UNIVERSITY

OF MINDANAO
College of Law
Taxation Laws Midterm Exam
Atty. Cecille Galleros



Julie Ann Olarte
III-Arellano

I

1.

The Court of Tax Appeals cannot act on KKI’s appeal.

The National Internal Revenue Code provides that a claim for tax refund or
credit of input VAT shall be made within the 2 year period after the close of the
taxable quarter when the sales were made. The Commissioner of Internal Revenue
has 120 days period within which to decide whether to grant or deny such claim.
Should there be inaction on the part of the Commissioner within the stated period,
the taxpayer may appeal to the Court of Tax Appeals within 30 days following the
lapse of the 120 day period. Failure to comply with such rule violates a mandatory
provision of law.

In this case, the 120 day period given to the CIR to decide had not yet lapsed
hence, the appeal filed before the CTA is still premature. The Court, therefore,
cannot act yet on KKI’s appeal.

2.

No. CTA should act on KKI’s appeal should it file the same on March 20, 2011
even if the CIR had not yet acted on its claim.

Section 112(D) of the NIRC envision two scenarios: (1) when a decision is
issued by the CIR before the lapse of the 120 day period; and (2) when no decision is
made after the 120 day period. In both instances, the taxpayer has 30 days within
which to file an appeal with the CTA.

In this case, since the Commissioner had not yet acted on KKI’s claim even after that
120 day period, such actions is already deemed to be a denial. KKI may file its appeal
within the 30 day period following the 120-day period. Since March 20, 2011 is
within that 30 day period, the CTA then should act on such case.

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 UNIVERSITY OF MINDANAO
College of Law
Taxation Laws Midterm Exam
Atty. Cecille Galleros


II.

No. BIR is not correct in denying SMZ’s application.

All sales of goods, properties, and services made by a VAT registered supplier
from the Customs Territory to an ecozone enterprise shall be subject to VAT, at zero
percent (0%) rate, regardless of the latter’s type or class of PEZA registration.

Moreover, under section 108 (B) (3) of the NIRC as amended, services
rendered to persons or entities whose exemption under special laws effectively
subjects the supply of such services to zero percent rate are considered zero-rated.

Considering the law does not provide for any additional qualification or
disqualification, the BIR cannot deny the application on the ground that HP
International already enjoy income tax holiday.


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III.

No. The claim for refund will not prosper.

Section 76 of the NIRC provides for the IRREVOCABILITY RULE which states that once
the option to carry-over and apply the excess quarterly income tax against income tax due for
the taxabale years has been made, such option shall be considered irrevocable for a period of 3
years an no application for cash refund or issuance of a tax credit certificate shall be allowed
therefore.

In the case at bench, the option to carry-over was made in 2015. Hence, such option is
Irrevocable for a period of 3 years which is up to 2018. The change from carry-over to refund
therefore by Wanderful Inc., is not valid and cannot be acted upon by the BIR.


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IV.

XL Co’s claim for refund covering the 1st and 2nd quarter were prematurely
filed while the claim for the 3rd and 4th quarter was timely filed.

With respect to the claims for refund covering the 1st and 2nd quarters, the
filing of judicial claims was not timely filed since the filing is considered premature
for the reason that the 120 day period has not yet lapsed. Although the
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 UNIVERSITY OF MINDANAO
College of Law
Taxation Laws Midterm Exam
Atty. Cecille Galleros


administrative filing wias timely complied with, the judicial filing was premature
since the 30 day period within which to file with the CTA has not started to run
bearing in mind that the 120 day period deemed denial has not lapsed yet.

Regarding the claims for refund covering the 3rd and 4th quarters, the judicial
claim was timely filed since the 120 day period of deemed denial has lapsed from
the filing of the administrative claim and the filing was done within 30 days from the
lapse of the 120 day period.


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V.

A.

