Summary of Selected Recent Tax Cases
Selected Del Castillo, J. Tax Cases reconsideration or new trial must first be filed
Republic of the Philippines (Republic) v.
Spouses Salvador, G.R. No. 205428, June 7,
2017
In an expropriation proceeding, consequential
damages are only awarded if as a result of the
expropriation, the remaining property of the
owner suffers from an impairment or decrease
in value. In this case, the Regional Trial Court
(RTC) rendered judgment in favor of the
Republic condemning the subject property for
the purpose of implementing the construction
of the C-5 Northern Link Road Project Phase 2
(Segment 9) from NLEX to McArthur Highway,
Valenzuela City. The RTC likewise directed the
Republic to pay respondents consequential
damages equivalent to the value of the capital
gains tax (CGT) and other taxes necessary for
the transfer of the subject property in the
Republic's name.
The Supreme Court ruled that the CGT on the
transfer of the expropriated property cannot be
considered consequential damages that may be
awarded to the property owner. The transfer of
property through expropriation proceedings is a
sale or exchange within the meaning of Sections
24(D) and 56(A)(3), Tax Code, and profit from
the transaction constitutes capital gain. Since
CGT is a tax on passive income, it is the seller, or
respondents in this case, who are liable to
shoulder the tax. Thus, as far as the
government is concerned, the CGT in
expropriation proceedings remains a liability of
the seller, as it is a tax on the seller's gain from
the sale of real property.
Asiatrust Development Bank, Inc. vs.
Commissioner of Internal Revenue (CIR), G.R.
Nos. 201530 and 201680-81, April 19, 2017
In order for the Court of Tax Appeals (CTA) En
Banc to take cognizance of an appeal via a
petition for review, a timely motion for
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.
The same is true in the case of an amended
decision. Section 3, Rule 14, Revised Rules of
the CTA, defines an amended decision as “[a]ny
action modifying or reversing a decision of the
Court en banc or in Division.” An amended
decision is a different decision, and thus, is a
proper subject of a motion for reconsideration.
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.
CIR v. St. Luke’s Medical Center, Inc. (St.
Luke’s), G.R. No. 203514, February 13, 2017
There is no dispute that St. Luke’s is organized
as a non-stock and non-profit charitable
institution. However, this does not
automatically exempt St. Luke’s from paying
taxes. This only refers to the organization of St.
Luke’s. Even if St. Luke’s meets the test of
charity, a charitable institution is not ipso facto
tax exempt. To be exempt from real property
taxes, Section 28(3), Article VI, Constitution
requires that a charitable institution use the
property ‘actually, directly and exclusively’ for
charitable purposes. To be exempt from income
taxes, Section 30(E), Tax Code requires that a
charitable institution must be ‘organized and
operated exclusively’ for charitable purposes.
Likewise, to be exempt from income taxes,
Section 30(G), Tax Code requires that the
institution be ‘operated exclusively’ for social
welfare.
However, the last paragraph of Section 30, Tax
Code provides that if a tax-exempt charitable
institution conducts ‘any’ activity for profit,
such activity is not tax exempt even as its not-
for-profit activities remain tax exempt. Thus,
even if the charitable institution must be
‘organized and operated exclusively’ for
charitable purposes, it is nevertheless allowed
to engage in ‘activities conducted for profit’
without losing its tax-exempt status for its not-
for-profit activities. The only consequence is
that the ‘income of whatever kind and
character’ of a charitable institution ‘from any
of its activities conducted for profit, regardless
of the disposition made of such income, shall be
subject to tax.’
Prior to the introduction of Section 27(B), Tax
Code, the tax rate on such income from for-
profit activities was the ordinary corporate rate
under Section 27(A). With the introduction of
Section 27(B), the tax rate is now 10%.
The Court finds that St. Luke’s is a corporation
that is not ‘operated exclusively’ for charitable
or social welfare purposes insofar as its
revenues from paying patients are concerned.
This ruling is based not only on a strict
interpretation of a provision granting tax
exemption, but also on the clear and plain text
of Section 30(E) and (G). Section 30(E) and (G),
Tax Code requires that an institution be
‘operated exclusively’ for charitable or social
welfare purposes to be completely exempt from
income tax. An institution under Section 30(E)
or (G) does not lose its tax exemption if it earns
income from its for-profit activities. Such
income from for-profit activities, under the last
paragraph of Section 30, is merely subject to
income tax, previously at the ordinary
corporate rate but now at the preferential 10%
rate pursuant to Section 27(B).
In sum, for an institution to be completely
exempt from income tax, Section 30 (E) and (G),
Tax Code requires the institution to operate
exclusively for charitable or social welfare
purpose. But in case an exempt institution
under Section 30 (E) or (G), Tax Code earns
income from its for-profit activities, it will not
lose its tax exemption. However, its income
from for-profit activities will be subject to
income tax at the preferential 10% rate
pursuant to Section 27 (B) thereof.
CIR v. Toledo Power Company (TPC), G.R. No.
196415, December 2, 2015
Section 6, Electric Power Industry Reform Act
(EPIRA) provides that the sale of generated
power by generation companies shall be zero-
rated. Section 4(x), EPIRA states that a
generation company “refers to any person or
entity authorized by the [Energy Regulatory
Commission] (ERC) to operate facilities used in
the generation of electricity.” Corollarily, to be
entitled to a refund or credit of unutilized input
value-added tax (VAT) attributable to the sale of
electricity under the EPIRA, a taxpayer must
establish: (1) that it is a generation company,
and (2) that it derived sales from power
generation.
