Questions and Answers On Significant Supreme Court Taxation Law Jurisprudence From January 2013 To June 2018

QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE

FROM JANUARY 2013 TO JUNE 2018
PIERRE MARTIN D. REYES
GENERAL PRINCIPLES
Q. ABC Petroleum sold XYZ Airlines
Q. The City of Manila imposed against ABC petroleum fuel. ABC Petroleum passed on
a tax on manufacturers under Section 14 of the related excise tax to XYZ Airlines. Now,
the Revenue Code of Manila and at the same XYZ Airlines sought to refund the said excise
time a tax on other businesses under Section taxes on the basis of the tax exemption
21 of the same Code. ABC argues that the privileges provided for in its franchise. The
collection of taxes under both Sections 14 CIR argues that XYZ Airlines has no
and 21 of the Code constitutes double personality to file the subject tax refund
taxation. Is ABC correct? claim because it is not the statutory
taxpayer. Does XYZ Airlines have
Yes. While the City of Manila could impose personality to file the refund?
against ABC a manufacturer's tax under
Section 14 of the Revenue Code of Manila, it Yes. The rule in the Silkair case is inapplicable
cannot at the same time impose the tax under to a case where the party to which the
Section 21 of the same code; otherwise, an economic burden is shifted is provided an
obnoxious double taxation would set in. exemption from both direct and indirect taxes.
In Silkair, the Court held that the the proper
Citing its previous ruling in The City of Manila party to question, or seek a refund of, an
v. Coca-cola Bottlers, Inc., G.R. No. 181845, indirect tax is the statutory taxpayer, the
August 4, 2009, there is indeed double person on whom the tax is imposed by law
taxation if the taxpayer is subjected to the and who paid the same even if he shifts the
taxes under both Sections 14 and 21 of Tax burden thereof to another.
Ordinance No. 7794, since these are being
imposed: (1) on the same subject matter – the The abovementioned rule should not apply to
privilege of doing business in the City of instances where the law clearly grants the
Manila; (2) for the same purpose - to make party to which the economic burden of the tax
persons conducting business within the City is shifted an exemption from both direct and
of Manila contribute to city revenues; (3) by indirect taxes. In which case, the latter must
the same taxing authority-petitioner City of be allowed to claim a tax refund even if it is
Manila; (4) within the same taxing jurisdiction not considered as the statutory taxpayer
- within the territorial jurisdiction of the City of under the law.
Manila; (5) for the same taxing periods – per
calendar year; and (6) of the same kind or The Court applied the Maceda case, where it
character - a local business tax imposed on upheld the National Power Corporation’s
gross sales or receipts of the business (City of (NPC) claim for a tax refund since its own
Manila v. Cosmos Bottling Corporation, G.R. charter specifically granted it an exemption
No. 196681, June 27, 2018) from both direct and indirect taxes.
Page 1 of 36
NOTICE
This material supplements the author’s 2013 Bar Reviewer and its supplements. No portion of this
work may be copied or reproduced without the written permission of the author. Possessors may
reproduce and distribute this supplement provided the name of the author remains clearly
associated with my work and no alterations in the form and content of this supplement are made.
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
The propriety of a tax refund claim is hinged of the disposition made of such income shall
on the kind of exemption which forms its be subject to income tax. Is the BIR correct?
basis. If the law confers an exemption from
both direct or indirect taxes, a claimant is No. The income, revenues and assets of non-
entitled to a tax refund even if it only bears the stock, non-profit educational institutions
economic burden of the applicable tax. On the proved to have been used actually, directly,
other hand, if the exemption conferred only and exclusively for education purposes are
applies to direct taxes, then the statutory exempt from duties and taxes.
taxpayer is regarded as the proper party to file
the refund claim, (Commissioner of Internal There is a distinction between the tax
Revenue v. Philippine Airlines, G.R. Nos. treatment of non-stock, non-profit
212536-37, August 27, 2014; Philippine educational institutions and proprietary
Airlines v. Commissioner of Internal educational institutions. The latter is granted
Revenue, G.R. No. 198759, July 1, 2013) tax exemption conditioned only on the actual,
direct and exclusive use of their revenues and
NOTE: This was later clarified in Chevron assets for educational purposes while tax
Philippines v. Commissioner of Internal exemptions for the former are subject to
Revenue, G.R. No. 210836, September 1, limitations imposed by law such as Section
2015. In Chevron, the Supreme Court held 30(H) of the Tax Code. The Tax Code cannot
that, as a general rule, it is the statutory qualify the exemption constitutionally-
taxpayer, not the party who only bears the granted to non-stock, non-profit educational
economic burden, who is entitled to claim the institutions. (Commissioner of Internal
tax refund or tax credit. However, this rule Revenue v. De La Salle University, G.R. No.
does not apply where the law grants the party 196596, 198841, and 198941, November 9,
(to whom the economic burden of the tax is 2016)
shifted) an exemption from both direct and
indirect taxes. Such party may claim the It is clear and unmistakable from the
refund or tax credit even if it is not the Constitution that non-stock, non-profit
statutory taxpayer. The general rule applied in educational institutions are constitutionally
the case because Chevron did not pass on the exempt from tax on all revenues derived in
excise taxes. pursuance of its purpose as an educational
institution and used actually, directly and
Q. A non-stock, non-profit educational exclusively for educational purposes. This
institution argues that is rental income from constitutional exemption gives the non-stock,
restaurants/canteens and bookstores non profit educational institutions a distinct
operating within its campus are exempt character. And for the constitutional
from income tax considering that such exemption to be enjoyed, jurisprudence and
revenues derived therefrom are used for tax rulings affirm the doctrinal rule that there
educational purposes. The BIR argues that are only two requisites: (1) The school must be
under the Tax Code, income of whatever non-stock and non-profit; and (2) The income
kind and character of a non-stock and non- is actually, directly and exclusively used for
profit educational institution from any of its educational purposes. There are no other
properties, real or personal, or from any of conditions and limitations. (RMO 44-2016
its activities conducted for profit regardless dated July 25, 2016 as cited in Commissioner
Page 2 of 36
NOTICE
This material supplements the author’s 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar
Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
are made. No stamping is allowed.
of Internal Revenue v. St. Paul College of funded portion of the project. Thus,
Makati, G.R. No. 215383, March 8, 2017) Mitsubishi filed for a claim for refund. The
BIR argues that (a) Mitsubishi is not entitled
Q. St. Lukes Medical Center (SLMC) is a to the refund as the Exchange of Notes
hospital organized as a non-stock and non- cannot be read as a treaty validly granting
profit corporation. It admits both paying and tax exemption considering the lack of
non-paying patients. The BIR claimed that Senate concurrence; and (b) that, based on
SLMC was liable for income tax at 10% as a revenue memorandum circular it issued,
provided under Section 27(B) of the NIRC. the proper remedy of Mitsubishi is to recover
SLMC argues that it is a non-stock, non- or obtain a refund from the National Power
profit institution for charitable and social Corporation, the executing agency. Is the
welfare purposes exempt from income tax BIR correct?
under Section 30(E) and (G) of the NIRC. Is
SLMC correct? No. The subject taxes was erroneously
collected from the taxpayer, considering that
No. To be exempt, Section 30(E) and (G) of the obligation to pay the same had already
the NIRC requires an institution to operate been assumed by the Philippine Government
exclusively for charitable or social welfare by virtue of its Exchange of Notes with the
purpose. In case an exempt institution earns Japanese Government. Case law explains that
income from its profit activities, it will not lose an exchange of notes is considered as an
its tax exemption. However, its income from executive agreement, which is binding on the
profit activities shall be subject to income tax. State even without Senate concurrence.
For proprietary educational institutions and
hospitals, the rate shall be 10%. Further, the Tax Code vests upon the CIR,
(Commissioner of Internal Revenue v. St. being the head of the BIR, the authority to
Luke’s Medical Center, G.R. No. 203514, credit or refund taxes which are erroneously
February 13, 2017) collected by the government. This specific
statutory mandate cannot be overridden by
Q. The governments of Japan and the averse interpretations made through mere
Philippines executed an Exchange of Notes, administrative issuances, which - as argued
whereby the former agreed to extend a loan by the CIR - shifts to the executing agencies
amounting to Forty Billion Four Hundred the power to refund the subject taxes.
Million Japanese Yen (¥40,400,000,000) to (Mitsubishi Corporation – Manila Branch v.
the latter for the implementation of a Coal- Commissioner of Internal Revenue, G.R. No.
Fired Thermal Power Plant Project. In 175772, June 29, 2017)
Paragraph 5 (2) of the Exchange of Notes,
the Philippine Government, by itself or INCOME TAX
through its executing agency, i.e. National
Power Corporation, undertook to assume all
Q. ABC Airways is a foreign airline. While it
taxes imposed by the Philippines on
did not carry passengers and/or cargo to or
Japanese contractors, i.e. Mitsubishi
from the Philippines, ABC maintains a
Corporation, engaged in the Project.
general sales agent of its tickets in the
Mitsubishi Corporation included in its
Philippines. Is the sale of the tickets taxable
income tax payments to the BIR income
as income from sources within the
pertaining to the Japanese Government-
Page 3 of 36
NOTICE
Philippines? corporations from the sale of real properties

are taxed differently. Individuals are taxed on
A. Yes. An offline international air carrier capital gains from sale of all real properties
selling passage tickets in the Philippines, located in the Philippines and classified as
through a general sales agent, is a resident capital assets. For corporations, the National
foreign corporation doing business in the Internal Revenue Code of 1997 treats the sale
Philippines. As such, it is taxable under of land and buildings, and the sale of
Section 28(A)(1), and not Section 28(A)(3) of machineries and equipment, differently.
the 1997 National International Revenue Domestic corporations are imposed a 6%
Code, subject to any applicable tax treaty to capital gains tax only on the presumed gain
which the Philippines is a signatory. (Air realized from the sale of lands and/or
Canada v. Commissioner of Internal buildings. The National Internal Revenue Code
Revenue, G.R. No. 169507, January 11, 2016) of 1997 does not impose the 6% capital gains
tax on the gains realized from the sale of
Q. ABC is a PEZA-registered corporation machineries and equipment. Therefore, only
engaged in the business of manufacturing the presumed gain from the sale of
microprocessors. After its registration, ABC petitioner’s land and/or building may be
constructed buildings and purchased subjected to the 6% capital gains tax. The
machineries and equipment. ABC failed to income from the sale of petitioner’s
commence operations. ABC sold the said machineries and equipment is subject to the
building and its machineries and equipment provisions on normal corporate income tax.
to another PEZA-registered enterprise. Are (SMI-ED Philippines v. Commissioner of
properties considered “capital assets” or Internal Revenue, G.R. No. 175410,
ordinary assets”? November 12, 2014)
A. The properties are not among the Q. A law was passed granting income tax
exclusions enumerated in Section 39(A)(1) of exemption for minimum wage earners
the National Internal Revenue Code of 1997 (MWE) as well as increase in personal and
which defines “ordinary assets.” None of the additional exemptions. The law became
properties were used in trade or ordinary effective on July 6, 2008. The BIR issued a
course of business because petitioner never revenue regulation providing for (a) the
commenced operations. They were not part of prorated application of the personal and
the inventory. None of them were stocks in additional exemptions for taxable year 2008
trade. Based on the definition of capital assets and for the period of applicability of the
under Section 39 of the National Internal MWE exemption for taxable year 2008 to
Revenue Code of 1997, they are capital begin only on 6 July 2008; and (b) the
assets. (SMI-ED Philippines v. Commissioner disqualification of MWEs who earn purely
of Internal Revenue, G.R. No. 175410, compensation income, whether in the
November 12, 2014) private or public sector, from the privilege of
availing themselves of the MWE exemption
Q. Differentiate between the tax treatment in case they receive compensation related
of capital gains of individuals and benefits exceeding the statutory ceiling of
corporations from the sale of real properties. P30,000 (now P82,000). Is the revenue
regulation valid?
A. Capital gains of individuals and
Page 4 of 36
NOTICE
No. The personal and additional exemptions payments, shall be paid in full without
should be applied to the entire taxable year deductions, as MERALCO shall bear the
2008. The test is whether the new set of obligation of paying and remitting to the BIR
personal and additional exemptions was the final withholding tax. MERALCO paid
available at the time of the filing of the income and remitted to the BIR the corresponding
tax return. In other words, while the status of final withholding taxes. Is the income
the individual taxpayers is determined at the derived by NORD/LB subject to income tax?
close of the taxable year, their personal and
additional exemptions - and consequently the A. No. NORD/LB is owned, controlled or
computation of their taxable income - are enjoying refinancing from the Federal
reckoned when the tax becomes due, and not Republic of Germany, a foreign government.
while the income is being earned or received. Section 32(B)(7)(a) of the Tax Code, as
As in the case of the adjusted personal and amended, exempts from income tax income
additional exemptions, the MWE exemption derived from investments in the Philippines in
should apply to the entire taxable year 2008, loans by financing institutions owned,
and not only from 6 July 2008 onwards. controlled, or enjoying refinancing from
foreign governments. (Commissioner of
The revenue regulations adds a requirement Internal Revenue v. Meralco, G.R. No.
not found in the law by effectively declaring 181459, June 9, 2014)
that an MWE who receives other benefits in
excess of the statutory limit is no longer In 2001, the Caucus of Development NGO
entitled to the exemption provided by the law. Networks (CODE-NGO) with the assistance
To be exempt, one must be an MWE, a term of its financial advisors, requested an
that is clearly defined. Section 22(HH) says approval from the Department of Finance
he/she must be one who is paid the statutory for the issuance by the Bureau of Treasury
minimum wage if he/she works in the private of 10-year zero-coupon treasury bonds. The
sector, or not more than the statutory said bonds would initially be purchased by a
minimum wage in the non-agricultural sector special purpose vehicle on behalf of CODE-
where he/she is assigned, if he/she is a NGO and then repackaged and sold at a
government employee. Thus, one is either an premium to investors as Poverty Eradication
MWE or he/she is not. Simply put, MWE is the and Alleviation Certificates or PEACe Bonds.
status acquired upon passing the litmus test - The net proceeds from the sale will be used
whether one receives wages not exceeding to endow a permanent fund to finance
the prescribed minimum wage.(Soriano v. meritorious activities and projects of
Secretary of Finance, G.R. Nos. 184450, accredited non-government organizations
184508, 184538, and 185234, January 24, (NGOs) throughout the country. The BIR
2017) issued BIR Ruling No. 020-2001 which
confirmed that the PEACe Bonds would not
Q. MERALCO obtained a loan from be classified as deposit substitutes and
Norddeutsche Landesbank Girozentrale would not be subject to the corresponding
(NORD/LB) Singapore Branch, which is a withholding tax. This was reiterated in
foreign government-owned financing subsequent rulings. During the auction,
institution of Germany. Under the loan RBCB which participated on behalf of
agreement, the income received by CODE-NGO was declared the winning
NORD/LB, by way of MERALCO’s interest bidder having tendered the lowest bids.
Page 5 of 36
NOTICE
RCBC entered into an underwriting Bonds by the Bureau of Treasury to

