2011 TAX CASES
CASE TITLE FACTS OF THE CASE
1. Belle Corporation vs CIR Belle Corporation is a domestic corporation engaged in the real estate and property Whether or not petitioner is No. Both the CTA and CA erred in applying Section 69 of the old NIRC. The law
(G.R. No. 181298 business. Petitioner filed with the BIR its ITR for the first quarter of 1997, showing a entitled to a refund of its excess applicable is Section 76 of the NIRC. Under Section 69 of the old NIRC, in case of
January 10, 2011) gross income of P741,607,495.00, a deduction of P65,381,054.00, a net taxable income tax payments for the overpayment of income taxes, a corporation may either file a claim for refund or carry over
income of P676,226,441.00 and an income tax due of P236,679,254.00. Petitioner taxable year 1997.
(Agustin, Marilou) filed with the BIR its second quarter ITR, declaring an overpayment income taxes in
the amount of P66,634,290.00. In view of the overpayment, no taxes were paid for
the second and thirds quarters of 1997.
Instead of claiming the amount as a tax refund, petitioner decided to apply it as a
tax credit to the succeeding taxable year by marking the tax credit option box in its
1997 ITR. For the taxable year 1998, petitioner’s amended ITR showed an
overpayment . Petitioner filed with the BIR an administrative claim for refund of its
unutilized excess income tax payments for the taxable year 1997 in the amount of
P106,447,318.00. Notwithstanding the filing of the administrative claim for refund,
petitioner carried over the amount of P106,447,318 to the taxable year 1999and
applied a portion thereof to its 1999 Minimum Corporate Income Tax (MCIT)
liability.
CTA rendered a Decision denying petitioner’s claim for refund.
It bears stressing that the applicable provision in the case at bar is Section 69of
the old Tax Code and not Section 76 of the 1997 Tax Code. Settled is the rule that
under Section 69 of the Old Tax Code, the carrying forward of any excess/overpaid
income tax for a given taxable year is limited only up to the succeeding taxable
year. However, petitioner even went further to the taxable year 1999 and applied
the Prior Year’s (1998) Excess Credit of P106,447,318.00 to its income tax liability.
True enough, upon verification of Petitioner’s 1999 Corporate Annual Income Tax
Return, the Court found that the whole amount of P106,447,318.00 representing its
prior year’s excess credit was carried forward to1999 income tax liability. It is
elementary rule in taxation that an automatic carry-over of an excess income tax
payment should only be made for the succeeding year. On appeal, CA denied the
petition and dismiss the decision of the CTA.
ISSUE/S RULING
the excess payments to the taxable year. Availment of one remedy, however, precludes
the other.
Thus, under Section 69 of the old NIRC, unutilized tax credits maybe refunded as long as
the claim is filed within the two-year prescriptive period. The option to carry over excess
income tax payments is irrevocable under Section 76 of the 1997 NIRC. This rule,
however, no longer applies as: Section 76 of the 1997 NIRC now reads:Section 76. Final
Adjustment Return – Every corporation liable to tax under Section 24 shall file a final
adjustment return covering the total net income for the preceding calendar or fiscal year.
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 net income of that year the corporation shall
either:a. Pay excess tax still due; orb. Be refunded of the excess amount paid, as the case
may be
In case the corporation is entitled to a refund of the excess estimated quarterly income
taxes paid, the refundable amount shown on its final adjustment return may be credited
against the estimated quarterly income tax liabilities for the taxable quarters of the
succeeding taxable years. Once the option to carry over and apply the excess quarterly
income tax against income tax due for the taxable quarters of the succeeding years has
been made, such option shall be considered irrevocable for that taxable period and no
application for tax refund or issuance of a tax credit certificate shall be allowed therefor.
Under the new law, in case of overpayment of income taxes, the remedies are still the
same; and the availment of one remedy still precludes the other. But unlike Section 69 of
the old NIRC, the carry over of excess income tax payments is no longer limited to the
taxable year. Unutilized excess income tax payments may now be carried over to the
succeeding taxable years until fully utilized. In addition, the option to carry over excess
income tax payments is now irrevocable. Hence, unutilized excess income tax payments
may no longer be refunded.
In the instant case, both the CTA and CA applied Section 69 of the old NIRC in denying
the claim for refund. The SC found however, that the applicable provision should be
Section 76 of the 1997 NIRC because at the time filed its 1997 final ITR, the old NIRC was
no longer in force.
Section 76 and its companion provisions in Title II, Chapter XII should be applied following
the general rule on the prospective application of laws such that they operate to govern
the conduct of corporate taxpayers the moment the 1997 NIRC took effect on 1 January
1998. There is no quarrel that at the time respondent filed its final adjustment return for
1997 on 15 April 1998, the deadline under Section 77 (B) of the 1997 NIRC (formerly
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 2011 TAX CASES
2. Silicon Philippines, Inc.,
(Formerly Intel
Philippines
Manufacturing, Inc.), vs
CIR (G.R. No. 172378
January 17, 2011)
(Agustin, Marilou)
Section 70(b) of the 1977 NIRC), the 1997 NIRC was already in force, having gone into
effect a few months earlier on 1 January 1998. Accordingly, Section 76 is controlling.
Accordingly, since petitioner already carried over its 1997 excess income tax payments to
the succeeding taxable year 1998, it may no longer file a claim for refund of unutilized tax
credit for taxable year 1997. To repeat, under the new law, once the option to carry over
excess income tax payments to the succeeding years has been made, it becomes
irrevocable. Thus, applications for refund of unutilized excess income tax payments may
no longer be allowed.
Whether or not the CTA En Banc No. In a claim for credit/refund of input VAT attributable to zero-rated sales, Section 112
erred in denying petitioner’s (A) of the NIRC lays down four requisites, to wit:
claim for credit/refund of input 1) the taxpayer must be VAT-registered;
VAT attributable to its zero-rated 2) the taxpayer must be engaged in sales which are zero-rated or effectively zero-rated;
sales. 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.
To prove that it is engaged in zero-rated sales, petitioner presented export sales invoices,
certifications of inward remittance, export declarations, and airway bills of lading for the
fourth quarter of 1998. The CTA Division, however, found the export sales invoices of no
probative value in establishing petitioners zero-rated sales for the purpose of claiming
credit/refund of input VAT because petitioner failed to show that it has an ATP from the
BIR and to indicate the ATP and the word zero-rated in its export sales invoices
Printing the ATP on the invoices or receipts is not required. It has been settled in Intel
Technology Philippines, Inc. v. Commissioner of Internal Revenue that the ATP need not
be reflected or indicated in the invoices or receipts because there is no law or regulation
requiring it. Thus, in the absence of such law or regulation, failure to print the ATP on the
invoices or receipts should not result in the outright denial of a claim or the invalidation of
the invoices or receipts for purposes of claiming a refund.
This brings us to the question of whether a claimant for unutilized input VAT on zero-rated
sales is required to present proof that it has secured an ATP from the BIR prior to the
printing of its invoices or receipts.
Under Section 112 (A) of the NIRC, 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 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.
In the case of Intel, we emphasized that it bears reiterating that while the pertinent
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 2011 TAX CASES
provisions of the Tax Code and the rules and regulations implementing them require
entities engaged in business to secure a BIR authority to print invoices or receipts and to
issue duly registered invoices or receipts, it is not specifically required that the BIR
authority to print be reflected or indicated therein. Indeed, what is important with respect to
the BIR authority to print is that it has been secured or obtained by the taxpayer, and that
invoices or receipts are duly registered.[

Failure to print the word zero-rated on the sales invoices is fatal to a claim for refund of
input VAT. 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.

