January 24, 2017 G.R. No.
184450 (b) whether an MWE is exempt from income tax for the entire taxable year
JAIME N. SORIANO, MICHAEL VERNON M. GUERRERO, MARY ANN L.
REYES, MARAH SHARYN M. DE CASTRO and CRIS P. TENORIO,
Petitioners, vs.
SECRETARY OF FINANCE and the COMMISSIONER OF INTERNAL
REVENUE, Respondents.
FACTS:
On June 17, 2008, RA No. 9504 was approved and signed into law by
President Arroyo. Its salient features included the increase of the basic
personal exemption to P50, 000 for each individual, the increase of the
additional exemption for each dependent not exceeding four to P25, 000, and
the grant to minimum wage earners (MWEs) exemption from payment of
income tax on their minimum wage, holiday pay, overtime pay, night shift
differential pay and hazard pay. RA No. 9504 took effect on July 6, 2008.
On September 24, 2008, the BIR issued RR No. 10-2008, dated July
8, 2008, implementing the provisions of RA No. 9504. Section 1 of the said
RR provided in part: “xxx Provided, further, that MWEs receiving 'other
benefits' exceeding the P30,000.00 limit shall be taxable on the excess
benefits, as well as on his salaries, wages and allowances, just like an
employee receiving compensation income beyond the SMW (statutory
minimum wage).” Section 3 provided in part: “xxx Provided, however, that
an employee who receives/earns additional compensation such as
commissions, honoraria, fringe benefits, benefits in excess of the allowable
statutory amount of P30,000.00, taxable allowances and other taxable income
other than the SMW, holiday pay, overtime pay, hazard pay and night shift
differential pay shall not enjoy the privilege of being a MWE and, therefore,
his/her entire earnings are not exempt from income tax, and consequently,
from withholding tax.”
The BIR required that those exempted should still pay from tax from
January 1, 2008 to July 5, 2008, or the so called pro-rated application prior to
the effectivity of tax exemption law for MWE.
ISSUE:
(a) whether the increased personal and additional exemptions provided by RA
No. 9504 should be applied to the entire taxable year 2008 or prorated,
considering that RA 9504 took effect only on July 6, 2008 (or second half of
the calendar year);
2008 or from July 6, 2008 only; and
(c) whether Sections 1 and 3 of RR No. 10-2008 are consistent with the law
in providing that an MWE who receives other benefits in excess of the statutory
limit of P30,000 ceases to be an MWE and is no longer entitled to the MWE
exemption provided by RA No. 9504.
RULING:
(A) The personal and additional exemptions established by R.A. 9504 should
be applied to the entire taxable year 2008.
Umali is applicable.
Umali v. Estanislao supports this Comi's stance that R.A. 9504 should
be applied on a full-year basis for the entire taxable year 2008. In Umali,
Congress enacted R.A. 7167 amending the 1977 National Internal Revenue
Code (NIRC). The amounts of basic personal and additional exemptions given
to individual income taxpayers were adjusted to the poverty threshold level.
R.A. 7167 came into law on 30 January 1992. Controversy arose when the
Commission of Internal Revenue (CIR) promulgated RR 1-92 stating that the
regulation shall take effect on compensation income earned beginning 1
January 1992. The issue posed was whether the increased personal and
additional exemptions could be applied to compensation income earned or
received during calendar year 1991, given that R.A. 7167 came into law only
on 30 January 1992, when taxable year 1991 had already closed.
This Court ruled in the affirmative, considering that the increased
exemptions were already available on or before 15 April 1992, the date for the
filing of individual income tax returns. Further, the law itself provided that the
new set of personal and additional exemptions would be immediately available
upon its effectivity. While R.A. 7167 had not yet become effective during
calendar year 1991, the Court found that it was a piece of social legislation that
was in part intended to alleviate the economic plight of the lower-income
taxpayers. For that purpose, the new law provided for adjustments "to the
poverty threshold level" prevailing at the time of the enactment of the law.
We now arrive at this important point: the policy of full taxable year
treatment is established, not by the amendments introduced by R.A. 9504, but
by the provisions of the 1997 Tax Code, which adopted the policy from as early
as 1969.
There is, of course, nothing to prevent Congress from again adopting
a policy that prorates the effectivity of basic personal and additional
exemptions. This policy, however, must be explicitly provided for by law - to
amend the prevailing law, which provides for full-year treatment. As already
pointed out, R.A. 9504 is totally silent on the matter. This silence cannot be
presumed by the BIR as providing for a half-year application of the new
exemption levels. Such presumption is unjust, as incomes do not remain the
same from month to month, especially for the MWEs.
Therefore, there is no legal basis for the BIR to reintroduce the
prorating of the new personal and additional exemptions. In so doing,
respondents overstepped the bounds of their rule-making power. It is an
established rule that administrative regulations are valid only when these are
consistent with the law. Respondents cannot amend, by mere regulation, the
laws they administer. To do so would violate the principle of non-delegability
of legislative powers.
The prorated application of the new set of personal and additional
exemptions for the year 2008, which was introduced by respondents, cannot
even be justified under the exception to the canon of non-delegability; that is,
when Congress makes a delegation to the executive branch. The delegation
would fail the two accepted tests for a valid delegation of legislative power; the
completeness test and the sufficient standard test. The first test requires the
law to be complete in all its terms and conditions, such that the only thing the
delegate will have to do is to enforce it. The sufficient standard test requires
adequate guidelines or limitations in the law that map out the boundaries of
the delegate's authority and canalize the delegation.
In this case, respondents went beyond enforcement of the law, given
the absence of a provision in R.A. 9504 mandating the prorated application of
the new amounts of personal and additional exemptions for 2008. Further,
even assuming that the law intended a prorated application, there are no
parameters set forth in R.A. 9504 that would delimit the legislative power
surrendered by Congress to the delegate. In contrast, Section 23(d) of the
1939 Tax Code authorized not only the prorating of the exemptions in case of
change of status of the taxpayer, but also authorized the Secretary of Finance
to prescribe the corresponding rules and regulations.
As it stands, the calendar year 2008 remained as one taxable year for
an individual taxpayer. Therefore, RR 10-2008 cannot declare the income
earned by a minimum wage earner from 1 January 2008 to 5 July 2008 to be
taxable and those earned by him for the rest of that year to be tax-exempt. To
do so would be to contradict the NIRC and jurisprudence, as taxable income
would then cease to be determined on a yearly basis.
(C)
Sections 1 and 3 of RR 10-2008 add a requirement not found in the
law by effectively declaring that an MWE who receives other benefits in excess
of the statutory limit of ₱30,000 is no longer entitled to the exemption provided
by R.A. 9504.
Nowhere in the above provisions of R.A. 9504 would one find the
qualifications prescribed by the assailed provisions of RR 10-2008. The
provisions of the law are clear and precise; they leave no room for
interpretation - they do not provide or require any other qualification as to who
are MWEs.
To be exempt, one must be an MWE, a term that is clearly defined.
Section 22(HH) says he/she must be one who is paid the statutory minimum
wage if he/she works in the private sector, or not more than the statutory
minimum wage in the non-agricultural sector where he/she is assigned, if
he/she is a government employee. Thus, one is either an MWE or he/she is
not. Simply put, MWE is the status acquired upon passing the litmus test -
whether one receives wages not exceeding the prescribed minimum wage.