Under the EPIRA, all new generation companies
and existing generation facilities are required to
obtain a Certificate of Compliance (COC) from
the ERC. New generation companies must show
that they have complied with the requirements,
standards, and guidelines of the ERC before
they can operate. As for existing generation
facilities, they must submit to the ERC an
application for a COC together with the
required documents within ninety (90) days
from the effectivity of the EPIRA Rules and
Regulations.
In this case, when the EPIRA took effect in 2001,
TPC was an existing generation facility. Further,
at the time the sales of electricity to CEBECO,
ACMDC, and AFC were made in 2002, TPC was
not yet a generation company under EPIRA.
Although it filed an application for a COC on
June 20, 2002, it did not automatically become
a generation company. It was only on June 23,
2005, when the ERC issued a COC in favor of
TPC, that it became a generation company
under EPIRA. Consequently, TPC’s sales of
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electricity to CEBECO, ACMDC, and AFC in 2002
cannot qualify for VAT zero-rating under the
EPIRA.
CIR v. La Tondeña Distillers, Inc., G.R. No.
175188, July 15, 2015
In a tax-free merger under Section 40(C)(2) and
(6)(b), Tax Code, no gain or loss shall be
recognized by the absorbed corporations as
transferors of all assets and liabilities. The
transfer of assets, such as real properties,
pursuant to the merger shall also not be subject
to the documentary stamp tax (DST) imposed
under Section 196, Tax Code.
Section 196, Tax Code does not apply because
there is no purchaser or buyer in the case of a
merger. Under Section 80, Corporation Code of
the Philippines, the assets of the absorbed
corporations were not bought or purchased by
surviving corporation but were transferred to
and vested in the latter as an inherent legal
consequence of the merger, without any
further act or deed. It also noted that any
doubts as to the tax-free nature of the merger
had been already removed by the subsequent
enactment of Republic Act No. (RA) No. 9243,
which amended Section 199, Tax Code by
specifically exempting from the payment of DST
the transfer of property pursuant to a merger.
CE Casecnan Water and Energy Company, Inc.
v. The Province of Nueva Ecija, et al., G.R. No.
196278, June 17, 2015
It is the CTA which has the power to rule on a
Petition for Certiorari assailing an interlocutory
order of the RTC relating to a local tax case.
The jurisdiction of the CTA was expanded and
its rank elevated to that of a collegiate court
with special jurisdiction by virtue of RA No.
9282. This expanded jurisdiction of the CTA
includes its exclusive appellate jurisdiction to
review by appeal the decisions, orders, or
resolutions of the RTC in local tax cases
originally decided or resolved by it in the
exercise of its original or appellate jurisdiction.
Bureau of Internal Revenue (BIR), v. Court of
Appeals (CA), Spouses Antonio Villan Manly,
and Ruby Ong Manly, G.R. No. 197590.
November 24, 2014.
In Ungab v. Judge Cusi, Jr., it was ruled that tax
evasion is deemed complete when the violator
has knowingly and willfully filed a fraudulent
return with intent to evade and defeat a part or
all of the tax. Corollarily, an assessment of the
tax deficiency is not required in a criminal
prosecution for tax evasion. However, in CIR v.
CA, it was clarified that although a deficiency
assessment is not necessary, the fact that a tax
is due must first be proved before one can be
prosecuted for tax evasion.
In this case, the amount of tax due from
respondent spouses was specifically alleged in
the Complaint-Affidavit. The computation, as
well as the method used in determining the tax
liability, was also clearly explained. The revenue
officers likewise showed that the
underdeclaration exceeded 30% of the reported
or declared income. The revenue officers also
identified the likely source of the unreported or
undeclared income in their Reply-Affidavit.
The Court held that there is probable cause to
indict respondent spouses for tax evasion as
petitioner was able to show that a tax is due
from them. Probable cause, for purposes of
filing a criminal information, is defined as such
facts that are sufficient to engender a well-
founded belief that a crime has been
committed, that the accused is probably guilty
thereof, and that he should be held for trial. It
bears stressing that the determination of
probable cause does not require actual or
absolute certainty, nor clear and convincing
evidence of guilt; it only requires reasonable
belief or probability that more likely than not a
crime has been committed by the accused.
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Manila Memorial Park, Inc., et al, v. Secretary
of the Department of Social Welfare and
Development (DSWD) and the Secretary of the
Department of Finance, G.R. No. 175356.
December 3, 2013
RA No. 7432 grants senior citizens 20% discount
on certain establishments. Revenue Regulations
(Rev. Regs.) No. 02-94 was issued to implement
RA No. 7432 stating therein that the amount of
20% discount shall be deducted from the gross
income for income tax purposes and from gross
sales of the business enterprise concerned for
purposes of the VAT and other percentage
taxes. The petitioners assail the
constitutionality of Section 4, RA No. 7432, as
amended by RA No. 9257, and the
implementing rules and regulations issued by
the DSWD and DOF insofar as these allow
business establishments to claim the 20%
discount given to senior citizens as tax
deduction. They posit that the tax deduction
scheme contravenes Article III, Section 9,
Constitution which provides that: “private
property shall not be taken for public use
without just compensation.”
The Court held that the subject regulation is a
police power measure. The 20% senior citizen
discount and tax deduction scheme are valid
exercises of police power of the State absent a
clear showing that it is arbitrary, oppressive or
confiscatory.
As to its nature and effects, the 20% discount is
a regulation affecting the ability of private
establishments to price their products and
services relative to a special class of individuals,
senior citizens, for which the Constitution
affords preferential concern. In turn, this affects
the amount of profits or income/gross sales
that a private establishment can derive from
senior citizens. In other words, the subject
regulation affects the pricing, and, hence, the
profitability of a private establishment.