To claim a refund of input VAT on capital goods, Section 112 (B)[56] of the NIRC requires
that:

1. the claimant must be a VAT registered person;

2. the input taxes claimed must have been paid on capital goods;
3. the input taxes must not have been applied against any output tax liability; and
4. the administrative claim for refund must have been filed within two (2) years after the
close of the taxable quarter when the importation or purchase was made.

Corollarily, Section 4.106-1 (b) of RR No. 7-95 defines capital goods as follows:

Capital goods or properties refer to goods or properties with estimated useful life greater
that one year and which are treated as depreciable assets under Section 29 (f),[57] used
directly or indirectly in the production or sale of taxable goods or services.

Based on the foregoing definition, we find no reason to deviate from the findings of the
CTA that training materials, office supplies, posters, banners, T-shirts, books, and the
other similar items reflected in petitioners Summary of Importation of Goods are not
capital goods. A reduction in the refundable input VAT on capital goods from
P15,170,082.00 to P9,898,867.00 is therefore in order.
3. Exxonmobil Petroleum Petitioner Exxon is a foreign corporation duly organized and existing under the laws Whether or not Exxonmobil is NO.As early as the 1960s, the Supreme Court has ruled that the proper party to question,
And Chemical Holdings, of the State of Delaware, United States of America. It is authorized to do business the proper party to file the claim or to seek a refund of, an indirect tax, is the statutory taxpayer, or the person on whom the
Inc, Philippine Branch in the Philippines through its Philippine Branch. for the refund of the excise taxes tax is imposed by law and who paid the same, even if he shifts the burden thereof to
VS. CIR (GR NO. passed-on by Caltex and Petron. another.
180909, JANUARY 19, Exxon is engaged in the business of selling petroleum products to domestic and
2011) international carriers. In pursuit of its business, Exxon purchased from Caltex As provided under Section 130 (A) (1) :
Philippines, Inc. (Caltex) and Petron Corporation (Petron) Jet A-1 fuel and other SEC. 130. Filing of Return and Payment of Excise Tax on Domestic Products. -
petroleum products, the excise taxes on which were paid for and remitted by both (A) Persons Liable to File a Return, Filing of Return on Removal and Payment of Tax. -
( Taguinod, Jelyne) Caltex and Petron. Said taxes, however, were passed on to Exxon which ultimately (1) Persons Liable to File a Return. - Every person liable to pay excise tax imposed under
shouldered the excise taxes on the fuel and petroleum products. this Title shall file a separate return for each place of production setting forth, among
others the description and quantity or volume of products to be removed, the applicable
From November 2001 to June 2002, Exxon sold a lot of Jet A1 fuel to international tax base and the amount of tax due thereon: Provided, however, That in the case of
carriers, free of excise taxes. On various dates, it filed administrative claims for indigenous petroleum, natural gas or liquefied natural gas, the excise tax shall be paid by

