, 2014
ANTECEDENTS:
Respondent Pilipinas Shell Petroleum Corporation (PSPC) is a corporation organized and existing under
the laws of the Philippinesentered into a Plan of Merger with its affiliate, Shell Philippine Petroleum
Corporation (SPPC). In the Plan of Merger, it was provided that the entire assets and liabilities of SPPC
will be transferred to, and absorbed by, respondent as the surviving entity.
PetitionerCommissioner of Internal Revenue points out that the merger between SPPC and respondent
resulted in the following:
1. the issuance by respondent of its own shares of stock to the shareholders of SPPC in exchange
for the surrendered certificates of stock of SPPC; hence, a documentary stamp tax under Section
175 of the Tax Code in the amount of P524,316.00 should be imposed; and
2. the transfer of SPPC’s real properties to respondent in exchange for the latter’s shares of stock;
hence, a documentary stamp tax under Section 196 of the Tax Code in the amount of
P22,101,407.64 should be imposed.
Hence, respondent paid to the BIR the amount of P22,101,407.64 representing documentary stamp tax on
the transfer of real property from SPPC to respondent. Thereafter, respondent claims that the
Page 68 of 148
documentary stamp tax imposed on the second transaction had been erroneously paid and seeks to claim
a refund or tax credit.
ISSUES:
The issues presented for our resolution are as follows:
1. whether the transfer of SPPC’s real properties to respondent is subject to documentary stamp
tax under Section 196 of the Tax Code; and
2. whether respondent is entitled to the refund/tax credit
RULING:
The pertinent provision states, to wit:
“SEC. 196. Stamp Tax on Deeds of Sale and Conveyance of Real Property.—On all
conveyances, deeds, instruments, or writings, other than grants, patents, or original
certificates of adjudication issued by the Government, whereby any land, tenement or
other realty soldshall be granted, assigned, transferred or otherwise conveyed to
the purchaser, or purchasers, or to any other person or persons designated by such
purchaser or purchasers, there shall be collected a documentary stamp tax, at the
rates herein below prescribed based on the consideration contracted to be paid for
such realty or on its fair market value determined in accordance with Section 6(E) of this
Code, whichever is higher: Provided, That when one of the contracting parties is the
Government, the tax hereinimposed shall be based on the actual consideration.”
Documentary stamp tax under Section 196 is
imposed on the transfer of realty by way of sale
and does not apply to all conveyances of real
property.
A perusal of the subject provision would clearly show it pertains only to sale transactions where real
property is conveyed to a purchaser for a consideration. The phrase “granted, assigned, transferred or
otherwise conveyed” is qualified by the word “sold” which means that documentary stamp tax under
Section 196 is imposed on the transfer of realty by way of sale and does not apply to all conveyances of
real property. The fact that Section 196 refers to words “sold,” “purchaser” and “consideration”
undoubtedlyleads to the conclusion that only sales of real property are contemplated therein.
In a merger, the real properties are not deemed “sold” to the surviving corporation and the latter could not
be considered as “purchaser” of realty since the real properties subject of the merger were merely
absorbed by the surviving corporation by operation of law and these properties are deemed automatically
transferred to and vested in the surviving corporation without further act or deed. Therefore, the transfer of
real properties to the surviving corporation in pursuance of a merger is not subject to documentary stamp
tax.
Documentary stamp tax is a tax on documents,
instruments, loan agreements, and papers
evidencing the acceptance, assignment, or
transfer of an obligation, right or property
incident thereto.
Documentary stamp tax is thus imposed on the exercise of these privileges through the execution of
specific instruments, independently of the legal status of the transactions giving rise thereto.Based on the
foregoing, the transfer of real properties from SPPC to respondent is not subject to documentary stamp
tax considering that the same was not conveyed to or vested in respondent by means of any specific
deed, instrument or writing.
There was no deed of assignment and transfer separately executed by the parties for the conveyance of
the real properties. The conveyance of real properties not being embodied in a separate instrument but is
incorporated in the merger plan, thus, respondent is not liable to pay documentary stamp tax.
Hence, respondent is entitled to a refund or issuance of a tax credit certificate in the amount of
P22,101,407.64 representing respondent’s erroneously paid documentary stamp tax on the transfer of
real property from SPPC to respondent.
Commissioner of Internal Revenue vs. Philippine National Bank
G.R. No. 180290. September 29, 2014
ANTECEDENTS:
In several transactions including but not limited to the sale of real properties, lease and commissions,
Philippine National Bank (PNB) allegedly earned income and paid the corresponding income taxes due
which were collected and remitted by various payors as withholding agents to the Bureau of Internal
Revenue (“BIR”) during the taxable year 2000.
PNB filed its tentative income tax return for taxable year 2000 which it subsequently amended. It filed
again an amended income tax return, declaring no income tax liability as it incurred a net loss in the
amount of P11,318,957,602.00 and a gross loss of P745,713,454.00 from its Regular Banking Unit
(“RBU”) transactions.
PNB, however, had a 10% final income tax liability of P210,364,280.00 on taxable income of
P1,959,931,182.00 earned from its Foreign Currency Deposit Unit (“FCDU”) transactions for the same
year. Likewise, in the same return, it reported a total amount of P245,888,507.00 final and creditable
withholding taxes which was applied against the final income tax due of P210,364,280.00 leaving an
overpayment of P35,524,227.00.
In its second amended return, PNB’s income tax overpayment of P35,524,227.00 consisted of the balance
of the prior year’s (1999) excess credits of P9,057,492.00 to be carried over as tax credit to the
succeeding quarter/year and excess creditable withholding taxes for taxable year 2000 in the amount of
P26,466,735.00 which PNB opted to be refunded.
PNB filed a claim for refund or the issuance of a tax credit certificate in the amount of P26,466,735.40 for
the taxable year 2000 with the BIR. Due to the latter’s inaction on its administrative claim.
Petitioner claims that:
1. PNB failed to prove that the creditable withholding taxes amounting to P23,762,347.83 are duly
supported by valid certificates of creditable tax withheld at source;
2. PNB failed to prove actual remittance of the alleged withheld taxes; and
3. PNB cannot present the withholding tax certificates only before the CTA, and when it did not
present the same when it filed its claim for administrative refund with the BIR, at the first
instance.
In its comment, respondent counters that:
Page 69 of 148
 1. It complied with all the requirements for judicial claim for refund of unutilized creditable
withholding taxes;
2. The fact of withholding was sufficiently established by the 622 creditable withholding tax
certificates, primarily attesting the amount of taxes withheld from the income payments received
by PNB; and
3. It need not prove the actual remittance of withheld taxes to the Bureau of Internal Revenue
because the remittance is the responsibility of the payor or withholding agent and not the payee.
ISSUES:
1. Whether PNB has to prove authenticity and validity of the certificates of creditable tax withheld at
source (withholding tax certificates);
2. Whether PNB is required to establish actual remittance with the BIR as a condition to claim
refund of unutilized tax credits; and
3. Whether CTA is precluded from accepting PNB’s evidence assuming that these were not
presented at the administrative level.
RULING:
The certificate of creditable tax withheld at
source is the competent proof to establish the
fact that taxes are withheld.
The certificate of creditable tax withheld at source is the competent proof to establish the fact that taxes
are withheld. It is not necessary for the person who executed and prepared the certificate of creditable tax
withheld at source to be presented and to testify personally to prove the authenticity of the certificates.
Upon presentation of a withholding tax certificate complete in its relevant details and with a written
statement that it was made under the penalties of perjury, the burden of evidence then shifts to the
Commissioner of Internal Revenue (CIR) to prove that (1) the certificate is not complete; (2) it is false; or
(3) it was not issued regularly. The figures appearing in the withholding tax certificates can be taken at
face value since these documents were executed under the penalties of perjury, pursuant to Section 267
of the NIRC.
Proof of actual remittance is not a condition to
claim for a refund of unutilized tax credits.
PNB is not required to establish actual remittance to the Bureau of Internal Revenue. Proof of actual
remittance is not a condition to claim for a refund of unutilized tax credits. Under Sections 57 and 58 of the
NIRC, as amended, it is the payor-withholding agent, and not the payee-refund claimant such as
respondent, who is vested with the responsibility of withholding and remitting income taxes.
Cases filed in the CTA are litigated de novo.
The BIR is in no position to assail the authenticity of the CWT certificates due to PNB’s alleged failure to
submit the same before the administrative level since it could have easily directed the claimant to furnish
copies of these documents, if the refund applied for casts him any doubt.
More importantly, the Court of Tax Appeals is not precluded from accepting respondent’s evidence
assuming these were not presented at the administrative level. Cases filed in the Court of Tax Appeals
are litigated de novo. Thus, PNB should prove every minute aspect of its case, by presenting, formally
offering and submitting to the CTA all evidence required for the successful prosecution of its
administrative claim.
Commissioner of Internal Revenue vs. CE Luzon Geothermal Power Company, Inc.
G.R. No. 190198. September 17, 2014
ANTECEDENTS:
Pursuant to the provisions of Republic Act No. (RA) 9136, otherwise known as the “Electric Power
Industry Reform Act of 2001,”— CE Luzon Geothermal Power Company Inc. (CE Luzon) treated the
delivery and supply of electric energy to the Philippine National Oil Company-Energy Development
Corporation (PNOC-EDC) as value-added tax (VAT) zero-rated.
CE Luzon timely filed its VAT returns for the third quarter of 2001, in which it declared unutilized input VAT
in the amount of P2,921,085.31. It likewise filed its VAT returns for the fourth quarter of 2001 and all
quarters of 2002 whereby it declared unutilized input VAT in the amount of P21,229,990.80.
CE Luzon filed administrative claims for refund of its unutilized input VAT attributable to its zero-rated
sales for all the aforementioned quarters, and alleging inaction on the part of the Commissioner of Internal
Revenue (CIR), it filed the respective judicial claims for the same, summarized as follows:
1. In C.T.A. Case No. 6792, CE Luzon filed its administrative claim for refund of unutilized input
VAT for the third quarter of 2001 on September 26, 2003 and the corresponding judicial claim on
September 30, 2003; and
2. In C.T.A. Case No. 6837, the administrative claim for refund of unutilized input VAT for the fourth
quarter of 2001 and all quarters of 2002 was filed on December 18, 2003 and the judicial claim
on December 19, 2003.
CIR contends that:
1. CE Luzon’s administrative claims are pro forma in that it failed to submit at the administrative
level all the necessary documents to prove entitlement to their claims for refund; and
2. CE Luzon filed its judicial claims prematurely in violation of Section 112(D) of the National
Internal Revenue Code (NIRC).
ISSUE:
1. Whether CE Luzon did not prematurely file its judicial claims for refund vis-à-vis its administrative
claims.
RULING:
Since CE Luzon’s claims for refund covered periods before the effectivity of RA 9337, Section 112 of the
NIRC, as amended by RA 8424, should apply, to wit:
Section 112. Refunds or Tax Credits of Input Tax.
(A) Zero-rated or Effectively Zero-rated Sales.—Any VAT-registered person, whose
sales are zero-rated or effectively zero-rated may, within two (2) years after theclose
of the taxable quarter when the sales were made, apply for the issuance of a tax
credit certificate or refund of creditable input tax due or paid attributable to such sales,
except transitional input tax, to the extent that such input tax has not been applied
against output tax: x xx. x x x x
Page 70 of 148
 (D) Period within which Refund or Tax Credit of Input Taxes shall be Made.—In proper
cases, the Commissioner shall grant a refund or issue the tax credit certificate for
creditable input taxes within one hundred twenty (120) days from the date of
submission of complete documents in support of the application filed in accordance
with Subsections (A) and (B) hereof.
In case of full or partial denial of the claim for tax refund or tax credit, or the failure on
the part of the Commissioner to act on the application within the period prescribed
above, the taxpayer affected may, within thirty (30) days from the receipt of the
decision denying the claim or after the expiration of the one hundred twenty-day
period, appeal the decision or the unacted claim with the Court of Tax Appeals.
The observance of the 120-day period is a
mandatory and jurisdictional requisite to the
filing of a judicial claim for refund before the
CTA.
In CIR v. Aichi Forging Company of Asia, Inc. (Aichi), the Court held that the observance of the 120-day
period is a mandatory and jurisdictional requisite to the filing of a judicial claim for refund before the CTA.
Consequently, its nonobservance would lead to the dismissal of the judicial claim on the ground of lack of
jurisdiction. Aichi also clarified that the two (2)-year prescriptive period applies only to administrative
claims and not to judicial claims. Succinctly put, once the administrative claim is filed within the two (2)-
year prescriptive period, the claimant must wait for the 120-day period to end and, thereafter, he is given a
30-day period to file his judicial claim before the CTA, even if said 120-day and 30-day periods would
exceed the aforementioned two (2)-year prescriptive period.
However, in CIR v. San Roque Power Corporation (San Roque), the Court categorically recognized an
exception to the mandatory and jurisdictional nature of the 120-day period. It ruled that BIR Ruling No. DA
-489-03 dated December 10, 2003 provided a valid claim for equitable estoppel under Section 246 of the
NIRC. In essence, the aforesaid BIR Ruling stated that “taxpayer-claimant need not wait for the lapse of
the 120-day period before it could seek judicial relief with the CTA by way of Petition for Review.”
Reconciling the pronouncements in the Aichi and San Roque cases, the rule must therefore bethat
during the period December 10, 2003 (when BIR Ruling No. DA-489-03 was issued) to October 6,
2010(when the Aichi case was promulgated), taxpayers-claimants need not observe the 120-day
periodbefore it could file a judicial claim for refund of excess input VAT before the CTA. Before and
after the aforementioned period (i.e., December 10, 2003 to October 6, 2010), the observance of the
120-day period is mandatory and jurisdictional to the filing of such claim.
While both claims for refund were filed within the two (2)-year prescriptive period, CE Luzon failed to
comply with the 120-day period as it filed its judicial claim in C.T.A. Case No. 6792 four (4) days after the
filing of the administrative claim, while in C.T.A. Case No. 6837, the judicial claim was filed a day after the
filing of the administrative claim. Proceeding from the aforementioned jurisprudence, only C.T.A. Case No.
6792 should be dismissed on the ground of lack of jurisdiction for being prematurely filed.
Commissioner of Internal Revenue vs. Philippine Airlines, Inc.
G.R. Nos. 212536-37. August 27, 2014
ANTECEDENTS:
Philippine Airlines, Inc. (PAL) was assessed excise taxes on its February and March 2007 importation of
cigarettes and alcoholic drinks for its commissary supplies used in its international flights.PAL paid the
corresponding amountsunder protest, thereafter, filed separate administrative claims for refund before the
Bureau of Internal Revenue (BIR) for the alleged excise taxes it erroneously paid.
As there was no appropriate action on the part of the then Commissioner of Internal Revenue (CIR) and
obviously to forestall the running of the two-year prescriptive period for claiming tax refunds, PAL filed
before the Court of Tax Appeals (CTA) a petition for review.
PALcontends that its exemption from excise tax, as provided in its franchise under PD 1590, has not been
withdrawn by the NIRC of 1997, as amended by RA 9334.
The contention of the parties herein, is with reference to the following provisions:
1. Presidential Decree No. 1590 (PD 1590) a franchise to operate air transport services
domestically and internationally. Section 13 of the decree prescribes the tax component of PAL’s
franchise. Under it, PAL, during the lifetime of its franchise, shall pay the government either basic
corporate income tax or franchise tax based on revenues and/or the rate defined in the provision,
whichever is lower and the taxes thus paid under either scheme shall be in lieu of all other taxes,
duties and other fees.
2. On January 1, 2005, Republic Act No. 9334 (RA 9334) took effect. Section 6 thereof, which
amended Sec. 131 of the 1997 National Internal Revenue Code (NIRC) to read:
SEC. 6. Section 131 of the National Internal Revenue Code of 1997, as amended, is
hereby amended to read as follows:
“SEC. 131. Payment of Excise Taxes on Imported Articles.
“(A) Persons Liable.—Excise taxes on imported articles shall be
paid by the owner or importer to the Customs Officers, x x x before
the release of such articles from the customs house, or by the person
who is found in possession of articles which are exempt from excise
taxes other than those legally entitled to exemption. x x x.
“The provision of any special or general law to the contrary
notwithstanding, the importation of x x xcigarettes, distilled
spirits, fermented liquors and wines x x x, even if destined for tax
and duty-free shops, shall be subject to all applicable taxes,
duties, charges, including excise taxes due thereon. This shall
apply to said items]x x x brought directly into the duly chartered or
legislated freeports x x x, and such other freeports as may hereafter
be established or created by law x x x.”
In addition to PAL’s claim of exemption, it contends that that RA 9334 partakes the nature of a general law
which could not have plausibly repealed a special law, e.g., PD 1590. PAL would draw attention to Sec.
24 of PD 1590 providing how its franchise or any of its provisions may be modified or amended:
Page 71 of 148
 SECTION 24. This franchise, as amended, or any section or provision hereof may only
be modified, amended or repealed expressly by a special law or decree that shall
specifically modify, amend or repeal this franchise or any section of provisions.
ISSUE:
1. Whether PAL’s importations of alcohol and tobacco products for its commissary supplies are
subject to excise tax.
RULING:
The tax privilege of PAL provided in Sec. 13 of
PD 1590 has not been revoked by Sec. 131 of
the NIRC of 1997, as amended by Sec. 6 of RA
9334.
It is a basic principle of statutory construction that a later law, general in terms and not expressly repealing
or amending a prior special law, will not ordinarily affect the special provisions of such earlier statute.
Indeed, as things stand, PD 1590 has not been revoked by the NIRC of 1997, as amended. Or to be more
precise, the tax privilege of PAL provided in Sec. 13 of PD 1590 has not been revoked by Sec. 131 of the
NIRC of 1997, as amended by Sec. 6 of RA 9334.
The manner to effectively repeal or at least modify any specific provision of PAL’s franchise under PD
1590, as decreed in the aforequoted Sec. 24, has not been demonstrated. The court said “the provisions
of any special or general law to the contrary notwithstanding,” such phrase left alone cannot be
considered as an express repeal of the exemptions granted under PAL’s franchise because it fails to
specifically identify PD 1590 as one of the acts intended to be repealed.
a) On person who sells goods and services in the course of
trade or businesses; x xx
PROVIDED, that all registered businesses in the City of Manila
already paying the aforementioned tax shall be exempted from
payment thereof.
To comply with the City of Manila’s assessment of taxes under Section 21, supra, the petitioners paid
under protest the following amounts corresponding to the first quarter of 1999.
Petitioners formally requested the Office of the City Treasurer for the tax credit or refund of the local
business taxes paid under protest. However, then City Treasurer Anthony Acevedo (Acevedo) denied the
request, which led the petitioners to file their respective petitions for certiorari in the Regional Trial Court
(RTC) in Manila.
The petitioners point out that the enforcement of Section 21 against then constituted double taxation
because:
1. The local business taxes under Section 15 and Section 17 of the Revenue Code of Manila were
already being paid by them.
2. That the proviso in Section 21 exempted all registered businesses in the City of Manila from
paying the tax imposed under Section 21; and
3. That the exemption was more in accord with Section 143 of the Local Government Code, the law
that vested in the municipal and city governments the power to impose business taxes.
The respondents counter, however, that double taxation did not occur from the imposition and collection of
the tax pursuant to Section 21 of the Revenue Code of Manila:

1. That the taxes imposed pursuant to Section 21 were in the concept of indirect taxes upon the
Nursery Care Corporation, et. al vs. Acevedo consumers of the goods and services sold by a business establishment; and
G.R. No. 180651. July 30, 2014 2. That the petitioners did not exhaust their administrative remedies by first appealing to the
Secretary of Justice to challenge the constitutionality or legality of the tax ordinance.
ANTECEDENTS:
ISSUE:
The City of Manila assessed and collected taxes from the individual petitioners (Nursery Care
Corporation; Shoemart, Inc.; Star Appliance Center, Inc.; H&B, Inc.; Supplies Station, Inc.; and Hardware
1. Whether the petitioners were entitled to the tax credit or tax refund for the taxes paid under
Workshop, Inc.), pursuant to the provisions under the Revenue Code of Manila, to wit:
Section 21 of the Revenue Code of Manila
1. Section 15. Tax on Wholesalers, Distributors, or Dealers); and RULING:
2. Section 17. Tax on Retailers Collection of taxes pursuant to Section 21 of the
Revenue Code of Manila constituted double
At the same time, the City of Manila imposed additional taxes upon the petitioners pursuant to Section 21
taxation
of the same code, as amended, as a condition for the renewal of their respectivebusiness licenses for the
Double taxation means taxing the same property twice when it should be taxed only once; that is, “taxing
year 1999. Section 21 of the Revenue Code of Manila stated:
the same person twice by the same jurisdiction for the same thing.”It is otherwise described as “direct
Section 21.Tax on Business Subject to the Excise, Value-Added or Percentage Taxes
duplicate taxation,” the two taxes must be imposed on:
under the NIRC.—On any of thefollowing businesses and articles of commerce x xxa
tax of FIFTY PERCENT (50%) OF ONE PERCENT (1%) per annum on the gross sales
1. the same subject matter;
or receipts of the preceding calendar year is hereby imposed:
2. for the same purpose;
3. by the same taxing authority;