agreement with CODE-NGO whereby RBCB RCBC/CODE-NGO; and (2) the sale and
was appointed as the Issue Manager and distribution by RCBC (underwriter) on
Lead Underwriter for the offering of the behalfof CODE-NGO of the PEACe Bonds to
PEACe Bonds. In the agreement, CODE-NGO undisclosed investors. It may seem that there
represented that all income derived from the was only one lender — RCBC on behalf of
Bonds, inclusive of premium on redemption CODE-NGO — to whom the PEACe Bonds
and gains on the trading of the same, are were issued at the time of origination.
exempt from all forms of taxation as
confirmed by BIR Rulings. RCBC then sold However, a reading of the underwriting
the government bonds in the secondary agreement and RCBC term sheet reveals that
market. However, in 2011, the BIR issued the settlement dates for the sale and
BIR Ruling No. 370-2011 declaring that the distribution by RCBC Capital (as underwriter
PEACe Bonds being deposit substitutes are for CODE-NGO) of the PEACe Bonds to
subject to the 20% final withholding tax. various undisclosed investors would fall on
Pursuant to this ruling, the Secretary of the same day, October 18, 2001, when the
Finance directed the Bureau of Treasury to PEACe Bonds were supposedly issued to
withhold a 20% final tax from the face value CODE-NGO/RCBC. In reality, therefore, the
of the PEACe Bonds upon their payment at entire borrowing received by the Bureau of
maturity on October 18, 2011. Is the discount Treasury in exchange for the PEACe Bonds
or interest income arising from the PEAce was sourced directly from the undisclosed
bonds subject to the 20% final withholding number of investors to whom RCBC
tax? Capital/CODE-NGO distributed the PEACe
Bonds — all at the time of origination or
A. No. The term ‘deposit substitutes’ shall issuance. However, the number of investors to
mean an alternative form of obtaining funds which the PEACe Bonds were sold to by RCBC
from the public other than deposits, through is not known. Should there have been a
the issuance, endorsement, or acceptance of simultaneous sale to 20 or more
debt instruments for the borrower’s own lenders/investors, the PEACe Bonds are
account, for the purpose of relending or deemed deposit substitutes and RCBC
purchasing of receivables and other Capital/CODE-NGO would have been obliged
obligations, or financing their own needs or to pay the 20% final withholding tax on the
the needs of their agent or dealer. The term interest or discount from the PEACe Bonds.
'public' means borrowing from twenty (20) or Further, the obligation to withhold the 20%
more individual or corporate lenders at any final tax on the corresponding interest from
one time). Based on this definition, the number the PEACe Bonds would likewise be required
of lenders is determinative of whether a debt of any lender/investor had the latter turned
instrument should be considered a deposit around and sold said PEACe Bonds, whether
substitute and consequently subject to the in whole or part, simultaneously to 20 or more
20% final withholding tax. lenders or investors.
BIR Ruling No. 370-2011 is void because it It must be noted, however, that interest
completely disregarded the 20 or more lender income received by individuals from long-term
rule. The transactions executed for the sale of deposits or investments with a holding period
the PEACe Bonds are: (1) the issuance of the of not less than five (5) years is exempt from
Page 6 of 36
NOTICE
the final tax. Thus, should the PEACe Bonds securities to final holders. When the GSED
be found to be within the coverage of deposit sells the government securities to 20 or more
substitutes, the proper procedure was for the investors, the government securities are
Bureau of Treasury to pay the face value of deemed to be in the nature of a deposit
the PEACe Bonds to the bondholders and for substitute, taxable as such. (Banco de Oro v.
the Bureau of Internal Revenue to collect the Republic, G.R. No. 198756, August 16, 2016)
unpaid final withholding tax directly from
RCBC Capital/CODE-NGO, or any lender or Q. The taxpayer initially opted to be
investor if such be the case, as the withholding refunded of its excess creditable tax for
agents. (Banco de Oro v. Republic, G.R. No. 2006 through the issuance of a tax credit
G.R. No. 198756, January 13, 2015) certificate. The taxpayer subsequently
indicated in its 2007 ITR that it carried over
Q. The BIR contends that the 20-lender rule the 2006 excess creditable tax and applied
should not strictly apply to issuances of the same against income tax due for 2007.
government debt instruments, which by The taxpayer filed with the BIR a claim for
nature, are borrowings from the public. refund and/or issuance of a TCC for the
Considering that the PEACe Bonds were alleged excess credit for 2006. This was later
intended to be freely tradable in the elevated to the Court of Tax Appeals (CTA).
secondary market to 20 or more Both CTA Division and CTA En Banc ruled
lenders/investors, they, like other similarly that the taxpayer effectively exercised the
situated government securities-awarded to carry-over option when it included the
19 or less Government Securities Eligible excess tax credit for 2006 in the original ITR
Dealers (GSEDs) in the primary market but for 2007. The taxpayer, on the other hand,
freely tradable to 20 or more contended that the option to be refunded
lenders/investors in the secondary market through the issuance of a TCC is irrevocable.
should be treated as deposit substitutes Thus, when it indicated in its annual ITR for
subject to the 20% final withholding tax. Is 2006 the option “To be issued a Tax Credit
the BIR’s contention correct? Certificate,” such choice precluded the other
option to carry over. Is the taxpayer correct?
No. The definition of deposit substitutes in
Section 22(Y) specifically defined "public" to No. The irrevocability rule is limited only to the
mean "twenty (20) or more individual or option of carry-over. There is nothing in the
corporate lenders at any one time." Hence, law which prevents the taxpayer who
reckoning of whether there are 20 or more originally opted for a refund or TCC to shift to
individuals or corporate lenders is crucial in the carry-over of the excess creditable taxes
determining the tax treatment of the yield to the taxable quarters of the succeeding
from the debt instrument. In other words, if taxable years. However, if the taxpayer
there are 20 or more lenders, the debt decides to shift its option to carry-over, it may
instrument is considered a deposit substitute no longer revert to its original choice due to
and subject to 20% final withholding tax. the irrevocability rule. Here, the taxpayer is
barred from recovering its excess creditable
The existence of 20 or more lenders should be tax for 2006 through refund or TCC since it
reckoned at the time when the successful constructively chose the option of carry-over
GSED-bidder distributes (either by itself or when, despite its initial option to refund, it
through an underwriter) the government subsequently indicated in its 2007 ITR that it
Page 7 of 36
NOTICE
carried over the 2006 excess creditable tax 1. Section 72 (now Section 79), which
and applied the same against income tax due provides that an employer is required to
for 2007. (University Physicians Services, deduct and pay the income tax on
Inc. – Management, Inc. v. Commissioner of compensation paid to its employees,
Internal Revenue, G.R. No. 205955, 7 March either actually or constructively.
2018) 2. Section 39 (now Section 35), which
provides that deductions from gross
Q. When is the payor/employer obliged to income are taken for the taxable year in
deduct and withhold the related withholding which “paid or accrued” or “paid or
taxes on accrued bonuses? incurred” is dependent upon the
method of accounting income and
The obligation of the payor/employer to expenses adopted by the taxpayer. If
deduct and withhold the related withholding the taxpayer is on cash basis, the
tax arises at the time the income was paid or expense is deductible in the year it was
accrued or recorded as expense in the paid, regardless of the year it was
payor’s/employer’s books, whichever comes incurred. If he is on the accrual method,
first. he can deduct the expense upon
In ING Bank v. Commissioner of Internal accrual thereof.
Revenue, G.R. No. 167679, July 22, 2015, at 3. Section 29(j) (now Section 34(K)), which
issue is whether ING Bank was liable for provides that, as a condition for
deficiency withholding tax on accrued deductibility of an expense, the tax
bonuses for the taxable years 1996 and 1997. required to be withheld on the amount
The accrued bonuses were recorded in ING paid or payable must be shown to have
Bank’s books as expenses for taxable years been remitted to the BIR by the
1996 and 1997, although no withholding of withholding agent.
tax was effected. ING Bank asserted that the Reconciling the above provisions, the
liability of the employer to withhold the tax Court held that the obligation of the
does not arise until such bonus is actually payor/employer to deduct and withhold
distributed. Since the supposed bonuses were the related withholding tax arises at the
not distributed to the officers and employees time the income was paid or accrued or
in 1996 and 1997 but were distributed in the recorded as an expense in the
succeeding year when the amounts of the payor’s/employer’s books, whichever
bonuses were finally determined, ING Bank comes first.
asserts that its duty as employer to withhold
the tax during these taxable years did not Q. The BIR assessed ABC with deficiency
arise. final withholding taxes (FWT) on interest
The Supreme Court ruled that ING bank is payments on loan agreements with XYZ for
liable for the withholding tax on the bonuses the taxable year 2000. The CTA found that
since it claimed the same as expenses in the ABC was not liable for the said deficiency
year they were accrued. Three provisions of FWT since its liability for interest payment
the NIRC of 1997, as amended, were became due and demandable only on June 1,
reconciled: 2002. The BIR contends that ABC was liable
to pay the interest from the date of the
execution of the contract on January 5, 2000,
Page 8 of 36
NOTICE
not from the date of first payment on June 1, shall be the fair market value. The difference
2002. Is the BIR correct? between the book value and the selling price
in the sales transaction is taxable donation
No. Under Section 2.57.4 of RR No. 2-98, the subject to donor’s tax. (Philippine American
obligation of ABC to deduct or withhold tax Life and General Insurance Company v. The
arises at the time an income is paid or Secretary of Finance and Commissioner of
payable, whichever comes first. Further, the Internal Revenue, G.R. No. 210987,
same Section provides that the term November 24, 2014)
“payable” refers to the date the obligation
becomes due, demandable or legally VALUE-ADDED TAX
enforceable. (Edison (Bataan) Cogeneration
Corporation v. Commissioner of Internal Q. Invoking Section 108(B)(2) of the Tax
Revenue, G.R. No. 201665, August 30, 2017) Code, a business process outsourcing
company filed a claim for refund or credit of
input VAT attributable to zero-rated sales of
DONOR’S TAX its call services to foreign corporations. Is it
indispensable that the said company prove
Q. Philamlife owns 498,590 shares in Philam that the recipient of its call services are
Care Health Systems. To divest itself of foreign corporations doing business outside
interests in the health maintenance the Philippines?
organization industry, Philamlife sold the
said shares to STI Investments at a price Yes. An essential condition to qualify for zero-
lower than their book value. The BIR rating under Section 108(B)(2) of the Tax
contends that donor’s tax became Code is that the service-recipient must be
imposable on the price difference. Philamlife doing business outside the Philippines. A
argues that the same is not subject to taxpayer claiming for a VAT refund or credit
donor’s tax as there was no donative intent. under Section 108(B)(2) has the burden to
Is the Philamlife correct? prove not only that the recipient of the service
is a foreign corporation, but also that said
No. The absence of donative intent, if that be corporation is doing business outside the
the case, does not exempt the sales of stock Philippines. (Sitel v. Commissioner of Internal
transaction from donor's tax since Sec. 100 of Revenue, G.R. No. 201326, February 8, 2017)
the Tax Code categorically states that the
amount by which the fair market value of the Q. What are the rules on the determination
property exceeded the value of the of the prescriptive period for filing a tax
consideration shall be deemed a gift. Thus, refund or credit of unutilized input VAT?
even if there is no actual donation, the
difference in price is considered a donation by The rules are as follows:
fiction of law. Pursuant to RR 6-2008, “fair
market value” shall be, in the case of shares of 1. An administrative claim must be filed
stock not listed and traded in the local stock with the CIR within two years after the
exchanges, the book value of the shares of close of the taxable quarter when the
stock as shown in the financial statements zero-rated or effectively zero-rated
duly certified by an independent certified sales were made.
public accountant nearest to the date of sale
Page 9 of 36
NOTICE
2. The CIR has 120 days from the date of Internal Revenue, G.R. No. 197519,
submission of complete documents in November 8, 2017; Commissioner of
support of the administrative claim Internal Revenue, G.R. No. 209306,
within which to decide whether to September 27, 2017; Harte-Hanks
grant a refund or issue a tax credit Philippines v. Commissioner of
certificate. The 120-day period may Internal Revenue, G.R. No. 205721,
extend beyond the two-year period September 14, 2016; Tekenaka
from the filing of the administrative Corporation v. Commissioner of
claim if the claim is filed in the later part Internal Revenue, G.R. No. 193321,
of the two-year period. If the 120-day October 19, 2016; Commissioner of
period expires without any decision Internal Revenue v. Deutsche
from the CIR, then the administrative Knowledge Services, G.R. No. 211072,
claim may be considered to be denied November 7, 2016; Deutsche
by inaction. Knowledge Services Pte v.
Commissioner of Internal Revenue,
3. A judicial claim must be filed with the G.R. No. 197980, December 1, 2016;
CTA within 30 days from the receipt of Sitel v. Commissioner of Internal
the CIR’s decision denying the Revenue, G.R. No. 201326, February 8,
administrative claim or from the 2017; Visayas Geothermal v.
expiration of the 120-day period Commissioner of Internal Revenue,
without any action from the CIR. G.R. No. 205279, April 26 2017;
Marubeni Philippines v. Commissioner
4. All taxpayers, however, can rely on BIR of Internal Revenue, G.R. 198485, June
Ruling No. DA-489-03 from the time of 5, 2017; Cargill Philippines, Inc. v. CIR,
its issuance on 10 December 2003 up G.R. No. 203774, March 11, 2015;
to its reversal by this Court in Aichi on 6 Commissioner of Internal Revenue v.
October 2010, as an exception to the Air Liquide, G.R. No. 210646, July 29,
mandatory and jurisdictional 120+30 2015; Commissioner of Internal
day periods. (Team Energy Revenue v. Toledo Power Company,
Corporation v. Commissioner of G.R. No. 195175 & 199645, August 10,
Internal Revenue, G.R. No. 197663 & 2015; Commissioner of Internal
G.R. No. 197770, March 14, 2018; Revenue v. Toledo Power Company,
Team Sual Corporation v. G.R. No. 196415 & 196451, December
Commissioner of Internal Revenue, 2, 2015; Commissioner of Internal
G.R. Nos. 201225-26, April 18, 2018; Revenue v. Mirant Pagbilao
CE Luzon Geothermal v. Corporation, G.R. No. 180434, January
Commissioner of Internal Revenue, 20, 2016; Silicon Philippines v.
G.R. No. 197526, July 26, 2017; Aichi Commissioner of Internal Revenue,
Forging Company v. Commissioner of G.R. No. 182737, March 2, 2016;
Internal Revenue, G.R. No. 193525, Miramar Fish Company Inc. v. CIR,
August 30, 2017; Procter & Gamble G.R. No. 185432, June 4, 2014; Visayas
Asia v. Commissioner of Internal Geothermal Power Company v. CIR,
Revenue, G.R. No. 205652, September G.R. No. 197525, June 4, 2014; CIR v.
6, 2017; Mindanao I Geothermal Mindanao II Geothermal Partnership,
Partnership v. Commissioner of G.R. No. 189440, June 18, 2014;
Page 10 of 36
NOTICE
Taganito Mining Corporation v. CIR,

