1. ASIATRUST v.

CIR

ASIATRUST DEVELOPMENT BANK, INC., Petitioners vs.

COMMISSIONER OF INTERNAL REVENUE, Respondents
G.R. No. 201530 / G.R. Nos. 201680-81
April 19, 2017

Facts:

Asiatrust Development Bank, Inc. (Asiatrust), on separate dates in February

2000, received from the Commissioner of Internal Revenue (CIR) three Formal
Letters of Demand (FLD) with Assessment Notices for deficiency internal
revenue taxes in the amounts of P131,909,161.85, P83,012,265.78, and
₱l44,012,918.42 for fiscal years ending June 30, 1996, 1997, and 1998,
respectively.

Asiatrust timely protested the assessment notices. Due to the inaction of the
CIR on the protest, Asiatrust filed before the CTA a Petition for Review praying
for the cancellation of the tax assessments for deficiency income tax,
documentary stamp tax (DST) - regular, DST - industry issue, final withholding
tax, expanded withholding tax, and fringe benefits tax issued against it by the
CIR.
The CIR issued against Asiatrust new Assessment Notices for deficiency taxes
in the amounts of ₱l 12,816,258.73, ₱53,314,512.72, and ₱133,013,458.73,
covering the fiscal years ending June 30, 1996, 1997, and 1998, respectively
and Asiatrust partially paid said deficiency tax assessments thus leaving the
following balances:
The CIR approved Asiatrust's Offer of Compromise of DST - regular
assessments for the fiscal years ending June 30, 1996, 1997, and 1998. During
the trial, Asiatrust manifested that it availed of the Tax Abatement Program for
its deficiency final withholding tax - trust assessments for fiscal years ending
June 30, 1996 and 1998; and that on June 29, 2007, it paid the basic taxes in the
amounts of P4,187,683.27 and P6,097,825.03 for the said fiscal years,
respectively. Asiatrust also claimed that on March 6, 2008, it availed of the
provisions of Republic Act (RA) No. 9480, otherwise known as the Tax
Amnesty Law of 2007.
The CTA Division rendered a Decision partially granting the Petition and
declared void the tax assessments for fiscal year ending June 30, 1996 for
having been issued beyond the three-year prescriptive period. However, due to
the failure of Asiatrust to present documentary and testimonial evidence to
prove its availment of the Tax Abatement Program and the Tax Amnesty Law,
the CTA Division affirmed the deficiency DST- Special Savings Account
(SSA) assessments for the fiscal years ending June 30, 1997 and 1998 and the
deficiency DST - Interbank Call Loans (IBCL) and deficiency final withholding
tax - trust assessments for fiscal year ending June 30, 1998, in the total amount
of ₱142,777,785.91.
However, [Asiatrust's] deficiency documentary stamp tax - Special Savings
Account assessments for the fiscal years ended June 30, 1997 & 1998, and
deficiency documentary sta..111p tax - IBCL and deficiency final withholding
tax - trust assessments for the fiscal year ended June 30, 1998, in the aggregate
amount of ?142,777,785.91 are hereby AFFIRMED. The said amount is broken
down as follows:
Asiatrust filed a Motion for Reconsideration attaching photocopies of its
Application for Abatement Program, BIR Payment Form, BIR Tax Payment
Deposit Slip, Improved Voluntary Assessment Program Application Forms,
Tax Amnesty Return, Tax Amnesty Payment Form, Notice of Availment of Tax
Amnesty and Statement of Assets and Liabilities and Networth (SALN). The
CIR, on the other hand, filed a Motion for Partial Reconsideration of the
assessments assailing the CTA Division's finding of prescription and
cancellation of assessment notices for deficiency income, DST - regular, DST
- trust, and fringe benefit tax for fiscal years ending June 30, 1997 and 1998. 18
The CTA Division issued a Resolution denying the motion of the CIR while
partially granting the motion of Asiatrust.
The CIR appealed the Decision and the Resolution before the CTA En Banc via
a Petition for Review. The CTA En Banc however dismissed the Petition for
being premature considering that the proceedings before the CTA Division was
still pending.
Asiatrust filed a Manifestation informing the CTA Division that the BIR issued
a Certification that Asiatrust paid the amounts of ₱4,187,683.27 and
₱6,097,825.03 at the Development Bank of the Philippines in connection with
the One-Time Administrative Abatement.
The CTA Division rendered an Amended Decision finding that Asiatrust is
entitled to the immunities and privileges granted in the Tax Amnesty Law.
Asiatrust moved for partial reconsideration insisting that the Certification
issued by the BIR is sufficient proof of its availment of the Tax Abatement
Program considering that the CIR has not yet issued a termination letter. The
CTA Division issued a Resolution denying Asiatrust's motion. The CTA
Division maintained that it cannot consider Asiatrust's availment of the Tax
Abatement Program in the absence of a termination letter from the BIR. Both
parties appealed to CTA En Banc. The CTA En Banc denied both appeals. It
denied the CIR's appeal for failure to file a prior motion for reconsideration of
the Amended Decision, while it denied Asiatrust's appeal for lack of merit. The
CTA En Banc sustained the ruling of the CTA Division that in the absence of a
termination letter, it cannot be established that Asiatrust validly availed of the
Tax Abatement Program.
The CTA En Banc denied the motions for partial reconsideration of the CIR
and Asiatrust. Hence, the instant consolidated Petitions under Rule 45 of the
Rules of Court.
Issues:
G.R. No. 201530
1. Whether the CTA en banc erred in finding that Asiatrust is liable for
deficiency final withholding tax for fiscal year ending June 30, 1998.
2. Whether the order of the CTA En Banc for petitioner to pay again the final
withholding tax for fiscal year ending June 30, 1998 would amount to double
taxation.
3. Whether the CTA En Banc erred in resolving the issue of alleged deficiency
final withholding tax for fiscal year ending June 30, 1998 based on mere
technicalities.
G.R. Nos. 201680-81
1. Whether xx x the CTA En Banc committed reversible error when it dismissed
the CIR's petition for review on the ground that the latter allegedly failed to
comply with section 1, rule 8 of the revised rules of the CTA.
2. Whether the CTA en banc committed reversible error when it sustained the
amended decision dated 16 march 2010 of the first division declaring closed
and terminated respondent's liability for deficiency documentary stamp tax for
taxable years 1997 and 1998.