Page 72 of 148
 4. within the same jurisdiction;
5. during the same taxing period; and
6. the taxes must be of the same kind or character.
On the basis of the rulings in Coca-Cola Bottlers Philippines, Inc. and Swedish Match Philippines, Inc.,
theCourt held that all the elements of double taxation concurred upon the City of Manila’s assessment on
and collection from the petitioners of taxes for the first quarter of 1999 pursuant to Section 21 of the
Revenue Code of Manila.
Firstly, because Section 21 of the Revenue Code of Manila imposed the tax on a person who sold goods
and services in the course of trade or business based on a certain percentage of his gross sales or
receipts in the preceding calendar year, while Section 15 and Section 17 likewise imposed the tax on a
person who sold goods and services in the course of trade or business but only identified such person
with particularity, namely, the wholesaler, distributor or dealer (Section 15), and the retailer (Section 17),
all the taxes — being imposed on the privilege of doing business in the City of Manila in order to make the
taxpayers contribute to the city’s revenues — were imposed on the same subject matter and for the
same purpose.
Secondly, the taxes were imposed by the same taxing authority (the City of Manila) and within the same
jurisdiction in the same taxing period (i.e., per calendar year).
Thirdly, the taxes were all in the nature of local business taxes.
EDEM, MICHAEL JOY, E.
2013-0505
G.R. No. 183664 July 28, 2014
AIRLIFT ASIA CUSTOMS BROKERAGE vs. COURT OF APPEALS
Facts:
CAO 3-2006 was issued by the then Commissioner (BOC) , It covers the Rules and Regulations
Governing the Accreditation of the Customs Brokers Transacting with the BOC and essentially
requires the accreditation by the BOC of customs brokers who intend to practice before the
BOC. Brokers who want to practice are required to apply for accreditation and to obtain a
Certificate of Accreditation.
Petitioners assailed the validity of CAO 3-2006 through an action for declaratory relief before the
Regional Trial Court of Manila. Issued without authority, and violates their right to practice their
profession.
RTC decided in favour of petitioners.
o This power, initially lodged with the Commissioner of the Civil Service under Section
3409 of the Tariff and Customs Code of the Philippines (TCCP), had been transferred
upon the passageof RA 9280 to the Professional Regulatory Board for Customs Brokers
(PRBCB), which is under the supervision and administrative control of the Professional
Regulation Commission (PRC).
o CAO 3-2006 imposed an additional qualification not found in the law.
CA reversed the RTC
o Although an added burden to brokers, nevertheless bore a reasonable connection to the
BOC’s aim to ensure accountability and integrity in the transactions involving customs
duties and tariff laws.
ISSUE :
WON the BOC can validly issue such Customs Administrative Order – NO
RULLING:
o Prior to the passage of RA 9280, the TCCP (specifically, Sections 3401 to 3409 thereof)
governed the entry, regulation, and supervision of the customs broker profession.
 Sections 3401 and 3402 of the TCCP required all applicants for customs
brokers’ certificates to pass a written examination given by the Board of
Examiners for Customs Brokers under PRC supervision. BOC Commissioner
was ex officio chairman.
 Suspension/revocation also filed with Board of Examiners.
 The enactment of RA 9280, however, brought about significant changes.
 In lieu of the Board of Examiners, RA 9280 created the PRBCB.
whose members are appointed by the President from a list of
recommendees submitted by the PRC which has supervisory and
administrative control over the PRBCB. Significantly, RA 9280
excluded the BOC Commissioner as member of the PRBCB.
 Some of the powers of the PRBCB is to supervise and regulate the
licensure, registration, and practice of customs brokers profession;
and to Register successful examinees in the licensure examination
and issue the corresponding Certificate of Registration and
Professional Identification Card;
o CA’s argument: It remains in the general power. It adds that "[t]o strip the BOC
[Commissioner] of any disciplinary and supervisory authority over license customs
brokers… would not only cripple the [BOC’s] efforts on anti smuggling and raising
revenue.
 This general grant of power should yield to specific grant of power to CSC
commissioner in the TCCP (Sec 3409) regarding the rules and regulation in
the practice of the brokerage profession.
o CAO 3-2006 amounts to a licensing requirement that restricts the practice of profession
of customs brokers and is prohibited by RA 9280.
 CA: intends to regulate only the practice before the BOC, which is claimed to
be one aspect
 SC: Notably, with the exception of consulting with clients, and
teaching tariff and customs administration, most of the above-
enumerated activities involve dealing with the BOC. In other words, a
large part of a custom brokers’ work involves practice before the
BOC.
Page 73 of 148
  Moreover, a reading of CAO 3-2006 does not appear to be restricted
only to "practice before the BOC."
GR No. 194105, Feb 05, 2014
CIR v. TEAM SUAL CORPORATION
FACTS:
TSC is a corporation that is principally engaged in the business of power generation and the subsequent
sale thereof solely to National Power Corporation (NPC); it is registered with the Bureau of Internal
Revenue (BIR) as a VAT taxpayer.
On November 26, 1999, the CIR granted TSC's application for zero-rating arising from its sale of power
generation services to NPC for the taxable year 2000. As a VAT-registered entity, TSC filed its VAT
returns for the first, second, third, and fourth quarters of taxable year 2000 on April 24, 2000, July 25,
2000, October 25, 2000, and January 25, 2001, respectively.
On March 11, 2002, TSC filed with the BIR an administrative claim for refund, claiming that it is entitled to
the unutilized input VAT in the amount of 179,314,926.56 arising from its zero-rated sales to NPC for the
taxable year 2000.
On April 1, 2002, without awa1tmg the CIR's resolution of its administrative claim for refund/tax credit,
TSC filed a petition for review with the CTA seeking the refund or the issuance of a tax credit certificate in
the amount of 179,314,926.56 for its unutilized input VAT for the taxable year 2000. The case was
subsequently raffled to the CTA First Division.
In his Answer, the CIR claimed that TSC's claim for refund/tax credit should be denied, asserting that TSC
failed to comply with the conditions precedent for claiming refund/tax credit of unutilized input VAT. The
CIR pointed out that TSC failed to submit complete documents in support of its application for refund/tax
credit contrary to Section 112 (C)[6] of the National Internal Revenue Code (NIRC).
On January 26, 2009, the CTA First Division rendered a Decision,[7] which granted TSC's claim for
refund/tax credit of input VAT. Nevertheless, the CTA First Division found that, from the total unutilized
input VAT of 179,314,926.56 that it claimed, TSC was only able to substantiate the amount of
173,265,261.30. Thus:
WHEREFORE, the instant Petition for Review is hereby GRANTED. Accordingly, [CIR] is hereby
ORDERED to REFUND or to ISSUE TAX CREDIT CERTIFICATE in favor of [TSC] in the amount of
[P]173,265,261.30.
SO ORDERED.[8]
The CIR sought a reconsideration of the CTA First Division Decision dated January 26, 2009 maintaining
that TSC is not entitled to a refund/tax credit of its unutilized input VAT for the taxable year 2000 since it
failed to submit all the necessary and relevant documents in support of its administrative claim.
The CIR further claimed that TSC's petition for review was prematurely filed, alleging that under Section
112(C) of the NIRC, the CIR is given 120 days from the submission of complete documents within which
to either grant or deny TSC's application for refund/tax credit of its unutilized input VAT. The CIR pointed
out that TSC filed its petition for review with the CTA sans any decision on its claim and without waiting for
the 120-day period to lapse.
On June 19, 2009, the CTA First Division issued a Resolution,[9] which denied the CIR's motion for
reconsideration. The CTA First Division opined that TSC's petition for review was not prematurely filed
notwithstanding that the 120-day period given to the CIR under Section 112(C) of the NIRC had not yet
lapsed. It ruled that, pursuant to Section 112(A) of the NIRC, claims for refund/tax credit of unutilized input
VAT should be filed within two years after the close of the taxable quarter when the sales were made; that
the 120-day period under Section 112(C) of the NIRC is also covered by the two-year prescriptive period
within which to claim the refund/tax credit of unutilized input VAT. Thus:
Admittedly, Section 112([C]) of the NIRC of 1997 provides for a one hundred twenty (120)-day period from
the submission of the complete documents within which respondent may grant or deny the taxpayer's
application for refund or issuance of tax credit certificate. The said 120-day period however is also
covered by the two-year prescriptive period to file a claim for refund or tax credit before this Court, as
specified in Section 112(A) ofthe same Code.
It has been consistently held that the administrative claim and the subsequent appeal to this Court must
be filed within the two-year period. In the case of Allison J. Gibbs, et aL vs. Collector of Internal
Revenue, et al., the High Tribunal declared that the suit or proceeding must be started in this Court
before the end of the two-year period without awaiting the decision of the Collector (now Commissioner).
Accordingly, as long as an administrative claim is filed prior to the filing of a judicial case, both within the
two-year prescriptive period, this Court has jurisdiction to take cognizance of the claim. And once a
Petition for Review is filed, this Court already acquires jurisdiction over the claim and is not bound to wait
indefinitely for whatever action respondent may take. After all, at stake are claims for refund and unlike
assessments, no decision of respondent is required before one can go to this Court.[10] (Citations omitted )
Aggrieved by the foregoing disquisition of the CTA First Division, the CIR filed a Petition for Review [11] with
the CTA en banc. He maintains that TSC's petition with the CTA First Division was prematurely filed; that
TSC can only elevate its claim for refund/tax credit of its unutilized input VAT with the CTA only within 30
days from the lapse of the 120-day period granted to the CIR, under Section 112(C) of the NIRC, within
which to decide administrative claims for refund/tax credit or from the CIR decision denying its claim.
On June 16, 2010, the CTA en banc rendered the herein assailed Decision,[12] which affirmed the Decision
dated January 26, 2009 of the CTA First Division, viz:
WHEREFORE, premises considered, the Petition for Review is hereby DENIED. The Commissioner is
hereby ordered to refund TSC the aggregate amount of [P]173,265,261.30 representing unutilized input
VAT on its domestic purchases and importation of goods and services attributable to zero-rated sales to
NPC for the taxable year 2000.
SO ORDERED.[13]
The CTA en banc ruled that, pursuant to Section 112(A) of the NIRC, both the administrative and judicial
remedies under Section 112(C) of the NIRC must be undertaken within the two-year period from the close
of the taxable quarter when the relevant sales were made. Thus:
Page 74 of 148
Under the law, the taxpayer-claimant may seek judicial redress for refund on excess or unutilized input
VAT attributable to zero-rated sales or effectively zero-rated sales with the Court of Tax Appeals either
within thirty (30) days from receipt of the denial of its claim for refund/tax credit, or after the lapse of the
one hundred twenty (120)[-]day period in the event of inaction by the Commissioner; provided that both
administrative and judicial remedies must be undertaken within the two (2)[-]year period from the close of
the taxable quarter when the relevant sales were made. If the two[-]year period is about to lapse, but the
BIR has not yet acted on the application for refund, the taxpayer should file a Petition for Review with this
Court within the two[-]year period. Otherwise, the refund claim for unutilized input value added tax
attributable to zero-rated sales or effectively zero-rated sales is time-barred.
Subsections (A) and ([C]) of Section 112 of the 1997 NIRC under the heading "Refunds or Tax Credits of
Input Tax" should be read in its entirety not in separate parts. Subsection ([C]) cannot be isolated from the
rest of the subsections of Section 112 of the 1997 NIRC. A statute is passed as a whole, and is animated
by one general purpose and intent. Its meaning cannot be extracted from any single part thereof but from
a general consideration of the statute as a whole.[14] (Citations omitted )
The CIR sought a reconsideration of the CTA en banc Decision dated June 16, 2010 but it was denied by
the CTA en banc in its Resolution[15] dated October 14, 2010.
ISSUE:
whether the CTA en banc erred in holding that TSC's petition for review with the CTA was not prematurely
filed.
RULLING:
The petition is meritorious.
Section 112 of the NIRC provides for the rules to be followed in claiming a refund/tax credit of unutilized
input VAT. Subsections (A) and (C) thereof provide that:
Sec. 112. Refunds or Tax Credits of Input Tax.
(A) Zero-Rated or Effectively Zero-Rated Sales. - Any VATregistered person, whose sales are zero-rated
or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales
were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid
attributable to such sales, except transitional input tax, to the extent that such input tax has not been
applied against output tax: Provided, however, That in the case of zero-rated sales under Section
106(A)(2)(a)(l), (2) and (b) and Section 108 (B)(1) and (2), the acceptable foreign currency exchange
proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or
effectively zero-rated sale and also in taxable or exempt sale of goods of properties or services, and the
amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the
transactions, it shall be allocated proportionately on the basis of the volume of sales: Provided, finally,
That for a person making sales that are zero-rated under Section 108 (B)(6), the input taxes shall be
allocated ratably between his zero-rated and non-zero-rated sales.
xxxx
(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the
Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one
hundred twenty (120) days from the date of submission of complete documents in support of the
application filed in accordance with Subsection (A) hereof.
In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the
Commissioner to act on the application within the period prescribed above, the taxpayer affected may,
within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one
hundred twenty-day period, appeal the decision or the unacted claim with the Court of Tax Appeals.
xxxx
Any unutilized input VAT attributable to zero-rated or effectively zero-rated sales may be claimed as a
refund/tax credit. Initially, claims for refund/tax credit for unutilized input VAT should be filed with the BIR,
together with the complete documents in support of the claim. Pursuant to Section 112(A) of the NIRC, the
administrative claim for refund/tax credit must be filed with the BIR within two years after the close of the
taxable quarter when the sales were made.
Under Section 112(C) of the NIRC, the CIR is given 120 days from the submission of complete documents
in support of the application for refund/tax credit within which to either grant or deny the claim. In case of
(1) full or partial denial of the claim or (2) the failure of the CIR to act on the claim within 120 days from the
submission of complete documents, the taxpayer-claimant may, within 30 days from receipt of the CIR
decision denying the claim or after the lapse of the 120-day period, file a petition for review with the CTA.
The CTA en banc and the CTA First Division opined that a taxpayer-claimant is permitted to file a judicial
claim for refund/tax credit with the CTA notwithstanding that the 120-day period given to the CIR to decide
an administrative claim had not yet lapsed. That TSC, in view of the fact that the two-year prescriptive
period for claiming refund/tax credit of unutilized input VAT under Section 112(A) of the NIRC is about to
lapse, had the right to seek judicial redress for its claim for refund/tax credit sans compliance with the 120-
day period under Section 112(C) of the NIRC.
The Court does not agree.
The pivotal question of whether the imminent lapse of the two-year period under Section 112(A) of the
NIRC justifies the filing of a judicial claim with the CTA without awaiting the lapse of the 120-day period
given to the CIR to decide the administrative claim for refund/tax credit had already been settled by the
Court. In Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc.,[16] the Court held that:
However, notwithstanding the timely filing of the administrative claim, we are constrained to deny
respondent's claim for tax refund/credit for having been filed in violation of Section 112([C]) of the NIRC, x
x x:
xxxx
Section 112([C]) of the NIRC clearly provides that the CIR has "120 days, from the date ofthe submission
ofthe complete documents in support of the application [for tax refund/credit]," within which to grant or
deny the claim. In case of full or partial denial by the CIR, the taxpayer's recourse is to file an appeal
before the CTA within 30 days from receipt of the decision of the CIR. However, if after the 120-day period
Page 75 of 148
the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the
inaction of the CIR to CTA within 30 days.
In this case, the administrative and the judicial claims were simultaneously filed on September 30, 2004.
Obviously, respondent did not wait for the decision of the CIR or the lapse of the 120-day period. For this
reason, we find the filing of the judicial claim with the CTA premature.
Respondent's assertion that the non-observance of the 120-day period is not fatal to the filing of a judicial
claim as long as both the administrative and the judicial claims are filed within the two-year prescriptive
period has no legal basis.
There is nothing in Section 112 of the NIRC to support respondent's view. Subsection (A) of the
said provision states that "any VAT-registered person, whose sales are zero-rated or effectively
zero-rated may, within two years after the close of the taxable quarter when the sales were made,
apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid
attributable to such sales." The phrase "within two (2) years x x x apply for the issuance of a tax
credit certificate or refund" refers to applications for refund/credit filed with the CIR and not to
appeals made to the CTA. This is apparent in the first paragraph of subsection ([C]) of the same
provision, which states that the CIR has "120 days from the submission of complete documents in
support of the application filed in accordance with Subsections (A) and (B)" within which to decide
on the claim.
In fact, applying the two-year period to judicial claims would render nugatory Section 112([C]) of
the NIRC, which already provides for a specific period within which a taxpayer should appeal the
decision or inaction of the CIR. The second paragraph of Section 112([C]) of the NIRC envisions
two scenarios: (1) when a decision is issued by the CIR before the lapse of the 120-day period; and
(2) when no decision is made after the 120-day period. In both instances, the taxpayer has 30 days
within which to file an appeal with the CTA. As we see it then, the 120-day period is crucial in filing
an appeal with the CTA.[17] (Citations omitted and emphasis ours)
Further, in Commissioner of Internal Revenue v. San Roque Power Corporation,[18] the Court emphasized
that the 120-day period that is given to the CIR within which to decide claims for refund/tax credit of
unutilized input VAT is mandatory and jurisdictional. The Court categorically held that the taxpayer-
claimant must wait for the 120-day period to lapse, should there be no decision fully or partially denying
the claim, before a petition for review may be filed with the CTA. Otherwise, the petition would be
rendered premature and without a cause of action. Consequently, the CTA does not have the
jurisdiction to take cognizance of a petition for review filed by the taxpayer-claimant should there
be no decision by the CIR on the claim for refund/tax credit or the 120-day period had not yet
lapsed. Thus:
Clearly, San Roque failed to comply with the 120-day waiting period, the time expressly given by law to
the Commissioner to decide whether to grant or deny San Roque's application for tax refund or credit. It is
indisputable that compliance with the 120-day waiting period is mandatory and jurisdictional. x x x.
Failure to comply with the 120-day waiting period violates a mandatory provision of law. It violates the
doctrine of exhaustion of administrative remedies and renders the petition premature and thus without a
cause of action, with the effect that the CTA does not acquire jurisdiction over the taxpayer's petition.
Philippine jurisprudence is replete with cases upholding and reiterating these doctrinal principles.
The charter of the CTA expressly provides that its jurisdiction is to review on appeal "decisions of the
Commissioner of Internal Revenue in cases involving x x x refunds of internal revenue taxes." When a
taxpayer prematurely files a judicial claim for tax refund or credit with the CTA without waiting for the
decision of the Commissioner, there is no "decision" of the Commissioner to review and thus the CTA as a
court of special jurisdiction has no jurisdiction over the appeal. The charter of the CTA also expressly
provides that if the Commissioner fails to decide within "a specific period" required by law, such
"inaction shall be deemed a denial" of the application for tax refund or credit. It is the Commissioner's
decision, or inaction "deemed a denial," that the taxpayer can take to the CTA for review. Without a
decision or an "inaction x x x deemed a denial" of the Commissioner, the CTA has no jurisdiction over a
petition for review.[19] (Citations omitted and emphasis supplied)
That the two-year prescriptive period within which to file a claim for refund/tax credit ofunutilized input VAT
under Section 112(A) of the NIRC is about to lapse is inconsequential and would not justify the immediate
filing of a petition for review with the CTA sans compliance with the 120-day mandatory period. To stress,
under Section 112 (C) of the NIRC, a taxpayer-claimant may only file a petition for review with the CTA
within 30 days from either: (1) the receipt of the decision of the CIR denying, in full or in part, the claim for
refund/tax credit; or (2) the lapse of the 120-day period given to the CIR to decide the claim for refund/tax
credit.
The 120-day mandatory period may extend beyond the two-year prescriptive period for filing a claim for
refund/tax credit under Section 112(A) of the NIRC. Consequently, the 30-day period given to the
taxpayer-claimant likewise need not fall under the two-year prescriptive period. What matters is that the
administrative claim for refund/tax credit of unutilized input VAT is filed with the BIR within the two-year
prescriptive period. In San Roque, the Court explained that:
There are three compelling reasons why the 30-day period need not necessarily fall within the two-year
prescriptive period, as long as the administrative claim is filed within the two-year prescriptive period.
First, Section 112(A) clearly, plainly, and unequivocally provides that the taxpayer "may, within two (2)
years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax
credit certificate or refund of the creditable input tax due or paid to such sales." In short, the law states
that the taxpayer may apply with the Commissioner for a refund or credit "within two (2) years," which
means at anytime within two years. Thus, the application for refund or credit may be filed by the
taxpayer with the Commissioner on the last day of the two-year prescriptive period and it will still strictly
comply with the law. The two-year prescriptive period is a grace period in favor of the taxpayer and he can
avail of the full period before his right to apply for a tax refund or credit is barred by prescription.
Second, Section 112(C) provides that the Commissioner shall decide the application for refund or credit
"within one hundred twenty (120) days from the date of submission of complete documents in support of
the application filed in accordance with Subsection (A)." The reference in Section 112(C) of the
submission of documents "in support of the application filed in accordance with Subsection A" means that
the application in Section 112(A) is the administrative claim that the Commissioner must decide within the
120-day period. In short, the two-year prescriptive period in Section 112(A) refers to the period within
which the taxpayer can file an administrative claim for tax refund or credit. Stated otherwise, the two-
year prescriptive period does not refer to the filing of the judicial claim with the CTA but to the
Page 76 of 148
filing of the administrative claim with the Commissioner. As held in Aichi, the "phrase 'within two
years x x x apply for the issuance of a tax credit or refund' refers to applications for refund/credit with
the CIR and not to appeals made to the CTA."
Third, if the 30-day period, or any part of it, is required to fall within the two-year prescriptive period
(equivalent to 730 days), then the taxpayer must file his administrative claim for refund or credit within the
first 610 days of the two-year prescriptive period. Otherwise, the filing of the administrative claim
beyond the first 610 days will result in the appeal to the CTA being filed beyond the two-year
prescriptive period. Thus, if the taxpayer files his administrative claim on the 611 th day, the
Commissioner, with his 120-day period, will have until the 731st day to decide the claim. If the
Commissioner decides only on the 731st day, or does not decide at all, the taxpayer can no longer file his
judicial claim with the CTA because the two-year prescriptive period (equivalent to 730 days) has lapsed.
The 30-day period granted by law to the taxpayer to file an appeal before the CTA becomes utterly
useless, even if the taxpayer complied with the law by filing his administrative claim within the two-year
prescriptive period.
The theory that the 30-day period must fall within the two-year prescriptive period adds a condition that is
not found in the law. It results in truncating 120 days from the 730 days that the law grants the taxpayer
for filing his administrative claim with the Commissioner. This Court cannot interpret a law to defeat,
wholly or even partly, a remedy that the law expressly grants in clear, plain, and unequivocal language.[20]
(Citation omitted and emphasis supplied)
It is undisputed that TSC filed its administrative claim for refund/tax credit with the BIR on March 11, 2002,
which is still within the two-year prescriptive period under Section 112(A) of the NIRC. However, without
waiting for the CIR decision or the lapse of the 120-day period from the time it submitted its complete
documents in support of its claim, TSC filed a petition for review with the CTA on April 1, 2002 - a mere 21
days after it filed its administrative claim with the BIR. Clearly, TSC's petition for review with the CTA was
prematurely filed; the CTA had no jurisdiction to take cognizance of TSC's petition since there was no
decision as yet by the CIR denying TSC's claim, fully or partially, and the 120-day period under Section
112(C) ofthe NIRC had not yet lapsed.
Nevertheless, TSC submits that the requirement to exhaust the 120-day period under Section 112(C) of
the NIRC prior to filing the judicial claim with the CTA is a species of the doctrine of exhaustion of
administrative remedies; that the non-observance of the doctrine merely results in lack of cause of action,
which ground may be waived for failure to timely invoke the same. TSC claims that the issue of its non-
compliance with the 120-day period, as a ground to deny its claim, was already waived since the CIR did
not raise it in the proceedings before the CTA First Division.
The Court does not agree. In San Roque, the Court opined that a petition for review that is filed with the
CTA without waiting for the 120-day mandatory period renders the same void. The Court then pointed out
that a person committing a void act cannot claim or acquire any right from such void act. Thus:
San Roque's failure to comply with the 120-day mandatory period renders its petition for review with the
CTA void. Article 5 of the Civil Code provides, "Acts executed against provisions of mandatory or
prohibitory laws shall be void, except when the law itself authorizes their validity." San Roque's void
petition for review cannot be legitimized by the CTA or this Court because Article 5 of the Civil Code
states that such void petition cannot be legitimized "except when the law itself authorizes [its] validity."
There is no law authorizing the petition's validity.
It is hornbook doctrine that a person committing a void act contrary to a mandatory provision of law cannot
claim or acquire any right from his void act. A right cannot spring in favor of a person from his own void or
illegal act. This doctrine is repeated in Article 2254 of the Civil Code, which states, "No vested or acquired
right can arise from acts or omissions which are against the law or which infringe upon the rights of
others." For violating a mandatory provision of law in filing its petition with the CTA, San Roque cannot
claim any right arising from such void petition. Thus, San Roque's petition with the CTA is a mere scrap of
paper.[21] (Citation omitted and emphasis supplied )
Accordingly, TSC's failure to comply with the 120-day mandatory period under Section 112(C) of the NIRC
renders its petition for review with the CTA void. It is a mere scrap of paper from which TSC cannot derive
or acquire any right notwithstanding the supposed failure on the part of the CIR to raise the issue of TSC's
non-compliance with the 120-day period in the proceedings before the CTA First Division. In any case, the
Court finds that the CIR raised the issue of TSC's non-compliance with the 120-days mandatory period in
the motion for reconsideration that was filed with the CTA First Division. Further, the CIR likewise raised
the same issue in the petition for review that was filed with the CTA en banc.
In insisting that the 120-day period under Section 112(C) of the NIRC is not mandatory, TSC further points
out that the BIR, under BIR Ruling No. DA-489-03 dated December 10, 2003 and Revenue Memorandum
Circular No. 49-03 (RMC No. 49-03) dated April 15, 2003, had already laid down the rule that the
taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek judicial relief with
the CTA. As such, the TSC claims, its failure to comply with the 120-day mandatory period is not cause to
deny its judicial claim for refund/tax credit.
TSC's assertion is untenable. RMC No. 49-03, in part, reads:
In cases where the taxpayer has filed a "Petition for Review" with the Court of Tax Appeals involving a
claim for refund/TCC that is pending at the administrative agency (Bureau of Internal Revenue or OSS-
DOF), the administrative agency and the tax court may act on the case separately. While the case is
pending in the tax court and at the same time is still under process by the administrative agency, the
litigation lawyer of the BIR, upon receipt of the summons from the tax court, shall request from the head of
the investigating/processing office for the docket containing certified true copies of all the documents
pertinent to the claim. The docket shall be presented to the court as evidence for the BIR in its defense on
the tax credit/refund case filed by the taxpayer. In the meantime, the investigating/processing office of the
administrative agency shall continue processing the refund/TCC case until such time that a final decision
has been reached by either the CTA or the administrative agency.
If the CTA is able to release its decision ahead of the evaluation of the administrative agency, the latter
shall cease from processing the claim. On the other hand, if the administrative agency is able to process
the claim of the taxpayer ahead of the CTA and the taxpayer is amenable to the findings thereof, the
concerned taxpayer must file a motion to withdraw the claim with the CTA. A copy of the positive
resolution or approval of the motion must be furnished the administrative agency as a prerequisite to the
release of the tax credit certificate/tax refund processed administratively. However, if the taxpayer is not
agreeable to the findings of the administrative agency or does not respond accordingly to the action of the
agency, the agency shall not release the refund/TCC unless the taxpayer shows proof of withdrawal of the
case filed with the tax court. If, despite the termination of the processing of the refund/TCC at the
Page 77 of 148
administrative level, the taxpayer decides to continue with the case filed at the tax court, the litigation
lawyer of the BIR, upon the initiative of either the Legal Office or the Processing Office of the
Administrative Agency, shall present as evidence against the claim of the taxpayer the result of the
investigation of the investigating/processing office. (Citation omitted and emphasis supplied)
In San Roque, the Court had already clarified that nowhere in RMC No. 49-03 was it stated that a
taxpayer-claimant need not wait for the lapse of the 120-day mandatory period before it can file its judicial
claim with the CTA. RMC No. 49-03 only authorized the BIR to continue the processing of a claim for
refund/tax credit notwithstanding that the same had been appealed to the CTA, viz:
There is nothing in RMC 49-03 that states, expressly or impliedly, that the taxpayer need not wait for the
120-day period to expire before filing a judicial claim with the CTA. RMC 49-03 merely authorizes the BIR
to continue processing the administrative claim even after the taxpayer has filed its judicial claim, without
saying that the taxpayer can file its judicial claim before the expiration of the 120-day period. RMC 49-03
states: "In cases where the taxpayer has filed a 'Petition for Review' with the Court of Tax Appeals
involving a claim for refund/TCC that is pending at the administrative agency (either the Bureau of Internal
Revenue or the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the Department of
Finance), the administrative agency and the court may act on the case separately." Thus, if the taxpayer
files its judicial claim before the expiration of the 120-day period, the BIR will nevertheless continue to act
on the administrative claim because such premature filing cannot divest the Commissioner of his statutory
power and jurisdiction to decide the administrative claim within the 120-day period.
On the other hand, if the taxpayer files its judicial claim after the 120-day period, the Commissioner can
still continue to evaluate the administrative claim. There is nothing new in this because even after the
expiration of the 120-day period, the Commissioner should still evaluate internally the administrative claim
for purposes of opposing the taxpayer's judicial claim, or even for purposes of determining if the BIR
should actually concede to the taxpayer's judicial claim. The internal administrative evaluation of the
taxpayer's claim must necessarily continue to enable the BIR to oppose intelligently the judicial claim or,
if the facts and the law warrant otherwise, for the BIR to concede to the judicial claim, resulting in the
termination of the judicial proceedings.
What is important, as far as the present cases are concerned, is that the mere filing by a taxpayer
of a judicial claim with the CTA before the expiration of the 120-day period cannot operate to
divest the Commissioner of his jurisdiction to decide an administrative claim within the 120-day
mandatory period, unless the Commissioner has clearly given cause for equitable estoppel to
apply as expressly recognized in Section 246 of the Tax Code. [22] (Citation omitted and emphasis
supplied)
As regards BIR Ruling No. DA-489-03, the Court, in San Roque, held that:
BIR Ruling No. DA-489-03 does provide a valid claim for equitable estoppel under Section 246 of the Tax
Code. BIR Ruling No. DA-489-03 expressly states that the "taxpayer-claimant need not wait for the
lapse of the 120-day period before it could seek judicial relief with the CTA by way of Petition for
Review." Prior to this ruling, the BIR held, as shown by its position in the Court of Appeals, that the
expiration of the 120-day period is mandatory and jurisdictional before a judicial claim can be filed.
There is no dispute that the 120-day period is mandatory and jurisdictional, and that the CTA does not
acquire jurisdiction over a judicial claim that is filed before the expiration of the 120-day period. There are,
however, two exceptions to this rule. The first exception is if the Commissioner, through a specific ruling,
misleads a particular taxpayer to prematurely file a judicial claim with the CTA. Such specific ruling is
applicable only to such particular taxpayer. The second exception is where the Commissioner, through a
general interpretative rule issued under Section 4 of the Tax Code, misleads all taxpayers into filing
prematurely judicial claims with the CTA. In these cases, the Commissioner cannot be allowed to later on
question the CTA's assumption of jurisdiction over such claim since equitable estoppel has set in as
expressly authorized under Section 246 of the Tax Code.
xxxx
BIR Ruling No. DA-489-03 is a general interpretative rule because it was 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.
x x x.[23] (Citation omitted and emphasis supplied )
Indeed, BIR Ruling No. DA-489-03 provided that the taxpayerclaimant may already file a judicial claim for
refund/tax credit with the CTA notwithstanding that the 120-day mandatory period under Section 112(C) of
the NIRC had not yet lapsed. Being a general interpretative rule, the CIR is barred from questioning the
CTA's assumption of jurisdiction on the ground that the 120-day mandatory period under Section 112(C)
of the NIRC had not yet lapsed since estoppel under Section 246[24] of the NIRC had already set in.
Nevertheless, the Court clarified that taxpayers can only rely on BIR Ruling No. DA-489-03 from the time
of its issuance on December 10, 2003 up to its reversal by this Court in Aichi on October 6, 2010,
where it was held that the 120-day period under Section 112(C) of the NIRC 1s mandatory and
jurisdictional.
TSC filed its judicial claim for refund/tax credit of its unutilized input VAT with the CTA on April 1, 2002 -
more than a year before the issuance of BIR Ruling No. DA-489-03. Accordingly, TSC cannot benefit from
the declaration laid down in BIR Ruling No. DA-489-03. As stressed by the Court in San Roque, prior to
the issuance of BIR Ruling No. DA-489-03, the BIR held that the 120-day period was mandatory and
jurisdictional, which is the correct interpretation of the law.
TSC nevertheless claims that the Court's ruling in Aichi should only be applied prospectively; that prior to
Aichi, the Court supposedly ruled that a taxpayer-claimant need not await the lapse of the 120-day period
under Section 112(C) of the NIRC before filing a petition for review with the CTA as shown by the Court's
ruling in the cases of Intel Technology Philippines, Inc. v. Commissioner of Internal Revenue,[25]San
Roque Power Corporation v. Commissioner of Internal Revenue,[26] and AT&T Communications Services
Philippines, Inc. v. Commissioner of Internal Revenue.[27]
The Court does not agree. There is no basis to TSC's claim that this Court, prior to Aichi, had ruled that a
taxpayer may file a judicial claim for refund/tax credit with the CTA sans compliance with the 120-day
mandatory period. The cases cited by TSC do not even remotely support its contention. Indeed, nowhere
in the said cases did the Court even discuss the 120-day mandatory period under Section 112(C) of the
NIRC.
In Intel, the administrative claim for refund/tax credit of unutilized input VAT was filed with the BIR on May
18, 1999. Due to the CIR's inaction on its claim for refund/tax credit, the petitioner therein filed a petition
Page 78 of 148
for review with CTA on June 30, 2000 - more than a year after it filed its administrative claim with the BIR.
Further, the issue in the said case is only limited to whether sales invoices, which do not bear the BIR
authority to print and do not indicate the TIN-V, are sufficient evidence to prove that the taxpayer is
engaged in sales which are zero-rated or effectively zero-rated for purposes of claiming unutilized input
VAT refund/tax credit.
Similarly, in San Roque Power Corporation v. Commissioner of Internal Revenue, the Court did not even
remotely touch on the issue of the application of the 120-day mandatory period under Section 112(C) of
the NIRC. The petitioner in the said case filed administrative claims for refund/tax credit of its unutilized
input VAT for the first, second, third, and fourth quarters of the taxable year 2002 on June 19, 2002,
October 5, 2002, February 27, 2003, and May 29, 2003, respectively. The CIR failed to act on the said
claims for refund/tax credit within the 120-day period, which prompted the petitioner therein to file a
petition for review with the CTA on April 5, 2004. Moreover, the issue that was resolved by the Court in the
said case is whether the petitioner therein was able to prove the existence of zero-rated or effectively
zero-rated sales, to which creditable input taxes may be attributed.
Likewise, AT&T Communications only dealt with the substantiation requirements in claiming refund/tax
credit of unutilized input VAT, i.e., whether VAT invoices are sufficient evidence to prove the existence of
zero-rated or effectively zero-rated sales.
Finally, even if TSC was able to substantiate, through the documents it submitted, that it is indeed entitled
to a refund/tax credit of its unutilized input VAT for the taxable year 2000, its claim would still have to be
denied. "Tax refunds are in the nature of tax exemptions, and are to be construed strictissimi juris against
the entity claiming the same."[28] "The taxpayer is charged with the heavy burden of proving that he has
complied with and satisfied all the statutory and administrative requirements to be entitled to the tax
refund."[29] TSC, in prematurely filing a petition for review with the CTA, failed to comply with the 120-day
mandatory period under Section 112(C) of the NIRC. Thus, TSC's claim for refund/tax credit of its
unutilized input VAT should be denied.
WHEREFORE, in consideration of the foregoing disquisitions, the instant petition is GRANTED. The
Decision dated June 16, 2010 and the Resolution dated October 14, 2010 of the Court of Tax Appeals en
banc in CTA EB No. 504 are hereby REVERSED and SET ASIDE. Team Sual Corporation's claim for
refund/tax credit of its unutilized input valued-added tax for the taxable year 2000 is DENIED.
G.R. No. 181836 , July 9,2014
BPI v. COMMISSIONER OF INTERNAL REVENUE
FACTS:
From 28 February 1986 to 8 October 1986, petitioner Bank of the Philippine Islands (BPI) sold to the
Central Bank of the Philippines (now Bangko Sentral ng Pilipinas) U.S. dollars for P 1,608,541,900.00.
BPI instructed, by cable, its correspondent bank in New York to transfer U.S. dollars deposited in BPI’s
account therein to the Federal Reserve Bank in New York for credit to the Central Bank’s account therein.
Thereafter, the Federal Reserve Bank sent to the Central Bank confirmation that such funds had been
credited to its account and the Central Bank promptly transferred to the petitioner’s account in the
Philippines the corresponding amount in Philippine pesos. In 1988, respondent CIR ordered an
investigation to be made on BPI’s sale of foreign currency. As a result thereof, the CIR issued a pre-
assessment notice informing BPI that in accordance with Section 195 (now Section 182) of the NIRC, BPI
was liable for documentary stamp tax at the rate of P 0.30 per P Total tax liability was assessed at P
200.00 on all foreign exchange sold to the Central Bank. 3,016,316.06, which consists of a documentary
stamp tax liability of P2,412,812.85, a 25% surcharge of P 603,203.21, and a compromise penalty of P
300.00.
Issue:
Whether or not the transactions covered is a bill of exchange liable for DST.
Held:
Yes. A definition of a “bill of exchange” is provided by Section 39 of Regulations No. 26, the rules
governing documentary taxes promulgated by the Bureau of Internal Revenue (BIR) in 1924:
Sec. 39. Definition of “bill of exchange”. The term bill of exchange denotes checks, drafts, and all other
kinds of orders for the payment of money, payable at sight, or on demand or after a specific period after
sight or from a stated date.
Section 126 of The Negotiable Instruments Law (Act No. 2031) reiterates that it is an “order for the
payment of money” and specifies the particular requisites that make it negotiable.
Sec. 126. Bill of exchange defined. – A bill of exchange is an unconditional order in writing addressed
by one person to another, signed by the person giving it, requiring the person to whom it is addressed to
pay on demand or at fixed or determinable future time a sum certain in money to order or to bearer.
Section 129 of the same law classifies bills of exchange as inland and foreign, the distinction is laid down
by where the bills are drawn and paid. Thus, a “foreign bill of exchange” may be drawn outside the
Philippines, payable outside the Philippines, or both drawn and payable outside of the Philippines.
Sec. 129. Inland and foreign bills of exchange. — An inland bill of exchange is a bill which is, or on its
face purports to be, both drawn and payable within the Philippines. Any other bill is a foreign bill.
A bill of exchange and a letter of credit may differ as to their negotiability, and as to who owns the funds
used for the payment at the time payment is made. However, in both bills of exchange and letters of
credit, a person orders another to pay money to a third person.
Section 195 (now Section 182) of the NIRC covers foreign bills of exchange, letters of credit, and orders of
payment for money, drawn in Philippines, but payable outside the Philippines. From this enumeration, two
common elements need to be present: (1) drawing the instrument or ordering a drawee, within the
Philippines; and (2) ordering that drawee to pay another person a specified amount of money outside the
Philippines. What is being taxed is the facility that allows a party to draw the draft or make the order to pay
within the Philippines and have the payment made in another country.
G.R. No. 161759, July 02, 2014
COMMISSIONER OF CUSTOMS, PETITIONER, VS. OILINK INTERNATIONAL CORPORATION,
RESPONDENT
FACTS:
On September 15, 1966, Union Refinery Corporation (URC) was established under the Corporation Code
of the Philippines. In the course of its business undertakings, particularly in the period from 1991 to 1994,
URC imported oil products into the country.
On January 11, 1996, Oilink was incorporated for the primary purpose of manufacturing, importing,
Page 79 of 148
exporting, buying, selling or dealing in oil and gas, and their refinements and by-products at wholesale
and retail of petroleum. URC and Oilink had interlocking directors when Oilink started its business.
In applying for and in expediting the transfer of the operator's name for the Customs Bonded Warehouse
then operated by URC, Esther Magleo, the Vice-President and General Manager of URC, sent a letter
dated January 15, 1996 to manifest that URC and Oilink had the same Board of Directors and that Oilink
was 100% owned by URC.
On March 4, 1998, Oscar Brillo, the District Collector of the Port of Manila, formally demanded that URC
pay the taxes and duties on its oil imports that had arrived between January 6, 1991 and November 7,
1995 at the Port of Lucanin in Mariveles, Bataan.
On April 16, 1998, Brillo made another demand letter to URC for the payment of the reduced sum of
P289,287,486.60 for the Value-Added Taxes (VAT), special duties and excise taxes for the years 1991-
1995.
On April 23, 1998, URC, through its counsel, responded to the demands by seeking the landed
computations of the assessments, and challenged the inconsistencies of the demands.
On November 25, 1998, then Customs Commissioner Pedro C. Mendoza formally directed that URC pay
the amount of P119,223,541.71 representing URC's special duties, VAT, and Excise Taxes that it had
failed to pay at the time of the release of its 17 oil shipments that had arrived in the Sub-port of Mariveles
from January 1, 1991 to September 7, 1995.
On December 21, 1998, Commissioner Mendoza wrote again to require URC to pay deficiency taxes but
in the reduced sum of P99,216,580.10.
On December 23, 1998, upon his assumption of office, Customs Commissioner Nelson Tan transmitted
another demand letter to URC affirming the assessment of P99,216,580.10 by Commissioner Mendoza.
On January 18, 1999, Magleo, in behalf of URC, replied by letter to Commissioner Tan's affirmance by
denying liability, insisting instead that only P28,933,079.20 should be paid by way of compromise.
On March 26, 1999, Commissioner Tan responded by rejecting Magleo's proposal, and directed URC to
pay P99,216,580.10.
On May 24, 1999, Manuel Co, URC's President, conveyed to Commissioner Tan URC's willingness to pay
only P94,216,580.10, of which the initial amount of P28,264,974.00 would be taken from the collectibles of
Oilink from the National Power Corporation, and the balance to be paid in monthly installments over a
period of three years to be secured with corresponding post-dated checks and its future available tax
credits.
On July 2, 1999, Commissioner Tan made a final demand for the total liability of P138,060,200.49 upon
URC and Oilink.
On July 8, 1999, Co requested from Commissioner Tan a complete finding of the facts and law in support
of the assessment made in the latter's July 2, 1999 final demand.
Also on July 8, 1999, Oilink formally protested the assessment on the ground that it was not the party
liable for the assessed deficiency taxes.
On July 12, 1999, after receiving the July 8, 1999 letter from Co, Commissioner Tan communicated in
writing the detailed computation of the tax liability, stressing that the Bureau of Customs (BoC) would not
issue any clearance to Oilink unless the amount of P138,060,200.49 demanded as Oilink's tax liability be
first paid, and a performance bond be posted by URC/Oilink to secure the payment of any adjustments
that would result from the BIR's review of the liabilities for VAT, excise tax, special duties, penalties, etc.
Thus, on July 30, 1999, Oilink appealed to the CTA, seeking the nullification of the assessment for having
been issued without authority and with grave abuse of discretion tantamount to lack of jurisdiction
because the Government was thereby shifting the imposition from URC to Oilink.
ISSUE:
Hence, this appeal, whereby the Commissioner of Customs reiterates the issues raised in the CA.
RULLING:
There is no question that the CTA had the jurisdiction over the case. Republic Act No. 1125, the law
creating the CTA, defined the appellate jurisdiction of the CTA as follows:
Section 7. Jurisdiction. - The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review
by appeal, as herein provided:
xxxx
2. Decisions of the Commissioner of Customs in cases involving liability for Customs duties, fees or other
money charges; seizure, detention or release of property affected; fines, forfeitures or other penalties
imposed in relation thereto; or other matters arising under the Customs Law or other law or part of law
administered by the Bureau of Customs;
xxxx
Nonetheless, the Commissioner of Customs contends that the CTA should not take cognizance of the
case because of the lapse of the 30-day period within which to appeal, arguing that on November 25,
1998 URC had already received the BoC's final assessment demanding payment of the amount due
within 10 days, but filed the petition only on July 30, 1999. [8]
We rule against the Commissioner of Customs. The CTA correctly ruled that the reckoning date for
Oilink's appeal was July 12, 1999, not July 2, 1999, because it was on the former date that the
Commissioner of Customs denied the protest of Oilink. Clearly, the filing of the petition on July 30, 1999
by Oilink was well within its reglementary period to appeal. The insistence by the Commissioner of
Customs on reckoning the reglementary period to appeal from November 25, 1998, the date when URC
received the final demand letter, is unwarranted. We note that the November 25, 1998 final demand letter
of the BoC was addressed to URC, not to Oilink. As such, the final demand sent to URC did not bind
Page 80 of 148
Oilink unless the separate identities of the corporations were disregarded in order to consider them as
one.
2.
Oilink had a valid cause of action
The Commissioner of Customs posits that the final demand letter dated July 2, 1999 from which Oilink
appealed was not the final "action" or "ruling" from which an appeal could be taken as contemplated by
Section 2402 of the Tariff and Customs Code; that what Section 7 of RA No. 1125 referred to as a
decision that was appealable to the CTA was a judgment or order of the Commissioner of Customs that
was final in nature, not merely an interlocutory one; that Oilink did not exhaust its administrative remedies
under Section 2308 of the Tariff and Customs Code by paying the assessment under protest; that only
when the ensuing decision of the Collector and then the adverse decision of the Commissioner of
Customs would it be proper for Oilink to seek judicial relief from the CTA; and that, accordingly, the CTA
should have dismissed the petition for lack of cause of action.
The position of the Commissioner of Customs lacks merit.
The CA correctly held that the principle of non-exhaustion of administrative remedies was not an iron-clad
rule because there were instances in which the immediate resort to judicial action was proper. This was
one such exceptional instance when the principle did not apply. As the records indicate, the
Commissioner of Customs already decided to deny the protest by Oilink on July 12, 1999, and stressed
then that the demand to pay was final. In that instance, the exhaustion of administrative remedies would
have been an exercise in futility because it was already the Commissioner of Customs demanding the
payment of the deficiency taxes and duties.
3.
There was no ground to pierce
the veil of corporate existence
A corporation, upon coming into existence, is invested by law with a personality separate and distinct from
those of the persons composing it as well as from any other legal entity to which it may be related. For this
reason, a stockholder is generally not made to answer for the acts or liabilities of the corporation, and vice
versa. The separate and distinct personality of the corporation is, however, a mere fiction established by
law for convenience and to promote the ends of justice. It may not be used or invoked for ends that
subvert the policy and purpose behind its establishment, or intended by law to which the corporation owes
its being. This is true particularly when the fiction is used to defeat public convenience, to justify wrong, to
protect fraud, to defend crime, to confuse legitimate legal or judicial issues, to perpetrate deception or
otherwise to circumvent the law. This is likewise true where the corporate entity is being used as an alter
ego, adjunct, or business conduit for the sole benefit of the stockholders or of another corporate entity. In
such instances, the veil of corporate entity will be pierced or disregarded with reference to the particular
transaction involved.[9]
In Philippine National Bank v. Ritratto Group, Inc.,[10] the Court has outlined the following circumstances
that are useful in the determination of whether a subsidiary is a mere instrumentality of the parent-
corporation, viz:
1. Control, not mere majority or complete control, but complete domination, not only of finances but of
policy and business practice in respect to the transaction attacked so that the corporate entity as to this
transaction had at the time no separate mind, will or existence of its own;
2. Such control must have been used by the defendant to commit fraud or wrong, to perpetrate the
violation of a statutory or other positive legal duty, or dishonest and, unjust act in contravention of
plaintiff's legal rights; and
3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained
of.
In applying the "instrumentality" or "alter ego" doctrine, the courts are concerned with reality, not form, and
with how the corporation operated and the individual defendant's relationship to the operation.[11]
Consequently, the absence of any one of the foregoing elements disauthorizes the piercing of the
corporate veil.
Indeed, the doctrine of piercing the corporate veil has no application here because the Commissioner of
Customs did not establish that Oilink had been set up to avoid the payment of taxes or duties, or for
purposes that would defeat public convenience, justify wrong, protect fraud, defend crime, confuse
legitimate legal or judicial issues, perpetrate deception or otherwise circumvent the law. It is also
noteworthy that from the outset the Commissioner of Customs sought to collect the deficiency taxes and
duties from URC, and that it was only on July 2, 1999 when the Commissioner of Customs sent the
demand letter to both URC and Oilink. That was revealing, because the failure of the Commissioner of
Customs to pursue the remedies against Oilink from the outset manifested that its belated pursuit of Oilink
was only an afterthought.
WHEREFORE, the Court AFFIRMS the decision promulgated by the Court of Appeals on September 29,
2003.
G.R. NO. 205543, June 30, 2014
CIR v. SAN ROQUE POWER CORPORATION,
FACTS:
On October 11, 1997, [San Roque] entered into a Power Purchase Agreement ("PPA") with the National
Power Corporation ("NPC") to develop hydro-potential of the Lower Agno River and generate additional
power and energy for the Luzon Power Grid, by building the San Roque Multi-Purpose Project located in
San Manuel, Pangasinan. The PPA provides, among others, that [San Roque] shall be responsible for the
design, construction, installation, completion, testing and commissioning of the Power Station and shall
operate and maintain the same, subject... to NPC instructions. During the cooperation period of twenty-
five (25) years commencing from the completion date of the Power Station, NPC will take and pay for all
electricity available from the Power Station. On the construction and development of the San Roque Multi-
Purpose Project which comprises of the dam, spillway and power plant, [San Roque] allegedly incurred,
excess input VAT in the amount of P559,709,337.54 for taxable year 2001 which it declared in its
Quarterly VAT Returns... filed for the same year. [San Roque] duly filed with the BIR separate claims for
Page 81 of 148
refund, in the total amount of P559,709,337.54, representing unutilized input taxes as declared in its VAT
returns for taxable year 2001.
However, on March 28, 2003, [San Roque] filed amended Quarterly VAT Returns for the year 2001 since
it increased its unutilized input VAT to the amount of P560,200,283.14. Consequently, [San Roque] filed
with the BIR on even date, separate amended claims for refund in the... aggregate amount of
P560,200,283.14. [CIR's] inaction on the subject claims led to the filing by [San Roque] of the Petition for
Review with the Court [of Tax Appeals] in Division on April 10, 2003.Trial of the case ensued and on July
20, 2005, the case was submitted for decision.
The CTA Second Division initially denied San Roque's claim. In its Decision[16] dated 8 March 2006, it
cited the following as bases for the denial of San Roque's claim: lack of recorded zero-rated or effectively
zero-rated sales; failure to submit documents... specifically identifying the purchased goods/services
related to the claimed input VAT which were included in its Property, Plant and Equipment account; and
failure to prove that the related construction costs were capitalized in its books of account and subjected
to... depreciation.
The CTA Second Division required San Roque to show that it complied with the following requirements of
Section 112(B) of Republic Act No. 8424 (RA 8424)[17] to be entitled to a tax refund or credit of input VAT
attributable to capital goods imported or... locally purchased: (1) it is a VAT-registered entity; (2) its input
taxes claimed were paid on capital goods duly supported by VAT invoices and/or official receipts; (3) it did
not offset or apply the claimed input VAT payments on capital goods against any output VAT liability;...
and (4) its claim for refund was filed within the two-year prescriptive period both in the administrative and
judicial levels.
San Roque filed a Motion for New Trial and/or Reconsideration on 7 April 2006. In its 29 November 2007
Amended Decision,[19] the CTA Second Division found legal basis to partially grant San Roque's claim.
The CTA Second Division ordered the Commissioner to... refund or issue a tax credit in favor of San
Roque in the amount of P483,797,599.65, which represents San Roque's unutilized input VAT on its
purchases of capital goods and services for the taxable year 2001. The CTA based the adjustment in the
amount on the findings of the... independent certified public accountant. The following reasons were cited
for the disallowed claims: erroneous computation; failure to ascertain whether the related purchases are in
the nature of capital goods; and the purchases pertain to capital goods. Moreover, the reduction... of
claims was based on the following: the difference between San Roque's claim and that appearing on its
books; the official receipts covering the claimed input VAT on purchases of local services are not within
the period of the claim; and the amount of VAT cannot be determined... from the submitted official receipts
and invoices. The CTA Second Division denied San Roque's claim for refund or tax credit of its unutilized
input VAT attributable to its zero-rated or effectively zero-rated sales because San Roque had no record
of such sales for the four... quarters of 2001.
The Commissioner filed a Petition for Review before the CTA EB praying for the denial of San Roque's
claim for refund or tax credit in its entirety as well as for the setting aside of the 29 November 2007
Amended Decision and the 11 July 2008 Resolution in CTA Case No.
The CTA EB dismissed the CIR's petition for review and affirmed the challenged decision and resolution.
The CTA EB cited Commissioner of Internal Revenue v. Toledo Power, Inc.[21] and Revenue
Memorandum Circular No. 49-03,[22] as its bases for ruling that San Roque's judicial claim was not
prematurely filed.
Lastly, it is apparent from the following provisions of Revenue Memorandum Circular No. 49-03 dated
August 18, 2003, that [the CIR] knows that claims for VAT refund or tax credit filed with the Court [of Tax
Appeals] can proceed simultaneously with the ones filed with the BIR... and that taxpayers need not wait
for the lapse of the subject 120-day period.
ISSUE:
The Court of Tax Appeals En Banc erred in holding that [San Roque's] claim for refund was not
prematurely filed
RULING:
On 10 April 2003, a mere 13 days after it filed its amended administrative claim with the Commissioner on
28 March 2003, San Roque filed a Petition for Review with the CTA docketed as CTA Case No. 6647.
From this we gather two crucial facts: first, San Roque did not wait... for the 120-day period to lapse
before filing its judicial claim; second, San Roque filed its judicial claim more than four (4) years before the
Atlas[45] doctrine, which was promulgated by the Court on 8 June 2007.
Clearly, San Roque failed to comply with the 120-day waiting period, the time expressly given by law to
the Commissioner to decide whether to grant or deny San Roque's application for tax refund or credit. It is
indisputable that compliance with the 120-day waiting period is... mandatory and jurisdictional. The waiting
period, originally fixed at 60 days only, was part of the provisions of the first VAT law, Executive Order No.
273, which took effect on 1 January 1988. The waiting period was extended to 120 days effective 1
January 1998 under RA
8424 or the Tax Reform Act of 1997. Thus, the waiting period has been in our statute books for more than
fifteen (15) years before San Roque filed its judicial claim.
Failure to comply with the 120-day waiting period violates a mandatory provision of law. It violates the
doctrine of exhaustion of administrative remedies and renders the petition premature and thus without a
cause of action, with the effect that the CTA does not acquire... jurisdiction over the taxpayer's petition.
Philippine jurisprudence is replete with cases upholding and reiterating these doctrinal principles.[46]
The charter of the CTA expressly provides that its jurisdiction is to review on appeal "decisions of the
Commissioner of Internal Revenue in cases involving x x x refunds of internal revenue taxes."[47] When a
taxpayer prematurely files a judicial... claim for tax refund or credit with the CTA without waiting for the
decision of the Commissioner, there is no "decision" of the Commissioner to review and thus the CTA as a
court of special jurisdiction has no jurisdiction over the appeal. The charter of the CTA also expressly...
provides that if the Commissioner fails to decide within "a specific period" required by law, such "inaction
shall be deemed a denial"[48] of the application for tax refund or credit. It is the Commissioner's decision,
or inaction "deemed a... denial," that the taxpayer can take to the CTA for review. Without a decision or an
"inaction x x x deemed a denial" of the Commissioner, the CTA has no jurisdiction over a petition for
review.[49]
San Roque's failure to comply with the 120-day mandatory period renders its petition for review with the
CTA void. Article 5 of the Civil Code provides, "Acts executed against provisions of mandatory or
prohibitory laws shall be void, except when the law itself authorizes... their validity." San Roque's void
petition for review cannot be legitimized by the CTA or this Court because Article 5 of the Civil Code
states that such void petition cannot be legitimized "except when the law itself authorizes [its] validity."
There is no law authorizing the... petition's validity.
It is hornbook doctrine that a person committing a void act contrary to a mandatory provision of law cannot
claim or acquire any right from his void act. A right cannot spring in favor of a person from his own void or
illegal act. This doctrine is repeated in Article 2254 of the
Civil Code, which states, "No vested or acquired right can arise from acts or omissions which are against
the law or which infringe upon the rights of others."[50] For violating a mandatory provision of law in filing
Page 82 of 148
its petition with the CTA, San Roque... cannot claim any right arising from such void petition. Thus, San
Roque's petition with the CTA is a mere scrap of paper.
This Court cannot brush aside the grave issue of the mandatory and jurisdictional nature of the 120-day
period just because the Commissioner merely asserts that the case was prematurely filed with the CTA
and does not question the entitlement of San Roque to the refund. The mere... fact that a taxpayer has
undisputed excess input VAT, or that the tax was admittedly illegally, erroneously or excessively collected
from him, does not entitle him as a matter of right to a tax refund or credit. Strict compliance with the
mandatory and jurisdictional conditions... prescribed by law to claim such tax refund or credit is essential
and necessary for such claim to prosper. Well-settled is the rule that tax refunds or credits, just like tax
exemptions, are strictly construed against the taxpayer.[51] The burden is... on the taxpayer to show that
he has strictly complied with the conditions for the grant of the tax refund or credit.
This Court cannot disregard mandatory and jurisdictional conditions mandated by law simply because the
Commissioner chose not to contest the numerical correctness of the claim for tax refund or credit of the
taxpayer. Non-compliance with mandatory periods, non-observance of... prescriptive periods, and non-
adherence to exhaustion of administrative remedies bar a taxpayer's claim for tax refund or credit,
whether or not the Commissioner questions the numerical correctness of the claim of the taxpayer. This
Court should not establish the... precedent that non-compliance with mandatory and jurisdictional
conditions can be excused if the claim is otherwise meritorious, particularly in claims for tax refunds or
credit. Such precedent will render meaningless compliance with mandatory and jurisdictional
requirements,... for then every tax refund case will have to be decided on the numerical correctness of the
amounts claimed, regardless of non-compliance with mandatory and jurisdictional conditions.
San Roque cannot also claim being misled, misguided or confused by the Atlas doctrine because San
Roque filed its petition for review with the CTA more than four years before Atlas was promulgated. The
Atlas doctrine did not exist at the time San
Roque failed to comply with the 120-day period. Thus, San Roque cannot invoke the Atlas doctrine as an
excuse for its failure to wait for the 120-day period to lapse. In any event, the Atlas doctrine merely stated
that the two-year prescriptive period should be counted... from the date of payment of the output VAT, not
from the close of the taxable quarter when the sales involving the input VAT were made. The Atlas
doctrine does not interpret, expressly or impliedly, the 120+30[52] day periods.
In fact, Section 106(b) and (e) of the Tax Code of 1977 as amended, which was the law cited by the Court
in Atlas as the applicable provision of the law did not yet provide for the 30-day period for the taxpayer to
appeal to the CTA from the decision or inaction of the
Commissioner.[53] Thus, the Atlas doctrine cannot be invoked by anyone to disregard compliance with
the 30-day mandatory and jurisdictional period. Also, the difference between the Atlas doctrine on one
hand, and the Mirant[54] doctrine on the other hand, is a mere 20 days. The Atlas doctrine counts the two-
year prescriptive period from the date of payment of the output VAT, which means within 20 days after the
close of the taxable quarter. The output VAT at that time must be... paid at the time of filing of the
quarterly tax returns, which were to be filed "within 20 days following the end of each quarter."
At the time San Roque filed its petition for review with the CTA, the 120+30 day mandatory periods were
already in the law. Section 112(C)[56] expressly grants the Commissioner 120 days within which to decide
the taxpayer's claim. The law is clear, plain,... and unequivocal: "x x x the Commissioner shall grant a
refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days
from the date of submission of complete documents." Following the verba legis doctrine, this law must...
be applied exactly as worded since it is clear, plain, and unequivocal. The taxpayer cannot simply file a
petition with the CTA without waiting for the Commissioner's decision within the 120-day mandatory and
jurisdictional period. The CTA will have no jurisdiction because there... will be no "decision" or "deemed a
denial" decision of the Commissioner for the CTA to review. In San Roque's case, it filed its petition with
the CTA a mere 13 days after it filed its administrative claim with the Commissioner. Indisputably, San
Roque knowingly violated the... mandatory 120-day period, and it cannot blame anyone but itself.
This law is clear, plain, and unequivocal. Following the well-settled verba legis doctrine, this law should be
applied exactly as worded since it is clear, plain, and unequivocal. As this law states, the taxpayer may, if
he wishes, appeal the decision of the Commissioner... to the CTA within 30 days from receipt of the
Commissioner's decision, or if the Commissioner does not act on the taxpayer's claim within the 120-day
period, the taxpayer may appeal to the CTA within 30 days from the expiration of the 120-day period.
FLORES, Joel F.
2009-0126
COMMISSIONER OF INTERNAL REVENUE, vs. MINDANAO II GEOTHERMAL PARTNERSHIP, G.R.
No. 189440 June 18, 2014
FACTS:
Respondent Mindanao II Geothermal Partnership filed a claim for refund concerning the input VAT it paid
attributable to zero-rated sales of the taxable period of 2002 in the amount of P7,427,965.37. Petitioner
failed to act on the said claim, hence a Petition for Review was filed in the CTA First Division. Pending the
said case, the petitioner issued Tax Credit Certificate amounting to P6,940,313.37 to the respondent
leaving a balance of P689,313.37. The CTA First Division still ordered the payment of the balance to the
respondent. Petitioner filed a motion to review the case claiming that the respondent failed to file its claim
within 30 days as mandated by Sec. 112(D) of the NIRC.
ISSUE:
Whether or not the court erred in ruling out the claim of prescription by petitioner, on the basis that it was
never raised in the initial stage of the case?
HELD:
Notwithstanding the timely filing of the respondent’s administrative claim, we are constrained to order the
dismissal of the respondent’s judicial claim for tax refund or tax credit for having been filed beyond the
mandatory and jurisdictional periods provided in Section 112(C) of the NIRC. Section 112(C) expressly
grants the taxpayer a 30-day period to appeal to the CTA the decision or inaction of the Commissioner of
Internal Revenue (CIR).
We clarified that the two-year prescriptive period under Section 112(A) of the NIRC refers only to the filing
of an administrative claim with the BIR. Meanwhile, the judicial claim under Section 112(C) of the NIRC
must be filed within a mandatory and jurisdictional period of 30 days from the date of receipt of the
decision denying the claim, or within 30 days from the expiration of the 120-day period for deciding the
claim.
Section 112(D) [now Section 112(C)] of the NIRC clearly provides that the CIR has "120 days, from the
date of the submission of the complete documents in support of the application [for tax refund/credit],"
within which to grant or deny the claim. In case of full or partial denial by the CIR, the taxpayer’s recourse
is to file an appeal before the CTA within 30 days from receipt of the decision of the CIR. However, if after
the 120-day period the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer
is to appeal the inaction of the CIR to CTA within 30 days.
TAGANITO MINING CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE G.R.
No. 197591 June 18, 2014
Page 83 of 148
FACTS:
Taganito Mining Corporation filed before the BIR an Administrative claim for the refund of Input VAT paid
on domestic purchases of taxable goods and services and importation of goods in the amount of
1,885,140.22 covering the period January 1, 2004 to December 31, 2004, in accordance with Section 112,
subsections (A) and (B) of the National Internal Revenue Code (NIRC). Less than 120 days after, it then
filed a judicial claim for refund. The CTA Division partially granted the claim, which covers only the period
Jan. 1, 2004 to Mar. 9, 2004. It further claimed that Taganito is considered an exporter, and cannot
therefore claim input VAT on its domestic purchases for the aforesaid period. CIR filed a motion for
reconsideration with the CTA En Banc. The CTA En Banc reversed the grant provided by its Division,
reasoning that the said claim was filed less than 120 days or 93 days after it filed the administrative claim,
making the said claim premature for judicial review.
ISSUE:
Whether or not the CTA En Banc is correct to completely deny Taganito of its claim for refund and
whether the latter is entitled to the said claims?
HELD:
As correctly pointed out by the CTA En Banc, the Court, in the 2010 Aichi case, ruled that the observance
of the 120-day period is a mandatory and jurisdictional requisite to the filing of a judicial claim for refund
before the CTA. Consequently, non-observance thereof would lead to the dismissal of the judicial claim
due to the CTA’s lack of jurisdiction. The Court, in the same case, also clarified that the two (2)-year
prescriptive period applies only to administrative claims and not to judicial claims. In other words, the Aichi
case instructs that once the administrative claim is filed within the prescriptive period, the claimant must
wait for the 120-day period to end and, thereafter, he is given a 30-day period to file his judicial claim
before the CTA, even if said 120-day and 30-day periods would exceed the aforementioned two (2)-year
prescriptive period.
COMMISSIONER OF INTERNAL REVENUE vs. MANILA ELECTRIC COMPANY (MERALCO)
G.R. No. 181459, June 9, 2014
Facts:
Respondent MERALCO obtain a loan from NORD/LB Singapore. The said loan was subjected to a final
withholding tax of 10%, which amounted to a total of P 264,120,181.44 covering the period of January
1999 to September 2003. MERALCO was able to find out, that NORD/LB Singapore is a foreign
government-owned financing institution which should have an exempt status as provided for under
Section 32(B)(7)(a) of the NIRC of 1997. It was only by July 13, 2004 that MERALCO was able to file a tax
refund. The CTA only granted partial refund, as it finds the amount P 224,760,926.55 filed erroneously to
have prescribed. Petitioner maintains that the whole amount should have been refunded since they were
able to provide sufficient evidence concerning the status of the grantor of loan.
Issue:
Whether or not the claim for refund had prescribed within 2 years from payment, provided that there is a
supervening cause?
Held:
The prescriptive period provided is mandatory regardless of any supervening cause that may arise after
payment. It should be pointed out further that while the prescriptive period of two (2) years commences to
run from the time that the refund is ascertained, the propriety thereof is determined by law (in this case,
from the date of payment of tax), and not upon the discovery by the taxpayer of the erroneous or
excessive payment of taxes. The issuance by the BIR of the Ruling declaring the tax-exempt status of
NORD/LB, if at all, is merely confirmatory in nature. As aptly held by the CTA-First Division, there is no
basis that the subject exemption was provided and ascertained only through BIR Ruling No. DA-342-
2003, since said ruling is not the operative act from which an entitlement of refund is determined.34 In
other words, the BIR is tasked only to confirm what is provided under the Tax Code on the matter of tax
exemptions as well as the period within which to file a claim for refund.
MIRAMAR FISH COMPANY INC., VS COMMISSIONER OF INTERNAL REVENUE G.R.
No. 185432 June 4, 2014
Facts:
Petitioner is a corporation registered with the BIR as a VAT taxpayer. On the other hand, respondent is
the duly appointed Commissioner of Internal Revenue. On 4 June 2002, petitioner was registered as a
new export producer of canned tuna and canned pet food with non-pioneer status. Petitioner filed its
Quarterly VAT for taxable year 2002 and 2003. The administrative claim for refund of petitioner’s alleged
unutilized input VAT for taxable year 2002 and 2003 was filed with the BIR. Subsequently, an
administrative claim for the refund or issuance of a TCC allegedly representing unutilized or unapplied
VAT input taxes attributable to petitioner’s zero- rated transactions or its export sales for taxable years
2002 and 2003. Consequently, since no final action has been taken by respondent on petitioner’s various
administrative claims, the latter filed a Petition for Review before the CTA on 30 March 2004. The CTA in
Division denied due course and dismissed petitioner’s claim for the issuance of a TCC on the sole ground
that the sales invoices presented in support thereof did not comply with the invoicing requirements
provided for under Section 1137 of the NIRC of 1997, as amended, and Section 4.108-1 of Revenue
Regulations (RR) No. 7-95.
Issue:
Whether or not petitioner is entitled to a TCC in the amount of P12,741,136.81 allegedly representing its
excess and unutilized input VAT for the taxable years 2002 and 2003, in accordance with the provisions of
the NIRC of 1997, as amended, other pertinent laws, and applicable jurisprudential proclamations.
Ruling:
No. The settled rule is that absence or non-printing of the word “zero-rated” in petitioner’s invoices is fatal
to its claim for the refund and/or tax credit representing its unutilized input VAT attributable to its zero-
rated sales.
Section 113 of the NIRC of 1997, as amended, categorically provides that a VAT- registered entity, like
petitioner, shall issue a duly registered VAT invoice or official receipt, which must contain “a statement
that the seller is a VAT-registered person.” Therefore, as correctly articulated by the CTA En Banc,
compliance with the aforesaid invoicing requirements is mandatory.
VISAYAS GEOTHERMAL POWER COMPANY, VS. COMISSIONER OF INTERNAL REVENUE
G.R. No. 197525 June 4, 2014
Facts:
Page 84 of 148
Petitioner filed an administrative claim for refund for the amount of 14,160,807.95 with the BIR District
Office on the ground that it was entitled to recover excess and unutilized input VAT payments for the four
quarters of taxable year 2005, pursuant to R.A No. 9136, which treated sales of generated power subject
to VAT to a zero percent (0%) rate starting June 26, 2001. Nearly one month later, on January 3, 2007,
while its administrative claim was pending, VGPC filed its judicial claim via a petition for review with the
CTA praying for a refund or the issuance of a tax credit certificate in the amount of 14,160,807.95,
covering the four quarters of taxable year 2005. The Court ruled that both the administrative and judicial
claims were filed within the two-year prescriptive period provided in Section 112(A) of the National Internal
Revenue Code of 1997 (NIRC), the reckoning point of the period being the close of the taxable quarter
when the sales were made.
Issue:
Whether or not the petitioner’s judicial claim for refund was prematurely filed?
Held:
No. Judicial claim is not premature. Under Section 112(A), the taxpayer may, within 2 years after the
close of the taxable quarter when the sales were made, via an administrative claim with the CIR, apply for
the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such
sales. Under Section 112(D), the CIR must then act on the claim within 120 days from the submission of
the taxpayer’s complete documents. In case of (a) a full or partial denial by the CIR of the claim, or (b) the
CIR’s failure to act on the claim within 120 days, the taxpayer may file a judicial claim via an appeal with
the CTA of the CIR decision or unacted claim, within 30 days (a) from receipt of the decision; or (b) after
the expiration of the 120-day period. The 2-year period under Section 229 does not apply to appeals
before the CTA in relation to claims for a refund or tax credit for unutilized creditable input VAT.Section
229 pertains to the recovery of taxes erroneously, illegally, or excessively collected. San Roque stressed
that "input VAT is not ‘excessively’ collected as understood under Section 229 because, at the time the
input VAT is collected, the amount paid is correct and proper." It is, therefore, Section 112 which applies
specifically with regard to claiming a refund or tax credit for unutilized creditable input VAT.
CIR v. INSULAR LIFE ASSURANCE CO. LTD
GR No. 197192, Jun 04, 2014
FACTS
Respondent The Insular Life Assurance, Co., Ltd. is a corporation duly organized and existing under and
by virtue of the laws of the Republic of the Philippines, with principal office located at IL Corporate Center,
Insular Life Drive, Filinvest Corporate City, Alabang, Muntinlupa City. It is registered as a non-stock
mutual life insurer with the Securities and Exchange Commission.
On October 7, 2004, respondent received an Assessment Notice with Formal Letter of Demand both
dated July 29, 2004, assessing respondent for deficiency DST on its premiums on direct business/sums
assured for calendar year 2002, computed as follows:
Documentary Stamp Tax
Deficiency Documentary Stamp Tax-Basic [P]70,732,389.83
Add: Increments (Interest and Compromise Penalty) 23,201,969.38
Total Amount Due [P]93,934,359.21
Thereafter, respondent filed its Protest Letter on November 4, 2004, which was subsequently denied by
petitioner in a Final Decision, on Disputed Assessment dated April 15, 2005 for lack of factual and legal
bases. Apparently, respondent received the aforesaid Final Decision on Disputed Assessment only on
June 23, 2005. On July 15, 2005, respondent filed a Petition for Review before [the CTA].
On April 21, 2009, the former Second Division of the [CTA] rendered a Decision in favor of respondent,
thus, granting the Petition for Review and held, among others, that respondent sufficiently established that
it is a cooperative company and therefore, it is exempt from the DST on the insurance policies it grants to
its members.
Consequently, on May 13, 2009, petitioner filed a Motion for Reconsideration.
On January 11, 2010, petitioner received a Resolution dated January 4, 2010 of the former Second
Division of [the CTA] denying [its] Motion for Reconsideration for lack of merit. It held, among others, that
the Supreme Court in Republic of the Philippines vs. Sunlife Assurance Company of Canada already laid
down the rule that registration with the Cooperative Development Authority is not essential before
respondent may avail of the exemptions granted under Section 199 of the 1997 NIRC, as amended.
Undaunted, petitioner filed a Petition for Review before the [CTA] en banc on January 26, 2010
On March 14, 2011, the CTA en banc denied the petition and rendered the assailed decision,
WHEREFORE, the instant Petition for Review is hereby DENIED for lack of merit. The assailed Decision
dated April 21, 2009 and Resolution dated January 4, 2010 are AFFIRMED.
It is the petitioner's contention that since the respondent is not registered with the Cooperative
Development Authority (CDA), it should not be considered as a cooperative company that is entitled to the
exemption provided under Section 199(a) of the National Internal Revenue Code (NIRC) of 1997.[7]
Thus, the instant petition.
Issue
WHETHER OR NOT THE CTA EN BANC ERRED IN RULING THAT RESPONDENT IS A
COOPERATIVE AND [IS] THUS[,] EXEMPT FROM DOCUMENTARY STAMP TAX.
Ruling of the Court
No. CTA en Banc is correct
Under NIRC of 1997 defined a cooperative company or association as "conducted by the members
thereof with the money collected from among themselves and solely for their own protection and not for
profit. Consequently, as long as these requisites are satisfied, a company or association is deemed a
cooperative insofar as taxation is concerned. In this case, the respondent has sufficiently established that
it conforms with the elements of a cooperative as defined in the NIRC of 1997 in that it is managed by
members, operated with money collected from the members and has for its main purpose the mutual
protection of members for profit
the NIRC of 1997 does not require registration with the CDA. No tax provision requires a mutual life
insurance company to register with that agency in order to enjoy exemption from both percentage and
DST. Although a provision of Section 8 of the Revenue Memorandum Circular (RMC) No. 48-91 requires
the submission of the Certificate of Registration with the CDA before the issuance of a tax exemption
certificate, that provision cannot prevail over the clear absence of an equivalent requirement under the
Tax Code
The respondent correctly pointed out that in other provisions of the NIRC, registration with the CDA is
expressly required in order to avail of certain tax exemptions or preferential tax treatment , a requirement
which is noticeably absent in Section 199 of the NIRC.
Page 85 of 148
This absence of the registration requirement under Section 199 clearly manifests the intention of the
Legislative branch of the government to do away with registration before the CDA for a cooperative to
benefit from the DST exemption under this particular section.
The distinguishing feature of a cooperative enterprise is the mutuality of cooperation among its member-
policyholders united for that purpose. So long as respondent meets this essential feature, it does not
even have to use and carry the name of a cooperative to operate its mutual life insurance business. Gratia
argumenti that registration is mandatory, it cannot deprive respondent of its tax exemption privilege merely
because it failed to register. The nature of its operations is clear; its purpose well-defined. Exemption
when granted cannot prevail over administrative convenience.
There being no cogent reason for the Court to deviate from its ruling in Sunlife, the Court holds that the
respondent, being a cooperative company not mandated by law to be registered with the CDA, cannot be
required under RMC No. 48-91, a mere circular, to be registered prior to availing of DST exemption.
G.R. No. 166018 June 4, 2014
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED-PHILIPPINE BRANCHES,
Petitioner, vs.COMMISSIONER OF INTERNAL REVENUE, Respondent;
x-----------------------x
G.R. No. 167728
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED-PHILIPPINE BRANCHES,
Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent.
FACTS:
1. HSBC performs custodial services on behalf of its investor-clients with respect to their passive
investments in the Philippines, particularly investments in shares of stocks in domestic
corporations. As a custodian bank, HSBC serves as the collection/payment agent.
2. HSBC’s investor-clients maintain Philippine peso and/or foreign currency accounts, which are
managed by HSBC through instructions given through electronic messages. The said
instructions are standard forms known in the banking industry as SWIFT, or "Society for
Worldwide Interbank Financial Telecommunication." In purchasing shares of stock and other
investment in securities, the investor-clients would send electronic messages from abroad
instructing HSBC to debit their local or foreign currency accounts and to pay the purchase price
therefor upon receipt of the securities.
3. Pursuant to the electronic messages of its investor-clients, HSBC purchased and paid
Documentary Stamp Tax (DST) from September to December 1997 and also from January to
December 1998 amounting to P19,572,992.10 and P32,904,437.30, respectively.
4. BIR, thru its then Commissioner, issued BIR Ruling to the effect that instructions or advises from
abroad on the management of funds located in the Philippines which do not involve transfer of
funds from abroad are not subject to DST. A documentary stamp tax shall be imposed on any bill
of exchange or order for payment purporting to be drawn in a foreign country but payable in the
Philippines.
a. While the payor is residing outside the Philippines, he maintains a local and
foreign currency account in the Philippines from where he will draw the money
intended to pay a named recipient. The instruction or order to pay shall be made
through an electronic message. Consequently, there is no negotiable instrument
to be made, signed or issued by the payee.
b. Such electronic instructions by the non-resident payor cannot be considered as a
transaction per se considering that the same do not involve any transfer of funds from
abroad or from the place where the instruction originates. Insofar as the local bank is
concerned, such instruction could be considered only as a memorandum and shall be
entered as such in its books of accounts. The actual debiting of the payor’s account,
local or foreign currency account in the Philippines, is the actual transaction that should
be properly entered as such. Under the Documentary Stamp Tax Law, the mere
withdrawal of money from a bank deposit, local or foreign currency account, is not
subject to DST, unless the account so maintained is a current or checking account, in
which case, the issuance of the check or bank drafts is subject to the documentary
stamp tax.
c. Likewise, the receipt of funds from another bank in the Philippines for deposit to the
payee’s account and thereafter upon instruction of the non-resident depositor-payor,
through an electronic message, the depository bank to debit his account and pay a
named recipient shall not be subject to documentary stamp tax. It should be noted that
the receipt of funds from another local bank in the Philippines by a local depository bank
for the account of its client residing abroad is part of its regular banking transaction
which is not subject to documentary stamp tax.
5. With the above BIR Ruling as its basis, HSBC filed on an administrative claim for the refund of
allegedly representing erroneously paid DST to the BIR
6. As its claims for refund were not acted upon by the BIR, HSBC subsequently brought the matter
to the CTA, which favored HSBC and ordered payment of refund or issuance of tax credit.
7. However, the CA reversed decisions of the CTA and ruled that the electronic messages of
HSBC’s investor-clients are subject to DST.
a. DST is levied on the exercise by persons of certain privileges conferred by law for the
creation, revision, or termination of specific legal relationships through the execution of
specific instruments, independently of the legal status of the transactions giving rise
thereto.
ISSUE: Whether or not the electronic messages are considered transactions pertaining to negotiable
instruments that warrant the payment of DST.
HELD: NO.
The Court agrees with the CTA that the DST under Section 181 of the Tax Code is levied on the
acceptance or payment of "a bill of exchange purporting to be drawn in a foreign country but payable in
the Philippines" and that "a bill of exchange is an unconditional order in writing addressed by one person
to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand
or at a fixed or determinable future time a sum certain in money to order or to bearer."
Page 86 of 148
The Court further agrees with the CTA that the electronic messages of HSBC’s investor-clients containing
instructions to debit their respective local or foreign currency accounts in the Philippines and pay a certain
named recipient also residing in the Philippines is not the transaction contemplated under Section 181 of
the Tax Code as such instructions are "parallel to an automatic bank transfer of local funds from a savings
account to a checking account maintained by a depositor in one bank." The Court favorably adopts the
finding of the CTA that the electronic messages "cannot be considered negotiable instruments as they
lack the feature of negotiability, which, is the ability to be transferred" and that the said electronic
messages are "mere memoranda" of the transaction consisting of the "actual debiting of the [investor-
client-payor’s] local or foreign currency account in the Philippines" and "entered as such in the books of
account of the local bank," HSBC.
The instructions given through electronic messages that are subjected to DST in these cases are not
negotiable instruments as they do not comply with the requisites of negotiability under Section 1 of the
Negotiable Instruments Law. The electronic messages are not signed by the investor-clients as supposed
drawers of a bill of exchange; they do not contain an unconditional order to pay a sum certain in money as
the payment is supposed to come from a specific fund or account of the investor-clients; and, they are not
payable to order or bearer but to a specifically designated third party. Thus, the electronic messages are
not bills of exchange. As there was no bill of exchange or order for the payment drawn abroad and made
payable here in the Philippines, there could have been no acceptance or payment that will trigger the
imposition of the DST under Section 181 of the Tax Code.
In these cases, the electronic messages received by HSBC from its investor-clients abroad instructing the
former to debit the latter's local and foreign currency accounts and to pay the purchase price of shares of
stock or investment in securities do not properly qualify as either presentment for acceptance or
presentment for payment. There being neither presentment for acceptance nor presentment for payment,
then there was no acceptance or payment that could have been subjected to DST to speak of.
WHEREFORE, the petitions are hereby GRANTED and the Decisions dated May 2, 2002 in CTA Case
No. 6009 and dated December 18, 2002 in CT A Case No. 5951 of the Court of Tax Appeals are
REINSTATED. SO ORDERED.
G.R. No. 197561 April 7, 2014
COCA-COLA BOTTLERS PHILIPPINES, INC., Petitioner,
vs.
CITY OF MANILA; LIBERTY M. TOLEDO, in her capacity as Officer-in-Charge (OIC), Treasurer of
the City of Manila; JOSEPH SANTIAGO, in his capacity as OIC, Chief License Division of the City
of Manila; REYNALDO MONTALBO, in his capacity as City Auditor of the City of Manila,
Respondents.
FACTS: Respondent paid the local business tax only as a manufacturers as it was expressly exempted
from the business tax under a different section and which applied to businesses subject to excise, VAT or
percentage tax under the Tax Code. The City of Manila subsequently amended the ordinance by deleting
the provision exempting businesses under the latter section if they have already paid taxes under a
different section in the ordinance. This amending ordinance was later declared by the Supreme Court null
and void. Respondent then filed a protest on the ground of double taxation. RTC decided in favor of
Respondent and the decision was received by Petitioner on April 20, 2007. On May 4, 2007, Petitioner
filed with the CTA a Motion for Extension of Time to File Petition for Review asking for a 15-day extension
or until May 20, 2007 within which to file its Petition. A second Motion for Extension was filed on May 18,
2007, this time asking for a 10-day extension to file the Petition. Petitioner finally filed the Petition on May
30, 2007 even if the CTA had earlier issued a resolution dismissing the case for failure to timely file the
Petition.
ISSUES: Does the enforcement of the latter section of the tax ordinance constitute double taxation?
HELD: YES. There is indeed double taxation if respondent is subjected to the taxes under both Sections
14 and 21 of the tax ordinance since these are being imposed: (1) on the same subject matter — the
privilege of doing business in the City of Manila; (2) for the same purpose — to make persons conducting
business within the City of Manila contribute to city revenues; (3) by the same taxing authority — petitioner
City of Manila; (4) within the same taxing jurisdiction — within the territorial jurisdiction of the City of
Manila; (5) for the same taxing periods — per calendar year; and (6) of the same kind or character — a
local business tax imposed on gross sales or receipts of the business.
Commissioner Of Internal Revenue vs. Team [Philippines] Operations Corporation [Formerly
Mirant (Phils) Operations Corporation]
G.R. No. 179260 April 2, 2014
FACTS: This is a Petition for Review on Certiorari by petitioner Commissioner of Internal Revenue (CIR)
seeking to reverse and set aside the Decision and Resolution of the Court of Tax Appeals (CTA) En Banc
in which affirmed in toto the Decision and Resolution of the First Division of the CTA (CTA in Division)
granting Team (Philippines) Operations Corporation’s (Team) claim for refund in the amount of
P69,562,412.00 representing unutilized tax credits for taxable period ending 31 December 2001.
Respondent Team on 15April2012 filed its 2001 income tax return with the Bureau of Internal Revenue
(BIR), reporting an overpayment in the amount of Php69,562,412.00 arising from unutilized credit taxes
withheld. Team marked the appropriate boxes manifesting its intent to have the said overpayment
refunded. Team also filed on 27March2003 with BIR a letter requesting for the refund or issuance of a tax
credit certificate in connection herewith.
CIR on its petition relies solely on the ground that CTA gravely erred on a question of law in affirming the
CTA in Division’s ruling despite not being supported by the evidence on record.
Page 87 of 148
ISSUES: Is the respondent entitled to a refund?
HELD: YES, the respondent is entitled to a refund.
There are three essential conditions for the grant of a claim for refund of creditable withholding income
tax, to wit: (1) the claim is filed with the Commissioner of Internal Revenue within the two-year period from
the date of payment of the tax; (2) it is shown on the return of the recipient that the income payment
received was declared as part of the gross income; and (3) the fact of withholding is established by a copy
of a statement duly issued by the payor to the payee showing the amount paid and the amount of the tax
withheld therefrom. The first requisite is provided under Sections 204(C) and 229 of the National Internal
Revenue Code (NIRC) of 1997. The second and third requisites are anchored on Section 2.58.3(B) of
Revenue Regulation No. 2-98.
In addition, strict observance to the irrevocability rule under Section 76 of NIRC of 1997 is required. The
rule provides: “Once the option to carry-over and apply the excess quarterly income tax against income
tax due for the taxable quarters of the succeeding taxable years has been made, such option shall be
considered irrevocable for that taxable period and no application for cash refund or issuance of a tax
credit certificate shall be allowed therefor.”
In this case, it is found undisputed that Team complied with the above requisites. Counting from
15April2002, Team had until 14April2004 to file for a refund and the 27March2003 claim falls within said
prescriptive period. Team also was able to present various certificated of creditable tax withheld at source
for year 2001. Lastly, Team opted for a refund as evidenced by the marked boxes in its return.
CS GARMENT, INC., v. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 182399, March 12, 2014
Facts: Petitioner [CS Garment] is a domestic corporation duly organized and existing under and by virtue
of the laws of the Philippines with principal office at Road A, Cavite Ecozone, Rosario, Cavite. On the
other hand, respondent is the duly appointed Commissioner of Internal Revenue of the Philippines
authorized under law to perform the duties of said office, including, inter alia, the power to assess
taxpayers for [alleged] deficiency internal revenue tax liabilities and to act upon administrative protests or
requests for reconsideration/reinvestigation of such assessments.
Petitioner [CS Garment] received from respondent [CIR] Letter of Authority, authorizing the examination of
petitioner’s books of accounts and other accounting records for all internal revenue taxes covering the
period January 1, 1998 to December 31, 1998. Thereafter received five (5) formal demand letters with
accompanying Assessment Notices from respondent to pay the alleged deficiency VAT, Income, DST and
withholding tax assessments for taxable year 1998 in the aggregate amount of P2,046,580.10; in return,
within the 30-day period prescribed under Section 228 of the Tax Code, as amended, petitioner filed a
formal written protest with the respondent assailing the above assessments and also additional
documents in support of its protest.
The CTA en banc affirmed the Decision and Resolution of the CTA Second Division. As regards the first
issue, the banc ruled that the CIR had duly apprised CS Garment of the factual and legal bases for
assessing the latter’s liability for deficiency income tax, as shown in the attached Schedule of
Discrepancies provided to petitioner; and in the subsequent reference of the CIR to Rule XX, Section 2 of
the Rules and Regulations of R.A. 7916
CS Garment filed the present Petition for Review assailing the Decision of the CTA en banc. However, on
26 September 2008, while the instant case was pending before this Court, petitioner filed a Manifestation
and Motion stating that it had availed itself of the government’s tax amnesty program under the 2007 Tax
Amnesty Law. It thus prays that we take note of its availment of the tax amnesty and confirm that it is
entitled to all the immunities and privileges under the law. It has submitted to this Court the following
documents, which have allegedly been filed with Equitable PCI Bank–Cavite EPZA Branch, a supposed
authorized agent-bank of the BIR: 1. Notice of Availment of Tax Amnesty under R.A. 9480, 2. Statement
of Assets, Liabilities, and Net worth (SALN), 3. Tax Amnesty Return (BIR Form No. 2116), 4. Tax Amnesty
Payment Form (Acceptance of Payment Form or BIR Form No. 0617), 5. Equitable PCI Bank’s BIR
Payment Form indicating that CS Garment deposited the amount of P250,000 to the account of the
Bureau of Treasury–BIR.
Issue: Whether or not CS Garment is already immune from paying the deficiency taxes stated in the 1998
tax assessments of the CIR, as modified by the CTA.
Held: Yes, Considering the completion of the aforementioned requirements, we find that petitioner has
successfully availed itself of the tax amnesty benefits granted under the Tax Amnesty Law. Therefore, we
no longer see any need to further discuss the issue of the deficiency tax assessments. CS Garment is
now deemed to have been absolved of its obligations and is already immune from the payment of taxes –
including the assessed deficiency in the payment of VAT, DST, and income tax as affirmed by the CTA en
banc – as well as of the additions thereto (e.g., interests and surcharges). Furthermore, the tax amnesty
benefits include immunity from "the appurtenant civil, criminal, or administrative penalties under the NIRC
of 1997, as amended, arising from the failure to pay any and all internal revenue taxes for taxable year
2005 and prior years. “Tax amnesty refers to the articulation of the absolute waiver by a sovereign of its
right to collect taxes and power to impose penalties on persons or entities guilty of violating a tax law. Tax
amnesty aims to grant a general reprieve to tax evaders who wish to come clean by giving them an
opportunity to straighten out their records. In 2007, Congress enacted R.A. 9480, which granted a tax
amnesty covering" all national internal revenue taxes for the taxable year 2005 and prior years, with or
without assessments duly issued therefor, that have remained unpaid as of December 31, 2005." These
national internal revenue taxes include (a) income tax; (b) VAT; (c) estate tax; (d) excise tax; (e) donor’s
tax; (f) documentary stamp tax; (g) capital gains tax; and (h) other percentage taxes.
Amnesty taxpayers may immediately enjoy the privileges and immunities under the 2007 Tax Amnesty
Law, as soon as they fulfill the suspensive conditions imposed therein
While tax amnesty, similar to a tax exemption, must be construed strictly against the taxpayer and liberally
in favor of the taxing authority, it is also a well-settled doctrine that the rule-making power of administrative
agencies cannot be extended to amend or expand statutory requirements or to embrace matters not
originally encompassed by the law
Page 88 of 148
 CIR vs. Silicon Philippines, Inc
G.R. No. 169778 March 12, 2004
FACTS
Silicon Philippines, Inc. is a domestic corporation engaged primarily in the business of designing,
developing, manufacturing, and exporting advance and large-scale integrated circuits components (ICs).
On 06 May 1999, Silicon filed for tax credit / refund of VAT paid for 2 nd quarter of 1998
representing its unutilized input tax.
Due to inaction of CIR, respondent filed an administrative claimfor refund before CTA on 30 June
2000.
ISSUE
Whether or not respondent is entitled to its claim for refund or issuance of a tax credit
representing its unutilized creditable input.
Ruling
No. Silicon is not entitled to its claim for refund or issuance of a tax credit for failing file the same
within the prescriptive period.
The SC in deciding this case dissected the Sec 112 NIRC provision and decided jurisprudence,
which prescribes that a taxpayer-claimant only had a limited period of thirty (30) days from the expiration
of the 120-day period of inaction of the Commissioner of Internal Revenue to file its judicial claim with
CTA. Failure to do so, the judicial claim shall prescribe or be considered as filed out of time.
*Note: The 2 year prescriptive period refers to the 2 years after the close of the taxable quarter
when the sales were made, within which a taxpayer-claimant may apply for the issuance of tax credit
certificate or refund of creditable input tax due. However, once an administrative claim was filed, CIR
has120-day period to act on the same. In its failure, the tax payer has 30-day period to file for judicial
claim before CTA
Procter and Gamble vs. CIR
G.R. No. 202071 February 19, 2014
FACTS:
On 26 September and 13 December 2006 Procter and Gamble (P&G) filed administrative claim
with BIR for the refund or credit of the input VAT attributable to the former’s zero-rated sales covering the
periods 1 July – 30 September 2004 and 01 October – 31 December 2004, respectively.
On 2 October and 29 December 2016, petitioner filed judicial claims.
CTA First Division rendered a Decision dismissing the judicial claims for having been
prematurely filed. CTA En Banc affirmed the dismissal of CTA Division.
ISSUE:
Whether or not the judicial claim suffers the vice of premature filing when the same is filed before
CTA before the lapse of the 120-day period when CIR may resolve on the administrative claim before it.
RULING:
No. In this case, there is no vice of premature filing even if judicial claim was filed before lapse of
120-day period for the CIR to resolve on the administrative claim before it.
BIR Ruling No. DA-489-03 expressly states that the "taxpayer-claimant need not wait for the
lapse of the 120-day period before it could seek judicial relief with the CTA by way of Petition for Review.
This was valid from its issuance on 10 December 2003 up to its reversal on 06 October 2010 when the
case of Aichi Forging Company of Asia, Inc was promulgated. Such reversal was necessitated when
taxpayers continue to get misled to file prematurely their judicial claims with CTA. The judicial claims in
the instant petition were filed on 2 October and 29 December 2006, well within the ruling's period of
validity.
Silicon vs. CIR
G.R. No.184360 & 184361 February 19, 2014
FACTS:
On 22 April 1999, Silicon Philippines, Inc, filed its Quarterly VAT Return for the 1 st Quarter of
1999 reflecting, among others, output VAT, input VAT on domestic, input VAT on importation of goods,
and zero-rated export sales.
On 06 August 1999, Silicon filed with the CIRa claim for tax credit or refund representing VAT
input taxes on its domestic purchases of goods and services and importation of goods and capital
equipment which are attributable to zero-rated sales for the period 01January 1999 to 31 March 1999.
On 30 March 2001, Silicon filed a Petition for Review with the CTA due to the inaction of the CIR
to toll the running of the two-year prescriptive period.
On 10 August 2000, Silicon filed a second claim for tax credit or refund for the period of 01 April
2000 to 30 June 2000. On 28 June 2002, Silicon filed a Petition for Review before CTA to toll the running
of the 2-year prescriptive period.
ISSUE:
Page 89 of 148
 Whether the petitions for review filed by Silicon before the CTA were filed within the prescribed
period in order to determine whether the CTA validly acquired jurisdiction over the petitions filed by
Silicon.
RULING:
No. CTA could have not validly acquired jurisdiction over the judicial claim as they were filed out
of time.
A claim for tax refund or credit, like a claim for tax exemption, is construed strictly against the
taxpayer. Sec. 112 (C) of NIRC prescribes that the CIR has 120 days within which to decide the
taxpayer’s claim for refund or tax credit. In addition, the taxpayer is granted a 30-day period to appeal to
the CTA the decision or inaction of the CIR after the 120-day period. In reiteration, one of the conditions
for a judicial claim of refund or credit under the VAT System is compliance with the 120+30 day mandatory
and jurisdictional periods.
With regard to the 1st administrative claim filed before CIR on 06 August 1999, CIR had until 04
December 1999 pursuant to the 120-day rule to decide on the claim for tax refund. Due to inaction of CIR,
Silicon had until 03 Jan 2000 to file its judicial claim following the 30-day period. When Silicon filed its
judicial claim on 30 March 2001, it was already 451 days late.
With regard to the 2nd administrative claim filed before CIR on 20 August 2000, CIR had until 08
December 2000 pursuant to the 120-day rule to decide on the claim for tax refund. Due to inaction of CIR,
Silicon had until 07 January 2001 to file its judicial claim following the 30-day period. When Silicon filed its
judicial claim on 28 June 2002, it was already 536 days late.
CIR vs. Pilipinas Shell Petroleum Corporation
G.R. No. 188497 February 19, 2014
FACTS:
Pilipinas Shell paid excises taxes for the petroleum products it sold to international carriers from
October 2001 to June 2002.
It filed administrative claim for refund on the excise taxes it paid. CTA granted respondent'’ claim
for tax refund. However, in the Decision on 25 April 2012, CTA was declared to have erred in granting the
claim for tax refund. A Motion for Reconsideration and Supplemental Motion for Reconsideration was filed
by Pilipinas Shell.
ISSUE:
Whether or not Pilipinas Shell is entitled to refund or credit for the excise taxes it paid for
petroleum products already sold to international carriers.
RULING:
Yes, Pilipinas Shell is entitled to refund. The Supreme Court held that there is prohibition from
passing the excise tax to international carriers who buys petroleum products from local
manufacturers/sellers. Such is pursuant to Section 135 (a) of NIRC, international agreement under
Chicago Convention of 1994, and practice to exempt aviation fuel from excise tax and other impositions.
However, SC held that there is a need to reexamine the effect of denying the domestic
manufacturers/sellers’ claim for refund of the excise taxes they already paid on petroleum products sold to
international carriers, and its serious implications. With the prospect of declining sales of aviation jet fuel
sales to international carriers on account of major domestic oil companies' unwillingness to shoulder the
burden of excise tax, or of petroleum products being sold to said carriers by local manufacturers or sellers
at still high prices , the practice of "tankering" would not be discouraged. This scenario does not augur
well for the Philippines' growing economy and the booming tourism industry. Worse, the Government
would be risking retaliatory action under several bilateral agreements with various countries. Ultimately,
SC found merit in Pilipinas Shell’s motion for reconsideration. It granted Pilipinas Shell’s claim for refund
representing the excise taxes it paid on petroleum products sold to international carriers.
CIR vs. Team Sual Corp (formerly Mirant Sual Corp)
G.R. No. 194105 February 5, 2014
FACTS:
On 24 April 2000, 25 July 2000, 25 October 2000 and 25 January 2001, Team Sual Corp (TSC)
filed its VAT returns for the 1st,2nd,3rd and 4th quarters, respectively of taxable year 2000.
On 11 March 2002, TSC filed its administrative claim for refund for the taxable year 2000.
On 01 April 2002, TSC filed its petition for review before CTA seeking for refund or the issuance
of a tax credit certificate for its unutilized input VAT for the taxable year 2000, which was granted.
CIR sought a reconsiderationbefore CTA En Banc claiming that petition for review was
prematurely filed because it was filed without waiting for the 120-day period to lapse.
ISSUE:
Whether TSC’s petition for review with CTA was prematurely filed.
RULING:
Yes. TSC’s petition for review with CTA was prematurely filed. Under Sec 112 of the NIRC it is
provided that CIR has 120 days, from the date of the submission of the complete documents in support of
the application for tax refund/credit within which to grant or deny the claim. In case of full or partial denial
by the CIR or its inaction, the taxpayer's recourse is to file an appeal before the CTA within 30 days from
receipt of the decision of the CIR or lapse of the 120-day. Failure to comply with the 120-day waiting
period violates the doctrine of exhaustion of administrative remedies, and renders the petition premature
and thus without a cause of action, with the effect that the CTA does not acquire jurisdiction over the
taxpayer's petition.
Page 90 of 148
 TSC provided that the 2-year prescriptive period will lapse should it wait to file its judicial claim
only after 120 days it filed its administrative claim.SC find the justification unmeritorious. It further provided
that upon careful reading of Sec 112 of NIRC there are three compelling reasons why the 30-day period
need not necessarily fall within the two-year prescriptive period, as long as the administrative claim is filed
within the two-year prescriptive period: (1) Section 112(A) states that the taxpayer may apply with the
Commissioner for a refund or credit "within two (2) years," which means at anytime within two years; (2)
the two-year prescriptive period does not refer to the filing of the judicial claim with the CTA but to the
filing of the administrative claim with the Commissioner;(3)the theory that the 30-day period must fall
within the two-year prescriptive period adds a condition that is not found in the law. It results in truncating
120 days from the 730 days that the law grants the taxpayer for filing his administrative claim with the
Commissioner. This Court cannot interpret a law to defeat, wholly or even partly, a remedy that the law
expressly grants in clear, plain, and unequivocal language.
COMMISSIONER OF INTERNAL REVENUEvs.TOLEDO POWER, INC.
G.R. No. 183880 January 20, 2014
Facts:
Petitioner filed with the BIR Revenue District Office (RDO) No. 83 at Toledo City, Province of
Cebu, its Quarterly VAT Return for the third quarter of 2001. an amended Quarterly VAT Return for the
same quarter of 2001was filed on November 22, 2001. The amended return shows unutilized input VAT
credits of P5,909,588.96 arising from petitioner’s taxable purchases for the third quarter of 2000.
Pursuant to the procedure prescribed in Revenue Regulations No. 7-95, as amended, petitioner
filed with the BIR RDO No. 83, an administrative claim for refund or unutilized input VAT for the third and
fourth quarter of 2001. On the third and fourth quarters of 2001, petitioner incurred and accumulated input
VAT from its domestic purchase of goods and services, which are all attributable to its zero-rated sales of
power generation services to NPC, CEBECO, Atlas Consolidated Mining and Development.
Respondent (herein petitioner Commissioner of Internal Revenue) has not ruled upon petitioner’s
administrative claim and in order to preserve its right to file a judicial claim for the refund or issuance of a
tax credit certificate of its unutilized input VAT, petitioner filed a Petition for Review to suspend the running
of the two-year prescriptive period. The claim of TPI was partially granted by the CTA First Division. CIR
appealed to CTA En Banc but was denied, the same with its MR.
Issues:
1. Whether TPI complied with the 120+30 day rule under Section 112 (C) of the Tax Code
2. Whether TPI sufficiently complied with the invoicing requirements under the Tax Code.
Ruling:
TPI’s judicial claims for refund of its unutilized input VAT covering the third and fourth quarters of 2001
were prematurely filed on October 24, 2003 and January 22, 2004, respectively. However, although TPI’s
judicial claim for the fourth quarter of 2001 has been filed prematurely, the most recent pronouncements
of the Court provide for a window wherein the same may be entertained. As held in the San Roque
ponencia, strict compliance with the 120+30 day mandatory and jurisdictional periods is not necessary
when the judicial claims are filed between December 10, 2003 (issuance of BIR Ruling No. DA-489-03
which states that the taxpayer need not wait for the 120-day period to expire before it could seek judicial
relief) to October 6, 2010 (promulgation of the Aichi doctrine).
Clearly, therefore, TPI’s refund claim of unutilized input VAT for the third quarter of 2001 was
denied for being prematurely filed with the CTA, while its refund claim of unutilized input VAT for the fourth
quarter of 2001 may be entertained since it falls within the exception provided in the Court’s most recent
rulings. With that settled, we now resolve the issue of whether TPI sufficiently complied with the invoicing
requirements under the Tax Code with respect to the fourth quarter of 2001.
The Court will not lightly set aside the conclusions reached by the CTA which, by the very nature
of its function of being dedicated exclusively to the resolution of tax problems, has accordingly developed
an expertise on the subject, unless there has been an abuse or improvident exercise of authority. Factual
findings made by the CTA can only be disturbed on appeal if they are supplied by substantial evidence or
there is a showing of gross error or abuse on the part of the CTA. In the absence of any clear and
convincing proof to the contrary, the Court must presume that the CTA rendered a decision, which is valid
in every respect.
COMMISSIONER OF INTERNAL REVENUEvs.MINDANAO II GEOTHERMAL PARTNERSHIP
G.R. No. 191498 January 15, 2014
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 II’s 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).
Issues:
Page 91 of 148