(B) The MWE is exempt for the entire taxable year 2008.

As in the case of the adjusted personal and additional exemptions, the

MWE exemption should apply to the entire taxable year 2008, and not only
from 6 July 2008 onwards. We see no reason why Umali cannot be made
applicable to the MWE exemption, which is undoubtedly a piece of social
legislation. It was intended to alleviate the plight of the working class,
especially the low-income earners. In concrete terms, the exemption translates
to a ₱34 per day benefit, as pointed out by Senator Escudero in his
sponsorship speech.50
G.R. No. 183408 July 12, 2017
COMMISSIONER OF INTERNAL REVENUE, Petitioner vs.
LANCASTER PHILIPPINES, INC., Respondent.
FACTS:
Lancaster Philippines, Inc. is a domestic corporation engaged in the
production, processing and marketing of tobacco. BIR issued a Letter of Authority
(LOA) authorizing its revenue officers to examine Lancaster’s books of accounts and
other accounting records for all internal revenue taxes due from taxable year 1998 to
an unspecified date.
After the conduct of an examination pursuant to the LOA, the BIR issued a
Preliminary Assessment Notice (PAN) which cited Lancaster for: (1) overstatement of
its purchases for the fiscal year April 1998 to March 1999; (2) noncompliance with the
generally accepted accounting principle of proper matching of cost and revenue; and
(3) disallowance of purchases of tobacco from farmers for the months of February and
March 1998 as deductions against income for the fiscal year April 1998 to March 1999.
Lancaster replied to the PAN contending that it had used an entire “tobacco
cropping season” to determine its total purchases covering a one-year period from
October 1 to September 30 of the following year; that it has been adopting the 6-month
timing difference to conform to the matching concept; and that this has long been
installed as part of the company’s system and consistently applied in its accounting
books. It also argued that the February and March 1998 purchases should not have
been disallowed. It concluded that they correctly posted the subject purchases in the
fiscal year ending March 1999 as it was the only in this year that the gross income from
the crop was realized.
Subsequently, Lancaster received from the BIR a final assessment notice
(FAN) which assessed Lancaster’s deficiency income tax amounting to P11,
496,770.18, as a consequence of the disallowance of purchases claimed for the taxable
year ending March 31, 1999.
Lancaster filed a petition for review before CTA Division.
CTA Division granted the petition filed by Lancaster.
CTA En Banc affirmed the cancellation of assessment against Lancaste
ISSUE:
Whether BIR revenue officers exceeded their authority. – YES
Whether CTA can resolve an issue (scope of authority of the revenue examiners) which
was not raised by the parties. – YES
RULING:
SC denied the petition for review on certiorari filed by Commissioner of Internal
Revenue.
Jurisdiction of CTA
The jurisdiction of the CTA is not limited only to cases which involve decisions
or inactions of the CIR on matters relating to assessments or refunds but also includes
other cases arising from the NIRC or related laws administered by the BIR. This court
has once held that the question of whether or not to impose a deficiency tax
assessment comes within the purview of the words “other matters arising under the
NIRC.” It must be stressed that the assessment of internal revenue taxes is one of the
duties of the BIR. Thus, CIR may authorize the examination of any taxpayer and
correspondingly make an assessment whenever necessary.
Authority of CTA to rule on issues not raised by the parties
Under Section 1 of the Revised Rules of the Court of Tax Appeals, the Court
(CTA) may not limit itself to the issues stipulated by the parties but may also rule upon
related issues necessary to achieve an orderly disposition of the case. The CTA,
therefore, was well within the authority to consider in its decision the question on the
scope of authority of the revenue officers who were named in the LOA even though the
parties had not raised the same in their pleadings or memoranda.
BIR Revenue Officers exceeds the authority granted by LOA
SC agreed with the trial court when it ruled the LOA authorizing BIR Revenue
Officers to examine the books of account of Lancaster for the taxable year 1998 only
or since Lancaster adopted a fiscal year for the period April 1, 1997 to March 31, 1998.
However, the deficiency income tax assessment which the BIR eventually issue against
Lancaster was based on the disallowance of expenses reported in FY 1999, or for the
period April 1, 1998 to March 31, 1999. The CTA concluded that the revenue examiners
had exceeded their authority when they issued the assessment against Lancaster and,
consequently, declared such assessment to be without force and effect.
The LOA gives notice to the taxpayer that it is under investigation for possible
deficiency tax assessment; at the same time it authorizes or empowers a designated
revenue officer to examine, verify, and scrutinize a taxpayer’s books and records, in
relation to internal revenue tax liabilities for a particular period.
The taxable year covered by the assessment being outside of the period
specified in the LOA in this case, the assessment issued against Lancaster is,
therefore, void.

