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Q & A On Significant SC Taxation Law Jurisprudence From January 2013 To June 2018 by Atty. Reyes PDF
Q & A On Significant SC Taxation Law Jurisprudence From January 2013 To June 2018 by Atty. Reyes PDF
GENERAL PRINCIPLES
Q. ABC Petroleum sold XYZ Airlines
Q. The City of Manila imposed against ABC petroleum fuel. ABC Petroleum passed on
a tax on manufacturers under Section 14 of the related excise tax to XYZ Airlines. Now,
the Revenue Code of Manila and at the same XYZ Airlines sought to refund the said excise
time a tax on other businesses under Section taxes on the basis of the tax exemption
21 of the same Code. ABC argues that the privileges provided for in its franchise. The
collection of taxes under both Sections 14 CIR argues that XYZ Airlines has no
and 21 of the Code constitutes double personality to file the subject tax refund
taxation. Is ABC correct? claim because it is not the statutory
taxpayer. Does XYZ Airlines have
Yes. While the City of Manila could impose personality to file the refund?
against ABC a manufacturer's tax under
Section 14 of the Revenue Code of Manila, it Yes. The rule in the Silkair case is inapplicable
cannot at the same time impose the tax under to a case where the party to which the
Section 21 of the same code; otherwise, an economic burden is shifted is provided an
obnoxious double taxation would set in. exemption from both direct and indirect taxes.
In Silkair, the Court held that the the proper
Citing its previous ruling in The City of Manila party to question, or seek a refund of, an
v. Coca-cola Bottlers, Inc., G.R. No. 181845, indirect tax is the statutory taxpayer, the
August 4, 2009, there is indeed double person on whom the tax is imposed by law
taxation if the taxpayer is subjected to the and who paid the same even if he shifts the
taxes under both Sections 14 and 21 of Tax burden thereof to another.
Ordinance No. 7794, since these are being
imposed: (1) on the same subject matter – the The abovementioned rule should not apply to
privilege of doing business in the City of instances where the law clearly grants the
Manila; (2) for the same purpose - to make party to which the economic burden of the tax
persons conducting business within the City is shifted an exemption from both direct and
of Manila contribute to city revenues; (3) by indirect taxes. In which case, the latter must
the same taxing authority-petitioner City of be allowed to claim a tax refund even if it is
Manila; (4) within the same taxing jurisdiction not considered as the statutory taxpayer
- within the territorial jurisdiction of the City of under the law.
Manila; (5) for the same taxing periods – per
calendar year; and (6) of the same kind or The Court applied the Maceda case, where it
character - a local business tax imposed on upheld the National Power Corporation’s
gross sales or receipts of the business (City of (NPC) claim for a tax refund since its own
Manila v. Cosmos Bottling Corporation, G.R. charter specifically granted it an exemption
No. 196681, June 27, 2018) from both direct and indirect taxes.
Page 1 of 36
NOTICE
This material supplements the author’s 2013 Bar Reviewer and its supplements. No portion of this
work may be copied or reproduced without the written permission of the author. Possessors may
reproduce and distribute this supplement provided the name of the author remains clearly
associated with my work and no alterations in the form and content of this supplement are made.
QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
The propriety of a tax refund claim is hinged of the disposition made of such income shall
on the kind of exemption which forms its be subject to income tax. Is the BIR correct?
basis. If the law confers an exemption from
both direct or indirect taxes, a claimant is No. The income, revenues and assets of non-
entitled to a tax refund even if it only bears the stock, non-profit educational institutions
economic burden of the applicable tax. On the proved to have been used actually, directly,
other hand, if the exemption conferred only and exclusively for education purposes are
applies to direct taxes, then the statutory exempt from duties and taxes.