However, it does not purport to appropriate or
burden specific properties, used in the
operation or conduct of the business of private
establishments, for the use or benefit of the
public, or senior citizens for that matter, but
merely regulates the pricing of goods and
services relative to, and the amount of profits
or income/gross sales that such private
establishments may derive from, senior citizens.
The 20% senior citizen discount and tax
deduction scheme are valid exercises of police
power of the State absent a clear showing that
it is arbitrary, oppressive or confiscatory.
Fort Bonifacio Development Corporation v.
CIR, G.R. No. 173425, January 22, 2013
Prior payment of taxes is not necessary before a
taxpayer could avail of the 8% transitional input
tax credit. The Tax Code provides that for a
taxpayer to avail of the 8% transitional input tax
credit, all that is required from the taxpayer is
to file a beginning inventory with the BIR. The
Tax Code does not mention that prior payment
of taxes is a requirement.
A transitional input tax credit is not a tax refund
per se but a tax credit. Logically, prior payment
of taxes is not required before a taxpayer could
avail of transitional input tax credit.
Tax refund is defined as the money that a
taxpayer overpaid and is thus returned by the
taxing authority. Tax credit, on the other hand,
is an amount subtracted directly from one’s
total tax liability. It is any amount given to a
taxpayer as a subsidy, a refund, or an incentive
to encourage investment.
Silicon Philippines (Formerly Intel Philippines
Manufacturing, Inc.) v. CIR, G.R. No. 172378,
January 17, 2011
In a claim for credit/refund of input VAT
attributable to zero-rated sales, Section 112 (A),
Tax Code lays down four requisites, to wit:
Page 4 of 15
1. the taxpayer must be VAT-registered;
2. the taxpayer must be engaged in sales
which are zero-rated or effectively zero-
rated;
3. the claim must be filed within two years
after the close of the taxable quarter when
such sales were made; and
4. the creditable input tax due or paid must be
attributable to such sales, except the
transitional input tax, to the extent that
such input tax has not been applied against
the output tax.
Under Section 112(A), Tax Code, a claimant
must be engaged in sales which are zero-rated
or effectively zero-rated. To prove this, duly
registered invoices or receipts evidencing zero-
rated sales must be presented. However, since
the Authority to Print (ATP) is not indicated in
the invoices or receipts, the only way to verify
whether the invoices or receipts are duly
registered is by requiring the claimant to
present its ATP from the BIR. Without this
proof, the invoices or receipts would have no
probative value for the purpose of refund.
Similarly, failure to print the word “zero-rated”
on the sales invoices or receipts is fatal to a
claim for credit/refund of input VAT on zero-
rated sales.
CIR vs. Smart Communication, Inc., G.R. No.
179045-46, August 25, 2010
As a general rule, the person entitled to claim a
tax refund is the taxpayer. However, in case the
taxpayer does not file a claim for refund, the
withholding agent may file the claim. A
withholding agent is considered a proper party
to file a claim for refund of the withheld taxes
of its foreign parent company.
The term “taxpayer” is defined in the Tax Code
as referring to “any person subject to tax
imposed by the Title [on Tax on Income].” It
thus becomes important to note that under
Section 53(c), Tax Code, the withholding agent
who is “required to deduct and withhold any
tax” is made “personally liable for such tax” and
indeed is indemnified against any claims and
demands which the stockholder might wish to
make in questioning the amount of payments
effected by the withholding agent in accordance
with the provisions of the Tax Code. The
withholding agent is directly and independently
liable for the correct amount of the tax that
should be withheld from the dividend
remittances. The withholding agent is,
moreover, subject to and liable for deficiency
assessments, surcharges, and penalties should
the amount of the tax withheld be finally found
to be less than the amount that should have
been withheld under law.
A “person liable for tax” has been held to be a
“person subject to tax” and properly considered
a “taxpayer.” The terms “liable for tax” and
“subject to tax” both connote legal obligation or
duty to pay a tax. It is very difficult, indeed
conceptually impossible, to consider a person
who is statutorily made “liable for tax” as not
“subject to tax.” By any reasonable standard,
such a person should be regarded as a party in
interest, or as a person having sufficient legal
interest, to bring a suit for refund of taxes he
believes were illegally collected from him.
Angeles City v. Angeles Electric Corporation,
G.R. No. 166134, June 29, 2010
A principle deeply embedded in our
jurisprudence is that taxes, being the lifeblood
of the government, should be collected
promptly, without unnecessary hindrance or
delay. In line with this principle, the Tax Code
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 CTA the collection thereof may
jeopardize the interest of the government
and/or the taxpayer.
Page 5 of 15
The situation, however, is different in the case
of the collection of local taxes as there is no
express provision in the Local Government Code
(LGC) prohibiting courts from issuing an
injunction to restrain local governments from
collecting taxes.
Unlike the Tax Code, the LGC does not contain
any specific provision prohibiting courts from
enjoining the collection of local taxes. Such
statutory lapse or intent, however it may be
viewed, may have allowed a preliminary
injunction where local taxes are involved but
cannot negate the procedural rules and
requirements under Rule 58.
Nevertheless, it must be emphasized that
although there is no express prohibition in the
LGC, injunctions enjoining the collection of local
taxes are frowned upon. Courts therefore
should exercise extreme caution in issuing such
injunctions.
CIR v. Kudos Metal Corporation, G.R. No.
178087, May 5, 2010
Section 222(B), Tax Code provides that 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.