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 2011 TAX CASES
refund with the Bureau of Internal Revenue.
On October 30, 2003, Exxon filed a petition for review with the CTA claiming a
refund or tax credit in the amount of Php105,093,536.47, representing the amount
of excise taxes paid on Jet A-1 fuel and other petroleum products it sold to
international carriers from November 2001 to June 2002.
During Exxons preparation of evidence, the CIR filed a motion dated January 28,
2005 to first resolve the issue of whether or not Exxon was the proper party to ask
for a refund. Exxon filed its opposition to the motion on March 15, 2005. On July 27,
2005, the CTA First Division issued a resolution sustaining the CIRs position and
dismissing Exxons claim for refund. Exxon filed a motion for reconsideration, but
this was denied. Exxon filed a petition for review with the CTA En Banc which
dismissed the petition for review, and which affirmed the said ruling.
The CTA En Banc dismissed the petition for review and affirmed the two resolutions
of the First Division dated July 27, 2005 and July 27, 2006. Exxon filed a motion for
reconsideration, but it was denied.
The CTA stated that Section 130(A)(2) makes the manufacturer or producer of the
petroleum products directly liable for the payment of excise taxes. Therefore, it
follows that the manufacturer or producer is the taxpayer. This determination of the
identity of the taxpayer designated by law is pivotal as the NIRC provides that it is
only the taxpayer who has the legal personality to ask for a refund in case of
erroneous payment of taxes.
Further, the excise tax imposed on manufacturers upon the removal of petroleum
products by oil companies is an indirect tax, or a tax which is primarily paid by
persons who can shift the burden upon someone else.
The CTA cited the cases of Philippine Acetylene Co., Inc. v. Commissioner of
Internal Revenue,Contex Corporation v. Commissioner of Internal Revenue, and
Commissioner of Internal Revenue v. Philippine Long Distance Telephone
Company, and explained that with indirect taxes, although the burden of an indirect
tax can be shifted or passed on to the purchaser of the goods, the liability for the
indirect tax remains with the manufacturer.
Moreover, the manufacturer has the option whether or not to shift the burden of the
tax to the purchaser. When shifted, the amount added by the manufacturer
becomes a part of the price, therefore, the purchaser does not really pay the tax per
se but only the price of the commodity. The CTA concluded that a refund of
erroneously paid or illegally received tax can only be made in favor of the taxpayer,
pursuant to Section 204(C) of the NIRC.
4
the first buyer, purchaser or transferee for local sale, barter or transfer, while the excise
tax on exported products shall be paid by the owner, lessee, concessionaire or operator of
the mining claim.
Should domestic products be removed from the place of production without the payment
of the tax, the owner or person having possession thereof shall be liable for the tax due
thereon.
The proper party to seek a refund of an indirect tax is the statutory taxpayer, the person
on whom the tax is imposed by law and who paid the same even if he shifts the burden to
another. Although the burden of an indirect tax can be shifted to the purchaser, the
amount added or shifted becomes part of the price. Thus, the purchaser does not really
pay the tax per se but only the price of the commodity. Indirect taxes were defined as
those that are demanded, in the first instance, from, or are paid by, one person to
someone else. When the seller passes on the tax to the buyer he in effect shifts only the
tax burden and not the liability to pay for it. Excise taxes are imposed under Title VI of the
NIRC. They apply to specific goods manufactured or produced in the Philippines for
domestic sale or consumption or for any other disposition, and to those that are imported.
In effect, these taxes are imposed when two conditions concur: first, that the articles
subject to tax belong to any of the categories of goods enumerated in Title VI of the NIRC;
and second, that said articles are for domestic sale or consumption, excluding those that
are actually exported.
There are certain exemptions to the coverage of excise taxes, such as petroleum products
sold to international carriers and exempt entities or agencies. Section 135 of the NIRC
provides:
SEC. 135. Petroleum Products Sold to International Carriers and Exempt Entities or
Agencies. - Petroleum products sold to the following are exempt from excise tax:
(a) International carriers of Philippine or foreign registry on their use or consumption
outside the Philippines: Provided, That the petroleum products sold to these international
carriers shall be stored in a bonded storage tank and may be disposed of only in
accordance with the rules and regulations to be prescribed by the Secretary of Finance,
upon recommendation of the Commissioner;
(b) Exempt entities or agencies covered by tax treaties, conventions and other
international agreements for their use of consumption: Provided, however, That the
country of said foreign international carrier or exempt entities or agencies exempts from
similar taxes petroleum products sold to Philippine carriers, entities or agencies; and
(c) Entities which are by law exempt from direct and indirect taxes.
Thus, under Section 135, petroleum products sold to international carriers of foreign
registry on their use or consumption outside the Philippines are exempt from excise tax,
provided that the petroleum products sold to such international carriers shall be stored in a
bonded storage tank and may be disposed of only in accordance with the rules and
 2011 TAX CASES
The CTA also emphasized that tax refunds are in the nature of tax exemptions and
are, thus, regarded as in derogation of sovereign authority and construed
strictissimi juris against the person or entity claiming the exemption.
Finally, the CTA disregarded Exxons argument that in effectively holding that only
petroleum products purchased directly from the manufacturers or producers are
exempt from excise taxes, the First Division of [the CTA] sanctioned a universal
amendment of existing bilateral agreements which the Philippines have with other
countries, in violation of the basic principle of pacta sunt servanda.
The CTA explained that the findings of fact of the First Division (that when Exxon
sold the Jet A-1 fuel to international carriers, it did so free of tax) negated any
violation of the exemption from excise tax of the petroleum products sold to
international carriers. Second, the right of international carriers to invoke the
exemption granted under Section 135(a) of the NIRC was neither affected nor
restricted in any way by the ruling of the First Division.
At the point of sale, the international carriers were free to invoke the exemption from
excise taxes of the petroleum products sold to them. Lastly, the lawmaking body
was presumed to have enacted a later law with the knowledge of all other laws
involving the same subject matter.
4. Atlas consolidated mining
and Development
CorporationVs.Commissi
oner of Internal Revenue(
G.R. No. 159471 January
26, 2011)
(Guim, Amiel)
5. Philippine Amusement The Philippine Amusement and Gaming Corporation (PAGCOR) was created by Whether or not PAGCOR should Yes. Section 1 of R.A. 9337 is constitutional. It was the express intent of Congress to
And Gaming Corporation P.D. No. 1067-A in 1977. It is a government owned and controlled corporation be subjected to income taxation. exclude PAGCOR from the exempt GOCCs hence PAGCOR is now subject to income
(PAGCOR), Petitioner,vs. (GOCC). In 1998, R.A. 8424 or the National Internal Revenue Code of 1997 (NIRC)
The Bureau Of Internal became effective. Section 27 thereof provides that GOCC’s are NOT EXEMPT from
Revenue (BIR) paying income taxation but it exempted the following GOCCs: GSIS, SSS,
( G.R. No. 172087 ; PHILHEALTH, PCSO, PAGCOR.
regulations to be prescribed by the Secretary of Finance, upon recommendation of the
Commissioner.
The confusion here stems from the fact that excise taxes are of the nature of indirect
taxes, the liability for payment of which may fall on a person other than he who actually
bears the burden of the tax.
In Commissioner of Internal Revenue v. Philippine Long Distance Telephone Company,
the Court discussed the nature of indirect taxes as follows:
[I]ndirect taxes are those that are demanded, in the first instance, from, or are paid by, one
person to someone else. Stated elsewise, indirect taxes are taxes wherein the liability for
the payment of the tax falls on one person but the burden thereof can be shifted or passed
on to another person, such as when the tax is imposed upon goods before reaching the
consumer who ultimately pays for it. When the seller passes on the tax to his buyer, he, in
effect, shifts the tax burden, not the liability to pay it, to the purchaser, as part of the goods
sold or services rendered.
Accordingly, the party liable for the tax can shift the burden to another, as part of the
purchase price of the goods or services. Although the manufacturer/seller is the one who
is statutorily liable for the tax, it is the buyer who actually shoulders or bears the burden of
the tax, albeit not in the nature of a tax, but part of the purchase price or the cost of the
goods or services sold.
As petitioner is not the statutory taxpayer, it is not entitled to claim a refund of excise taxes
paid.
Whether or not the petitioner Although the Court agreed with the petitioner corporation that the two-year prescriptive
corporation sufficiently establish period for the filing of claims for refund/credit of input VAT must be counted from the date
the factual bases for its of filing of the quarterly VAT return, and that sales to PASAR and PHILPOS inside the
applications for refund/credit of EPZA are taxed as exports because these export processing zones are to be managed as
input VAT a separate customs territory from the rest of the Philippines, and thus, for tax purposes,
are effectively considered as foreign territory, it still denies the claims of petitioner
corporation for refund of its input VAT on its purchases of capital goods and effectively
zero-rated sales during the period claimed for not being established and substantiated by
appropriate and sufficient evidence( purchase invoices or official receipts).
Tax refunds are in the nature of tax exemptions. It is regarded as in derogation of the
sovereign authority, and should be construed in strictissimi juris against the person or
entity claiming the exemption. The taxpayer who claims for exemption must justify his
claim by the clearest grant of organic or statute law and should not be permitted to stand
on vague implications.
taxation. PAGCOR’s contention that the law violated the constitution is not tenable. The
equal protection clause provides that all persons or things similarly situated should be
treated alike, both as to rights conferred and responsibilities imposed.
5

March 15, 2011)
(Ferrer, Elena Marie)
2011 TAX CASES
But in May 2005, R.A. 9337, a law amending certain provisions of R.A. 8424, was
passed. Section 1 thereof excluded PAGCOR from the exempt GOCCs hence
PAGCOR was subjected to pay income taxation. In September 2005, the Bureau of
Internal Revenue issued the implementing rules and regulations (IRR) for R.A.
9337. In the said IRR, it identified PAGCOR as subject to a 10% value added tax
(VAT) upon items covered by Section 108 of the NIRC (Sale of Services and Use or
Lease of Properties).
PAGCOR questions the constitutionality of Section 1 of R.A. 9337 as well as the
IRR. PAGCOR avers that the said provision violates the equal protection clause.
PAGCOR argues that it is similarly situated with SSS, GSIS, PCSO, and
PHILHEALTH, hence it should not be excluded from the exemption.
The general rule is, ALL GOCC’s are subject to income taxation. However, certain classes
of GOCC’s may be exempt from income taxation based on the following requisites for a
valid classification under the principle of equal protection:
1) It must be based on substantial distinctions.
2) It must be germane to the purposes of the law.
3) It must not be limited to existing conditions only.
4) It must apply equally to all members of the class.
When the Supreme Court looked into the records of the deliberations of the lawmakers
when R.A. 8424 was being drafted, the SC found out that PAGCOR’s exemption was not
really based on substantial distinctions. In fact, the lawmakers merely exempted PAGCOR
from income taxation upon the request of PAGCOR itself. This was changed however
when R.A. 9337 was passed and now PAGCOR is already subject to income taxation.