G.R. No. 197591, June 18, 2014; San 1. The CIR has 120 days 1. As it now
Roque Power Corporation v. CIR, G.R. from the date of stands, RMC
No. 205543, June 30, 2014; CIR v. CE submission of complete 54-2014
Luzon Geothermal Power Company, documents to decide a dated June
G.R. No. 190198, September 17, 2014; claim for tax credit or 11, 2014
CNK Power Company Limited v. CIR, refund. Pursuant to mandates
G.R. No. 202066 and G.R. No. 205353, RMC No. 49-2003, that the
September 30, 2014; CIR v. Aichi, G.R. from the date an application
No. 183421, October 22, 2015; CIR v. administrative claim for for VAT
Burmeistor, G.R. No. 190021, October excess unutilized VAT refund/tax
22, 2014; Taganito Mining is filed, a taxpayer has credit must
Corporation v. CIR, G.R. No. 198076, 30 days within which to be
November 19, 2014; AT&T submit the accompanied
Communications Services Phils., Inc. v. documentary by complete
CIR, G.R. No. 185969, November 19, requirements sufficient supporting
2014; Taganito Mining Corporation v. to support his claim. documents.
CIR, G.R. No. 201195, November 26, 2. If in the course of the 2. Under the
2014; CBK Power Company Limited v.
investigation and current rule,
CIR, G.R. No. 198928, December 3, processing of the claim, the reckoning
2014; Mindanao II Geothermal additional documents of the 120-
Partnership v. CIR, G.R. No. 204745, are required for the day period
December 8, 2014; Panay Power
proper determination has been
Corporation v. CIR, G.R. No. 203351, of the legitimacy of the withdrawn
January 21, 2015; Nippon Express claim, the taxpayer- from the
(Philippines) Corporation v. CIR, G.R. claimants shall submit taxpayer by
No. 185666, February 4, 2015;
such documents within RMC 54-
Northern Mindanao Power thirty (30) days from 2014, since it
Corporation v. CIR, G.R. No. 185115, request of the requires him
February 18, 2015; Cargill Philippines, investigating/processin at the time he
Inc. v. CIR, G.R. No. 203774, March 11,
g office. Notice, by way files his claim
2015) of a request from the to complete
tax collection authority his
Q. When does the 120-day period begin to to produce the supporting
run?
complete documents in documents
A distinction must be made between claims these cases, is and attest
filed before June 14, 2014 and claims filed on essential. that he will no
June 14, 2014 to present. longer submit
3. Then, upon filing by the any other
taxpayer of his document to
Claims filed prior to Claims filed on complete documents to prove his
June 14, 2014 (RMC 49- June 14, 2014 to support his application, claim.
2003 – prevailing rule) present (RMC or expiration of the Further, the
54-2014 – period given, the BIR taxpayer is
prevailing rule) has 120 days within
Page 11 of 36
NOTICE
which to decide the barred from failure. (Commissioner of Internal Revenue v.

claim for tax credit or submitting Toledo Power Company, G.R. No. 196415 &
refund. additional 196451, December 2, 2015; Pilipinas Total
documents Gas v. Commissioner of Internal Revenue,
4. Should the taxpayer, after he has G.R. No. 207112, December 8, 2015)
on the date of filing, filed his
manifest that he no administrativ Q. Who determines when the completeness
longer wishes to e claim. Thus, of documents submitted in a claim for refund
submit any other the 120-day or tax credit of unutilized input taxes?
additional documents has to be
to complete his counted from It is the taxpayer who ultimately determines
administrative claim, the filing of when complete documents have been
the 120-day period the submitted for the purpose of commencing and
allowed to the BIR administrativ continuing the running of the 120-day period.
begins to run from the e claim. To allow the CIR to determine the
date of filing. (Pilipinas completeness of the documents submitted
Total Gas v. and, thus, dictate the running of the 120-day
5. In all cases, whatever period, would undermine these objectives, as
documents a taxpayer Commissione
r of Internal it would provide the CIR the unbridled power
intends to file to to indefinitely delay the administrative claim,
support his claim must Revenue,
G.R. No. which would ultimately prevent the filing of a
be completed within judicial claim with the CTA. Whether these
the 2-year period under 207112,
December 8, documents are actually complete as required
Section 112(A) of the by law – is for the CIR and the courts to
NIRC. 2015)
determine. (Pilipinas Total Gas v.
Commissioner of Internal Revenue, G.R. No.
Thus, for claims filed prior to June 14, 2014, 207112, December 8, 2015)
the 120-day period begins to run from the
date of submission of complete documents Q. ABC filed its administrative claim for the
supporting the administrative claim. If there is refund of excess and unused input VAT for
no evidence showing that the taxpayer was the 2nd quarter of taxable year 2008 on 28
required to submit – or actually submitted – December 2009. Counting 120+30 days, the
additional documents after the filing of the taxpayer should have elevated the same to
administrative claim, it is presumed that the the CTA on 27 May 2010. The judicial claim
complete documents accompanied the claim was belatedly filed on 6 July 2010. ABC now
when it was filed. (Silicon Philippines v. argues that it filed its complete documents
Commissioner of Internal Revenue, G.R. No. on 20 September 2010 and thus the 120-day
182737, March 2, 2016) period should be counted from said date. Is
ABC correct?
Failure of the taxpayer to submit all relevant
documents is not fatal to its claim for refund No. To allow the taxpayer’s position to prevail
or tax credit of unutilized input VAT. If the would set a dangerous precedent, as the
taxpayer indeed failed to submit the complete reckoning period for the 120 days would be at
documents in support of its application, the the mercy of taxpayers. They will then submit
CIR could have informed the taxpayer of its complete supporting documents even after
the two-year prescriptive period for filing an
Page 12 of 36
NOTICE
administrative claim has lapsed. This is documents

obviously not the intention of the law. The despite
burden of proving entitlement to a tax refund notice/request
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 The judicial claim The CTA may give
to necessarily include the filing of complete before the CTA credence to all
supporting documents to prove entitlement would be evidence
for the refund. Otherwise, the mere filing of an dismissible, not for presented by the
application without any supporting document lack of jurisdiction, taxpayer, including
would be as good as filing a mere scrap of but for the those that may not
paper. taxpayer’s failure have been
to substantiate the submitted to the
Peculiar to this case is that prior to the alleged claim at the CIR as the case is
completion of its supporting documents, the administrative being essentially
taxpayer had already filed its judicial claim level. decided in the first
with the CTA. Assuming arguendo that the instance. The
120-day period should commence to run only In case of claims taxpayer must
upon receipt of the complete documents or dismissed at the prove every minute
from 20 September 2010, the judicial claim administrative aspect of its case
will still fail. By that time, the period for filing level due to the by presenting and
an administrative application for a refund failure of the formally offering its
would have already on 30 June 2010 or two taxpayer to submit evidence to the
(2) years from the close of the taxable quarter supporting CTA, which must
when the relevant sales were made. (Hedcor, documents, it is, necessarily include
Inc. v. Commissioner of Internal Revenue, thus, crucial for a whatever is
G.R. No. 207575, July 15, 2015) taxpayer in a required for the
judicial claim for administrative
Q. If the taxpayer fails to submit a document refund or tax credit claim. (Pilipinas
at the administrative level, can the taxpayer to show that its Total Gas v.
cure such failure by filing the said document administrative Commissioner of
in its judicial claim before the CTA? claim should have Internal Revenue,
been granted in the G.R. No. 207112,
A distinction must, thus, be made between an first place. December 8, 2015)
administrative claimed appealed due to
inaction and those dismissed at the A taxpayer cannot
administrative level due to the failure of the cure its failure to
taxpayer to submit supporting documents. submit a document
requested by the
Administrative If the judicial claim BIR at the
claim dismissed by is an appeal due to administrative
the BIR due to the inaction of the BIR level by filing the
taxpayer’s failure said document
to submit before the CTA.
complete
Page 13 of 36
NOTICE
lots in October 2006. For the 1st quarter of