A review of the waivers executed by
respondent’s accountant reveals the following
infirmities:
1. The waivers were executed without the
notarized written authority of Pasco to sign
the waiver on behalf of respondent;
2. The waivers 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.
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. As we have often
said, 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 of estoppel cannot
give validity to an act that is prohibited by law
or one that is against public policy. It should be
resorted to solely as a means of preventing
injustice and should not be permitted to defeat
the administration of the law, or to accomplish
a wrong or secure an undue advantage, or to
extend beyond them requirements of the
transactions in which they originate. Simply put,
the doctrine of estoppel must be sparingly
applied.
Moreover, the BIR cannot hide behind the
doctrine of estoppel to cover its failure to
comply with Revenue Memorandum Order
(RMO) No. 20-90 and Revenue Delegation
Authority Order (RDAO) 05-01, which the BIR
itself issued.
CIR v. Far East Bank & Trust Company (now
Bank of the Philippine Islands), G.R. No.
173854, March 15, 2010
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; and
Page 6 of 15
3. The fact of withholding must be established
by a copy of a statement duly issued by the
payor to the payee showing the amount
paid and the amount of the tax withheld.
CIR v. SM Prime Holdings, Inc. and First Asia
Development Corporation, G.R. No. 183505,
February 26, 2010
The sale of cinema tickets is not subject to VAT.
A cursory reading of Section 108, Tax Code,
clearly shows that the enumeration of the “sale
or exchange of services” subject to VAT is not
exhaustive. The words, “including,” “similar
services,” and “shall likewise include,” indicate
that the enumeration is by way of example
only. Among those included in the enumeration
is the “lease of motion picture films, films, tapes
and discs.” This, however, is not the same as
the showing or exhibition of motion pictures or
films.
Since the activity of showing motion pictures,
films or movies by cinema/theater operators or
proprietors is not included in the enumeration,
it is incumbent upon the court to the determine
whether such activity falls under the phrase
“similar services.” The intent of the legislature
must therefore be ascertained.
In 1994, RA No. 7716 restructured the VAT
system by widening its tax base and enhancing
its administration. Three years later, RA No
7716 was amended by RA No. 8241. Shortly
thereafter, the NIRC of 1997 was signed into
law. Several amendments were made to expand
the coverage of VAT. However, none pertain to
cinema/theater operators or proprietors. Under
the NIRC of 1997, only lessors or distributors of
cinematographic films are subject to VAT, while
persons subject to amusement tax under the
NIRC of 1997 are exempt from the coverage of
VAT.
Allied Banking Corporation v. CIR, G.R. No.
175097, February 5, 2010
A Formal Letter of Demand (FLD) with the
following language may be considered a
“decision” appealable to the CTA:
“It is requested that the above
deficiency tax be paid immediately
upon receipt hereof, inclusive of
penalties incident to delinquency. This
is our final decision based on
investigation. If you disagree, you may
appeal the final decision within 30 days
from receipt hereof, otherwise said
deficiency tax assessment shall become
final, executory and demandable.”
(Emphasis supplied.)
A careful reading of the FLD confirms the
petitioner’s position that the instant case is an
exception to the rule on exhaustion of
administrative remedies, i.e., estoppel on the
part of the administrative agency concerned.
In this case, records show that petitioner
disputed the PAN but not the FLD. Instead, the
petitioner filed a Petition for Review with the
CTA. Nevertheless, petitioner cannot be blamed
for not filing a protest against the FLD since the
language used and the tenor of the demand
letter indicate that it is the final decision of the
respondent on the matter. The CIR should
indicate, in a clear and unequivocal language,
whether his action on a disputed assessment
constitutes his final determination thereon in
order for the taxpayer concerned to determine
when his or her right to appeal to the tax court
accrues.
Moreover, it cannot be ignored that in the FLD,
respondent used the word “appeal” instead of
“protest,” “reinvestigation,” or
“reconsideration.” Although there was no
direct reference for petitioner to bring the
matter directly to the CTA, it cannot be denied
that the word “appeal” under prevailing tax
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laws refers to the filing of a Petition for Review
with the CTA. As aptly pointed out by
petitioner, under Section 228, Tax Code, the
terms “protest,” “reinvestigation,” and
“reconsideration” refer to the administrative
remedies a taxpayer may take before the CIR,
while the term “appeal” refers to the remedy
available to the taxpayer before the CTA.
Petitioner in appealing the FLD to the CTA
merely took the cue from respondent.
Other Selected Tax Cases
CIR v. Lancaster Philippines, Inc., G.R. No.
183408, July 12, 2017
The Letter of Authority (LOA) authorized the BIR
officers to examine the books of account of
Lancaster for the taxable year 1998 only or,
since Lancaster adopted a fiscal year (FY), for
the period 1 April 1997 to 31 March 1998.
However, the deficiency income tax assessment
which the BIR eventually issued against
Lancaster was based on the disallowance of
expenses reported in FY 1999, or for the period
1 April 1998 to 31 March 1999. Thus, the
revenue examiners had exceeded their
authority when they issued the assessment
against Lancaster and, consequently, the
assessment is without force and effect.
CIR v. Systems Technology Institute, Inc., G.R.
No. 220835, July 26, 2017
Section 203, Tax Code limits the CIR’s period to
assess and collect internal revenue taxes to 3
years counted from the last day prescribed by
law for the filing of the return or from the day
the return was filed, whichever comes later.
Thus, assessments issued after the expiration of
such period are no longer valid and effective.
To implement the foregoing provisions, the BIR
issued RMO No. 20-90 and RDAO No. 05-01,
outlining the procedures for the proper
execution of a valid waiver. The requirements
are mandatory and must strictly be followed. To
be sure, in a number of cases, the Court did not
hesitate to strike down waivers which failed to
strictly comply with the provisions of RMO No.