Anent the issue of the imposition of the 10% VAT against PAGCOR, the BIR had
overstepped its authority. Nowhere in R.A. 9337 does it state that PAGCOR is subject to
VAT. Therefore, that portion of the IRR issued by the BIR is void. In fact, Section 109 of
R.A. 9337 expressly exempts PAGCOR from VAT. Further, PAGCOR’s charter exempts it
from VAT. To recapitulate, PAGCOR is subject to income taxation but not to VAT.
6. Commissioner Of Internal Whether or not the respondent The Court granted the petition and the earlier decision of the Court of Appeals is set aside.
Revenue Vs Manila Manila Banker’s Life Insurance The respondent Manila Banker’s Life Insurance Corporation is ordered to pay petitioner
Bankers' Life Insurance Corporation is liable to pay the CIR the deficiency documentary stamp tax, plus the delinquency penalties of 25%
Corporation (G.R. No. assessed deficiency surcharge on the amount due and 20% annual interest until fully paid.
169103 documentary stamp tax, plus
March 16, 2011) 25% surcharge for the late Section 198. Stamp Tax on Assignments and Renewals of Certain Instruments. – Upon
payment and 20% annual each and every assignment or transfer of any mortgage, lease or policy of insurance, or
(Maramag, Jocelyn) interest on their policy premiums. the renewal or continuance of any agreement, contract, charter, or any evidence of
obligation or indebtedness by altering or otherwise, there shall be levied, collected and
paid a documentary stamp tax, at the same rate as that imposed on the original
instrument.
Section 198. Speaks of assignments and renewals. In the case of insurance policies, this
section applies only when such policy was assigned or transferred. The provision which
specifically applies to renewals of life insurance policies is Section 183:

Section 183. Stamp Tax on Life Insurance Policies. — On all policies of insurance or other
instruments by whatever name the same may be called, whereby any insurance shall be
made or renewed upon any life or lives, there shall be collected a documentary stamp tax
of fifty centavos on each two hundred pesos or fractional part thereof, of the amount
insured by any such policy.

Section 183. Is a substantial reproduction of the earlier documentary stamp tax provision,
Section 1449(j) of the Administrative Code of 1917. Regulations No. 26, or The Revised
Documentary Stamp Tax Regulations, provided the implementing rules to the provisions
on documentary stamp tax under the Administrative Code of 1917. Section 54 of the

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 2011 TAX CASES
7. CIR vsPL Management
International
Philippines(GR. NO.
160949 April 4, 2011)
(Augustin, Marilou)
8. Sta. Lucia Realty and
Development, Inc.,Vs.City
of Pasig , taxes to Cainta, as it alleged to requisite was reiterated in Republic Act No. 7160, or the Local Government Code. Thus,
Respondent Municipality
of Cainta, Province of
Rizal,Intervenor(G.R. No.
166838 June 15, 2011)
( Guim, Amiel)
Regulations, in reference to what is now Section 183, explicitly stated that the
documentary stamp tax imposed under that section is also collectible upon renewals of life
insurance policies.
Section 54. Tax also due on renewals. – The tax under this section is collectible not only
on the original policy or contract of insurance but also upon the renewal of the policy or
contract of insurance.
It is clear that the availment of the option in the guaranteed continuity clause will
effectively renew the Money Plus Plan policy, which is indisputably subject to the
imposition of documentary stamp tax under Section 183 as an insurance renewed upon
the life of the insured.
Whether or not the decision of The SC reversed the decision of the CA to the extent that it orders the petitioner to refund
CA suspending the running to respondent the unutilized creditable withholding tax in the year 1997, but permit the
period set by Section 29 of the respondent to apply the amount as tax credit in succeeding taxable years until fully
NIRC on the ground of equity is exhausted.
proper.
Any tax income that is paid in excess of the amount due the government may be
refunded, provided that the taxpayer properly applies for the refund. One cannot get a tax
refund and a tax credit at the same time for the same income taxes paid.
The amount being claimed as a refund would remain in the account of the taxpayer until
utilized in taxable years, as provided in Section 76 of the NIRC of 1997.
It is worthy to note that unlike the option refund of excess income tax, which prescribes
after 2 years from filing of the Final Adjustment Return , for there is no prescriptive period
for the carrying over the same.
In this regard, prescription did not bar it from applying the amount as tax credit considering
that there was no prescriptive period for carrying over the amount as tax credit in
subsequent taxable years.
SC ruled that PL Management may still use the creditable withholding tax as tax credit in
succeeding taxable years until fully exhausted.
Whether or not Sta. Lucia should Under Presidential Decree No. 464, or the “Real Property Tax Code, “the authority to
continue paying its real property collect real property taxes are vested in the locality where the property is situated. This
have always done, or to Pasig, while a local government unit is authorized under several laws to collect real estate tax on
as the location stated in Sta. properties falling under its territorial jurisdiction, it is imperative to first show that these
Lucia’s TCTs. properties are unquestionably within its geographical boundaries. The Court cited the case
of Mariano, Jr. v Commission on Elections which stated that “the importance of drawing
with precise strokes the territorial boundaries of a local unit of government cannot be
overemphasized.
The boundaries must be clear to define the limits of the territorial jurisdiction of a local
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 2011 TAX CASES
9. Commissioner Of Internal
RevenueVs.Mirant
(Philippines) Operations,
Corporation (G.R. No.
171742 June 15,
2011)
x---------------------
- -x
Mirant Operations Corporation
Vs.Commissioner Of Internal
Revenue (G.R. No. 176165)
(Maramag, Jocelyn)
government unit. It can legitimately exercise powers of government only within the limits of
its territorial jurisdiction. Beyond these limits, its acts are ultra vires.” Clearly therefore,
the local government unit entitled to collect real property taxes from Sta. Lucia must
undoubtedly show that the subject properties are situated within its territorial jurisdiction;
otherwise, It would be acting beyond the powers vested to it by law. We hold that the
Pasig RTC should have held in abeyance the proceedings in Civil Case No.
65420, in view of the fact that the outcome of the boundary dispute case before the
Antipolo RTC will undeniably affect both Pasig’s and Cainta’s rights. In fact, the only
reason Pasig had to file a tax collection case against Sta. Lucia was not that Sta. Lucia
refused to pay, but that Sta. Lucia had already paid, albeit to another local government
unit.
Evidently, had the territorial boundaries of the contending local government
units herein been delineated with accuracy, and then there would be no controversy at all.
In the meantime, to avoid further animosity, Sta. Lucia is directed to deposit the
succeeding real property taxes due on the subject properties, in an escrow account with
the Land Bank of the Philippines. WHEREFORE, the instant petition is GRANTED .The
June 30, 2004Decision and the January 27, 2005 Resolution of the Court of Appeals in
CA-G.R. CV No. 69603 are SET ASIDE.
The City of Pasig and the Municipality of Cainta are both directed to await the judgment in
their boundary dispute case (Civil Case No. 94-3006), pending before Branch 74 of the
Regional Trial Court in Antipolo City, to determine which local government unit is entitled
to exercise its powers, including the collection of real property taxes, on the properties
subject of the dispute.
In the meantime, Sta. Lucia Realty and Development, Inc. is directed to deposit the
succeeding real property taxes due on the lots and improvements covered by TCT Nos.
532250, 598424,599131, 92869, 92870 and 38457 in an escrow account with the Land
Bank of the Philippines.
Whether or not petitioner is Mirant’s claim is denied on its fiscal year ended June 30, 1999 and the Interim period from
entitled to a tax refund or to the July 1, 1999 to December 31, 1999 as it opted for carry over. Once exercised, the option
issuance of a tax credit to carry over is irrevocable.
certificate and if it is, then what is
the amount to which it is entitled. Section 76 of the National Internal Revenue Code (Presidential Decree No. 1158, as
amended) provides:
SEC. 76. - Final Adjustment Return. - Every corporation liable to tax under Section 27
shall file a final adjustment return covering the total taxable income for the preceding
calendar or fiscal year. 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; or
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 2011 TAX CASES
(B) Carry-over the excess credit; or
(C) Be credited or refunded with the excess amount paid, as the case may be.

