TAX LAWS ARE PROSPECTIVE, UNLESS RETROACTIVE APPLICATION IS EXPRESSLY

PROVIDED

Commissioner of Internal Revenue vs. Philippine National Bank

G.R. No. 195147; July 11, 2016
BERSAMIN, J.

Facts: Petitioner Commissioner of Internal Revenue (CIR) examined PNB's books of accounts
and other accounting records in relation to its internal revenue taxes for taxable year 1997. It
was found that Philippine National Bank (PNB) had deficiency payments of documentary stamp
taxes (“DST”), withholding taxes on compensation, and expanded withholding taxes for taxable
year 1997. CIR issued a formal assessment notice, together with a formal letter of demand and
details of discrepancies, requiring PNB to pay the said deficiency taxes.
PNB filed a protest against this assessment, but the CIR denied PNB's protest. PNB filed its
petition for review with the CTA which ordered PNB to pay the deficient DST on ​Special Savings
Account ​|​for taxable year 1997 but cancelled ​the assessment for deficiency DST on Interbank
Call Loans for the same year. C​TA denied petitioner’s motion for partial reconsideration which
was affirmed by the CTA ​En Banc.​
Petitioner claims that PNB’s interbank call loans were included in the concept of loan
agreements; thus, the interbank call loans were subject to DST.

ISSUE:
Are interbank call loans ​included in the concept of loan agreements thus ​subject to
documentary stamp taxes?

HELD:
No, interbank call loans are not subject to documentary stamp taxes.
An interbank call loan refers to the cost of borrowings from other resident banks and
non-bank financial institutions with quasi-banking authority that is payable on call or demand. It
is transacted primarily to correct a bank's reserve requirements. A​n interbank call loan is
considered as a deposit substitute transaction by a bank performing quasi-banking functions to
cover reserve deficiencies. It does not fall under the definition of a loan agreement. Even if it
does, the DST liability under Section 180, will only attach if the loan agreement was signed
abroad but the object of the contract is located or used in the Philippines, which was not the
case in regard to PNB's interbank call loans. ​Section 180 of the ​National Internal Revenue Code
of 1977 (​1977 NIRC) ​as amended, provides that DST of P0.30 on each P200.00, or fractional
part thereof, shall only be imposed on the face value of: (1) loan agreements; (2) bills of
exchange; (3) drafts; (4) instruments and securities issued by the Government or any of its
instrumentalities; (5) certificates of deposits drawing interest; (6) orders for the payment of any
sum of money otherwise than at sight or on demand; and (7) promissory notes, whether
negotiable or non-negotiable, except bank notes issued for circulation, and on each renewal of
any such note.
However, for taxation purposes interbank call loans are not considered as deposit
substitutes by express provision of Section 20 of the 1977 NIRC, as amended. Interbank call
loans, although not considered as deposit substitutes, are not expressly included among the
taxable instruments listed in Section 180; hence, they may not be held as taxable.
H​ence, the cancellation of the assessment for DST on PNB's interbank call loans was in
order.
TAX CODE REQUIRES ADMINISTRATIVE CLAIM BE FILED FIRST, IT DOES NOT
REQUIRE FINAL RESOLUTION OF ADMINISTRATIVE CLAIM BEFORE RESORT TO
COURT

Commissioner of Internal Revenue vs. Goodyear Philippines, Inc.

G.R. No. 216130; August 03, 2016
PERLAS-BERNABE, J.

Facts: Petitioner CIR appealed the ruling of the CTA en banc, which affirmed the ruling of CTA
Division granting the petition for review of the claim for refund or issuance of a tax credit
certificate filed by Respondent Goodyear Philippines, Inc. (“Goodyear”).

Respondent is a domestic corporation. Goodyear Tire and Rubber Company (“GTRC”), which is
a US foreign company, was the sole and exclusive subscriber of all the preferred shares of
Respondent. The Board of Directors of Respondent authorized the redemption of GTRCs
shares. Later, Respondent filed an application for relief from double taxation to confirm that the
redemption was not subject to Philippine Income Tax, pursuant to the RP-US Tax Treaty.
Nevertheless, Respondent withheld and remitted an amount representing 15% FWT on
November 3, 2008.