1. Whether or not Mindanao II’s administrative claim for refund/credit was timely filed
2. Whether or not Mindanao II’s judicial claim for refund/credit was timely filed
Ruling:
1. 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 II’s application for
refund/credit on Oct 6 2005 was filed before theirpromulgation. 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 verbalegis
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.]
2. 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
verbalegis 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. ##
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)
6. CBK POWER COMPANY LIMITEDvs.COMMISSIONER OF INTERNAL REVENUE
G.R. Nos. 198729-30 January 15, 2014
Facts:
Petitioner CBK Power Co is engaged in the operation, maintenance, and management of
hydroelectric power plants in Laguna. In December 2004, petitioner filed an Application for VAT Zero-Rate
with the Bureau of Internal Revenue (BIR) in accordance with Section 108(B)(3) of the National Internal
Revenue Code (NIRC) of 1997, as amended. The application was duly approved by the BIR. Thus,
petitioner’s sale of electricity to the NPC from 1 January 2005 to 31 October 2005 was declared to be
entitled to the benefit of effectively zero-rated value added tax (VAT).Petitioner filed its administrative
claims for the issuance of tax credit certificates for its alleged unutilized input taxes on its purchase of
capital goods and alleged unutilized input taxes on its local purchases and/or importation of goods and
services, other than capital goods. For inaction of the Commissioner of Internal Revenue (CIR), petitioner
filed a Petition for Review with the CTA. The CTA En Banc ruled that petitioner’s judicial claim for the first,
second, and third quarters of 2005 were belatedly filed. Hence, this petition.
Issue:
Whether or not petitioner lost its right to claim for refund of unutilized input VAT for the first to third
quarters of 2005 for failure to comply the prescribed period
Ruling:
Page 92 of 148
 Yes, for failure of petitioner to comply with the 120+30 day mandatory and jurisdictional period,
petitioner lost its right to claim a refund or credit of its alleged excess input VAT. The law is explicit on the
mandatory and jurisdictional nature of the 120+30 day period. The period of 120 days is a prerequisite for
the commencement of the 30-day period to appeal to the CTA.
Although petitioner did not file its judicial claim with the CTA prior to the expiration of the 120-day
waiting period, it failed to observe the 30-day prescriptive period to appeal to the CTA counted from the
lapse of the 120-day period. While petitioner filed its administrative and judicial claims during the period of
applicability of BIR Ruling No. DA-489-03, it cannot claim the benefit of the exception period as it did not
file its judicial claim prematurely, but did so long after the lapse of the 30-day period following the
expiration of the 120-day period. BIR Ruling No. DA-489-03 allowed premature filing of a judicial claim,
which means non-exhaustion of the 120-day period for the Commissioner to act on an administrative
claim, but not its late filing.
TEAM ENERGY CORPORATION (formerly MIRANT PAGBILAO CORP.)vs.
COMMISSIONER OF INTERNAL REVENUE
G.R. No. 190928 January 13, 2014
Facts:
Petitioner Team Energy Corporation filed with the Bureau of Internal Revenue (BIR) its first to
fourth quarterly value-added tax (VAT) returns for the calendar year 2002. Subsequently, petitioner filed
an administrative claim for refund of unutilized input VAT paid by petitioner on its domestic purchases of
goods and services and importation of goods attributable to its effectively zero-rated sales of power
generation services to the National Power Corporation for the taxable year 2002. However, due to
respondent’s inaction, petitioner elevated its claim before the CTA First Division. The CTA First Division
rendered judgment in favor of the petitioner for which respondent was ordered to refund or issue a tax
credit certificate.
Respondent filed his Motion for Partial Reconsideration against said decision, but it was denied
which brought the respondent to file a Petition for Review with the CTA En Banc. The CTA En Banc
affirmed the CTA First Division’s decision with the modification reducing the refundable amount on the
ground that petitioner’s judicial claim for the first quarter of 2002 was filed beyond the two-year period
prescribed. Unfazed, petitioner filed a motion for reconsideration against said Decision, but the same was
denied.
Issue:
Whether or not petitioner timely filed its judicial claim for refund of input VAT for the first quarter of 2002.
Ruling:
Yes. Since its administrative claim was filed within the two-year prescriptive period and its judicial
claim was filed on the first day after the expiration of the 120-day period granted to respondent, to decide
on its claim, we rule that petitioner’s claim for refund for the first quarter of 2002 should be granted.
Section 112 (C) also expressly grants the taxpayer a 30-day period to appeal to the CTA the
decision or inaction of the Commissioner within the 120-day period. The 30-day period need not
necessarily fall within the two-year prescriptive period, as long as the administrative claim is filed within
the two-year prescriptive period.
Section 112 (A) and (C) must be interpreted according to its clear, plain and unequivocal
language.The taxpayer can file his administrative claim for refund or credit at any time within the two-year
prescriptive period. If he files his claim on the last day of the two-year prescriptive period, his claim is still
filed on time. The Commissioner will have 120 days from such filing to decide the claim. If the
Commissioner decides the claim on the 120th day, or does not decide it on that day, the taxpayer still has
30 days to file his judicial claim with the CTA. This is not only the plain meaning but also the only logical
interpretation of Section 112 (A) and (C).
TEAM ENERGY CORPORATION (Formerly MIRANT PAGBILAO CORPORATION)
vs.COMMISSIONER OF INTERNAL REVENUE
G.R. No. 197760 January 13, 2014
Facts:
Team Energy Corporation is principally engaged in the business of power generation and
subsequent sale thereof to the National Power Corporation (NPC) under a Build, Operate, Transfer (BOT)
scheme. As such, it is registered with the BIR as a VAT taxpayer. Petitioner filed an Application for VAT
Zero-Rate for the supply of electricity to the NPC from January 1, 2005 to December 31, 2005, which was
subsequently approved.
Petitioner filed with the BIR its Quarterly VAT Returns for the first three quarters of 2005 on
April 25, 2005, July 26, 2005, and October 25, 2005, respectively. Likewise, petitioner filed its
Monthly VAT Declaration for the month of October 2005 on November 21, 2005, which was subsequently
amended on May 24, 2006. Petitioner filed an administrative claim for cash refund or issuance of tax
credit certificate corresponding to the input VAT reported in its Quarterly VAT Returns for the first three
quarters of 2005 and Monthly VAT Declaration for October 2005.
Due to respondent’s inaction on its claim, petitioner filed the instant Petition for Review before
the CTA on April 18, 2007. The CTA Special First Division partially granted petitioner’s claim for refund or
issuance of tax credit certificate. Respondent filed a Motion for Reconsideration against said decision and
resulted to the reversal of CTA’s earlier decision. It said that observing the 120-day period for the
Commissioner to render a decision on the administrative claim, petitioner’s judicial claim should have
been filed not earlier than April 19, 2007. Petitioner, however, filed its judicial claim on April 18, 2007 or
only 199 days from December 20, 2006, thus, prematurely filed.
Petitioner then filed a Petition for Review with the CTA En Banc arguing that the requirement to
exhaust the 120-day period for respondent to act on its administrative claim for input VAT refund/credit
under Section 112 (C) of the NIRC is merely a species of the doctrine of exhaustion of administrative
remedies and is, therefore, not jurisdictional. The CTA En Banc denied the petition for lack of merit.
Page 93 of 148
Issue:
Whether or not the judicial claim was filed on time
Ruling:
Yes. Petitioner 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. BIR Ruling No. DA-489-03 expressly ruled that the taxpayer need not wait for the expiration
of the 120-day period before it could seek judicial relief with the CTA. It was in the case of Commissioner
of Internal Revenue v. San Roque Power Corporation (San Roque), the Court clarified that the mandatory
and jurisdictional nature of the 120-30-day rule does not apply on claims for refund that were prematurely
filed during the interim period from the issuance of Bureau of Internal Revenue (BIR) Ruling No. DA-489-
03. Thus, even though petitioner’s judicial claim was prematurely filed without waiting for the expiration of
the 120-day mandatory period, the CTA may still take cognizance of the instant case as it was filed within
the period exempted from the 120-30-day mandatory period.
Commissioner of Internal Revenue vs. Dash Engineering Philippines, Inc.
G.R. No. 184145December 11, 2013
FACTS:
Respondent Dash Engineering Philippines, Inc. (DEPJ) is a corporation duly registered with the SEC,
authorized to do business in the Philippines and listed with the Philippine Economic Zone Authority as an
ecozone IT export enterprise. It is also a VAT-registered entity engaged in the export sales of computer-
aided engineering and design.
Respondent DEPI filed its monthly and quarterly value-added tax (VAT) returns for the period from
January 1, 2003 to June 30, 2003. On August 9, 2004, it filed a claim for tax credit or refund for the
unutilized input VAT attributable to its zero-rated sales. Because petitioner Commissioner of Internal
Revenue (CIR) failed to act upon the said claim, respondent was compelled to file a petition for review
with the CTA on May 5, 2005. The CTA ruled in favor of DEPI. Petitioner elevated the case to CTA En
Banc averring that the claim was filed out of time. DEPI asserts that its petition was filed with the two-year
prescriptive period provided. CTA En Banc upheld the CTA division ruling.
ISSUE:
Whether respondent DEPI’s judicial claim failed to observe the requisite 120+30day period as mandated
by Section 112(C) of the NIRC.
RULLING:
Yes. Respondent DEPI’s judicial claim was not filed within the prescriptive period. Respondent's judicial
claim for refund must be denied for having been filed late. Although respondent filed its administrative
claim with the BIR on August 9, 2004 before the expiration of the two-year period in Section l 12(A), it
undoubtedly failed to comply with the 120+ 30-day period in Section l l 2(D) (now subparagraph C) which
requires that upon the inaction of the CIR for 120 days after the submission of the documents in support
of the claim, the taxpayer has to file its judicial claim within 30 days after the lapse of the said period. The
120 days granted to the CIR to decide the case ended on December 7, 2004. Thus, DEPI had 30 days
therefrom, or until January 6, 2005, to file a petition for review with the CTA. Unfortunately, DEPI only
sought judicial relief on May 5, 2005 when it belatedly filed its petition to the CTA, despite having had
ample time to file the same, almost four months after the period allowed by law.
Commissioner of Internal Revenue vs. Bank of Commerce
G.R. No. 180529November 13, 2013
FACTS:
Bank of Commerce (BOC) is a banking corporation duly organized and existing under and by virtue of the
laws of the Republic of the Philippines. The BOC and Traders Royal Bank (TRB) executed a Purchase
and Sale Agreementwhereby it stipulated the TRB’s desire to sell and the BOC’s desire to purchase
identified recorded assets of TRB in consideration of BOC assuming identified recorded liabilities. Later,
BOC received copies of the Formal Letter of Demand and Assessment Notice issued by the CIR
demanding payment for deficiency documentary stamp taxes (DST) on Special Savings Deposit (SSD)
account of TRB for taxable year 1999. TRB filed its protest letter contesting the said notice.
On September 17, 2007, the CTA En Banc, in its Amended Decision, reversed itself and ruled that BOC
could not be held liable for the deficiency DST of TRB on its SSD accounts.
ISSUE:
Whether or not BOC is liable for the deficiency Documentary Stamp Tax of TRB for taxable year 1999
RULLING:
No. The term “merger” or “consolidation”, when used shall be understood to mean: (i) the ordinary merger
or consolidation, or (ii) the acquisition by one corporation of all or substantially all the properties of another
corporation solely for stock: Provided, [t]hat for a transaction to be regarded as a merger or consolidation,
it must be undertaken for a bona fide business purpose and not solely for the purpose of escaping the
burden of taxation. In case of a merger, two previously separate entities are treated as one entity and the
remaining entity may be held liable for both of their tax deficiencies. In the agreement between Traders
Royal Bank and Bank of Commerce, it was explicitly provided that they shall continue to exist as separate
entities. Since the purchase and sale of identified assets between the two companies does not constitute
a merger under the foregoing definition, the Bank of Commerce is considered an entity separate from
petitioner. Thus, it cannot be held liable for the payment of the deficiency documentary stamp tax
assessed against petitioner.
Luzon Hydro Corporation vs. Commissioner of Internal Revenue
G.R. No. 188260November 13, 2013
FACTS;
This case involves a claim for refund or tax credit to cover petitioner Luzon Hydro Corporation's unutilized
Input (VAT for the four quarters of taxable year 2001.
The petitioner brought this action in the CTA after the Commissioner of Internal Revenue did not act on
the claim. The CTA 2nd Division denied the claim on the ground that the petitioner did not prove that it
had zero-rated sales for the four quarters of 2001.The CTA En Banc denied the petitioner's motion for
reconsideration, and affirmed the decision of the CTA 2nd Division. Hence, the petitioner appeals the
decision of the CTA En Banc. CTA En Banc denied the claim for refund or tax credit.
ISSUE:
Whether or not petitioner’s claim for refund or tax be granted?
Page 94 of 148
RULLING:
No. The petitioner did not competently establish its claim for refund or tax credit. A claim for refund or tax
credit for unutilized input VAT may be allowed only if the following requisites concur, namely: (a) the
taxpayer is VAT-registered; (b) the taxpayer is engaged in zero-rated or effectively zero-rated sales; (c)
the input taxes are due or paid; (d) the input taxes are not transitional input taxes; (e) the input taxes have
not been applied against output taxes during and in the succeeding quarters; (f) the input taxes claimed
are attributable to zero-rated or effectively zero-rated sales; (g) for zerorated sales under Section
106(A)(2)(1) and (2); 106(B); and 108(B)(1) and (2), the acceptable foreign currency exchange proceeds
have been duly accounted for in accordance with the rules and regulations of the BangkoSentral ng
Pilipinas; (h) where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales,
and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall
be proportionately allocated on the basis of sales volume; and (i) the claim is filed within two years after
the close of the taxable quarter when such sales were made.
The court agrees with the CTA En Banc that the petitioner did not produce evidence showing that it had
zero-rated sales for the four quarters of taxable year 2001. As the CTA En Banc precisely found, the
petitioner did not reflect any zero-rated sales from its power generation in its four quarterly VAT returns,
which indicated that it had not made any sale of electricity. Had there been zero-rated sales, it would have
reported them in the returns.
The Commissioner of Internal Revenue vs. Visayas Geothermal Power Company, Inc.
G.R. No. 181276November 11, 2013
FACTS:
Respondent Visayas Geothermal Power Company, Inc. (VGPCI), a corporation authorized by the
Department of Energy to own and operate a power plant facility in Leyte is engaged in the business of
generation and sale of electricity. VGPCI incurred input value added tax of P20,213,044.50 on its
domestic purchase of goods and services and importation of goods used in its business for the third and
fourth quarter of
2001 and for the entire year of 2002.Due to the enactment of Republic Act (R.A.) No.
9136, VGPCI’s sales of generated power became zero-rated and were no longer subject to VAT at 10%.
On June 26, 2003, VGPCI filed before the BIR a claim for refund of unutilized input VAT payment for the
third quarter of 2001. On December 18, 2003, another claim was filed for the last quarter of 2001 and the
four quarters of 2002. For failure of the BIR to act upon said claims, VGPCI filed separate petitions for
review before the CTA on September 30, 2003 and December 19, 2003, praying for a refund on the
issuance of a tax credit certificate covering the period from July to September 2001 andfor the period from
October 2001 to December 2002, CTA Case Nos. 6790 and 6838, respectively.
ISSUE:
Whether or not VGPCI failed to observe the proper prescriptive period required by law for the filing of an
appeal before the CTA because it filed its petition before the end of the 120-day period granted to the CIR
to decide its claim for refund under Section 112(D) of the National Internal Revenue Code (NIRC).
RULLING:
Yes to CTA Case No. 6790 and No to CTA Case No. 6838.
The judicial claim filed on September 30, 2003 (CTA Case No. 6790) was prematurely filed and cannot be
taken cognizance of because respondent failed to wait for the requisite 120 days after the filing of its claim
for refund with the BIR before elevating the case to the CTA. VGPCI should have waited for the decision
of the CIR or the lapse of the 120-day period from the date of submission of complete documents in
support of the application for refund as provided in Section 112(D) of the NIRC.The filing by VGPCI of its
petition for review before the CTA almost immediately after filing its administrative claim for refund is
premature. However, the judicial claim filed on December 19, 2003 (CTA Case No. 6838), which was
made after the issuance of BIR Ruling DA-480-03, can be considered by the CTA despite its hasty filing
only one day after the application for refund was first lodged with the BIR.
Under the BIR Ruling No. DA 489-03, a judicial claim for refund may be filed with the CTA even before the
lapse of the 120-day period given to the BIR to decide on the administrative case. All taxpayers can rely
on this ruling only 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+30 day periods are mandatory and jurisdictional. pplied Food
Ingedients Co., Inc. vs. Commissioner of Internal Revenue
G.R. No. 184266November 11, 2013
FACTS:
Petitioner Applied Food Ingredients, Company, Inc. is a Value-Added Tax (VAT) taxpayer engaged in the
importation and exportation business, as a pure buy-sell trader. Petitioner alleged that from September
1998 to December 31, 2000, it paid input taxes for its importation of food ingredients. Subsequently, these
imported food ingredients were exported between the periods of April 1, 2000 to December 31, 2000,
from which the petitioner was able to generate export sales. Petitioner claimed that the export sales which
transpired from April 1, 2000 to December 31, 2000 were "zero-rated" sales, pursuant to Section 106(A
(2)(a)(1) of the N1RC of 1997. Petitioner alleged that the accumulated input taxes for the period of
September 1, 1998 to December 31, 2000 have not been applied against any output tax.
Petitioner filed two separate applications for the issuance of tax credit certificates. In view of respondent's
inaction, petitioner elevated the case. The CTA First Division denied petitioner’s claim for failure to
comply with the invoicing requirements prescribed under Section 113 in relation to Section 237 of the
National Internal Revenue Code (NIRC) of 1997 and Section 4.108-1 of Revenue Regulations No. 7-95.
On appeal, the CTA En Banc denied the claim of petitioner on the same ground and ruled that the latter’s
sales for the subject period could not qualify for VAT zero-rating, as the export sales invoices did not bear
the following: 1) the imprinted word "zero-rated;" 2) "TINVAT;" and 3) BIR’s permit number, all in violation
of the invoicing requirements.
ISSUE:
Whether or not petitioner is entitled to the issuance of a tax certificate or refund representing creditable
input taxes attributable to zero-rated sales
RULLING:
No. The judicial claim of petitioner was filed on 24 July 2002.Petitioner clearly failed to observe the
mandatory 120-day waiting period. Consequently, the premature filing of its claim for refund/credit of input
VAT before the CTA warranted a dismissal, inasmuch as no jurisdiction was acquired by the CTA.
Page 95 of 148
 In accordance with San Roque and considering that petitioner s judicial claim was filed on 24 July 2002, GST can benefit from BIR Ruling No. DA-489-03 with respect to its claims for refund of unutilized
when the 120+30 day mandatory periods were already in the law and BIR Ruling No. DA-489-03 had not excess input VAT for the second and third quarters of taxable year 2005 which were filed before the CIR
yet been issued, petitioner does not have an excuse for not observing the 120+ 30 day period. Failure of on November 18, 2005 but elevated to the CTA on March 17, 2006 before the expiration of the 120-day
petitioner to observe the mandatory 120-day period is fatal to its claim and rendered the CTA devoid of period (March 18, 2006 being the 120th day). BIR Ruling No. DA-489-03 effectively shielded the filing of
jurisdiction over the judicial claim. GST’s judicial claim from the vice of prematurity.
JOYA, Donald Jude H.
2015-0503 The 120-day period is mandatory and jurisdictional.However, the Supreme Court categorically
held that BIR Ruling No. DA-489-03 dated December 10, 2003 provided a valid claim for equitable
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE COMMISSIONER estoppel under Section 246 of the Tax Code. BIR Ruling No. DA-489-03 expressly states that the
OF INTERNAL REVENUE vs GST PHILIPPINES, INC. “taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek judicial relief with
G.R. No. 190872 October 17, 2013 the CTA by way of Petition for Review.” As such, all taxpayers can rely on said ruling from the time of its
issuance on December 10, 2003 up to its reversal by the Supreme Court in Aichi on October 6, 2010,
FACTS: where it was held that the 120+30 day periods are mandatory and jurisdictional.

Respondent GST is a VAT registered domestic corporation primarily engaged in steel and iron LANGKUNO,Raisa P.
products. During taxable years 2004-2005, GST filed claimed for unutilized excess input VAT attributable 2014-0049
to its zero rated sales.
J.R.A. Philippines, Inc. vs. Commissioner of Internal Revenue
PERIOD DATE OF FILING OF ADMINISTRATIVE CLAIM G.R. No.171307,August 28, 2013
FOR REFUND
1st Quarter of year 2004 June 9, 2004 Facts:
2nd Quarter of year 2004 August 12, 2004 Petitioner, a VAT and Philippine Economic Zone Authority (PEZA) registered corporation engaged in the
3rd Quarter of year 2004 February 18, 2005 manufacture and export of ready-to-wear items, claimed to have paid the aggregate sum of
4th Quarter of year 2004 February 18, 2005 P7,786,614.04 as excess input VAT for the calendar year 1999, which amount it purportedly used to
1st Quarter of year 2005 May 11, 2005 purchase domestic goods and services directly attributable to its zero-rated export sales. Alleging that its
2nd Quarter of year 2005 November 18, 2015 input VAT remained unutilized as it has not engaged in any business activity or transaction for which it
3rd Quarter of year 2005 November 18, 2005 may be liable for output VAT, petitioner filed four separate applications for tax refund. When the same
was not acted upon by respondent Commissioner of Internal Revenue, filed a petition for review before
For failure of CIR to act on its administrative claims, GST filed for a petition for review before the the CTA. The CIR contended that since petitioner is registered with the PEZA, its business was not
subject to VAT therefore it may not claim tax refund. The CTA ruled against petitioner stating that. The
CTA. The CTA granted the petition.CIR filed an MR but was denied. In a petition for review before the
latter failed to establish the fact that its 1999 export sales were "zero-rated" for VAT purposes as it failed
CTA En Banc, CIR raised that the appeal before the CTA was filed beyond the reglementary period. GST
asserts that under Section 112 (A) of the Tax Code, the prescriptive period is complied with if both the to comply with the substantiation requirements under Section 113(A) in relation to Section 238 of the
administrative and judicial claims are filed within the two-year prescriptive period; and that compliance NIRC, as well as Section 4.108-1 of RR 7-95. Further, it affirmed the earlier finding that petitioner’s export
sales invoices had no BIR Permit to Print and did not contain its TIN-V and the words "zero-rated." As
with the 120-day and 30-day periods under Section 112 (D) of the Tax Code is not mandatory
such, the documents it submitted were insufficient to prove the zero-rated export sales of the goods for
ISSUE: input VAT refund purposes.

Issue:
Whether or not GST’s action for refund has complied with the prescriptive periods provided for by
Whether or not the CTA erred in denying petitioner’s claim for tax refund.
the Tax Code?

RULING: Ruling:
No. Case law dictates that in a claim for tax refund or tax credit, the applicant must prove not only
entitlement to the claim but also compliance with all the documentary and evidentiary requirements
No as to claims in 2004 and first quarter of 2005 but YES as to the second and third quarter of
therefor. Section 110(A)(1) of the NIRC provides that creditable input taxes must be evidenced by a VAT
2005.
invoice or official receipt, which must, in turn, comply with Sections 237 and 238 of the same law, as well