In case the corporation is entitled to a tax credit or refund of the excess estimated
quarterly income taxes paid, the excess amount shown on its final adjustment return may
be carried over and credited against the estimated quarterly income tax liabilities for the
taxable quarters of the succeeding taxable years. 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.
The last sentence of Section 76 is clear in its mandate.

Once a corporation exercises the option to carry-over and apply the excess quarterly
income tax against the tax due for the taxable quarters of the succeeding taxable years,
such option is irrevocable for that taxable period. Having chosen to carry-over the excess
quarterly income tax, the corporation cannot thereafter choose to apply for a cash refund
or for the issuance of a tax credit certificate for the amount representing such
overpayment.Mirant is entitled to the refund of its unutilized creditable withholding taxes
for the taxable year 2000.

Therefore, as the CTA ruled, Mirant complied with all the legal requirements and it is
entitled, as it opted, to a refund of its excess creditable withholding tax for the taxable year
2000 in the amount of ₱ 38,620,427.00.

The Court finds no abusive or improvident exercise of authority on the part of the CTA.
Since there is no showing of gross error or abuse on the part of the CTA, and its findings
are supported by substantial evidence, there is no cogent reason to disturb its findings
and conclusions.

10. CIR vs Filinvest FDC is the owner of the outstanding shares of both FAI and FLI with 80% and Whether or not FDC is liable for No. Sec. 34(c) (2) Now Sec. 40 (c) (2) of the NIRC does not include the power to impute
Development 67.42% respectively. Sometimes in 1996, FDC and FAI entered into a Deed of theoretical interest on said theoretical interest to the CIR’s power of distribution, allocation, apportionment or
Corporation(Gr. No exchange with FLI where both transferred parcel of lands in exchange for shares of advances extended by it to its allocation of gross income and deductions. To accord precipitate credulity to the CIR’s
163653. July 19, 2011) stock of FLI. As a result, the ownership structure of FLI changed whereby FDC’s affiliates. bare assertion that FDC had deducted substantial interest expense from its gross income,
ownership decreased from 67.42% to 61.03% meanwhile Fai now owned 9.96% of there would still be no factual basis for the imputation of theoretical interest on the subject
CIR vs. Filinvest shares of FLI. FLI then requested from the BIR a ruling to the effect that no gain or advances and assess deficiency income taxes. Under Art. 1956 of the New Civil Code, no
Development Corporation loss should be recognized on said transfer and BIR issued ruling no. S-34-046-97 interest shall be due unless it has been expressly stipulated in writing. Considering that
(Gr. No. 167689. July 19, finding the exchange falling within Sec. 34(c) (2) Now Sec. 40 (c) (2) of the NIRC. taxes, being burdens, are not to be presumed beyond what the applicable statute
2011) Furthermore, FDC extended advances in favour of its affiliates during 1996 and expressly and clearly declares, the rule is likewise settled that tax statutes must be
1997 duly evidence by instructional letters as well as cash and journal vouchers. construed strictly against the government and liberally in favour of the taxpayer.
( Carodan, Jose Emmanuel) Moreover, FDC also entered into shareholders agreement with Reco-Herrera PTE Accordingly, the general rule of requiring adherence to the letter in construing statutes
Ltd (RHPL). For the formation of a Singapore base joint venture company called applies with peculiar strictness to tax law and the provision of a taxing act are not to be
Filinvest Asia Corp. (FAC). The equity participation of FDC was pegged at 60% extended by implication. While it is true that taxes are the lifeblood of the government, it
subscribing to P500.7m worth of shares of FAC. has been held that their assessment and collection should be in accordance with law as

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 2011 TAX CASES
any arbitrariness will negate the very reason for government itself.
On Jan. 3, 2010, FDC received assessment notice for deficiency income tax and
deficiency stamp taxes. The foregoing deficiency taxes were assessed on the Whether or not FDC met all the Yes, it was admitted in the stipulation of facts.Requisites for the non-recognition of gain or
taxable gain realized by FDC on the taxable gain supposedly gain realized by FDC requirements for non-recognition loss under Sec. 34(c) (2) of the 1993 NIRC are as follows:
from the Deed of Exchange it executed with FAI and FLI, on the dilution resulting of taxable gain under Sec. 34(c) a. the transferee is a corporation;
from the shareholder’s agreement FDC executed with RHPL and with the interest (2) Now Sec. 40 (c) (2) of b. the transferee exchanges its shares of stock for properties of the transferor;
rate and DST imposable on the advances executed by FDC. FAI also received the NIRC and therefore, is not c. the transfer is made by a person, acting alone or together with others, not exceeding
similar assessment on deficiency income tax relating to the Deed of exchange. Both taxable. four persons; and
FDC and FAI protested and after having failed to act on their protest they elevated d.as a result of the exchange the transferor, alone or together with others, not exceeding
their case. Hence, this petition for review on certiorari. four, gains control of the transferee.