20-90 and RDAO No. 05-01.
[Cf. CIR v. Next Mobile, Inc. (formerly Nextel
Communications Phils., Inc.), G.R. No. 212825.
December 7, 2015 where the Court ruled that
the general rule is that when a waiver does not
comply with the requisites for its validity
specified under RMO No. 20-90 and RDAO 01-
05, it is invalid and ineffective to extend the
prescriptive period to assess taxes. However, as
an exception, the waivers shall be considered
valid where the parties are in pari delicto or “in
equal fault.”]
Procter & Gamble Asia Pte. Ltd v. CIR, G.R. No.
205652, September 6, 2017
Below are the rules laid down in San Roque with
regard to claims for refund or tax credit of
unutilized or excess creditable input VAT
attributable to zero-rated sales:
1. When to file an administrative claim with
the CIR:
a. General rule — Section 112(A) and
Mirant: Within 2 years from the close of
the taxable quarter when the sales
were made
b. Exception — Atlas: Within 2 years from
the date of payment of the output VAT,
if the administrative claim was filed
from June 8, 2007 (promulgation of
Atlas) to September 12, 2008
(promulgation of Mirant)
2. When to file a judicial claim with the CTA:
a. General rule — Section 112(D); not
Section 229
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 i. Within 30 days from the full or
partial denial of the administrative
claim by the CIR; or
ii. Within 30 days from the expiration
of the 120-day period provided to
the CIR to decide on the claim. This
is mandatory and jurisdictional
beginning January 1, 1998
(effectivity of 1997 NIRC).
b. Exception — BIR Ruling No. DA-489-03:
The judicial claim need not await the
expiration of the 120-day period, if such
was filed from December 10, 2003
(issuance of BIR Ruling No. DA-489-03)
to October 6, 2010 (promulgation of
Aichi).
N.B. The TRAIN Law has reduced the period
for the CIR to act on claims for refund or tax
credit of unutilized or excess creditable input
VAT attributable to zero-rated sales from 120
days to 90 days.
Teresa R. Ignacio v. Office of the City Treasurer
of Quezon City, et al., G.R. No. 221620,
September 11, 2017
The CTA’s appellate jurisdiction over decisions,
orders, or resolutions of the RTC becomes
operative only when the RTC has ruled on a
local tax case. Thus, before the case can be
raised on appeal to the CTA, the action before
the RTC must be in the nature of a tax case, or
one which primarily involves a tax issue.
Thus, cases decided by the RTC which involve
issues relating to the power of the local
government to impose real property taxes are
considered local tax cases, which fall under the
appellate jurisdiction of the CTA. To note, these
issues may, inter alia, involve the legality or
validity of the real property tax assessment;
protests of assessments; disputed assessments,
surcharges, or penalties; legality or validity of a
tax ordinance; claims for tax refund/credit;
claims for tax exemption; actions to collect the
tax due; and even prescription of assessments.
In this case, a reading of the Annulment
Complaint shows that Teresa’s action before
the RTC is essentially one for recovery of
ownership and possession of the property, with
damages, which is not anchored on a tax issue,
but on due process considerations. As such, the
RTC’s ruling thereon could not be characterized
as a local tax case over which the CTA could
have properly assumed jurisdiction on appeal.
In fine, the case was correctly elevated to the
CA.
Katherine Rose Salva v. Ildefonso P. Magpile,
G.R. No. 220440, November 8, 2017
Magpile failed to pay the real property taxes
due on the subject property from 1998 up to
2006. As a result, the City Treasurer of Makati
sent him billing statements, notice of realty tax
delinquency, and warrants of levy at his
registered address. On May 24, 2006, the
subject property was sold at a public auction for
P200,000.00 to petitioner, Katherine Rose Salva
(Salva), as the highest bidder.
Magpile filed a petition before the RTC to
declare as null and void the auction sale and to
cancel the certificate of sale issued in favor of
Salva. The trial court denied Magpile’s petition,
opining that the notices sent to him through
registered mail by the City Treasurer adequately
protected his rights as the registered owner of
the subject property.
Magpile elevated the case to the CA. One of
Salva’s arguments is that it is the CTA, and not
the CA, which has jurisdiction over the subject
matter of the appeal pursuant to Section
7(a)(3), RA No. 9282.
The CA correctly asserted its jurisdiction in this
case. Here, the dispute arose from the alleged
non-compliance of the respondents with the
pertinent provisions of the LGC on a tax
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delinquency sale. A plain reading of Magpile’s
petition before the RTC would show that he did
not assail the legality or validity and
reasonableness or correctness of the real
property tax assessment and collection. In fact,
he categorically and repeatedly admits in his
pleadings that he failed to pay the real property
tax from 1998 up to 2006. As the CA ruled, what
he is questioning is the alleged denial of due
process in the levying of his property.
CIR v. Transitions Optical Philippines, Inc., G.R.
No. 227544, November 22, 2017
The Court reiterated the rule in Next Mobile
which recognized the doctrine of estoppel and
upheld the waivers when both the taxpayer and
the BIR were in pari delicto. The taxpayer's act
of impugning its waivers after benefitting from
them was considered an act of bad faith.
The Court also ruled as untenable petitioner’s
contention that the assessment required to be
issued within the 3-year or extended period
provided in Sections 203 and 222, Tax Code
refers to the PAN. Considering the functions
and effects of a PAN vis-à-vis a FAN, it is clear
that the assessment contemplated in Sections
203 and 222, Tax Code refers to the service of
the FAN upon the taxpayer.