Page 96 of 148
as Section 4.108.1 of RR 7-95. The foregoing provisions require, inter alia, that an invoice must reflect, as
required by law: (a) the BIR Permit to Print; (b) the TIN-V of the purchaser; and (c) the word "zero-rated"
imprinted thereon. In this relation, failure to comply with the said invoicing requirements provides sufficient
ground to deny a claim for tax refund or tax credit.
In this case, records show that all of the export sales invoices presented by petitioner not only
lack the word "zero-rated" but also failed to reflect its BIR Permit to Print as well as its TIN-V. Thus, it
cannot be gainsaid that it failed to comply with the above-stated invoicing requirements, thereby rendering
improper its claim for tax refund. Clearly, compliance with all the VAT invoicing requirements is required to
able to file a claim for input taxes attributable to zero-rated sales.
Deutsche Bank Ag Manila Branch vs. Commissioner of Internal Revenue
G.R. No.188550,August 19, 2013
Facts:
Petitioner withheld and remitted to respondent the amount Facts:
67,688,553.51, which represented the fifteen percent (15%) branch profit remittance tax (BPRT) on its
regular banking unit (RBU) net income remitted to Deutsche Bank Germany (DB Germany) for 2002 and
prior taxable years. Believing that it made an overpayment of the BPRT, petitioner filed an administrative
claim for refund or issuance of its tax credit certificate in the total amount of PHP 22,562,851.17. Alleging
the inaction of the BIR on its administrative claim, petitioner filed a Petition for Review with the CTA.
The CTA Second Division denied the petition on the ground that the application for a tax treaty
relief was not filed with ITAD prior to the payment by the former of its BPRT and actual remittance of its
branch profits to DB Germany, or prior to its availment of the preferential rate of ten percent (10%) under
the RP-Germany Tax Treaty provision. The CTA En Banc affirmed the CTA Second Division’s Decision.
The court likewise ruled that the 15-day rule for tax treaty relief application under RMO No. 1-2000 cannot
be relaxed for petitioner, unlike in CBK Power Company Limited v. Commissioner of Internal Revenue. In
that case, the rule was relaxed and the claim for refund of excess final withholding taxes was partially
granted. While it issued a ruling to CBK Power Company Limited after the payment of withholding taxes,
the ITAD did not issue any ruling to petitioner even if it filed a request for confirmation on 4 October 2005
that the remittance of branch profits to DB Germany is subject to a preferential tax rate of 10% pursuant to
Article 10 of the RP-Germany Tax Treaty.
Issue:
Whether the failure to strictly comply with RMO No. 1-2000 will deprive persons or corporations
of the benefit of a tax treaty.
. deductible. A mere averment that the taxpayer has incurred a loss does not automatically warrant a
Ruling:
Yes. RMO No. 1-2000 was implemented to obviate any erroneous interpretation and/or application of the
treaty provisions. The objective of the BIR is to forestall assessments against corporations who
erroneously availed themselves of the benefits of the tax treaty but are not legally entitled thereto, as well
as to save such investors from the tedious process of claims for a refund due to an inaccurate application
of the tax treaty provisions. However, as earlier discussed, noncompliance with the 15-day period for prior
application should not operate to automatically divest entitlement to the tax treaty relief especially in
claims for refund.
The underlying principle of prior application with the BIR becomes moot in refund cases, such as the
present case, where the very basis of the claim is erroneous or there is excessive payment arising from
non-availment of a tax treaty relief at the first instance. In this case, petitioner should not be faulted for not
complying with RMO No. 1-2000 prior to the transaction. It could not have applied for a tax treaty relief
within the period prescribed, or 15 days prior to the payment of its BPRT, precisely because it erroneously
paid the BPRT not on the basis of the preferential tax rate under
the RP-Germany Tax Treaty, but on the regular rate as prescribed by the NIRC. Hence, the prior
application requirement becomes illogical. Therefore, the fact that petitioner invoked the provisions of the
RP-Germany Tax Treaty when it requested for a confirmation from the ITAD before filing an administrative
claim for a refund should be deemed substantial compliance with RMO No. 1-2000.
H. Tambunting Pawnshop Inc. vs. Commissioner of Internal Revenue
G.R. No.173373,July 29, 2013
of PHP
H. Tambunting Pawnshop, Inc., a domestic corporation duly licensed and authorized to engage in the
pawnshop business, appeals the adverse decision promulgated on April 24, 2006, whereby the Court of
Tax Appeals En Banc (CTA En Bane) affirmed the decision of the CTA First Division ordering it to pay
deficiency income taxes in the amount of P4,536,687.15 for taxable year 1997, plus 20% delinquency
interest but cancelling the compromise penalties for lack of basis. The BIR then issued assessment
notices and demand letters. Tambunting thereafter instituted an administrative protest against the
assessment notices and demand letters. Tambunting brought a petition for review in the CTA, pursuant to
Section 228 of the National Internal Revenue Code of 1997, citing the inaction of the Commissioner of
Internal Revenue on its protest within the 180-day period prescribed by law. The CTA denied its petition.
Issue:
Whether or not CTA should have allowed Tambunting its deductions because it had been able to
point out the provisions of law authorizing the deductions.
Ruling:
No. The rule that tax deductions, being in the nature of tax exemptions, are to be construed in
strictissimijuris against the taxpayer is well settled. Corollary to this rule is the principle that when a
taxpayer claims a deduction, he must point to some specific provision of the statute in which that
deduction is authorized and must be able to prove that he is entitled to the deduction which the law
allows. An item of expenditure, therefore, must fall squarely within the language of the law in order to be
deduction from its gross income.
As the CTA En Banc held, Tambunting did not properly prove that it had incurred losses. The subasta
books it presented were not the proper evidence of such losses from the auctions because they did not
reflect the true amounts of the proceeds of the auctions due to certain items having been left unsold after
the auctions. The rematado books did not also prove the amounts of capital because the figures reflected
therein were only the amounts given to the pawnees. It is interesting to note, too, that the amounts
received by the pawnees were not the actual values of the pawned articles but were only fractions of the
real values.
Page 97 of 148
Philippine Deposit Insurance Corporation vs. Bureau of Internal Revenue
G.R. No.172892,June 13, 2013
Facts:
The Monetary Board of the BangkoSentralngPilipinas (BSP) prohibited the Rural Bank of Tuba
(Benguet), Inc. (RBTI) from doing business in the Philippines and placed it under receivership in
accordance with Section 30 of Republic Act No. 7653. Subsequently, PDIC conducted an evaluation of
RBTI’s financial condition and determined that RBTI remained insolvent. Thus, the Monetary Board issued
a resolution directing PDIC to proceed with the liquidation of RBTI. PDIC filed in the Regional Trial Court
(RTC) of La Trinidad, Benguet a petition for assistance in the liquidation of RBTI which was approved. As
an incident of the proceedings, the Bureau of Internal Revenue (BIR) intervened as one of the creditors of
RBTI and prayed that the proceedings be suspended until PDIC has secured a tax clearance required
under the Tax Code.
Issue:
Whether a bank placed under liquidation has to secure a tax clearance from the BIR before the
project of distribution of the assets of the bank can be approved by the liquidation court.
Ruling:
No. Section 30 of the New Central Bank Act lays down the proceedings for receivership and liquidation of
a bank. The said provision is silent as regards the securing of a tax clearance from the BIR. The omission,
nonetheless, cannot compel this Court to apply by analogy the tax clearance requirement of the SEC, as
stated in Section 52(C) of the Tax Code of 1997 and BIR-SEC Regulations No. 1, since, again, the
dissolution of a corporation by the SEC is a totally different proceeding from the receivership and
liquidation of a bank by the BSP. This Court cannot simply replace any reference by Section 52(C) of the
Tax Code of 1997 and the provisions of the BIR-SEC Regulations No. 1 to the "SEC" with the "BSP." To
do so would be to read into the law and the regulations something that is simply not there, and would be
tantamount to judicial legislation.
The law expressly provides that debts and liabilities of the bank under liquidation are to be paid
in accordance with the rules on concurrence and preference of credit under the Civil Code. Duties, taxes,
and fees due the Government enjoy priority only when they are with reference to a specific movable
property, under Article 2241(1) of the Civil Code, or immovable property, under Article 2242(1) of the
same Code. However, with reference to the other real and personal property of the debtor, sometimes
referred to as "free property," the taxes and assessments due the National Government, other than those
in Articles 2241(1) and 2242(1) of the Civil Code, such as the corporate income tax, will come only in ninth
place in the order of preference. On the other hand, if the BIR’s contention that a tax clearance be
secured first before the project of distribution of the assets of a bank under liquidation may be approved,
then the tax liabilities will be given absolute preference in all instances, including those that do not fall
under Articles 2241(1) and 2242(1) of the Civil Code. In order to secure a tax clearance which will serve
as proof that the taxpayer had completely paid off his tax liabilities, PDIC will be compelled to settle and
pay first all tax liabilities and deficiencies of the bank, regardless of the order of preference under the
pertinent provisions of the Civil Code. Following the BIR’s stance, therefore, only then may the project of
distribution of the bank’s assets be approved and the other debts and claims thereafter settled, even
though under Article 2244 of the Civil Code such debts and claims enjoy preference over taxes and
assessments due the National Government. The BIR effectively wants this Court to ignore Section 30 of
the New Central Bank Act and disregard Article 2244 of the Civil Code. However, as a court of law, this
Court has the solemn duty to apply the law. It cannot and will not give its imprimatur to a violation of the
laws.
First Lepanto Taisho Insurance Corporation vs. Commissioner of Internal Revenue
G.R. No.197117,April 10, 2013
Facts:
Petitioner protested before the CTA the issuance by the CIR of internal revenue tax assessments for
deficiency income, withholding, expanded withholding, final withholding, value-added, and documentary
stamp taxes for taxable year 1997. Petitioner contended that it was not liable to pay Withholding Tax on
Compensation on the P500,000.00 Director’s Bonus to their directors, because they were not employees
and the amount was already subjected to Expanded Withholding Tax. The CTA En Banc, however, ruled
that Section 5 of Revenue Regulation No. 12-86 expressly identified a director to be an employee.
As to transportation, subsistence and lodging, and representation expenses, the expenses would
not be subject to withholding tax only if the same were reimbursement for actual expenses of the
company. In the present case, the CTA En Banc declared that petitioner failed to prove that they were so.
As to deficiency expanded withholding taxes on compensation, petitioner failed to substantiate
that the commissions earned totaling P905,428.36, came from reinsurance activities and should not be
subject to withholding tax. Petitioner likewise failed to prove its direct loss expense, occupancy cost and
service/contractors and purchases.
As to deficiency final withholding taxes, "petitioner failed to present proof of remittance to
establish that it had remitted the final tax on dividends paid as well as the payments for services rendered
by the Malaysian entity."
As to the imposition of delinquency interest under Section 249 (c) (3) of the 1997 National
Internal Revenue Code (NIRC), records reveal that petitioner failed to pay the deficiency taxes within thirty
(30) days from receipt of the demand letter, thus, delinquency interest accrued from such non-payment.
Issue:
Whether the CTA En Banc erred in holding petitioner liable for:
a. deficiency withholding taxes on compensation on directors’ bonuses under Assessment No. ST-WC-
97-0021-99;
b. deficiency expanded withholding taxes on transportation, subsistence and lodging, and representation
expense; commission expense; direct loss expense; occupancy cost; and service/contractor and
purchases under Assessment No. ST-EWT-97-0218-
99;
c. deficiency final withholding taxes on payment of dividends and computerization expenses to foreign
entities under Assessment No. ST-FT-97-0219-99; and
d. delinquency interest under Section 249 (c) (3) of the NIRC.
Ruling:
No. For taxation purposes, a director is considered an employee under Section 5 of Revenue Regulation
No. 12-86. The non-inclusion of the names of some of petitioner’s directors in the company’s Alpha List
Page 98 of 148
does not ipso facto create a presumption that they are not employees of the corporation, because the
imposition of withholding tax on compensation hinges upon the nature of work performed by such
individuals in the company.
As to the deficiency withholding tax assessment on transportation, subsistence and lodging, and
representation expense, commission expense, direct loss expense, occupancy cost, service/contractor
and purchases, petitioner was not able to sufficiently establish that the transportation expenses reflected
in their books were reimbursement from actual transportation expenses incurred by its employees in
connection with their duties as the only document presented was a Schedule of Transportation. Expenses
without pertinent supporting documents. Without said documents, such as but not limited to, receipts,
transportation-related vouchers and/or invoices, there is no way of ascertaining whether the amounts
reflected in the schedule of expenses were disbursed for transportation.
As to the deficiency final withholding tax assessments for payments of dividends and computerization
expenses incurred by petitioner to foreign entities, the imposition of delinquency interest under Section
249 (c) (3) of the 1997 NIRC to be proper, because failure to pay the deficiency tax assessed within the
time prescribed for its payment justifies the imposition of interest at the rate of twenty percent (20%) per
annum, which interest shall be assessed and collected from the date prescribed for its payment until full
payment is made.
LIM,JOHN MARC I.
2015-0471
NIPPON EXPRESS (PHILIPPINES) CORPORATION vs. CIR
G.R. No. 196907, March 13, 2013
FACTS:
Petitioner Nippon Express (Philippines) Corporation is a corporation duly organized and
registered with the Securities and Exchange Commission. It is also a value-added tax (VAT)-registered
entity.On April 24, 2003, Nippon filed an administrative claim for refund representing excess input tax
attributable to its effectively zero-rated sales in 2001. Pending review by the BIR, Nippon filed a petition
for review with the CTA First Division, requesting for the issuance of a tax credit certificate on April 25,
2003.
CTA First Division granted and ordered CIR to issue a tax credit certificate in favor of petitioner.
CTA En Banc affirmed. CIR filed a MR and argued that CTA had no jurisdiction over the petition for review
because it was filed beforethe lapse of the 120-day period accorded to the CIR to decide on its
administrative claim for input VAT refund. (*claim was premature according to CIR).
ISSUE:
WON the CTA has jurisdiction to entertain the petition for review.
RULING:
The petitioner argues that the non-exhaustion of administrative remedies is not a jurisdictional
defect as to prevent the tax court from taking cognizance of the case. It merely renders the filing of the
case premature and makes it susceptible to dismissal for lack of cause of action, if invoked. Considering,
however, that the CIR failed to seasonably object to the filing of the case by petitioner with the CTA, it is
deemed to have waived any defect in the petition for review. In fact, petitioner points out that the this issue
was only raised for the first time in the respondent’s Supplemental Motion for Reconsideration, dated
December 3, 2010, which was filed after the promulgation of the September 22, 2010 Amended Decision
of the CTA En Banc. Finally, petitioner insists that it cannot be faulted for relying on prevailing CTA
jurisprudence requiring that both administrative and judicial claims for refund be filed within two (2) years
from the date of the filing of the return and the payment of the tax due. Because this case was filed more
than seven years prior to Aichi, the doctrine espoused therein cannot be applied retroactively as it would
impair petitioner’s substantial rights and will deprive it of its right to refund
Petitioner is mistaken.
The provision in question is Section 112(D) (now subparagraph C) of the NIRC:
Sec. 112. Refunds or Tax Credits of Input Tax
(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. – In proper cases, the
Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one
hundred twenty (120) days from the date of submission of complete documents in support of the
application filed in accordance with Subsections (A) and (B) hereof.
MINDANAO II GEOTHERMAL PARTNERSHIP VS. CIR
G.R. 193301, 11 March 2013
FACTS:
Mindanao II Geothermal Partnership sold its fully depreciated Nissan Patrol, CIR said that the
sale is subject to VAT. Mindanao, in its defense, asserted that the sale is not incidental transaction in the
course of its business, hence, an isolated transaction that should not have been subject to VAT.
ISSUE:
Whether or not an isolated transaction can be an incidental transaction for purposes of VAT
liability.
RULING
Yes, just because a transaction is said to be an isolated one, it does not follow that it cannot be
an incidental transaction.
Mindanao II’s business is to convert the steam supplied to it by PNOC-EDC into electricity and to deliver
the electricity to NPC. In the course of business, Mindanao II bought and eventually sold a Nissan Patrol.
Prior to the sale, the Nissan Patrol was part of Mindanao II’s property, plant and equipment. Therefore, the
sale of the Nissan Patrol is an incidental transaction made in the course of business which should be
liable for VAT
Page 99 of 148
 CHINA BANKING CORPORATION VS. CIR
G.R. No. 175108, February 27, 2013
FACTS:
For the four quarters of 1996, petitioner paid Il93,119,433.50 as gross receipts tax (GRD on its
income from the interests on loan investments, commissions, service and collection charges, foreign
exchange profit and other operating earnings.
In computing its taxable gross receipts, petitioner included the 20% final withholding tax on its
passive interest income.
On January 30, 1996, the Court of Tax Appeals (CTA) rendered a Decision entitled Asian Bank
Corporation v. Commissioner of Internal Revenue, wherein it ruled that the 20% final withholding tax on a
bank’s passive interest income should not form part of its taxable gross receipts.
On the strength of the aforementioned decision, petitioner filed with respondent a claim for refund
on April 20, 1998, of the alleged overpaid GRT for the four (4) quarters of 1996 in the aggregate amount
of ₱6,646,829.67.
On even date, petitioner filed its Petition for Review with the CTA.
The CTA, on November 8, 2000, rendered a Decision agreeing with petitioner that the 20% final
withholding tax on interest income does not form part of its taxable gross receipts. However, the CTA
dismissed petitioner’s claim for its failure to prove that the 20% final withholding tax forms part of its 1996
taxable gross receipts.
ISSUE:
Whether or not he 20% final tax withheld on a bank’s passive income should be included in the
computation of the GRT.
RULING:
Yes. The 20% final tax withheld on a bank’s passive income should be included in the
computation ofthe Gross Receipts Tax (GRT). Bureau of Internal Revenue (BIR) has consistently ruled
that theterm gross receipts do not admit of any deduction. It emphasized that interest earned by
banks,even if subject to the final tax and excluded from taxable gross income, forms part of its
grossreceipt for GRT purposes. The interest earned refers to the gross interest without deduction,
sincethe regulations do not provide for any deduction. Absent a statutory definition of the term, theBIR had
consistently applied it in its ordinary meaning, i.e., without deduction.
FORT BONIFACIO DEVELOPMENT CORPORATION vs. CIR
G.R. Nos. 164155 & 175543, February 25, 2013
FACTS:
In 1992 Congress enacted Republic Act (R.A.) 7227 creating the Bases Conversion
Development Authority (BCDA) for the purpose of raising funds through the sale to private investors of
military camps located in bustling Metro Manila. To do this, on Febmary 3, 1995 the BCDA established the
FBDC for the purpose of enabling it to develop a 440-hectare area in Fort Bonifacio, Taguig City, for
mixed residential, commercial, business, institutional, recreational, tourism, and other purposes. At the
time of its incorporation, FBDC was a wholly-owned subsidiary of BCDA.
As part of the scheme that would enable BCDA to raise funds through FBDC,1 on February 7,
1995 the Republic of the Philippines transferred by land grant to FBDC, through Special Patent 3596, a
214-hectare land in Fort Bonifacio. FBDC in turn executed a Promissory Note for ₱71.2 billion plus in
favor of the Republic. The Republic for its part assigned the promissory note to BCDA which assigned it
back to FBDC as full and complete payment of BCDA’s subscription to FBDC’s authorized capital stock.
More than three years later or on September 15, 1998 respondent Commissioner of Internal
Revenue issued a Letter of Authority, providing for the examination of FBDC’s books and other accounting
records covering all its internal revenue liabilities for the 1995 taxable year, the year it came into being. On
December 10, 1999 the Commissioner issued a Final Assessment Notice to FBDC for deficiency
documentary stamp tax of ₱1,068,412,560.00 based on the Republic’s 1995 sale to it of the Fort Bonifacio
land.
ISSUE:
Whether or not the CA erred in ruling that FBDC was liable for the payment of the DST and a
20% delinquency interest on the Deed of Absolute Sale of the 214-hectare Fort Bonifacio land that the
Republic executed in FBDC’s favor.
HELD:
DST is by nature, an excisetax since it is levied on the exercise by persons of privilegesconferred
by law. These privileges may cover the creation,modification or termination of contractual relationships
byexecuting specific documents like deeds of sale, mortgages, pledges,trust and issuance of shares of
stock. The sale of Fort Bonifacio landwas not a privilege but an obligation imposed by law which was
tosell lands in order to fulfill a public purpose. To charge DST on atransaction which was basically a
compliance with a legislativemandate would go against its very nature as an excise tax.
COMMISSIONER OF INTERNAL REVENUE vs. SAN ROQUE POWER CORPORATION
G.R. No. 187485. February 12, 2013
TAGANITO MINING CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 196113. February 12, 2013
PHILEX MINING CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 197156. February 12, 2013
FACTS:
SAN ROQUE
San Roque was incorporated in 1997 to design, construct, erect, assemble, own, commission
and operate power-generating plant facilities pursuant to and under contract with the government. As a
seller of services it is duly registered with BIR and BOI on a preferred pioneer status.
On October 1997, San Roque entered into a Power Purchase Agreement (PPA) with National
Power Corporation (NPC) to generate additional power and energy for Luzon Power Grid by developing
hydro-potential on the Agno River. The PPA provides, among others, that San Roque shall be
Page 100 of 148
responsible for the design, construction and commissioning of the Power Station and shall operate and
maintain the same, subject to NPC instructions.
During the cooperation period of 25 years commencing from the completion date of the power
station, NPC will take and pay for all electricity available from the power station. On the construction and
development of the San Roque multi-purpose project which comprises of the dam, spillway and power
plant, allegedly incurred, excess input VAT in the amount of 559, 709, 337.54 for taxable year 2001 which
it declared in its quarterly VAT returns filed for the same year. However, on Mar 28 2003, it amended its
VAT returns for the year 2001 sand increased its input VAT to the amount of 560,200,283.14. San Roque
filed with BIR for refund of such amount.
TAGANITO
Taganito is a VAT registered entity and is also registered with BOI as an exporter of beneficiated
nickel.
Taganito filed all its monthly VAT declarations and VAT returns for the period of Jan 1 –
December 2005. Taganito reported zero-rated sales amounting to 1,446,854,034; input VAY on its
domestic purchases and importations of goods and services amounting to 2, 314,730 and input VAT on its
domestic purchases and importations amounting to 6,050,933.95. On Nov 14, 2005 filed with CIR claiming
a tax refund of its supposed input VAT amounting to 8M period covering Jan 1-Dec 2004 and also Jan 1-
Dec 2005.
As the statutory period within which to file claim for refund is about to lapse without CIR’s action,
they filed the instant petition for review on Feb 17 2007.
PHILEX MINING
Philex is a corporation duly organized and existing under the laws of the Republic of the
Philippines, which is principally engaged in the mining business, which includes the exploration and
operation of mine properties and commercial production and marketing of mine products
On Oct 21, 2005, filed its original VAT return for 3rd quarter of taxable year 2005 and amended
VAT return for the same quarter on Dec 1, 2005.
On March 20, 2006, [Philex] filed its claim for refund/tax credit of the amount of ₱23,956,732.44
with the One Stop Shop Center of the Department of Finance.
ISSUE:
Whether or not the three companies filed their claim for refund were timely filed.
RULING:
SAN ROQUE
No. Clearly, San Roque failed to comply with the 120-day waiting period, the time expressly
given by law to the Commissioner to decide whether to grant or deny San Roque’s application for tax
refund or credit. It is indisputable that compliance with the 120-day waiting period is mandatory and
jurisdictional.
This Court cannot disregard mandatory and jurisdictional conditions mandated by law simply
because the Commissioner chose not to contest the numerical correctness of the claim for tax refund or
credit of the taxpayer. Non-compliance with mandatory periods, non-observance of prescriptive periods,
and non-adherence to exhaustion of administrative remedies bar a taxpayer’s claim for tax refund or
credit, whether or not the Commissioner questions the numerical correctness of the claim of the taxpayer.
TAGANITO
Yes. Like San Roque, Taganito also filed its petition for review with the CTA without waiting for
the 120-day period to lapse. Also, like San Roque, Taganito filed its judicial claim before the promulgation
of Atlas doctrine. Similarly situated as San Roque – both cannot claim being misled, misguided or
confused by the Atlas doctrine.
HOWEVER, Taganito can invoke BIR Ruling No. DA-489-0357 dated 10 Dec 2003, which
expressly ruled that the “taxpayer-claimant need not wait for the lapse of the 120-day period beforeit could
seek judicial relief with the CTA by way of petition for review.
Taganito filed its judicial claim after the issuance of BIR ruling but before the adoption of the Aichi
doctrine. Thus, Taganito is deemed to have filed its judicial claim on time.
PHILEX MINING
No. Taxpayer may within 2 years after the close of the taxable quarter when the sales are made,
apply for the issuance of tax credit certificate or refund of the creditable input tax due or paid to such
sales. In short, the law states that the taxpayer may apply with the Commissioner for a refund or credit
within 2 years, which meant at anytime within 2 years.
The two-year prescriptive period does not refer to the filing of judicial claim with the CTA but the
filing of the CTA but to the filing of the administrative claim with the commissioner ⇒ refund/ credit with the
CIR and not to appeals made to the CTA.
The commissioner will have 120 days from such filing to decide the claim. If the commissioner
decides the claim on the 120th day, or does not decide it on that day, the taxpayer has 30 days to file his
judicial claim with the CTA.
The 30-day period was adopted precisely to do away with the old rule, so that under the VAT
System the taxpayer will always have 30 days to file the judicial claim even if the Commissioner acts only
on the 120th day, or does not act at all during the 120-day period . With the 30-day period always
available to the taxpayer, the taxpayer can no longer file a judicial claim for refund or credit of input VAT
without waiting for the Commissioner to decide until the expiration of the 120-day period.
Loyola, Paula Bianca
COMMISSIONER OF INTERNAL REVENUE
vs
ST. LUKES MEDICAL CENTER
G.R 195909
26 SEPTEMBER 2012
--
COMMISSIONER OF INTERNAL REVENUE
vs
ST. LUKES MEDICAL CENTER
G.R 195960
26 SEPTEMBER 2012
Facts:
These are consolidatedpetitions for review on certiorari under Rule 45 of the Rules of Court assailing the
Decision of 19 November 2010 of the Court of Tax Appeals (CTA) En Banc and its Resolutionof 1 March
2011 in CTA Case No. 6746. This Court resolves this case on a pure question of law, which involves the
interpretation of Section 27(B) vis-à- visSection 30(E) and (G) of the National Internal Revenue Code of
the Philippines (NIRC), on the income tax treatment of proprietary non-profit hospitals.
Page 101 of 148

On 16 December 2002, the Bureau of Internal Revenue (BIR) assessed St. Luke’s deficiency taxes
comprised of deficiency income tax, value-added tax, withholding tax on compensation and expanded
withholding tax. The BIR reduced the amount during trial in the First Division of the CTA. On 14 January
2003, St. Luke’s filed an administrative protest with the BIR against the deficiency tax assessments. The
BIR did not act on the protest within the 180-day period under Section 228 of the NIRC. Thus, St. Luke’s
appealed to the CTA. The BIR argued before the CTA that Section 27(B) of the NIRC, which imposes a
10% preferential tax rate on the income of proprietary non-profit hospitals, should be applicable to St.
Luke’s. According to the BIR, Section 27(B), introduced in 1997, “is a new provision intended to amend
the exemption on non-profit hospitals that were previously categorized as non-stock non-profit
corporations under Section 26 of the 1997 Tax Code.It is a specific provision which prevails over the
general exemption on income tax granted under Section 30(E) and (G) for non-stock, non-profit charitable
institutions and civic organizations promoting social welfare.
The BIR claimed that St. Luke’s was actually operating for profit in 1998 because only 13% of its revenues
came from charitable purposes. St. Luke’s contended that the BIR should not consider its total revenues,
because of its free services to patients St. Luke’s also claimed that its income does not inure to the benefit
of any individual. St. Luke’s maintained that it is a non-stock and nonprofit institution for charitable and
social welfare purposes under Section 30(E) and (G) of the NIRC. It argued that the making of profit per
se does not destroy its income tax exemption. The petition of St. Luke’s in G.R. No. 195960 raises factual
matters on the treatment and withholding of a part of its income,as well as the payment of surcharge and
delinquency interest. There is no ground for this Court to undertake such a factual review. Under the
Constitutionand the Rules of Court,this Court’s review power is generally limited to “cases in which only an
error or question of law is involved.This Court cannot depart from this limitation if a party fails to invoke a
recognized exception. The Court of Tax appeals ruled partially granting the Petitioner’s petition for review
and cancelling the 100,000 due however ruled that it must pay its deficiency tax and ordered to pay
additional 20% on its delinquent tax due. Hence the petition.
Issue:
Whether St. Lukes is liable for deficiency tax on income for the year 1998 under Section 27 (B) of the
NIRC, which imposes a preferential tax rate of 10% on the income of propriety non – profit hospitals?
Held:
The petition is without merit as it raises a factual issue on G.R 195960, it is provided under rules of court
that issues to be raised are that of questions of Law and not factual issues.
There is no dispute that St. Luke’s is organized as a non-stock and non-profit charitable institution.
However, this does not automatically exempt St. Luke’s from paying taxes. This only refers to the
organization of St. Luke’s. Even if St. Luke’s meets the test of charity, a charitable institution is not ipso
facto tax exempt. To be exempt from real property taxes, Section 28(3), Article VI of the Constitution
requires that a charitable institution use the property “actually, directly and exclusively” for charitable
purposes. To be exempt from income taxes, Section 30(E) of the NIRC requires that a charitable
institution must be “organized and operated exclusively” for charitable purposes. Likewise, to be exempt
from income taxes, Section 30(G) of the NIRC requires that the institution be “operated exclusively” for
social welfare. The Supreme Court finds that St. Luke’s is a corporation that is not “operated exclusively”
for charitable or social welfare purposes insofar as its revenues from paying patients are concerned; Such
income from for-profit activities, under the last paragraph of Section 30, is merely subject to income tax,
previously at the ordinary corporate rate but now at the preferential 10% rate pursuant to Section 27(B).
―The Court finds that St. Luke’s is a corporation that is not“operated exclusively” for charitable or social
welfare purposesinsofar as its revenues from paying patients are concerned. Thisruling is based not only
on a strict interpretation of a provisiongranting tax exemption, but also on the clear and plain text
ofSection 30(E) and (G). Section 30(E) and (G) of the NIRC requiresthat an institution be “operated
exclusively” for charitable orsocial welfare purposes to be completely exempt from incometax. An
institution under Section 30(E) or (G) does not lose its taxexemption if it earns income from its for-profit
activities. Suchincome from for profit activities, under the last paragraph ofSection 30 is merely subject to
income tax, previously at theordinary corporate rate but now at the preferential 10% ratepursuant to
Section 27(B). Section 27(B) of the NIRC imposes a 10% preferential tax rate on the income of (1)
proprietary non-profit educational institutions and (2) proprietary non-profit hospitals. The only
qualifications for hospitals are that they must be proprietary and non-profit. “Proprietary” means private,
following the definition of a “proprietary educational institution” as “any private school maintained and
administered by private individuals or groups” with a government permit. “Non-profit” means no net
income or asset accrues to or benefits any member or specific person, with all the net income or asset
devoted to the institution’s purposes and all its activities conducted not for profit.
WHEREFORE, the petition of the Commissioner of Internal Revenue in G.R. No. 195909 is PARTLY
GRANTED. The Decision of the Court of Tax Appeals En Banc dated 19 November 2010 and its
Resolution dated 1 March 2011 in CTA Case No. 6746 are MODIFIED. St. Luke’s Medical Center, Inc. is
ORDERED TO PAY the deficiency income tax in 1998 based on the 10% preferential income tax rate
under Section 27(B) of the National Internal Revenue Code. However, it is not liable for surcharges and
interest on such deficiency income tax under Sections 248 and 249 of the National Internal Revenue
Code. All other parts of the Decision and Resolution of the Court of Tax Appeals are AFFIRMED. The
petition of St. Luke’s Medical Center, Inc. in G.R. No. 195960 is DENIED for violating Section 1, Rule 45
of the Rules of Court.
DIAGEO PHILIPPINES, INCORPORATED
vs
COMISSIONER OF INTERNAL REVENUE
G.R. 183553
12 NOVEMBER 2012
Facts:
Petitioner Diageo Philippines, Inc. (Diageo) is a domestic corporation organized and existing under the
laws of the Republic of the Philippines and is primarily engaged in the business of importing, exporting,
manufacturing, marketing, distributing, buying and selling, by wholesale, all kinds of beverages and liquors
and in dealing in any material, article, or thing required in connection with or incidental to its principal
business.It is registered with the Bureau of Internal Revenue (BIR) as an excise tax taxpayer, with Tax
Identification No. 000-161-879-000.For the period November 1, 2003 to December 31, 2004, Diageo
purchased raw alcohol from its supplier for use in the manufacture of its beverage and liquor products.
The supplier imported the raw alcohol and paid the related excise taxes thereon before the same were
Page 102 of 148
sold to the petitioner.The purchase price for the raw alcohol included, among others, the excise taxes paid
by the supplier in the total amount of P12,007,528.83.Subsequently, Diageo exported its locally
manufactured liquor products to Japan, Taiwan, Turkey and Thailand and received the corresponding
foreign currency proceeds of such export sales.Within two (2) years from the time the supplier paid the
subject excise taxes, Diageo filed with the BIR Large Taxpayer’s Audit and Investigation Division II
applications for tax refund/issuance of tax credit certificates corresponding to the excise taxes which its
supplier paid but passed on to it as part of the purchase price of the subject raw alcohol invoking Section
130(D) of the Tax Code. However, due to the failure of the respondent Commissioner of Internal Revenue
(CIR) to act upon Diageo’s claims, the latter was constrained to timely file a petition for review before the
CTA.On December 27, 2005, the CIR filed its Answer assailing Diageo’s lack of legal personality to
institute the claim for refund because it was not the one that paid the alleged excise taxes but its
supplier.Subsequently, the CIR filed a motion to dismiss reiterating the same issue.
The CTA ruled dismissing the petition on the ground that Diageo is not a real party in interest to file the
claim for refund, hence the petition.
Issue:
Whether Diageo has the legal personality to file a claim for refund or tax credit for the excise taxes paid by
its supplier on the raw alcohol it purchased and used in the manufacture of its exported goods.
Held:
The petition is without merit. The Court has categorically declared that “[t]he proper party to question, or
seek a refund of, an indirect tax is the statutory taxpayer, the person on whom the tax is imposed by law
and who paid the same even if he shifts the burden thereof to another.”—The phrase “any excise tax paid
thereon shall be credited or refunded” requires that the claimant be the same person who paid the excise
tax. In Silkair (Singapore) Pte. Ltd. v. Commissioner of Internal Revenue, 544 SCRA 100 (2008), the
Court has categorically declared that “[t]he proper party to question, or seek a refund of, an indirect tax is
the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even if he
shifts the burden thereof to another.” Pursuant to the foregoing, the person entitled to claim a tax refund is
the statutory taxpayer or the person liable for or subject to tax.In the present case, it is not disputed that
the supplier of Diageo imported the subject raw alcohol, hence, it was the one directly liable and obligated
to file a return and pay the excise taxes under the Tax Code before the goods or products are removed
from the customs house. It is, therefore, the statutory taxpayer as contemplated by law and remains to be
so, even if it shifts the burden of tax to Diageo. Consequently, the right to claim a refund, if legally allowed,
belongs to it and cannot be transferred to another, in this case Diageo, without any clear provision of law
allowing the same. Unlike the law on Value Added Tax which allows the subsequent purchaser under the
tax credit method to refund or credit input taxes passed on to it by a supplier,no provision for excise taxes
exists granting non-statutory taxpayer like Diageo to claim a refund or credit. It should also be stressed
that when the excise taxes were included in the purchase price of the goods sold to Diageo, the same was
no longer in the nature of a tax but already formed part of the cost of the goods. Finally, statutes granting
tax exemptions are construed stricissimijurisagainst the taxpayer and liberally in favor of the taxing
authority. A claim of tax exemption must be clearly shown and based on language in law too plain to be
mistaken.Unfortunately, Diageo failed to meet the burden of proof that it is covered by the exemption
granted under Section 130(D) of the Tax Code. In sum, Diageo, not being the party statutorily liable to pay
excise taxes and having failed to prove that it is covered by the exemption granted under Section 130(D)
of the Tax Code, is not the proper party to claim a refund or credit of the excise taxes paid on the
ingredients of its exported locally produced liquor.
FORT BONIFACIO DEVELOPMENT CORPORATION
vs
COMMISSIONER OF INTERNAL REVENUE and REVENUE DISTRICT OFFICER, REVENUE
DISTRICT NO. 44, TAGUIG and PATEROS, BUREAU OF INTERNAL REVENUE
G.R. 173425
22 JANUARY 2013
Del Castillo, J.;
Facts:
Petitioner FBDC is a duly organized domestic corporation registered under the Philippine Laws engaged
in the development and sale of real property. BCDA on the other hand is a wholly owned government
corporation created under the special law. FBDC purchased a property by virtue of RA 7227 in one of the
Fort Bonifacio reserves known as the Bonifacio Global City. On the other hand RA 7716 re-structured the
VAT system by amending certain provisions of the old NIRC it extended the VAT coverage to real
properties held primarily for sales to to customers or held for lease in the ordinary course of its business.
Petitioner then submitted to the BIR an inventory of all its properties and claimed that it is entitled to a
transitional input tax credit pursuant to Section 105 of the NIRC. FBDC then started selling properties to
the interested customers. Petitioner then paid the VAT by making cash payments to the BIR, realizing that
its transitional tax was not applied, the petitioner claim for refund from the BIR. Due to the inaction of the
CIR they elevated it to the CTA and it denied the claim for refund of the petitioner hence they filed an
appeal to the CA and it ruled affirming the decision of the CTA hence the petition.
Issue:
Whether the petitioner is entitled for the tax refund
Held:
The supreme court held that the petition is with merit.
Contrary to the view of the CTA and the CA, there is nothing in the above-quoted provision to indicate that
prior payment of taxes is necessary for the availment of the 8% transitional input tax credit. Obviously, all
that is required is for the taxpayer to file a beginning inventory with the BIR.
Page 103 of 148
To require prior payment of taxes, as proposed in the Dissent is not only tantamount to judicial legislation
but would also render nugatory the provision in Section 105 of the old NIRC that the transitional input tax
credit shall be "8% of the value of [the beginning] inventory or the actual [VAT] paid on such goods,
materials and supplies, whichever is higher" because the actual VAT (now 12%) paid on the goods,
materials, and supplies would always be higher than the 8% (now 2%) of the beginning inventory which,
following the view of Justice Carpio, would have to exclude all goods, materials, and supplies where no
taxes were paid. Clearly, limiting the value of the beginning inventory only to goods, materials, and
supplies, where prior taxes were paid, was not the intention of the law. Otherwise, it would have
specifically stated that the beginning inventory excludes goods, materials, and supplies where no taxes
were paid. As retired Justice Consuelo Ynares-Santiago has pointed out in her Concurring Opinion in the
earlier case of Fort Bonifacio:
If the intent of the law were to limit the input tax to cases where actual VAT was paid, it could have simply
said that the tax base shall be the actual value-added tax paid. Instead, the law as framed contemplates a
situation where a transitional input tax credit is claimed even if there was no actual payment of VAT in the
underlying transaction. In such cases, the tax base used shall be the value of the beginning inventory of
goods, materials and supplies.
Moreover, 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 one’s 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. In fact, in Commissioner of Internal Revenue v. Central
Luzon Drug Corp., we declared that prior payment of taxes is not required in order to avail of a tax credit.
Pertinent portions of the Decision read:
While a tax liability is essential to the availment or use of any tax credit, prior tax payments are not. On the
contrary, for the existence or grant solely of such credit, neither a tax liability nor a prior tax payment is
needed. The Tax Code is in fact replete with provisions granting or allowing tax credits, even though no
taxes have been previously paid.
For example, in computing the estate tax due, Section 86(E) allows a tax credit -- subject to certain
limitations -- for estate taxes paid to a foreign country. Also found in Section 101(C) is a similar provision
for donor’s taxes -- again when paid to a foreign country -- in computing for the donor’s tax due. The tax
credits in both instances allude to the prior payment of taxes, even if not made to our government.
Under Section 110, a VAT (Value-Added Tax) - registered person engaging in transactions -- whether or
not subject to the VAT -- is also allowed a tax credit that includes a ratable portion of any input tax not
directly attributable to either activity. This input tax may either be the VAT on the purchase or importation
of goods or services that is merely due from -- not necessarily paid by -- such VAT-registered person in
the course of trade or business; or the transitional input tax determined in accordance with Section
111(A). The latter type may in fact be an amount equivalent to only eight percent of the value of a VAT-
registered person’s beginning inventory of goods, materials and supplies, when such amount -- as
computed -- is higher than the actual VAT paid on the said items. Clearly from this provision, the tax credit
refers to an input tax that is either due only or given a value by mere comparison with the VAT actually
paid -- then later prorated. No tax is actually paid prior to the availment of such credit.
In Section 111(B), a one and a half percent input tax credit that is merely presumptive is allowed. For the
purchase of primary agricultural products used as inputs -- either in the processing of sardines, mackerel
and milk, or in the manufacture of refined sugar and cooking oil -- and for the contract price of public
works contracts entered into with the government, again, no prior tax payments are needed for the use of
the tax credit.
More important, a VAT-registered person whose sales are zero-rated or effectively zero-rated may, under
Section 112(A), apply for the issuance of a tax credit certificate for the amount of creditable input taxes
merely due -- again not necessarily paid to -- the government and attributable to such sales, to the extent
that the input taxes have not been applied against output taxes. Where a taxpayer is engaged in zero-
rated or effectively zero-rated sales and also in taxable or exempt sales, the amount of creditable input
taxes due that are not directly and entirely attributable to any one of these transactions shall be
proportionately allocated on the basis of the volume of sales. Indeed, in availing of such tax credit for VAT
purposes, this provision -- as well as the one earlier mentioned -- shows that the prior payment of taxes is
not a requisite.
It may be argued that Section 28(B)(5)(b) of the Tax Code is another illustration of a tax credit allowed,
even though no prior tax payments are not required. Specifically, in this provision, the imposition of a final
withholding tax rate on cash and/or property dividends received by a nonresident foreign corporation from
a domestic corporation is subjected to the condition that a foreign tax credit will be given by the domiciliary
country in an amount equivalent to taxes that are merely deemed paid. Although true, this provision
actually refers to the tax credit as a condition only for the imposition of a lower tax rate, not as a deduction
from the corresponding tax liability. Besides, it is not our government but the domiciliary country that
credits against the income tax payable to the latter by the foreign corporation, the tax to be foregone or
spared.
In contrast, Section 34(C)(3), in relation to Section 34(C)(7)(b), categorically allows as credits, against the
income tax imposable under Title II, the amount of income taxes merely incurred -- not necessarily paid --
by a domestic corporation during a taxable year in any foreign country. Moreover, Section 34(C)(5)
provides that for such taxes incurred but not paid, a tax credit may be allowed, subject to the condition
precedent that the taxpayer shall simply give a bond with sureties satisfactory to and approved by
petitioner, in such sum as may be required; and further conditioned upon payment by the taxpayer of any
tax found due, upon petitioner’s redetermination of it.
In addition to the above-cited provisions in the Tax Code, there are also tax treaties and special laws that
grant or allow tax credits, even though no prior tax payments have been made.
Under the treaties in which the tax credit method is used as a relief to avoid double taxation, income that
is taxed in the state of source is also taxable in the state of residence, but the tax paid in the former is
merely allowed as a credit against the tax levied in the latter. Apparently, payment is made to the state of
source, not the state of residence. No tax, therefore, has been previously paid to the latter.
Under special laws that particularly affect businesses, there can also be tax credit incentives. To illustrate,
the incentives provided for in Article 48 of Presidential Decree No. (PD) 1789, as amended by Batas
PambansaBlg. (BP) 391, include tax credits equivalent to either five percent of the net value earned, or
five or ten percent of the net local content of export. In order to avail of such credits under the said law
and still achieve its objectives, no prior tax payments are necessary.
From all the foregoing instances, it is evident that prior tax payments are not indispensable to the
availment of a tax credit. Thus, the CA correctly held that the availment under RA 7432 did not require
prior tax payments by private establishments concerned. However, we do not agree with its finding that
the carry-over of tax credits under the said special law to succeeding taxable periods, and even their
application against internal revenue taxes, did not necessitate the existence of a tax liability.
The examples above show that a tax liability is certainly important in the availment or use, not the
existence or grant, of a tax credit. Regarding this matter, a private establishment reporting a net loss in its
Page 104 of 148
financial statements is no different from another that presents a net income. Both are entitled to the tax
credit provided for under RA 7432, since the law itself accords that unconditional benefit. However, for the
losing establishment to immediately apply such credit, where no tax is due, will be an improvident usance.
In this case, when petitioner realized that its transitional input tax credit was not applied in computing its
output VAT for the 1st quarter of 1997, it filed a claim for refund to recover the output VAT it erroneously
or excessively paid for the 1st quarter of 1997. In filing a claim for tax refund, petitioner is simply applying
its transitional input tax credit against the output VAT it has paid. Hence, it is merely availing of the tax
credit incentive given by law to first time VAT taxpayers. As we have said in the earlier case of Fort
Bonifacio, the provision on transitional input tax credit was enacted to benefit first time VAT taxpayers by
mitigating the impact of VAT on the taxpayer. Thus, contrary to the view of Justice Carpio, the granting of
a transitional input tax credit in favor of petitioner, which would be paid out of the general fund of the
government, would be an appropriation authorized by law, specifically Section 105 of the old NIRC.
Wherefore the petition is granted and the decision of the CA is hereby reversed and set aside.
PHILACOR CREDIT CORPORATION
vs
COMISSIONER OF INTERNAL REVENUE
G.R 169899
6 FEBRUARY 2013
Brion, J.;
Facts:
Philacor is a domestic corporation organized under Philippine laws and is engaged in the business of
retail financing. Through retail financing, a prospective buyer of a home appliance—with neither cash nor
any credit card— may purchase appliances on installment basis from an appliance dealer. After Philacor
conducts a credit investigation and approves the buyer’s application, the buyer executes a unilateral
promissory note in favor of the appliance dealer. The same promissory note is subsequently assigned by
the appliance dealer to Philacor. Pursuant to Letter of Authority No. 17107 dated July 6, 1974, Revenue
Officer Celestino Mejia examined Philacor’s books of accounts and other accounting records for the fiscal
year August 1, 1992 to July 31, 1993. Philacor received tentative computations of deficiency taxes for this
year. Philacor’s Finance Manager, Leticia Pangan, contested the tentative computations of deficiency
taxes through a letter dated April 17, 1995. Philacor protested the PANs, with a request for
reconsideration and reinvestigation. It alleged that the assessed deficiency income tax was erroneously
computed when it failed to take into account the reversing entries of the revenue accounts and income
adjustments, such as repossessions, write-offs and legal accounts. Similarly, the Bureau of Internal
Revenue (BIR) failed to take into account the reversing entries of repossessions, legal accounts, and
write-offs when it computed the percentage tax; thus, the total income reported, that the BIR arrived at,
was not equal to the actual receipts of payment from the customers. As for the deficiency DST, Philacor
claims that the accredited appliance dealers were required by law to affix the documentary stamps on all
promissory notes purchased until the enactment of Republic Act No. 7660, otherwise known as An Act
Rationalizing Further the Structure and Administration of the Documentary Stamp Tax,which took effect
on January 15, 1994. In addition, Philacor filed, on the following day, a supplemental protest, arguing that
the assessments were void for failure to state the law and the facts on which they were based.On
September 30, 1998, Philacor filed a petition for review before the CTA Division, docketed as C.T.A. Case
No. 5674. The CTA rendered decision making Philacor liable for Documentary stamp tax for issuing
promisory note. Hence the petition.
Issue:
Whether Philacor is liable to pay Documentary Stamp Tax for the issuance of the Promisory note?
Held:
The Court held that Philacor is not liable for the payment of Documentary Stamp Tax for the issuance of
Promisory Note. The personsprimarily liable for the payment of the documentary stamp tax arethe
persons (1) making; (2) signing; (3) issuing; (4) accepting; or (5)transferring thetaxable documents,
instruments or papers. Shouldthese parties be exempted from paying tax, the other party who isnot
exempt would then be liable.—Section 173 of the 1997National Internal Revenue Code (1997 NIRC)
names those whoare primarily liable for the DST and those who would besecondarily liable: Section 173.
Stamp taxes upon documents,instruments, and papers.—Upon documents, instruments, andpapers, and
upon acceptances, assignments, sales, and transfersof the obligation, right, or property incident thereto,
there shall belevied, collected andpaid for, and in respect of the transaction sohad or accomplished, the
corresponding documentary stamp taxesprescribed in the following sections of this Title, by the
personmaking, signing, issuing, accepting, or transferring the same, andat the same time such act is done
or transaction had: Provided,that wherever one party to the taxable document enjoysexemption from the
tax herein imposed, the other party theretowho is not exempt shall be the one directly liable for the
tax.The persons primarilyliable for the payment of the DST are the person (1) making; (2)signing; (3)
issuing; (4) accepting; or (5) transferring the taxabledocuments, instruments or papers. Should these
parties beexempted from paying tax, the other party who is not exemptwould then be liable. Revenue
Regulations No. 9-2000 interprets the law more widely so that all parties to atransaction are primarily
liable for the DST, and not only theperson making, signing, issuing, accepting or transferring the same
becomes liable asthe law provides. It provides: SEC. 2. Nature of the DocumentaryStamp Tax and
Persons Liable for the Tax.—(a) In General.—Thedocumentary stamptaxes under Title VII of the Code is
a tax oncertain transactions. It is imposed against “the person making,signing, issuing, accepting, or
transferring” the document orfacility evidencing the aforesaid transactions. Thus, in general, itmay be
imposed on the transaction itself or upon the documentunderlying such act. Any of the parties thereto
shall be liablefor the full amount of the tax due: Provided, however, that asbetween themselves, the said
parties may agree on who shall beliable or how they may share on the cost of the tax. (b) Exception.—
Whenever one of the parties to the taxable transaction isexempt from the tax imposed under Title VII of
the Code, theother party thereto who is not exempt shall be the one directlyliable for the tax. In case of
doubt, tax laws must be construedstrictly against the State and liberally in favor of the taxpayer.
Thereason for this ruling is not hard to grasp: taxes, as burdens whichmust be endured by the taxpayer,
should not be presumed to gobeyond what the lawexpressly and clearly declares.—The settledrule is that
in case of doubt, tax laws must be construed strictlyagainst the State and liberally in favor of the taxpayer.
The reason for this ruling is nothard to grasp: taxes, as burdenswhich must be endured by the taxpayer,
Page 105 of 148
should not be presumedto go beyond what the law expressly and clearly declares. Thatsuch strict
construction is necessary in this case is evidenced by the change in the subjectprovision as presently
worded, which now expressly levies the taxon shares of stock as against the privilege of issuing
certificates ofstock as formerlyprovided.
Hence in this case, Promisory Note are not those documents included for a taxpayer to be liable for
payment of Documentary Stamp Tax.
UNITED INTERNATIONAL PICTURES AB
vs
COMMISSIONER OF INTERNAL REVENUE
G.R 168331
11 OCTOBER 2012
Peralta, J.;
Facts:
On April 15, 1999, petitioner filed with the Bureau of Internal Revenue (BIR) its Corporation Annual
Income Tax Return for the calendar year ended December 31, 1998 reflecting, among others, a net
taxable income from operations, an income tax liability but with an excess income tax payment arising
from quarterly income tax payments and creditable taxes withheld at source.
Petitioner opted to carry-over as tax credit to the succeeding taxable year the said overpayment by putting
an “x” mark on the corresponding box. On April 17, 2000, petitioner filed its Corporation Annual Income
Tax Return for the calendar year ended December 31, 1999 wherein it reported, among others, a taxable
income, an income tax due but with an excess income tax payment. On the face of the 1999 return,
petitioner indicated its option by putting an “x” mark on the box “To be refunded.” On April 28, 2000,
petitioner filed with the BIR an administrative claim for refund. As respondent did not act on petitioner’s
claim, the latter filed a petition for review before the Court of Tax Appeals (CTA) to toll the running of the
two-year prescriptive period. On September 12, 2001, the CTA rendered a Decisiondenying petitioner’s
claim for refund for taxable year 1998. It reasoned that since petitioner opted to carry over the 1998 tax
overpayment as tax credit to the succeeding taxable year, the same cannot be refunded pursuant to
Section 76 of the National Internal Revenue Code (NIRC) of 1997. Dissatisfied, they filed their claim with
the CTA but the same was denied. In its petition, respondent argued that petitioner is not entitled to refund
since there is no proof of the illegally collected tax. The CA rendered decision reversing the CTA decision
of petitioner being entitled for the said refund. Casting doubt on documents for evidence, the same could
not be granted. Hence the petition for reconsideration.
Issue:
Whether petitioner UIP is barred from claiming its tax refund it being opted to choose the carry – over?
Held:
The supreme court held that Yes, UIP is barred from claiming a tax refund for choosing a carry-over of its
erroneously and / or illegally collected taxes from them. In case the corporation is entitled to a tax credit or
refund of the excess estimated quarterly income taxes paid, the excess amount shown on its final
adjustment return may be carried over and credited against the estimated quarterly income tax liabilities
for the taxable quarters of the succeeding taxable years. Once the option to carry-over and apply the
excess quarterly income tax against income due for the taxable quarters of the succeeding taxable years
has been made, such option shall be considered irrevocable for that taxable period and no application for
cash refund or issuance of a tax credit certificate shall be allowed therefore. From the afore quoted
provision, it is clear that once a corporation exercises the option to carry-over, such option is irrevocable
“for that taxable period.” Having chosen to carry-over the excess quarterly income tax, the corporation
cannot thereafter choose to apply for a cash refund or for the issuance of a tax credit certificate for the
amount representing such overpayment.To avoid confusion, this Court has properly explained the phrase
“for that taxable period” in Commissioner of Internal Revenue v. Bank of the Philippine Islands.In said
case, the Court held that the phrase merely identifies the excess income tax, subject of the option, by
referring to the “taxable period when it was acquired by the taxpayer.” Thus: Section 76 remains clear and
unequivocal. Once the carry-over option is taken, actually or constructively, it becomes irrevocable. It
mentioned no exception or qualification to the irrevocability rule. Hence, the controlling factor for the
operation of the irrevocability rule is that the taxpayer chose an option; and once it had already done so, it
could no longer make another one. Consequently, after the taxpayer opts to carry-over its excess tax
credit to the following taxable period, the question of whether or not it actually gets to apply said tax credit
is irrelevant. Section 76 of the NIRC of 1997 is explicit in stating that once the option to carry over has
been made, “no application for tax refund or issuance of a tax credit certificate shall be allowed therefor.”
Plainly, petitioner’s claim for refund for 1998 should be denied as its option to carry over has precluded it
from claiming the refund of the excess 1998 income tax payment. Apropos, we now resolve the issue of
whether petitioner had sufficiently proven entitlement to refund its tax overpayments for taxable year 1999.
As to this issue, petitioner contends that the CA erred when it annulled the decision of the CTA and insists
that it had substantially established its claim for refund through documentary and testimonial evidence.
For its part, respondent maintains that petitioner is not entitled to the refund awarded by the CTA,
because it failed to present sufficient proof that the subject taxes were erroneously or illegally collected. It
asserts that the 1999 certificate of withholding tax is defective, since petitioner failed to file the same
together with the 1999 corporate return and include in its return income payments from which the taxes
were withheld.
MADELO, Ginalyn G.
2014-0465
ASIA INTERNATIONAL AUCTIONEERS, INC. vs. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 179115September 26, 2012
FACTS:
Asia International Auctioneers (AIA) is a duly organized corporation operating within the Subic
Special Economic Zone. It is engaged in the importation of used motor vehicles and heavy equipment
which it sells to the public through auction.
Page 106 of 148