Ruling:
The Petitions lack merit. G.R. No. 201530 An application for tax abatement is
considered approved only upon the issuance of a termination letter. Section
204(B) of the 1997 National lnten1al Revenue Code (NIRC) empowers the CIR
to abate or cancel a tax liability. The BIR issued RR No. 15-06 prescribing the
guidelines on the implementation of the one-time administrative abatement of
all penalties/surcharges and interest on delinquent accounts and assessments
(preliminary or final, disputed or not). Section 4 of RR No. 15-06 provides:
SECTION 4. Who May Avail, - Any person/ taxpayer, natural or juridical, may
settle thru this abatement program any delinquent account or assessment which
has been released as of June 30, 2006, by paying an amount equal to One
Hundred Percent (100%) of the Basic Tax assessed with the Accredited Agent
Bank (AAB) of the Revenue District Office (RDO)/Large Taxpayers Service
(LTS)/Large Taxpayers District Office (LTDO) that has jurisdiction over the
taxpayer. In the absence of an AAB, payment may be made with the Revenue
Collection Officer/Deputized Treasurer of the RDO that has jurisdiction over
the taxpayer. After payment of the basic tax, the assessment for
penalties/surcharge and interest shall be cancelled by the concerned BIR Office
following existing rules and procedures. Thereafter, the docket of the case shall
be forwarded to the Office of the Commissioner, thru the Deputy Commissioner
for Operations Group, for issuance of Termination Letter.1âwphi1 In this case,
Asiatrust failed to present a termination letter from the BIR. Instead, it
presented a Certification issued by the BIR to prove that it availed of the Tax
Abatement Program and paid the basic tax. It also attached copies of its BIR
Tax Payment Deposit Slips and a letter issued by RDO Nacar. These
documents, however, do not prove that Asiatrust's application for tax abatement
has been approved. If at all, these documents only prove Asiatrust's payment of
basic taxes, which is not a ground to consider its deficiency tax assessment
closed and terminated.
Thus, the Court finds no error on the part of the CTA En Banc in affirming the
said tax assessment. G.R. Nos. 201680-81 An appeal to the CTA En Banc must
be preceded by the filing of a timely motion for reconsideration or new trial
with the CTA Division.
Section 1, Rule 8 of the Revised Rules of the CTA states: SECTION 1. Review
of cases in the Court en bane. - In cases falling under the exclusive appellate
jurisdiction of the Court en bane, the petition for review of a decision or
resolution of the Court in Division must be preceded by the filing of a timely
motion for reconsideration or new trial with the Division.
Thus, in order for the CTA En Banc to take cognizance of an appeal via a
petition for review, a timely motion for reconsideration or new trial must first
be filed with the CTA Division that issued the assailed decision or resolution.
Failure to do so is a ground for the dismissal of the appeal as the word "must"
indicates that the filing of a prior motion is mandatory, and not merely directory.
In this case, the CIR's failure to move for a reconsideration of the Amended
Decision of the CTA Division is a ground for the dismissal of its Petition for
Review before the CTA En Banc. Thus, the CTA En Banc did not err in denying
the CIR's appeal on procedural grounds.
2. COMMISSIONER OF CUSTOMS v. MARINA SALES
(GR No. 183868, 2010-11-22)
Facts:
Respondent Marina Sales, Inc. (Marina) is engaged in the manufacture of
Sunquick juice concentrates in the Philippines.
As such, Marina usually imports raw materials into the country for the
purpose.
In the past, the Bureau of Customs (BOC) assessed said type of importation
with a 1% import duty rate.
Marina's importation arrived at the Manila International Container Port (MICP)
on board the vessel supported by documents. Marina computed and paid the
duties at 1% import duty rate. However, the BOC examiners contested the tariff
classification of Marina's Import Entry. BOC examiners recommended to the
Collector of Customs to reclassify Marina's importation as covering composite
concentrates for simple dilution with water to make beverages) with a
corresponding 7% import duty rate. Marina requested the District Collector
of the BOC to release Import Entry under its Tentative Release System. Marina
undertook to pay the reclassified rate of duty should it be finally determined
that such reclassification was correct.
The District Collector granted the request another importation of Marina arrived
at the MICP accompanied following documents. Again, the BOC examiners
disputed the tariff classification and recommended that the importation be
classified with the corresponding 7% duty rate. Marina once again signed an
undertaking under the Tentative Release System. They attended the VCRC
deliberation and submitted its explanation in support of its claim that the
imported goods should not be reclassified. The VCRC reclassified Import Entry
at 7% import duty rate.
Marina appealed VCRC's reclassification.
Marina interposed a petition for review before the CTA. The CTA Second
Division ruled that its classification under Tariff Heading H.S. 2106.90 10 was
the most appropriate and descriptive of the disputed importations. Marina's
importations were raw materials used for the manufacture of its Sunquick
products, not ready-to-drink juice concentrates as argued by the Commissioner.
The latter elevated the case to the CTA-En Banc via a petition for review. The
CTA En Banc dismissed the petition. The petitioner failed to file before the
Second Division the required Motion for Reconsideration before elevating his
case to the CTA En Banc. (Section 1, Rule 8 of the Revised Rules of the Court
of Tax Appeals)
The Commissioner insists that Marina's two importations should be classified
under Tariff Heading H.S. 2106.90 50 with an import duty rate of 7% because
the concentrates are ready for consumption by mere dilution with water.
Issues:
WON the dismissal of the CTA En Banc is correct.
WON the import duty rate of 1% is correct.
Ruling:
The Commissioner failed to comply with the mandatory provisions of Rule 8,
Section 1 of the Revised Rules of the Court of Tax Appeals requiring that
"the petition for review of a decision or resolution of the Court in
Division must be preceded by the filing of a timely motion for
reconsideration or new trial with the Division." The word "must" clearly
indicates the mandatory -- not merely directory -- nature of a requirement.
Before the CTA En Banc could take cognizance of the petition for review
concerning a case falling under its exclusive appellate jurisdiction, the litigant
must sufficiently show that it sought prior reconsideration or moved for a new
trial with the concerned CTA division.
The import duty rate of 1% is correct.
Food preparations to be used as raw material in preparing composite
concentrates for making beverages. Covers composite concentrate for simple
dilution with water to make beverages to fit into the category listed under the
Tariff Harmonized System Headings calling for a higher import duty rate of
7%, the imported articles must not lose its original character. The report
supported Marina's position that the subject importations are not yet ready for
human consumption.
In other words, the concentrates, to be consumable, must have to lose their
original character. To fall under the assailed Tariff Harmonized System
Headings, petitioner's (herein respondent) articles of importation, as fruit
juices/mixtures, should not have lost its original character, in spite of the
addition of certain "standardizing agents/constituents. Since the item is
compound which is composed of water, sugar, concentrated juice, flavourings,
citric acid, stabilizer, preservatives, vitamins C and colouring to produce
beverage ready to drink. Consequently the concentrated citrus juice has lost its
original character due to the fact that it comprises only 12% of the total
compound.
To "manufacture" is to "make or fabricate raw materials by hand, art or
machinery, and work into forms convenient for use. Stated differently, it is to
transform by any process into another form suitable for its intended use. Marina,
as the manufacturing arm of CO-RO Food A/S of Denmark, transforms said
juice compounds, being raw materials, into a substance suitable for human
consumption. Evidence shows that the subject importations would have to
undergo a laborious method to achieve their marketable juice consistency.