G.R. No. 201530 / G.R. Nos. 201680-81 April 19, 2017
ASIATRUST DEVELOPMENT BANK, INC., Petitioners vs.
COMMISSIONER OF INTERNAL REVENUE, Respondents
FACTS:
In 2000, BIR issued assessment notice to Asiatrust for several
deficiency taxes from 1996- 1998.
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 rule applies in amended decisions because an amended
decision is a different decision, and thus, is a· proper subject of a motion for
reconsideration. An amended decision is defined as "any action modifying or
reversing a decision of the Court en banc or in Division."
For failure to do so, the CTA Division’s Amended decision has attained
finality insofar as CIR is concerned and therefore, may no longer question the
merits of the case.

Asiatrust protested, but due to CIR’s inaction, it filed a Pettion for

Review before CTA raising the defense of prescription and that it availed of The failure to move for reconsideration of an Amended Decision is a
Tax Abatement Program, and the Tax Amnesty Law. ground for dismissal of the Petition

CTA Division cancelled the assessment made outside the prescriptive
period of 3 years; it sustained validity of other assessment because Asiatrust
failed to prove that it availed of the Tax Abatement Program and Tax Amnesty
Law because it failed to present the letter of termination issued by BIR granting
the application to supposedly issued by BIR granting the application to avail of
the programs.
On CTA Division’s first decision, CIR was able to file an MR, albeit,
denied; but not on the Amended decision that CTA Division later issued
The failure to move for a reconsideration of an Amended Decision of
the CTA Division is a ground for the dismissal of the Petition for Review filed
with the CTA En Banc pursuant to the Supreme Court case of Asiatrust
Development Bank, Inc. v. Commissioner of Internal Revenue (G.R. No.
201530, April 19, 2017). In this case, both parties failed to file their respective
motions for reconsideration of the Amended Decision. Thus, their respective
Petitions for Review must be dismissed.

Upon appeal, CTA En Banc affirmed the ruling as to Asiatrust, but

denied CIR’s appeal on the ground that it didn’t file a MR on the Amended
Decision of CTA Division.
ISSUE;

Whether Motion for Reconsideration before CTA Division is required before

CIR can appeal before CTA En Banc.

RULING:

Yes Motion for Reconsideration is required.