It received from the CIR a Formal Letter of Demand containing an assessment for deficiency
value added tax (VAT) and excise tax for auction sales conducted in 2004.
For failure to file a timely protest, the CTA En Banc affirmed the ruling of the CTA Division
holding that AIA's evidence was not sufficient to prove receipt by the CIR of the protest letter. AIA then
appealed to the Supreme Court. It filed a Manifestation and Motion with Leave of the Honorable Court to
Defer or Suspend Further Proceedings on the ground that it availed of the Tax Amnesty Program under
RA 9480.
The CIR contended that AIA was disqualified under Section 8(a) of RA 9480 from availing itself
of the Tax Amnesty Program because it was deemed a withholding agent for the deficiency taxes.
ISSUE:
Whether or not AIA is disqualified under Section 8(a) of RA 9480 from availing of the Tax
Amnesty Program
RULING:
No. AIA is not disqualified under Section 8(a) of RA 9480 from availing of the Tax Amnesty
Program.
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.
The Court takes judicial notice of the "Certification of Qualification" issued by Eduardo A.
Baluyut, BIR Revenue District Officer, stating that AIA "has availed and is qualified for Tax Amnesty for
the Taxable Year 2005 and Prior Years" pursuant to RA 9480. In the absence of sufficient evidence
proving that the certification was issued in excess of authority, the presumption that it was issued in the
regular performance of the revenue district officer's official duty stands. The petition is DENIED for being
MOOT and ACADEMIC in view of AIA's availment of the Tax Amnesty Program under RA 9480.
Accordingly, the outstanding deficiency taxes of AIA are deemed fully settled.
GULF AIR COMPANY, PHILIPPINE BRANCH (GF) vs. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 182045September 19, 2012
FACTS:
GF is a branch of Gulf Air Company, a foreign corporation duly organized in accordance with the
laws of the Kingdom of Bahrain.
GF received an assessment from the CIR for deficiency percentage tax.
The CTA En Banc affirmed the decision of the CTA Division. It found that Revenue Regulations
No. 6-66 was the applicable rule because the period involved in the assessment covered the first, second
and fourth quarters of 2000. Revenue Regulations No. 15-2002 could not be given retroactive effect
because it was declarative of a new right as it provided a different rule in determining gross receipts.
GF questioned the validity of Revenue Regulations No. 6-66, claiming that it was not a correct
interpretation of Section 118(A) of the NIRC, and insisting that the gross receipts should be based on the
"net net" amount – the amount actually received, derived, collected, and realized by the petitioner from
passengers, cargo and excess baggage. It further argued that the CAB approved fares were merely
notional and not reflective of the actual revenue or receipts derived by it from its business as an
international air carrier.
ISSUE:
Whether or not the definition of gross receipts, for purposes of computing the 3% Percentage
Tax under Section 118(a) of the Tax Code, should include special commissions on passengers and
special commissions on cargo based on the rates approved by the CAB
RULING:
Yes. The definition of gross receipts, for purposes of computing the 3% Percentage Tax under
Section 118(a) of the Tax Code, should include special commissions on passengers and special
commissions on cargo based on the rates approved by the CAB.
There is no doubt that prior to the issuance of Revenue Regulations No. 15-2002 which became
effective on October 26, 2002, the prevailing rule then for the purpose of computing common carrier’s tax
was Revenue Regulations No. 6-66. While the petitioner’s interpretation has been vindicated by the new
rules which compute gross revenues based on the actual amount received by the airline company as
reflected on the plane ticket, this does not change the fact that during the relevant taxable period involved
in this case, it was Revenue Regulations No. 6-66 that was in effect.
COMMISSIONER OF INTERNAL REVENUEvs.COURT OF TAX APPEALS and
AYALA LAND, INC.
G.R. No. 190680September 13, 2012
FACTS:
Ayala Land, Inc. (ALI) is primarily engaged in the sale and/or lease of real properties and, among
others, likewise owns and operates theatres or cinemas.
ALI was assessed by the CIR deficiency Value Added Tax (VAT) on its alleged income from
cinema operations for the taxable year 2003.
Page 107 of 148
 The CTA en banc affirmed the decision of the CTA Division cancelling and setting aside the
assessment against ALI.The CIR filed a motion for reconsideration, but this was denied by the CTA en
banc in its Resolution dated March 25, 2009.
The CIR claimed that neither he nor his statutory counsel, the Office of the Solicitor General
(OSG), received a copy of the CTA en banc’s resolution denying his motion for reconsideration. It then
came as a surprise to him when he received on June 17, 2009 a copy of the CTA en banc’s Resolution
dated June 10, 2009 which provided that the CTA Decision dated February 12, 2009 had become final
and executory. The CIR then filed on October 2, 2009 with the CTA en banc a petition for relief asking
that the entry of judgment in the case be recalled, and for the CIR and OSG to be served with copies of
the Resolution dated March 25, 2009. To show the timeliness of the petition for relief, the CIR claimed that
he knew of the Resolution dated March 25, 2009 only on August 3, 2009, when he received a copy of the
Resolution dated July 29, 2009. He then claimed that the sixty (60)-day period for the filing of the petition
for relief should be reckoned from August 3, 2009, giving him until October 2, 2009 to file it.
ISSUE:
Whether or not the CTA committed grave abuse of discretion amounting to lack or excess of
jurisdiction in ruling that the petition for relief of the CIR was filed beyond the 60-day reglementary period
under Rule 38
RULING:
No. The CTA did not commit grave abuse of discretion amounting to lack or excess of
jurisdiction in ruling that the petition for relief of the CIR was filed beyond the 60-day reglementary period
under Rule 38.
Section 3, Rule 38 of the Rules of Court provides:
Sec. 3. Time for filing petition; contents and verification. – A petition provided
for in either of the preceding sections of this Rule must be verified, filed within sixty (60)
days after the petitioner learns of the judgment, final order, or other proceeding to be set
aside, and not more than six (6) months after such judgment or final order was entered,
or such proceeding was taken; and must be accompanied with affidavits showing the
fraud, accident, mistake, or excusable negligence relied upon, and the facts constituting
the petitioner’s good and substantial cause of action or defense, as the case may be.
The CIR’s claim that it was only on August 3, 2009 that he learned of the CTA’s denial of his
motion for reconsideration is belied by records showing that as of June 22, 2009, he already knew of such
fact. The information was relayed by the CTA to the CIR, when the latter inquired from the court about the
status of the case and the court’s action on his motion for reconsideration. It was precisely because of
such knowledge that he filed on July 2, 2009 the manifestation and motion pertaining to the CTA’s order of
entry of judgment.
The CIR then can no longer validly dispute that he had known of the CTA’s Resolution dated
March 25, 2009 on June 22, 2009. Even as we reckon the 60-day period under Section 3, Rule 38 from
said date, the petitioner only had until August 21, 2009 within which to file a petition for relief. Since
August 21, 2009, a Friday, was a non-working holiday, the petitioner should have filed the petition at the
latest on August 24, 2009. The CIR’s filing with the CTA of the petition for relief on October 2, 2009 then
did not conform to the 60-day requirement.
FORT BONIFACIO DEVELOPMENT CORPORATION vs. THE COMMISSIONER OF INTERNAL
REVENUE and REVENUE DISTRICT OFFICER, REVENUE DISTRICT NO. 44, TAGUIG and
PATEROS, BUREAU OF INTERNAL REVENUE
G.R. No. 173425September 4, 2012
FACTS:
Fort Bonifacio Development Corporation (FBDC) is a duly registered domestic corporation
engaged in the development and sale of real property. The Bases Conversion Development Authority
(BCDA), a wholly owned government corporation created under Republic Act (RA) No. 7227, owns 45% of
petitioner’s issued and outstanding capital stock; while the Bonifacio Land Corporation, a consortium of
private domestic corporations, owns the remaining 55%.
By virtue of RA 7227 and Executive Order No. 40, dated December 8, 1992, petitioner purchased
from the national government a portion of the Fort Bonifacio reservation, now known as the Fort Bonifacio
Global City (Global City).
FBDC submitted to the Bureau of Internal Revenue (BIR) Revenue District No. 44, Taguig and
Pateros, an inventory of all its real properties and claimed that it is entitled to a transitional input tax credit.
In October 1996, FBDC started selling Global City lots to interested buyers.
Realizing that its 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 erroneously paid as output VAT for the said
period.
The CA affirmed the decision of the CTA. The CA agreed that petitioner was not entitled to the
8% transitional input tax credit since it did not pay any VAT when it purchased the Global City property.
The CA opined that transitional input tax credit was allowed only when business taxes had been paid and
passed-on as part of the purchase price. In arriving at this conclusion, the CA relied heavily on the
historical background of transitional input tax credit. As to the validity of RR 7-95, which limited the 8%
transitional input tax to the value of the improvements on the land, the CA said that it was entitled to great
weight as it was issued pursuant to Section 245 of the old NIRC.
Page 108 of 148
ISSUE: Whether or not FBDC was entitled to a refund of P359M erroneously paid as output VAT for the
first quarter of 1997 and that prior payment of taxes was not required
RULING:
Yes. FBDC was entitled to a refund of P359M erroneously paid as output VAT for the first
quarter of 1997 and prior payment of taxes was not required.
Section 105 of the old NIRC reads:
SEC. 105. Transitional input tax credits. – A person who becomes liable to
value-added tax or any person who elects to be a VAT-registered person shall, subject
to the filing of an inventory as prescribed by regulations, be allowed input tax on his
beginning inventory of goods, materials and supplies equivalent to 8% of the value of
such inventory or the actual value-added tax paid on such goods, materials and
supplies, whichever is higher, which shall be creditable against the output tax.
Contrary to the view of the CTA and the CA, there is nothing in the above-quoted provision to
indicate that prior payment of taxes is necessary for the availment of the 8% transitional input tax credit.
Obviously, all that is required is for the taxpayer to file a beginning inventory with the BIR.
To require prior payment of taxes, as proposed in the Dissent is not only tantamount to judicial
legislation but would also render nugatory the provision in Section 105 of the old NIRC that the transitional
input tax credit shall be "8% of the value of [the beginning] inventory or the actual [VAT] paid on such
goods, materials and supplies, whichever is higher" because the actual VAT (now 12%) paid on the
goods, materials, and supplies would always be higher than the 8% (now 2%) of the beginning inventory
which, following the view of Justice Carpio, would have to exclude all goods, materials, and supplies
where no taxes were paid. Clearly, limiting the value of the beginning inventory only to goods, materials,
and supplies, where prior taxes were paid, was not the intention of the law. Otherwise, it would have
specifically stated that the beginning inventory excludes goods, materials, and supplies where no taxes
were paid. As retired Justice Consuelo Ynares-Santiago has pointed out in her Concurring Opinion in the
earlier case of Fort Bonifacio:
If the intent of the law were to limit the input tax to cases where actual VAT
was paid, it could have simply said that the tax base shall be the actual value-added tax
paid. Instead, the law as framed contemplates a situation where a transitional input tax
credit is claimed even if there was no actual payment of VAT in the underlying
transaction. In such cases, the tax base used shall be the value of the beginning
inventory of goods, materials and supplies.
Moreover, 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 one’s 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. In fact, in Commissioner of
Internal Revenue v. Central Luzon Drug Corp., we declared that prior payment of taxes is not required in
order to avail of a tax credit.
EASTERN TELECOMMUNICATIONS PHILIPPINES, INC. vs. THE COMMISSIONER OF INTERNAL
REVENUE
G.R. No. 168856August 29, 2012
FACTS:
Eastern Telecommunications Philippines, Inc. (ETPI) is a duly authorized corporation engaged in
telecommunications services by virtue of a legislative franchise. It has entered into various international
service agreements with international non-resident telecommunications companies and it handles
incoming telecommunications services for non-resident foreign telecommunication companies and the
relay of said international calls within the Philippines. In addition, to broaden the coverage of its
distribution of telecommunications services, it executed several interconnection agreements with local
carriers for the receipt of foreign calls relayed by it and the distribution of such calls to the intended local
end-receiver.
From these services to non-resident foreign telecommunications companies, ETPI generates
foreign currency revenues which are inwardly remitted in accordance with the rules and regulations of the
BangkoSentral ng Pilipinas to its US dollar accounts in banks such as the Hong Kong and Shanghai
Banking Corporation, Metrobank and Citibank. The manner and mode of payments follow the international
standard as set forth in the Blue Book or Manual prepared by the Consultative Commission of
International Telegraph and Telephony.
Believing that it is entitled to a refund for the unutilized input VAT attributable to its zero-rated
sales, ETPI filed with the Bureau of Internal Revenue (BIR) an administrative claim for refund and/or tax
credit representing excess input VAT derived from its zero-rated sales for the period from January 1999 to
December 1999. Without waiting for the decision of the BIR, ETPI filed a petition for review before the
Court of Tax Appeals (CTA) to toll the running of the two-year prescriptive period.
The CTA en banc affirmed the decision of the CTA Division. The CTA en banc ruled that in order
for a zero-rated taxpayer to claim a tax credit or refund, the taxpayer must first comply with the mandatory
invoicing requirements under the regulations. One such requirement was that the word "zero-rated" be
imprinted on the invoice or receipt. According to the CTA en banc, the purpose of this requisite was to
avoid the danger that the purchaser of goods or services might be able to claim input tax on the sale to it
by the taxpayer of goods or services despite the fact that no VAT was actually paid thereon since the
taxpayer was zero-rated. Also, it agreed with the conclusion of the CTA-Division that ETPI failed to
substantiate its taxable and exempt sales.
ETPI contended that the lack of the word "zero-rated" on ETPI’s invoices and receipts did not
justify the outright denial of its claim for refund, considering that the zero-rated nature of the transactions
had been sufficiently established by other equally relevant and competent evidence.
ISSUE:
Whether or not ETPI’s failure to imprint the word "zero-rated" on its invoices or receipts was fatal
to its claim for tax refund or tax credit for excess input VAT
Page 109 of 148
RULING:
Yes. ETPI’s failure to imprint the word "zero-rated" on its invoices or receipts was fatal to its
claim for tax refund or tax credit for excess input VAT.
The following invoicing requirements enumerated in Section 4.108-1 of Revenue Regulations No.
7-95 must be observed by all VAT-registered taxpayers:
Sec. 4.108-1. Invoicing Requirements. – All VAT-registered persons shall, for every sale
or lease of goods or properties or services, issue duly registered receipts or sales or
commercial invoices which must show:
1. the name, TIN and address of seller;
2. date of transaction;
3. quantity, unit cost and description of merchandise or nature of service;
4. the name, TIN, business style, if any, and address of the VAT-registered
purchaser, customer or client;
5. the word "zero-rated" imprinted on the invoice covering zero-rated sales;
and
6. the invoice value or consideration.
In the case of sale of real property subject to VAT and where the zonal or market value
is higher than the actual consideration, the VAT shall be separately indicated in the
invoice or receipt.
Only VAT-registered persons are required to print their TIN followed by the word "VAT"
in their invoices or receipts and this shall be considered as a "VAT invoice." All
purchases covered by invoices other than a "VAT Invoice" shall not give rise to any
input tax.
The need for taxpayers to indicate in their invoices and receipts the fact that they are zero-rated
or that its transactions are zero-rated became more apparent upon the integration of the abovequoted
provisions of Revenue Regulations No. 7-95 in Section 113 of the NIRC enumerating the invoicing
requirements of VAT-registered persons when the tax code was amended by Republic Act (R.A.) No.
9337.
A consequence of failing to comply with the invoicing requirements is the denial of the claim for
tax refund or tax credit, as stated in Revenue Memorandum Circular No. 42-2003, to wit:
A-13: Failure by the supplier to comply with the invoicing requirements on the
documents supporting the sale of goods and services will result to the disallowance of
the claim for input tax by the purchaser-claimant.
If the claim for refund/TCC is based on the existence of zero-rated sales by the taxpayer
but it fails to comply with the invoicing requirements in the issuance of sales invoices
(e.g. failure to indicate the TIN), its claim for tax credit/refund of VAT on its purchases
shall be denied considering that the invoice it is issuing to its customers does not depict
its being a VAT-registered taxpayer whose sales are classified as zero-rated sales.
Nonetheless, this treatment is without prejudice to the right of the taxpayer to charge the
input taxes to the appropriate expense account or asset account subject to depreciation,
whichever is applicable. Moreover, the case shall be referred by the processing office to
the concerned BIR office for verification of other tax liabilities of the taxpayer.
COMMISSIONER OF INTERNAL REVENUE vs TEAM (PHILIPPINES)
OPERATIONS CORPORATION [FORMERLY MIRANT
(PHILIPPINES) OPRATIONS CORPORATION]
G.R. No. 185728 October 16, 2013
FACTS:
Respondent entered into Operating and Management Agreements with Mirant Pagbilao
Corporation [formerly Southern Energy Quezon, Inc.] or (MPagC) and Mirant Sual Corporation [formerly
Southern Energy Pangasinan, Inc.] or (MSC) to provide these corporations with maintenance and
management services in connection with the operation, construction and commissioning of the coal-fired
power stations situated in Pagbilao, Province of Quezon and Sual, Province of Pangasinan, respectively.
Payments received by respondent for the operating and management services rendered to MPagC and
MSC were allegedly subjected to creditable withholding tax.
On April 15, 2003, respondent filed with the Bureau of Internal Revenue (BIR) its original Annual
Income Tax Return (ITR) for the calendar year ended December 31, 2002 declaring zero taxable income
and unutilized tax credits of ₱23,108,689.00. In its Income Tax Return for the year 2002, respondent
indicated its option to refund its alleged excess creditable withholding tax when it marked "X" the box
corresponding to the option "To be refunded" under line 30 of said ITR.
On March 17, 2004, respondent filed an administrative claim for refund or issuance of tax credit
certificate with the BIR in the total amount of ₱23,108,689.00, allegedly representing overpaid income tax
or excess creditable withholding tax for calendar year ended December 31, 2002.
ISSUE:
Whether or not respondent has complied with the requirement for refund of creditable withholding
taxes for calendar year ended December 31, 2002?
RULING:
Yes. Respondent complied and is entitled to the P23,053,919.22 claim for refund or issuance of
tax credit certificate.A taxpayer claiming for a tax credit or refund of creditable withholding tax must
comply with the following requisites:
1) The claim must be filed with the CIR within the two-year period from the date of payment of the
tax
2) It must be shown on the return of the recipient that the income received was declared as part of
the gross income
3) The fact of withholding is established by a copy of a statement duly issued by the payor to the
payee showing the amount paid and the amount of tax withheld.
COMMISSIONER OF INTERNAL REVENUE vs SAN ROQUE POWER CORPORATION
G.R. No. 187485 February, 12 2013
Page 110 of 148
FACTS:
San Roque Power Plant entered into a Power Purchase Agreement (PPA) with the NPC by
building the San Roque Multi-Purpose Project in San Miguel, Pangasinan. The project allegedly incurred
excess input VAT in the amount of P559,709,337.54 for taxable year 2001 which it declared in its
quarterly VAT Returns filed for the same year. San Roque filed with the BIR separate claims of refund,
representing unutilized input taxes as declared in its VAT returns.
However, on March 28, 2003, San Roque filed amended Quarterly Vat Retuns for the year 2001
since it increased its unutilized input VAT to the amount of P560,200,283.14, it also filed separate claims
of refund. On April 10, 2003, San Roque filed its amended administrative claim with the CIR then filed a
petition with the CTA – wherein it ruled that the claim of San Roque was prematurely filed.
ISSUE:
Whether or not San Roque is entitled to tax refund?
RULING:
No. San Roque is not entitled to a tax refund because it failed to comply with the mandatory and
jurisdictional requirement of the 120-day waiting period before filing a judicial claim. Compliance with the
120-day waiting period is mandatory and jurisdictional, under RA 8424 or the Tax Reform Act of 1997.
Failure to comply with the said requirement renders the petition void.
COMMISSIONER OF INTERNAL REVENUE vs PHILIPPINE AIRLINES, INC. (PAL)
G.R. No. 179259 September 25, 2013
FACTS:
PHILIPPINE AIRLINES, INC. had zero taxable income for 2000 but would have been liable for
Minimum Corporate Income Tax (MCIT) based on its gross income. However, PHILIPPINE AIRLINES,
INC. did not pay the Minimum Corporate Income Tax using as basis its franchise which exempts it from
“all other taxes” upon payment of whichever is lower of either (a) the basic corporate income tax based on
the net taxable income or (b) a franchise tax of 2%.
ISSUE:
Whether or not PAL is liable for MCIT?
RULING:
No. PHILIPPINE AIRLINES, INC.’s franchise clearly refers to "basic corporate income tax" which
refers to the general rate of 35% (now 30%). In addition, there is an apparent distinction under the Tax
Code between taxable income, which is the basis for basic corporate income tax under Sec. 27(A) and
gross income, which is the basis for the Minimum Corporate Income Tax under Section 27(E). The two
terms have their respective technical meanings and cannot be used interchangeably. Not being covered
by the Charter which makes PAL liable only for basic corporate income tax, then Minimum Corporate
Income Tax is included in "all other taxes" from which PHILIPPINE AIRLINES, INC. is exempted.
The CIR also cannot point to the “Substitution Theory” which states that Respondent may not
invoke the “in lieu of all other taxes” provision if it did not pay anything at all as basic corporate income tax
or franchise tax. The Court ruled that it is not the fact tax payment that exempts Respondent but the
exercise of its option. The Court even pointed out the fallacy of the argument in that a measly sum of one
peso would suffice to exempt PAL from other taxes while a zero liability would not and said that there is
really no substantial distinction between a zero tax and a one-peso tax liability. Lastly, the Revenue
Memorandum Circular stating the applicability of the MCIT to PAL does more than just clarify a previous
regulation and goes beyond mere internal administration and thus cannot be given effect without previous
notice or publication to those who will be affected thereby.
SECRETARY OF THE DEPARTMENT OF FINANCE vs COURT OF TAX APPEALS
G.R. No. 168137 August 7, 2013
FACTS:
On the strength of a Warrant of Seizure and Detention issued on January 31, 2003 (seizure
warrant) by the Bureau of Customs, 4th Collection District, Batangas (BoC), 73 container vans loaded with
29,796 bags of imported rice (subject goods) were seized and detained for alleged violation of Section
2530 of Republic Act No. (RA) 1937, otherwise known as the "Tariff and Customs Code of the Philippines"
(TCCP).Upon inspection, it was discovered that the shipment did not have the required import permit and
that the shipment was declared in the Coasting Manifest and Bill of Lading of the vessel as "corn grits,"
instead of rice, in violation of the TCCP. The seizure was thereafter, docketed as Batangas Seizure
Identification No. 02-03.
On February 7, 2003, KCTMPC, claiming ownership over the foregoing shipment, moved to
intervene in the seizure proceedings and further sought the quashal of the seizure warrant. In an Order
dated March 18, 2003, the BoC granted KCTMPC’s motion to intervene but denied its motion to quash
seizure warrant.
CTA issued a Resolution which granted KCTMPC’s motion to release. Petitioners moved for
reconsideration which was, however, denied in a Resolution dated April 18, 2005.
ISSUE:
Whether or not the CTA committed grave abuse of discretion when it granted KCTMPC’s motion
to release?
RULING:
Page 111 of 148
 No.
At the outset, it bears to stress that the issues raised in the instant petition have already been
rendered moot and academic by virtue of petitioner’s own manifestation that the CTA had already
rendered a decision on the main case,of which the matter on the propriety of the CTA’s grant of
KCTMPC’s motion to release is but an incident.
In any event, the Court finds that the CTA did not gravely abuse its discretion when it granted
KCTMPC’s motion to release since there lies cogent legal bases to support its conclusion that the subject
goods were merely "regulated" and not "prohibited" commodities.
Among others, the CTA correctly observed that the Geotina ruling was inapplicable due to the
classification of the goods involved therein. As cited by the CTA, CB Circular No. 1389 dated April 13,
1993 classified imports into three (3) categories, namely: (a) "freely importable commodities" or those
commodities which are neither "regulated" nor "prohibited" and the importation of which may be effected
without any prior approval of or clearance from any government agency; (b) "regulated commodities" or
those commodities the importation of which require clearances/permits from appropriate government
agencies; and (c) "prohibited commodities" or those commodities the importation of which are not allowed
by law.Under Annex 1 of the foregoing circular, rice and corn are enumerated as "regulated" commodities,
unlike the goods in the Geotina case, which were, at that time, classified as "prohibited" commodities.
Therefore, owing to this divergence, the CTA properly pronounced that the Geotina ruling is inapplicable.
ACCENTURE INC. VS. COMISSIONER OF INTERNAL REVENUE
Gr no. 190102. July 11, 2012
Facts:
Petitioner Accenture is a corporation duly registered with the Bureau of Internal Revenue (BIR) as a Value
Added Tax (VAT) taxpayer or enterprise. On July 1, 2004, Accenture filed with the Department of Finance
(DOF) an administrative claim for the refund or the issuance of a Tax Credit Certificate (TCC) in the
amounts of 35, 178, 844.21 for its excess or unutilized input VAT credits which was not applied to any
output VAT and was instead carried over to Accenture’s 2 nd Quarterly VAT Return for 2003.
Due to the DOF’s inaction, Accenture filed a Petition for Review with the Court of Tax Appeals First
Division.
The Division denied the petition for failing to prove that that the foreign clients to which Accenture
rendered services did business outside the Philippines. It held that Accenture’s services would qualify for
zero-rating under the 1997 Tax Code only if the recipient of the services was doing business outside of
the Philippines.
Accenture appealed to the CTA En Banc by arguing that prior to the amendment introduced by RA 9337,
there was no requirement that the services must be rendered to a person engaged in the business
conducted outside the Philippines to qualify for zero-rating. The CTA En Banc agreed that the applicable
law was the 1997 Tax Code and not RA 9337. Still, it ruled that Section 108 (B) (2) of the 1997 Tax Code
was a mere enactment of Section (102) (b) (2) of the 1977 Tax Code. It concluded that Accenture failed to
discharge the burden of proving that its clients were foreign-based.
Accenture filed a Petition for Review with the CTA En Banc but was denied. Hence this Petition for
Review under Rule 45
Issue:
Whether or not Accenture was entitled to a refund or an issuance of a TCC in the said amount?
Held:
No. The Court ruled that the recipient of the service must be doing business outside of the Philippines for
the transaction to qualify for zero-rating under Section 108 (B) of the Tax Code.
The Court upholds that because Section 108 (B) of the 1997 Tax Code is a verbatim copy of Section 102
(b) of the 1977 Tax Code, any interpretation of the latter holds true for the former.
Here, the documents presented by Accenture show that these zero-rated sales were paid in foreign
exchange currency and duly accounted for in the rules and regulations of the BSP. However, these
documents merely substantiate the existence of the sales, receipt of foreign currency payments, and
inward remittance of the proceeds of these sales duly accounted for in accordance with BSP rules.
Accenture presented no evidence whatsoever that these clients were doing business outside the
Philippines.
WESTERN MINDANAO POWER CORPORATION VS. CIR
Gr no. 181136. June 13, 2012
Facts:
Petitioner WMPC is a domestic corporation engaged in the production and sale of electricity. It is
registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer. Petitioner alleges that 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 Section 13of Republic Act (R.A.) No. 6395 (An Act
Revising the Charter of the National Power Corporation). In view thereof and pursuant to Section 108(B)
(3) of the National Internal Revenue Code (NIRC)petitioners power generation services to NPC is zero-
rated.
On 20 June 2000 and 13 June 2001, WMPC filed with the Commissioner of Internal Revenue (CIR)
applications for a tax credit certificate of its input VAT covering the taxable
3rd and 4th quarters of 1999 (amounting to ₱3,675,026.67)and all the taxable quarters of 2000 (amounting
to ₱5,649,256.81).
WMPC on 28 September 2001 filed with the Court of Tax Appeals (CTA) in Division a Petition for Review
because of CIR’s inaction.
CIR filed its Comment on the CTA Petition, arguing that WMPC was not entitled to the latter’s claim for a
tax refund in view of its failure to comply with the invoicing requirements under Section 113 of the NIRC in
relation to Section 4.108-1 of RR 7-95.
WMPC countered that the invoicing and accounting requirements laid down in RR 7-95 were merely
compliance requirements, which were not indispensable to establish the claim for refund of excess and
unutilized input VAT. Also, Section 113 of the NIRC prevailing at the time the sales transactions were
made did not expressly state that failure to comply with all the invoicing requirements would result in the
disallowance of a tax credit refund. The express requirement that the term zero-rated sale shall be written
or printed prominently on the VAT invoice or official receipt for sales subject to zero percent (0%) VAT
Page 112 of 148
appeared in Section 113 of the NIRC only after it was amended by Section 11 of R.A. 9337.This
amendment cannot be applied retroactively, considering that it took effect only on 1 July 2005, or long
after petitioner filed its claim for a tax refund, and considering further that the RR 7-95 is punitive in nature.
Further, since there was no statutory requirement for imprinting the phrase zero-rated on official receipts
prior to 1 July 2005, the RR 7-95 constituted undue expansion of the scope of the legislation it sought to
implement.
CTA Second Division dismissedthe Petition. It held that while petitioner submitted in evidence its Quarterly
VAT Returns for the periods applied for, the same do not reflect any zero-rated or effectively zero-rated
sales allegedly incurred during said periods. The spaces provided for such amounts were left blank, which
only shows that there existed no zero-rated or effectively zero-rated sales for the 3rd and 4th quarters of
1999 and the four quarters of 2000.Moreover, it found that petitioners VAT Invoices and Official Receipts
did not contain on their face the phrase zero-rated, contrary to Section 4.108-1 of RR 7-95.
The CTA En Banc quoted the CTA Second Division finding that the Quarterly VAT Returns that petitioner
adduced in evidence did not reflect any zero-rated or effectively zero-rated sales allegedly incurred during
the said period. In addition, the CTA En Banc noted that petitioners Official Receipts and VAT Invoices did
not have the word zero-rated imprinted/stamped thereon, contrary to the clear mandate of Section 4.108-1
of RR 7-95.
Issue:
Whether the CTA En Banc seriously erred in dismissing the claim of petitioner for a refund or tax credit on
input tax on the ground that the latter’s Official Receipts do not contain the phrase zero-rated?
Held:
NO. In a claim for tax refund or tax credit, the applicant must prove not only entitlement to the grant of the
claim under substantive law. It must also show satisfaction of all the documentary and evidentiary
requirements for an administrative claim for a refund or tax credit.Hence, the mere fact that petitioner’s
application for zero-rating has been approved by the CIR does not, by itself, justify the grant of a refund or
tax credit. The taxpayer claiming the refund must further comply with the invoicing and accounting
requirements mandated by the NIRC, as well as by revenue regulations implementing them.
Under the NIRC, a creditable input tax should be evidenced by a VAT invoice or official receipt,which may
only be considered as such when it complies with the requirements of RR 7-95, particularly Section 4.108-
1. This section requires, among others, that if the sale is subject to zero percent (0%) value-added tax, the
term zero-rated sale shall be written or printed prominently on the invoice or receipt.
This Court has consistently held as fatal the failure to print the word zero-rated on the VAT invoices or
official receipts in claims for a refund or credit of input VAT on zero-rated sales, even if the claims were
made prior to the effectivity of R.A. 9337.
CIR VS. PILIPINAS SHELL PETROLEUM CORPORATION
Gr no. 188497. April 25, 2012
Facts:
Respondent Pilipinas Shell is engaged in the business of processing, treating and refining petroleum for
the purpose of producing marketable products and the subsequent sale thereof.
From 2002 to 2003 respondent filed several claims with the Large Taxpayers Audit & Investigation
Division II of the Bureau of Internal Revenue (BIR) for refund or tax credit representing excise taxes it
allegedly paid on sales and deliveries of gas and fuel oils to various international carriers during the period
October to December 2001 for ₱28,064,925.15; January to March 2002 for ₱41,614,827.99 and deliveries
from April to June 2002 ₱30,652,890.55.
Since no action was taken by the petitioner on its claims, respondent filed petitions for review before the
CTA.
The CTA’s First Division ruled that respondent is entitled to the refund of excise taxes in the reduced
amount of ₱95,014,283.00. The CTA First Division relied on a previous ruling rendered by the CTA En
Banc in the case of "Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue"7 where
the CTA also granted respondent’s claim for refund on the basis of excise tax exemption for petroleum
products sold to international carriers of foreign registry for their use or consumption outside the
Philippines. Petitioner’s motion for reconsideration was denied by the CTA First Division.
Petitioner elevated the case to the CTA En Banc which upheld the ruling of the First Division. The CTA
pointed out the specific exemption mentioned under Section 135 of the National Internal Revenue Code of
1997 (NIRC) of petroleum products sold to international carriers such as respondent’s clients.
Petitioner filed a motion for reconsideration which the CTA likewise denied.
The Solicitor General argues that the obvious intent of the law 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, respondent paid the subject 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, as in fact respondent averred that it paid the excise
tax on its petroleum products when it "withdrew petroleum products from its place of production for
eventual sale and delivery to various international carriers as well as to other customers." Sec. 135 (a)
and (c) granting exemption from the payment of excise tax on petroleum products can only be interpreted
to mean that the respondent cannot pass on to international carriers and exempt agencies the excise
taxes it paid as a manufacturer or producer.
As to whether respondent has the right to file a claim for refund or tax credit for the excise taxes it paid for
the petroleum products sold to international carriers, the Solicitor General contends that Sec. 130 (D) is
explicit on the circumstances under which a taxpayer may claim for a refund of excise taxes paid on
manufactured products, which express enumeration did not include those excise taxes paid on petroleum
products which were eventually sold to international carriers (expressio unius est exclusio alterius).
Further, the Solicitor General asserts that the Respondent must shoulder the excise taxes it previously
paid on petroleum products which it later sold to international carriers because it cannot pass on the tax
burden to the said international carriers which have been granted exemption under Sec. 135 (a) of the
NIRC. Considering that respondent failed to prove an express grant of a right to a tax refund, such claim
cannot be implied; hence, it must be denied.
Page 113 of 148
On the other hand, respondent maintains that since petroleum products sold to qualified international
carriers are exempt from excise tax, no taxes should be imposed on the article, to which goods the tax
attaches, whether in the hands of the said international carriers or the petroleum manufacturer or
producer. As these excise taxes have been erroneously paid taxes, they can be recovered under Sec. 229
of the NIRC. Respondent contends that contrary to petitioner’s assertion, Sections 204 and 229
authorizes respondent to maintain a suit or proceeding to recover such erroneously paid taxes on the
petroleum products sold to tax-exempt international carriers.
Issue:
Whether respondent as manufacturer or producer of petroleum products is exempt from the payment of
excise tax on such petroleum products it sold to international carriers.
Held:
NO. Founded on the principles of international comity and reciprocity, P.D. No. 1359 granted exemption
from payment of excise tax but only to foreign international carriers who are allowed to purchase
petroleum products free of specific tax provided the country of said carrier also grants tax exemption to
Philippine carriers. Both the earlier amendment in the 1977 Tax Code and the present Sec. 135 of the
1997 NIRC did not exempt the oil companies from the payment of excise tax on petroleum products
manufactured and sold by them to international carriers.
Because an excise tax is a tax on the manufacturer and not on the purchaser, and there being no express
grant under the NIRC of exemption from payment of excise tax to local manufacturers of petroleum
products sold to international carriers, and absent any provision in the Code authorizing the refund or
crediting of such excise taxes paid, the Court holds that Sec. 135 (a) should be construed as prohibiting
the shifting of the burden of the excise tax to the international carriers who buys petroleum products from
the local manufacturers. Said provision thus merely allows the international carriers to purchase petroleum
products without the excise tax component as an added cost in the price fixed by the manufacturers or
distributors/sellers. Consequently, the oil companies which sold such petroleum products to international
carriers are not entitled to a refund of excise taxes previously paid on the goods.
CIR VS. PETRON CORPORATION
GR No. 185568. March 21, 2012
Facts:
Respondent Petron is a corporation engaged in the production of petroleum productsand is a Board of
Investment (BOI) – registered enterprise in accordance with the provisions of the Omnibus Investments
Code of 1987 (E.O. 226) under Certificate of Registration Nos. 89-1037 and D95-136.
During the period covering the taxable years 1995 to 1998, Petron hadbeen an assignee of several Tax
Credit Certificates (TCCs) from various BOI-registered entitiesfor which it utilized in the payment of its
excise tax liabilities for the taxable years 1995 to1998. The transfers and assignments of the said TCCs
were approved by the Department of Finance’s One Stop Shop Inter-Agency Tax Credit and Duty
Drawback Center (DOF Center)composed of representatives from the appropriate government agencies.
Taking ground on a BOI letter issued on May 15, 1998 which states that ‘hydraulic oil,penetrating oil,
diesel fuels and industrial gases are classified as supplies and considered thesuppliers thereof as
qualified transferees of tax credit, Petron acknowledged and accepted thetransfers of the TCCs from the
various BOI-registered entities. Such acceptance and use of the TCCs as payment of its excise tax
liabilities for the taxable years 1995 to 1998 had beencontinuously approved by the DOF as well as the
BIR’s Collection Program Division.
On January 30, 2002, Petitioner CIR issued an Assessment against petitioner fordeficiency excise taxes
for the taxable years 1995 to 1998 in the total amount of P739,003,036.32, inclusive of surcharges and
interests on the ground that the TCCs utilized bypetitioner in the payment of excise taxes have been
cancelled by the DOF for having beenfraudulently issued and transferred. Thus, petitioner, through letters
dated August 31, 1999and September 1, 1999, was required by the DOF Center to submit copies of its
sales invoicesand delivery receipts showing the consummation of the sale transaction to certain
TCCtransferors.
Instead of submitting the documents required by the respondent, on February 27, 2002,
petitioner filed its protest letter to the Assessment on the grounds, among others, that:
a. The BIR did not comply with the requirements of
Revenue Regulations 12-99 in issuing the assessment letter dated
January 30, 2002, hence, the assessment made against it is void;
b. The assignment/transfer of the TCCs to petitioner by the
TCC holders was submitted to, examined and approved by the
concerned government agencies which processed the assignment in
accordance with law and revenue regulations;
c. There is no basis for the imposition of the 50% surcharge
in the amount of ₱159,460,900.00 and interest penalties in the amount
of ₱260,620,335.32 against it;
d. Some of the items included in the assessment are already
pending litigation and are subject of the case entitled Commissioner of
Internal Revenue vs. Petron Corporation, C.A. GR SP No. 55330 (CTA
Case No. 5657) and hence, should no longer be included in the
assessment; and
e. The assessment and collection of alleged excise tax
deficiencies sought to be collected by the BIR against petitioner through
the January 30, 2002 letter are already barred by prescription under
Section 203 of the National Internal Revenue Code.
On March 27, 2002, CIR served a Warrant of Distraint and/or Levy on petitioner to enforcepayment of the
tax deficiencies without first acting on its letter-protest. Construing theWarrant of Distraint and/or Levy as
the final adverse decision of the BIR on its protest of theassessment, Petron filed the petition before the
CTA Second Division on April 2, 2002. On May4, 2007, the CTA Second Division promulgated a Decision
ordering Petron to pay the reducedamount of P600,769,353.95 representing deficiency excise taxes for
the taxable years 1995 to1998 and 25% late payment surcharge and 20% delinquency interest per annum
on the saidamount, computed from June 27, 2002 until the amount is fully paid. Petron filed a motion
forreconsideration but was denied. Aggrieved, Petron appealed the Decision to the CTA En Bancthrough
a Petition for Review. The CTA en banc reversed and set aside the CTA Second Division and absolved
Petition from any excise tax liability for taxable years 1995-1998.
Issue:
Page 114 of 148
Whether or not the CTA committed reversible error in holding that respondent Petron is not liable for its
excise tax liabilities from 1995 to 1998?
Held:
NO. Not finding merit in the CIRs contention, we affirm the ruling of the CTA En Banc finding that Petron
is a transferee in good faith and for value of the subject TCCs.
From the records, we observe that the CIR had no allegation that there was a deviation from the process
for the approval of the TCCs, which Petron used as payment to settle its excise tax liabilities for the years
1995 to 1998.
The CIR quotes the CTA Second Division and urges us to affirm the latter’s Decision, which found Petron
to have participated in the fraudulent issuance and transfer of the TCCs. However, any merit in the
position of petitioner on this issue is negated by the Joint Stipulation it entered into with Petron in the
proceedings before the said Division. As correctly noted by the CTA En Banc, herein parties jointly
stipulated before the Second Division in CTA Case No. 6423 as follows:
13. That petitioner (Petron) did not participate in the procurement and
issuance of the TCCs, which TCCs were transferred to Petron and later utilized
by Petron in payment of its excise taxes.[43]
This stipulation of fact by the CIR amounts to an admission and, having been made by the parties in a
stipulation of facts at pretrial, is treated as a judicial admission. Under Section 4, Rule 129 of the Rules of
Court, a judicial admission requires no proof. [44] The Court cannot lightly set it aside, especially when the
opposing party relies upon it and accordingly dispenses with further proof of the fact already admitted. The
exception provided in Rule 129, Section 4 is that an admission may be contradicted only by a showing
that it was made through a palpable mistake, or that no such admission was made. In this case, however,
exception to the rule does not exist.
We agree with the pronouncement of the CTA En Banc that Petron has not been shown or proven to have
participated in the alleged fraudulent acts involved in the transfer and utilization of the subject TCCs.
Petron had the right to rely on the joint stipulation that absolved it from any participation in the alleged
fraud pertaining to the issuance and procurement of the subject TCCs. The joint stipulation made by the
parties consequently obviated the opportunity of the CIR to present evidence on this matter, as no proof is
required for an admission made by a party in the course of the proceedings. [45] Thus, the CIR cannot now
be allowed to change its stand and renege on that admission.
LASCONA LAND CO. INC VS. CIR
Gr. No. 171251. March 5, 2012
Facts:
On March 27, 1998, the Commissioner of Internal Revenue (CIR) issued Assessment Notice No.
0000047-93-407 against Lascona Land Co., Inc. (Lascona) informing the latter of its alleged deficiency
income tax for the year 1993 in the amount of P753,266.56.
Consequently, Lascona filed a letter protest, but was denied by Norberto R. Odulio, Officer-in-Charge
(OIC), Regional Director, Bureau of Internal Revenue, Revenue Region No. 8, MakatiCity, in his Letter
dated March 3, 1999.Lascona appealed before the CTA on April 12, 1999, alleging that the Regional
Director erred in ruling that the failure to appeal to the CTA within thirty (30) days from the lapse of the
180-day period rendered the assessment final and executory.
The CIR, however, maintained that Lascona's failure to timely file an appeal with the CTA after the lapse
of the 180-day reglementary period provided under Section 228 of the National Internal Revenue Code
(NIRC) resulted to the finality of the assessment.
On January 4, 2000, the CTA, in its Decision, nullified the subject assessment. It held that in cases of
inaction by the CIR on the protested assessment, Section 228 of the NIRC provided two options for the
taxpayer: (1) appeal to the CTA within thirty (30) days from the lapse of the one hundred eighty (180)-day
period, or (2) wait until the Commissioner decides on his protest before he elevates the case.
The CIR moved for reconsideration arguing that in declaring the subject assessment as final, executory
and demandable, it did so pursuant to Section 3 (3.1.5) of Revenue Regulations No. 12-99
dated September 6, 1999 which reads, thus:
If the Commissioner or his duly authorized representative fails to act on the taxpayer's
protest within one hundred eighty (180) days from date of submission, by the taxpayer,
of the required documents in support of his protest, the taxpayer may appeal to the
Court of Tax Appeals within thirty (30) days from the lapse of the said 180-day period;
otherwise, the assessment shall become final, executory and demandable.
The CTA denied the CIR's motion for reconsideration for lack of merit. It held that Revenue Regulations
No. 12-99 must conform to Section 228 of the NIRC. It pointed out that the former spoke of an
assessment becoming final, executory and demandable by reason of the inaction by the Commissioner,
while the latter referred to decisions becoming final, executory and demandable should the taxpayer
adversely affected by the decision fail to appeal before the CTA within the prescribed period.Finally, it
emphasized that in cases of discrepancy, Section 228 of the NIRC must prevail over the revenue
regulations.
Dissatisfied, the CIR filed an appeal before the CA. In the disputed Decision, the Court of Appeals
granted the CIR's petition and set aside the Decision dated January 4, 2000 of the CTA and its Resolution
dated March 3, 2000. It further declared that the subject Assessment Notice No. 0000047-93-407
dated March 27, 1998 as final, executory and demandable.Lascona moved for reconsideration, but was
denied for lack of merit. Hence this petition.
Issue:
Whether the subject assessment has become final, executory and demandable due to the failure of
petitioner to file an appeal before the CTA within thirty (30) days from the lapse of the One Hundred Eighty
(180)-day period pursuant to Section 228 of the NIRC?
Page 115 of 148

Held:
NO. In arguing that the assessment became final and executory by the sole reason that petitioner failed to
appeal the inaction of the Commissioner within 30 days after the 180-day reglementary period,
respondent, in effect, limited the remedy of Lascona, as a taxpayer, under Section 228 of the NIRC to just
one, that is - to appeal the inaction of the Commissioner on its protested assessment after the lapse of the
180-day period. This is incorrect.
As early as the case of CIR v. Villa it was already established that the word "decisions" in paragraph 1,
Section 7 of Republic Act No. 1125, quoted above, has been interpreted to mean the decisions of the
Commissioner of Internal Revenue on the protest of the taxpayer against the assessments. Definitely,
said word does not signify the assessment itself.
Therefore, as in Section 228, when the law provided for the remedy to appeal the inaction of the CIR, it
did not intend to limit it to a single remedy of filing of an appeal after the lapse of the 180-day prescribed
period. Precisely, when a taxpayer protested an assessment, he naturally expects the CIR to decide either
positively or negatively. A taxpayer cannot be prejudiced if he chooses to wait for the final decision of the
CIR on the protested assessment. More so, because the law and jurisprudence have always
contemplated a scenario where the CIR will decide on the protested assessment.
It must be emphasized, however, that in case of the inaction of the CIR on the protested assessment,
while we reiterate − the taxpayer has two options, either: (1) file a petition for review with the CTA within
30 days after the expiration of the 180-day period; or (2) await the final decision of the Commissioner on
the disputed assessment and appeal such final 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.
Accordingly, 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 Court by filing a petition for
review within thirty days after receipt of a copy of such decision or ruling, even after the expiration of the
180-day period fixed by law for the Commissioner of Internal Revenue 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 Letterdated March 3, 1999 on March 12, 1999, the appeal was timely made as it was filed within 30
days after receipt of the copy of the decision.
BUREAU OF CUSTOMS EMPLOYEES ASSOCIATION (BOCEA) vs. THE DEPARTMENT OF
FINANCE, THE BUREAU OF CUSTOMS, THE BUREAU OF INTERNAL REVENUE, RESPONDENTS.
FACTS:
On January 25, 2005, former president Gloria Macapagal-arroyo signed into law RA no. 9335.

RA 9335 was enacted to optimize the revenue-generation capability and collection of the bureau of
internal
 revenue (bir) and the bureau of customs (boc). The law intends to encourage bir and boc officials
and employees to exceed their revenue targets by providing
 a system of rewards and sanctions through
the creation of rewards and incentives fund (fund) and a revenue performance evaluation board (board). It
covers all officials and employees of the bir and the boc with at least six months of service, regardless of
employment status.
 The fund is sourced from the collection of the bir and the boc in excess of their
revenue targets for the year, as determined by the development budget and coordinating committee
(dbcc). Any incentive or reward is taken from the fund and allocated to the bir and the boc in proportion to
their contribution in the excess collection of the targeted amount of tax revenue.
 Contending that the
enactment and implementation of r.a. no. 9335 are tainted with constitutional infirmities in violation of the
fundamental rights of its members, petitioners, directly filed the present petition against respondents
margarito b. Teves, in his capacity as secretary of the department of finance (dof), commissioner
napoleon l. Morales (commissioner morales), in his capacity as boc commissioner, and lilian b. Hefti, in
her capacity as commissioner of the bureau of internal revenue (bir).
in 2008, high-ranking officials of the
boc pursuant to the mandate of r.a. no. 9335 and its irr, and in order to comply with the stringent deadlines
thereof, started to disseminate collection district performance contracts(performance contracts) for the
lower ranking officials and rank-and-file employees to sign.
 bocea opined that the revenue target was
impossible to meet due to the government’s own policies on reduced tariff rates and tax breaks to big
businesses, the occurrence of natural calamities and because of other economic factors. 
bocea claimed
that some boc employees were coerced and forced to sign the performance contract. They also alleged
they were threatened that if they do not sign their respective performance contracts, they would face
possible reassignment, reshuffling, or worse, be placed on floating status. 
 this petition was filed directly
with this court on march 3, 2008. Bocea asserted that in view of the unconstitutionality of r.a. no. 9335 and
its irr, and their adverse effects on the constitutional rights of boc officials and employees, direct resort to
this court is justified.

ISSUE:
1 Whether there is undue delegation of legislative power to the board;
2 Whether RA 9335 and its irr violate the rights of bocea’s members to: (a) equal protection of
laws, (b) security of tenure and (c) due process
HELD:
1. No. In the face of the increasing complexity of modern life, delegation of legislative power to
various specialized administrative agencies is allowed as an exception to this principle. Given the volume
and variety of interactions in today’s society, it is doubtful if the legislature can promulgate laws that will
deal adequately with and respond promptly to the minutiae of everyday life. Hence, the need to delegate
to administrative bodies — the principal agencies tasked to execute laws in their specialized fields — the
authority to promulgate rules and regulations to implement a given statute and effectuate its policies. All
that is required for the valid exercise of this power of subordinate legislation is that the regulation be
germane to the objects and purposes of the law and that the regulation be not in contradiction to, but in
conformity with, the standards prescribed by the law. These requirements are denominated as the
completeness test and the sufficient standard test.
Two tests determine the validity of delegation of legislative power: (1) the completeness test and (2) the
sufficient standard test. A law is complete when it sets forth therein the policy to be executed, carried out
or implemented by the delegate. It lays down a sufficient standard when it provides adequate guidelines or
limitations in the law to map out the boundaries of the delegate’s authority and prevent the delegation from
running riot. To be sufficient, the standard must specify the limits of the delegate’s authority announce the
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legislative policy and identify the conditions under which it is to be implemented. At any rate, this court has
recognized the following as sufficient standards: "public interest", "justice and equity", "public convenience
and welfare" and "simplicity, economy and welfare". In this case, the declared policy of optimization of the
revenue-generation capability and collection of the bir and the boc is infused with public interest.The court
finds that r.a. no. 9335, read and appreciated in its entirety, is complete in all its essential terms and
conditions, and that it contains sufficient standards as to negate bocea’s supposition of undue delegation
of legislative power to the board.
2. No. A. On equal protection the equal protection clause recognizes a valid classification, that is,
a classification that has a reasonable foundation or rational basis and not arbitrary. With respect to ra [no.]
9335, its expressed public policy is the optimization of the revenue-generation capability and collection of
the bir and the boc. Since the subject of the law is the revenue-generation capability and collection of the
bir and the boc, the incentives and/or sanctions provided in the law should logically pertain to the said
agencies. Moreover, the law concerns only the bir and the boc because they have the common distinct
primary function of generating revenues for the national government through the collection of taxes,
customs duties, fees and charges.
Both the bir and the boc are bureaus under the dof. They principally perform the special function of being
the instrumentalities through which the state exercises one of its great inherent functions — taxation.
Indubitably, such substantial distinction is germane and intimately related to the purpose of the law.
Hence, the classification and treatment accorded to the bir and the boc under ra [no.] 9335 fully satisfy the
demands of equal protection.
B. Security of tenure
Ra [no.] 9335 in no way violates the security of tenure of officials and employees of the bir and the boc.
The guarantee of security of tenure only means that an employee cannot be dismissed from the service
for causes other than those provided by law and only after due process is accorded the employee. In the
case of ra [no.] 9335, it lays down a reasonable yardstick for removal (when the revenue collection falls
short of the target by at least 7.5%) with due consideration of all relevant factors affecting the level of
collection. This standard is analogous to inefficiency and incompetence in the performance of official
duties, a ground for disciplinary action under civil service laws. The action for removal is also subject to
civil service laws, rules and regulations and compliance with substantive and procedural due process.
C. Due process
Bocea’s apprehension of deprivation of due process finds its answer in section 7 (b) and (c) of r.a. no.
9335.The concerned bir or boc official or employee is not simply given a target revenue collection and
capriciously left without any quarter. R.a. no. 9335 and its irr clearly give due consideration to all relevant
factorsthat may affect the level of collection. In the same manner, exemptionswere set, contravening
bocea’s claim that its members may be removed for unattained target collection even due to causes which
are beyond their control. Moreover, an employee’s right to be heard is not at all prevented and his right to
appeal is not deprived of him.In fine, a bir or boc official or employee in this case cannot be arbitrarily
removed from the service without according him his constitutional right to due process.
COMMISSIONER OF INTERNAL REVENUE vs.SAN MIGUEL CORPORATION
G.R. NO. 184428 NOVEMBER 23, 2011