A PAN merely informs the taxpayer of the initial
findings of the BIR. It contains the proposed
assessment, and the facts, law, rules, and
regulations or jurisprudence on which the
proposed assessment is based. It does not
contain a demand for payment but usually
requires the taxpayer to reply within 15 days
from receipt. Otherwise, the CIR will finalize an
assessment and issue a FAN. The PAN is a part
of due process. It gives both the taxpayer and
the CIR the opportunity to settle the case at the
earliest possible time without the need for the
issuance of a FAN.
On the other hand, a FAN contains not only a
computation of tax liabilities but also a demand
for payment within a prescribed period. As soon
as it is served, an obligation arises on the part of
the taxpayer concerned to pay the amount
assessed and demanded. It also signals the time
when penalties and interests begin to accrue
against the taxpayer.
Philippine Airlines, Inc. (PAL) v. CIR, G.R. Nos.
206079-80, January 17, 2018
The CTA is not limited by the evidence
presented in the administrative claim in the BIR.
The claimant may present new and additional
evidence to the CTA to support its case for tax
refund.
The power of the CTA to exercise its appellate
jurisdiction does not preclude it from
considering evidence that was not presented in
the administrative claim in the BIR. RA No.
1125, as amended, states that the CTA is a court
of record. Parties are expected to litigate and
prove every aspect of their case anew and
formally offer all their evidence. No value is
given to documentary evidence submitted in
the BIR unless it is formally offered in the CTA.
Steel Corporation of the Philippines
(STEELCORP) v. Bureau of Customs (BOC), et
al., G.R. No. 220502, February 12, 2018
In the course of the rehabilitation proceedings
of STEELCORP RA No. 10142, or the Financial
Rehabilitation and Insolvency Act (FRIA) of 2010
was enacted. Section 19 of which mandates
that upon issuance of the Commencement
Order by the court, and until the approval of
the Rehabilitation Plan or dismissal of the
petition, whichever is earlier, the imposition of
all taxes and fees, including penalties, interests
and charges thereof, due to the national
government or to LGUs shall be considered
waived, in furtherance of the objectives of
rehabilitation.
In a letter to the BOC, STEELCORP manifested
its intent to avail of the privileges granted by
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Section 19, RA No. 10142, stressing that the
import duties and fees/VAT which the BOC
wanted to impose on and collect cannot be
made without violating the aforesaid provision.
It appears that STEELCORP had imported raw
materials for use in its manufacture of steel
products, which the BOC assessed with taxes in
the sum of P41,206,120.00.
The request was denied by the BOC and the
Department of Finance. Thus, STEELCORP filed
before the RTC a Complaint against the
respondents for injunction with application for
immediate issuance of temporary restraining
order (TRO) and writ of preliminary injunction
(WPI) seeking to restrain the respondents from
assessing and continuing to assess STEELCORP
of all taxes and fees due to the national
government, including penalties, interests, and
charges from the issuance of the Stay Order on
September 12, 2006 and until final court
approval of the rehabilitation plan.
The RTC dismissed the complaint. Thus,
STEELCORP elevated the case to the CA. The CA
dismissed the appeal. One of its grounds for
dismissal is that the appeal should have been
taken to the CTA.
The Court reiterated Banco De Oro which held
that the CTA has undoubted jurisdiction to pass
upon the constitutionality or validity of a tax
law or regulation when raised by the taxpayer
as a defense in disputing or contesting an
assessment or claiming a refund. It is only in the
lawful exercise of its power to pass upon all
matters brought before it, as sanctioned by
Section 7, RA No. 1125, as amended.
In Banco De Oro, the Court also declared that
the CTA may likewise take cognizance of cases
directly challenging the constitutionality or
validity of a tax law or regulation or
administrative issuance (revenue orders,
revenue memorandum circulars, rulings). In
other words, within the judicial system, the law
intends the Court of Tax Appeals to have
exclusive jurisdiction to resolve all tax
problems.
From the clear purpose of RA No. 1125 and its
amendatory laws, the CTA, therefore, is the
proper forum to file the appeal. Matters calling
for technical knowledge should be handled by
such court as it has the specialty to adjudicate
tax, customs, and assessment cases.
Coca-Cola Bottlers Philippines, Inc. v. CIR, G.R.
No. 222428 February 19, 2018
Coca-Cola was not able to credit input tax
amounting to P123,459,674.70 against the
corresponding output tax during the first
quarter of 2008 due to its employees’
inadvertence. Since an LOA was already served
for CY 2008, Coca-Cola was not able to amend
its VAT Return. Thus, Coca-Cola took the
position that it made erroneous/excessive
payment of output VAT due to its failure to
apply the P123,459,674.70 input VAT in the
computation of its excess allowable input VAT.
In line with this position, Coca-Cola filed a claim
for refund or tax credit of its alleged
over/erroneous payment of VAT under Section
229, Tax Code.
The Court ruled that Section 229 is not
applicable under the VAT System. A claim for
refund or TCC for excess input tax over output
tax must be filed under Section 112, Tax Code.
From the plain text of Section 229, it is clear
that what can be refunded or credited is a tax
that is “erroneously, xxx illegally, xxx excessively
or in any manner wrongfully collected.” In
short, there must be a wrongful payment
because what is paid, or part of it, is not legally
due.
Under the VAT System, there is no claim or
issue that the “excess” input VAT is “excessively
or in any manner wrongfully collected.” In fact,
if the “excess” input VAT is an “excessively”
collected tax under Section 229, then the
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taxpayer claiming to apply such “excessively”
collected input VAT to offset his output VAT
may have no legal basis to make such offsetting.