Since the term control is clearly defined as ownership of stock in a corporation possessing
atleast 51% of the total voting power of classes of stocks entitled to one vote. Therefore,
both FDC and FAI cannot be held liable for deficiency income tax on said transfer.
Whether or not the letter of Yes. The Instructional letters as well as the journal and cash vouchers evidencing the
instruction or cash vouchers are advances FDC extended to its affiliates in 1996 and 1997 qualified as lone agreement
deemed loan agreement subject upon which DST may be imposed.Under Section 246 of the 1993 NIRC, rulings, circulars,
to DST. rules and regulation promulgated by the BIR have no retroactive application if to so apply
them would be prejudicial to the taxpayers; Exception to the rule:
a. where the taxpayer deliberately misstates or omits material facts from his return or in
any documents require of him by the BIR;
b. where the facts subsequently gathered by the BIR are materially different from the facts
on which the ruling is based;
c. where the taxpayer acted in bad faith.
Not being the taxpayer who, in the first instance, sought a ruling from the CIR, however,
FDC cannot invoke the foregoing principle on non-retroactivity of BIR rulings.
Whether or not the dilution as a No. The dilution as a result increase is not taxable. The rule is settled that the findings and
result of increase of FDC conclusion of the CTA are accorded great respect and are generally upheld by the Court,
shareholding in FAC is taxable. unless there is a clear showing of a reversible error or an improvident exercise of
authority. Absent showing of such error here, the court find no strong and cogent reasons
to depart from said rule with respect to the CTA’s finding that no deficiency income tax can
be assessed on the gain on the supposed dilution or increase in the value of FDC’s
shareholdings in FAC which the CIR, failed to establish. It cannot be gainsaid, that a mere
increase or appreciation in the value of said shares cannot be considered income for
taxation purposes. Since a ‘’mere advance in the value of the property of a person or
corporation in no sense constitute the income specified in the revenue law.

Hence, the CIR has no factual and legal basis in assessing income tax on the increase in
the value of FDC’s shareholding in FAC until the same is actually sold at a profit.
11. Renato V. Diaz And Petitioners Renato V. Diaz and Aurora Ma. F. Timbol (petitioners) filed petition for Whether or not the toll fees VAT on tollway operations cannot be a tax on tax even if toll fess were deemed as a
Aurora Ma. F. Timbol Vs. declaratory relief assailing the validity of the impending imposition of VAT by the collected by toll way operators “user’s tax” ; VAT is assessed against the tollway operators gross receipt’s and not
The Secretary Of Finance (BIR) on the collections of tollway operators. Petitioners claim that, since the VAT be subjected to value added tax necessarily on the fees. Although the tollway operator may shift the VAT burden to the
And The Commissioner would result in increased toll fees, they have an interest as regular users of toll (VAT). tollway user, it will not make the latter directly liable for the VAT. The shifted VAT burden
Of Internal Revenue ways in stopping the BIR action. Petitioners allege that the BIR attempted during simply becomes part of the fees that one has to pay in order to use the tollway.

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 2011 TAX CASES
GR. NO. 193007 JULY 19, the administration of President Gloria Macapagal-Arroyo to impose VAT on toll fees.
2011 The imposition was deferred, however, in view of the consistent opposition of Diaz
and other sectors to such move. But, upon President Benigno C. Aquino III's
assumption of office in 2010, the BIR revived the idea and would impose the
(Balubal, Eden) challenged tax on toll fees beginning August 16, 2010 unless judicially enjoined.
VAT on tollway operations is not really a tax on the tollway user, but on the
tollway operator. Under Section 105 of the Code, VAT is imposed on any person who, in
the course of trade or business, sells or renders services for a fee. In other words, the
seller of services, who in this case is the tollway operator, is the person liable for VAT. The
latter merely shifts the burden of VAT to the tollway user as part of the toll fees.

Petitioners hold the view that Congress did not, when it enacted the NIRC, intend to
include toll fees within the meaning of "sale of services" that are subject to VAT; that
a toll fee is a "user's tax," not a sale of services; that to impose VAT on toll fees
would amount to a tax on public service; and that, since VAT was never factored
into the formula for computing toll fees, its imposition would violate the non-
impairment clause of the constitution.
On August 13, 2010 the Court issued a temporary restraining order (TRO),
enjoining the implementation of the VAT.
12. Mercury Drug vs CIR Petitioner Mercury Drug corporation grants a 20% sales discount to qualified senior Whether the claim for tax credit The court ruled that the cost of discount should be computed on the actual amount of the
(G.R. No. 164050; July 20, citizens in the purchase of medicines pursuant to RA 7432. With this, petitioner should be based on the full discount extended to senior citizens. RA 7432, which grants, among others, sales
2011) claims an amount representing the 20% sales discount as deductions from its gross amount of the 20% senior discounts to senior citizens on the purchase of medicines, imposes burden to private
income. Realizing that RA 7432 allows tax credit for the sales granted to senior citizens’ discount or the establishments amounting to taking of private property for public use with just
(Attaban, Anne Kenneth) citizens, petitioner filed with CIR claims for refund for the years 1993 and 1994. acquisition cost of the compensation in the form of tax credit. However, said law does not provide how the cost
Computation of its overpayment of income tax was presented by petitioner. merchandise sold. of the discount as tax credit be computed. Thus, the court construed the cost as referring
When CIR failed to act on petitioner’s claims, the latter filed petitioner for review to the amount of the 20% sales discount extended by establishments to senior citizens in
with the CTA. CTA ruled in favor of petitioner and treated the 20% sales discount as the purchase of medicines.
tax credit rather than a deduction from the gross income. However, the CTA did not
grant the full amount of claims because if found some discrepancies and However, the Court gave full accord to the factual findings of the Court of Tax Appeals
irregularities in the cash slips submitted by petitioner. The CTA stated that the tax with respect to the actual amount of the 20% sales discount. Thus the court held that
credit must be based on the actual cost of the medicine and not the whole amount petitioner is entitled to a tax credit equivalent to the actual amounts of the 20% sales
of the 20% senior citizens discount, thus the formula applied is: cost of sales/gross discount as determined by the Court of Tax Appeals. A new computation for tax was made
sales x amount of 20% sales discount. in favor of petitioner in the amounts of P2,289,381.71 and P22,237,650.34.

Petitioner moved for partial reconsideration which CTA modified its ruling by
increasing the taxable creditable tax amount. still unsatisfied with the decision,
petitioner appealed with CA seeking partial modification of the CTA resolution
raising a legal issue on the basis of the computation of tax credit.
Petitioner contended that the actual discount granted to the senior citizens, rather
than the acquisition cost of the item availed by senior citizens, should be the basis
for computation of tax credit.