Accordingly, the 1% tariff import duty rate under Tariff Heading H.S. 2106.90
10 was correctly applied to the subject importations.
[ G.R. No. 215534, April 18, 2016 ]
3. COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS.
LIQUIGAZ PHILIPPINES CORPORATION, RESPONDENT.
[G.R. NO. 215557]
LIQUIGAZ PHILIPPINES CORPORATION, PETITIONER, VS.
COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
FACTS:
Liquigaz Philippine Corp received a copy of Letter of Authority (LOA) issued
by the CIR authorizing investigation of all internal revenue taxes for 2005.
It also received a copy of the PAN on May 20, 2008 and was assessed
23,931,708.72 PHP as deficiency tax.
On June 25, 2008, it received a Formal Assessment Notice (FAN) together
with its attached details of discrepancies for December 31, 2005. Liquigaz
filed a protest on July 25, 2008 and submitted documents on September 23,
2008.
It received the copy of FDDA on July 1, 2010 and still liable for
22,380,025.19 PHP. Liquigaz filed a petition for review to the CTA division
CTA division—partially granted Liquigaz’s petition to cancel EWT and FBT
assessments.
CTA en banc-affirmed the CTA division. It is a requirement that the taxpayer
should be informed in writing of the law and the facts on which the
assessment was made applied to the FDDA—otherwise the assessment shall
be void.
ISSUE: W/N the assessment made by the CIR is valid
HELD: Under Section 228 of the NIRC, a taxpayer shall be informed in
writing of the law and the facts on which the assessment is made, otherwise it
shall be void. Again, Section 3.1.4 of RR No. 12-99 requires that the FLD
must state the facts and law on which is it is based.
Section 228 of the NIRC should not be read restrictively as to limit the
written notice only to the assessment itself. The written notice requirement
for both the FLD and the FAN is in observance of due process—to afford
the taxpayer adequate opportunity to file a protest on the assessment and
file an appeal in case of an adverse decision.
However, a void FDDA does not ipso facto render the assessment void. A
decision differs from an assessment. An assessment becomes a disputed
assessment after a taxpayer has filed its protest to the assessment. The
CIR either issues a decision on the disputed assessment or fails to act on it
and is considered denied. The taxpayer may then appeal the decision on
the disputed assessment or the inaction of the CIR. As such, the FDDA is
not the only means that the final tax liability of a taxpayer is fixed, which
may then be appealed by the taxpayer.
A decision of the CIR on a disputed assessment differs from the assessment
itself. The invalidity of one does not necessarily result in the invalidity of the
other.
However the FFDA issued reveals that it merely contained a table of
Liquigaz’s supposed tax liabilities, without providing any details. The FDDA
must state the facts and law on which it is based to provide the taxpayer the
opportunity to file an intelligent appeal.
As established, an FDDA that does not inform the taxpayer in writing of
the facts and law on which it is based renders the decision void.
Therefore, it is as if there was no decision rendered by the CIR. It is
tantamount to a denial by inaction by the CIR, which may still be
appealed before the CTA and the assessment evaluated on the basis of the
available evidence and documents. The merits of the EWT and FBT
assessment should have been discussed and not merely brushed
aside on account of the void FDDA.
The Court agrees that the FDDA substantially informed Liquigaz of its tax
liabilities with regard to its WTC assessment.
Substantial compliance with the requirement under Section 228 of the NIRC
is permissible provided that the tax payer would be eventually apprised in
writing of the factual and legal bases of the assessment to allow him to file an
effective protest against.
It is imperative that the FDDA contain details of the discrepancy. Failure to
do so would deprive LIquigaz adequate opportunity to prepare an intelligent
appeal. It would have no way of determining what were considered by the
CIR in the defenses it had raised in the protest to the FLD.
REMANDED TO CTA
4. Commissioner of Internal Revenue v. Court of Tax Appeals and Petron
Corporation (G.R. No. 207843, July 15, 2015)
DOCTRINE:
The CTA has no jurisdiction to determine the validity of a ruling issued by the
CIR or the COC in the exercise of their quasi-legislative powers to interpret
tax laws. The phrase "other matters arising under this Code," as stated in the
second paragraph of Section 4 of the NIRC, should be understood as
pertaining to those matters directly related to the preceding phrase "disputed
assessments, refunds of internal revenue taxes, fees or other charges, penalties
imposed in relation thereto". It cannot extend to evaluating the soundness of
the interpretation of tax laws by the CIR.
FACTS:
(Short Version)
Petron imports alkylate as a raw material for the manufacture of motor
gasoline. It claims that its importation of akylate is exempt from excise tax.
A Customs Memorandum Circular (CMC) was issued stating that Alkylate is
subject to excise tax under Section 148( e) of the NIRC. CIR then issued
assessment to Petron for deficiency tax.
Petron filed before the CTA a petition for review raising the issue of whether
its importation of alkylate is subject to excise tax as contemplated under
Section 148 (e) of the NIRC.
CIR filed a motion to dismiss on the grounds of lack of jurisdiction and
prematurity. CTA ruled in favor of Petron, stating that (a) the controversy was
not essentially for the determination of the constitutionality, legality or
validity of a law, rule or regulation but a question on the propriety or
soundness of the CIR's interpretation of Section 148 (e) of the NIRC which
falls within the exclusive jurisdiction of the CTA under Section 4 thereof,
particularly under the phrase "other matters arising under [the NIRC]";17 and
(b) there are attending circumstances that exempt the case from the rule on
non-exhaustion of administrative remedies, such as the great irreparable
damage that may be suffered by Petron from the CIR's final assessment of
excise tax on its importation.
CIR is now alleging that the CTA committed grave abuse of discretion
because it does not have jurisdiction to take cognizance of the case.
(Long Version)
Petron, which is engaged in the manufacture and marketing of petroleum
products, imports alkylate as a raw material or blending component for the
manufacture of ethanol-blended motor gasoline.For the period January 2009
to August 2011, as well as for the month of April 2012, Petron transacted an
aggregate of 22 separate importations for which petitioner the Commissioner
of Internal Revenue (CIR) issued Authorities to Release Imported Goods
(ATRIGs), categorically stating that Petron's importation of alkylate is exempt
from the payment of the excise tax.