Furthermore, a plain and simple reading of
Sections 110(B) and 112(A), Tax Code reveals
that if and when the input tax exceeds the
output tax, the excess shall be carried over to
the succeeding quarter or quarters. It is only
when ·the sales of a VAT-registered person are
zero-rated or effectively zero-rated that he may
have the option of applying for the issuance of a
TCC or refund of creditable input tax due or
paid attributable to such sales.
City of Pasig v. Manila Electric Company, G.R.
No. 181710, March 7, 2018
The power to impose franchise tax belongs to
the province under Section 137, LGC.
Municipalities are prohibited from levying the
taxes specifically allocated to provinces under
Section 142, LGC. However, Section 151, LGC
empowers the cities to levy taxes, fees and
charges allowed to both provinces and
municipalities.
It is not disputed that at the time the ordinance
in question was enacted in 1992, the local
government of Pasig, then a municipality, had
no authority to levy franchise tax. Article 5, Civil
Code explicitly provides, “acts executed against
the provisions of mandatory or prohibitory laws
shall be void, except when the law itself
authorizers their validity.” Section 32, Municipal
Ordinance No. 25 is, thus, void for being in
direct contravention with Section 142, LGC.
Being void, it cannot be given any legal effect.
An assessment and collection pursuant to the
said ordinance is, perforce, legally infirm.
Furthermore, the conversion of the municipality
into a city does not remove the original
infirmity of the subject ordinance. Thus, the
cityhood law (R.A. No. 7829) of Pasig cannot
breathe life into Section 32, Municipal
Ordinance No. 25, ostensibly by bringing it
within the ambit of Section 151, LGC that
authorizes cities to levy the franchise tax under
Section 137 of the same law. It is beyond cavil
that Section 32, Municipal Ordinance No. 25 is
an act that is null and void ab initio. It is even of
little consequence that Pasig sought to collect
only those taxes after its conversion into a city.
A void ordinance, or provision thereof, is what it
is — a nullity that produces no legal effect. It
cannot be enforced; and no right could spring
forth from it. The cityhood of Pasig
notwithstanding, it has no right to collect
franchise tax under the assailed ordinance.
University Physicians Services, Inc.-
Management, Inc. v. CIR, G.R. No. 205955,
March 7, 2018
Section 76, Tax Code provides that if the sum of
the quarterly tax payments made during the
said taxable year is not equal to the total tax
due on the entire taxable income of that year,
the corporation shall either: (a) Pay the balance
of tax still due; (b) Carry over the excess credit;
or (c) Be credited or refunded with the excess
amount paid, as the case may be. Furthermore,
the same section also provides that once the
option to carry-over and apply the excess
quarterly income tax against income tax due for
the taxable quarters of the succeeding taxable
years has been made, such option shall be
considered irrevocable for that taxable period
and no application for cash refund or issuance
of a tax credit certificate shall be allowed
therefor.
It is clear from the foregoing that only the carry
over option is irrevocable. There appears
nothing in Section 76 from which to infer that
the other choice (cash refund or tax credit
certificate) is also irrevocable. If the intention of
the lawmakers was to make such option of cash
refund or tax credit certificate also irrevocable,
then they would have clearly provided so. To
insist that the Irrevocability Rule applies to
option for cash refund/TCC would be violative
of the principle of administrative feasibility.
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Team Energy Corporation v. CIR, G.R. Nos.
197663 and 197770, March 14, 2018
For a judicial claim for Value Added Tax (VAT)
refund to prosper, the claim must not only be
filed within the mandatory 120+30-day periods.
The taxpayer must also prove the factual basis
of its claim and comply with the invoicing
requirements under the Tax Code and other
appropriate revenue regulations. Input VAT
payments on local purchases of goods or
services must be substantiated with VAT
invoices or official receipts, respectively.
Philippine Ports Authority v. The City of Davao,
G.R. No. 190324, June 6, 2018
When a tax case is pending on appeal with the
CTA, the CTA has the exclusive jurisdiction to
enjoin the levy of taxes and the auction of a
taxpayer’s properties in relation to that case.
In this case, the CTA had jurisdiction over
petitioner’s appeal to resolve the question of
whether or not it was liable for real property
tax. To recall, the real property tax liability was
the very reason for the acts which petitioner
wanted to have enjoined. It was, thus, the CTA,
and not the CA, that had the power to preserve
the subject of the appeal, to give effect to its
final determination, and, when necessary, to
control auxiliary and incidental matters and to
prohibit or restrain acts which might interfere
with its exercise of jurisdiction over petitioner's
appeal. Thus, respondents’ acts carried out
pursuant to the imposition of the real property
tax were also within the jurisdiction of the CTA.
Even if the law had vested the CA with
jurisdiction to issue injunctive relief in real
property tax cases such as this, the CA was still
correct in dismissing the petition before it. Once
a court acquires jurisdiction over a case, it also
has the power to issue all auxiliary writs
necessary to maintain and exercise its
jurisdiction, to the exclusion of all other courts.
Thus, once the CTA acquired jurisdiction over
petitioner’s appeal, the CA would have been
precluded from taking cognizance of the case.
CIR v. Bank of the Philippine Islands, G.R. No.
224327, June 11, 2018
The CTA has jurisdiction over cases praying for
the cancellation and withdrawal of a warrant of
distraint and/or levy issued by the CIR. Section
7, RA No. 1125, as amended, provides that the
CTA has exclusive appellate jurisdiction to
review by appeal or other matters arising under
the NIRC or other laws administered by the BIR.