The CA affirms the CTA decision. It interpreted the term "cost" as used in Section
4(a) of Republic Act No. 7432 to mean the acquisition cost of the medicines sold to
senior citizens. Hence, comes this petition for review before the SC.
13. CIR vs FORTUNE Pursuant to RA 8240 which amended RA 8424 RE specific tax imposed on any Whether or not there was an The court ruled that this case presents same issue that has long been resolved in 2008,
TOBACCO brand of cigarettes, respondent Fortune Tobacco Corporation (respondent) paid in overpayment of excise tax which where Fortune Tobacco found an invalid proviso in Sec. 1of RR 17-99 – in which the court
CORPORATION(GR # advance its excise taxes for the year 2003 in the amount of PHP 11.15 billion and entitles respondent for a tax upheld its tax refund claim.
180006 September 28, for the period covering January 1 to May 31, 2004 in the amount of PHP 4.90 refund.

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 2011 TAX CASES
2011) billion. Applying the principle of stare decisis, the proviso in Sec. 1 of RR 17-99 clearly went
beyond the terms of the law it was supposed to implement and therefore entitles
Upon learning that the taxes paid were erroneously and/or illegally collected in the respondent to claim a refund of the overpaid excise taxes collected pursuant to this
(Abella, Khat) amount of PHP 491 million assailing the proviso in Sec. 1 of RR 17-99 that requires provision.
the payment of excise tax actually being paid prior January 1, 2000 if the amount is
higher than the new specific tax rate, respondent filed an administrative claim for Given is that RA 8240 was enacted to raise government revenues but this is not the sole
tax refund with the CIR. It claimed that by including the proviso, the CIR went and only objective of the law. The imposition of specific taxes, which are based on the
beyond the language of the law and usurped Congress power – without waiting for volume of goods produced would prevent price manipulation and also cure the unequal
the CIR’s action on its claim; respondent filed a judicial claim for tax refund with the tax treatment created by the skewed valuation of similar goods. Moreover, the Constitution
CTA.The CTA First Division ruled in favor of the respondent and granted its tax requires that taxation should be uniform and equitable. Uniformity in taxation requires that
refund claim. The same was upheld on appeal filed by the CIR before the CTA en all subjects or objects of taxation similarly situated are to be treated alike both in privileges
banc. Hence, this petition. and liabilities – which in this case is unwittingly violated when the proviso in Sec. 1of RR
17-99 is applied in certain cases.
14. Commissioner Of Internal Whether or not the petitioner Section 143 of the Tax Reform Act of 1997 is clear and unambiguous. It provides for two
Revenue Vs San Miguel committed an error in periods: the first is the 3-year transition period beginning January 1, 1997, the date when
Corporation( G.R. No. interpreting the provision in the R.A. No. 8240 took effect, until December 31, 1999; and the second is the period
184428 last paragraph of Section 1 of thereafter. During the 3-year transition period, Section 143 provides that "the excise tax
November 23, 2011) Revenue Regulations No. 17-99 from any brand of fermented liquor…shall not be lower than the tax which was due from
in relation of Section 143 of the each brand on October 1, 1996."
Tax Reform Act of 1997. After the transitory period, Section 143 provides that the excise tax rate shall be the
figures provided under paragraphs (a), (b) and (c) of Section 143 but increased by 12%,
without regard to whether such rate is lower or higher than the tax rate that is actually
being paid prior to January 1, 2000 and therefore, without regard to whether the revenue
collection starting January 1, 2000 may turn out to be lower than that collected prior to
said date. Revenue Regulations No. 17-99, however, created a new tax rate when it
added in the last paragraph of Section 1 thereof, the qualification that the tax due after the
12% increase becomes effective "shall not be lower than the tax actually paid prior to
January 1, 2000."

As there is nothing in Section 143 of the Tax Reform Act of 1997 which clothes the BIR
with the power or authority to rule that the new specific tax rate should not be lower than
the excise tax that is actually being paid prior to January 1, 2000, such interpretation is
clearly an invalid exercise of the power of the Secretary of Finance to interpret tax laws
and to promulgate rules and regulations necessary for the effective enforcement of the
Tax Reform Act of 1997. Said qualification must, perforce, be struck down as invalid and
of no effect.

It bears reiterating that tax burdens are not to be imposed, nor presumed to be imposed
beyond what the statute expressly and clearly imports, tax statutes being construed
strictissimi juris against the government. In case of discrepancy between the basic law
and a rule or regulation issued to implement said law, the basic law prevails as said rule or
regulation cannot go beyond the terms and provisions of the basic law. It must be stressed
that the objective of issuing BIR Revenue Regulations is to establish parameters or
guidelines within which our tax laws should be implemented, and not to amend or modify

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 2011 TAX CASES
its substantive meaning and import

The rule in the interpretation of tax laws is that a statute will not be construed as imposing
a tax unless it does so clearly, expressly, and unambiguously. A tax cannot be imposed
without clear and express words for that purpose. Accordingly, the general rule of
requiring adherence to the letter in construing statutes applies with peculiar strictness to
tax laws and the provisions of a taxing act are not to be extended by implication. As
burdens, taxes should not be unduly exacted nor assumed beyond the plain meaning of
the tax laws.
15. LVM Construction LVM Construction Corporation (LVM) is a duly licensed construction firm primarily Whether or not respondents’ (No. The Supreme Court held that for lack of any stipulation regarding the same in the
Corporation vs FT engaged in the construction of roads and bridges for DPWH liability to pay value added tax parties’ sub-contract agreement, that it should not deduct its e-vat payments from the
Sanchez/SOCOR/KIMWA need not be stated in the sub- retention money demanded by the joint venture. A contract constitutes the law between
(JOINT VENTURE), FT LVM was awarded the construction of the Arterial Road Link Development Project in contract agreement form part of, the parties who are, therefore, bound by its stipulations which, when couched in clear and
Sanchez Construction Southern Leyte (the Project), and are deemed incorporated plain language, should be applied according to their literal tenor. There was no agreement
Corporation, Et. Al., ( GR and read into said agreement. regarding the offsetting. The record shows that, except for deducting sums corresponding
No. 181961, December 5, It sub-contracted 30% of the contract amount with the Joint Venture composed of to the 10% retention agreed upon, 9% as contingency on sub-contract, 1% withholding tax
2011) respondents F.T. Sanchez Corporation (FTSC), Socor Construction Corporation and such other itemized miscellaneous expenses, LVM settled the Joint Venture’s Billing
(SCC) and Kimwa Construction Development Corporation (KCDC). Nos. 1 to 26 without any mention of deductions for the E-VAT payments it claims to have
advanced.
(Azurin, Jastise) LVM was the Contractor and the Joint Venture as Sub-Contractor
Whether or not respondents are Yes. The SC held that the unqualified acceptance of LVM accepted the BIR registered
The Sub-Contract Agreement executed by the parties provided that: deemed to have already paid receipts by the owner of F. Sanchez Construction, Mr. Fortunato Sanchez, Sr. shall
value added tax merely because already be considered as payment of VAT. Said official receipts should, clearly, bar the
The payment to the SUB-CONTRACTOR shall be on item of work accomplished in respondents had allegedly belated exceptions it now takes with respect thereto. “A party, having performed
the sub-contracted portion of the project at awarded unit cost of the project less 9%. issued receipts for services affirmative acts upon which another person based his subsequent actions, cannot
The SUB-CONTRACTOR shall issue a BIR registered receipt to the rendered. thereafter refute his acts or renege on the effects of the same, to the prejudice of the
CONTRACTOR. latter.” LVM, as contractor for the project, was liable for the 8.5% vat which was withheld
by the DPWH from its payments, pursuant to section 114 (c) of the NIRC. absent any
agreement to that effect, LVM cannot deduct the amounts thus withheld from the sums it
10% retention to be deducted for every billing of sub-contractor as prescribed under still owed the joint venture which, as sub-contractor of 30% of the project, had its own
the Tender Documents. liability for10% vat insofar as the sums paid for the sub-contracted works were concerned.
Although the burden to pay an indirect tax like VAT can, admittedly, be passed on to the
The payment to the SUB-CONTRACTOR shall be made within seven (7) days after purchaser of the goods or services, it bears emphasizing that the liability to pay the same
the check issued by DPWH to CONTRACTOR has already been made good. For remains with the manufacturer or seller like LVM and the Joint Venture. In the same
work rendered in the premises, Joint Venture sent LVM a total of 27 Billings LVM manner that LVM is liable for the VAT due on the payments made by the DPWH pursuant
paid the Joint Venture a partial sum claiming that it had not yet been fully paid by to the contract on the Project, the Joint Venture is, consequently, liable for the VAT due on
the DPWH. the payments made by LVM pursuant to the parties’ Sub-Contract.