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. Under the
Rules of CTA, 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. G.R. No. 193381 February 8, 2017
COMMISSIONER OF INTERNAL REVENUE, Petitioner vs.
APO CEMENT CORPORATION, Respondent
FACTS:
BIR sent Apo cement a Final Assessment Notice (FAN) for deficiency
taxes for the taxable year 1999, totalling to more than 144 million pesos. Apo
Cement protested the FAN. However, BIR denied the protest. A Final Decision
on Disputed Assessment (FDDA) was issued.
Apo Cement petitioned for review with the CTA. The CIR admitted that
Apo Cement had already paid the deficiency assessment in the FDDA, except
the documentary stamp taxes (DST) based on several real property
transactions.
In the meantime, Apo Cement availed of the tax amnesty under
Republic Act No. 9480, particularly affecting the 1999 deficiency. Hence, it filed
a motion to cancel tax assessment. The CTA granted the motion.
The CIR motioned for reconsideration and appealed but failed. One of
the requirements for tax amnesty under said law is the submission of SALN.
The CIR wished to question the correctness of Apo Cement's SALN.
ISSUE:
[1] Is Apo Cement entitled to tax amnesty under RA 9480?
[2] What is the effect of the CIR's act of questioning the correctness of Apo
Cement's SALN?
[3] Can the CIR question the correctness of Apo Cement's SALN?
[4] How can the correctness of SALN be questioned for purposes of
disqualifying a taxpayer from the amnesty benefit?
RULING:
[1] Yes, Apo Cement is entitled to tax amnesty. Submission of the
documentary requirements and payment of the amnesty tax is considered full
compliance with Republic Act No. 9480 and the taxpayer can immediately
enjoy the immunities and privileges enumerated in Section 6 of the law.
Taxpayers who availed themselves of the tax amnesty program are
entitled to the immunities and privileges under Section 6 of the law. This Court
has declared that submission of the documentary requirements and payment
of the amnesty tax is considered full compliance with Republic Act No. 9480
and the taxpayer can immediately enjoy the immunities and privileges
enumerated in Section 6 of the law.
The plain and straightforward conditions were obviously meant to
encourage taxpayers to avail of the amnesty program, thereby enhancing
revenue administration and collection. The Court explained that the
documentary requirements and payment of the amnesty tax operate as a
suspensive condition, such that completion of these requirements entitles the
taxpayer-applicant to immediately enjoy the immunities and privileges under
Republic Act No. 9480. However, the Court further stated that
Section 6 of the law contains a resolutory condition. Immunities and privileges
will cease to apply to taxpayers who, in their SALN, were proven to have
understated their net worth by 30% or more. Thus, the amnesty granted
under the law is revoked once the taxpayer is proven to have under-
declared his assets in his SALN by 30% or more. Pursuant to Section 10
of the Tax Amnesty Law, amnesty taxpayers who wilfully understate their
net worth shall not only be liable for perjury under the Revised Penal Code,
but, upon conviction, also subject to immediate tax fraud
[2] Proceedings must be initiated to question the correctness of the
Statement of Assets, Liabilities, and Net worth (SALN) within the one-year
period stated in Section 4 of the law. Here, no such action has been taken by
the CIR. This one-year period referred to in the law should be considered only
as a prescriptive period within which third parties, meaning 'parties other than
the BIR or its agents,' can question the SALN - not as a waiting period during
which the BIR may contest the SALN and the taxpayer prevented from
enjoying the immunities and privileges under the law.
[3] No, the CIR cannot question the correctness of Apo Cement's SALN.
Under Section 4 of the law, there is a presumption of correctness of the SALN
and only parties other than the Bureau of Internal Revenue or its agents may
dispute the correctness of the SALN. Even assuming that petitioner has the
standing to question the SALN, Republic Act No. 9480 provides that the
proceeding to challenge the SALN must be initiated within one year following
the date of filing of the Tax Amnesty documents.
[4] The amnesty granted under the law is revoked once the taxpayer is
proven to have under-declared his assets in his SALN by 30% or more.
Pursuant to Section 1060 of the Tax Amnesty Law, amnesty taxpayers who
wilfully understate their net worth shall not only be liable for perjury under the
Revised Penal Code, but, upon conviction, also subject to immediate tax fraud
investigation in order to collect all taxes due and to criminally prosecute for tax
evasion. Here, the requisites to overturn the presumption of correctness of
respondent's 2005 SALN were not met.
G.R. No. 167679, July 22, 2015
ING BANK N.V., ENGAGED IN BANKING OPERATIONS IN THE
PHILIPPINES AS ING BANK N.V. MANILA BRANCH, Petitioner VS.
COMMISSIONER OF INTERNAL REVENUE, Respondent
FACTS:
This is a Petition for Review appealing the April 5, 2005 Decision of
the Court of Tax Appeals En Banc, which in turn affirmed the August 9, 2004
Decision and November 12, 2004 Resolution of the Court of Tax Appeals
Second Division. The August 9, 2004 Decision held petitioner ING Bank, N.V.
Manila Branch (ING Bank) liable for;
(a) Deficiency documentary stamp tax for the taxable years 1996 and 1997 in
the total amount ofP238, 545,052.38 inclusive of surcharges;
(b) Deficiency onshore tax for the taxable year 1996 in the total amount of