On October 21, 2010, respondent filed the aforementioned claim for refund or issuance
of a tax credit certificate before the BIR. On November 3, 2010, it filed a judicial claim before the
CTA.

CIR argues that the claim should be denied because of failure to exhaust administrative
remedies by prematurely filing its petition for review before the CTA, among other things.

Issue: Does the filing of administrative and judicial claims, which are only 13 days apart, a
sufficient cause for the dismissal of the petition for review?

Held: No. Section 229 of the Tax Code states that judicial claims for refund must be filed within
two years from the date of payment of the tax or penalty, providing further that the same may
not be maintained until a claim for refund or credit has been duly filed with the CIR.

Section 229 of the Tax Code, as worded, only required that an administrative claim should first
be filed. The primary purpose of filing an administrative claim was to serve as a notice of
warning to the CIR that court action would follow unless the tax or penalty alleged to have been
collected erroneously or illegally is refunded. This does not however mean that the taxpayer
must await the final resolution of its administrative claim for refund, since doing so would be
tantamount to the taxpayer's forfeiture of its right to seek judicial recourse should the two
(2)-year prescriptive period expire without the appropriate judicial claim being filed. It bears
stressing that respondent could not be faulted for resorting to court action, considering that the
prescriptive period stated therein was about to expire. Had respondent awaited the action of
petitioner knowing fully well that the prescriptive period was about to lapse, it would have
resultantly forfeited its right to seek a judicial review of its claim, thereby suffering irreparable
damage.

Thus, respondent correctly and timely sought judicial redress, notwithstanding that its
administrative and judicial claims were filed only 13 days apart.
DOCTRINE OF EXHAUSTION OF REMEDIES; EXCEPTION SUBSTANTIAL JUSTICE

SPECIAL LAW PREVAILS OVER GENERAL LAW

Bloomberry Resorts And Hotels Inc. vs. Bureau Of Internal Revenue Represented by
Commissioner Kim S. Jacinto-Henares
G.R. No. 212530; AUGUST 10, 2016
PEREZ, J.

Facts: Petitioner Bloomberry Resorts and Hotels Inc. (“Bloomberry”) filed a petition for
Certiorari and Prohibition under Rule 65 seeking to annul the issuance by the Respondent CIR
of a provision of Revenue Memorandum Circular (“RMC”) 33-2013 subjecting contractees and
licensees of PAGCOR to income tax under the NIRC, and to enjoin Respondent from
implementing said provision.

Petitioner is one of PAGCOR's licensees and only pays license fees, in lieu of all taxes,
as contained in its provisional license and consistent with the PAGCOR Charter, which provides
the exemption from taxes of persons or entities contracting with P AGCOR in casino operations.

However, after RA 9337 took effect, it amended Sec. 27(C) of the NIRC, which excluded
PAGCOR from the enumeration of GOCCs exempt from paying corporate income tax. In
PAGCOR vs. BIR, the Court articulated that said Section was valid and constitutional but upheld
the tax exemption granted to PAGCOR.

In implementing the amendments, RMC 33-2013 was issued by the Respondent which
contained the aforementioned provision.

Issue:
(1) Can a party, questioning the validity of a RMC, directly resort to the Supreme Court?
(2) Is RA 9337 a valid provision?

Held:

(1) Yes. As a rule, RMCs are considered administrative rulings issued from time to time
by the Respondent. Accordingly, failure to ask the Respondent for a reconsideration of the
assailed revenue regulations is a ground for dismissal. Nevertheless, direct recourse to this
Court is proper in order to promote the vital interest of substantial justice.

(2) No. Section 13 of PD 1869 states that payment of the 5% franchise tax by PAGCOR
and its contractees and licensees exempts them from payment of any other taxes, including
corporate income tax. This provision was neither amended nor repealed by Section 1 of R.A.
No. 9337; thus, it is still in effect.

PD 1869, being a special law, prevails over RA 9337, which is a general law. Likewise,
the principle that since the statute is clear and free from ambiguity, it must be given its literal
meaning and applied without attempted interpretation. Thus, upon payment of the 5% franchise
tax, petitioner's income from its gaming operations of gambling casinos, gaming clubs and other
similar recreation or amusement places, and gaming pools, defined within the purview of the
aforesaid section, is not subject to corporate income tax.