Having completed the sub-contracted works, the Joint Venture subsequently

demanded from LVM the settlement of its unpaid claims as well as the release of
money retained by the latter in accordance with the Sub-Contract Agreement.

In a letter, LVM explained the Joint Venture of the fact that its auditors have
belatedly discovered that no deductions for E-VAT had been made from its

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 2011 TAX CASES
payments on Billing Nos. 1 to 26 and that it was, as a consequence, going to deduct
the 8.5% payments for said tax from the amount still due in the premises. The Joint
Venture claimed that, having issued Official Receipts for every payment it received,
it was liable to pay 10% VAT thereon and that LVM can, in turn, claim therefrom an
equivalent input tax of 10%.

With its claims still unpaid despite the lapse of more than 4 years from the
completion of the sub-contracted works, the Joint Venture, thru its Managing
Director, Fortunato O. Sanchez, Jr., filed against LVM complaint for sum of money
and damages which was docketed before the Construction Industry Arbitration
Commission Having submitted a Bill of Particulars in response to LVM’s motion,
Joint Venture went on to file an Amended Complaint claiming amounts of unpaid
balances and interests as well as attorneys fees

LVM maintained that it did not release the 10% retention for the 26 Billing on the
ground that it had yet to make the corresponding 8.5% deductions for E-VAT which
the Joint Venture should have paid to the BIR and as a consequence, there was a
need to offset the sums corresponding thereto from the retention money still in its
possession. Moreover, LVM alleged that the Joint Venture’s claims failed to take
into consideration its own outstanding obligation representing the liquidated
damages it incurred as a consequence of its delays in the completion of the project.

16. MICROSOFT PHILS, INC. VS. CIR
G.R. NO. 180173, April 6, 2011
(Ma. Esperanza F. Tayawa)
17.Prudential Bank vs. CIR
G.R, No. 180390, July 27, 2011
Petitioner is a vat registered taxpayer, renders marketing to Whether or not petitioner is entitled to a refund of VAT input NO, the invoicing requirements for a VAT registered
Microsoft Operations PTE, Ltd and Micro Licensing Inc, taxes on domestic purchases of goods and services taxpayer as provided in the NIRC and revenue regulations
both affiliated non-resident foreign corporations. The attributable to zero rated sale for the year 2001 even if the are clear. A VAT registered taxpayer is required to comply
services are paid for in acceptable foreign currency and word zero rated is not imprinted on Microsoft’s official with all VAT invoicing requirements to be able to file a claim
qualify as zero rated sales for the tax credit of VAT input receipts for input taxes on domestic purchases for goods or services
taxes in the amount of 11.4M attributable to its zero rated attributable to zero-rated sales. A “VAT invoice” is an
sale..Due to the BIR in action, petitioner filed a Petition for invoice that meets the requirements of Section 108.1 of RR
Review before the CTA which denied the claim for the tax 7-95. It was ruled in several cases that the printing of the
credit of VAT input taxes. The CTA explained that the word zero-rated is required to be placed on VAT invoices or
petitioner failed to comply with the invoicing requirements of receipts covering zero-rated sales in order to be entitled to
Sections 113 and 237 of the NIRC as well as Sec 4, 108.1 claim for tax credit or refund. It was also held in one case
of the Revenue Regulations No. 7-95. I t also states that wherein it as held that the appearance of the word “zero
petitioner official receipts do not bear the imprinted word rated” on the face f the invoices covering the zero-rated
“zero rated” on its face, thus, the official receipts cannot be sales prevents buyers from falsely claiming input VAT from
considered as valid evidence to prove zero rated sales for their purchases when no VAT is actually paid. Absent such
VAT purposes. word, the government may be refunding taxes it did not
collect.
Whether or not petitioners SAP with a higher interest is Yes, it is subject to DST as it is essentially the same as the
subject to Documentary Stamp Tax Special/Super Savings Deposit Account which are
considered certificate of deposit drawing interests. Similarly

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2011 TAX CASES
in this case, although the money deposited in a SAP is
payable anytime, the withdrawal of the money before the
expiration of 30 days results in the reduction of the interest
rate. In the same way, a time deposit withdrawn before its
maturity results to a lower interest rate and payment of bank
charges or penalties. The fact that SAP is evidenced by a
passbook and not a certificate of deposit, hence still subject
to DST. For a document to be considered a certificate of
deposit it need not be in a specific form, thus a passbook
issued by the bank qualifies as a certificate of deposit
drawing interest because it is considered a written
acknowledgment by a bank that is has accepted a deposit
of a sum of money from a depositor.
Whether or not the CTA Enbancs denial of petitioners Yes, because petitioner failed to show that it was able to
motion to withdraw is proper comply with the requirements of IVAP. To avail of the IVAP,
a taxpayer must pay the 100% basic tax of the original
assessment of the BIR or the CTA Decision, whichever is
higher and submit the letter of termination and authority to
cancel assessment signed by the respondent. In this case,
respondent failed to submit the letter of termination and
authority to cancel assessment as respondent found the
payment of more than 5M not in accordance with RMC No.
66-2006. Petitioners payment of more than 5M without the
supporting documents cannot be deemed substantial
compliance as tax amnesty must be construed strictly
against the taxpayer and liberally in favor of the taxing
authority. Nevertheless the payment of petitioner’s more
than 5M to BIR must be considered as partial payments of
its tax liability.

15