P997, 333.89 inclusive of surcharges and interest; and
(c) Deficiency withholding tax on compensation for the taxable years 1996 and
1997 in the total amount of P564, 542.67 inclusive of interest. The Resolution
denied ING Bank's Motion for Reconsideration.
ING Bank filed a Manifestation and Motion stating that it availed itself
of the government's tax amnesty program under Republic Act No. 9480 with
respect to its deficiency documentary stamp tax and deficiency onshore tax
liabilities.
ING Bank "paid the deficiency assessments for the compromise
penalty, 1997 deficiency documentary stamp tax and 1997 deficiency final tax
in the respective amounts of P1,000.00, P1,000.00 and P75,013.25 [the
original amount of P73,752.47 plus additional interest]."ING Bank, however,
"protested [on the same day] the remaining ten (10) deficiency tax
assessments in the total amount of P672, 576,939.18."
ING Bank filed a Petition for Review before the Court of Tax Appeals.
The Petition was filed to seek "the cancellation and withdrawal of the deficiency
tax assessments for the years 1996 and 1997, including the alleged deficiency
documentary stamp tax on special savings accounts, deficiency onshore tax,
and deficiency withholding tax on compensation.
Court of Tax Appeals Second Division rendered its Decision, with the following
disposition:
“WHEREFORE, the assessments for 1996 and 1997 deficiency income tax,
1996 and 1997 deficiency branch profit remittance tax and 1997 deficiency
documentary stamp tax on IBCLs exceeding five days are hereby
CANCELLED and WITHDRAWN. However, the assessments for 1996 and
1997 deficiency withholding tax on compensation, 1996 deficiency onshore tax
and 1996 and 1997 deficiency documentary stamp tax on special savings
accounts are hereby UPHELD.”
Both the CIR and ING Bank filed their respective Motions for
Reconsideration. Both Motions were denied through the Second Division's
Resolution.
ING Bank filed its appeal before the CTA En Banc. The CTA En Banc
denied due course to ING Bank's Petition for Review and dismissed the same
for lack of merit.
ING Bank filed a Manifestation and Motion informing this court that it
had availed itself of the tax amnesty authorized and granted under Republic
Act No. 9480 covering "all national internal revenue taxes for the taxable year
2005 and prior years, with or without assessments duly issued therefore, that
have remained unpaid. ING Bank stated that it filed before the Bureau of
Internal Revenue its Notice of Availment of Tax Amnesty under Republic Act
No. 9480.
ISSUE:
1. Whether or not petitioner ING Bank may validly avail itself of the tax
amnesty granted by Republic Act No. 9480?
2. Whether or not petitioner ING Bank is liable for
deficiency withholding tax on accrued bonuses for the taxable
years 1996 and 1997?
RULING:
1. The assessments with respect to petitioner ING Bank's liabilities for
deficiency documentary stamp taxes on its special savings accounts for the
taxable years 1996 and 1997 and deficiency tax on onshore interest income
under the foreign currency deposit system for taxable year 1996 are hereby
set aside solely in view of petitioner ING Bank's availment of the tax amnesty
program under Republic Act No.
9480.
Petitioner ING Bank showed that it complied with the requirements
set forth under Republic Act No. 9480. Respondent Commissioner of Internal
Revenue never questioned or rebutted that petitioner ING Bank fully complied
with the requirements for tax amnesty under the law. Moreover, the
contestability period of one (1) year from the time of petitioner ING Bank's
availment of the tax amnesty law on
December 14, 2007 lapsed.
Correspondingly, it is fully entitled to the immunities and privileges mentioned
under Section 6 of Republic Act No. 9480:
“SEC. 6. Immunities and Privileges. - Those who availed themselves
of the tax amnesty under Section 5 hereof and have fully complied with all its
conditions shall be entitled to the following immunities and privileges:
The taxpayer shall be immune from the payment of taxes, as well as
addition thereto, and the appurtenant civil, criminal or administrative penalties
under the National Internal Revenue Code of 1997, as amended, arising from,
the failure to pay any and all internal revenue taxes for taxable year 2005 and
prior years.
The taxpayer's Tax Amnesty Returns and the SALN as of December
31, 2005 shall not be admissible as evidence in all proceedings that pertain to
taxable year 2005 and prior years, insofar as such proceedings relate to
internal revenue taxes, before judicial, quasi-judicial or administrative bodies
in which he is a defendant or respondent, and except for the purpose of
ascertaining the networth beginning January 1. 2006, the same shall not be
examined, inquired or looked into by any person or government office.
However, the taxpayer may use this as a defense, whenever appropriate, in
cases brought against him.
The books of accounts and other records of the taxpayer for the years
covered by the tax amnesty availed of shall not be examined: Provided, That
the
Commissioner of Internal Revenue may authorize in writing the
examination of the said books of accounts and other records to verify the
validity or correctness of a claim for any tax refund, tax credit (other than refund
or credit of taxes withheld on wages), tax incentives, and/or exemptions under
existing laws.”
The documentary stamp tax and onshore income tax are covered by
the tax amnesty program under Republic Act No. 9480 and its Implementing