The following are the requisites for a valid waiver of statute of limitations:

1. The waiver may be, but not necessarily, in the form prescribed in RMO No.
20-90. The taxpayer’s failure to follow the aforesaid forms does not
invalidate the executed waiver, for as long as the following are complied
with:

a. The waiver shall be executed before the expiration of the period to
assess or to collect taxes.

b. The waiver shall be signed by the taxpayer himself or his duly
authorized representative.

c. The expiry date of the period agreed upon to assess/collect the tax after
the regular three year period of prescription should be indicated.

2. Except for waiver of collection of taxes which shall indicate the particular
taxes assessed, the waiver need not specify the particular taxes to be
assessed nor the amount thereof, and it may simply state “all internal
revenue taxes” considering that during the assessment stage the CIR or her
duly authorized representative is still in the process of examining and
determining the tax liability of the taxpayer.


3. Since the taxpayer is the applicant and the executor of the extension of the
period of limitation for its benefit in order to submit the required documents

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 UNIVERSITY OF MINDANAO
College of Law
Taxation Laws Midterm Exam
Atty. Cecille Galleros


and accounting recors, the taxpayer is charged with the burden of ensuring
that the waivers of statute of limitation are validly executed by its authorized
representative.

4. The waiver may or may not be notarized. It is sufficient that the waiver is in
writing as specially provided by the NIRC.

5. Considering that the waiver is a voluntary act of the taxpayer, the waiver
shall take legal effect and be binding on the taxpayer upon its execution
thereof.

6. It shall be the duty of the taxpayer to submit its duly executed waiver to the
CIR or officials previously designated in existing issuances or the concerned
revenue district officer or group supervisor as designated in the Letter of
Authority/Memorandum of Assignment who shall then indicate acceptance
by signing the same. Such waiver shall be executed and duly accepted prior
to the expiration of the period to assess or to collect. The taxpayer shall have
the sduty to retain a copy of the accepted waiver.

7. Note that there shall only be two (2) material dates that need to be present
on the waiver:

a. The date of execution of the waiver by the taxpayer or its authorized
representative; and

b. The expiry date of the period the taxpayer waives the statute of
limitations

8. Before the expiration of the period set on the previously executed waiver, the
period earlier set may be extended by subsequent written waiver.

B.

The government’s right to collect deficient taxes has not yet prescribed since
the waiver that was executed did not comply with the guidelines provided under the
law.

As ruled by the Court in the case of CIR vs. Next Mobile Inc., in case a
taxpayer executes waivers, delivered them to CIR and allowed the latter to rely on
them and did not raise any objection against their validity until he was assessed,
said taxpayer is estopped from questioning the validity of the waivers. The
application of estoppel is necessary to prevent the undue injury that the

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 UNIVERSITY OF MINDANAO
College of Law
Taxation Laws Midterm Exam
Atty. Cecille Galleros


government would suffer because of the cancellation of assessment of taxpayer
liabilities.

In the case at bench, the signatory in the waiver was not the duly authorized
representative of the company. Hence, such waiver is invalid and ineffective to
extend the prescriptive period to assess taxes. The corporation is therefor estopped
from claiming the defense of prescription since it is the one who executed the
incomplete waivers.

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VI.

A.

Yes. The transaction is subject to VAT.

The following elements must be present in order for a transaction to be
subjected to 12% VAT:

1. It must be done in the ordinary course of trade or business;
2. There must be a sale, barter, exchange, lease of properties, or rendering of
service in the Philippines
3. It is not VAT Exempt or VAT Zero-Rated

It is considered to be in the course of trade or business if it is within the regular
conduct or pursuit of a commercial or an economic activity, including transactions
incidental thereto, by any person regardless of whether or not the person engaged
therein is a non-stock non –profit private organization or government entity.

The above-mentioned requisites are clearly present in this case. There is a sale of
property which was made by real estate corporation, not VAT Exempt and in its
regular course of business. Hence, such action falls under VATABLE Transaction.

B.

No. If the property was sold by a bank in a foreclosure sale, it would not be
constitute a VATable Transaction.