FACTS:
Respondent san miguel corporation, a domestic corporation engaged in the manufacture and
sale of fermented liquor, produces as one of its products "red horse" beer which is sold in 500-ml. And 1-
liter bottle variants. On january 1, 1998, republic act (r.a.) no. 8424 or the tax reform act of 1997 took
effect. It reproduced, as section 143 thereof, the provisions of section 140 of the old national internal
revenue code as amended by r.a. no. 8240 which became effective on january 1, 1997. Part of section
143 of the tax reform act of 1997 reads: The excise tax from any brand of fermented liquor within the next
three (3) years from the effectivity of republic act no. 8240 shall not be lower than the tax which was due
from each brand on october 1, 1996. The rates of excise tax on fermented liquor under paragraphs (a), (b)
and (c) hereof shall be increased by twelve percent (12%) on january 1, 2000. Thereafter, on december
16, 1999, the secretary of finance issued revenue regulations no. 17-99 increasing the applicable tax rates
on fermented liquor by 12%. This increase, however, was qualified by the last paragraph of section 1 of
revenue regulations no. 17-99, which reads:
Provided, however, that the new specific tax rate for any existing brand of cigars, cigarettes packed by
machine, distilled spirits, wines and fermented liquors shall not be lower than the excise tax that is actually
being paid prior to january 1, 2000. For the period june 1, 2004 to december 31, 2004, respondent was
assessed and paid excise taxes amounting to p2,286,488,861.58. Respondent, however, later contended
that the said qualification in the last paragraph of section 1 of revenue regulations no. 17- 99 has no basis
in the plain wording of section 143 and led before the bir a claim for refund or tax credit of the amount of
p60,778,519.56 as erroneously paid excise taxes for the period of may 22, 2004 to december 31, 2004.
Later, said amount was reduced to p58,213,294.92 because of prescription. On september 26, 2007, the
cta second division granted the petition and ordered petitioner to refund p58,213,294.92 to respondent or
to issue in the latter’s favor a tax credit certificate for the said amount for the erroneously paid excise
taxes. The cta held that revenue regulations no. 17-99 modified or altered the mandate of section 143 of
the tax reform act of 1997. The cta en banc affirmed the decision. Hence, this petition for review on
certiorari.
ISSUE:
Whether or not section 1 of revenue regulations no. 17-99 is an invalid administrative
interpretation of section 143 of the tax reform act of 1997.
HELD:
Yes. Section 143 of the tax reform act of 1997 is clear and unambiguous. It provides for two
periods: the first is the 3- year transition period beginning january 1, 1997, the date when r.a. no. 8240
took effect, until december 31, 1999; and the second is the period thereafter. During the 3-year transition
period, section 143 provides that "the excise tax from any brand of fermented liquor...shall not be lower
than the tax which was due from each brand on october 1, 1996." after the transitory period, section 143
provides that the excise tax rate shall be the figures provided under paragraphs (a), (b) and (c) of section
143 but increased by 12%, without regard to whether the revenue collection starting january 1, 2000 may
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turn out to be lower than that collected prior to said date. Revenue regulations no. 17-99, however,
created a new tax rate when it added in the last paragraph of section 1 thereof, the qualification that the
tax due after the 12% increase becomes effective "shall not be lower than the tax actually paid prior to
january 1, 2000." It bears reiterating that tax burdens are not to be imposed, nor presumed to be imposed
beyond what the statute expressly and clearly imports, tax statutes being construed strictissimijuris
against the government. In case of discrepancy between the basic law and a rule or regulation issued to
implement said law, the basic law prevails as said rule or regulation cannot go beyond the terms and
provisions of the basic law. As there is nothing in section 143 of the tax reform act of 1997 which clothes
the bir with the power or authority to rule that the new specific tax rate should not be lower than the excise
tax that is actually being paid prior to january 1, 2000, such interpretation is clearly an invalid exercise of
the power of the secretary of finance to interpret tax laws and to promulgate rules and regulations
necessary for the effective enforcement of the tax reform act of 1997.
SOUTHERN PHILIPPINES POWER CORPORATION vsCOMMISSIONER OF INTERNALREVENUE
FACTS:
Petitioner southern philippines power corporation (spp), a power company that generates and
sells electricity to the national power corporation (npc), applied with the bureau of internal revenue (bir) for
zero-rating of its transactions under section 108(b)(3) of the national internal revenue code (nirc). The bir
approved the application for taxable years 1999 and 2000.On june 20, 2000 spp filed a claim with
respondent commissioner of internal revenue (cir) for a p5,083,371.57 tax credit or refund for 1999. On
july 13, 2001 spp filed a second claim of p6,221,078.44 in tax credit or refund for 2000. The amounts
represented unutilized input vat attributable to spps zero-rated sale of electricity to npc. On september 29,
2001, before the lapse of the two-year prescriptive period for such actions, spp filed with the court of tax
appeals (cta) second division a petition for review covering its claims for refund or tax credit. The petition
claimed only the aggregate amount of p8,636,126.75 which covered the last two quarters of 1999 and the
four quarters in 2000.In his comment on the petition, the cir maintained that spp is not entitled to tax credit
or refund since (a) the bir was still examining spps claims for the same; (b) spp failed to substantiate its
payment of input vat; (c) its right to claim refund already prescribed, and (d) spp has not shown
compliance with section 204(c) in relation to section 229 of the nirc as amended and revenue regulation
(rr) 5-87 as amended by rr 3-88.In a decision dated april 26, 2006, the second division denied spps
claims, holding that its zero-rated official receipts did not correspond to the quarterly vat returns, bearing a
difference of p800,107,956.61. Those receipts only support the amount of p118,945,643.88. Further,
these receipts do not bear the words zero-rated in violation of rr 7-95. The second division denied spps
motion for reconsideration on august 15, 2006.On appeal, the cta en banc affirmed the second divisions
decision dated july 31, 2007. The cta en banc rejected spps contention that its sales invoices reflected the
words zero-rated; pointing out that it is on the official receipts that the law requires the printing of such
words. Moreover, spp did not report in the corresponding quarterly vat return the sales subject of its zero-
rated receipts. The cta en banc denied spps motion for reconsideration on september 19, 2007.
ISSUES:
1. Whether or not the cta en banc correctly rejected the invoices that spp presented and, thus,
ruled that it failed to prove the zero-rated or effectively zero-rated sales that it made;
2. Whether or not the cta en banc correctly ruled that the words bir-vat zero rate application
number 419.2000 imprinted on spps invoices did not comply with rr 7-95;
3. Whether or not the cta en banc correctly held that spp should have declared its zero-rated
sales in its vat returns for the subject period of the claim; and
4. Whether or not the cta en banc correctly ruled that spp was not entitled to a tax refund or
credit.
HELD:
For issues one and two, while acknowledging that spps sale of electricity to npc is a zero-rated
transaction, the cta en banc ruled that spp failed to establish that it made zero-rated sales. True, spp
submitted official receipts and sales invoices stamped with the words bir vat zero-rate application number
419.2000 but the cta en banc held that these were not sufficient to prove the fact of sale.Butnirc section
110 (a.1) provides that the input tax subject of tax refund is to be evidenced by a vat invoice or official
receipt issued in accordance with section 113. Section 113 has been amended by republic act (r.a.) 9337
but it is the unamended version that covers the period when the transactions in this case took place. The
above does not distinguish between an invoice and a receipt when used as evidence of a zero-rated
transaction. Consequently, the cta should have accepted either or both of these documents as evidence
of spps zero-rated transactions.
Three, the cta also did not accept spps official receipts due to the absence of the words zero-
rated on it. The omission, said that court, made the receipts non-compliant with rr 7-95, specifically section
4.108.1. But section 4.108.1 requires the printing of the words zero-rated only on invoices, not on official
receipts.
Actually, it is r.a. 9337 that in 2005 required the printing of the words zero-rated on receipts. But, since the
receipts and invoices in this case cover sales made from 1999 to 2000, what applies is section 4.108.1
above which refers only to invoices.A claim for tax credit or refund, arising out of zero-rated transactions,
is essentially based on excess payment. In zero-rating a transaction, the purpose is not to benefit the
person legally liable to pay the tax, like spp, but to relieve exempt entities like npc which supplies
electricity to factories, offices, and homes, from having to shoulder the tax burden that ultimately would be
passed to the public.
Four. The court finds that spp failed to indicate its zero-rated sales in its vat returns. But this is
not sufficient reason to deny it its claim for tax credit or refund when there are other documents from
which the cta can determine the veracity of spps claim.Of course, such failure if partaking of a criminal act
under section 255 of the nirc could warrant the criminal prosecution of the responsible person or
persons. But the omission does not furnish ground for the outright denial of the claim for tax credit or
refund if such claim is in fact justified.The cta denied spps claim outright for failure to establish the
existence of zero-rated sales, disregarding spps sales invoices and receipts which evidence them. That
court did not delve into the question of spps compliance with the other requisites provided under section
112 of the nirc.Consequently, even as the court holds that spps sales invoices and receipts would be
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sufficient to prove its zero-rated transactions, the case has to be remanded to the cta for determination of
whether or not spp has complied with the other requisites mentioned. Such matter involves questions of
fact and entails the need to examine the records. The court is not a trier of facts and the competence
needed for examining the relevant accounting books or records is undoubtedly with the cta.
COMMISSIONER OF INTERNAL REVENUE vs. FORTUNE TOBACCO
SEPTEMBER 28, 2011 G.R. NO. 180006
FACTS:
Prior to january 1, 1997, the excises taxes on cigarettes were in the form of ad valorem taxes,
pursuant to section 142 of the 1977 national internal revenue code (1977 tax code). Beginning january 1,
1997, ra 8240 took effect and a shift from ad valorem to specific taxes was made. A portion of section
142(c) of the 1977 tax code, as amended by ra 8240, reads in part: “the specific tax from any brand of
cigarettes within the next three (3) years of e effctivity of this act shall not be lower than the tax [which] is
due from each brand on october 1, 1996. The rates of specific tax on cigars and cigarettes under
paragraphs (1), (2), (3) and (4) hereof, shall be increased by twelve percent (12%) on january 1, 2000.” To
implement the 12% increase in specific taxes mandated under section 145 of the 1997 tax code and again
pursuant to its rule-making powers, the cir issued rr 17- 99, which reads partly: “provided, however, that
the new specific tax rate for any existing brand of cigars [and] cigarettes packed by machine, distilled
spirits, wines and fermented liquors shall not be lower than the excise tax that is actually being paid prior
to january 1, 2000.” Pursuant to these laws, respondent fortune tobacco corporation paid in advance
excise taxes and led an administrative claim for tax refund with the cir for erroneously and/or illegally
collected taxes in the amount of p491 million.
In its decision, the cta first division ruled in favor of fortune tobacco and granted its claim for refund. The
cta first divisions ruling was upheld on appeal by the ctaen banc. The cir’s motion for reconsideration of
the ctaen banc’sdecision was denied in a resolution.
ISSUE:
Whether or not section 1 of rr 17-99 is an unauthorized administrative legislation on the part of
the cir.
HELD:
Yes. The proviso in section 1 of rr 17-99 clearly went beyond the terms of the law it was
supposed to implement, and therefore entitles fortune tobacco to claim a refund of the overpaid excise
taxes collected pursuant to this provision. The rule on uniformity of taxation is violated by the proviso in
section 1, rr 17-99. Uniformity in taxation requires that all subjects or objects of taxation, similarly situated,
are to be treated alike both in privileges and liabilities. Although the brands all belong to the same
category, the proviso in section 1, rr 17-99 authorized the imposition of different (and grossly
disproportionate) tax rates. It effectively extended the qualification stated in the third paragraph of section
145(c) of the 1997 tax code that was supposed to apply only during the transition period. In the process,
the cir also perpetuated the unequal tax treatment of similar goods that was supposed to be cured by the
shift from ad valorem to specific taxes. The court further said that the omission in the law in fact reveals
the legislative intent not to adopt the higher tax rule. It appears that despite its awareness of the need to
protect the increase of excise taxes to increase government revenue, congress ultimately decided against
adopting the higher tax rule.
RIZAL COMMERCIAL BANKING CORPORATION vs.COMMISSIONER OF INTERNAL REVENUE-
PROTEST TAX ASSESSMENTS

FACTS:
Rcbc received the final assessment notice on july 5, 2001. It filed a protest on july 20, 2001. As
the protest was not acted upon, it filed a petition for review with the court of tax appeals (cta) on april 30,
2002, or more than 30 days after the lapse of the 180-day period reckoned from the submission of
complete documents. The cta dismissed the petition for lack of jurisdiction since the appeal was filed out
of time.
ISSUE:
Has the action to protest the assessment judicially prescribed? 


HELD:
Yes. The assessment has become final. The jurisdiction of the cta has been expanded to include
not only decision but also inactions and both are jurisdictional such that failure to observe either is fatal.
However, if there has been inaction, the taxpayer can choose between (1) file a petition with the
cta within 30 days from the lapse of the 180-day period or (2) await the final decision of the cir and appeal
such decision to the cta within 30 days after receipt of the decision. These options are mutually exclusive
and resort to one bars the application of the other. Thus, if petitioner belatedly filed an action based on
inaction, it cannot subsequently file another petition once the decision comes out.
RIZAL COMMERCIAL BANKING CORPORATION v. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 170257
September 7, 2011
Facts:
Petitioner Rizal Commercial Banking Corporation (RCBC) is a corporation engaged in general banking
operations. It seasonably filed its Corporation Annual Income Tax Returns for Foreign Currency Deposit
Unit for the calendar years 1994 and 1995.
On January 23, 1997, RCBC executed 2 waivers of Defense of Prescription. Under the statute of
limitation of the NIRC covering the Internal Revenue Taxes due for 1994 and 1995 extending the
assessment up to Dec. 31, 2000.
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On January 27, 2000, RCBC received a formal letter of demand together with assessment notices for
deficiency taxes. RCBC filed a Protest and then, a Petition for Review before the CTA pursuant to Sec.
228 of the 1997 Tax Code.
On Dec. 6, 2000, it again received a letter of demand which drastically reduced the deficiency tax except
from the onshore tax and document stamp tax (DST).
RCBC argued the validity of the waivers for not being signed and for the onshore tax, it should not be
primarily liable since it is only a withholding agent.
CTA terminated the assessment for other deficiencies except for the FCDU shore tax and DST charging
20% deficiency tax. Being denied in CTA en banc, it raised the matter to the Supreme Court. While the
case is pending, the DST deficiency was paid after the BIR approved its application for abatement.
RENATO V. DIAZ and AURORA MA. F. TIMBOL v. THE SECRETARY OF FINANCE and
THE COMMISSIONER OF INTERNAL REVENUE,
G.R. No. 193007
July 19, 2011
Facts:
Renato V. Diaz and Aurora Ma. F. Timbol filed a petition for declaratory relief1 assailing the validity of the
impending imposition of VAT by BIR on the collections of tollway operators Petitioners claim that, since
the VAT would result in increased toll fees, they have an interest asregular users of tollways in stopping
the BIR action. Diaz claims that he sponsored the approval of Republic Act 7716 (EVAT Law) and
Republic Act 8424 (the1997 NIRC) at the House of Representatives.

Timbol claims that she served as Assistant Secretary of DTI and consultant of the TRB in the past
Issue: administration. Petitioners allege that the BIR attempted during the administration of President Gloria
Macapagal- Arroyo to impose VAT on toll fees.
Whether or not RCBC as payee bank can be held liable for deficiency on shore tax which is mandatory by
law to be collected at source in the form of a final withholding tax. But the imposition was deferred in view of the consistentopposition of Diaz and other sectors to such
move. But, upon President Benigno C. Aquino III’s assumption of office in 2010, the BIR revived the idea
Ruling : and would impose the challenged tax on toll fees beginning August 16, 2010 unless judicially enjoined.

Petition is denied. As held in Chamber of Real Estate and Builder's Association Inc. v. Executive Sec., the Petitioners hold the view that:
purpose of the withholding tax system are:
- Congress did not, when it enacted the NIRC, intend to include toll fees within themeaning of "sale
1. to provide the taxpayer with a convenient way of paying his tax liability of services" that are subject to VAT;
2. to ensure the collection of tax
3. to improve the governments cashflow. - a toll fee is a "user’s tax," not a sale of services;

Under the withholding tax system, the payor is the taxpayer upon whom the tax is imposed, while the
withholding agent simply acts as an agent or a collector of the government to ensure the collection of
taxes
The liability of the withholding agent is independent from that of the taxpayer. The former cannot be made
liable for the tax due because it is the latter who earned the income subject to withholding tax. The
withholding agent is liable only insofar as he failed to perform his duty to withhold the tax and remit the
same to the government. The liability for the tax, however, remains with the taxpayer because the gain
was realized and received by him.
RCBC cannot evade its liability for FCDU Onshore Tax by shifting the blame on the payor-borrower as the
withholding agent. The CTA, as a specialized court dedicated exclusively to the study and resolution of
tax problems, has developed an expertise on the subject of taxation and shall be accorded the highest
respect and shall be presumed valid, in the absence of any clear and convincing proof to the contrary.
- to impose VAT on toll fees would amount to a tax on public service;
- since VAT was never factored into the formula for computing toll fees, its impositionwould violate
the non-impairment clause of the constitution.
Court issued a TRO enjoining the implementation of the VAT.
The Court required the government, represented by respondents Cesar V. Purisima, SOF, and Kim
S.Jacinto-Henares, CIR, to comment on the petition within 10 days from notice. Later, the Court issued
another resolution treating the petition as one for prohibition
Office of the Solicitor General filed the government’s comment.
The government (SOLGEN) avers that:

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 1. NIRC imposes VAT on all kinds of services of franchise grantees, including tollwayoperations,
except where the law provides otherwise; that the Court should seek the meaningand intent of
the law from the words used in the statute; and that the imposition of VAT on tollwayoperations
has been the subject as early as 2003 of several BIR rulings and circulars.
2. petitioners have no right to invoke the non-impairment of contracts clause since they clearlyhave
no personal interest in existing toll operating agreements (TOAs) between thegovernment and
tollway operators. At any rate, the non-impairment clause cannot limit the State’s sovereign
taxing power which is generally read into contracts.
3. non-inclusion of VAT in the parametric formula for computing toll rates cannot exempttollway
operators from VAT.
In any event, it cannot be claimed that the rights of tollway operators to a reasonable rate of return will be
impaired by the VAT since this is imposed on top of the toll rate. Further, theimposition of VAT on toll fees
would have very minimal effect on motorists using the tollways. petitioners point out that tollway operators
cannot be regarded as franchise grantees under theNIRC since they do not hold legislative franchises.
Finally, BIR Revenue Memorandum Circular 63-2010 (BIR RMC 63-2010), which directs tollcompanies to
record an accumulated input VAT of zero balance in their books as of August 16,2010, contravenes
Section 111 of the NIRC which grants entities that first become liable to VAT atransitional input tax credit
of 2% on beginning inventory. For this reason, the VAT on toll fees cannot be implemented.
Issue:
Whether or not the government is unlawfully expanding VAT coverage by including tollway operators and
tollway operations in the terms "franchise grantees" and "sale of services" under Section 108 of the Code.
Ruling:
SC held it is subject to VAT under enumeration provided in Sec. 108 of NIRC (tollway operators fallunder
franchise gratees)
VAT is levied, assessed, and collected, according to Section 108, on the gross receipts derived fromthe
sale or exchange of services as well as from the use or lease of properties.
The third paragraph of Section 108 defines "sale or exchange of services" as follows:
- The phrase ‘sale or exchange of services’ means the performance of all kinds of services in the
Philippines for others for a fee, remuneration or consideration
- It is plain from the above that the law imposes VAT on "all kinds of services" rendered in the
Philippines for a fee, including those specified in the list.
- The enumeration of affected services is not exclusive
- By qualifying "services" with the words "all kinds," Congress has given the term "services" an all-
encompassing meaning
The listing of specific services are intended to illustrate how pervasive and broad is the VAT’s
reach rather than establish concrete limits to its application.
Thus,every activity that can be imagined as a form of "service" rendered for a feeshould be deemed
included unless some provision of law especially excludes it.
Presidential Decree (P.D.) 1112 or the Toll Operation Decree establishes the legal basis for theservices
that tollway operators render. Essentially, tollway operators construct, maintain, and operate
expressways, also called tollways, at the operators’ expense.
Tollways serve as alternatives toregular public highways that meander through populated areas and
branch out to local roads. Traffic in the regular public highways is for this reason slow-moving. In
consideration for constructingtollways at their expense, the operators are allowed to collect government-
approved fees frommotorists using the tollways until such operators could fully recover their expenses and
earnreasonable returns from their investments.
When a tollway operator takes a toll fee from a motorist, the fee is in effect for the latter’s use of the
tollway facilities over which the operator enjoys private proprietary rights that its contract and the
lawrecognize. In this sense, the tollway operator is no different from the following service providers under
Section 108 who allow others to use their properties or facilities for a fee:
1. Lessors of property, whether personal or real
2. Warehousing service operators
3. Lessors or distributors of cinematographic films
4. Proprietors, operators or keepers of hotels, motels, resthouses, pension houses, inns, resorts;
5. Lending investors (for use of money)
6. Transportation contractors on their transport of goods or cargoes, including persons who
transportgoods or cargoes for hire and other domestic common carriers by land relative to their
transport of goods or cargoes; and
7. Common carriers by air and sea relative to their transport of passengers, goods or cargoes
fromone place in the Philippines to another place in the Philippines
PRUDENTIAL BANK v. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 180390
July 27, 2011
Facts:
Petitioner Prudential Bank is a banking corporation organized and existing under Philippine law. On July
23, 1999, petitioner received from the respondent Commissioner of Internal Revenue (CIR) a Final
Assessment Notice No. ST-DST-95-0042-99 and a Demand Letter for deficiency Documentary Stamp Tax
(DST) for the taxable year 1995 on its Repurchase Agreement with the Bangko Sentral ng Pilipinas [BSP],
Page 121 of 148
Purchase of Treasury Bills from the BSP, and on its Savings Account Plus [SAP] product, in the amount
of P18,982,734.38, Petitioner protested the assessment on the ground that the documents subject matter
of the assessment are not subject to DST. However, respondent denied the protest on December 28,
2001.
Thus, petitioner filed a Petition for Review before the CTA which was raffled to its First Division and
docketed as CTA Case No. 6396.]
On February 10, 2006, the First Division of the CTA affirmed the assessment for deficiency DST insofar
as the SAP is concerned, but cancelled and set aside the assessment on petitioners repurchase
agreement and purchase of treasury bills.
On March 30, 2007, the CTA En Banc denied the appeal for lack of merit. It affirmed the ruling of its First
Division that petitioners SAP is a certificate of deposit bearing interest subject to DST under Section 180
of the old National Internal Revenue Code (NIRC), as amended by Republic Act (RA) No. 7660
Issue:
Whether or not petitioners Savings accounts Plus with a higher interest is subject to documentary stamp
tax.
Rulling:
The petition lacks merit.
Petitioners Savings Account Plus is subject to Dcumentary Stamp Tax.
DST is imposed on certificates of deposit bearing interest pursuant to Section 180 of the old NIRC, as
amended, to wit:
Sec. 180. Stamp tax on all loan agreements, promissory notes, bills of
exchange, drafts, instruments and securities issued by the government or any of its
instrumentalities, certificates of deposit bearing interest and others not payable on sight
or demand. On all loan agreements signed abroad wherein the object of the contract is
located or used in the Philippines; bills of exchange (between points within the
Philippines), drafts, instruments and securities issued by the Government or any of its
instrumentalities or certificates of deposits drawing interest, or orders for the payment of
any sum of money otherwise than at the sight or on demand, or on all promissory notes,
whether negotiable or non-negotiable, except bank notes issued for circulation, and on
each renewal of any such note, there shall be collected a documentary stamp tax of
Thirty centavos (P0.30) on each Two hundred pesos, or fractional part thereof, of the
face value of any such agreement, bill of exchange, draft, certificate of deposit, or note:
Provided, That only one documentary stamp tax shall be imposed on either loan
agreement, or promissory note issued to secure such loan, whichever will yield a higher
tax: provided, however, that loan agreements or promissory notes the aggregate of
which does not exceed Two hundred fifty thousand pesos (P250,000.00) executed by
an individual for his purchase on installment for his personal use or that of his family
and not for business, resale, barter or hire of a house, lot, motor vehicle, appliance or
furniture shall be exempt from the payment of the documentary stamp tax provided
under this section. (Emphasis supplied.)
A certificate of deposit is defined as a written acknowledgment by a bank or banker of the receipt of a sum
of money on deposit which the bank or banker promises to pay to the depositor, to the order of the
depositor, or to some other person or his order, whereby the relation of debtor and creditor between the
bank and the depositor is created.
In this case, petitioner claims that its SAP is not a certificate of deposit bearing interest because unlike a
time deposit, its SAP is payable on demand and is evidenced by a passbook and not by a certificate of
deposit.
We do not agree.
In China Banking Corporation v. Commissioner of Internal Revenue, we held that the Savings
Plus Deposit Account, which has the following features:
1. Amount deposited is withdrawable anytime;
2. The same is evidenced by a passbook;
3. The rate of interest offered is the prevailing market rate, provided the depositor
would maintain his minimum balance in thirty (30) days at the minimum, and should
he withdraw before the period, his deposit would earn the regular savings deposit
rate;
is subject to DST as it is essentially the same as the Special/Super Savings Deposit Account
in Philippine Banking Corporation v. Commissioner of Internal Revenue, and the Savings
Account-Fixed Savings Deposit in International Exchange Bank v. Commissioner of Internal
Revenue, which are considered certificates of deposit drawing interests.
MERCURY DRUG CORPORATION v. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 164050
July 20, 2011
Facts:
Petitioner Mercury Drug corporation grants a 20% sales discount to qualified seniorcitizens in the
purchase of medicines pursuant to RA 7432. With this, petitioner claims anamount representing the 20%
sales discount as deductions from its gross income. Realizing thatRA 7432 allows tax credit for the
sales granted to senior citizens, petitioner filed with CIR claimsfor refund for the years 1993 and 1994.
Computation of its overpayment of income tax waspresented by petitioner.
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When CIR failed to act on petitioner’s claims, the latter filed petitioner for review with the CTA. CTA ruled
in favor of petitioner and treated the 20% sales discount as tax credit ratherthan a deduction from the
gross income. However, the CTA did not grant the full amount ofclaims because if found some
discrepancies and irregularities in the cash slips submitted by petitioner.
The CTA stated that the tax credit must be based on the actual cost of the medicineand not the whole
amount of the 20% senior citizens discount, thus the formula applied is: costof sales/gross sales x amount
of 20% sales discount.Petitioner moved for partial reconsideration which CTA modified its ruling by
increasingthe taxable creditable tax amount. Still unsatisfied with the decision, petitioner appealed with CA
seeking partial modification of the CTA resolution raising a legal issue on the basis of thecomputation of
tax credit.Petitioner contended that the actual discount granted to the senior citizens, rather thanthe
acquisition cost of the item availed by senior citizens, should be the basis for computationof tax credit.The
CA affirms the CTA decision. It interpreted the term "cost" as used in Section 4(a) ofRepublic Act No.
7432 to mean the acquisition cost of the medicines sold to senior citizens.Hence, comes this petition for
review before the SC.
Issue:
Whether the claim for tax credit should be based on the full amount of the 20% senior citizens’ discount or
the acquisition cost of the merchandise sold.Ruling:The court ruled that the cost of discount should be
computed on the actual amount of thediscount extended to senior citizens.
Ruling:
RA 7432, which grants, among others, sales discounts to senior citizens on the purchase ofmedicines,
imposes burden to private establishments amounting to taking of private propertyfor public use with just
compensation in the form of tax credit. However, said law does notprovide how the cost of the discount as
tax credit be computed. Thus, the court construed thecost as referring to the amount of the 20% sales
discount extended by establishments to seniorcitizens in the purchase of medicines.However, the Court
gave full accord to the factual findings of the Court of Tax Appeals withrespect to the actual amount of the
20% sales discount. Thus the court held that petitioner isentitled to a tax credit equivalent to the actual
amounts of the 20% sales discount asdetermined by the Court of Tax Appeals. A new computation for tax
was made in favor ofpetitioner in the amounts of P2,289,381.71 and P22,237,650.34.
COMMISSIONER OF INTERNAL REVENUE v. MIRANT (PHILIPPINES) OPERATIONS,
CORPORATION
G.R. No. 171742
MIRANT (PHILIPPINES) OPERATIONS CORPORATION (formerly: Southern Energy Asia-Pacific
Operations (Phils.), Inc.), v. COMMISSIONER OF INTERNAL REVENUE,
G.R. No. 176165
June 15, 2011
Facts:
Mirant, duly licensed to do business in the Philippines, is primarily engaged in the design, construction,
assembly, commissioning, operation, maintenance, rehabilitation and management of gas turbine and
other power generating plants and related facilities using coal, distillate, and other fuel provided by and
under contract with the Government of the Republic of the Philippines or any subdivision, instrumentality
or agency thereof, or any government-owned or controlled corporations or other entities engaged in the
development, supply or distribution of energy.
Mirant filed its income tax return for the fiscal year ending June 30, 1999, declaring net loss and unutilized
tax credits. To synchronize its accounting period with its affiliates, with BIR approval, it change its fiscal
period to Dec. 31, 1994 indicating the unutilized tax credit to be carried over as tax credit next year. For
its Dec. 2000 taxable year, it again had net loss and unutilized tax credits.
It then filed a claim for refund for 1999 and 2000. But, CTA granted only 2000 reduced based on those
reconcilable with creditable taxes withheld by Southern Energy Quezon Inc. since the 1999 tax credit was
already opted to be carried over.
Issue:
Whether or not refund for 1999 can be claimed
Ruling:
No.
According to Sec. 76 of NIRC once option to carry-over has been made, such option shall be considered
irrevocable for that taxable period. The 2 options are alternative. The amount being claimed as carry-
over would remain in the account of the taxpayer until utilized. Unlike the option to refund, it has no
prescriptive period.
The requisites for claiming a tax credit or a refund of creditable withholding tax:
1) The claim must be filed with the CIR within the two-year period from the date of payment of the
tax;
2) It must be shown on the return that the income received was declared as part of the gross
income; and
3) The fact of withholding must be established by a copy of a statement duly issued by the payor to
the payee showing the amount paid and the amount of the tax withheld
Commissioner of Internal Revenue vs.
Filinvest Development Corporation/Commissioner of Internal
G.R. No. 163653/ G.R. No.167689 7/19/2011
“Assailed in these twin petitions for review on certiorari filed pursuant to Rule 45 of the 1997 Rules of Civil
Procedure are the decisions rendered by the Court of Appeals (CA) in the following cases: (a) Decision
dated 16 December 2003 of the then Special Fifth Division in CA-G.R. SP No. 72992;[1] and, (b) Decision
dated 26 January 2005 of the then Fourteenth Division in CA-G.R. SP No. 74510.”
FACTS:Filinvest Development Corporation (FDC) owns 80% of the outstanding shares of
FilinvestAlabang, Inc. (FAI) and 67.42% of Filinvest Land, Inc. (FLI). FDC Extended advances in favour of
its affiliates and supported the same with instructional letters and cash and journal vouchers. The BIR
assessed Filinvest for deficiency income tax by imputing an “arm’s length” interest rate on its advances to
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affiliates. Filinvest disputed this by saying that the CIR lacks the authority to impute theoretical interest
and that the rule is that interests cannot be demanded in the absence of a stipulation to the effect.
ISSUE: Whether or not the CIR can impute theoretical interest on the advances made by Filinvest to its
affiliates?
RULING: NO. Despite the seemingly broad power of the CIR to distribute, apportion and allocate gross
income under (now) Section 50 of the Tax Code, the same does not include the power to impute
theoretical interests even with regard to controlled taxpayers’ transactions.
Theoretical Interest Rates (for the advances extended) - Sec 43 of the 1993 NIRC provides that,“(i)n any
case of 2 or more organizations, trades or businesses (whether or not incorporated and whether or not
organized in the Philippines) owned or controlled directly or indirectly by the same interests, the CIR is
authorized to distribute, apportion or allocate gross income or deductions between or among such
organization, trade or business, if he determines that such distribution, apportionment or allocation is
necessary in order to prevent evasion of taxes or clearly to reflect the income of any such organization,
trade or business.”
It may also be seen that the CIR's power to distribute, apportion or allocate gross income or
deductions between or among controlled taxpayers may be likewise exercised whether or not fraud
inheres in the transaction/s under scrutiny. For as long as the controlled taxpayer's taxable income is not
reflective of that which it would have realized had it been dealing at arm's length with an uncontrolled
taxpayer, the CIR can make the necessary rectifications in order to prevent evasion of taxes. Despite the
broad parameters provided, the power to impute "theoretical interests" to the controlled taxpayer's
transactions is not included. There must be proof of the actual or, at the very least, probable receipt or
realization by the controlled taxpayer of the item of gross income sought to be distributed, apportioned or
allocated by the CIR. There is no evidence of actual or possible showing that the advances FDC extended
to its affiliates had resulted to the interests subsequently assessed by the CIR.
Belle Corporation vs. Commissioner of Internal Revenue
G.R. No. 181298 3/2/2011
“Section 69 of the old National Internal Revenue Code (NIRC) allows unutilized tax credits to be refunded
as long as the claim is filed within the prescriptive period. This, however, no longer holds true under
Section 76 of the 1997 NIRC as the option to carry-over excess income tax payments to the succeeding
taxable year is now irrevocable.”
“This Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court seeks to set aside the
January 25, 2007 Decision[2] and the January 21, 2008 Resolution[3] of the Court of Appeals (CA).”
FACTS: Petitioner Belle Corporation is a domestic corporation engaged in the real estate and property business, filed
with the BIR its income tax return (ITR) for the first quarter of 1997. Subsequently, it filed with the BIR its second
quarter ITR, declaring an overpayment of taxes. In view of the overpayment, no taxes were paid for the second and
third quarters of 1997. Instead of claiming the amount as a tax refund, petitioner decided to apply it as a tax credit to
the succeeding taxable year by marking the tax credit option box in its 1997 ITR. On April 12, 200, petitioner filed with
the BIR an administrative claim for refund its unutilized excess income tax payments for the taxable year 1997.
ISSUE: Whether or not petitioner is entitled to a refund of its excess income tax payments for the taxable
year 1997?
RULING: The petition has no merit. Both the CTA and the CA erred in applying Section 69[52] of the old
NIRC. The law applicable is Section 76 of the NIRC. Unutilized excess income tax payments may be
refunded within two years from the date of payment under Section 69 of the old NIRC
Under Section 69 of the old NIRC, in case of overpayment of income taxes, a corporation may
either file a claim for refund or carry-over the excess payments to the succeeding taxable year. Availment
of one remedy, however, precludes the other. This rule, however, no longer applies as Section 76 of the
1997 NIRC now reads:
Section 76.Final Adjustment Return. Every corporation liable to tax under Section 24 shall file a final
adjustment return covering the total net income for the preceding calendar or fiscal year. If the sum of the
quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire
taxable net income of that year the corporation shall either: (a) Pay the excess tax still due; or (b) Be
refunded the excess amount paid, as the case may be.
In case the corporation is entitled to a refund of the excess estimated quarterly income taxes paid, the
refundable amount shown on its final adjustment return may be credited against the estimated quarterly
income tax liabilities for the taxable quarters of the succeeding taxable years. Once the option to carry
over and apply the excess quarterly income tax against income tax due for the taxable quarters of the
succeeding taxable years has been made, such option shall be considered irrevocable for that taxable
period and no application for tax refund or issuance of a tax credit certificate shall be allowed therefor.
In the instant case, both the CTA and the CA applied Section 69 of the old NIRC in denying the
claim for refund. We find, however, that the applicable provision should be Section 76 of the 1997 NIRC
because at the time petitioner filed its 1997 final ITR, the old NIRC was no longer in force. Accordingly,
since petitioner already carried over its 1997 excess income tax payments to the succeeding taxable year
1998, it may no longer file a claim for refund of unutilized tax credits for taxable year 1997. To repeat,
under the new law, once the option to carry-over excess income tax payments to the succeeding years
has been made, it becomes irrevocable. Thus, applications for refund of the unutilized excess income tax
payments may no longer be allowed.
Commissioner of Internal Revenue vs. PL Management International Phil., Inc.
G.R. No. 160949 4/4/2011
FACTS: In 1997, the respondent, a Philippine corporation, earned an income of P24,000,000.00 from its
professional services rendered to UEM-MARA Philippines Corporation (UMPC), from which income
UMPC withheld P1,200,000.00 as the respondents withholding agent.
In its 1997 income tax return (ITR) filed on April 13, 1998, the respondent reported a net loss of
P983,037.00, but expressly signified that it had a creditable withholding tax of P1,200,000.00 for taxable
year 1997 to be claimed as tax credit in taxable year 1998.
On April 13, 1999, the respondent submitted its ITR for taxable year 1998, in which it declared a
net loss of P2,772,043.00. Due to its net-loss position, the respondent was unable to claim the
P1,200,000.00 as tax credit.
On April 12, 2000, the respondent filed with the petitioner a written claim for the refund of the
P1,200,000.00 unutilized creditable withholding tax for taxable year 1997. However, the petitioner did not
act on the claim. Appeal with the CA was for PL, the CA saying that the prescriptive period is not
jurisdictional and might be suspended for reasons of equity.
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ISSUE: Whether or not the two-year prescriptive period for tax claim is non-jurisdictional and can be
suspended for equity?
RULING: YES. The SC reverse and set aside the decision of the CA to the extent that it orders the
petitioner to refund to the respondent the P1,200,000.00 representing the unutilized creditable withholding
tax in taxable year 1997, but permit the respondent to apply that amount as tax credit in succeeding
taxable years until fully exhausted.
Section 76 of the NIRC of 1997 provides: “Once the option to carry-over and apply the excess quarterly
income tax against income tax due for the taxable quarters of the succeeding taxable years has been
made, such option shall be considered irrevocable for that taxable period and no application for tax refund
or issuance of a tax credit certificate shall be allowed therefor. “
The SC further rule that PL Management International Phils., Inc. may still use the creditable withholding
tax of P1,200,000.00 as tax credit in succeeding taxable years until fully exhausted.
Central Luzon Drug Corporation vs. Commissioner of Internal Revenue
G.R. No. 181371 3/2/2011
FACTS: Respondent is a domestic corporation primarily engaged in retailing of medicines and other
pharmaceutical products. In 1996, it operated six (6) drugstores under the business name and style
Mercury Drug.From January to December 1996, respondent granted twenty (20%) percent sales discount
to qualified senior citizens on their purchases of medicines pursuant to Republic Act No. [R.A.] 7432 and
its Implementing Rules and Regulations. For the said period, the amount allegedly representing the 20%
sales discount granted by respondent to qualified senior citizens totaled P904,769.00.
On April 15, 1997, respondent filed its Annual Income Tax Return for taxable year 1996 declaring
therein that it incurred net losses from its operations.
On January 16, 1998, respondent filed with petitioner a claim for tax refund/credit in the amount
of P904,769.00 allegedly arising from the 20% sales discount granted by respondent to qualified senior
citizens in compliance with [R.A.] 7432. Unable to obtain affirmative response from petitioner, respondent
elevated its claim to the Court of Tax Appeals [(CTA or Tax Court)] via a Petition for Review. CTA dismiss
respondents Petition for lack of merit. The CA affirmed in toto the Resolution of the Court of Tax Appeals
(CTA) ordering petitioner to issue a tax credit certificate in favor of respondent.
ISSUE:Whether or not the Court of Appeals erred in holding that respondent may claim the 20%
sales discount as a tax credit instead of as a deduction from gross income or gross sales?
RULING: NO. The Petition is not meritorious. SC ruled that under Section 4 of RA 7432 grants to senior
citizens the privilege of obtaining a 20 % discount on their purchase of medicine from any private
establishment in the country. The latter may then claim the cost of the discount as a tax credit. But can
such credit be claimed, even though an establishment operates at a loss?The SC answer in the
affirmative.
Tax Credit versus Tax Deduction
Although the term is not specifically defined in our Tax Code, tax credit generally refers to an
amount that is subtracted directly from ones total tax liability. It is an allowance against the tax itself or a
deduction from what is owed by a taxpayer to the government. Examples of tax credits are withheld taxes,
payments of estimated tax, and investment tax credits.
Tax credit should be understood in relation to other tax concepts. One of these is tax deduction --
defined as a subtraction from income for tax purposes, or an amount that is allowed by law to reduce
income prior to the application of the tax rate to compute the amount of tax which is due. An example of a
tax deduction is any of the allowable deductions enumerated in Section 34 of the Tax Code.
A tax credit differs from a tax deduction. On the one hand, a tax credit reduces the tax due,
including -- whenever applicable -- the income tax that is determined after applying the corresponding tax
rates to taxable income. A tax deduction, on the other, reduces the income that is subject to tax in order to
arrive at taxable income. To think of the former as the latter is to avoid, if not entirely confuse, the issue. A
tax credit is used only after the tax has been computed; a tax deduction, before.
Microsoft Philippines, Inc. vs. Commissioner of Internal Revenue
G.R. No. 180173 4/6/2011
FACTS: Microsoft Philippines, Inc. (Microsoft) is a VAT taxpayer duly registered with BIR. It renders
marketing services to Microsoft OperationsPte Ltd. (MOP) and Microsoft Licensing, Inc. (MLI), both
affiliated non-resident foreign corporations. The services are paid for in acceptable foreign currency and
qualify as zero-rated sales for VAT purposes under Section 108(B)(2) of NIRC on Value-added Tax on
Sale of Services and Use or Lease of Properties. (B) Transactions Subject to Zero Percent (0%) Rate.
The following services performed in the Philippines by VAT-registered persons shall be subject to zero
percent (0%) rate:
1) Processing, manufacturing or repacking goods for other persons doing business outside
the Philippines which goods are subsequently exported x xx;
2) Services other than those mentioned in the preceding paragraph, the consideration for
which is paid for in acceptable foreign currency and accounted for in accordance with the rules and
regulations of the BangkoSentralngPilipinas (BSP); x xx
Microsoft paid VAT input taxes in the amount of P11,449,814.99 on its domestic purchases of
taxable goods and services. On December 27, 2002 Microsoft filed an administrative claim for tax credit of
VAT input taxes in the amount of P11,449,814.99 with the BIR. The administrative claim for tax credit was
filed within two years from the close of the taxable quarters when the zero-rated sales were made. On
April 23, 2003 due to the BIR's inaction, Microsoft filed a petition for review with the CTA. It claimed to be
entitled to a refund of unutilized input VAT attributable to its zero-rated
CTA Second Division denied the claim for tax credit of VAT input taxes. Microsoft then filed a
petition for review with the CTA En Banc but denied again the petition
Page 125 of 148

ISSUE: Whether or not Microsoft is entitled to a claim for a tax credit or refund of VAT input taxes on
domestic purchases of goods or services attributable to zero-rated sales for the year 2001 even if the
word "zero-rated" is not imprinted on Microsoft's official receipts?
RULING: NO. Under Sections 113(A) and 237 of the NIRC which provide for the invoicing requirements
for VAT-registered persons state:
(A) Invoicing Requirements. – A VAT-registered person shall, for every sale, issue an invoice or
receipt. In addition to the information required under Section 237, the following information shall be
indicated in the invoice or receipt:
1) A statement that the seller is a VAT-registered person, followed by his taxpayer's
identification number (TIN); and
2) The total amount which the purchaser pays or is obligated to pay to the seller with the
indication that such amount includes the value-added tax. x xx
All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or
for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or
sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit
cost and description of merchandise or nature of service: Provided, however, That in the case of sales,
receipts or transfers in the amount of One hundred pesos (P100.00) or more, or regardless of the amount,
where the sale or transfer is made by a person liable to value-added tax to another person also liable to
value-added tax; or where the receipt is issued to cover payment made as rentals, commissions,
compensations or fees, receipts or invoices shall be issued which shall show the name, business style, if
any, and address of the purchaser, customer or client: Provided, further, That where the purchaser is a
VAT-registered person, in addition to the information herein required, the invoice or receipt shall further
show the Taxpayer Identification Number (TIN) of the purchaser.
The original of each receipt or invoice shall be issued to the purchaser, customer or client at the
time the transaction is effected, who, if engaged in business or in the exercise of profession, shall keep
and preserve the same in his place of business for a period of three (3) years from the close of the taxable
year in which such invoice or receipt was issued, while the duplicate shall be kept and preserved by the
issuer, also in his place of business, for a like period.
The Commissioner may, in meritorious cases, exempt any person subject to internal revenue tax
from compliance with the provisions of this Section.
The invoicing requirements for a VAT-registered taxpayer as provided in the NIRC and revenue
regulations are clear. A VAT-registered taxpayer is required to comply with all the VAT invoicing
requirements to be able to file a claim for input taxes on domestic purchases for goods or services
attributable to zero-rated sales. A "VAT invoice" is an invoice that meets the requirements of Section
4.108-1 of RR 7-95.Contrary to Microsoft's claim, RR 7-95 expressly states that "[A]ll purchases covered
by invoices other than a VAT invoice shall not give rise to any input tax."
Microsoft's invoice, lacking the word "zero-rated," is not a "VAT invoice," and thus cannot
give rise to any input tax.
PEÑAFLOR, Alexander P.
2013-0039
ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION V
COMMISSION OF INTERNAL REVENUE
G. R. 159471, JANUARY 26, 2011
FACTS:
Under Section 100 of the Tax Code of the Philippines, petitioner is a zero-rated Value Added Tax
(VAT) person for being an exporter of copper concentrates.According to petitioner, on January 20, 1994, it
filed its VAT return for the fourth quarter of 1993, showing a total input tax of P863,556,963.74 and an
excess VAT credit of P842,336,291.60 and, on January 25, 1996, it applied for a tax refund or a tax credit
certificate for the latter amount with respondent Commissioner of Internal Revenue (CIR). On the same
date, petitioner filed the same claim for refund with the Court of Tax Appeals (CTA), claiming that the two-
year prescriptive period provided for under Section 230 of the Tax Code for claiming a refund was about
to expire. The CIR failed to file his answer with the CTA; thus, the former declared the latter in default.
On August 24, 1998, the CTA rendered its Decision [3] denying petitioner's claim for refund due to
petitioner's failure to comply with the documentary requirements prescribed under Section 16 of Revenue
Regulations No. 5-87, as amended by Revenue Regulations No. 3-88, dated April 7, 1988.
Petitioner filed a Motion for Reconsideration[5] praying for the reopening of the case in order for it
to present the required documents, together with its proof of non-availment for prior and succeeding
quarters of the input VAT subject of petitioner's claim for refund. The CTA granted the motion in its
Resolution[6] dated October 29, 1998. Thereafter, in a Resolution[7] dated June 21, 2000, the CTA denied
petitioner's claim. It ruled that the action has already prescribed and that petitioner has failed to
substantiate its claim that it has not applied its alleged excess input taxes to any of its subsequent
quarter's output tax liability.
The CTA's Decision and Resolution were questioned in the CA who later on affirmed the said
Decision and Resolution. Subsequently, a Motion for Reconsideration was also filed by the Petitioner but
was also denied.
ISSUE:
Whether the CA erred in holding that the Petitioner’s claim for refund has prescribed.
HELD:
No, the CA did not err in holding that the Petitioner’s claim for refund has prescribe.
Section 106, Tax Code
Refunds or tax credits of input tax. - (a) Any VAT-registered person, whose sales are zero-rated,
may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the
issuance of a tax credit certificate or refund creditable input tax due or paid attributable to such sales,
except transitional input tax, to the extent that such input tax has not been applied against output tax:
Provided, however, That in case of zero-rated sales under Section 100 (a) (2) (A) (I), (ii) and (b) and
Section 102 (b) (1) and (2), the acceptable foreign currency exchange proceeds thereof have been duly
accounted for in accordance with the regulations of the BangkoSentral ng Pilipinas (BSP): Provided,
further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable
or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid
cannot be directly and entirely attributed to any one of the transactions, it shall be allocated
proportionately on the basis of the volume of sales.
Page 126 of 148
 It must be remembered that when claiming tax refund/credit, the VAT-registered taxpayer must
be able to establish that it does have refundable or creditable input VAT, and the same has not been
applied against its output VAT liabilities information which are supposed to be reflected in the taxpayers
VAT returns. Thus, an application for tax refund/credit must be accompanied by copies of the taxpayers
VAT return/s for the taxable quarter/s concerned.
KEPCO PHILIPPINES CORP. V CIR
G. R. 17996, January 31, 2011
FACTS:
Petitioner Kepco Philippines Corporation is a egistered taxpayer engaged in the production and
sale of electricity as an independent power producer. It sells its electricity to the National Power
Corporation (NPC). Kepco filed with respondent Commissioner of Internal Revenue (CIR) an application
for effective zero-rating of its sales of electricity to the NPC.
Kepco alleged that for the taxable year 1999, it incurred input VAT in the amount
of P10,527,202.54 on its domestic purchases of goods and services that were used in its production and
sale of electricity to NPC for the same period. In its 1999 quarterly VAT returns filed with the Bureau of
Internal Revenue (BIR) on March 30, 2000
On January 29, 2001, Kepco filed an administrative claim for refund corresponding to its reported
unutilized input VAT for the four quarters of 1999 in the amount of P10,527,202.54. Thereafter, on April
24, 2001, Kepco filed a petition for review before the CTA pursuant to Section 112(A) of the 1997 National
Internal Revenue Code (NIRC), which grants refund of unutilized input taxes attributable to zero-rated or
effectively zero-rated sales.
August 31, 2005, the CTA denied Kepcos claim for refund for failure to properly substantiate its
effectively zero-rated sales for the taxable year 1999 in the total amount of P860,340,488.96, with the
alleged input VAT of P10,527,202.54 directly attributable thereto.
Kepco filed an appeal via petition for review before the CTA En Banc, on the ground that the
CTA Second Division erred in not considering the amount of P10,514,023.92 as refundable tax credit and
in failing to appreciate that it was exclusively selling electricity to NPC, a tax exempt entity.
On May 17, 2007, the CTA En Banc dismissed the petition, reasoning out that Kepcos failure to
comply with the requirement of imprinting the words zero-rated on its official receipts resulted in non-
entitlement to the benefit of VAT zero-rating and denial of its claim for refund of input tax.
Kepco filed a motion for reconsideration of the decision but it was denied for lack of merit by the
CTA En Banc.
Hence the Petition.
ISSUE:
Whether the failure to imprint the words zero-rated on its official receipts issued to NPC justifies
an outright denial of its claim for refund of unutilized input tax credits
HELD:
Yes. Section 4.108-1. Invoicing Requirements. All VAT-registered persons shall, for every sale or
lease of goods or properties or services, issue duly registered receipts or sales or commercial invoices
which must show:
1. The name, TIN and address of seller;
2. Date of transaction;
3. Quantity, unit cost and description of merchandise or nature of service;
4. The name, TIN, business style, if any, and address of the VAT-registered purchaser, customer
or client;
5. The word "zero-rated" imprinted on the invoice covering zero-rated sales;
6. The invoice value or consideration.
In the case of sale of real property subject to VAT and where the zonal or market value is higher
than the actual consideration, the VAT shall be separately indicated in the invoice or receipt.
Only VAT-registered persons are required to print their TIN followed by the word "VAT" in their
invoices or receipts and this shall be considered as "VAT Invoice." All purchases covered by
invoices other than "VAT Invoice" shall not give rise to any input tax.
If the taxable person is also engaged in exempt operations, he should issue separate invoices or
receipts for the taxable and exempt operations. A "VAT Invoice" shall be issued only for sales of goods,
properties or services subject to VAT imposed in Sections 100 and 102 of the code.
The invoice or receipt shall be prepared at least in duplicate, the original to be given to the buyer
and the duplicate to be retained by the seller as part of his accounting records. (Emphases supplied)
Kepcos failure to substantiate its effectively zero-rated sales for the taxable year 1999, the
claimed P10,527,202.54 input VAT cannot be refunded.
CIR V ASIAN TRANSMISSION CORPORATION
G. R. 179617, JANUARY 19, 2011
FACTS:
ATC is a domestic corporation engaged in the manufacture of automotive parts. It filed its annual
Income Tax Return (ITR)for the year 2000[5] on April 10, 2001 where it declared a gross income
of P370,532,082.00, a net loss of P279,926,225.00 and a minimum corporate income
tax (MCIT) of P7,410,642.00. The MCIT due was offset against the P38,301,198.00 existing tax credits
and creditable taxes withheld of the ATC, thereby leaving an excess tax credit or overpayment
of P30,890,556.00.
In its ITR for the year 2001,[6] ATC declared a gross income of P322,839,802.00, a net loss
of P37,869,455.00, and MCIT of P6,456,796.00. After deducting its MCIT due against its existing tax
credits and creditable taxes, ATC was left with a total tax credit of P51,760,312.00.
ATC, however, applied part of its unutilized creditable taxes for the year 2000 amounting
to P7,639,822.00 to its MCIT due of P6,456,796.00 for the year 2001. Left unapplied of its 2000 creditable
taxes, therefore, was the amount of P1,183,026.00
Again, ATC opted to be issued a Tax Credit Certificate for the excess income tax payment.
On April 9, 2003, ATC filed with CIRs Large Taxpayers Service an administrative claim[7] for the
issuance of tax credit certificate or cash refund in the amount of P28,509,578.00, representing
excess/unutilized creditable income taxes withheld as of December 31, 2001
The next day, on April 10, 2003, ATC filed a petition for review[8] with the CTA without waiting for
an action from the CIR to avoid the prescriptive period under Section 229 of the Tax Code.
Page 127 of 148
 After the CTA-First Division approved the Joint Stipulation of Facts and Issues, the case was
submitted for decision.[9]
On March 20, 2006, the CTA-First Division rendered its Decision partially granting ATCs claim for
refund on its unutilized creditable withholding taxes for the taxable year 2001
The CTA-First Division found that, contrary to the contentions of the CIR, ATC was able to
establish the factual basis for its claim for refund or for the issuance of a tax credit certificate, and that the
same was filed within the period prescribed under Section 229 of the Tax Code.
The CTA-First Division, however, noted that ATC could not be issued a tax credit certificate for
the remaining 2000 unutilized creditable taxes pursuant to Section 78 of the Tax Code, considering that
ATC initially declared that it would opt to be Issued a Tax Credit Certificate for its 2000 creditable taxes,
but never really exercised this option. Instead, it made use of the option to carry-over its excess income
tax payments, when it applied the same in reducing its 2001 MCIT.
Thus, the CTA-First Division ordered the CIR to issue a tax credit certificate in favor of ATC in
the reduced amount of P24,325,856.58 representing the unutilized creditable withholding taxes for the
taxable year 2001 based on its own computation,
Both parties sought reconsideration. On one hand, CIR insisted that ATC failed to establish the
net loss it incurred and the tax credits due it.[11] On the other hand, ATC averred that the CTA-First
Division erred in: a) crediting only the amount of P331,824.00 as the amount withheld by MMC Sittipol Co.
Ltd. instead of the P3,831,824.00 it actually withheld from ATC; and b) in ordering the issuance of a Tax
Credit Certificate in the amount of P24,325,856.58.
On appeal, the CTA-En Banc was convinced that ATC was able to provide sufficient evidence to
establish its claim for refund or issuance of a tax credit certificate.Thus, denying the Appeal of CIR.
ISSUE:
Whether the ATC is entitled to refund the amount of P27,325,856.58 representing the alleged
unutilized creditable withholding tax for taxable year 2001.
HELD:
Yes. It is true that the taxpayer bears the burden to establish the losses, but it is quite clear from
the evidence presented that ATC has fulfilled its duty. Moreover, other than the bare assertion that ATC
must establish its losses, the CIR fails to point to any circumstance or evidence that would cast doubt on
ATCs sworn declaration that it incurred losses in 2000 and 2001.
EXXONMOBIL PETROLEUM V CIR
G.R. 180909, JANUARY 19, 2011
FACTS:
Exxonmobil was a US corporation engaged in selling petroleum products to domestic and
international carriers. It purchased petroleum products from local suppliers (Caltex and Petron), the excise
taxes on which were remitted by the said suppliers but the amount of which were, however, passed-on to
Exxonmobil. It then filed a claim for refund of excise taxes paid on its purchase of petroleum products from
its suppliers.
ISSUE:
Is Exxonmobil entitled to file the claim for the refund of the excise taxes passed-on by Caltex and
Petron?
HELD:
NO. The proper party to seek a refund of an indirect tax is the statutory taxpayer, the person on
whom the tax is imposed by law and who paid the same even if he shifts the burden to another. Although
the burden of an indirect tax can be shifted to the purchaser, the amount added or shifted becomes part of
the price. Thus, the purchaser does not really pay the tax per se but only the price of the commodity.
Indirect taxes were defined as those that are demanded, in the first instance, from, or are paid by, one
person to someone else. When the seller passes on the tax to the buyer he in effect shifts only the tax
burden and not the liability to pay for it.
PAGCOR V BIR
G. R. 172087, MARCH 15, 2011
FACTS:
The Philippine Amusement and Gaming Corporation (PAGCOR) was created by P.D. No. 1067-
A in 1977. Obviously, it is a government owned and controlled corporation (GOCC).
In 1998, R.A. 8424 or the National Internal Revenue Code of 1997 (NIRC) became effective.
Section 27 thereof provides that GOCC’s are NOT EXEMPT from paying income taxation but it exempted
the following GOCCs:
1. GSIS
2. SSS
3. PHILHEALTH
4. PCSO
5. PAGCOR
But in May 2005, R.A. 9337, a law amending certain provisions of R.A. 8424, was passed.
Section 1 thereof excluded PAGCOR from the exempt GOCCs hence PAGCOR was subjected to pay
income taxation. In September 2005, the Bureau of Internal Revenue issued the implementing rules and
regulations (IRR) for R.A. 9337. In the said IRR, it identified PAGCOR as subject to a 10% value added
tax (VAT) upon items covered by Section 108 of the NIRC (Sale of Services and Use or Lease of
Properties).
PAGCOR questions the constitutionality of Section 1 of R.A. 9337 as well as the IRR. PAGCOR
avers that the said provision violates the equal protection clause. PAGCOR argues that it is similarly
situated with SSS, GSIS, PCSO, and PHILHEALTH, hence it should not be excluded from the exemption.
ISSUE:
Whether or not PAGCOR should be subjected to income taxation.
HELD:
Yes. Section 1 of R.A. 9337 is constitutional. It was the express intent of Congress to exclude
PAGCOR from the exempt GOCCs hence PAGCOR is now subject to income taxation.
PAGCOR’s contention that the law violated the constitution is not tenable. The equal protection
clause provides that all persons or things similarly situated should be treated alike, both as to rights
conferred and responsibilities imposed.
Page 128 of 148
 The general rule is, ALL GOCC’s are subject to income taxation. However, certain classes of
GOCC’s may be exempt from income taxation based on the following requisites for a valid classification
under the principle of equal protection:
1) It must be based on substantial distinctions.
2) It must be germane to the purposes of the law.
3) It must not be limited to existing conditions only.
4) It must apply equally to all members of the class.
When the Supreme Court looked into the records of the deliberations of the lawmakers when
R.A. 8424 was being drafted, the SC found out that PAGCOR’s exemption was not really based on
substantial distinctions. In fact, the lawmakers merely exempted PAGCOR from income taxation upon the
request of PAGCOR itself. This was changed however when R.A. 9337 was passed and now PAGCOR is
already subject to income taxation.
Anent the issue of the imposition of the 10% VAT against PAGCOR, the BIR had overstepped its
authority. Nowhere in R.A. 9337 does it state that PAGCOR is subject to VAT. Therefore, that portion of
the IRR issued by the BIR is void. In fact, Section 109 of R.A. 9337 expressly exempts PAGCOR from
VAT. Further, PAGCOR’s charter exempts it from VAT.
To recapitulate, PAGCOR is subject to income taxation but not to VAT.
QUEBEC, RALPH
2013-0633
COMMISSIONER OF INTERNAL REVENUEvs. MANILA BANKERS' LIFE INSURANCE
CORPORATION,G.R. No. 169103 March 16, 2011
FACTS:
On December 14, 1999, based on the findings of the Revenue Officers, the petitioner issued a
Preliminary Assessment for its deficiency internal revenue taxes for the year 1997. The respondent
agreed to all the assessments issued against it except to the amount of ₱2,351,680.90 representing
deficiency documentary stamp taxes on its policy premiums and penalties.
On January 4, 2000, the petitioner issued against the respondent a Formal Letter of Demand with the
corresponding Assessment Notices attached, one of which was Assessment Notice pertaining to the
documentary stamp taxes due on respondent’s policy premiums.
The tax deficiency was computed by including the increases in the life insurance coverage or the sum
assured by some of respondent’s life insurance plans.
On February 3, 2000, the respondent filed its Letter of Protest 17 with the Bureau of Internal Revenue (BIR)
contesting the assessment for deficiency documentary stamp tax on its insurance policy premiums.
Despite submission of documents on April 3, 2000, 18 as required by the BIR in its March 20, 200019 letter,
the respondent’s Protest was not acted upon by the BIR within the 180-day period given to it by Section
228 of the 1997 National Internal Revenue Code (NIRC) within which to rule on the protest.
ISSUES:
1. Won the assessment for deficiency documentary stamp tax was issued provide that documentary
stamp tax is collectible not only on the original policy but also upon renewal or continuance thereof.
2. Wonthe "guaranteed continuity" clause takes effect, the insurer is liable for deficiency documentary
stamp tax corresponding to the increase of the insurance coverage.
3. WON the documentary stamp tax is imposable upon renewal or continuance of any policy of insurance
or the renewal or continuance of any contract by altering or otherwise, at the same rate as that imposed
on the original instrument.
HELD:
1. YES. Documentary stamp tax is a tax on documents, instruments, loan agreements, and papers
evidencing the acceptance, assignment, sale or transfer of an obligation, right or property incident
thereto.36 It is in the nature of an excise tax because it is imposed upon the privilege, opportunity or
facility offered at exchanges for the transaction of the business. It is an excise upon the facilities used
in the transaction of the business distinct and separate from the business itself.3
The documentary stamp tax on insurance policies, though imposed on the document itself, is actually
levied on the privilege to conduct insurance business. Under Section 173, the documentary stamp tax
becomes due and payable at the time the insurance policy is issued, with the tax based on the
amount insured by the policy as provided for in Section 183
2. NO. Section 54. Tax also due on renewals. – The tax under this section is collectible not only on the
original policy or contract of insurance but also upon the renewal of the policy or contract of
insurance.
To argue that there was no new legal relationship created by the availment of the guaranteed continuity
clause would mean that any option to renew, integrated in the original agreement or contract, would not in
reality be a renewal but only a discharge of a pre-existing obligation. The truth of the matter is that the
guaranteed continuity clause only gave the insured the right to renew his life insurance policy which had a
fixed term of twenty years. And although the policy would still continue with essentially the same terms
and conditions, the fact is, its maturity date, coverage, and premium rate would have changed. We cannot
agree with the CTA in its holding that "the renewal, is in effect treated as an increase in the sum assured
since no new insurance policy was issued." The renewal was not meant to restore the original terms of an
old agreement, but instead it was meant to extend the life of an existing agreement, with some of the
contract’s terms modified. This renewal was still subject to the acceptance and to the conditions of both
the insured and the respondent. This is entirely different from a simple mutual agreement between the
insurer and the insured, to increase the coverage of an existing and effective life insurance policy.
It is clear that theavailment of the option in the guaranteed continuity clause will effectively renew the
Money Plus Plan policy, which is indisputably subject to the imposition of documentary stamp tax under
Section 183 as an insurance renewed upon the life of the insured
3. YES. it is axiomatic that the State can never be in estoppel, and this is particularly true in matters
involving taxation. The errors of certain administrative officers should never be allowed to jeopardize
the government's financial position.
Along with police power and eminent domain, taxation is one of the three basic and necessary attributes
of sovereignty.54 Taxes are the lifeblood of the government and their prompt and certain availability is an
imperious need. It is through taxes that government agencies are able to operate and with which the State
executes its functions for the welfare of its constituents. 55 It is for this reason that we cannot let the
petitioner’s oversight bar the government’s rightful claim.
Page 129 of 148
This Court would like to make it clear that the assessment for deficiency documentary stamp tax is being
upheld not because the additional premium payments or an agreement to change the sum assured during
the effectivity of an insurance plan are subject to documentary stamp tax, but because documentary
stamp tax is levied on every document which establishes that insurance was made or renewed upon a life.
Silicon Philippines, Inc. Vs. Commissioner of Internal Revenue
G.R. No. 172378. January 17, 2011
FACTS:
Silicon Philippines, Inc., a corporation duly organized and existing under and by virtue of the laws of the
Republic of the Philippines, is engaged in the business of designing, developing, manufacturing and
exporting advance and large-scale integrated circuit components or “IC’s.” Petitioner is registered with the
Bureau of Internal Revenue (BIR) as a Value Added Tax (VAT) taxpayer and with the Board of
Investments (BOI) as a preferred pioneer enterprise.
On May 21, 1999, petitioner filed with the respondent Commissioner of Internal Revenue (CIR), through
the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the Department of Finance
(DOF), an application for credit/refund of unutilized input VAT for the period October 1, 1998 to December
31, 1998.
On December 27, 2000, due to the inaction of the respondent, petitioner filed a Petition for Review with
the CTA Division. Petitioner alleged that for the 4th quarter of 1998, it generated and recorded zero-rated
export sales, paid to petitioner in acceptable foreign currency and accounted for in accordance with the
rules and regulations of the BangkoSentral ng Pilipinas; and that for the said period, petitioner paid input
VAT which have not been applied to any output VAT.
Respondent filed an Answer that the petition states no cause of action as it does not allege the dates
when the taxes sought to be refunded/credited were actually paid.
On November 18, 2003, the CTA Division rendered a Decision partially granting petitioner’s claim for
refund of unutilized input VAT on capital goods. Partial amount was allowed to be refunded because
training materials, office supplies, posters, banners, T-shirts, books, and other similar items purchased by
petitioner were not considered capital goods. With regard to petitioner’s claim for credit/refund of input
VAT attributable to its zero-rated export sales, the CTA Division denied the same because petitioner failed
to present an Authority to Print (ATP) from the BIR; neither did it print on its export sales invoices the ATP
and the word “zero-rated.
Petitioner sought reconsideration of the assailed Decision but the CTA En Banc denied the Motion in a
Resolution dated April 20, 2006.
ISSUES:
(1) whether the CTA En Banc erred in denying petitioner’s claim for credit/ refund of input VAT
attributable to its zero-rated sales in the amount of P16,732,425.00 due to its failure to show that it
secured an ATP from the BIR and to indicate the same in its export sales invoices; and to print the word
“zero-rated” in its export sales invoices.
(2) whether the CTA En Banc erred in ruling that only the amount of P9,898,867.00 can be classified
as input VAT paid on capital goods.
HELD:
1. YES. Under Section 112 (A) of the NIRC, a claimant must be engaged in sales which are zero-rated or
effectively zero-rated. To prove this, duly registered invoices or receipts evidencing zero-rated sales must
be presented. However, since the ATP is not indicated in the invoices or receipts, the only way to verify
whether the invoices or receipts are duly registered is by requiring the claimant to present its ATP from the
BIR. Without this proof, the invoices or receipts would have no probative value for the purpose of refund.
It bears reiterating that while the pertinent provisions of the Tax Code and the rules and regulations
implementing them require entities engaged in business to secure a BIR authority to print invoices or
receipts and to issue duly registered invoices or receipts, it is not specifically required that the BIR
authority to print be reflected or indicated therein. Indeed, what is important with respect to the BIR
authority to print is that it has been secured or obtained by the taxpayer, and that invoices or receipts are
duly registered.
All told, the non-presentation of the ATP and the failure to indicate the word “zero-rated” in the invoices or
receipts are fatal to a claim for credit/refund of input VAT on zero-rated sales. The failure to indicate the
ATP in the sales invoices or receipts, on the other hand, is not. In this case, petitioner failed to present its
ATP and to print the word “zero-rated” on its export sales invoices. Thus, we find no error on the part of
the CTA in denying outright petitioner’s claim for credit/refund of input VAT attributable to its zero-rated
sales.
2. NO. “Capital goods or properties” refer to goods or properties with estimated useful life greater that one
year and which are treated as depreciable assets under Section 29 (f), used directly or indirectly in the
production or sale of taxable goods or services.
Page 130 of 148