Rules and Regulations.77 Moreover, as to the deficiency tax on onshore
interest income, it is worthy to state that petitioner ING Bank was assessed by
respondent Commissioner of Internal Revenue, not as a withholding agent, but
as one that was directly liable for the tax on onshore interest income and failed
to pay the same.
Considering petitioner ING Bank's tax amnesty availment, there is no
more issue regarding its liability for deficiency documentary stamp taxes on its
special savings accounts for 1996 and 1997 and deficiency tax on onshore
interest income for 1996, including surcharge and interest.
-----------------------------------XX
2. Petitioner is still liable for the amounts of P167,384.97 and
P397,157.70 representing deficiency withholding taxes on compensation for
the respective years of 1996 and 1997.
Under the National Internal Revenue Code, every form of
compensation for personal services is subject to income tax and,
consequently, to withholding tax. The term "compensation" means all
remunerations paid for services performed by an employee for his or her
employer, whether paid in cash or in kind, unless specifically excluded under
Sections 32(B) and 78(A) of the 1997 National Internal Revenue Code. The
name designated to the remuneration for services is immaterial. Thus,
"salaries, wages, emoluments and honoraria, bonuses, allowances (such as
transportation, representation, entertainment, and the like), [taxable] fringe
benefits [,] pensions and retirement pay, and other income of a similar nature
constitute compensation income" that is taxable.
Petitioner ING Bank accrued or recorded the bonuses as deductible
expense in its books. Therefore, its obligation to withhold the related
withholding tax due from the deductions for accrued bonuses arose at the time
of accrual and not at the time of actual payment.
Petitioner ING Bank already recognized a definite liability on its part
considering that it had deducted as business expense from its gross income
the accrued bonuses due to its employees. Underlying its accrual of the bonus
expense was a reasonable expectation or probability that the bonus would be
achieved. In this sense, there was already a constructive payment for income
tax purposes as these accrued bonuses were already allotted or made
available to its officers and employees.
GR NO. 222743 April 5, 2017
MEDICARD PHILIPPINES, INC VS.
Commissioner of Internal Revenue
FACTS:
MEDICARD is a health maintenance organization (HMO) that provides
prepaid health and medical insurance coverage to its clients. Individuals
enrolled in its health care programs pay an annual membership fee and are
entitled to various preventive, diagnostic and curative medical services
provided by duly licensed physicians, specialists, and other professional
technical staff participating in the group practice health delivery system at a
hospital or clinic owned, operated or accredited by it.
MEDICARD filed it first, second, and third quarterly VAT Returns
through Electronic Filing and Payment System (EFPS) on April 20, July 25,
and October 25, 2006, respectively, and its fourth quarterly VAT Return on
January 25, 2007.
Upon finding some discrepancies between MEDICARD’s Income Tax
Returns (ITR) and VAT Returns, the CIR issued a Letter Notice (LN) dated
September 20, 2007. Subsequently, the CIR also issued a Preliminary
Assessment Notice (PAN) against MEDICARD for deficiency VAT.
MEDICARD received CIR’s FAN dated December 10, 2007 for allegedly
deficiency VAT for taxable year 2006 including penalties.
MEDICARD filed a protest arguing, among others, that that the
services it render is not limited merely to arranging for the provision of medical
and/or hospitalization services but include actual and direct rendition of
medical and laboratory services. On June 19, 2009, MEDICARD received
CIR’s Final Decision denying its protest. The petitioner MEDICARD proceeded
to file a petition for review before the CTA.
The CTA Division held that the determination of deficiency VAT is not
limited to the issuance of Letter of Authority (LOA) alone and that in lieu of an
LOA, an LN was issued to MEDICARD informing it if the discrepancies
between its ITRs and VAT Returns and this procedure is authorized under
Revenue Memorandum Order (RMO) No. 30-2003 and 42-2003. Also, the
amounts that MEDICARD earmarked and eventually paid to doctors, hospitals
and clinics cannot be excluded from the computation of its gross receipts
because the act of earmarking or allocation is by itself an act of ownership and
management over the funds by MEDICARD which is beyond the
contemplation of RR No. 4-2007. Furthermore, MEDICARD’s earnings from its
clinics and laboratory facilities cannot be excluded from its gross receipts
because the operation of these clinics and laboratory is merely an incident to
MEDICARD’s line of business as an HMO.
MEDICARD filed a Motion for Reconsideration but it was denied. Petitioner
elevated the matter to the CTA en banc.
CTA en banc partially granted the petition only insofar as 10% VAT rate for
January 2006 is concerned but sustained the findings of the CTA Division.
ISSUE:
Is the absence of the Letter of Authority fatal?
RULING
The absence of an LOA violated MEDICARD's right to due process.
An LOA is the authority given to the appropriate revenue officer assigned to
perform assessment functions. It empowers or enables said revenue officer to
examine the books of account and other accounting records of a taxpayer for
the purpose of collecting the correct amount of tax. An LOA is premised on the
fact that the examination of a taxpayer who has already filed his tax returns