Q. Can an entity located within an ECOZONE 1997, ABC paid output taxes on the sale of
be entitled to refund of its unutilized input lots after deducting input taxes. Realizing
taxes? that the transitional input taxes were not
applied against the output VAT, which
No. ECOZONES are by legal fiction foreign would have resulted to no net output VAT
territory. Thus, sales made by suppliers from liability (the transitional input taxes being
a customs territory to a purchaser located higher), FBDC filed a claim for refund for the
within an ECOZONE shall be considered VAT payment. The BIR argues that (1)
exportations. Following the Cross Border transitional input tax is limited to
Doctrine and Destination Principle, no VAT improvements to real properties; and (2)
shall be imposed to form part of the cost of there should have been prior payment of
goods destined for consumption outside the taxes. Is the BIR correct?
territorial border of the taxing authority.
No. There is nothing in the law that prohibits
As such, purchases of goods and services that the inclusion of real properties, together
are destined for consumption within the with the improvements thereon, in the
ECOZONE should be free of VAT. No input beginning inventory of goods, materials and
should be paid on such purchases and thus supplies, based on which inventory the
the entity located within the ECOZONE is not transitional input tax credit is computed.
entitled to claim a tax refund or credit. Further, there is nothing in the law that
indicates that prior payment of taxes is
If the taxpayer paid the input VAT, the proper necessary for the availment of the transitional
recourse is not a claim for tax refund or credit input tax credit. All that is required is for the
against the government, but reimbursement taxpayer to file a beginning inventory with the
against the seller who shifted the output VAT. BIR. (Fort Bonifacio Development
(Coral Bay Nickel Corporation v. Corporation v CIR, G.R. Nos. 175707,
Commissioner of Internal Revenue, G.R. No. 180035, and 181092, November 19, 2014)
190506, June 13, 2016)
NOTE: The same issues have been passed
Q. ABC Corporation purchased from the upon in Fort Bonifacio Development
government in 1995 portion of the Fort Corporation v CIR, G.R. No. 173425, January
Bonifacio reservation, now known as the 22, 2013; Fort Bonifacio Development
Fort Bonifacio Global City. No VAT on the Corporation v CIR, G.R. No. 173425,
sale of the land was passed on by the September 4, 2012; Fort Bonifacio
government to ABC. On January 1, 1996, Development Corporation v CIR, G.R. Nos.
Republic Act 7716 took effect, which 158885 and 170680, October 2, 2009; Fort
extended the coverage of the VAT to sale of Bonifacio Development Corporation v CIR,
real properties held primarily for sale to G.R. Nos. 158885 and 170680, April 2, 2009.
customers or held for lease in the ordinary
course of business. In September 1996, ABC TAX REMEDIES UNDER THE NIRC
submitted to the BIR an inventory of all its
real properties, claiming that it is entitled to Q. A Letter of Authority (LOA) was issued
the transitional input tax credit on said authorizing the BIR officers to examine the
inventories. ABC started selling Global City books of account of the taxpayer for the
Page 14 of 36
NOTICE
taxable year 1998 only or, since the taxpayer void for having been unspecified on separate
adopted a fiscal year, for the period April 1, LOAs. (Commissioner of Internal Revenue v.
1997 to March 31, 1998. The deficiency tax De La Salle University, G.R. No. 196596,
assessment which the BIR eventually issued 198841, and 198941, November 9, 2016)
against the taxpayer was based on
disallowance of expenses reported in fiscal Q. Is an assessment based merely on a
year 1999, or for the period April 1, 1998 to Letter Notice (LN) valid?
March 31, 1999. Is the assessment valid?
No. An assessment based only on a LN is void.
No. The LOA gives notice to the taxpayer that A Letter of Authority (LOA) cannot be
it is under investigation for possible deficiency dispensed with just because none of the
tax assessment; at the same time it authorizes financial books or records being physically
or empowers a designated revenue officer to kept was examined. The SC opined that the
examine, verify, and scrutinize a taxpayer's statutory requirement of a LOA is not
books and records, in relation to internal dependent on whether the taxpayer may be
revenue required to physically open his books or
financial records but only on whether a
tax liabilities for a particular period. In this taxpayer is being subject to examination. A
case, the LOA shows that the period of LN is issued only for the purpose of notifying
examination is the taxable year 1998. A valid the taxpayer that a discrepancy is found
LOA does not necessarily clothe validity to an based on the BIR’s RELIEF System and
assessment issued on it, as when the revenue nothing more.
officers designated in the LOA act in excess or
outside of the authority granted them under Revenue Memorandum Order (RMO) No. 32-
said LOA. The taxable year covered by the 2005 states that in case the discrepancies
assessment being outside of the period shown in the LN remained unresolved within
specified in the LOA, the assessment issued 120 days from issuance of the LN, the revenue
against the taxpayer is void. (Commissioner officer shall recommend the issuance of a LOA
of Internal Revenue v. Lancaster, G.R. No. to replace the LN. Due process requires that
183408, July 12, 2017) the revenue officer should secure first a LOA
before proceeding with the further
Q. The BIR issued a Letter of Authority examination and assessment of a taxpayer.
authorizing its revenue officers to examine The Court cannot convert or treat the LN into
the taxpayer’s books of accounts and other the LOA required under the law. If no LOA is
accounting records for all internal revenue secured, the assessment on the basis of a LN
taxes for the period “Fiscal Year Ending is void. (Medicard Philippines v.
2003 and Unverified Prior Years.” Is the Commissioner of Internal Revenue, G.R. No.
assessment made pursuant to this Letter of 222743, April 5, 2017)
Authority valid?
Q. (1) What is the consequence if a FAN does
Partly. A LOA which contains a specified year not contain a definite due date for payment
and unverified prior years is not entirely void. by the taxpayer? (2) Can the reckoning date
The assessment for the year clearly specified of the accrual of the penalties and
remains to be valid while the assessments surcharges be considered as the due date for
which pertain to the unverified prior years are payment?
Page 15 of 36
NOTICE
A. Although the FAN and demand letter

(1) A Final Assessment Notice that does not issued to the taxpayer were not accompanied
contain a definite due date for payment by the by a written explanation of the legal and
taxpayer is void. factual bases of the deficiency taxes assessed
against the petitioner, the records showed
(2) The reckoning date of the accrual of that the BIR in its letter responded to the
penalties and surcharges cannot be taxpayer’s reply to the PAN, explaining at
considered as the due date for payment of tax length the factual and legal bases of the
liabilities In the absence of an actual due date, deficiency tax assessments. Considering the
a FAN does not contain a definite and actual foregoing exchange of correspondence and
demand to pay. (Commissioner of Internal documents between the parties, the
Revenue v. Fitness by Design, Inc., G.R. No. requirement of Section 228 was substantially
215957, November 9, 2016) complied with. The BIR had fully informed the
taxpayer in writing of the factual and legal
Q. The BIR issued a Letter of Authority to bases of the deficiency taxes assessment,
examine the books of account and other which enabled the latter to file an "effective"
accounting records of the taxpayer for protest. Petitioner's right to due process was
income and withholding taxes for the period thus not violated. (Samar-I Electric
1997 to 1999. BIR then sent a Notice of Cooperative v. CIR, G.R. No. 193100,
Informal Conference. Attached thereto is a December 10, 2014)
Summary Report containing an explanation
of the legal and factual bases for the Q. ABC Corporation was dissolved by
deficiency assessment. The taxpayer shortening its corporate term. As a result
requested for copies of working papers thereof, ABC moved out of its address in Las
indicating how the deficiency withholding Pinas City and transferred to Calamba
taxes were computed. The BIR promptly Laguna. ABC sent a notice of dissolution to
responded in a letter-reply. Thereafter, the the BIR as well as an update of information
taxpayer received a PAN which contained contained in its BIR Certificate of
the computations of its deficiency income Registration. ABC was assessed for
and withholding taxes. Attached to the PAN deficiency income taxes. The Final
was the detailed explanation of the Assessment Notice was sent via registered
particular provision of law and revenue mail to ABC’s former address in Las Pinas
regulation violated. The taxpayer replied to City. Is the assessment valid?
the PAN. The BIR replied in a letter
explaining the factual and legal bases of the No. The taxpayer’s right to due process is
deficiency assessment and denying the violated when there is no valid notice of
reply. A FAN and demand letter were then assessment sent to it. Here, the CIR was
issued, unaccompanied by any written aware of the new address and yet sent the
explanation of the legal and factual bases of assessment to the taxpayer’s former address.
the deficiency taxes assessed against the As a consequence thereof, the running of the
taxpayer. Is the assessment valid? three-year period was not suspended and
had already prescribed.1

1 Commissioner of Internal Revenue v BASF Coating + Inks Phils.,
Inc., G.R. No. 198677, November 26, 2014
Page 16 of 36
NOTICE
Q. What is the effect of failure of the waiver requirements specified under RMO No. 20-
to strictly conform to the requirements of a 90 and RDAO No. 01-05 become valid?
waiver of the statute of limitations under
RMO 20-90? Yes. Generally, a waiver of the statute of
limitations that does not comply with the
The requirements are mandatory and must requisites for its validity specified under RMO
strictly be followed. Defective and invalid No. 20-90 and RDAO 01-05 is invalid, but
waivers of Statute of Limitations do not may still be valid due to peculiar
extend the CIR's period to issue assessments. circumstances. In Commissioner of Internal
Thus, the right of the government to assess or Revenue v. Next Mobile, G.R. No. 212825,
collect the alleged deficiency taxes is already December 7, 2015, five (5) waivers were
barred by prescription. Assessments issued executed by the taxpayer and the BIR. The
by the BIR beyond the three-year prescriptive, CTA found the following defects: (1) they were
are considered void and of no legal effect. executed without a notarized board authority;
(Commissioner of Internal Revenue v. (2) the dates of acceptance by the BIR were
Systems Technology Institute, G.R. No. not indicated therein; and (3) the fact of
220835, July 26, 2017; Philippine Daily receipt by respondent of its copy of the
Inquirer v. Commissioner of Internal Second Waiver was not indicated on the face
Revenue, G.R. No. 213943, March 22, 2017) of the original Second Waiver.
The Court ruled that, due to peculiar

Q. If the taxpayer actively participated in the circumstances and as exception to the
administrative investigation by filing a general rule, the supposedly invalid waivers
request for reinvestigation, which resulted in may be considered valid for the following
a reduced assessment, does that fact reasons:
amount to estoppel that prescription can no
longer be invoked? 1. If the parties are in pari delicto or “in
equal fault” and thus they shall have no
No. The doctrine of estoppel cannot be action against each other. Taxpayer
applied as an exception to the statute of violated RMO No. 20-90 which states
limitations on the assessment of taxes that in case of a corporate taxpayer,
considering that there is a detailed the waiver must be signed by its
procedure for the proper execution of the responsible officials and RDAO 01-05
waiver, which the BIR must strictly follow. The which requires the presentation of a
BIR cannot hide behind the doctrine of written and notarized authority to the
estoppel to cover its failure to comply with BIR. Similarly, BIR violates its own rules
RMO 20-90 and RDAO 05-01, which the BIR when it did not ensure that the waiver
itself had issued. Having caused the defects in is duly signed by an authorized
the waivers, the BIR must bear the representative and by not ensuring that
consequence. It cannot simply shift the blame the delegation of authority is in writing
to the taxpayer. (Commissioner of Internal and duly notarized.
Revenue v. Systems Technology Institute,
G.R. No. 220835, July 26, 2017) 2. Parties who do not come to Court with
clean hands cannot be allowed to
Q. Can a waiver of the statute of limitations benefit from their own wrongdoing.
which does not comply with the Taxpayer should not be allowed to
Page 17 of 36
NOTICE
benefit from the flaws in its own taxpayer is obviously in bad faith.
waivers and successfully insist on their (Commissioner of Internal Revenue v.
invalidity in order to evade its Next Mobile, G.R. No. 212825, December
responsibility to pay taxes. 7, 2015)
3. Taxpayer is estopped from questioning Q. ABC received a Letter of Authority for the
the validity of its waivers. The taxpayer examination of its books of accounts for
executed 5 waivers and delivered them internal revenue purposes for the taxable
to the BIR and did not raise any year 2004. On October 9, 2007, the parties
objection against their validity until the executed a Waiver to extend the prescriptive
BIR assessed taxes against it. In its period for the year 2004 to June 20, 2008. On
Letter Protest to the BIR, respondent the part of ABC, this was signed by its
did not even question the validity of the Finance Manager. The waiver was followed
Waivers or call attention to their by another waiver extending the
alleged defects. prescriptive period to November 30, 2008.
4. The Court cannot tolerate a highly Thereafter, the BIR issued a PAN. ABC filed
suspicious situation. In this case, after a protest against the PAN arguing that it not
the taxpayer voluntarily executing the liable for the deficiency taxes. It did not raise
waivers, insisted on their invalidity by as an issue the invalidity of the waiver and
raising the very same defects it caused. the prescription of the BIR’s right to assess.
On the other hand, the BIR miserably In its protest against the FAN, ABC argued
failed to exact from the taxpayer that the year being audited in the FAN has
compliance with its rules. The BIR’s already prescribed at the time such FAN was
negligence in the compliance of its mailed on December 4, 2008. ABC received
duties was so gross such that it seemed the FAN on December 5, 2008 which is 5
that it consented to the mistakes in the days after the waiver it issued had
waivers. Such a situation is dangerous prescribed. In the CTA, ABC further argued
and open to abuse by unscrupulous that the signatories in the waivers were not
taxpayers who intend to escape their duly sanctioned to act on its behalf.
responsibility to pay taxes by mere
expedient of hiding behind (1) Are the two waivers valid?
technicalities. (2) Is the assessment barred already by
prescription?
Further, the Court said that while the BIR
was also at fault here because it was (1) Estoppel applies against a taxpayer who
careless in complying with the did not only raise at the earliest opportunity its
requirements of RMO No. 20-90 and representative's lack of authority to execute
RDAO 01-05, such negligence may be two (2) waivers of defense of prescription, but
addressed by enforcing the provisions was also accorded, through these waivers,
imposing administrative liabilities upon the more time to comply with the audit
officers responsible for these errors. The requirements of the Bureau of Internal
BIR's right to assess and collect taxes Revenue.
should not be jeopardized merely because
of the mistakes and lapses of its officers, Citing its previous ruling in Commissioner of
especially in cases like this where the Internal Revenue v. Next Mobile, Inc., G.R. No.
Page 18 of 36
NOTICE
212825, December 7, 2015, a defective denied by the CIR or his authorized