Based on the foregoing definition, we find no reason to deviate from the findings of the CTA that training
materials, office supplies, posters, banners, T-shirts, books, and the other similar items reflected in
petitioner’s Summary of Importation of Goods are not capital goods. A reduction in the refundable input
VAT on capital goods from is therefore in order.
Belle Corporation vs. Commissioner of Internal Revenue
G.R. No. 181298.
FACTS:
Belle Corporation is a domestic corporation engaged in the real estate and property business. On May 30,
1997, petitioner filed with the Bureau of Internal Revenue (BIR) its Income Tax Return (ITR) for the first quarter of
1997, showing a gross income of P741,607,495.00, a deduction of P65,381,054.00, a net taxable income
of P676,226,441.00 and an income tax due of P236,679,254.00, which petitioner paid on even date through PCI
Bank, Tektite Tower Branch, an Authorized Agent Bank of the BIR.
On August 14, 1997, petitioner filed with the BIR its second quarter ITR, declaring an overpayment of
income taxes
In view of the overpayment, no taxes were paid for the second and third quarters of 1997. Petitioners ITR for the
taxable year ending December 31, 1997 thereby reflected an overpayment of income taxes
Instead of claiming the amount as a tax refund, petitioner decided to apply it as a tax credit to the succeeding taxable
year by marking the tax credit option box in its 1997 ITR
On April 12, 2000, petitioner filed with the BIR an administrative claim for refund of its unutilized excess
income tax payments for the taxable year 1997 in the amount of P106,447,318.00.
Notwithstanding the filing of the administrative claim for refund, petitioner carried over the amount
of P106,447,318.00 to the taxable year 1999 and applied a portion thereof to its 1999 Minimum Corporate Income
Tax (MCIT) liability
On January 25, 2007, the CA denied the petition. The CA explained that the overpayment for taxable year
1997 can no longer be carried over to taxable year 1999 because excess income payments can only be credited
against the income tax liabilities of the succeeding taxable year, in this case up to 1998 only and not beyond. Neither
can the overpayment be refunded as the remedies of automatic tax crediting and tax refund are alternative remedies
While BELLE may not have fully enjoyed the complete utilization of its option and the sum of
Php106,447,318 still remained after it opted for a tax carry over of its excess payment for the taxable year 1998, but
be that as it may, BELLE has only itself to blame for making such useless and damaging option, and BELLE may no
longer opt to claim for a refund considering that the remedy of refund is barred after the corporation has previously
opted for the tax carry over remedy. As a matter of fact, the CTA even made the factual findings that BELLE
committed an aberration to exhaust its unutilized overpaid income tax by carrying it over further to the taxable year
1999, which is a blatant transgression of the succeeding taxable year limit provided for under Section 69 of the old
NIRC.
ISSUE:
Whether petitioner is entitled to a refund of its excess income tax payments for the taxable year 1997.
HELD:
No. Under Section 69 of the old NIRC, in case of overpayment of income taxes, a corporation may either file
a claim for refund or carry-over the excess payments to the succeeding taxable year. Availment of one remedy,
however, precludes the other.
Section 76 and its companion provisions in Title II, Chapter XII should be applied following the general rule on the
prospective application of laws such that they operate to govern the conduct of corporate taxpayers the moment the
1997 NIRC took effect on 1 January 1998. There is no quarrel that at the time respondent filed its final adjustment
return for 1997 on 15 April 1998, the deadline under Section 77 (B) of the 1997 NIRC (formerly Section 70(b) of the
1977 NIRC), the 1997 NIRC was already in force, having gone into effect a few months earlier on 1 January 1998.
Accordingly, Section 76 is controlling.
The lower courts grounded their contrary conclusion on the fact that respondents overpayment in 1997 was based on
transactions occurring before 1 January 1998. This analysis suffers from the twin defects of missing the gist of the
present controversy and misconceiving the nature and purpose of Section 76. None of respondents corporate
transactions in 1997 is disputed here. Nor can it be argued that Section 76 determines the taxability of
corporate transactions. To sustain the rulings below is to subscribe to the untenable proposition that, had Congress in
the 1997 NIRC moved the deadline for the filing of final adjustment returns from 15 April to 15 March of each year,
taxpayers filing returns after 15 March 1998 can excuse their tardiness by invoking the 1977 NIRC because the
transactions subject of the returns took place before 1 January 1998. A keener appreciation of the nature and purpose
of the varied provisions of the 1997 NIRC cautions against sanctioning this reasoning.
Accordingly, since petitioner already carried over its 1997 excess income tax payments to the succeeding taxable
year 1998, it may no longer file a claim for refund of unutilized tax credits for taxable year 1997.
To repeat, under the new law, once the option to carry-over excess income tax payments to the succeeding years
has been made, it becomes irrevocable. Thus, applications for refund of the unutilized excess income tax payments
may no longer be allowed.
Commissioner of Internal Revenue vs. Metro Star Suprema, Inc.
G.R. No. 185371 12/8/2010
FACTS:
On January 26, 2001, the Regional Director of Revenue Region No. 10, Legazpi City, issued Letter of
Authority No. 00006561 for Revenue Officer Daisy G. Justiniana to examine petitioners books of accounts
and other accounting records for income tax and other internal revenue taxes for the taxable year 1999.
For petitioners failure to comply with several requests for the presentation of records and Subpoena
Duces Tecum, [the] OIC of BIR Legal Division issued an Indorsement informing Revenue District Officer
Legazpi City to proceed with the investigation based on the best evidence obtainable preparatory to the
issuance of assessment notice.
Page 131 of 148
On November 8, 2001, Revenue District Officer Socorro O. Ramos-Lafuente issued a Preliminary 15-day
Letter . The said letter stated that a post audit review was held and it was ascertained that there was
deficiency value-added and withholding taxes due from petitioner in the amount of P 292,874.16.
On April 11, 2002, petitioner received a Formal Letter of Demand dated April 3, 2002 for deficiency value-
added and withholding taxes for the taxable year 1999.
Revenue District Office sent a copy of the Final Notice of Seizure which petitioner received on May 15,
2003, giving the latter last opportunity to settle its deficiency tax liabilities within ten (10) [days] from
receipt thereof, otherwise respondent BIR shall be constrained to serve and execute the Warrants of
Distraint and/or Levy and Garnishment to enforce collection.
On February 6, 2004, petitioner received from Revenue District Office a Warrant of Distraint demanding
payment of deficiency value-added tax and withholding tax.
On July 30, 2004, petitioner filed Motion for Reconsideration and on February 8, 2005, respondent
Commissioner, through its authorized representative, Revenue Regional Director of Revenue Region
10, Legaspi City, issued a Decision denying petitioners Motion for Reconsideration.
Denying that it received a Preliminary Assessment Notice (PAN) and claiming that it was not accorded
due process, Metro Star filed a petition for review with the CTA
ISSUE: WON the failure to strictly comply with notice requirements prescribed under Section 228 of the
National Internal Revenue Code of 1997 and Revenue Regulations (R.R.) No. 12-99 tantamount to a
denial of due process? Specifically, are the requirements of due process satisfied if only the FAN stating
the computation of tax liabilities and a demand to pay within the prescribed period was sent to the
taxpayer?
HELD: NO.
It is an elementary rule enshrined in the 1987 Constitution that no person shall be deprived of
property without due process of law.[19] In balancing the scales between the power of the State to tax and
its inherent right to prosecute perceived transgressors of the law on one side, and the constitutional rights
of a citizen to due process of law and the equal protection of the laws on the other, the scales must tilt in
favor of the individual, for a citizens right is amply protected by the Bill of Rights under the Constitution.
Thus, while taxes are the lifeblood of the government, the power to tax has its limits, in spite of all its
plenitude. Hence in Commissioner of Internal Revenue v. Algue, Inc.,[20] it was said
Taxes are the lifeblood of the government and so should be collected without unnecessary
hindrance. On the other hand, such collection should be made in accordance with law as any arbitrariness
will negate the very reason for government itself. It is therefore necessary to reconcile the apparently
conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is the
promotion of the common good, may be achieved.
It is said that taxes are what we pay for civilized society. Without taxes, the government would be
paralyzed for the lack of the motive power to activate and operate it. Hence, despite the natural reluctance
to surrender part of ones hard-earned income to taxing authorities, every person who is able to must
contribute his share in the running of the government. The government for its part is expected to respond
in the form of tangible and intangible benefits intended to improve the lives of the people and enhance
their moral and material values. This symbiotic relationship is the rationale of taxation and should dispel
the erroneous notion that it is an arbitrary method of exaction by those in the seat of power.
But even as we concede the inevitability and indispensability of taxation, it is a requirement in all
democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure. If it
is not, then the taxpayer has a right to complain and the courts will then come to his succor. For all the
awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate
x xx that the law has not been observed.
Milwaukee Industries Corp. vs. Corp. of Appeals and Commissioner of Internal Revenue
G.R. No. 173815
FACTS:
In a Letter of Authority, dated July 17, 1998, public respondent Commissioner of Internal Revenue (CIR)
notified Milwaukee of its intent to examine their books of account and other accounting records for all
internal revenue taxes for 1997 and other unverified prior years.
Milwaukee complied with the directive and submitted its documents to CIR.
Thereafter, CIR issued three undated assessment notices together with a demand letter and explanation
of the deficiency tax assessments. Milwaukee allegedly owed a total of P173,063,711.58 corresponding to
the deficiencies on income tax, expanded withholding and value-added taxes for the 1997 taxable year.
After Milwaukee had presented its evidence-in-chief, CIR offered the testimony of Ms.
EdralinSilario (Silario), the group supervisor of the BIR examiners, who conducted the examination
of Milwaukees books. She testified on the Final Report she prepared for the BIR and explained the
grounds for the disallowance of the deductions being claimed by Milwaukee on the following: (1) foreign
exchange losses classified as miscellaneous expenses; and (2) interest and bank charges paid in 1997.
ISSUE:
WON petitioner was denied due process by not being allowed to present its rebuttal evidence in relation to
its disallowed interest and bank charges for the year 1997
HELD:
NO. Milwaukee was given more than ample time to collate and gather its evidence. It should
have been prepared for the continuance of the trial. True, the incident on said date was for the cross-
examination of Milwaukees witness but it could be short; it could be lengthy. Milwaukee should have
Page 132 of 148
prepared for any eventuality. It is discretionary on the part of the court to allow a piece-meal presentation
of evidence. If it decides not to allow it, it cannot be considered an abuse of discretion. As defined,
discretion is a faculty of a court or an official by which he may decide a question either way, and still be
right.
Accordingly, Milwaukees right to due process was not transgressed. The Court has consistently
reminded litigants that due process is simply an opportunity to be heard. The requirement of due process
is satisfactorily met as long as the parties are given the opportunity to present their side. In the case at
bar, Milwaukee was precisely given the right and the opportunity to present its side. It was able to present
its evidence-in-chief and had its opportunity to present rebuttal evidence.
REYES, MARA ORLENE GRACEL S.
TAXATION 2- SUNDAY 9:00-12:00
ATTY. EUFROCINA M. SACDALAN-CASESOLA
Kepco Philippines Corp vs. CIR
FACTS: KEPCO is an independent power producer engaged in selling electricity to National Power
Corporation (NPC), it forged a Rehabilitation Operation Maintenance and Management Agreement with
NPC for rehabilitation and operation of Malaya Power Plant Complex in Pililia, Rizal. The first claim for a
tax refund was filed before CIR, in the amounts of (1) P4, 895, 858.01- unutilized input VAT payments on
domestic purchases of goods and services for quarter 3 of 1996 and (2) P4, 084, 867.25- creditable VAT
withheld from payments received from NPC for April and June 1996. The second claim for a tax refund
was representing unutilized input VAT payments attributable to its zero-rated sale transaction with NPC,
amounting to P13, 191, 278 for quarter 4 of 1996.
The consolidated petition before the CTA amounting to P22, 172, 003.26. The Court-commissioned
auditor claimed was properly substantiated for VAT purposes and subject of a valid refund. The CTA grant
the petitioner partial refund with respect to P8, 325,350.35 for purchase for quarter 3 and 4 of 1996. The
Motion for reconsideration was denied because the purchases were not recorded under depreciable asset
amounts. It is said that those purchases were used for the rehabilitation of the power plant and should be
considered as capital expense, falling within the purview of capital goods. The CA affirmed, and held that
the account vouchers submitted by petitioner listed said purchases under inventory accounts and are not
considered capital goods, therefore, not entitled for tax refund.
ISSUE: Whether KEPCO is entitled to tax refund?
HELD: No. As a general rule, tax refunds are in the nature of tax exemptions. Laws granting exemptions
are construed strictly against the tax payer and liberally in favor of the taxing authority. Where the
taxpayer claims a refund, CTA as a court of record is required to conduct a formal trial to prove every
minute aspect of the claim.
By the very nature of its functions, the CTA is dedicated exclusively to the resolution of tax problems and
has consequently developed an expertise on the subject. Absent a showing of abuse or reckless exercise
of authority, the Court appreciates no ground to disturb the appellate court’s Decision affirming that of the
CTA. Purchase of domestic goods and services to be considered as “capital goods or properties”, three
requisites must concur: (1) Useful life of goods must exceed one year, (2) said goods or properties are
treated as depreciable assets under Sec. 34 (f) of NIRC, and (3) goods or properties must be used directly
or indirectly in the production or sale of taxable goods and services. KEPCO was not able to show that all
three requisites for claim of refund of capital goods were satisfied.
CIR vs. Hambrecht & Quist Philippines, Inc
FACTS: The assessment against Hambrecht & Quist had become final and unappelable since there was
a failure to protest the same within the 30-day period provided by law. However, the CTA held that the BIR
failed to collect within the prescribed time and thus ordered the cancellation of the assessment notice. The
CIR disputed the jurisdiction of the CTA arguing that since the assessment had become final and
unappealable, the taxpayer can no longer dispute the correctness of the assessment even before the
CTA.
ISSUE: Can the CTA still take cognizance of an assessment case which has become ‘final and
unappealable’ for failure of the taxpayer to protest within the 30-day protest period?
HELD: Yes. The appellate jurisdiction of the CTA is not limited to cases which involve decisions of the CIR
on matters relating to assessments or refunds. The CTA law clearly bestows jurisdiction to the CTA even
on “other matters arising under the National Internal Revenue Code”. Thus, the issue of whether the right
of the CIR to collect has prescribed, collection being one of the duties of the BIR, is considered covered
by the term “other matters”. The fact that assessment has become final for failure to protest only means
that the validity or correctness of the assessment may no longer be questioned on appeal. However, this
issue is entirely distinct from the issue of whether the right to collect has in fact prescribed.
The Court ruled that the right to collect has indeed prescribed since there was no proof that the request for
reinvestigation was in fact granted/acted upon by the CIR. Thus, the period to collect was never
suspended.
CIR vs. Sony Philippines
FACTS: Sony Philippines was ordered examined for “the period 1997 and unverified prior years” as
indicated in the Letter of Authority. The audit yielded assessments against Sony Philippines for deficiency
VAT and FWT,: (1) late remittance of Final Withholding Tax on royalties for the period January to March
1998 and (2) deficiency VAT on reimbursable received by Sony Philippines from its offshore affiliate, Sony
International Singapore (SIS).
ISSUES: (1) Is Petitioner liable for deficiency Value Added Tax? (2) Was the investigation of its 1998 Final
Withholding Tax return valid?
HELD: (1) No. Sony Philippines did in fact incur expenses supported by valid VAT invoices when it paid
for certain advertising costs. This is sufficient to accord it the benefit of input VAT credits and where the
money came from to satisfy said advertising billings is another matter but does not alter the VAT effect. In
the same way, Sony Philippines cannot be deemed to have received the reimbursable as a fee for a VAT-
taxable activity. The reimbursable was couched as an aid for Sony Philippines by SIS in view of the
company’s “dire or adverse economic conditions”. More importantly, the absence of a sale, barter or
exchange of goods or properties supports the non-VAT nature of the reimbursement. This was
distinguished from the COMASERCO case where even if there was similarly a reimbursement-on-cost
arrangement between affiliates, there was in fact an underlying service. Here, the advertising services
were rendered in favor of Sony Philippines not SIS.
(2) No. A Letter of Authority should cover a taxable period not exceeding one year and to indicate that it
covers ‘unverified prior years’ should be enough to invalidate it. In addition, even if the Final Withholding
Tax was covered by Sony Philippines’ fiscal year ending March 1998, the same fell outside of ‘the period
1997’ and was thus not validly covered by the Letter of Authority.
Page 133 of 148
Hitachi Global Storage Technologies Philippines v. CIR
FACTS: Hitachi is a domestic corporation engaged in the business of manufacturing and exporting
computer products. Hitachi is registered with the Bureau of Internal Revenue as Value-added tax
taxpayer, and with the Export Processing Zone Authority as an Ecozone Export Enterprise. Hitachi filed an
administrative claim for refund or issuance of a tax credit certificate before the BIR. The claim involved
P25, 023, 471.84 representing excess input VAT attributable to Hitachi;s zero-rated export sales for the
four taxable quarters of 1999.
Due to BIR’s inaction, Hitachi filed a petition for review with the CTA, which was later denied. Hitachi then
filed a motion for reconsideration, hence, denied. Then filed a motion for review with CTA En Banc, which
was later affirmed. Hence, this petition.
ISSUE: Whether Hitachi’s failure to comply with the requirements prescribed by law is sufficient to
invalidate Hitachi’s claim for VAT refund for taxable year 1999?
HELD: No. The petition has no merit, Hitachi argues that Section 4.108-1 of RR 7-95 cannot expand the
invoicing requirements prescribed by Section 113(A) of the NIRC, in relation to Sections 237 and
106(A)(2)(a)(1),[12] by imposing the additional requirement of printing the word "zero-rated" on the
invoices of a VAT registered taxpayer. Hitachi also submits that the non-observance of the requirements
of (1) printing "zero-rated;" (2) BIR authority to print; (3) BIR permit number; and (4) registration of such
receipts with the BIR cannot result in the outright invalidation of its claim for refund.
We already settled the issue of printing the word "zero-rated" on the sales invoices in Panasonic v.
Commissioner of Internal Revenue. In that case, we denied Panasonic's claim for refund of the VAT it paid
as a zero-rated taxpayer on the ground that its sales invoices did not state on their face that its sales were
"zero-rated."
In this case, when Hitachi filed its claim for refund or tax credit, RR 7-95 was already in force. Section
4.108-1 of RR 7-95 specifically required the following to be reflected in the invoice:
Sec.4.108-1. Invoicing Requirements. - All VAT-registered persons shall, for every sale or lease
of goods or properties or services, issue duly registered receipts or sales or commercial invoices which
must show:
1. the name, TIN and address of seller;
2. date of transaction;
3. quantity, unit cost and description of merchandise or nature of service;
4. the name, TIN, business style, if any, and address of the VAT-registered purchaser, customer or
client;
5. the word "zero-rated" imprinted on the invoice covering zero-rated sales; and
6. The invoice value or consideration.
Only VAT-registered persons are required to print their TIN followed by the word "VAT" in their invoices or
receipts and this shall be considered as a "VAT invoice." All purchases covered by invoices other than a
"VAT invoice" shall not give rise to any input tax.
Both the CTA First Division and the CTA En Banc found that Hitachi's export sales invoices did not
indicate Hitachi's Tax Identification Number (TIN) followed by the word VAT. The word "zero-rated" was
also not imprinted on the invoices. Moreover, both the CTA First Division and the CTA En Banc found
that the invoices were not duly registered with the BIR.
CIR vs. McGeorge Food Industries
FACTS: McGeorge Food Industries Inc., filed with BIR its final adjustment income tax return for the
calendar year ending December 31, 1997. The return indicated a tax liability of P5, 393,988 against a total
payment of P10, 130,176 for the first three quarters, resulting in a net overpayment of P4, 736,188.
Respondent chose to carry it over to the succeeding year as tax credit, indicating in its 1997 final return
that it wished the amount to be applied as credit to next year. Respondent then filed its final adjustment
return for the calendar year ending December 31, 1998, indicating a tax liability of P5, 799, 056. Instead of
applying to this amount its unused tax credit carried over from 1997 (P4, 736, 188), as it was supposed to
do, respondent merely deducted from its tax liability the taxes withheld at source for 1998 (P217, 179) and
paid the balance of P5, 581, 877. Respondent simultaneously filed with the BIR and CTA a claim for
refund of its overpayment in 1997 of P4, 736, 188. CIR opposed the suit at the CTA. The CTA ruled for
respondent and ordered petitioner to refund the reduced amount of P4, 598, 176.98 to account for two
payments allegedly withheld at source which respondent failed to substantiate. The Court of Tax Appeals
affirmed the CTA and uphold the applicability of Section 69 of 1977 NIRC. Hence, this petition.
ISSUE: Whether respondent is entitled to a tax refund for overpayment in 1997 after it opted, but failed, to
credit such to its tax liability in 1998?
HELD: No. The respondent is not entitled to a refund, under Sec. 76 of the 1997 NIRC, the law in effect at
the time respondent made known to the BIR its preference to carry over and apply its overpayment in
1997 to its tax liability in 1998. In lieu of refund, respondent’s overpayment should be applied to its tax
liability for the taxable years following 1998 until it is fully credited. Once the tax payer opts to carry-over
the excess income tax against the taxes due for the succeeding taxable years, such option is irrevocable
for the whole amount of the excess income tax, thus, prohibiting the taxpayer from applying for a refund
for that same excess income tax in the next succeeding taxable years. The unutilized excess tax credits
will remain in the taxpayer’s income tax liabilities in the succeeding taxable years until fully utilized. As
respondent opted to carry-over and credit its overpayment in 1997 to its tax liability in 1998, Section 76
makes respondent’s exercise such option irrevocable, barring it from later switching options to “apply cash
refund.” Instead, respondent’s overpayment in 1997 will be carried over to the succeeding taxable years
until it has been fully applied to respondent’s tax liabilities. Hence, under Sec. 76 of the 1977 NIRC,
respondent’s claim for refund in unavailing. However, respondent is entitled to apply its unused creditable
overpayment in 1997 to its tax liability arising after 1998 until such has been fully applied.
COMMISSION OF INTERNAL REVENUE vs. AQUAFRESH SEAFOODS, INC.
G.R. No. 170389 October 20, 2010
FACTS:
Respondent Aquafresh sold two parcels of land to Philips Seafoods, Inc. Respondent then filed a Capital
Gains Tax (CGT) Return for Certification Authorizing Registration and paid the corresponding amount
thereon as well as the Documentary Stamp Tax (DST) due from the said sale. Subsequently, a
Certification Authorizing Registration was issued. However, the BIR received a report that the lots sold
were undervalued for taxation purposes. After investigation, it was concluded that the sale was
undervalued and that the subject properties were commercial with a zonal value of Php2, 000.00 per
square meter.
Page 134 of 148
On September 15, 2000, the BIR sent two Assessment Notices apprising respondent of CGT and DST
deficiencies. On October 1, 2000, respondent sent a letter protesting the assessments which was denied
with finality on February 13, 2002.
Thereafter, respondent filed a petition for review before the CTA alleging that the subject properties were
located in Barrio Banica, Roxas, where the pre-defined zonal value was Php650.00 per square meter
based on the 1995 Revised Zonal Values of Real Properties. The CTA ruled in favor of the respondent
ruling that the existing Revised Zonal Values in the City of Roxas should prevail for purposes of
determining respondent's tax liabilities.
Cabantac, Jr., Ricardo L. Suba, Jr. and Aurelio Agustin T. Zamora supervised by Section Chief Sixto C. Dy, Jr. of the
Tax Fraud Division (TFD), National Office, conducted a fraud investigation for all internal revenue taxes to
ascertain/determine the tax liabilities of respondent L. M. Camus Engineering Corporation (LMCEC) for the taxable
years 1997, 1998 and 1999.The audit and investigation against LMCEC was precipitated by the information
provided by an informer that LMCEC had substantial under declared income for the said period. For failure to
comply with the subpoena ducestecumissued in connection with the tax fraud investigation, a criminal complaint
was instituted by the Bureau of Internal Revenue (BIR) against LMCEC on January 19, 2001 for violation of Section
266 of the NIRC.

ISSUE:
Petitioner referred case to the Secretary of Justice for preliminary investigation its complaint against
LMCEC which was dismissed for lack of probable cause.Petitioner filed a motion for reconsideration which
Whether or not respondent’s tax liabilities were correctly computed based on the Revised Zonal Values in
was denied by the Chief State Prosecutor. Petitioner appealed to respondent Secretary of Justice but the
the City of Roxas?
latter denied hence the petition in the CA who denied the same. A petition for review ensues.
RULING:
ISSUE:

Whether or not LMCEC and its corporate officers may be prosecuted for violation of Sections 254 and
Yes, the SC held that in determining the value of CGT and DST arising from the sale of a property, the
255?
power of the CIR to assess is subject to Section 6(E) of the NIRC which provides that while the CIR has
the authority to prescribe real property values and divide the Philippines into zones, the law is clear that
RULING:
the same has to be done upon consultation with competent appraisers both from the public and private
sectors.
Yes. It is clear that I.S. No. 00-956 involves a separate offense and hence litispendentiais not present
It is undisputed that at the time of the sale of the subject properties found in Barrio Banica, Roxas City; the
considering that the outcome of I.S. No. 00-956 is not determinative of the issue as to whether probable
same were classified as "RR," or residential, based on the 1995 Revised Zonal Value of Real Properties.
cause exists to charge the private respondents with the crimes of attempt to evade or defeat tax and willful
Petitioner, thus, cannot unilaterally change the zonal valuation of such properties to "commercial" without
failure to supply correct and accurate information and pay tax defined and penalized under Sections 254
first conducting a re-evaluation of the zonal values as mandated under Section 6(E) of the NIRC.
and 255, respectively. For the crime of tax evasion in particular, compliance by the taxpayer with such
subpoena, if any had been issued, is irrelevant. As we held in Ungab v. Cusi, Jr., the crime is complete
Further, petitioner's act of re-classifying the subject properties from residential to commercial cannot be
when the taxpayer has x x x knowingly and willfully filed a fraudulent return with intent to evade and defeat
done without first complying with the procedures prescribed by RM No. 58-69 and that a revision of the
x x x the tax. Thus, respondent Secretary erred in holding that petitioner committed forum shopping when
1995 Revised Zonal Values of Real Properties was made prior to the sale of the subject properties. Thus,
it filed the present criminal complaint during the pendency of its appeal from the City Prosecutors
notwithstanding petitioner's disagreement to the classification of the subject properties, the same must be
dismissal of I.S. No. 00-956 involving the act of disobedience to the summons in the course of the
followed for purposes of computing the CGT and DST. It bears stressing, and as observed by the CTA En
preliminary investigation on LMCECs correct tax liabilities for taxable years 1997, 1998 and 1999.
Banc, that the 1995 Revised Zonal Values of Real Properties was drafted by petitioner, BIR personnel,
representatives from the Department of Finance, National Tax Research Center, Institute of Philippine
We have held that the lack of consent of the taxpayer under investigation does not imply that the BIR
Real Estate Appraisers and Philippine Association of Realtors Board, which duly satisfied the requirement
obtained the information from third parties illegally or that the information received is false or malicious.
of consultation with public and private appraisers. Thus, petitioner's act of classifying the subject
Nor does the lack of consent preclude the BIR from assessing deficiency taxes on the taxpayer based on
properties involves a re-classification and revision of the prescribed zonal values.
the document.
COMMISSIONER OF INTERNAL REVENUE vs. HON. RAUL M. GONZALEZ, et al.
Subsequently, petitioner sent to LMCEC by constructive service allowed under Section 3 of RR No. 12-99,
G.R. No. 177279 October 13, 2010
assessment notice and formal demand informing the said taxpayer of the law and the facts on which the
assessment is made, as required by Section 228 of the NIRC. A notice of assessment is a declaration of
FACTS:Pursuant to Letter of Authority (LA) No. 00009361 dated August 25, 2000 issued by then Commissioner of
deficiency taxes issued to a taxpayer who fails to respond to a Pre-Assessment Notice (PAN) within the
Internal Revenue (petitioner), Dakila B. Fonacier, Revenue Officers Remedios C. Advincula, Jr., Simplicio V.

Page 135 of 148

prescribed period of time, or whose reply to the PAN was found to be without merit. The Notice of
Assessment shall inform the taxpayer of this fact, and that the report of investigation submitted by the
Revenue Officer conducting the audit shall be given due course.
The formal letter of demand calling for payment of the taxpayer’s deficiency tax or taxes shall state the
fact, the law, rules and regulations or jurisprudence on which the assessment is based, otherwise the
formal letter of demand and the notice of assessment shall be void.
As it is, the formality of a control number in the assessment notice is not a requirement for its validity but
rather the contents thereof which should inform the taxpayer of the declaration of deficiency tax against
said taxpayer. Both the formal letter of demand and the notice of assessment shall be void if the former
failed to state the fact, the law, rules and regulations or jurisprudence on which the assessment is based,
which is a mandatory requirement under Section 228 of the NIRC.
Section 228 of the NIRC provides that the taxpayer shall be informed in writing of the law and the facts on
which the assessment is made. Otherwise, the assessment isvoid. In the same letter, Assistant
Commissioner Percival T. Salazar informed private respondents that the estimated tax liabilities arising
from LMCECs underdeclaration amounted to P186,773,600.84 in 1997, P150,069,323.81 in 1998 and
P163,220,111.13 in 1999. These figures confirmed that the non-declaration by LMCEC for the taxable
years 1997, 1998 and 1999 of an amount exceeding 30% income declared in its return is considered a
substantial underdeclaration of income, which constituted prima facie evidence of false or fraudulent
return under Section 248(B) of the NIRC, as amended.
On the alleged settlement of the assessed tax deficiencies by private respondents, respondent Secretary
found the latter’s claim as meritorious on the basis of the Certificate of Immunity from Audit issued on
December 6, 1999 pursuant to RR No. 2-99 and Letter of Termination dated June 1, 1999 issued by
Revenue Region No. 7 Chief of Assessment Division Ruth Vivian G. Gandia. Petitioner, however, clarified
that the certificate of immunity from audit covered only income tax for the year 1997 and does not include
VAT and withholding taxes, while the Letter of Termination involved tax liabilities for taxable year 1997
(EWT, VAT and income taxes) but which was submitted for review of higher authorities as per the
Certification of RD No. 40 District Officer Pablo C. Cabreros, Jr. For 1999, private respondents
supposedly availed of the VAP pursuant to RR No. 8-2001.
Tax amnesty is a general pardon to taxpayers who want to start a clean tax slate. It also gives the
government a chance to collect uncollected tax from tax evaders without having to go through the tedious
process of a tax case. Even assuming arguendo that the issuance of RR No. 2-99 is in the nature of tax
amnesty, it bears noting that a tax amnesty, much like a tax exemption, is never favored nor presumed in
law and if granted by statute, the terms of the amnesty like that of a tax exemption must be construed
strictly against the taxpayer and liberally in favor of the taxing authority.
For the same reason, the availment by LMCEC of VAP under RR No. 8-2001 as amended by RR No. 10-
2001, through payment supposedly made in October 29, 2001 before the said program ended on October
31, 2001, did not amount to settlement of its assessed tax deficiencies for the period 1997 to 1999, nor
immunity from prosecution for filing fraudulent return and attempt to evade or defeat tax. As correctly
asserted by petitioner, from the express terms of the aforesaid revenue regulations, LMCEC is not
qualified to avail of the VAP granting taxpayers the privilege of last priority in the audit and investigation of
all internal revenue taxes for the taxable year 2000 and all prior years under certain conditions,
considering that first, it was issued a PAN on February 19, 2001, and second, it was the subject of
investigation as a result of verified information filed by a Tax Informer under Section 282 of the NIRC duly
recorded in the BIR Official Registry as Confidential Information (CI) No. 29-2000 even prior to the
issuance of the PAN.
Tax assessments by tax examiners are presumed correct and made in good faith, and all presumptions
are in favor of the correctness of a tax assessment unless proven otherwise. We have held that a
taxpayer’s failure to file a petition for review with the Court of Tax Appeals within the statutory period
rendered the disputed assessment final, executory and demandable, thereby precluding it from
interposing the defenses of legality or validity of the assessment and prescription of the Governments right
to assess. Indeed, any objection against the assessment should have been pursued following the avenue
paved in Section 229 (now Section 228) of the NIRC on protests on assessments of internal revenue
taxes.
Records bear out that the assessment notice and Formal Letter of Demand dated August 7, 2002 were
duly served on LMCEC on October 1, 2002. Private respondents did not file a motion for reconsideration
of the said assessment notice and formal demand; neither did they appeal to the Court of Tax Appeals.
Section 228 of the NIRC provides the remedy to dispute a tax assessment within a certain period of time.
It states that an assessment may be protested by filing a request for reconsideration or reinvestigation
within 30 days from receipt of the assessment by the taxpayer. No such administrative protest was filed by
private respondents seeking reconsideration of the August 7, 2002 assessment notice and formal letter of
demand. Private respondents cannot belatedly assail the said assessment, which they allowed to lapse
into finality, by raising issues as to its validity and correctness during the preliminary investigation after the
BIR has referred the matter for prosecution under Sections 254 and 255 of the NIRC.
H. TAMBUNTING PAWNSHOP, INC. vs. COMMISSIONER OFINTERNAL REVENUE
G.R. No. 172394 October 13, 2010
FACTS:
Petitioner was issued an assessment for deficiency VAT for the taxable year of 1999. Petitioner, after his
protest with the CIR merited no response, it filed a Petition for Review with the CTA raising that
pawnshops are not subject to VAT under the NIRC and that pawn tickers are not subject to documentary
stamp tax.
The CTA ruled that petitioner is liable for the deficiency VAT and the documentary stamp tax.
The petitioner argues that a pawnshop is not enumerated as one of those engaged in sale or exchange of
services in Section 108 of the National Internal Revenue Code and citing the case of Commissioner of
Internal Revenue v. Michel J. Lhuillier Pawnshops, Inc. as basis.
Page 136 of 148
ISSUE:
Whether or not the petitioner who is a pawnshop operator was liable for VAT and the compromise penalty
for taxable year 2000?
RULING:
No. Since petitioner is a non-bank financial intermediary, it is subject to 10% VAT for the tax years 1996 to
2002; however, with the levy, assessment and collection of VAT from non-bank financial intermediaries
being specifically deferred by law, then petitioner is not liable for VAT during these tax years. But with the
full implementation of the VAT system on non-bank financial intermediaries starting January 1, 2003,
petitioner is liable for 10% VAT for said tax year. And beginning 2004 up to the present, by virtue of R.A.
No. 9238, Petitioner is no longer liable for VAT but it is subject to percentage tax on gross receipts from
0% to 5%, as the case may be.
J.R.A. PHILIPPINES, INC. vs. COMMISSIONER OF INTERNALREVENUE
G.R. NO. 177127 October 11, 2010
FACTS:
Petitioner J.R.A. Philippines, Inc., a domestic corporation, is engaged in the manufacture and wholesale
export of jackets, pants, trousers, overalls, shirts, polo shirts, ladies wear, dresses and other wearing
apparel. It is registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer and as an Ecozone
Export Enterprise with the Philippine Economic Zone Authority (PEZA). On separate dates, petitioner filed
with the Revenue District Office (RDO) No. 54 of the BIR, TreceMartires City, applications for tax
credit/refund of unutilized input VAT on its zero-rated sales for the taxable quarters of 2000 in the total
amount of P8,228,276.34. The claim for credit/refund, however, remained unacted by the respondent.
Hence, petitioner was constrained to file a petition before the CTA. After trial, the Second Division of the
CTA rendered a Decisiondenying petitioners claim for refund/credit of input VAT attributable to its zero-
rated sales due to the failure of petitioner to indicate its Taxpayers Identification Number-VAT (TIN-V) and
the word zero-rated on its invoices.
ISSUE:
Whether or not the failure to print the word zero-rated on the invoices/receipts is fatal to a claim for credit/
refund of input VAT on zero-rated sales?
RULING:
Zero-rated on the invoices/receipts is fatal to a claim for credit/refund of input VAT is not novel. This has
been squarely resolved in Panasonic Communications Imaging Corporation of the Philippines v. CIR.
Zero-rated transactions generally refer to the export sale of goods and services. The tax rate in this case
is set at zero. When applied to the tax base or the selling price of the goods or services sold, such zero
rate results in no tax chargeable against the foreign buyer or customer. But, although the seller in such
transactions charges no output tax, he can claim a refund of the VAT that his suppliers charged him. The
seller thus enjoys automatic zero rating, which allows him to recover the input taxes he paid relating to the
export sales, making him internationally competitive.
For the effective zero rating of such transactions, however, the taxpayer has to be VAT-registered and
must comply with invoicing requirements. Section 4.108-1 of RR 7-95 proceeds from the rule-making
authority granted to the Secretary of Finance under Section 245 of the 1977 NIRC (Presidential Decree
1158) for the efficient enforcement of the tax code and of course its amendments. The requirement is
reasonable and is in accord with the efficient collection of VAT from the covered sales of goods and
services. As aptly explained by the CTAs First Division, the appearance of the word zero-rated on the face
of invoices covering zero-rated sales prevents buyers from falsely claiming input VAT from their
purchases when no VAT was actually paid. If, absent such word, a successful claim for input VAT is
made, the government would be refunding money it did not collect.
Further, the printing of the word zero-rated on the invoice helps segregate sales that are subject to 10%
(now 12%) VAT from those sales that are zero-rated. Unable to submit the proper invoices, petitioner
Panasonic has been unable to substantiate its claim for refund.
COMMISSIONER OF INTERNAL REVENUE vs. AICHI FORGING COMPANY OF ASIA, INC.
G.R. No. 184823 October 6, 2010
FACTS:
Respondent Aichi Forging Company of Asia, Inc., a corporation duly organized and existing under the
laws of the Republic of the Philippines, is engaged in the manufacturing, producing, and processing of
steel and its by-products. It is registered with the BIR as a Value-Added Tax (VAT) entity and its products,
"close impression die steel forgings" and "tool and dies," are registered with the Board of Investments
(BOI) as a pioneer status. On September 30, 2004, respondent filed a claim for refund/credit of input VAT
for the period July 1, 2002 to September 30, 2002 in the total amount of P3,891,123.82 with the petitioner
CIR, through the Department of Finance (DOF) One-Stop Shop Inter-Agency Tax Credit and Duty
Drawback Center. CTA rendered a Decision partially granting respondent’s claim for refund/credit.
Petitioner filed a Motion for Partial Reconsideration,15 insisting that the administrative and the judicial
claims were filed beyond the two-year period to claim a tax refund/credit provided for under Sections
112(A) and 229 of the NIRC. He reasoned that since the year 2004 was a leap year, the filing of the claim
for tax refund/credit on September 30, 2004 was beyond the two-year period, which expired on
September 29, 2004.The Second Division of the CTA, however, denied petitioner’s Motion for Partial
Reconsideration for lack of merit. Petitioner thus elevated the matter to the CTA En Banc via a Petition for
Review.
ISSUE:
Whether or not respondent’s judicial and administrative claims for tax refund were filed within the two-year
prescriptive period provided in Sections 112(A) and 229 of the NIRC?
RULING:
Page 137 of 148