is a power that statutorily belongs only to the CIR himself or his duly authorized
representatives.
Based on Section 6 of the NIRC, it is clear that unless authorized by
the CIR himself or by his duly authorized representative, through an LOA, an
examination of the taxpayer cannot ordinarily be undertaken. The
circumstances contemplated under Section 6 where the taxpayer may be
assessed through best-evidence obtainable, inventory-taking, or surveillance
among others has nothing to do with the LOA. These are simply methods of
examining the taxpayer in order to arrive at the correct amount of taxes.
A Letter Notice (LN) is different from an LOA. An LN is issued to
notify the taxpayer of an audit while an LOA is the authority to conduct an audit
or examination of the taxpayer leading to the issuance of deficiency
assessments. Thus, after the LN has been served, the revenue officer should
secure an LOA before proceeding with further examination and assessment of
the taxpayer.
Hence, unless undertaken by the CIR himself or his duly authorized
representatives, other tax agents may not validly conduct any of these kinds
of examinations without prior authority. In this there is no dispute that there is
no LOA issued prior to the issuance of a PAN and FAN against MEDICARD.
Therefore no LOA was also served on.
G.R. No. 201665/G.R. No. 201668 August 30, 2017
EDISON (BATAAN) COGENERATION CORPORATION, Petitioner, vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
FACTS:
On February 2, 2004, Edison (Bataan) Cogeneration Corporation
[EBCC] received from the Commissioner of Internal Revenue (CIR) a Formal
Letter of Demand and Final Assessment Notice dated January 23, 2004
assessing EBCC of deficiency income tax, Value Added Tax (VAT),
withholding tax on compensation, Expanded Withholding Tax (EWT) and Final
Withholding Tax (FWT) for taxable year 2000 in the total amount of P84,
868,390.16. On March 3, 2004, EBCC filed with the CIR a letter-protest dated
March 2, 2004 and furnished the CIR with the required documents.
Due to the inaction of the CIR, EBCC elevated the matter to the CTA
via a Petition for Review, docketed as CTA Case No. 7104 and raffled to the
Second Division of the CTA.
While the case was pending, EBCC availed itself of the Tax Amnesty
Program under Republic Act (RA) No. 9480.Thus, in a November 7, 2008
Resolution, the CTA Second Division deemed the Petition partially withdrawn
and the case closed and terminated with regard to EBCC’s deficiency income
tax and VAT for the year 2000.
On March 18, 2009, the CTA Second Division issued a Resolution
setting aside the assessments against EBCC for deficiency income tax and
VAT for the taxable year 2000 in view of its availment of the Tax Amnesty
Program. The CIR filed a Motion for Reconsideration while EBCC filed a
Motion for Partial Reconsideration and/or Clarification. On April 7, 2011, the
CTA Former Second Division issued a Resolution denying both Motions. Both
parties appealed to the CTA En Banc.
On January 30, 2012, the CTA En Banc denied both appeals. It
sustained the findings of the CTA Former Second Division that the assessment
over EBCC’s FWT on interest payments arising from its loan from Ogden was
without basis as EBCC had no obligation to withhold any taxes on the interest
payment for the year 2000. Under Revenue Regulation (RR) No. 02-98, the
obligation to withhold only accrues when the loan is paid or becomes payable
or when it becomes due, demandable or legally enforceable, whichever comes
first. In this case, the obligation to withhold the interest over the loan only
commenced on June 1, 2002.
ISSUE:
1. 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?
2. Whether x x x EBCC is liable for deficiency final withholding tax for the year
2000? And Whether x x x Revenue Regulation No. 12-01 should be applied in
this case?
RULING:
1. 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.
In this case, EBCC claims that the CTA En Banc erred in failing to consider
the judicial admission made by the CIR in her Memorandum that EBCC
remitted FWT in the amount of P2, 842,630.20.
A careful reading of the Memorandum reveals that the alleged remittance of
the amount of P2,842,630.20 was based on a Memorandum 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. In
fact, there was no mention of such remittance in the Joint Stipulations of Facts
and Issues by the parties and in the Answer filed by the CIR. Thus, we find no
error on the part of the CTA En Banc in not considering such statement as a
judicial admission.
- - - - - - - - - - - - - - - - -XX
2. 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.
In this case, the CIR insists that EBCC was liable to pay the interest from the
date of the execution of the contract on January 5, 2000, not from the date of
the first payment on June 1, 2002.
Clearly, EBCC’s liability for interest payment became due and demandable
starting June 1, 2002. And considering that under RR No. 02-98, the obligation
of EBCC to deduct or withhold tax arises at the time an income is paid or
payable, whichever comes first, and considering further that under the said
RR, the term “payable” refers to the date the obligation becomes due,
demandable or legally enforceable, we find no error on the part of the CTA En
Banc in ruling that EBCC had no obligation to withhold any taxes on the
interest payment for the year 2000 as the obligation to withhold only
commenced on June 1, 2002, and thus cancelling the assessment for
deficiency FWT on interest payments arising from EBCC’s loan from Ogden.