In June 2012, Petron imported 12,802,660 liters of alkylate and paid value-
added tax (VAT) in the total amount of 41,657,533.00 as evidenced by Import
Entry and Internal Revenue Declaration (IEIRD) No. SN 122406532. Based
on the Final Computation, said importation was subjected by the Collector of
Customs of Port Limay, Bataan, upon instructions of the Commissioner of
Customs (COC), to excise taxes of P4.35 per liter, or in the aggregate amount
of P55,691,571.00, and consequently, to an additional VAT of 12% on the
imposed excise tax in the amount of P6,682,989.00. The imposition of the
excise tax was supposedly premised on Customs Memorandum Circular
(CMC) No. 164-2012 dated July 18, 2012, implementing the Letter dated June
29, 2012 issued by the CIR, which states that: [A]lkylate which is a product of
distillation similar to that of naphta, is subject to excise tax under Section 148(
e) of the National Internal Revenue Code (NIRC) of 1997. In view of the
CIR's assessment, Petron filed before the CTA a petition for review, docketed
as CTA Case No. 8544, raising the issue of whether its importation of alkylate
as a blending component is subject to excise tax as contemplated under
Section 148 (e) of the NIRC.
CIR filed a motion to dismiss on the grounds of lack of jurisdiction and
prematurity.
CTA gave due course to Petron's petition, finding that: (a) the controversy was
not essentially for the determination of the constitutionality, legality or
validity of a law, rule or regulation but a question on the propriety or
soundness of the CIR's interpretation of Section 148 (e) of the NIRC which
falls within the exclusive jurisdiction of the CTA under Section 4 thereof,
particularly under the phrase "other matters arising under [the NIRC]";17 and
(b) there are attending circumstances that exempt the case from the rule on
non-exhaustion of administrative remedies, such as the great irreparable
damage that may be suffered by Petron from the CIR's final assessment of
excise tax on its importation.
CIR sought immediate recourse to the Court, through the instant petition,
alleging that the CTA committed grave abuse of discretion when it assumed
authority to take cognizance of the case despite its lack of jurisdiction to do
so.
ISSUE/S: WON CTA had jurisdiction - NO
HELD:
NO. The case does not fall within the jurisdiction of the CTA because the phrase
"other matters arising under this Code," as stated in the second paragraph of
Section 4 of the NIRC, should be understood as pertaining to those matters
directly related to the preceding phrase "disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties imposed in relation
thereto". It cannot extend to evaluating the soundness of the interpretation of
tax laws by the CIR.
Moreover, Section 4 of the NIRC confers upon the CIR both: (a) the power to
interpret tax laws in the exercise of her quasi-legislative function; and (b) the
power to decide tax cases in the exercise of her quasi-judicial function. It also
delineates the jurisdictional authority to review the validity of the CIR's
exercise of the said powers, thus:
SEC. 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax
Cases. - The power to interpret the provisions of this Code and other tax laws
shall be under the exclusive and original jurisdiction of the Commissioner,
subject to review by the Secretary of Finance. The power to decide disputed
assessments, refunds of internal revenue taxes, fees or other charges,
penalties imposed in relation thereto, or other matters arising under this Code
or other laws or portions thereof administered by the Bureau of Internal
Revenue is vested in the Commissioner, subject to the exclusive appellate
jurisdiction of the Court of Tax Appeals.
The CTA is a court of special jurisdiction, with power to review by appeal
decisions involving tax disputes rendered by either the CIR or the COC.
Conversely, [the CTA] has no jurisdiction to determine the validity of a ruling
issued by the CIR or the COC in the exercise of their quasilegislative powers
to interpret tax laws.
In this case, Petron's tax liability was premised on the COC's issuance of CMC
No. 164-2012, which gave effect to the CIR's June 29, 2012 Letter interpreting
Section 148 (e) of the NIRC as to include alkylate among the articles subject to
customs duties, hence, Petron's petition before the CTA ultimately challenging
the legality and constitutionality of the CIR's aforesaid interpretation of a tax
provision. In line with the foregoing discussion, however, the CIR correctly
argues that the CTA had no jurisdiction to take cognizance of the petition as its
resolution would necessarily involve a declaration of the validity or
constitutionality of the CIR's interpretation of Section 148 (e) of the NIRC,
which is subject to the exclusive review by the Secretary of Finance and
ultimately by the regular courts.
Hence, as the CIR's interpretation of a tax provision involves an exercise of her
quasi-legislative functions, the proper recourse against the subject tax ruling
expressed in CMC No. 164-2012 is a review by the Secretary of Finance and
ultimately the regular courts. There being no protest ruling by the customs
collector that was appealed to the COC, the filing of the petition before the CTA
was premature as there was nothing yet to review.
Verily, the fact that there is no decision by the COC to appeal from highlights
Petron's failure to exhaust administrative remedies prescribed by law. Before a
party is allowed to seek the intervention of the courts, it is a pre-condition that
he avail of all administrative processes afforded him, such that if a remedy
within the administrative machinery can be resorted to by giving the
administrative officer every opportunity to decide on a matter that comes within
his jurisdiction, then such remedy must be exhausted first before the court's
power of judicial review can be sought, otherwise, the premature resort to the
court is fatal.
5. EQUAL PROTECTION CLAUSE AND RULE ON UNIFORMITY OF
TAXATION
Commissioner of Customs and the District Collector of the Port of Subic
vs Hypermix Feeds Corporation, G.R. No 179579
February 1, 2012
Facts:
On 7 November 2003, petitioner Commissioner of Customs issued CMO 27-
2003. Under the Memorandum, for tariff purposes, wheat was classified
according to the following: (1) importer or consignee; (2) country of origin; and
(3) port of discharge. The regulation provided an exclusive list of corporations,
ports of discharge, commodity descriptions and countries of origin. Depending
on these factors, wheat would be classified either as food grade or feed grade.
The corresponding tariff for food grade wheat was 3%, for feed grade, 7%.
The regulation also provides for an exclusive list of corporations, ports of
discharge, commodity descriptions and countries of origin.
On December 19, 2003, the respondent filed a Petition for Declaratory Relief
with the Regional Trial Court of Las Pinas contending the following:
(1) the regulation was issued without following the mandate of the Revised
Administrative Code,
(2) that the regulation classified them to be a feed grade supplier without prior
assessment and examination,
(3)the equal protection clause of the Constitution was violated when the
regulation treated the non-flour millers differently from flour millers for
no reason at all, and
(4) the retroactive application of the regulation is confiscatory.
The petitioners thereafter filed a motion to dismiss contending that:
(1) the RTC does not have jurisdiction of the subject matter,
(2) an action for declaratory relief was improper,
(3) CM 27-2003 was an internal administrative rule and not legislative in
nature; and
(4) the claims of the respondent were speculative and premature.
On March10, 2005, the Regional Trial Court rendered a decision ruling in favor
of the respondent. It held that the jurisdiction is properly held because the
subject matter is quasi-legislative in nature. It also held that the petition for
declaratory relief was proper remedy and that the respondent was the proper
party to file it. On matters relating to the validity of the regulation, the court
held that the regulation is invalid because the basic requirements of hearing and
publication were not complied with. The petitioners then appealed to Court of
Appeals but it was, however, dismissed. Hence, this petition for review on
certiorari under Rule45 assailing the decision of the Court of Appeals.