waiver will be upheld when both the taxpayer representative, then the taxpayer may
and the BIR were in pari delicto. In this case, appeal to the CTA within 30 days from
the Bureau of Internal Revenue was at fault receipt of the whole or partial denial of
when it accepted the waivers despite their the protest.
non-compliance with the requirements of 2. If the protest is wholly or partially
RMO No. 20-90 and RDAO No. 05-01. The denied by the CIR's authorized
taxpayer’s acts also show its implied representative, then the taxpayer may
admission of the validity of the waivers. First, appeal to the CIR within 30 days from
the taxpayer never raised the invalidity of the receipt of the whole or partial denial of
Waivers at the earliest opportunity, either in the protest.
its Protest to the PAN, Protest to 3. If the CIR or his authorized
the FAN, or Supplemental Protest to the FAN. representative failed to act upon the
It thereby impliedly recognized these waivers' protest within 180 days from
validity and its representatives' authority to submission of the required supporting
execute them. Second, the taxpayer documents, then the taxpayer may
benefitted from the waivers executed as it appeal to the CTA within 30 days from
gave the taxpayer more time to comply with the lapse of the 180-day period.
the audit requirements of the BIR.
A whole or partial denial by the CIR's
(2) Yes, the assessment is void because it was authorized representative may be appealed to
served beyond the extended period. The the CIR or the CTA. A whole or partial denial
FAN/FLD was mailed on December 4, 2008. by the CIR may be appealed to the CTA. The
Since the validity period of the second waiver CIR or the CIR's authorized representative's
is only until November 30, 2008, prescription failure to act may be appealed to the CTA.
had already set in at the time the FAN and the There is no mention of an appeal to the CIR
FLD were actually mailed on December 4, from the failure to act by the CIR's authorized
2008. (Commissioner of Internal Revenue v. representative. (PAGCOR v. BIR, G.R. No.
Transitions Optical Philippines, G.R. No. 208731, January 27, 2016)
227544, November 22, 2017)
Q. Can the BIR collect deficiency taxes from
Q. PAGCOR received a Final Assessment a corporation subject of rehabilitation
Notice (FAN) signed by the Regional proceedings and where a Commencement
Director. Claiming exemption based on its Order has already been issued?
charter, PAGCOR timely filed a protest to the
FAN. After 203 days, PAGCOR elevated its No. Section 16 of RA 10142 or the Financial
protest to the CIR. After 209 days, PAGCOR Rehabilitation and Insolvency Act (FRIA)
filed a Petition for Review with the CTA. provides that upon issuance of a
Does the CTA have jurisdiction over the Commencement Order which includes a Stay
appeal? or Suspension Order – all actions or
proceedings, in court or otherwise, for the
A. No, a protesting taxpayer has only three enforcement of “claims” against a distressed
options: company shall be suspended.
1. If the protest is wholly or partially
Page 19 of 36
NOTICE
“Claims” includes all claims of the erroneously or illegally assessed or collected

government, whether national or local, internal revenue taxes?
including taxes, tariffs and customs duties.
Creditors, including the government, must A. No. The claim for refund must be filed
ventilate their claims before the rehabilitation. within two (2) years from the date of payment
Thus, it is improper for the BIR to collect, or of the tax regardless of any supervening
even attempt to collect deficiency taxes cause that may arise after payment. While the
outside of the rehabilitation proceedings in prescriptive period of two (2) years
willful disregard of a Commencement Order commences to run from the time that the
lawfully issued by a Rehabilitation Court. refund is ascertained, the propriety thereof is
(Bureau of Internal Revenue v. Lepanto determined by law (in this case, from the date
Ceramics, G.R. No. 224764, April 24, 2017) of payment of tax), and not upon the discovery
by the taxpayer of the erroneous or excessive
Q. A taxpayer filed its administrative claim payment of taxes. The issuance of the BIR of
and judicial claim for refund of tax a Ruling declaring the tax-exempt status of a
erroneously or illegally collected only 13 taxpayer, if at all, is merely confirmatory in
days apart. The BIR argues that this does nature. Such ruling is not the operative act
not satisfy the requirement of exhaustion of from which an entitlement of refund is
administrative remedies. Is the BIR correct? determined. (Commissioner of Internal
Revenue v. Meralco, G.R. No. 181459, June 9,
No. Section 229 of the Tax Code states that 2014)
judicial claims for refund of tax erroneously or
illegally collected must be filed within 2 years Q. A taxpayer-bank extended a foreign
from the date of payment of the tax or penalty currency denominated loan to a company.
providing further that the same may not be As agreed, the company withheld and paid
maintained until a claim for refund or credit to the BIR the final withholding tax on
has been duly filed with the CIR. taxpayer-bank’s interest income on the said
loan. However, the taxpayer-bank
Section 229 does not mean that the taxpayer mistakenly remitted the same amounts to
must await the final resolution of its the BIR on April 25, 2001. Thus, the
administrative claim. Section 229 only taxpayer-bank filed its administrative claim
requires that the administrative claim should for refund on December 27, 2002 while the
first be filed. The purpose of the administrative judicial claim was filed only on September
claim is to serve as notice of warning to the 10, 2003. The taxpayer-bank argues that the
CIR that court action would follow unless the two-year prescriptive period of its claim for
tax erroneously or illegally collected is refund should be reckoned not from April 25,
refunded. (Commissioner of Internal Revenue 2001, when it remitted the tax to the BIR but
v. Goodyear Philippines, G.R. No. 216130, at the time it filed its Final Adjustment
August 3, 2016) Return or Annual Income Tax Return for the
taxable year of 2001, or in April 2002, as it
Q. Can the date of issuance of a BIR Ruling was only at this time that its right to refund
confirming the tax-exemption status of a was ascertained. Is the taxpayer-bank
taxpayer be used as the reckoning point of correct?
the prescriptive period for recovery of
Page 20 of 36
NOTICE
No. In claims for refund of tax erroneously or a claim for refund/credit must commence. For
illegally collected, both the administrative and DS metering machine users, the payment of
judicial claims for refund should be filed within DST upon loading/reloading is merely an
the two-year prescriptive period. The two- advanced payment for future application. The
year prescriptive period is counted from the liability of the payment of DST falls due only
date of the payment of the tax or penalty. upon occurrence of the taxable transaction.
(Philippine Bank of Communications v.
In this case, the tax involved in the case is the Commissioner of Internal Revenue, G.R. No.
final withholding tax on the taxpayer’s 194065, June 20, 2016)
interest income on its foreign currency
denominated loan. Final withholding taxes Q. Whether evidence not presented in the
are considered as full and final payment of the administrative claim for refund in the Bureau
income tax due and thus are not subject to of Internal Revenue can be presented in the
any adjustments. Thus, the two-year Court of Tax Appeals?
prescriptive period shall commence to run
from the time the refund is ascertained, i.e. Yes. The Court of Tax Appeals is not limited by
date such tax was paid, and not upon the evidence presented in the administrative
discovery of the taxpayer of the erroneous or claim in the Bureau of Internal Revenue. The
excessive payment of taxes. (Metropolitan claimant may present new and additional
Bank and Trust Company v. Commissioner evidence to the Court of Tax Appeals to
of Internal Revenue, G.R. No. 182582, April support its case for tax refund. The power of
17, 2017) the Court of Tax Appeals to exercise its
appellate jurisdiction does not preclude it from
Q. For taxpayers using the On-line Electronic considering evidence that was not presented
Documentary Stamp Metering Machine (DS in the administrative claim in the Bureau of
metering machine), what should be deemed Internal Revenue.
the “date of payment” of the DST for the
purpose of counting the two-year Parties are expected to litigate and prove
prescriptive period for filing a claim for a every aspect of their case anew and formally
refund or tax credit? offer all their evidence. No value is given to
documentary evidence submitted in the
The “date of payment” of the DST when the Bureau of Internal Revenue unless it is
prescriptive period to file a claim for formally offered in the Court of Tax Appeals.
refund/credit must commence shall be the Thus, the review of the Court of Tax Appeals
date when the documentary stamps are is not limited to whether or not the
imprinted upon the documents and not the Commissioner committed gross abuse of
date of purchase of documentary stamps for discretion, fraud, or error of law, as contended
loading or reloading on the DS metering by the Commissioner. As evidence is
machine. considered and evaluated again, the scope of
the Court of Tax Appeals' review covers
The payment of the DST and the filing of the factual findings. (Philippine Airlines v.
DST Declaration Return upon Commissioner of Internal Revenue, G.R. No.
loading/reloading of the DS Metering machine 206079-80 & 206309, January 17, 2018)
must not be considered as the “date of
payment” when the prescriptive period to file
Page 21 of 36
NOTICE
Note: The case involved a claim for refund business tax is consistent with the intent of
pursuant to Section 229 of the Tax Code. our laws, which is to prevent the duplication
of the so-called common carriers tax. (City of
Q. What are the requisites for claiming a Manila v Hon. Colet and Malaysian Air
refund of excess creditable withholding System, G.R. No. 120051, December 10,
taxes? 2014)
The requisites for claiming a refund of excess Q. Do LGUs have the power to impose taxes
creditable withholding taxes are: on persons or entities engaged in the
business of manufacturing and distribution
1. The claim for refund was filed within of petroleum products?
the two-year prescriptive period;
No. Among the common limitations on the
2. The fact of withholding is established taxing powers of LGUs provided under
by a copy of a statement Section 133 of the LGC are “excise taxes on
duly issued by the payor (withholding articles enumerated under the National
agent) to the payee, showing the Internal Revenue Code, as amended, and
amount of tax withheld therefrom; and taxes, fees or charges on petroleum products.”
The prohibition with respect to petroleum
3. The income upon which the taxes products extends not only to excise taxes
were withheld was included in the thereon, but all “taxes, fees or charges.”
income tax return of the recipient as (Batangas City v. Pilipinas Shell, G.R. No.
part of the gross income. 187631, July 8, 2015)
(Commissioner of Internal Revenue v.
Cebu Holding, G.R. No. 189792, June Q. Uniwide conducted business in buildings
29, 2018; Commissioner of Internal and establishments constructed on parcels
Revenue v. Team (Philippines) of land covered by Transfer Certificates of
Operations Corporation, G.R. No. Title (TCTs) issued by the Registry of Deeds
179260, April 2, 2014.) of Pasig City. In the said TCTs, the location
of the parcels of land is indicated as being in
LOCAL GOVERNMENT TAXATION Pasig. From 1989 to 1996, Uniwide paid
business and realty taxes, fees, and other
Q. Do LGUs have the power to impose taxes charges to the City of Pasig. However,
on the gross receipts of keepers of garages, beginning 1997 and after receiving notice
cars for rent or hire driven by the lessee, from the Municipality of Cainta that the
transportation contractors, persons who subject properties were within its territorial
transport passenger or freight for hire, and jurisdiction, Uniwide no longer paid local
common carriers by land, air, or water? taxes to the City of Pasig. For purposes of
complying with local tax liabilities in case of
No. Section 133(j) of the LGC clearly and a boundary dispute between local
unambiguously proscribes LGUs from governments, to whom should the taxpayer
imposing a tax on the gross receipts of pay its local business tax and realty taxes?
transportation contractors and common
carriers. Exemption of transportation The taxpayer should pay its local business tax
contractors and common carriers from local to the City of Pasig who has the apparent
Page 22 of 36
NOTICE
right to levy and collect local business tax and provinces and municipalities. Unlike a city, a
realty taxes on the subject properties on the municipality is bereft of authority to levy
basis of the TCTs. Under the Local franchise tax, thus, the ordinance enacted for
Government Code, local business taxes are that purpose is void.
payable for every separate or distinct
establishment or place where business The ordinance in question was enacted in
subject to the tax is conducted, which must be 1992 when the local government of Pasig was
paid by the person conduct the same. The still a municipality and, as such, had no
situs of taxation shall be paid to the local authority to levy franchise tax. The conversion
government where such branch or sales outlet of the municipality into a city does not lend
is located. For real property taxes, collection is validity to the void ordinance. The ordinance is
vested in the locality where the property is void for being in direct contravention with
situated. In determining the location for Section 142 of the Local Government Code.
purposes of identifying the local government Being void, it cannot be given any legal effect.
entitled to collect taxes, the taxpayer should An assessment and collection pursuant to the
follow the location stated in the certificate of said ordinance is legally infirm. (City of Pasig
title until amended through proper judicial v. Manila Electric Company, G.R. No. 181710,
proceedings. (Municipality of Cainta v. City of March 7, 2018)
Pasig and Uniwide, G.R. No. 176703, June
28, 2017) Q. The City of Manila assessed ABC local
business taxes for the taxable year 2007
Q. On 26 December 1992, the Sangguniang using the gross sales for the calendar year
Bayan of the Municipality of Pasig enacted 2005. ABC argues that the computation of
Ordinance No. 25 which imposed a franchise the business tax should be on the basis of its
tax on all business venture operations gross sales in 2006 which amount was lower
carried out through a franchise within the than the gross sales in 2005. Is ABC correct?
municipality. On 25 January 1995, the
Municipality of Pasig was converted into a Yes. Section 14 of the Revenue Code of
highly urbanized city now known as the City Manila, which is derived from Section 143(a)
of Pasig. The City Treasurer assessed the of the Local Government Code, provides that
Manila Electric Company for deficiency an assessment for business tax should be
franchise taxes for the period 1996 to 1999 computed based on the taxpayer’s gross
pursuant to Municipal Ordinance No. 25. sales or receipts of the preceding calendar
Does the City of Pasig have valid basis for its year. (City of Manila v. Cosmos Bottling
imposition of franchise tax for the period Corporation, G.R. No. 196681, June 27, 2018)
1996 to 1999?
Q. In the imposition of the surcharge on local
No. The power to impose franchise tax taxes due and unpaid, should the 25%
belongs to the province by virtue of Section surcharge be computed yearly based on the
137 of the Local Government Code. On the unpaid tax due for each particular year?
other hand, Section 142 of the Code provides
that the municipalities are prohibited from No. Section 168 of the Local Government
levying the taxes specifically provided to Code categorically provides that the local
provinces. Section 151 empowers the cities to government unit may impose a surcharge not
levy taxes, fees and charges allowed to both exceeding 25% of the amount of taxes, fees,
Page 23 of 36
NOTICE
or charges not paid on time. The surcharge is inaction,” should be reckoned from January
a civil penalty imposed once for late payment 15, 2007, the date the taxpayer filed its
of a Contrast this with the succeeding protest, and not March 27, 2007. (China
provisions on interest, which was imposable Banking Corporation v. City Treasurer of
at the rate not exceeding 2% per month of the Manila, G.R. No. 204117, July 1, 2015)
unpaid taxes until fully paid. The fact that the
interest charge is made proportionate to the Note: The Court likewise stated that, at any
period of delay, whereas the surcharge is not, rate, the RTC has no jurisdiction. Following
clearly reveals the legislative intent for the R.A. No. 9282, the authority to exercise either
different modes in their application. If the original or appellate jurisdiction over local tax
legislative intent was to make the 25% cases depended on the amount of the claim.
surcharge proportionate to the period of In cases where the amount sought to be
delay, the law should have provided for the refunded is below the jurisdictional amount of
same in clear terms. (NPC v. City of the RTC, the Metropolitan, Municipal, and
Cabanatuan, G.R. No. 177332, October 1, Municipal Circuit Trial Courts (“MTC”) have
2014) jurisdiction. RTC has jurisdiction if amount
exceeds exceed P300,000 outside Metro
Q. On January 15, 2007, ABC protested, thru Manila (P400,000 in Metro Manila); MTC if
a letter, the imposition of business tax under amount does not exceed P300,000 outside
Section 21 of the Manila Revenue Code on Metro Manila (P400,000 in Metro Manila).
the ground that it constitutes double
taxation. The City Treasurer acknowledged Q. The City of Manila assessed ABC local
receipt of the letter but said that she will business taxes. ABC protested the
await the formal protest. On March 27, 2007, assessment arguing that it constitutes as
ABC wrote a letter-reply reiterating that double taxation. ABC tendered payment of
ABC already protested. On April 17, 2007, what they believe to be the correct
ABC filed a Petition for Review with the computation of their local business tax. The
Regional Trial Court (“RTC”). On appeal, the payment was refused by the City Treasurer.
CTA ruled that ABC belatedly filed its ABC also received a letter from the City
petition with RTC by 1 day. ABC countered it Treasurer denying their protest. ABC then
timely filed now claiming that reckoning paid the assessment and filed a claim for
point should be from March 27, 2007. Was refund with the Office of the City Treasurer
the petition timely filed? raising the same grounds in their protest.
ABC then filed its refund with the RTC of
No. Section 195 of the Local Government Manila. The City of Manila argues that the
Code states that the taxpayer shall have thirty assessment against ABC became final and
(30) days from the receipt of the denial of the executory when the latter effectively
protest or from the lapse of the sixty (60)-day abandoned its protest and instead sued in
period prescribed herein within which to court for the refund of the assessed taxes. Is
appeal with the court of competent the City of Manila correct?
jurisdiction otherwise the assessment
becomes conclusive and unappealable. No. A taxpayer who had protested and paid
an assessment is not precluded from later on
In the instant case, the period within which the instituting an action for refund or credit.
City Treasurer must act on the protest, and the
consequent period to appeal a “denial due to
Page 24 of 36
NOTICE
While Section 196 does not expressly mention