Neither do we find any reason for the retroactive application of RR No. 12-01,
which provides that the withholding of final tax commences “at the time an
income payment is paid or payable, or the income payment is accrued or
recorded as an expense or asset, whichever is applicable in the payor’s book,
whichever comes first.” To begin with, 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.

All told, we find no reason to reverse the January 30, 2012 Decision and the
April 17, 2012 Resolution of the CTA in CTA EB Case Nos. 766 and 769.

We need not belabor that “findings and conclusions of the CTA are accorded
the highest respect and will not be lightly set aside because by [its] very nature
x x x, it is dedicated exclusively to the resolution of tax problems and has
accordingly developed an expertise on the subject.”

G.R. No. 202695, February 29, 2016

COMMISSIONER OF INTERNAL REVENUE, Petitioner VS. GJM
PHILIPPINES MANUFACTURING, INC., Respondent
FACTS:
On April 12, 2000, GJM filed its Annual Income Tax Return for the year
1999. Thereafter, its parent company, Warnaco (HK) Ltd., underwent
bankruptcy proceedings, resulting in the transfer of ownership over GJM and
its global affiliates to Luen Thai Overseas Limited in December 2001. On
August 26, 2002, GJM informed the Revenue District Officer (RDO) of Trece
Martirez, through a letter, that on April 29, 2002, it would be cancelling its
registered address in Makati and transferring to Rosario, Cavite, which I under
RDO No. 54. On August 26, 2002, GJM’s request for transfer of its tax
registration from RDO No. 48 to RDO No. 53 was confirmed through Transfer
Confirmation Notice No. OCN ITR 000018688.
On October 18, 2002, the Bureau of Internal Revenue sent a letter of
informal conference informing GJM that the report of investigation on its
income and business tax liabilities for 1999 had been submitted. The report
disclosed that GJM was still liable for an income tax deficiency and the
corresponding 20% interest, as well as for the compromise penalty in the total
amount of P1, 192,541.51. Said tax deficiency allegedly resulted from the
disallowances/understatements.
On February 12, 2003, the Bureau of Internal Revenue issued a Pre
Assessment Notice and Details of Discrepancies against GJM. On April 14,
2003, it issued an undated Assessment Notice, indicating a deficiency income
tax assessment in the amount of P1, 480,099.29. On July 25, 2003, the BIR
issued a Preliminary Collection Letter requesting GJM to pay said income tax
deficiency for the taxable year 1999. Said letter was addressed to GJM’s
former address in Pio Del Pilar, Makati. On August 18, 2003, although the BIR
sent a Final Notice before seizure to GJM’s address in Cavite, the latter
claimed that it did not receive the same.
The company then filed its letter protest dated January 7, 2004, which
the BIR denied on January 15, 2004. GJM filed a Petition for Review before
the CTA.
CTA 1st Division Ruling: The deficiency income tax assessment in the
amount of P1, 480,099.29, inclusive of interest, for taxable year 1999, covered
by Formal Assessment Notice and the Warrant of distraint and/or Levy dated
November 27, 2003, both issued against petitioner by respondent, are
Cancelled and Withdrawn.
CTA En Banc Ruling: The petition for review is denied.
ISSUE(S):
Whether or not the Formal Assessment Notice (FAN) for deficiency income tax
issued to GJM for taxable year 1999 was released, mailed, and sent within the
three (3) year prescriptive period under section 203 of the NIRC of 1997?
Whether or not the BIR’s right to assess GJM for deficiency income tax for
taxable year 1999 has already prescribed?
RULING:
The CIR has three (3) years from the date of the actual filing of the
return or from the last day of prescribed by law for the filing of the return,
whichever is later, to assess internal revenue taxes. Here, GJM filed its Annual
Income Tax Return for the taxable year 1999 on April 12, 2000. The three (3)-
year prescriptive period, therefore was only until April 15, 2003. The records
reveal that the BIR sent the FAN through registered mail on April 14, 2003,
well-within the required period. The Court has held that when an assessment
is made within the prescriptive period, as in the case at bar, receipt by the
taxpayer may or may not be within said period. But it must be clarified that the
rule does not dispense with the requirement that the taxpayer should actually
receive the assessment notice, even beyond the prescriptive period. If the
taxpayer denies having received an assessment from the BIR, it then becomes
incumbent upon the latter to prove by competent evidence that such notice
was indeed received by the addressee.
To prove the fact of mailing, it is essential to present:
The registry receipt issued by the Bureau of Posts or the Registry return card.
If could not be located, a certification issued by the Bureau of Posts and any
other pertinent document executed with its intervention.
The BIR’s failure to prove GJM’s receipt of the assessment leads to no other
conclusion but that no assessment was issued.
Consequently, the government’s right to issue an assessment for the said
period has already prescribed.
G.R. No. 212825, December 7, 2015
COMMISSIONER OF INTERNAL REVENUE, Petitioner vs.
NEXT MOBILE, INC., Respondent
FACTS:
On April 15, 2002, respondent Next Mobile filed with the BIR its Annual Income
Tax Return for taxable year ending December 31, 2001.
Respondent also filed its Monthly Remittance Returns of Final Income Taxes
Withheld, its Monthly Remittance Return of Expanded Withholding Taxes and its
Monthly Remittance Returns of Income Taxes Withheld on Compensation.
Respondent received a copy of the Letter of Authority from the Regional
Director Nestor S. Valeroso to examine respondent’s books of accounts and other
accounting records and withholding taxes for the period covering January 1, 2001 –
December 31, 2001.
Ma. Lida Sarmiento, respondent’s Director of Finance, subsequently executed
several waivers of the Statute of Limitations to extend the prescriptive period of
assessment of taxes due in taxable year ending 2001.
On September 26, 2005, respondent received from the BIR Preliminary
Assessment Notice dated September 16, 2005 to which it filed a Reply. On October 25,
2005, respondent received a Formal Letter of Demand and Assessment
Notices/Demand, demanding the payment of deficiency income tax, final withholding
tax, expanded withholding tax, increments for late remittance of taxes withheld, and
compromise penalty for failure to file returns/late filing/late remittance of taxes withheld.
CTA Former First Division Ruling – Granted respondent’s Petition for Review
and declared the FLD and Assessment Notices/Demand cancelled and withdrawn for
being issued beyond the three-year prescriptive period provided by law. It was held that
the adverted FLD and the FAN were issued beyond the three-year prescriptive period.
Petitioner failed to substantiate its allegation by clear and convincing proof that
respondent filed a false or fraudulent return. Also, the Waivers executed by Sarmiento
did not validly extend the threeyear prescriptive period to assess respondent for
deficiency income tax.
CTA En Banc Ruling – Denied Petition for Review and affirmed the Decision
of the former CTA First Division.
ISSUE:
1.) Whether or not the CIR’s right to assess respondent’s deficiency taxes had already
prescribed.
RULING:
Section 203 of NIRC mandates BIR to assess internal revenue taxes within 3
years from the last day prescribed by law for the filing of the tax return. Hence, an
assessment notice issued after the three-year prescriptive period is not valid and
effective but with exceptions provided.
Section 222(b) of the NIRC 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 prescriptive period.
In the instant case, the CTA found the Waivers defective because of the following:
 They were executed without a notarized board authority;
 The dates of acceptance by the BIR were not indicated therein; and
 The fact of receipt by respondent of its copy of the
Second Waiver was not indicated on the face of the original Second Waiver.
Here, respondent through Sarmiento, executed five Waivers in favour of
petitioner. However, her authority to sign these Waivers was not presented upon their
submission to the BIR. In fact, later on, her authority to sign was questioned by
respondent itself, the very same entity that caused her to sign such in the first place.
Thus it is clear that respondent violated RMO No. 2090 which stated that in case of a
corporate taxpayer, the waiver must be signed by its responsible officials and RDAO
01-05 which requires presentation of a written and notarized authority to the BIR.
In this case, respondent, after deliberately executing defective waivers, raised
the very same deficiencies it caused to avoid the tax liability determined by the BIR
during the extended assessment period. It must be remembered that by virtue of these
waivers, respondent was given the opportunity to gather and submit documents to
substantiate its claims before the CIR during the investigation. It was able to postpone
the payment of taxes, as well as contest negotiate the assessment against it. Yet after
enjoying these benefits, respondent challenged the validity of the Waivers when
the consequences thereof were not in its favour.
It is true that petitioner was also at fault here because it was careless in
complying with the requirements of RMO No. 20-90 and RDAO 01-05.
Nevertheless, petitioner’s negligence may be addressed by enforcing the
provisions imposing administrative liabilities upon the officers responsible for these
errors. The BIR’s right to assess and collect taxes should not be jeopardized merely
because of the mistakes and lapses of its officers, especially in cases like this where
the taxpayer is obviously in bad faith.
The Court resolves to GRANT the petition and let this case be remanded to
the Court of Tax Appeals for further proceedings.