Issue: Was the issuance of CMO 27-2003 violates equal protection clause of
the constitution.
Ruling: Yes. The content of the CMO 27-3003 is unconstitutional for being
violative of the equal protection clause of the Constitution.
The equal protection clause means that no person or class of persons shall be
deprived of the same protection of laws enjoyed by other persons or other
classes in the same place in like circumstances.
Thus, the guarantee of the equal protection of laws is not violated if there is a
reasonable classification. For a classification to be reasonable, it must be shown
that (1) it rests on substantial distinctions; (2) it is germane to the purpose of
the law; (3) it is not limited to existing conditions only; and (4) it applies equally
to all members of the same class.
Unfortunately, CMO 27-2003 does not meet these requirements. We do not see
how the quality of wheat is affected by who imports it, where it is discharged,
or which country it came from.
Thus, on the one hand, even if other millers excluded from CMO 27-2003 have
imported food grade wheat, the product would still be declared as feed grade
wheat, a classification subjecting them to 7% tariff. On the other hand, even if
the importers listed under CMO 27-2003 have imported feed grade wheat, they
would only be made to pay 3% tariff, thus depriving the state of the taxes due.
The regulation, therefore, does not become disadvantageous to respondent only,
but even to the state.
The provision mandates that the customs officer must first assess and determine
the classification of the imported article before tariff may be imposed.
Unfortunately, CMO 23-2007 has already classified the article even before the
customs officer had the chance to examine it. In effect, petitioner Commissioner
of Customs diminished the powers granted by the Tariff and Customs Code
with regard to wheat importation when it no longer required the customs
officer’s prior examination and assessment of the proper classification of the
wheat. It is well-settled that rules and regulations, which are the product of a
delegated power to create new and additional legal provisions that have the
effect of law should be within the scope of the statutory authority granted by
the legislature to the administrative agency. It is required that the regulation be
germane to the objects and purposes of the law; and that it be not in
contradiction to, but inconformity with, the standards prescribed by law.
6. Province of Zamboanga Del Norte vs. CA
GR No. 109853, Oct 11, 2000
396 Phil. 709
“A party questioning the rates imposed by an electric cooperative may file a
complaint with the NEA.”
Petitioner Province of Zamboanga del Norte filed with the Regional Trial Court,
Zamboanga del Norte a complaint against Zamboanga del Norte Electric
Cooperative (ZANECO) for "Illegal Collection Of Power Bills And
Preliminary Injunction With Restraining Order.
As per electric bills issued by ZANECO for the month of May 1991, respondent
increased the Fuel Compensating Charge (FCC) by P0.29 and Interim
Adjustment by P0.02, or a total of P 0.31. This amount is added to the basic
charge of P 1.90 per kilowatt.
ZANECO increased the FCC once more. Petitioner claimed that the increase
was arbitrary and illegal, and that the Energy Regulatory Board (ERB) did not
sanction the collections.
Petitioner assails the imposition of the FCC and Incremental Costs Charge
(ICC) as void, illegal, and unconstitutional for lack of notice, hearing and
consultation of the parties affected, and without prior authority from the Energy
Regulatory Board.
Petitioner rationalized that the Energy Regulatory Board (ERB) has jurisdiction
by virtue of Executive Order 172,
Section 3 (a) in that ERB is empowered to fix and regulate the
prices of petroleum products. It argued that diesel fuel is
embraced within the term petroleum products. Since the Fuel
Compensation Charge was imposed to compensate the cost of
diesel fuel, then such imposition must be approved by the ERB.
ISSUE:
Which government agency has jurisdiction over a complaint for illegal
collection of power bills by an electric cooperative the Energy Regulatory
Board or the regular trial courts, or the National Electrification Administration.
HELD:
The real issue is not the compensation of the cost of diesel fuel used to feed
the generating set in Mindanao Precisely, the complaint was for "Illegal
Collection of Power Bills."
Since the complaint is one questioning the increase in the power rates, the
proper body to investigate the case is the NEA.
The regulation and fixing of power rates to be charged by electric
cooperatives remain within the jurisdiction of the National Electrification
Administration, despite the enactment of Executive Order No. 172, creating 7. EDISON (BATAAN) COGENERATION CORPORATION v.
the Energy Regulatory Board. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 201665, August 30, 2017
The issue raised in the complaint is the legality of the imposition of the FCC or
ICC. Despite the fact that diesel fuel was used to run its machinery, the fact is REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE
that respondent charged its consumers to compensate for the increase in the COMMISSIONER OF INTERNAL REVENUE v. EDISON (BATAAN)
price of fuel. Petitioner did not question the price of diesel fuel. Rather, it COGENERATION CORPORATION
questioned the charges passed on to its end users as a result of increase in the G.R. No. 201668, August 30, 2017
price of fuel. And the body with the technical expertise to determine whether or
not the charges are legal is the NEA. FACTS

Electric cooperatives, such as the respondent, are vested under Presidential On February 2, 2004, Edison (Bataan) Cogeneration Corporation
Decree No. 269 with the power to fix, maintain, implement and collect rates, [EBCC] received from the CIR a Formal Letter of Demand and Final
fees, rents, tolls, and other charges and terms and conditions for service. Assessment Notice dated January 23, 2004 assessing EBCC of deficiency for
However, the NEA requires that such must be in furtherance of the purposes taxable year 2000, they are as follows:
and in conformity with the provisions of Presidential Decree No. 269.
Deficiency Tax Amount
NEA, in the exercise of its power of supervision and control over electric
cooperatives and other borrowers, supervised or controlled entities, is Income Tax P65,571,268.01
empowered to issue orders, rules and regulations. It may also, motu proprio or Value-Added Tax 168,866.15
upon petition of third parties, conduct investigations, referenda and other Withholding Tax on Compensation 128,087.84
similar actions in all matters, affecting electric cooperatives and other borrower, Expanded Withholding Tax 79,066.13
or supervised or controlled entities.[28] Final Withholding Tax 18,921,102.03
TOTAL P84,868 390.165
Thus, a party questioning the rates imposed by an electric cooperative may file EBCC filed with the CIR a letter-protest dated March 2, 2004 and
a complaint with the NEA as it is empowered to conduct hearings and furnished the CIR with the required documents but due to CIR’s inaction,
investigations and issue such orders on the rates that may be EBCC elevated the matter to the CTA via a Petition for Review and raffled to
charged. Consequently, the case does not fall within the jurisdiction of the ERB. the Second Division of the CTA. While the case was pending, EBCC availed
itself of the Tax Amnesty Program under RA No. 9480.