an assessment made by the local treasurer, Where an assessment is to be protested or
this simply means that its applicability does disputed, the taxpayer may proceed (a)
not depend upon the existence of an without payment, or (b) with payment of the
assessment notice. By consequence, a assessed tax, fee or charge. Whether there is
taxpayer may proceed to the remedy of refund payment of the assessed tax or not, the
of taxes even without a prior protest against protest in writing must be made within sixty
an assessment that was not issued in the first (60) days from receipt of the notice of
place. This is not to say that an application for assessment; otherwise, the assessment shall
refund can never be precipitated by a become final and conclusive. Additionally, the
previously issued assessment, for it is entirely subsequent court action must be initiated
possible that the taxpayer, who had received within thirty (30) days from denial or inaction
a notice of assessment, paid the assessed tax, by the local treasurer; otherwise, the
fee or charge believing it to be erroneous or assessment becomes conclusive and
illegal. Thus, under such circumstance, the unappealable.
taxpayer may subsequently direct his claim
pursuant to Section 196 of the LGC. a. Where no payment is made, the
taxpayer's procedural remedy is
When a taxpayer is assessed a deficiency governed strictly by Section 195. That
local tax, fee or charge, he may protest it is, in case of whole or partial denial of
under Section 195 even without making the protest, or inaction by the local
payment of such assessed tax, fee or. charge. treasurer, the taxpayer's only recourse
This is because the law on local government is to appeal the assessment with the
taxation, save in the case of real property tax, court of competent jurisdiction. The
does not expressly require ''payment under appeal before the court does not seek a
protest" as a procedure prior to instituting the refund but only questions the validity or
appropriate proceeding in court. This implies correctness of the assessment.
that the success of a judicial action
questioning the validity or correctness of the b. Where payment was made, the
assessment is not necessarily hinged on the taxpayer may thereafter maintain an
previous payment of the tax under protest. action in court questioning the validity
Needless to say, there is nothing to prevent and correctness of the assessment
the taxpayer from paying the tax under (Section 195) and at the same time
protest or simultaneous to a protest. seeking a refund of the taxes. It would
be illogical for the taxpayer to only seek
Thus, a taxpayer facing an assessment may a reversal of the assessment without
protest it and alternatively: (1) appeal the praying for the refund of taxes. Once
assessment in court, or (2) pay the the assessment is set aside by the
tax and thereafter seek a refund. (City of court, it follows as a matter of course
Manila v. Cosmos Bottling Corporation, G.R. that all taxes paid under the erroneous
No. 196681, June 27, 2018) or invalid assessment are refunded to
the taxpayer. The same implication
Q. What are the remedies of the taxpayer in should ensue even if the taxpayer were
case of an assessment for deficiency local to style his suit in court as an action for
taxes? refund or recovery of erroneously paid
Page 25 of 36
NOTICE
or illegally collected tax as pursued serve the owner's business or tend to meet the
under Section 196 of the LGC. In such a needs of his industry or works that are on real
suit for refund, the taxpayer cannot estate. (Capitol Wireless v. Provincial
successfully prosecute his theory of Treasurer of Batangas, G.R. No. 180110,
erroneous payment or illegal collection May 30, 2016)
of taxes without necessarily assailing
the validity or correctness of the Q. Does the exemption from real property
assessment he had administratively taxes given to cooperatives exclude real
protested. property leased to other persons?
Note that where an assessment is issued, the No. The Local Government Code exempts duly
taxpayer cannot choose to pay the registered cooperatives from payment of real
assessment and thereafter seek a refund at property taxes without distinction. Nothing in
any time within the full period of two years the law suggests that real property tax
from the date of payment as Section 196 may exemption only applies when the property is
suggest. If refund is pursued, the taxpayer used by the cooperative itself. Thus, the
must administratively question the validity or exemption from real property taxes given to
correctness of the assessment in the 'letter cooperatives applies regardless of whether or
claim for refund' within 60 days from receipt not the land owned is leased. The instance
of the notice of assessment, and thereafter that the real property is leased to either an
bring suit in court within 30 days from either individual or corporation is not a ground for
decision or inaction by the local treasurer. withdrawal of tax exemption. (Provincial
(City of Manila v. Cosmos Bottling Assessor of Agusan del Sur v. Filipinas Palm
Corporation, G.R. No. 196681, June 27, 2018) Oil Plantation, G.R. No. 183416, October 5,
2016)
REAL PROPERTY TAXATION
Q. Is the Philippine Economic Zone Authority
Q. May submarine communications cables (PEZA) exempt from the payment of real
be classified as taxable real property by the property taxes?
local governments?
Yes. The PEZA is exempt from the payment of
Yes. Submarine or undersea communications real property taxes. The general rule is that
cables are akin to electric transmission lines real properties are subject to real property
which the Court has previously declared as taxes. This is true especially since the Local
“machinery” subject to real property tax under Government Code has withdrawn exemptions
the Local Government Code to the extent that from real property taxes of all persons,
the equipment's location is determinable to be whether natural or juridical. Exceptions to the
within the taxing authority's jurisdiction. Both rule are however also provided in the Local
electric lines and communications cables, in Government Code. Under Section 133(o), local
the strictest sense, are not directly adhered to government units have no power to levy taxes
the soil but pass through posts, relays or of any kind on the national government, its
landing stations, but both may be classified agencies and instrumentalities and local
under the term "machinery" as real property government units. Specifically on real
under Article 415(5) of the Civil Code for the property taxes, Section 234 enumerates the
simple reason that such pieces of equipment persons and real property exempt from real
Page 26 of 36
NOTICE
property taxes, which includes “real property exclusively accrue to the Special Education
owned by the Republic of the Philippines or Fund (SEF).” The operative phrase in Section
any of its political subdivisions except when 235’s grant to municipalities in Metro Manila,
the beneficial use thereof has been granted, cities, and provinces of the power to impose
for consideration or otherwise, to a taxable an additional levy for the special education
person.” The PEZA is an instrumentality of the fund is prefixed with “may,” thus, “may levy
national government. Being an and collect an annual tax of one percent
instrumentality of the national government, (1%).” There is no limiting qualifier to the
the PEZA cannot be taxed by local articulated rate of 1% which unequivocally
government units. Further, the real properties indicates that any and all special education
under the PEZA’s title are owned by the fund collections must be at such rate. Setting
Republic of the Philippines. Properties of the rate of the additional levy for the special
public dominion, even if titled in the name of education fund at less than 1% is within the
an instrumentality as in this case, remain taxing power of local government units.
owned by the Republic of the Philippines. (City (Demaala v. COA, G.R. No. 199752, February
of Lapu-Lapu v. PEZA, G.R. No. 184203 & 17, 2015)
187583, November 26, 2014)
Q. The Provincial Treasurer assessed ABC
NOTE: Even the PEZA’s lands and buildings for real property taxes on its submarine
whose beneficial use have been granted to cables. Thereafter, ABC received a Warrant
other persons may not be taxed with real of Levy and a Notice of Auction Sale. ABC
property taxes. The PEZA may only lease its filed a Petition for Prohibition and
lands and buildings to PEZA-registered Declaration of Nullity of Warrant of Levy,
economic zone enterprises and entities. These Notice of Auction Sale and/or Auction Sale
PEZA-registered enterprises and entities, with the RTC. ABC argues that the
which operate within economic zones, are not submarines cables are not subject to tax.
subject to real property taxes. Under Section Further, ABC argues that such issue involves
24 of the Special Economic Zone Act of 1995, purely questions of law and, thus,
no taxes, whether local or national, shall be exhaustion of administrative remedies is not
imposed on all business establishments required. Is ABC’s remedy proper?
operating within the economic zones.
No. In disputes involving real property
Q. May a municipality within the taxation, the general rule is to require the
Metropolitan Manila Area, a city, or a taxpayer to first avail of administrative
province have an additional levy on real remedies and pay the tax under protest before
property for the special education fund at allowing any resort to a judicial action, except
the rate of less than 1%.? when the assessment itself is alleged to be
illegal or is made without legal authority. The
Yes. Section 235 of the Local Government instant case, however, is one replete with
Code provides that “a province or city, or a questions of fact instead of pure questions of
municipality within the Metropolitan Manila law, which renders its filing in a judicial forum
Area, may levy and collect an annual tax of improper because it is instead cognizable by
one percent (1%) on the assessed value of real local administrative bodies like the Board of
property which shall be in addition to the basic Assessment Appeals, which are the proper
real property tax. The proceeds thereof shall venues for trying these factual issues such as
Page 27 of 36
NOTICE
the extent and status of the taxpayer’s assessment levels.