Furthermore, failure of the CIR to prove the
receipt of the assessment by the taxpayer
would necessarily lead to the conclusion that no
assessment was issued. While a mailed letter is
deemed received by the addressee in the
ordinary course of mail, this is still merely a
disputable presumption subject to
controversion, and a direct denial of the receipt
thereof shifts the burden upon the party
favored by the presumption to prove that the
mailed letter was indeed received by the
addressee. In the instant case, BPI denies
receiving the assessment notice, and the CIR
was unable to present substantial evidence that
such notice was, indeed, mailed or sent before
the BIR’s right to assess had prescribed and that
said notice was received by BPI. As a matter of
fact, there was an express admission on the
part of the CIR that there was no proof that
indeed the alleged Final Assessment Notice was
ever sent to or received by BPI.
City of Manila v. Cosmos Bottling Corporation,
G.R. No. 196681, June 27, 2018
The filing of a motion for reconsideration or
new trial to question the decision of a division
of the CTA is mandatory. An appeal brought
directly to the CTA En Banc is dismissible for
lack of jurisdiction.
In local taxation, an assessment for deficiency
taxes made by the local government unit may
Page 13 of 15
be protested before the local treasurer without
necessity of payment under protest. But if
payment is made simultaneous with or
following a protest against an assessment, the
taxpayer may subsequently maintain an action
in court, whether as an appeal from assessment
or a claim for refund, so long as it is initiated
within 30 days from either decision or inaction
of the local treasurer on the protest.
A taxpayer who had protested and paid an
assessment is not precluded from later on
instituting an action for refund or credit. The
taxpayers’ remedies of protesting an
assessment and refund of taxes are stated in
Sections 195 and 196, LGC.
Where an assessment is to be protested or
disputed, the taxpayer may proceed (a) without
payment, or (b) with payment of the assessed
tax, fee or charge. Whether there is payment of
the assessed tax or not, it is clear that the
protest in writing must be made within 60 days
from receipt of the notice of assessment;
otherwise, the assessment shall become final
and conclusive. Additionally, the subsequent
court action must be initiated within 30 days
from denial or inaction by the local treasurer;
otherwise, the assessment becomes conclusive
and unappealable.
(a) Where no payment is made, the taxpayer’s
procedural remedy is governed strictly by
Section 195. That is, in case of whole or partial
denial of the protest, or inaction by the local
treasurer, the taxpayer’s only recourse is to
appeal the assessment with the court of
competent jurisdiction. The appeal before the
court does not seek a refund but only questions
the validity or correctness of the assessment.
(b) Where payment was made, the taxpayer
may thereafter maintain an action in court
questioning the validity and correctness of the
assessment (Section 195, LGC) and at the same
time seeking a refund of the taxes.
To stress, where an assessment is issued, the
taxpayer cannot choose to pay the assessment
and thereafter seek a refund at any time within
the full period of two years from the date of
payment as Section 196 may suggest. If refund
is pursued, the taxpayer must administratively
question the validity or correctness of the
assessment in the “letter-claim for refund”
within 60 days from receipt of the notice of
assessment, and thereafter bring suit in court
within 30 days from either decision or inaction
by the local treasurer.
Confederation for Unity, Recognition and
Advancement of Government Employees v.
CIR, G.R. Nos. 213446 and 213658, July 3, 2018
In this case, Petitioners filed directly before the
Supreme Court a petition for certiorari,
prohibition, and mandamus against the CIR,
assailing the issuance of RMO No. 23-2014 as
unconstitutional.
It is an unquestioned rule in this jurisdiction
that certiorari under Rule 65 will only lie if there
is no appeal, or any other plain, speedy, and
adequate remedy in the ordinary course of law
against the assailed issuance of the CIR. The
plain, speedy, and adequate remedy expressly
provided by law is an appeal of the assailed
RMO with the Secretary of Finance under
Section 4, Tax Code.
The CIR’s exercise of its power to interpret tax
laws comes in the form of revenue issuances,
which include RMOs that provide “directives or
instructions; prescribe guidelines; and outline
processes, operations, activities, workflows,
methods and procedures necessary in the
implementation of stated policies, goals,
objectives, plans and programs of the Bureau in
all areas of operations, except auditing.” These
revenue issuances are subject to the review of
the Secretary of Finance.
Page 14 of 15
GAW, JR. v. CIR, G.R. No. 222837, July 23, 2018
Prepared by:
The civil action filed by the petitioner to
question the final decision on disputed Atty. Martin Ignacio D. Mijares
assessment is not deemed instituted with the
Atty. Iris Katrine M. Exchaure
criminal case for tax evasion.
Atty. Kariza Bianca M. Borlagdan
It is well-settled that the taxpayer’s obligation Atty. Joshua Y. Bagotsay
to pay the tax is an obligation that is created by Atty. Arjuna Das Matthew F. Guevara
law and does not arise from the offense of tax
evasion, as such, the same is not deemed SALVADOR LLANILLO & BERNARDO
instituted in the criminal case. Attorneys-at-Law
8th Floor, Tower One and Exchange Plaza
Under Sections 254 and 255, Tax Code, the Ayala Triangle, Ayala Avenue
government can file a criminal case for tax Makati City 1226 Philippines
evasion against any taxpayer who willfully www.salvadorlaw.com
attempts in any manner to evade or defeat any info@salvadorlaw.com
tax imposed in the tax code or the payment
thereof. The crime of tax evasion is committed
by the mere fact that the taxpayer knowingly
and willfully filed a fraudulent return with
intent to evade and defeat a part or all of the
tax. It is therefore not required that a tax
deficiency assessment must first be issued for a
criminal prosecution for tax evasion to prosper.

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