In case a party feels aggrieved by any order, ruling or decision of the NEA, he
may file a petition for review before the Court of Appeals. Ruling of the Court of Tax Appeals Former Second Division

CTA Former Second Division partly granted the Petition, EBCC was
found to have paid the correct amount of EWT and withholding tax on
compensation of its employees. As to the deficiency FWT, EBCC was found
liable to pay FWT in a reduced amount of P2,232,146.91. The CTA Former
Second Division agreed with EBCC that it was not liable for the deficiency
FWT assessment of P7,707,504.96 on interest payments on loan agreements
with Ogden Power International Holdings, Inc. for taxable year 2000 since its
liability for interest payment became due and demandable only on June 1, 2002.
Likewise cancelled and set aside were the deficiency tax assessments on loan
interest payment of EBCC to Philippine National Bank and Security Bank
Corporation in the amounts of P346,988.77 and P387,411.46, respectively, as
these had already been remitted by EBCC.
CIR filed a Motion for Reconsideration while EBCC filed a Motion for
Partial Reconsideration and/or Clarification, both were denied. Parties appealed
to the CTA En Banc. CTA En Banc denied both appeals.
ISSUES:
G.R. No. 201665
Whether the CTA En Banc erred in not recognizing [the CIR's] judicial
admission that she reduced her assessment for deficiency FWT for taxable year
2000 from [P]10,227,622[.]72 to [P]7,384,922.52. - NO.
G.R. No. 201668
1.Whether EBCC is liable for deficiency final withholding tax for the
year 2000. – NO, Ogden loan. YES, syndicated loans.
2.Whether Revenue Regulation No. 12-01 should be applied in this
case. – NO.
RULING:
G.R. No. 201665
The CIR made no judicial admission that EBCC remitted the amount of
P2,842,630.20 as payment for its FWT for the year 2000. Section 4 of Rule 129
of the Rules of Court states:
SEC. 4. Judicial Admissions. - An admission, verbal or written,
made by a party in the course of the proceedings in the same
case, does not require proof. The admission may be
contradicted only by showing that it was made through palpable
mistake or that no such admission was made.
Memorandum reveals that the remittance of P2,842,630.20 was based
on a Report prepared by the revenue officers recommending the denial of
EBCC's protest, which was issued prior to EBCC's filing of its Petition for
Review before the CTA.
Besides, the CTA Former Second Division, in its April 7, 2011
Resolution already explained how it computed EBCC's deficiency FWT, to wit:
Although EBCC is not liable to pay FWT on interest payment on loan
from Ogden in the amount of P7,707,504.96; however, as regards the deficiency
assessment of FWT on Interest Payments on Syndicated Loan in Dollars, in the
amount of P2,520,117.76, the Court found that EBCC failed to present proof of
withholding and/or remittance of FWT on its interest payments to UCPB and
Sung Hung Kai Bank. Likewise, BIR Forms No. 2306 (Certificates of Final
Income Tax Withheld), pertaining to petitioner's alleged interest payments to
First Metro Investment Corporation and United Overseas Bank/Westmont
Bank, were not considered by the Court.
 Therefore, EBCC's contention that the amount of P2,842,630.20 should
still be deducted from the deficiency assessment, as found by this Court in the
amount of P1,785,717.53 is misplaced. As heretofore discussed, out of
P2,520,117.76 deficiency FWT assessment on Interest Paid on Syndicated Loan
in US Dollars, [EBCC] was able to substantiate FWT remittance in the total
amount of P734,400.23 only. Thus, we found [EBCC] liable to pay basic
deficiency FWT for the year 2000 in the amount of P1,785,717.53.42
In addition, it is a basic rule in evidence that the person who alleges
payment has the burden of proving that payment has indeed been made. More
so, in cases filed before the CTA, which are litigated de novo, party-litigants
must prove every minute aspect of their case.
G.R. No. 201668
RR No.02-98 provides that the term payable refers to the date the
obligation becomes due, demandable or legally enforceable. Section 2.57.4 of
Revenue Regulations No. 2-98 provides:
SEC. 2.57.4. Time of Withholding. - The obligation of the payor to
deduct and withhold the tax under Section 2.57 of these regulations arises at the
time an income is paid or payable, whichever comes first, the term 'payable'
refers to the date the obligation becomes due, demandable or legally
enforceable.
EBCC's loan agreement with Ogden stated that:
3. Repayment and Interest
3.1 The BORROWER shall repay the Loan to the LENDER in
sixteen (16) consecutive semi-annual installments of
US$881,250.00 commencing on 1 June 2002 and thereafter on
June 1 and December 1 of each year.
Clearly, EBCC's liability for interest payment became due and
demandable starting June 1, 2002.
Retroactive application of RR No. 12-01
This issue was never raised before the CTA. Thus, we cannot rule on
this matter now. It is a settled rule that issues not raised below cannot be pleaded
for the first time on appeal because a party is not allowed to change his theory
on appeal; to do so would be unfair to the other party and offensive to rules of
fair play, justice and due process.
Moreover, as aptly pointed out by EBCC, whether it omitted to state a
material fact or acted in bad faith in failing to present documents on its interest
payments to show the exact date of payment is a factual issue, which is not
allowed under Rule 45.
In any case, even if the first payment was due on January 4, 2001 as
claimed by the CIR, EBCC would still not be liable, as the tax assessment
pertained to taxable year 2000 and not 2001.
WHEREFORE, the Petitions are hereby DENIED. The assailed January
30, 2012 Decision and the April 17, 2012 Resolution of the Court of Tax
Appeals in CTA EB Case Nos. 766 and 769 are hereby AFFIRMED.
8. MIGUEL J. OSSORIO PENSION FOUNDATION, INCORPORATED
(MJOPFI) vs. COURT OF APPEALS and COMMISSIONER OF
INTERNAL REVENUE
G.R. No. 162175 June 7, 2010
FACTS:
 MJOPFI, a non-stock and non-profit corporation, was organized for the
purpose of holding title to and administering the employees’ trust or retirement
funds (Employees’ Trust Fund) established for the benefit of the employees of
Victorias Milling Company, Inc. (VMC).MJOPFI, as trustee, claims that the
income earned by the Employees’ Trust Fund is tax exempt under Section 53(b)
of the Tax Code. MJOPFI bought 49.59% of Madrigal Business Park (MBP lot)
with VMC as co-owner to invest part of the trust fund. The MBP lot is covered
by Transfer Certificate of Title No. 183907 (TCT 183907) with VMC as the
registered owner.
MJOPFI claims that since it needed funds to pay the retirement and
pension benefits of VMC employees and to reimburse advances made by VMC,
MJOPFI’s Board of Trustees authorized the sale of its share in the MBP lot.
VMC negotiated the sale of the MBP lot and eventually sold to
Metrobank. Metrobank, as withholding agent, paid the Bureau of Internal
Revenue (BIR) ₱6,125,625 as withholding tax on the sale of real property.