ownership of the system, the actual length of The taxpayer must The taxpayer may
the cable/s that lie in Philippine territory, and exhaust the directly resort to
the corresponding assessment and taxes due administrative judicial action
on the same. (Capitol Wireless v. Provincial remedies provided without paying
Treasurer of Batangas, G.R. No. 180110, under the Local under protest the
May 30, 2016) Government Code assessed tax and
before resorting to filing an appeal
Q. Distinguish between an illegal judicial action. The with the Local and
assessment and an erroneous assessment taxpayer must first Central Board of
of real property taxes in terms of remedies pay the real Assessment
to be taken? property tax under Appeals. The
protest. Should the taxpayer shall file a
A. An erroneous assessment is different from taxpayer find the complaint for
an illegal assessment, and the proper remedy action on the injunction before
of a taxpayer issued an assessment depends protest the Regional Trial
on whether the assessment was erroneous or unsatisfactory, the Court to enjoin the
illegal. taxpayer may local government
appeal with the unit from collecting
Local Board of real property taxes.
Erroneous Illegal Assessment Assessment The party
Assessment Appeals within 60 unsatisfied with
days from receipt the decision of the
An erroneous An assessment is of the decision on Regional Trial
assessment illegal if it was the protest. If the Court shall file an
“presupposes that made without taxpayer is still appeal, not a
the taxpayer is authority under the unsatisfied after petition for
subject to the tax law. appealing with the certiorari, before
but is disputing the Local Board of the Court of Tax
correctness of the Assessment Appeals, the
amount assessed.” Appeals, the complaint being a
With an erroneous taxpayer may local tax case
assessment, the appeal with the decided by the
taxpayer claims Central Board of Regional Trial
that the local Assessment Court. The appeal
assessor erred in Appeals within 30 shall be filed within
determining any of days from receipt fifteen (15) days
the items for of the Local from notice of the
computing the real Board’s decision. trial court’s
property tax, i.e., The decision of the decision. The Court
the value of the Central Board of of Tax Appeals’
real property or the Assessment decision may then
portion thereof Appeals is be appealed before
subject to tax and appealable before the Supreme Court
the proper the Court of Tax through a petition
Page 28 of 36
NOTICE
Appeals En Banc. for review on No. Filing of a Motion for Reconsideration

The Court of Tax certiorari under before the Local Board of Assessment
Appeals’ decision Rule 45 of the Appeals (LBAA) will not toll the 30-day period
may then be Rules of Court within which to appeal before the Central
appealed before raising pure Board of Assessment Appeals (CBAA).
the Supreme Court questions of law.
through a petition (City of Lapu-Lapu The “fresh period rule” in Neypes does not
for review on v. PEZA, G.R. No. apply as the appeal from a decision of the
certiorari under 184203 & 187583, LBAA to the CBAA is administrative in nature,
Rule 45 of the November 26, not judicial. (National Power Corporation v.
Rules of Court 2014) The Provincial Treasurer of Benguet, G.R.
raising pure No. 209303, November 14, 2016)
questions of law.
TARIFF AND CUSTOMS DUTIES
Q. A taxpayer argues that payment under Q. Who has jurisdiction to hear and
protest is not required before it could determine questions involving the seizure
challenge the authority of the local and forfeiture of dutiable goods?
government to assess tax on its tax exempt
properties before the LBAA. Is the taxpayer The Collector of Customs has exclusive
correct? jurisdiction over seizure and forfeiture
proceedings, and regular courts cannot
No. Settled is the rule that should the interfere with his exercise thereof or stifle or
taxpayer/real property owner question the put it at naught. The Collector of Customs
excessiveness or reasonableness of the sitting in seizure and forfeiture proceedings
assessment, the law directs that the taxpayer has exclusive jurisdiction to hear and
should first pay the tax due before his protest determine all questions touching on the
can be entertained. seizure and forfeiture of dutiable goods.
Regional trial courts are devoid of any
A claim for exemption from the payment of competence to pass upon the validity or
real property taxes does not question the regularity of seizure and forfeiture
assessor’s authority to assess and collect proceedings conducted by the BOC and to
such taxes, but pertains to the enjoin or otherwise interfere with these
reasonableness or correctness of the proceedings. Regional trial courts are
assessment by the local assessor. Thus, precluded from assuming cognizance over
payment under protest is required. (National such matters even through petitions for
Power Corporation v. The Provincial certiorari, prohibition or mandamus. (Agriex
Treasurer of Benguet, G.R. No. 209303, Co. Ltd. v. Commissioner of Customs, G.R.
November 14, 2016) No. 158150, September 10, 2014)
Q. Does the filing of a Motion for JUDICIAL REMEDIES

Reconsideration before the LBAA toll the 30-
day period within which to appeal before the Q. Does the CTA have the power to issue
CBAA? writs of certiorari in its appellate
jurisdiction?
Page 29 of 36
NOTICE
on the validity of the revenue regulation or

Yes. The Court of Tax Appeals has the power revenue memorandum circular on which the
to issue writs of certiorari in the exercise of its assessment is based. It is now within the
appellate jurisdiction. The CTA can rule not power of the Court of Tax Appeals, through its
only on the propriety of an assessment or tax power of certioriari, to rule on the validity of a
treatment of a certain transaction, but also on particular administrative rule or regulation so
the validity of the revenue regulation or long as it is within its appellate jurisdiction.
revenue memorandum circular on which the (Philippine American Life and General
assessment is based, so long as it is within its Insurance Company v. The Secretary of
appellate jurisdiction. (City of Manila v. Hon. Finance and Commissioner of Internal
Grecia-Cuerdo, G.R. No. 175723, February 4, Revenue, G.R. No. 210987, November 24,
2014) 2014)
Q. Is an adverse ruling of the Secretary of Q. The Philippine Ports Authority (PPA)