VATable Transaction should include those transactions which are made in
the ordinary course of trade or business of the company or entity.

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 UNIVERSITY OF MINDANAO
College of Law
Taxation Laws Midterm Exam
Atty. Cecille Galleros


In this case, the selling of real property not in the ordinary couse of business
in the foreclosure sale by the bank is not within the purview of transactions made in
the usual course of business.

Thus, such sale should be tax exempt.

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VII.

A.


As a general rule, collections of taxes cannot be suspended except under
certain circumstances provided under the law.

As ruled by the Court in Sps. Pacquiao vs CIR, Appeal will not suspend
collection of taxes. Section 11 of R.A. No. 1125, as amended by R.A. No.
9282,[53] embodies the rule that an appeal to the CTA from the decision of the CIR
will not suspend the payment, levy, distraint, and/or sale of any property of the
taxpayer for the satisfaction of his tax liability as provided by existing law. When, in
the view of the CTA, the collection may jeopardize the interest of the Government
and/or the taxpayer, it may suspend the said collection and require the taxpayer
either to deposit the amount claimed or to file a surety bond.

B.

Yes. The CTA is justified in requiring Globesmart services, Inc. to post a
surety bond as a condition for the suspension of the deficiency tax collection.

In the case of Sps. Pacquiao vs CIR, the Court ruled that it is clear that the
authority of the courts to issue injunctive writs to restrain the collection of tax and
to dispense with the deposit of the amount claimed or the filing of the required
bond is not simply confined to cases where prescription has set in. As explained
by the Court in those cases, whenever it is determined by the courts that the
method employed by the Collector of Internal Revenue in the collection of tax is
not sanctioned by law, the bond requirement under Section 11 of R.A. No.
1125 should be dispensed with. The purpose of the rule is not only to prevent
jeopardizing the interest of the taxpayer, but more importantly, to prevent the
absurd situation wherein the court would declare "that the collection by the
summary methods of distraint and levy was violative of law, and then, in the same

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 UNIVERSITY OF MINDANAO
College of Law
Taxation Laws Midterm Exam
Atty. Cecille Galleros


breath require the petitioner to deposit or file a bond as a prerequisite for the
issuance of a writ of injunction.

Here, in this case, the collection tax will be prejudicial to the taxpayer and the
taxpayer. Therefore, the CTA may require it to file a bond as a condition for the
suspension.


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VIII.

A.

There is deficiency tax then the amount by which imposed by law as

determined by the Commissioner of Internal Revenue or its authorized
representative exceeds the amount of tax in taxpayer’s return. It cannot be
collected immediately as the taxpayer may file a protest assessment.

On the other hand, there is delinquency tax when the self-asses tax per
return filed by the taxpayer on the prescribed date was not paid at all or
partially. Unlike deficiency tax, it can be collected immediately through
administrative or judicial action.

B.

A compromise of tax is a remedy which is available when there is a
reasonable doubt as to the validity of the claim against the taxpayer.

Abatement of tax on the other side is available as a remedy when the tax or
any portion thereof appears to be unjustly or excessively assessed.


C.

The following cases are under the exclusive appellate jurisdiction of the
Court of Tax Appeals, to wit:

a. Decisions of the CIR in cases involving disputed assessments, refunds

of internal revenue taxes, fees or other charges;

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 UNIVERSITY OF MINDANAO
College of Law
Taxation Laws Midterm Exam
Atty. Cecille Galleros

b. Inaction by the CIR in cases involving disputed assessments, refunds

of internal revenue taxes, fees or other charges;
c. Decisions, resolutions or orders of the RTC’s in the local tax cases
decided or resolved by them in the exercise of their original
jurisdiction;
d. Decisions of the Commissioner of Customs in cases involving liability
for customs, duties, fees or other money charges, seizure, detention or
release of property affected, fines, forfeitures or other penalties in
relation thereto; and
e. Decisions of the Secretary of Finance on customs cases elevated to it
automatically for review from decisions of the Commissioner of
Customs.

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