MJOPFI alleges that the parties who co-owned the MBP lot executed a
notarized Memorandum of Agreement as to the proceeds of the sale. Since Lot
1 has been sold for ₱81,675,000.00 (gross of 7.5% withholding tax and 3%
broker’s commission, MJOPFI’s share in the proceeds of the sale is
₱40,500,000.00 (gross of 7.5% withholding tax and 3% broker’s commission).
MJOPFI maintains that the tax exemption of the Employees’ Trust Fund
rendered the payment of ₱3,037,500 as illegal or erroneous. The BIR, through
its Revenue District Officer, wrote MJOPFI stating that under Section 26 of the
Tax Code, MJOPFI is not exempt from tax on its income from the sale of real
property.
ISSUE:
Whether or not MJOFPI, a tax-exempt under Section 53(b) of the Tax
Code, is exempt from tax on its income from the sale of real property
RULING:
Yes. Petitioner is a corporation that was formed to administer the
Employees' Trust Fund. Petitioner invested ₱5,504,748.25 of the funds of the
Employees' Trust Fund to purchase the MBP lot. When the MBP lot was sold,
the gross income of the Employees’ Trust Fund from the sale of the MBP lot
was ₱40,500,000. The 7.5% withholding tax of ₱3,037,500 and broker’s
commission were deducted from the proceeds. In Commissioner of Internal
Revenue v. Court of Appeals, the Court explained the rationale for the tax-
exemption privilege of income derived from employees’ trusts:
It is evident that tax-exemption is likewise to be enjoyed by the income of the
pension trust. Otherwise, taxation of those earnings would result in a
diminution of accumulated income and reduce whatever the trust beneficiaries
would receive out of the trust fund. This would run afoul of the very
intendment of the law.
9. CIR vs Kudos Metal
GR 178087, 5 May 2010
FACTS: On April 15, 1999, Kudos Metal Corporation filed its Annual
Income Tax Return for the taxable year 1998. The BIR served upon
respondent 3 Notices of Presentation of Records which the latter failed to
comply. The BIR issued a Subpeona Duces Tecum which was acknowledged
by respondent’s President on October 20, 2000. On December 10, 2001 and
February 18, 2003, respondent’s accountant, executed two Waiver of the
Defense of Prescription, respectively. On August 25, 2003, the BIR issued a
Preliminary Assessment Notice for the taxable year 1998 against the
respondent. This was followed by a Formal Letter of Demand with
Assessment Notices for taxable year 1998, dated September 26, 2003 which
was received by respondent on November 12, 2003. Respondent challenged
the assessments arguing that the government’s right to assess has already
prescribed. Petitioner, on the other hand, does not deny that the assessment
notices were issued beyond the three-year prescriptive period but claims that
the period was extended by such two waivers.
ISSUES:
1. Whether or not the government’s right to assess unpaid taxes of the
respondent has already prescribed despite the Waiver of Prescription
executed by the respondent
2. Whether or not respondent is estopped from claiming prescription since
by executing the waivers, it was the one which asked for additional time
to submit the required documents
RULING:
1. Yes. Section 203 of the National Internal Revenue Code of 1997 (NIRC)
mandates the government to assess internal revenue taxes within three
years from the last day prescribed by law for the filing of the tax return
or the actual date of filing of such return, whichever comes later. Hence,
an assessment notice issued after the three-year prescriptive period is no
longer valid and effective.
Exceptions however are provided under Section 222 of the NIRC, to
wit, “the period to assess and collect taxes may only be extended upon
a written agreement between the CIR and the taxpayer executed before
the expiration of the three-year period.” RMO 20-90 (April 4, 1990)
and RDAO 05-01 (August 2, 2001) lay down the procedure for the
proper execution of the waiver, to wit:
i. The waiver must be in the proper form prescribed by RMO 20-
90. The phrase "but not after ______ 19 ___", which indicates
the expiry date of the period agreed upon to assess/collect the
tax after the regular three-year period of prescription, should be
filled up.
ii. The waiver must be signed by the taxpayer himself or his duly
authorized representative. In the case of a corporation, the
waiver must be signed by any of its responsible officials. In case
the authority is delegated by the taxpayer to a representative,
such delegation should be in writing and duly notarized.
iii. The waiver should be duly notarized.
iv. The CIR or the revenue official authorized by him must sign the
waiver indicating that the BIR has accepted and agreed to the
waiver. The date of such acceptance by the BIR should be
indicated. However, before signing the waiver, the CIR or the
revenue official authorized by him must make sure that the
waiver is in the prescribed form, duly notarized, and executed
by the taxpayer or his duly authorized representative.
v. Both the date of execution by the taxpayer and date of
acceptance by the Bureau should be before the expiration of the
period of prescription or before the lapse of the period agreed
upon in case a subsequent agreement is executed.
vi. The waiver must be executed in three copies, the original copy
to be attached to the docket of the case, the second copy for the
taxpayer and the third copy for the Office accepting the waiver.
The fact of receipt by the taxpayer of his/her file copy must be
indicated in the original copy to show that the taxpayer was
notified of the acceptance of the BIR and the perfection of the
agreement.19
 In the case at bar, the waivers executed by respondent’s accountant,
however, were (1) executed without the notarized written authority of
the latter to sign the waiver in behalf of respondent; (2) failed to
indicate the date of acceptance; and, (3) the fact of receipt by the
respondent of its file copy was not indicated in the original copies of
the waivers. Due to the defects in the waivers, the period to assess or
collect taxes was not extended. Consequently, the assessments were
issued by the BIR beyond the three-year period and are void.
2. The doctrine of estoppel cannot be applied in this case as an exception
to the statute of limitations on the assessment of taxes considering that
there is a detailed procedure for the proper execution of the waiver,
which the BIR must strictly follow. The doctrine of estoppel is
predicated on, and has its origin in, equity which, broadly defined, is
justice according to natural law and right. As such, the doctrine cannot
give validity to an act that is prohibited by law or one that is against
public policy.
The BIR cannot hide behind the doctrine of estoppel to cover its
failure to comply with RMO 20-90 and RDAO 05-01. Having caused
the defects in the waivers, the BIR must bear the consequence. It
cannot shift the blame to the taxpayer. To stress, a waiver of the statute
of limitations, being a derogation of the taxpayer’s right to security
against prolonged and unscrupulous investigations, must be carefully
and strictly construed.
As to the alleged delay of the respondent to furnish the BIR of the
required documents, this cannot be taken against respondent. Neither
can the BIR use this as an excuse for issuing the assessments beyond
the three-year period because with or without the required documents,
the CIR has the power to make assessments based on the best evidence
obtainable.
COMMISSIONER OF INTERNAL REVENUE vs. KUDOS METAL
CORPORATION (GR 178087, 5 May 2010)
Waiver of the Statute of Limitations
FACTS:
CIR assessed Kudos Metal Corporation for taxable year 1998. A Waiver of
the Statute of Limitations was executed on December 2001. The CTA issued a
Resolution canceling the assessment notices issued against Petitioner for
having been issued beyond the prescriptive period as the waiver purportedly
failed to (a) have the valid officer execute the same (i.e., only the Assistant
Commissioner signed it and not the CIR); (b) the date of acceptance was not
indicated; (c) the fact of receipt by the taxpayer was not indicated in the
original copy.