Finance in the exercise of its power of review received a letter from the City Assessor for
under Section 4 of the NIRC appealable to the assessment and collection of real
the Court of Tax Appeals? property taxes against its administered
properties. It appealed the assessment to
Yes. Review by the Secretary of Finance the Local Board of Assessment Appeals
pursuant to Section 4 of the NIRC, as (LBAA) through the Office of the City
amended, of a BIR Ruling is appealable to the Treasurer. While the case was pending, the
Court of Tax Appeals. The Court opined that City of Davao posted a notice of sale of
Section 7(a)(1) of RA 1125, as amended by delinquent real properties including the
RA 9282, addresses the seeming gap in the properties of the PPA. The LBAA dismissed
law as it vests in the Court of Tax Appeals, the appeal. The PPA appealed before the
albeit impliedly, with jurisdiction over the Central Board of Assessment Appeals
appeal from the Secretary of Finance’s review (CBAA) and was denied. Thus, it filed an
of rulings of the Commissioner of Internal appeal with the CTA. The PPA claimed it did
Revenue as “other matters” arising under the not receive any warrant of levy and thus it
NIRC or other laws administered by the BIR. filed a Petition for Certiorari with the Court
(Philippine American Life and General of Appeals (CA). The CTA ruled in favor of
Insurance Company v. The Secretary of the PPA declaring the properties as exempt
Finance and Commissioner of Internal from real property tax and declaring void the
Revenue, G.R. No. 210987, November 24, assessments issued. The CA, on the other
2014; Banco de Oro v. Republic, G.R. No. G.R. hand, dismissed the petition ruling that the
No. 198756, January 13, 2015) CTA has exclusive jurisdiction and said that
the PPA should have applied for issuance of
Q. Does the CTA have jurisdiction relative to a writ of injunction or prohibition. PPA filed
matters involving the validity of a rule or a Motion for Reconsideration with the CA
regulation issued by the Bureau of Internal and was denied. Hence, the PPA filed a
Revenue? Petition for Review with the Supreme Court.
Does the CA have jurisdiction to issue the
Yes. The Court of Tax Appeals can now rule injunctive relief prayed for by PPA?
not only on the propriety of an assessment or
tax treatment of a certain transaction, but also
Page 30 of 36
NOTICE
No. When a tax case is pending on appeal of Appeals would have been precluded from
with the CTA, the CTA has exclusive taking cognizance of the case. (Philippine
jurisdiction to enjoin the levy of taxes and Ports Authority v. The City of Davao, G.R. No.
auction of the taxpayer’s properties in 190324, June 6, 2018)
relation to that case. Section 7(a)(5) of RA No.
1125, as amended by RA No. 9282 provides Q. Does the CTA have exclusive jurisdiction
that the CTA has exclusive appellate to determine the constitutionality or validity
jurisdiction over decisions of the CBAA in the of tax laws, rules and regulations, and other
exercise of its appellate jurisdiction over cases administrative issuances of the CIR?
involving the assessment and taxation of real
property originally decided by the provincial or Yes. The CTA has exclusive jurisdiction to
city board of assessment appeals. determine the constitutionality or validity of
tax laws, rules and regulations, and other
The CTA has the power to determine whether administrative issuances of the Commissioner
or not there has been grave abuse of of Internal Revenue.
discretion in cases falling within its exclusive
appellate jurisdiction and its power to issue The CTA has not only jurisdiction to pass upon
writs of certiorari. the constitutionality or validity of a tax law or
regulation when raised by the taxpayer as a
The Court of Tax Appeals had jurisdiction over defense in disputing or contesting an
PPA’s appeal to resolve the question of assessment or claiming a refund, but also
whether or not it was liable for jurisdiction to take cognizance of cases
real property tax. The real property tax liability directly challenging the constitutionality or
was the very reason for the acts which validity of a tax law or regulation or
petitioner wanted to have enjoined. It was, administrative issuance (revenue orders,
thus, the Court of Tax Appeals, and not the revenue memorandum circulars, rulings).
Court of Appeals, that had the power to
preserve the subject of the appeal, to give The law intends the CTA to have exclusive
effect to its final determination, and, when jurisdiction to resolve all tax problems.
necessary, to control auxiliary and incidental Petitions for writs of certiorari against the acts
matters and to prohibit or restrain acts which and omissions of the said quasi-judicial
might interfere with its exercise of jurisdiction agencies should, thus, be filed before the CTA.
over petitioner's appeal. Except for local tax cases, actions directly
challenging the constitutionality or validity of
Even if the law had vested the Court of a tax law or regulation or administrative
Appeals with jurisdiction to issue injunctive issuance may be filed directly before the CTA.
relief in real property tax cases such as this,
the Court of Appeals was still correct in With respect to administrative issuances
dismissing the petition before it. Once a court (revenue orders, revenue memorandum
acquires jurisdiction over a case, it also has circulars, or rulings), these are issued by the
the power to issue all auxiliary writs Commissioner under its power to make rulings
necessary to maintain and exercise its or opinions in connection with the
jurisdiction, to the exclusion of all other courts. implementation of the provisions of internal
Thus, once the Court of Tax Appeals acquired revenue laws. Tax rulings, on the other hand,
jurisdiction over petitioner's appeal, the Court are official positions of the Bureau on inquiries
Page 31 of 36
NOTICE
of taxpayers who request clarification on Taxpayers should comply with the doctrine of
certain provisions of the National Internal administrative remedies and the rule on
Revenue Code, other tax laws, or their hierarchy of courts. (Bloomberry Resorts and
implementing regulations. Hence, the Hotels v. Bureau of Internal Revenue, G.R.
determination of the validity of these No. 212530, August 10, 2016)
issuances clearly falls within the exclusive
appellate jurisdiction of the CTA, subject to Interpretative rulings of the Bureau of Internal
prior review by the Secretary of Finance. Revenue are reviewable by the Secretary of
(Steel Corporation v. Bureau of Customs & Finance. However, in one case, the Supreme
Bureau of Internal Revenue, G.R. No. Court has held that because of special
220502, February 12, 2018; Banco de Oro v. circumstances - namely: the question involved
Republic, G.R. No. 198756, August 16, 2016) is purely legal; the urgency of judicial
intervention given impending maturity of the
NOTE: This reverses the previous ruling of the PEACe Bonds; and the futility of an appeal to
Supreme Court in Clark Investors and the Secretary of Finance as the latter
Locators Association v. Secretary of appeared to have adopted the challenged
Finance, G.R. No. 200670, July 6, 2015 where Bureau of Internal Revenue rulings - there
it held that the proper remedy to assail a was no need to exhaust all administrative
Revenue Regulation is via a special civil action remedies before seeking judicial relief directly
of declaratory relief under Rule 63 which falls with the Supreme Court. (Banco de Oro v.
under the exclusive jurisdiction of the Regional Republic, G.R. No. 198756, August 16, 2016)
Trial Courts.
Q. The National Power Corporation (NPC)
This likewise reverses the ruling of the received a notice of franchise tax
Supreme Court in Commissioner of Internal delinquency from the Provincial Government
Revenue v. Court of Tax Appeals and Petron of Bataan. NPC argued that it was exempt
Corporation, G.R. No. 207843, July 15, 2015 from the local franchise tax. Eventually, the
where it held that the CTA has no jurisdiction Provincial Government issued Warrants of
to determine the validity of a ruling issued by Levy on 14 properties owned by NPC in
the CIR or the COC in the exercise of their Limay, Bataan. The same were likewise sold
quasi-legislative powers to interpret tax laws. via public auction where the Provincial
Government was the winning bidder. NPC
Q. Can a taxpayer directly question a tax filed a Petition for declaration of nullity of
ruling with the Supreme Court? foreclosure sale with prayer for preliminary
mandatory injunction with the Regional Trial
No. Rulings of the CIR (including Revenue Court (RTC). The RTC dismissed the same.
Memorandum Circulars) are appealable to the NPC appealed to the Court of Appeals (CA).
Court of Tax Appeals, and not to any other The Provincial Government of Bataan
courts. If a remedy in the administrative moved to dismiss the same for lack of
machinery can still be resorted to, then such jurisdiction of the CA over the subject matter
remedy must first be exhausted before the as the suit was essentially a local tax case
court’s power of judicial review can be sought. questioning the validity of the imposition of
In questioning the validity of a Revenue the local franchise tax. Is the Provincial
Memorandum Circular, taxpayers should not Government of Bataan correct?
resort directly to the Supreme Court.
Page 32 of 36
NOTICE
Yes. The Court of Tax Appeals is vested with corporations, shall be administratively settled
the exclusive appellate jurisdiction over, or adjudicated by the Secretary of Justice, the
among others, appeals from the "decisions, Solicitor General, or the Government
orders or resolutions of the Regional Trial Corporate Counsel, depending on the issues
Courts in local tax cases originally decided or and government agencies involved. The use of
resolved by them in the exercise of their the word "shall" in PD 242 means that
original or appellate jurisdiction." administrative settlement or adjudication of
disputes and claims between government
The case a quo is a local tax case that is within agencies and offices, including government
the exclusive appellate jurisdiction of the owned or controlled corporations, is not
Court of Tax Appeals. Parenthetically, the merely permissive but mandatory and
case arose from the dispute between Napocor imperative.
and the Provincial Government of Bataan over
the purported franchise tax delinquency of The second paragraph of Section 4 of the
Napocor. Although the complaint filed with 1997 NIRC, providing for the exclusive
the trial court is a “Petition for declaration of appellate jurisdiction of the CTA as regards
nullity of foreclosure sale with prayer for the CIR's decisions on matters involving
preliminary mandatory injunction,” the disputed assessments, refunds in internal
petition essentially assails the correctness of revenue taxes, fees or other charges, penalties
the local franchise tax assessments by the imposed in relation thereto, or
Provincial Government of Bataan. (Napocor v. other matters arising under NIRC, is in conflict
Provincial Government of Bataan, G.R. No. with PD 242. To harmonize Section 4 of the
180654, March 6, 2017) 1997 NIRC with PD 242, the following
interpretation should be adopted:
Q. Does the CTA have jurisdiction over cases
asking for the cancellation and withdrawal 1. As regards private entities and the
of a warrant of distraint and/or levy? BIR, the power to decide disputed
assessments, refunds of internal
Yes. Section 7 of RA No. 9282 provides that revenue taxes, fees or other charges,
the CTA has jurisdiction over other matters penalties in relation thereto, or other
arising under the National Internal Revenue matters arising under the NIRC or other
Code or other laws administered by the laws administered by the. BIR is vested
Bureau of Internal Revenue. (Commissioner in the CIR subject to the exclusive
of Internal Revenue v. Bank of the Philippine appellate jurisdiction of the CTA, in
Islands, G.R. No. 224327, June 11, 2018) accordance with Section 4 of the NIRC;
and
Q. Does the Secretary of Justice have
jurisdiction to review disputed assessments 2. Where the disputing parties
involving government owned and controlled are all public entities (covers disputes
corporations? between the BIR and other
government entities), the case shall be
No. Under Presidential Decree No. 242 (PD governed by PD 242.
242), all disputes and claims solely between
government agencies and offices, including Even if the 1997 NIRC, a general statute, is a
government-owned or controlled later act, PD 242, which is a special law, will
Page 33 of 36
NOTICE
still prevail and is treated as an exception to Republic Act (RA) No. 9282 expanding the
the terms of the 1997 NIRC with regard solely CTA’s jurisdiction, it is no longer clear which
to intragovernmental disputes. PD 242 is a between the CA and the CTA has jurisdiction
special law while the 1997 NIRC is a general to review through a petition for certiorari the
law, insofar as disputes solely between or DOJ resolution in preliminary investigations
among government agencies are concerned. involving tax and tariff offenses. The Supreme
(Power Sector Assets and Liabilities Court then declared that the CA’s original
Management Corporation v. Commissioner jurisdiction over a petition for certiorari
of Internal Revenue, G.R. No. 198146, assailing the DOJ resolution in a preliminary
August 8, 2007) investigation involving tax and tariff offenses
was necessarily transferred to the CTA
NOTE: Previously, the Supreme Court ruled pursuant to Section 7 of RA No. 9282,
that the Secretary of Justice does not have amending R.A. No. 1125.
jurisdiction to review disputed assessments
and it is the CTA that has the exclusive Q. Does the CTA en banc have jurisdiction
appellate jurisdiction to review, among others, over interlocutory orders issued by the CTA
the decisions of the Commissioner of Internal Division?
Revenue in cases involving disputed
assessments. (Commissioner of Internal No. The CTA en banc has jurisdiction over final
Revenue v. Secretary of Justice and orders or judgments but not over interlocutory
Philippine Amusement and Gaming orders issued by the CTA in division. An
Corporation, G.R. No. 177387, November 9, interlocutory order may not be questioned on
2016) appeal. (Commissioner of Internal Revenue
v. Court of Tax Appeals and CBK Power, G.R.
Q. Does the CTA have jurisdiction over a No. 203054-55, July 29, 2015)
petition for certiorari assailing a Department
of Justice (DOJ) resolution in a preliminary Q. The BIR issued several assessment
investigation involving tax and tariff notices to the taxpayer for deficiency income
offenses? tax and VAT for the taxable years 1999 to
2002. The taxpayer filed protests, but they
Jurisdiction over a petition for certiorari were denied by the BIR. The taxpayer then
assailing a DOJ resolution in a preliminary filed a Petition for Review with the CTA in
investigation involving tax and tariff offenses Division. The CTA Division denied the
is now with the CTA, not the Court of Appeals Petition. The CTA Division likewise denied
(“CA”). the Motion for Reconsideration. The
taxpayer then appealed directly to the
In Bureau of Customs v. Hon. Devanadera, Supreme Court. Does the Supreme Court
G.R. No. 193253, September 8, 2015, the have jurisdiction?
Supreme Court said that the elementary rule
is that the Court of Appeals has jurisdiction to No. The Court is without jurisdiction to review
review the resolution of the DOJ through a decisions rendered by a division of the CTA,
petition for certiorari under Rule 65 of the exclusive appellate jurisdiction over which is
Rules of Court on the ground that the vested in the CTA en banc. RA 1125, as
Secretary of Justice committed grave abuse of amended by RA 9282, provides that the CTA
his discretion amounting to excess or lack of en banc shall have exclusive jurisdiction over
jurisdiction. However, with the enactment of
Page 34 of 36
NOTICE
appeals from the decision of its divisions. A Ilijan Corporation, G.R. No. 199422, June 21,
party adversely affected by the resolution of 2016)
the CTA division may, on motion for
reconsideration, file a petition for review with Q. What is the effect of filing a Petition for
the CTA en banc. Thereafter, the decision or Review with the CTA En Banc without filing
ruling of the CTA en banc may be elevated to a prior motion for reconsideration or new
this Court. Simply stated, no decision of the trial before the CTA Division?
CTA division may be elevated to this Court
under Rule 45 of the 1997 Rules of Civil The filing of a motion for reconsideration or
Procedure without passing through the CTA new trial before the CTA Division is an
en banc. (Duty Free Philippines v. BIR, G.R. No. indispensable requirement for filing an appeal
197228, October 8, 2014) before the CTA En Banc. Failure to file such
motion for reconsideration or new trial is
Q. Does the CTA En Banc have jurisdiction to cause for dismissal of the appeal before the
take cognizance of a petition for annulment CTA En Banc. (City of Manila v. Cosmos
of judgment to annul and set aside a final Bottling Corporation, G.R. No. 196681, June
decision of a CTA division ? 27, 2018)
No. The Revised Rules of the CTA and even Q. Within sixty days from receipt of the
the Rules of Court which apply suppletorily resolution of the CTA En Banc on the Motion
thereto provide for no instance in which the en for Reconsideration of the CTA En Banc
banc may reverse, annul or void a final Decision, the taxpayer filed a Petition for
decision of a division. The Revised Rules of the Certiorari with the Supreme Court alleging
CTA provide for no instance of an annulment grave abuse of discretion amounting to lack
of judgment at all. The Rules of Court are silent or excess of jurisdiction on the part of the
as to whether a collegial court sitting en banc CTA En Banc when it issued the assailed
may annul a final judgment of its own decision and resolution. Did the taxpayer
division.The silence of the Rules may be avail of the proper remedy?
attributed to the need to preserve the
principles that there can be no hierarchy No. The taxpayer adopted the wrong remedy
within a collegial court between its divisions in assailing the resolution of the CTA En Banc.
and the en banc, and that a court's judgment, What the petitioner should have done to
once final, is immutable. question the decision of the CTA En Banc was
to file before the Supreme Court a petition for
Further, a direct petition for annulment of a review under Rule 45 of the same Rules of
judgment of the CTA to the Supreme Court, Court in conformity with Section 11 of R.A. No.
meanwhile, is likewise unavailing, for the 9282. A petition for certiorari under Rule 65 of
same reason that there is no identical remedy the Rules of Court is a special civil action that
with the High Court to annul a final and may be resorted to only in the absence of
executory judgment of the Court of Appeals. appeal or any plain, speedy and adequate
The proper remedy of the taxpayer is to file a remedy in the ordinary course of law.54 In this
petition for certiorari under Rule 65, which can case, there is a plain, speedy and adequate
be filed as an original action with the Supreme remedy that is available - appeal by certiorari
Court and not before the CTA En Banc. under Rule 45. (Aichi Forging Company v.
(Commissioner of Internal Revenue v. Kepco Commissioner of Internal Revenue, G.R. No.
Page 35 of 36
NOTICE
193625, August 30, 2017; Bureau of Internal Appeals and Commissioner of Internal
Revenue v. Hon. Ernesto Acosta, G.R. No. Revenue, G.R. No. 215950, June 20, 2016)
195320, April 23, 2018)
***Nothing else follows***
Q. May the requirement of a bond for the
CTA to suspend the collection of tax be
dispensed with?
Yes. The authority of the CTA to issue such

injunctive writs to restrain the collection of tax
and to dispense with the deposit of the
amount claimed or the filing of the required
bond is not simply confined to cases where
prescription has set in. Whenever it is
determined that the method employed by the
CIR in the collection of tax is not sanctioned by
law or jeopardies the interests of a taxpayer
for being patently in violation of the law, the
bond requirement under Section 11 of R.A.
1125 should be dispensed with. (Pacquiao v.
Court of Tax Appeals – First Division, G.R.
No. 2133394, April 6, 2016)
The requirement of the bond as a condition

precedent to suspension of collection applies
only in cases where the processes by which
the collection ought to be made by means
thereof are carried out in consonance with the
law, not when the processes are in plain
violation of the law that they have to be
suspended for jeopardizing the interests of
the taxpayer.
The CTA should conduct a preliminary hearing

to ascertain and rule whether the bond may
be dispensed or reduced. The CTA should
consider other factors recognized by law
towards suspending the collection of the
assessment, like whether or not the
assessment would jeopardize the interest of
the taxpayer, or whether the means adopted
by the CIR in determining the liability of the
taxpayer was legal and valid. (Tridharma
Marketing Corporation v. Court of Tax
Page 36 of 36
NOTICE

Questions and Answers On Significant Supreme Court Taxation Law Jurisprudence From January 2013 To June 2018

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QUESTIONS AND ANSWERS ON SIGNIFICANT

SUPREME COURT TAXATION LAW JURISPRUDENCE

PIERRE MARTIN D. REYES

Philippines? corporations from the sale of real properties

RCBC entered into an underwriting Bonds by the Bureau of Treasury to

Taganito Mining Corporation v. CIR,

which to decide the barred from failure. (Commissioner of Internal Revenue v.

administrative claim has lapsed. This is documents

lots in October 2006. For the 1st quarter of

A. Although the FAN and demand letter

Inc., G.R. No. 198677, November 26, 2014

The Court ruled that, due to peculiar

212825, December 7, 2015, a defective denied by the CIR or his authorized

1. If the protest is wholly or partially

“Claims” includes all claims of the erroneously or illegally assessed or collected

While Section 196 does not expressly mention

the extent and status of the taxpayer’s assessment levels.

Appeals En Banc. for review on No. Filing of a Motion for Reconsideration

Q. Does the filing of a Motion for JUDICIAL REMEDIES

on the validity of the revenue regulation or

Q. Is an adverse ruling of the Secretary of Q. The Philippine Ports Authority (PPA)

Yes. The authority of the CTA to issue such

The requirement of the bond as a condition

The CTA should conduct a preliminary hearing

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