Applying this to the present case, the two-year period to file a claim for tax refund/credit for the period July
1, 2002 to September 30, 2002 expired on September 30, 2004. Hence, respondent’s administrative claim
was timely filed.
The filing of the judicial claim was premature. In this case, the administrative and the judicial claims were
simultaneously filed on September 30, 2004. Obviously, respondentdid not wait for the decision of the CIR
or the lapse of the 120-day period. For this reason, we find the filing of the judicial claim with the CTA
premature.
Respondent’s assertion that the non-observance of the 120-day period is not fatal to the filing of a judicial
claim as long as both the administrative and the judicial claims are filed within the two-year prescriptive
period52 has no legal basis.
There is nothing in Section 112 of the NIRC to support respondent’s view. Subsection (A) of the said
provision states that "any VAT-registered person, whose sales are zero-rated or effectively zero-rated
may, within two years after the close of the taxable quarter when the sales were made, apply for the
issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales."
The phrase "within two (2) years x x x apply for the issuance of a tax credit certificate or refund" refers to
applications for refund/credit filed with the CIR and not to appeals made to the CTA. This is apparent in
the first paragraph of subsection (D) of the same provision, which states that the CIR has "120 days from
the submission of complete documents in support of the application filed in accordance with Subsections
(A) and (B)" within which to decide on the claim.
In fact, applying the two-year period to judicial claims would render nugatory Section 112(D) of the NIRC,
which already provides for a specific period within which a taxpayer should appeal the decision or inaction
of the CIR. The second paragraph of Section 112(D) of the NIRC envisions two scenarios: (1) when a
decision is issued by the CIR before the lapse of the 120-day period; and (2) when no decision is made
after the 120-day period. In both instances, the taxpayer has 30 days within which to file an appeal with
the CTA. As we see it then, the 120-day period is crucial in filing an appeal with the CTA.
AT&T COMMUNICATIONS SERVICES PHILIPPINES, INC., vs. COMMISSIONER OF INTERNAL
REVENUE
G.R. No. 182364, August 3, 2010
FACTS:
AT&T Communications Services Philippines, Inc. (petitioner) is a domestic corporation primarily
engaged in the business of providing information, promotional, supportive and liaison services to foreign
corporations such as AT&T Communications Services International Inc., AT&T Solutions, Inc., AT&T
Singapore, Pte. Ltd.,, AT&T Global Communications Services, Inc. and Acer, Inc., an enterprise registered
with the Philippine Economic Zone Authority (PEZA).
Petitioner filed with the respondent an application for tax refund and/or tax credit of its
excess/unutilized input VAT from zero-rated sales. To prevent the running of the prescriptive period,
petitioner subsequently filed a petition for review with the CTA.
The CTA held that since petitioner is engaged in sale of services, VAT Official Receipts should
have been presented in order to substantiate its claime of zero-rated sales, not VAT invoices which
pertain to sale of goods or properties.
ISSUE:
Whether or not a Sales Invoice would suffice as a proof for entitlement to a refund of VAT from zero-rated
sales, even for seller of services?
RULING:
YES.Section 113 of the Tax Code does not create a distinction between a sales invoice and an
official receipt.Parenthetically, to determine the validity of petitioners claim as to unutilized input VAT, an
invoice would suffice provided the requirements under Sections 113 and 237 of the Tax Code are met.
Sales invoices are recognized commercial documents to facilitate trade or credit transactions.
They are proofs that a business transaction has been concluded, hence, should not be considered bereft
of probative value. Only the preponderance of evidence threshold as applied in ordinary civil cases is
needed to substantiate a claim for tax refund proper.
COMMISSIONER OF INTERNAL REVENUE, vs. FORT BONIFACIO DEVELOPMENT CORPORATION
G.R. No. 167606, August 11, 2010
FACTS:
At bar is a petition for review under Rule 45 of the Rules of Court, filed by the Commissioner of
Internal Revenue (CIR) against Fort Bonifacio Development Corporation (FBDC), challenging the
Resolutions of the Court of Appeals (CA) dated: (1) January 27, 2003, denying the prayer of petitioner CIR
and the Revenue District Officer, Revenue District No. 44, Taguig and Pateros, Bureau of Internal
Revenue (BIR), to admit the Amended Petition for Review; and (2) March 18, 2005, denying their motion
for the reconsideration thereof.
In its decision dated December 7, 2001, the Court of Tax Appeals (CTA) granted the petition of
FBDC and ordered the CIR and the Revenue District Officer, Revenue District No. 44, Taguig and
Pateros, BIR, to refund or issue a Tax Credit Certificate in the total amount of P15,036,891.26 in favor of
FBDC for the fourth quarter of taxable year 1997.
The CIR sought to appeal the CTA decision to the CA. The appeal was docketed as CA-G.R. SP No.
UDK-4443. On December 28, 2001, petitioner filed, by registered mail, a motion praying for an extension
of fifteen (15) days from December 28, 2001, the last day for filing the petition for review, or until January
12, 2002 within which to file the petition.
On January 21, 2002, the petitioner filed a Motion for Re-Extension of Time to File Petition for
Review praying for another extension of fifteen (15) days or until January 27, 2002.
Page 138 of 148
ISSUE:
Whether the CA erred in dismissing the amended petition for review May 16, 2002 on
pure technicality and in not adjudicating the case on the merits considering its importance as it
involves an enormous amount of money which government stands to lose should the petition be
dismissed outright.
HELD:
NO. The failure to timely perfect an appeal cannot simply be dismissed as a mere technicality,
for it is jurisdictional. Thus:
Nor can petitioner invoke the doctrine that rules of technicality must yield to
the broader interest of substantial justice. While every litigant must be given the
amplest opportunity for the proper and just determination of his cause, free from the
constraints of technicalities, the failure to perfect an appeal within the reglementary
period is not a mere technicality. It raises a jurisdictional problem as it deprives the
appellate court of jurisdiction over the appeal. The failure to file the notice of
appeal within the reglementary period is akin to the failure to pay the appeal fee
within the prescribed period. In both cases, the appeal is not perfected in due
time.
As to the claim that the government would suffer loss of substantial amount if not
allowed to recover the tax refund in the amount of more than P15M, the Court is of the view that
said problem has been caused by petitioners own doing or undoing. While We understand its
counsels predicament of being burdened with a heavy case load, We cannot always rule in favor
of the Government. In this case, petitioner even failed to sufficiently explain its failure to observe
the Rules.
COMMISSIONER OF INTERNAL REVENUE vs. SMART COMMUNICATION, INC.
G.R. Nos. 179045-46,August 25, 2010
FACTS:
Respondent Smart Communications, Inc. is a corporation organized and existing under Philippine law. It is
an enterprise duly registered with the Board of Investments.
Smart entered into an Agreement with Prism, a nonresident foreign corporation domiciled in
Malaysia, whereby Prism will provide programming and consultancy services to Smart. Thinking that the
payments to Prism were royalties, Smart withheld 25% under the RP-Malaysia Tax Treaty. Smart then
filed a refund with the BIR alleging that the payments were not subject to Philippine withholding taxes
given that they constituted business profits paid to an entity without a permanent establishment in the
Philippines.
ISSUE:
Whether respondent Smart, as withholding agent, has the right to file the claim for refund?
RULING:
YES. Although such relation between the taxpayer and the withholding agent is a factor that increases the
latters legal interest to file a claim for refund, there is nothing in the decision to suggest that such relationship is
required or that the lack of such relation deprives the withholding agent of the right to file a claim for refund. Rather,
what is clear in the decision is that a withholding agent has a legal right to file a claim for refund for two reasons. First,
he is considered a taxpayer under the NIRC as he is personally liable for the withholding tax as well as for deficiency
assessments, surcharges, and penalties, should the amount of the tax withheld be finally found to be less than the
amount that should have been withheld under law. Second, as an agent of the taxpayer, his authority to file the
necessary income tax return and to remit the tax withheld to the government impliedly includes the authority to file a
claim for refund and to bring an action for recovery of such claim.
In this connection, it is however significant to add that while the withholding agent has the right to recover
the taxes erroneously or illegally collected, he nevertheless has the obligation to remit the same to the principal
taxpayer. As an agent of the taxpayer, it is his duty to return what he has recovered; otherwise, he would be unjustly
enriching himself at the expense of the principal taxpayer from whom the taxes were withheld, and from whom he
derives his legal right to file a claim for refund.
COMMISSIONER OF INTERNAL REVENUE VS. THE PHILIPPINE AMERICAN LIFE AND
GENERAL INSURANCE COMPANY
G.R. No. 175124, September 29, 2010
FACTS:
On 15 April 1998, The Philippine American Life and General Insurance Company (respondent)
filed with the Bureau of Internal Revenue (BIR) its Annual Income Tax Return (ITR) for the taxable year
1997,[6] declaring a net loss of P165,701,508.
On 16 December 1999, respondent filed with the BIR-Appellate Division a claim for refund in the
amount of P9,326,979.35, representing a portion of its accumulated creditable withholding tax. The
amount of P9,326,979.35 allegedly represents the creditable taxes withheld and remitted to the BIR by
respondents withholding agents from rentals and real property and dividend income during the calendar
year 1997.
Petitioner maintains that Section 76 of the NIRC of 1997 clearly states that once a corporate
taxpayer opts to carry-over the excess income tax and apply it as tax credits against the income tax due
for the succeeding taxable years, such option is irrevocable and the corporate taxpayer can no longer
apply for either a tax refund or an issuance of a tax credit certificate. [10]
On the other hand, respondent argues that the choice of the taxpayer to carry-over its excess tax
credits to the succeeding taxable year does not necessarily preclude the taxpayer from requesting a tax
refund when there was no actual carry-over of the tax credits due to a net loss suffered by the taxpayer in
the succeeding year. Respondent alleges that there was no actual carry-over of its 1997 excess tax
credits because its tax credits accumulated over the years were much more than the ensuing tax
liabilities.
ISSUE:
Whether respondent is entitled to a refund of its excess income tax credit in the taxable year
1997 even if it had already opted to carry-over the excess income tax credit against the tax due in the
succeeding taxable years.
Page 139 of 148
RULING:
NO. In this case, it is undisputed that respondent indicated in its 1997 ITR its option to carry-over TABABA, Ronee J.
as tax credit for the next year its tax overpayment. In its 1998 ITR, respondent again indicated its 2014-0138
preference to carry-over the excess income tax credit against the tax liabilities for the succeeding taxable
years. Clearly, respondent chose to carry-over and apply the overpaid tax against the income tax due in
the succeeding taxable years. Under Section 76 of the NIRC of 1997, once the taxpayer exercises the ASIAWORLD PROPERTIES PHILIPPINE CORPORATION vs.COMMISIONER OF INTERNAL
option to carry-over and apply the excess creditable tax against the income tax due for the succeeding REVENUE
taxable years, such option is irrevocable.[13] Thus, respondent can no longer claim a refund of its excess G.R. No. 171766 July 29, 2010
income tax credit in the taxable year 1997 because it has already opted to carry-over the excess income
tax credit against the tax due in the succeeding taxable years. FACTS:

Asiaworld Properties Philippine Corporation (Asiaworld) is a domestic corporation engaged in

business of real estate development.

For the calendar year ending 31 December 2001, Asiaworld filed its Annual Income Tax Return
(ITR) on 5 April 2002. Asiaworld declared a minimum corporate income tax (MCIT) due in the amount of
P1,222,066.00, but with a refundable income tax payment in the sum of P6,473,959.00.
UNITED AIRLINES, INC., vs. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 178788,September 29, 2010 Income:
Realized Gross Profit P49,234,453.00
FACTS: Add: Other Income 11,868,847.00
Petitioner United Airlines, Inc. is a foreign corporation organized and existing under the laws of Gross Income P61,103,300.00
the State of Delaware, U.S.A., engaged in the international airline business. Less: Deductions 58,148,630.00
Petitioner used to be an online carrier but ceased operating cargo flights from the Philippines Taxable Income P 2,954,670.00
starting 2001. It is now an offline international air carrier but has a general sales agent in the Philippines
which sells passage documents for its off-line flights for carriage of passengers and cargo. It filed a claim Tax Due (MCIT) P 1,222,066.00
for refund on the Gross Philippine Billings (GPB) tax it paid. The CTA ruled that Petitioner was not liable Less: Tax Credit/Payments
for the GBP but was liable to pay 32% tax on its net income derived from the sales of passage documents a. Prior Years Excess Credit P7,468,061.00
in the Philippines. b. Tax Payments For the 160,000.00
First Three Quarters
ISSUE: c. Creditable Tax Withheld 67,964.00
Whether the petitioner is liable for either the GPB or the 32% tax? For the First Three Quarters
RULING: d. Creditable Tax Withheld 7,696,025.00
For the Fourth Quarter
32% tax. The Court reiterated the ruling in South African Airways and BOAC stating that it is the Total Amount of Overpayment P6,473,959.00
sale of tickets which is the revenue-generating activity subject to Philippine tax. The correct interpretation
of the applicable rules is that, if an international air carrier maintains flights to and from the Philippines, it
shall be taxed at the rate of 2 1/2% of its Gross Philippine Billings, while international air carriers that do In its 2001 ITR, Asiaworld stated that the amount of P7,468,061.00 representing Prior Years
not have flights to and from the Philippines but nonetheless earn income from other activities in the Excess Credits was net of year 1999 excess creditable withholding tax to be refunded in the amount of
country will be taxed at the rate of 32% of such income. P18,477,144.00. Asiaworldalso indicated in its 2001 ITR its option to carry-over as tax credit next
The Court also ruled that “to avoid multiplicity of suits and unnecessary difficulties and expenses” the year/quarter the overpayment of P6,473,959.00.
issue of deficiency tax assessment be resolved jointly with the its claim for refund – and doing so does not
violate the rule against offsetting of taxes. On 9 April 2002, Asiaworldfiled with the Revenue District Office No. 52, BIR Region VIII, a
request for refund in the amount of P18,477,144.00, allegedly representing partial excess creditable tax

Page 140 of 148

withheld for the year 2001. Asiaworldclaimed that it is entitled to the refund of its unapplied creditable
withholding taxes.
On 12 April 2002, before the BIR Revenue District Office could act on Asiaworld’sclaim for
refund, Asiaworldfiled a Petition for Review with the Court of Tax Appeals to toll the running of the two-
year prescriptive period provided under Section 229 of the National Internal Revenue Code (NIRC) of
1997.
ISSUE:
Whether or not the exercise of the option to carry-over the excess income tax credit, which shall
be applied against the tax due in the succeeding taxable years, prohibits a claim for refund in the
subsequent taxable years for the unused portion of the excess tax credits carried over
RULING:
Yes. Section 76 of NIRC of 1997 clearly states: Once the option to carry-over and apply the
excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable
years has been made, such option shall be considered irrevocable for that taxable period and no
application for cash refund or issuance of a tax credit certificate shall be allowed therefore. Section 76
expressly states that the option shall be considered irrevocable for that taxable period referring to the
period comprising the succeeding taxable years. Section 76 further states that no application for cash
refund or issuance of a tax credit certificate shall be allowed therefore referring to that taxable period
comprising the succeeding taxable years.
In this case, Asiaworld opted to carry-over its 1999 excess income tax as tax credit for the
succeeding taxable years. As correctly held by the Court of Appeals, such option to carry-over is not
limited to the following taxable year 2000, but should apply to the succeeding taxable years until the whole
amount of the 1999 creditable withholding tax would be fully utilized.
TRON CORPORATION vs. COMMISIONER OF INTERNAL REVENUE
G.R. No. 180385 July 28, 2010
FACTS:
Petron is acquired Tax Credit Certificates (TCCs). The assignments of the TCCs were duly
approved by the Department of Finance One-Stop Shop Inter-Agency Tax Credit and Duty Drawback
Center (the Center). Upon Petron’s surrender of the DOF-TDMs, TCCs and Deeds of Assignment, the
corresponding Authorities to Accept Payment of Excise Taxes (ATAPETs) were further issued by the BIR
Collection Program Division. Together with the documents, the ATAPETs were further submitted to the
BIR Head Office which issued BIR-TDMs signed by the Assistant Commissioner of Collection Service,
signifying acceptance of the TCCs as payment of Petron’s excise taxes.
Pursuant to its undertaking under the aforesaid Deeds of Assignment, Petron issued Credit
Notes (CNs) in an equivalent amount in favor of its assignors which, by themselves or thru their own
assignees, used the same to avail of fuel products from the former. On the ground, however, that its use
of TCCs issued to said grantees was invalid for being violative of Rule IX of the Rules and Regulations
issued by the BOI to implement Presidential Decree No. 1789 and Batas PambansaBlg. 391, Petron
received a collection letter dated April 22, 1998 from the BIR Revenue District Office of South Makati,
Metro Manila, demanding payment of the total amount of P1,107,542,547.08 in unpaid taxes, surcharges
and interests for the years 1993 to 1997.
The Center conducted a post-audit in the premises. On October 24, 1999, the Center cancelled
TCCs worth P284,390,845.00 of the same TCCs acquired and used by Petron on the ground that they
were fraudulently procured and transferred. The cancellation was based on the following findings, viz.: (a)
the grantees did not manufacture and export at the volumes which served as bases for the grant of the
subject TCCs; and, (b) the grantees were not using fuel oil at the levels which served as bases for the
approval of the transfer of the same TCCs. As a consequence of the cancellation, respondent issued an
Assessment dated November 15, 1999 (the Assessment), directing Petron to pay deficiency excise taxes
in the sum of P284,390,854.00 for the period 1995 to 1997, surcharges in the sum of P142,195,422.50
and interest in the sum of P224,747,996.42 or an aggregate amount of P651,334,263.92.
ISSUE/S:
(1) Whether or not Petron acted in bad faith hence can be prejudiced by a subsequent finding of
fraud in the grant and transfer of the TCCs
(2) Whether or not the original grantee or transferor is solidarily liable relative to the transfer of the
TCCs from the original grantee to a transferee
RULING:
(1) No. Bad faith was not proved by clear and convincing evidence in this case. While the CTA is not
governed strictly by technical rules of evidence on the principle that rules of procedure are not
ends in themselves but are primarily intended as tools in the administration of justice,
respondents presentation of evidence to prove the fraud which attended the issuance of the
subject TCCs is not a mere procedural technicality which may be disregarded considering that it
is the very basis for the claim that Petrons payment of its excise tax liabilities had been avoided.
It cannot be over-emphasized that fraud is a question of fact which cannot be presumed and
must be proven by clear and convincing evidence by the party alleging the same. Without even
presenting the documents which served as bases for the issuance of the subject TCCs from
1994 to 1997, respondent miserably failed in discharging his evidentiary burden with the
presentation of the Centers cancellation memoranda to which were simply annexed some of the
grantees original registration documents and their Financial Statements for an average of two
years.
(2) Yes. A transferee in good faith and for value of a TCC who has relied on the Centers
representation of the genuineness and validity of the TCC transferred to it may not be legally
required to pay again the tax covered by the TCC which has been belatedly declared null and
void, that is, after the TCCs have been fully utilized through settlement of internal revenue tax
Page 141 of 148
 liabilities. Conversely, when the transferee is party to the fraud as when it did not obtain the TCC
for value or was a party to or has knowledge of its fraudulent issuance, said transferee is liable
for taxes and for the fraud committed as provided for by law.
JAKA INVESTMENTS CORPORATION vs. COMMISIONER OF INTERNAL REVENUE
G.R. No. 147629 July 28, 2010
FACTS:
Jaka sought to invest in JAKA Equities Corporation (JEC), which was then planning to undertake
an initial public offering (IPO) and listing of its shares of stock with the Philippine Stock Exchange. JEC
increased its authorized capital stock from P185,000,000.00 to P2,000,000,000.00. Jaka proposed to
subscribe to P508,806,200.00 out of the increase in the authorized capital stock of JEC through a tax-free
exchange under Section 34(c)(2) of the National Internal Revenue Code (NIRC) of 1977, as amended,
which was effected by the execution of a Subscription Agreement and Deed of Assignment of Property in
Payment of Subscription. Under this Agreement, as payment for its subscription, Jaka will assign and
transfer to JEC the shares of stock. The intended IPO and listing of shares of JEC did not materialize.
However, JEC still decided to proceed with the increase in its authorized capital stock and Jaka agreed to
subscribe thereto, but under different terms of payment. Jaka paid P1,003,895.65 for basic documentary
stamp tax inclusive of the 25% surcharge for late payment on the Amended Subscription Agreement,
broken down as follows:
Documentary Stamp Tax –P803,116.72
25% Surcharge - 200,778.93
Total P1,003,895.65
Revenue District Officer (RDO) Atty. Sixto S. Esquivias IV (RDO Esquivias) issued three
Certifications as follows:
Certificate No. Shares of Stock Documentary Stamps
94-10-17-07 7,495,488 UCPB shares P 23,423.14
94-10-17-08 154,208,403 RGHC shares 481,901.88
94-10-17-14 2,822,500 PGCI shares 88,203.13
P593,528.15
Due to overpayment, Jaka sought a refund for the alleged excess documentary stamp tax and
surcharges it had paid.
ISSUE:
Whether or not Jaka is entitled to a partial refund of the documentary stamp tax and surcharges it
paid on the execution of the Amended Subscription Agreement
RULING:
No. In the case at bar, the rights and obligations between petitioner JAKA Investments
Corporation and JAKA Equities Corporation are established and enforceable at the time the Amended
Subscription Agreement and Deed of Assignment of Property in Payment of Subscription were signed by
the parties and their witness, so is the right of the state to tax the aforestated document evidencing the
transaction. DST is a tax on the document itself and therefore the rate of tax must be determined on the
basis of what is written or indicated on the instrument itself independent of any adjustment which the
parties may agree on in the future x xx. The DST upon the taxable document should be paid at the time
the contract is executed or at the time the transaction is accomplished. The overriding purpose of the law
is the collection of taxes. So that when it paid in cash the amount of P370,766,000.00 in substitution for, or
replacement of the 1,313,176 FEBTC shares, its payment of P1,003,835.65 documentary stamps tax
pursuant to Section 175 of NIRC is in order.
Thus, applying the settled rule in this jurisdiction that, a claim for refund is in the nature of a claim
for exemption, thus, should be construed in strictissi mi jurisagainst the taxpayer (Commissioner of
Internal Revenue vs. Tokyo Shipping Co., Ltd., 244 SCRA 332) and since the petitioner failed to adduce
evidence that will show that it is exempt from DST under Section 199 or other provision of the tax code,
We rule the focal issue in the negative.
COMMISSIONER OF INTERNAL REVENUE vs. EASTERN TELECOMMUNICATIONS PHILIPPINES
INC. (EASTERN)
G.R. No. 163835 July 7, 2010
FACTS:
Eastern is a domestic corporation granted by Congress with a telecommunications franchise.
From July 1, 1995 to December 31, 1996, Eastern purchased various imported equipment, machineries,
and spare parts necessary in carrying out its business activities. The importations were subjected to a 10%
value-added tax (VAT) by the Bureau of Customs, which was duly paid by Eastern.
On September 19, 1997, Eastern filed with the CIR a written application for refund or credit
of unapplied input taxes it paid on the imported equipment during the taxable years 1995 and 1996
amounting to P22,013,134.00. In claiming for the tax refund, Eastern principally relied on Sec. 10 of RA
No. 7617, which allows Eastern to pay 3% of its gross receipts in lieu of all taxes on this franchise or
earnings thereof.In the alternative, Eastern cited Section 106(B) of theTax Code which authorizes a VAT-
registered taxpayer to claim for the issuance of a tax credit certificate or a tax refund of input taxes paid on
capital goods imported or purchased locally to the extent that such input taxes have not been applied
against its output taxes.
Ruling in favor of Eastern, the CTA found that Eastern has a valid claim for the refund/credit
of the unapplied input taxes, not on the basis of the in lieu of all taxes provision of its legislative
franchise,but rather, on Section 106(B) of the Tax Code, which states:
Page 142 of 148

SECTION 106. Refunds or tax credits of input tax.
xxxx
(b) Capital goods. - A VAT-registered person may apply for the issuance of a
tax credit certificate or refund of input taxes paid on capital goods imported or
locally purchased, to the extent that such input taxes have not been applied
against output taxes. The application may be made only within two (2) years after
the close of the taxable quarter when the importation or purchase was
made. [Emphases supplied.]
The CIR takes exception to the CAs ruling that Eastern is entitled to the full amount of unapplied
input taxes paid for its purchase of imported capital goods that were substantiated by the corresponding
receipts and invoices. The CIR posits that, applying Section 104(A) of the Tax Code on apportionment of
tax credits, Eastern is entitled to a tax refund of only P8,814,790.15, instead of the P16,229,100.00
adjudged by the CTA and the CA. Section 104(A) of the Tax Code states:
SEC. 104. Tax Credits.
(a) Creditable Input tax. -
xxxx
A VAT-registered person who is also engaged in transactions
not subject to the value-added tax shall be allowed input tax
credit as follows:
(A) Total input tax which can be directly attributed to
transactions subject to value-added tax; and
(B) A ratable portion of any input tax which cannot be
directly attributed to either activity. [Emphases supplied.]
To be entitled to a tax refund of the full amount of P16,229,100.00, the CIR asserts that Eastern
must prove that (a) it was engaged in purely VAT taxable transactions and (b) the unapplied input taxes it
claims as refund were directly attributable to transactions subject to VAT.
ISSUE:
Whether or not Eastern shall be exempt only up to a ratable portion of input tax directly
attributable to transactions subject to VAT
RULING:
Yes. the CIR put forward the applicability of Section 104(A) because, essentially, the applicability
of the provision boils down to the question of whether the purchased capital goods which a taxpayer paid
input taxes were also used in a VAT-taxable business, i.e., transactions that were subject to VAT, in order
for them to be refundable/creditable. Once proved that the taxpayer used the purchased capital goods in a
both VAT taxable and non-VAT taxable business, the proportional allocation of tax credits stated in the
law necessarily applies. This rule is also embodied in Section 4.106-1 of Revenue Regulation No. 7-95,
entitled Consolidated Value-Added Tax Regulations, which states:
SEC. 4.106-1.Refunds or tax credits of input tax. x xxx
(b) Capital Goods. Only a VAT-registered person may apply for issuance of a tax credit certificate
or refund of input taxes paid on capital goods imported or locally purchased. The refund shall be
allowed to the extent that such input taxes have not been applied against output taxes. The
application should be made within two (2) years after the close of the taxable quarter when the
importation or purchase was made.
Refund of input taxes on capital goods shall be allowed only to the extent that such
capital goods are used in VAT taxable business. If it is also used in exempt operations,
the input tax refundable shall only be the ratable portion corresponding to the taxable
operations. [Emphasis supplied.]
MIGUEL J. OSSORIO PENSION FOUNDATION, INCORPORATED (MJOPFI)vs. COURT OF APPEALS
and COMMISSIONER OF INTERNAL REVENUE
G.R. No. 162175 June 7, 2010
FACTS:
MJOPFI, a non-stock and non-profit corporation, was organized for the purpose of holding title to
and administering the employees’ trust or retirement funds (Employees’ Trust Fund) established for the
benefit of the employees of Victorias Milling Company, Inc. (VMC).MJOPFI, as trustee, claims that the
income earned by the Employees’ Trust Fund is tax exempt under Section 53(b) of the Tax Code.MJOPFI
bought 49.59% of Madrigal Business Park (MBP lot) with VMC as co-owner to invest part of the trust fund.
The MBP lot is covered by Transfer Certificate of Title No. 183907 (TCT 183907) with VMC as the
registered owner.
MJOPFI claims that since it needed funds to pay the retirement and pension benefits of VMC
employees and to reimburse advances made by VMC, MJOPFI’s Board of Trustees authorized the sale of
its share in the MBP lot.
VMC negotiated the sale of the MBP lot and eventually sold to Metrobank. Metrobank, as
withholding agent, paid the Bureau of Internal Revenue (BIR) ₱6,125,625 as withholding tax on the sale of
real property.
MJOPFI alleges that the parties who co-owned the MBP lot executed a notarized Memorandum
of Agreement as to the proceeds of the sale. Since Lot 1 has been sold for ₱81,675,000.00 (gross of 7.5%
withholding tax and 3% broker’s commission, MJOPFI’s share in the proceeds of the sale is
₱40,500,000.00 (gross of 7.5% withholding tax and 3% broker’s commission).
MJOPFI maintains that the tax exemption of the Employees’ Trust Fund rendered the payment of
₱3,037,500 as illegal or erroneous. The BIR, through its Revenue District Officer, wrote MJOPFI stating
that under Section 26 of the Tax Code, MJOPFI is not exempt from tax on its income from the sale of real
property.
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ISSUE:
Whether or not MJOFPI, a tax-exempt under Section 53(b) of the Tax Code, is exempt from tax
on its income from the sale of real property
RULING:
Yes. Petitioner is a corporation that was formed to administer the Employees' Trust Fund.
Petitioner invested ₱5,504,748.25 of the funds of the Employees' Trust Fund to purchase the MBP lot.
When the MBP lot was sold, the gross income of the Employees’ Trust Fund from the sale of the MBP lot
was ₱40,500,000. The 7.5% withholding tax of ₱3,037,500 and broker’s commission were deducted from
the proceeds. In Commissioner of Internal Revenue v. Court of Appeals, the Court explained the rationale
for the tax-exemption privilege of income derived from employees’ trusts:
It is evident that tax-exemption is likewise to be enjoyed by the income of the pension trust.
Otherwise, taxation of those earnings would result in a diminution of accumulated income and
reduce whatever the trust beneficiaries would receive out of the trust fund. This would run afoul
of the very intendment of the law.
TEEPECUY, Maria Yvette Bernadette V.
2014-0127
Commissioner of Internal Revenue vs. Kudos Metal Corporation
G.R. No. 178087 05/05/2010
Facts:
The BIR reviewed and audited Kudos Metal’s records after the latter filed its income tax return.
Meanwhile, Pasco, the corporation’s 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
government’s right to assess taxes had prescribed.
Issue:
Whether or not 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.
TFS Incorporated vs. Commissioner of Internal Reve
G.R. No. 166829 19/04/2010
Facts:
The CTA rendered a Decision upholding the assessment issued against petitioner in the amount of
P11,905,696.32, representing deficiency VAT for the year 1998, inclusive of 25% surcharge and 20%
deficiency interest, plus 20% delinquency interest from February 25, 2002 until full payment, pursuant to
Sections 248 and 249(B) of the National Internal Revenue Code of 1997 (NIRC). The CTA ruled that
pawnshops are subject to VAT under Section 108(A) of the NIRC as they are engaged in the sale of
services for a fee, remuneration or consideration. Petitioner filed before the Court of Appeals a Petition for
Review but it was dismissed by the CA for lack of jurisdiction in view of the enactment of Republic Act No.
9282.
Realizing its error, petitioner filed a Petition for Review with the CTA En Banc. The petition, however, was
dismissed for having been filed out of time. Petitioner filed a Motion for Reconsideration but it was denied.
Issue:
(1) Whether or not the Honorable court of Tax Appeal en banc should have given due course to the
petition for review and not strictly applied the technical rules of procedure to the detriment of justice?
(2) Whether or not petitioner is subject to the 10% VAT?
Held:
(1) The petition is meritorious. Jurisdiction to review decisions or resolutions issued by the Divisions of the
CTA is no longer with the CA but with the CTA En Banc. This rule is embodied in Section 11 of RA 9282.
In the instant case, we are constrained to disregard procedural rules because we cannot in conscience
allow the government to collect deficiency VAT from petitioner considering that the government has no
right at all to collect or to receive the same. Besides, dismissing this case on a mere technicality would
lead to the unjustenrichment of the government at the expense of petitioner, which we cannot permit.
Technicalities should never be used as a shield to perpetrate or commit an injustice.
(2) Petitioner disputes the assessment made by the BIR for VAT deficiency in the amount of
P11,905,696.32 for taxable year 1998 on the ground that pawnshops are not included in the coverage of
VAT.
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We agree. Since petitioner is a non-bank financial intermediary, it is subject to 10% VAT for the tax years
1996 to 2002; however, with the levy, assessment and collection of VAT from non-bank financial
intermediaries being specifically deferred by law, then petitioner is not liable for VAT during these tax
years. But with the full implementation of the VAT system on non-bank financial intermediaries starting
January 1, 2003, petitioner is liable for 10% VAT for said tax year. And beginning 2004 up to the present,
by virtue of R.A. No. 9238, petitioner is no longer liable for VAT but it is subject to percentage tax on gross
receipts from 0% to 5%, as the case may be.
Guided by the foregoing, petitioner is not liable for VAT for the year 1998. Consequently, the VAT
deficiency assessment issued by the BIR against petitioner has no legal basis and must therefore be
cancelled. In the same vein, the imposition of surcharge and interest must be deleted.
Toshiba Information Equipment (Phils.), Inc. vs. Commissioner of Internal Revenue
G.R. No. 157594 09/03/2010
Facts:
Toshiba is a domestic corporation registered with the Philippine Economic Zone Authority (PEZA) as an
Economic Zone (ECOZONE) export enterprise.It filed two separate applications for tax credit/refund of its
unutilized input VAT payments. The CIR denied the application. On appeal, the CTA ruled that Toshiba is
entitled to the credit/refund of the input VAT paid on its purchases of goods and services relative to such
zero-rated export sales. The Court of Appeals reversed the decision of the CTA in the petition for review
stating that Toshiba is a tax exempt entity under R.A. No. 7916 thus not entitled to refund the VAT
payments made in the domestic purchase of goods and services.
Issue:
Whether or not Toshiba entitled to VAT refund?
Held:
Yes.Such export sales took place before October 15, 1999, when the old rule on the VAT treatment of
PEZA-registered enterprises still applied. Under this old rule, it was not only possible, but even
acceptable, for Toshiba, availing itself of the income tax holiday option under Section 23 of Republic Act
No. 7916, in relation to Section 39 of the Omnibus Investments Code of 1987, to be subject to VAT, both
indirectly (as purchaser to whom the seller shifts the VAT burden) and directly (as seller whose sales were
subject to VAT, either at ten percent [10%] or zero percent [0%]).
Commissioner of Internal Revenue vs. SM Prime Holdings, Inc., et al.
G.R. No. 183505 26/02/2010
Facts:
SM Prime and First Asia are Filipino domestic corporations. The BIR assessed them for VAT Deficiency
from cinema sales: SP Prime (Year 2000), First Asia (Year 1999-2003). Both corporations protested the
assessments but the CIR denied all of them. Respondents raised the matter with the CTA via petition for
review.
The CTA di-ision ruled in their favor and stated that the activity of showing cinematographic films is not a
service covered by the VAT under the NIRC, but one covered by amusement tax under the Local
Government Code. On reconsideration, the CTA en banc affirmed the CTA division and ruled that Section
108 of the NIRC sets forth an exhaustive enumeration of what services are intended to be subject to VAT.
And since the showing or exhibition of motion pictures, films or movies by cinema operators or proprietors
is not among the enumerated activities contemplated in the phrase “sale or exchange of services,” then
gross receipts derived by cinema/theater operators orproprietors from admission tickets in showing
motion pictures, film or movie are not subject to VAT.
CIR argues that Section 108 of the NIRC is not exhaustive because it covers all sales of services unless
exempted by law. Respondents, however, argue that a plain reading of Section 108 of the NIRC of 1997
shows that the gross receipts of proprietors or operators of cinemas/theaters derived from public
admission are not among the services subject to VAT.
Issue:
Whether or not gross receipts derived from admission tickets by cinema/theater operators or proprietors
are subject to VAT?
Held:
No. While the enumeration under Section 108 on the VAT-taxable services is not exhaustive and the said
list includes “the lease of motion picture films, films, tapes and discs”, the said activity however is not the
same as showing or exhibition of motion pictures or films. Thus, since the showing or exhibition of motion
pictures or films is not in the enumeration, the CIR must show that it falls under the phrase “similar
services”.
The repeal of the Local Tax Code by the LGC of 1991 is not a legal basis for the imposition of VAT on the
gross receipts of cinema/theater operators or proprietors derived from admission tickets. The removal of
the prohibition (on the national government to tax certain activities) under the Local Tax Code did not
grant nor restore to the national government the power to impose amusement tax on cinema/theater
operators or proprietors. Neither did it expand the coverage of VAT.
Silkair (Singapore) PTE. Ltd. vs. Commissioner of Internal Revenue
G.R. No. 184398 25/02/2010
Facts:
Silkair, a foreign corporation organized under the laws of Singapore is an online international carrier plying
the Singapore-Cebu-Singapore and Singapore-Cebu-Davao-Singapore routes. Silkair filed with the BIR an
administrative claim for the refund of Three Million Nine Hundred Eighty-Three Thousand Five Hundred
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Ninety Pesos and Forty-Nine Centavos (P3,983,590.49) in excise taxes which it allegedly erroneously
paid on its purchases of aviation jet fuel from Petron Corporation from June to December 2000. Since the
BIR took no action on petitioner’s claim for refund, petitioner sought judicial recourse. CTA First Division
ruled that Silkair was qualified for tax exemption under the provisions of Section 135 of the National
Internal Revenue Code and Art. 4 of the Air Transport Agreement between the Philippines and Singapore
but not entitled thereto for failure to present proof that it was authorized to operate in the Philippines
during the period material to the case due to non-admission of some of its exhibits which were merely
photocopies. The said exhibits were Silkair’s Certificate of Registration from the SEC and operating permit
from the Civil Aeronautics Board (CAB). CTA En Banc denied the petition for review on the ground,
among others, of failure to prove that it was authorized to operate in the Philippines for the period June to
December 2000 and further ruled that Silkair was not the proper party to file the instant claim for refund.
Issue:
Whether or not Silkair has substantially proven its authority to operate in the Philippines by invoking the
principle of judicial notice?
Held:
No. The CTA cannot take judicial notice of Silkair’s SEC Registration, previously offered and admitted in
evidence in similar cases before the CTA. A court is not compelled to take judicial notice of pieces of
evidence offered and admitted in a previous case unless the same are properly offered or have
accordingly complied with the requirements on the rules of evidence. In other words, the evidence
presented in the previous cases cannot be considered in the instant case without being offered in
evidence.The documents are not among the matters which the law mandatorily requires the court to take
judicial notice of, without any introduction of evidence.
Neither could it be said that petitioner’s SEC Registration and operating permits from the CAB are
documents which are of public knowledge, capable of unquestionable demonstration, or ought to be
known to the judges because of their judicial functions, in order to allow the CTA to take discretionary
judicial notice of the said documents. Moreover, a hearing is necessary before judicial notice of any matter
may be taken by the court. This requirement of a hearing is needed so that the parties can be heard
thereon if such matter is decisive of a material issue in the case.
Silkair cannot rely on the principle of judicial notice so as to evade its responsibility of properly complying
with the rules of evidence.
South African Airways vs. Commission of Internal Revenue, G.R. No. 180356, Feb. 16, 2010.
Facts:
Petitioner South African Airways is a foreign corporation organized and existing under and by virtue of the
laws of the Republic of South Africa. Its principal office is located at Airways Park, Jones Road,
Johannesburg International Airport, South Africa. In the Philippines, it is an internal air carrier having no
landing rights in the country. Petitioner has a general sales agent in the Philippines, Aerotel Limited
Corporation. Aerotel sells passage documents for compensation or commission for petitioner’s off-line
flights for the carriage of passengers and cargo between ports or points outside the territorial jurisdiction
of the Philippines. Petitioner is not registered with the Securities and Exchange Commission as a
corporation, branch office, or partnership. It is not licensed to do business in the Philippines. It paid a
corporate tax in the rate of 32% of its gross billings. However, it subsequently claim for refund contending
that its income should be taxed at the rate of 2 1/2% of its gross billings.
Issue:
Whether or not petitioner’s income is sourced within the Philippines and is to be taxed at 32% of the gross
billings.
Ruling:
Yes! In the instant case, the general rule is that resident foreign corporations shall be liable for a 32%
income tax on their income from within the Philippines, except for resident foreign corporations that are
international carriers that derive income “from carriage of persons, excess baggage, cargo and mail
originating from the Philippines” which shall be taxed at 2 1/2% of their Gross Philippine Billings.
Petitioner, being an international carrier with no flights originating from the Philippines, does not fall under
the exception. As such, petitioner must fall under the general rule. This principle is embodied in the Latin
maxim, exception firmatregulam in casibus non exceptis, which means, a thing not being excepted must
be regarded as coming within the purview of the general rule.
To reiterate, the correct interpretation of the above provisions is that, if an international air carrier
maintains flights to and from the Philippines, it shall be taxed at the rate of 2 1/2% of its Gross Philippine
Billings, while international air carriers that do not have flights to and from the Philippines but nonetheless
earn income from other activities in the country will be taxed at the rate of 32% of such income.
Panasonic Communications Imaging Corporation of the Philippines vs. Commissioner of Internal
Revenue, G.R. No. 178090, Feb. 8, 2010.
Facts:
Petitioner Panasonic Communications Imaging Corporation of the Philippines (Panasonic) produces and
exports plain paper copiers and their sub-assemblies, parts, and components. It is registered with the
Board of Investments as a preferred pioneer enterprise under the Omnibus Investments Code of 1987. It
is also a registered value-added tax (VAT) enterprise. From April 1 to September 30, 1998 and from
October 1, 1998 to March 31, 1999, petitioner Panasonic generated export sales amounting to
US$12,819,475.15 and US$11,859,489.78, respectively, for a total of US$24,678,964.93. Believing that
these export sales were zero-rated for VAT under Section 106(A)(2)(a)(1) of the 1997 National Internal
Revenue Code as amended by Republic Act (R.A.) 8424 (1997 NIRC). Panasonic paid input VAT of
P4,980,254.26 and P4,388,228.14 for the two periods or a total of P9,368,482.40 attributable to its zero-
rated sales. Claiming that the input VAT it paid remained unutilized or unapplied, on March 12, 1999 and
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July 20, 1999 petitioner. Panasonic filed with the Bureau of Internal Revenue (BIR) two separate
applications for refund or tax credit of what it paid. When the BIR did not act on the same, Panasonic filed
on December 16,1999 a petition for review with the CTA, averring the inaction of the respondent
Commissioner of Internal Revenue (CIR) on its applications.
After trial or on August 22, 2006 the CTA’s First Division rendered judgment,denying the petition for lack
of merit. The First Division said that, while petitioner Panasonic’s export sales were subject to 0% VAT
under Section 106(A)(2)(a)(1) of the 1997 NIRC, the same did not qualify for zero-rating because the
word, zero-rated was not printed on Panasonic’s export invoices. This omission, said the First Division,
violates the invoicing requirements of Section 4.108-1 of Revenue Regulations (RR) 7-95.
Issue:
Whether or not the CTA en banc correctly denied petitioner Panasonic’s claim for refund of the VAT it paid
as a zero-rated taxpayer on the ground that its sales invoices did not state on their faces that its sales
were zero-rated.
Ruling:
The VAT is a tax on consumption, an indirect tax that the provider of goods or services may pass on to his
customers. Under the VAT method of taxation, which is invoice-based, an entity can subtract from the
VAT charged on its sales or outputs the VAT it paid on its purchases, inputs and imports.6 For example,
when a seller charges VAT on its sale, it issues an invoice to the buyer, indicating the amount of VAT he
charged. For his part, if the buyer is also a seller subjected to the payment of VAT on his sales, he can
use the invoice issued to him by his supplier to get a reduction of his own VAT liability. The difference in
tax shown on invoices passed and invoices received is the tax paid to the government. In case the tax on
invoices received exceeds that on invoices passed, a tax
refund may be claimed.
Zero-rated transactions generally refer to the export sale of goodsand services. The tax rate in this case is
set at zero. When applied to the tax base or the selling price of the goods or services sold, such
zero rate results in no tax chargeable against the foreign buyer or customer. But, although the seller in
such transactions charges no output tax, he can claim a refund of the VAT that his suppliers charged him.
The seller thus enjoys automatic zero rating, which allows him to recover the input taxes he paid relating
to the export sales, making him internationally competitive.For the effective zero rating of such
transactions, however, the taxpayer has to be VAT-registered and must comply with invoicing
requirements. Interpreting these requirements, respondent CIR ruled that under Revenue Memorandum
Circular (RMC) 42-2003, the taxpayer’s failure to comply with invoicing requirements will result in the
disallowance of his claim for refund.
This Court held that, since the BIR authority to print is not one of the items required to be indicated on the
invoices or receipts, the BIR erred in denying the claim for refund. Here, however, the ground for denial of
petitioner Panasonic’s claim for tax refund the absence of the word „zero-rated on its invoices is one
which is specifically and precisely included in the above enumeration. Consequently, the BIR correctly
denied Panasonic’s claim for tax refund.
CIR vs. Ironcon Builders and Development Corp., G.R. No. 180042, Feb. 8, 2010.
Facts:
Respondent Ironcon Builders and Development Corporation (Ironcon) sought the refund by the Bureau of
Internal Revenue (BIR) of its income tax overpayment and excess creditable VAT. The Commissioner
continued not to act on its claims which made Ironcon to bring it up toCTA for review. CTA 2ndDivision
held that taxpayers have the option to either carry over the excess credit or ask for a refund, as regards
with the overpayment. Apparently, the respondent filed two income tax returns for the year 2000,
an original and an amended one. Although Ironcon’s amended return indicated a preference for “refund”
of the overpaid tax, the CTA ruled that respondent’s original choice is regarded as irrevocable, pursuant to
Sec.76 of R.A. No. 8424, and moreover found out that Ironcon actually carried over the credit from
the overpayment and applied it to the tax due for 2001, and hence, denied Ironcon’s claim for the refund.
As to the claim for VAT refund, CTA found that by the end of 2000, respondent had excess tax credit
carried over from 1999, an allowable input tax and a 6% creditable VAT, withheld and remitted by its
clients, which are deductible from Ironcon’s total output VAT liability of P20+M. The CTA ruled that
respondent had no more output VAT against which the excess creditable VAT withheld may be applied or
credited, the VAT withheld had been excessively paid. Because Ironcon did not present its VAT returns for
the succeeding quarters of 2001, 2ndDivision denied the refund. Upon MR of respondent, now attaching
the required VAT returns, CTA then granted the application having found that Ironcon sufficiently proved
that its excess creditable VAT withheld was not carried over or applied to any input VAT for 2001.
CIR filed its own MR for the amended decision, which CTA denied, and CTA en banc denied. Petitioner
CIR’s main contention is that, since these amounts were withheld in accordance with what the law
provides, they cannot be regarded as erroneously or illegally collected as contemplated in Sections
204(C) and 229 of the NIRC. Petitioner CIR also points out that since the NIRC does not specifically grant
taxpayers the option to refund excess creditable VAT withheld, it follows that such refund cannot be
allowed. Excess creditable VAT withheld is much unlike excess income taxes withheld.
Issue:
Whether or not creditable VAT withheld from a taxpayer in excess of its output VAT liability may be the
subject of a tax refund in place of a tax credit.
Ruling:
YES. In the latter case, Sections 76 and 58(D) of the NIRC specifically make the option to seek a refund
available to the taxpayer. The CIR submits thus that the only option available to taxpayers in case of
excess creditable VAT withheld is to apply the excess credits to succeeding quarters. But the amounts
involved in this case are creditable withholding taxes, not final taxes subject to withholding. As the CTA
correctly points out, taxes withheld on certain payments under the creditable withholding tax system
are but intended to approximate the tax due from the payee. The withheld taxes remitted to the BIR are
treated as deposits or advances on the actual tax liability of the taxpayer, subject to adjustment at the
proper time when the actual tax liability can be fully and finally determined. Even if the law does not
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expressly state that Ironcon’s excess creditable VAT withheld is refundable, it may be the subject of a
claim for refund as an erroneously collected tax under Sections 204(C) and 229.
Even if the law does not expressly state that Ironcon’s excess creditable VAT withheld is refundable, it
may be the subject of a claim for refund as an erroneously collected tax under Sections 204(C) and
229. The rule is that before a refund may be granted, respondent Ironcon must show that it had not used
the creditable amount or carried it over to succeeding taxable quarters. Substantial justice dictates that the
government should not keep money that does not belong to it at the expense of citizens. Since he ought
to know the tax records of all taxpayers, petitioner CIR could have easily disproved the claimant’s
allegations. That he chose not to amounts to a waiver of that right. Also, the CIR failed in this case to
make a timely objection to or comment on respondent Ironcon’s offer of the documents in question despite
an opportunity to do so. Taking all these circumstances together, it was sufficiently proved that Ironcon’s
excess creditable VAT withheld was not carried over to succeeding taxable quarters.
Allied Banking Corporation vs. CIR, G.R. No. 175097, Feb. 5, 2010.
Facts:
The petitioner timely filed a protest after receiving the PAN. In response thereto, the BIR issued a Formal
letter of Demand with Assessment Notices, (which read in part):
“It is requested that the above deficiency tax be paid immediately upon receipt hereof, inclusive of
penalties incident to delinquency. This is our final decision based on investigation. If you disagree, you
may appeal the final decision within thirty (30) days from receipt hereof, otherwise said deficiency tax
assessment shall become final, executory and demandable.”
Pursuant to this, the petitioner filed a Petition for Review with the CTA instead of protesting the final
assessment notices.
Issue: Should the action be given due course?
Ruling: Yes. If we strictly apply the rules, the dismissal of the Petition for Review by the CTA was proper.
However, a careful reading of the Formal Letter of Demand with Assessment Notices leads us to agree
with petitioner that the instant case is an exception to the rule on exhaustion of administrative remedies,
i.e., estoppel on the part of the administrative agency concerned.
In this case, records show that petitioner disputed the PAN but not the Formal Letter of Demand with
Assessment Notices. Nevertheless,we cannot blame petitioner for not filing a protest against the Formal
Letter of Demand with Assessment Notices since the language used and the tenor of the demand letter
indicate that it is the final decision of the respondent on the matter. We have time and again reminded the
CIR to indicate, in a clear and unequivocal language, whether his action on a disputed assessment
constitutes his final determination thereon in order for the taxpayer concerned to determine when his or
her right to appeal to the tax court accrues. Viewed in the light of the foregoing, respondent is now
estopped from claiming that he did not intend the Formal Letter of Demand with Assessment Notices to be
a final decision.
Republic of the Philippines represented by the Commissioner of Internal Revenue vs. Philippine
Airlines, Inc., (PAL), G.R. No. 179800, Feb. 4, 2010.
Facts:
CIR is the duly authorized government official empowered, among others, to refunderroneously collected
taxes. To meet the exigencies of its daily business operations, PAL availed of the communication services
of the PLDT. For the period Jan. 1, 2002 to Dec.31, 2002, PAL allegedly paid PLDT the 10% [Overseas
Communications Tax] OCT in the amount of P134, 431.95 on its overseas telephone calls. PAL, through
Diaz, filed with the Commissioner a claim for refund in the amount of P134,431.95 representing the total
amount of 10% OCT paid to PLDT from January to December 2002 citing as legal bases Sec. 13 of PD
No. 1590and BIR Ruling No. 97-94. Due to the Commissioner’s inaction, PAL appealed and argued that
since it incurred negative taxable income for fiscal years 2002 and 2003 and opted for zero basic
corporate income tax, which was lower than the 2% franchise tax, PAL had complied with the, in lieu of all
other taxes clause of PD No.1590.Thus, it was no longer liable for all other taxes of any kind,nature, or
description, including the 10% OCT, and the erroneous payments thereof entitled it to a refund pursuant to
its franchise.CIR disagreed. It maintained that Sec. 120 of NIRC, imposes 10% OCT on overseas
dispatch, message or conversion originating from the Philippines, which includes PLDT communication
services. It further stated that respondent PAL, in order for it to be not liable for other taxes, in this case
the 10% OCT, should pay the 2% franchise tax, since it did not pay any amount as its basic corporate
income tax.CTA Second Division ruled that PAL was not required to pay the 10% OCT and, therefore,
was not entitled to the refund, based on the, in lieu of all taxes provision under Sec. 13 of P.D. No.
1590,respondent PAL’s franchise.The CTA En Banc upheld the Decision of the CTA Second Division.
Issue: Whether the respondent is exempt from the 10% overseas employment tax under its franchise, PD
1590, and therefore, entitled to the refund prayed for.
Ruling: Respondent Philippine Airlines is exempt from the10% Overseas Communications Tax (OCT)
and therefore, entitled to the refund requested. Given the foregoing, and the fact that the 10%
OCTproperly falls within the purview of the all other taxesproviso in P.D. No. 1590, this Court holds that
respondent PAL is exempt from the 10% OCT and, therefore, entitled to the refund requested.It is clear
from the foregoing thatthis Court had already settled the issue of whether or not there was a need for the
actual payment of tax, either the basic corporate income tax or the 2% franchise tax, before therein
respondent PAL could avail itself of the in lieu of all other taxes provision under its Charter. This Court
finds no cogent reason to deviate from the ruling in the said case.
PAL’s franchise exempts it from paying any tax other than the option it chooses: either the „basic
corporate income tax or the two percent gross revenue tax.Petitioner contends thatsince PD. No. 1590
does not provide for an exemption from the payment oftaxes, any claim of exemption from the payment
thereof must be strictlyconstrued against the taxpayer. Said position is, however, dispelled by CIR vs.
PAL, 504 SCRA 90 (2006), where this Court ruled: While the Court recognizes the gen. rule that thegrant
of tax exemptions is strictly construed against the taxpayer and in favor of the taxing power, Section 13 of
the franchise of respondent leaves no room for interpretation. Its franchise exempts it from paying any
taxother than the option it chooses: either the basic corporate income tax or the two percent gross
revenue tax.
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