ISSUE:
Has the CIR’s right to assess prescribed?
HELD:
YES. The requirements for a valid waiver as laid down in RMO 20-90 and
RDAO No. 5-01 are mandatory to give effect to Section 222 of the Tax Code.
Specifically, the flaws in the waiver executed by Kudos Metal were as
follows: (a) there was no notarized written authority in favor of the signatory
for the company; (b) there is no stated date of acceptance by the
Commissioner or his representative; and (c) the fact of the receipt of the copy
was not indicated in the original waivers.
Neither can it be said that by merely executing the waiver the taxpayer is
already estopped from disputing an action by the CIR beyond the statutory 3-
year period since the exception under the Suyoc case (i.e., when the delays
were due to taxpayer’s acts) does not apply.
Note: Requisites of a valid waiver: (i) acceptance date; (ii) expiry date; (iii)
signed by authorized officer of taxpayer and BIR; (iv) notarized; (v) fact of
receipt must be indicated in the copies
10. ANGELES CITY vs ANGELES CITY ELECTRIC CORPORATION
AND RTC BRANCH 57
GR No. 166134, June 29, 2010
FACTS:
Angeles Electric Corporation (AEC) was granted a legislative franchise
under RA 4079 to construct, maintain and operate an electric light, heat, and
power system for the purpose of generating and distributing electric light, heat,
and power for sale in Angeles City. Pursuant to Section 3-A thereof, AEC’s
payment of franchise tax for gross earnings from electric current sold was in
lieu of all taxes, fees and assessments.
However, PD 551 came about and reduced the franchise tax of electric
franchise holders to 2% of their gross receipts from the sale of electric current
and from transactions incident to the generation, distribution and sale of electric
current.
When RA 7160 (Local Government Code) was passed into law, it
imposed tax on businesses enjoying franchise, and in accordance, the
Sangguniang Panlunsod of Angeles City enacted Tax Ordinance No. 33, S-93,
otherwise known as the Revised Revenue Code of Angeles City (RRCAC). A
petition was then filed with the Sangguniang Panlunsod by Metro Angeles
Chamber of Commerce and Industry, Inc. (MACCI) of which AEC is a
member, seeking the reduction of the tax rates and a review of the provisions
of the RRCAC.
The Bureau of Local Government Finance (BLGF) issued a First
Indorsement to the City Treasurer of Angeles City instructing it to make
representations with the Sangguniang Panlunsod for the appropriate
amendment of the RRCAC in order to ensure compliance with the provisions
of the LGC.
Thereafter, AEC paid the local franchise tax to the Office of the City
Treasurer on a quarterly basis, in addition to the national franchise tax it pays
every quarter to the BIR.
The City Treasurer denied AEC’s protest that it was exempt from paying
local business tax, the payment of franchise tax on business resulted to double
taxation, the assessment period has already prescribed, and the assessment and
collection of taxes under RRCAC cannot be made retroactive. The City
Treasurer then levied on the real properties of AEC prompting AEC to file with
the RTC an Urgent Motion for Issuance of a TRO and/or Writ of Preliminary
Injunction.
ISSUE:
Whether or not the Local Government Code prohibits an injunction
enjoining the collection of taxes.
RULING:
No. The Local Government Code does not specifically prohibit an
injunction enjoining the collection of taxes. The prohibition of a writ of
injunction to enjoin the collection of taxes applies only to national internal
revenue taxes, and not to local taxes. Unlike the NIRC, the Local Tax Code
does not contain any specific provision prohibiting courts from enjoining the
collection of local taxes.
Taxes, being the lifeblood of the government should be collected promptly,
without necessary hindrance or delay. The National Internal Revenue Code of
1997 (NIRC) expressly provides that no court shall have the authority to grant
an injunction to restrain the collection of any national internal revenue tax, fee
or charge imposed by the code. An exception to this rule obtains only when in
the opinion of the Court of Tax Appeals (CTA), the collection thereof may
jeopardize the interest of the government and/or the taxpayer.
ANGELES CITY vs. ANGELES ELECTRIC CORPORATION
Injunction on Local Taxes
ISSUE:
Can an injunction be issued to enjoin the collection of local taxes?
HELD:
YES. The Local Government Code does not specifically prohibit an
injunction enjoining the collection of taxes. This is different in the case of
national taxes where the Tax Code expressly provides that no court shall
have the authority to grant an injunction to restrain the collection on national
internal revenue tax, fee or charge with the sole exception of when the CTA
finds that the collection thereof may jeopardize the interest of the
government and/or the taxpayer. Nevertheless, there must still be proof of
the existence of the requirements for injunction to be issued under the Rules
of Court (i.e., clear right to be protected and urgent necessity to prevent
serious damage).
11. CIR vs Far East Bank/BPI
GR 173852, 15 March 2010
FACTS: Far East filed Corporate Annual Income Tax Return for 1994 for
Corporate Banking Unit and Foreign Currency Deposit Unit with reflected
refundable income tax of P12M. The P12M refund was carried over and applied
for the1995 income tax return. In 1995, Far East claimed that it overpaid tax
payments by P17M. P13M is being sought for refund and chose that the
remaining will be carried over. FarEast then claimed for the refund of the
P13.6M, which the CIR did not act upon. Far East filed a claim for refund. CTA
denied claim for refund. CA reversed the CTA, ruling that Far East duly proved
that the income derived from rentals and sale of real property upon which the
taxes were withheld were included in the return as part of the gross income.
ISSUE: WON respondent is entitled to the refund.
RULING: NO, The burden of proof for the claim is with the claimant which it
failed to establish. A taxpayer claiming for a tax credit or refund of creditable
withholding tax must comply with the following requisites:1) The claim must
be filed with the CIR within the two-year period from the date of payment of
the tax;2) It must be shown on the return that the income received was declared
as part of the gross income; and3) The fact of withholding must be established
by a copy of a statement duly issued by the payor to the payee showing the
amount paid and the amount of the tax withheld. Moreover, the fact that the
petitioner failed to present any evidence or to refute the evidence presented by
respondent does not ipso facto entitle the respondent to a tax refund. It is not
the duty of the government to disprove a Taxpayer’s claim for refund. Rather,
the burden of establishing the factual basis of a claim for a refund rests on the
taxpayer.
And while the petitioner has the power to make an examination of the returns
and to assess the correct amount of tax, his failure to exercise such powers does
not create a presumption in favor of the correctness of the returns. The taxpayer
must still present substantial evidence to prove his claim for refund.
As we have said, there is no automatic grant of a tax refund.