taxpayer is regarded as the proper party to file
the refund claim, (Commissioner of Internal There is a distinction between the tax
Revenue v. Philippine Airlines, G.R. Nos. treatment of non-stock, non-profit
212536-37, August 27, 2014; Philippine educational institutions and proprietary
Airlines v. Commissioner of Internal educational institutions. The latter is granted
Revenue, G.R. No. 198759, July 1, 2013) tax exemption conditioned only on the actual,
direct and exclusive use of their revenues and
NOTE: This was later clarified in Chevron assets for educational purposes while tax
Philippines v. Commissioner of Internal exemptions for the former are subject to
Revenue, G.R. No. 210836, September 1, limitations imposed by law such as Section
2015. In Chevron, the Supreme Court held 30(H) of the Tax Code. The Tax Code cannot
that, as a general rule, it is the statutory qualify the exemption constitutionally-
taxpayer, not the party who only bears the granted to non-stock, non-profit educational
economic burden, who is entitled to claim the institutions. (Commissioner of Internal
tax refund or tax credit. However, this rule Revenue v. De La Salle University, G.R. No.
does not apply where the law grants the party 196596, 198841, and 198941, November 9,
(to whom the economic burden of the tax is 2016)
shifted) an exemption from both direct and
indirect taxes. Such party may claim the It is clear and unmistakable from the
refund or tax credit even if it is not the Constitution that non-stock, non-profit
statutory taxpayer. The general rule applied in educational institutions are constitutionally
the case because Chevron did not pass on the exempt from tax on all revenues derived in
excise taxes. pursuance of its purpose as an educational
institution and used actually, directly and
Q. A non-stock, non-profit educational exclusively for educational purposes. This
institution argues that is rental income from constitutional exemption gives the non-stock,
restaurants/canteens and bookstores non profit educational institutions a distinct
operating within its campus are exempt character. And for the constitutional
from income tax considering that such exemption to be enjoyed, jurisprudence and
revenues derived therefrom are used for tax rulings affirm the doctrinal rule that there
educational purposes. The BIR argues that are only two requisites: (1) The school must be
under the Tax Code, income of whatever non-stock and non-profit; and (2) The income
kind and character of a non-stock and non- is actually, directly and exclusively used for
profit educational institution from any of its educational purposes. There are no other
properties, real or personal, or from any of conditions and limitations. (RMO 44-2016
its activities conducted for profit regardless dated July 25, 2016 as cited in Commissioner
Page 2 of 36
NOTICE
This material supplements the author’s 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar
Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
are made. No stamping is allowed.
QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
of Internal Revenue v. St. Paul College of funded portion of the project. Thus,
Makati, G.R. No. 215383, March 8, 2017) Mitsubishi filed for a claim for refund. The
BIR argues that (a) Mitsubishi is not entitled
Q. St. Lukes Medical Center (SLMC) is a to the refund as the Exchange of Notes
hospital organized as a non-stock and non- cannot be read as a treaty validly granting
profit corporation. It admits both paying and tax exemption considering the lack of
non-paying patients. The BIR claimed that Senate concurrence; and (b) that, based on
SLMC was liable for income tax at 10% as a revenue memorandum circular it issued,
provided under Section 27(B) of the NIRC. the proper remedy of Mitsubishi is to recover
SLMC argues that it is a non-stock, non- or obtain a refund from the National Power
profit institution for charitable and social Corporation, the executing agency. Is the
welfare purposes exempt from income tax BIR correct?
under Section 30(E) and (G) of the NIRC. Is
SLMC correct? No. The subject taxes was erroneously
collected from the taxpayer, considering that
No. To be exempt, Section 30(E) and (G) of the obligation to pay the same had already
the NIRC requires an institution to operate been assumed by the Philippine Government
exclusively for charitable or social welfare by virtue of its Exchange of Notes with the
purpose. In case an exempt institution earns Japanese Government. Case law explains that
income from its profit activities, it will not lose an exchange of notes is considered as an
its tax exemption. However, its income from executive agreement, which is binding on the
profit activities shall be subject to income tax. State even without Senate concurrence.
For proprietary educational institutions and
hospitals, the rate shall be 10%. Further, the Tax Code vests upon the CIR,
(Commissioner of Internal Revenue v. St. being the head of the BIR, the authority to
Luke’s Medical Center, G.R. No. 203514, credit or refund taxes which are erroneously
February 13, 2017) collected by the government. This specific
statutory mandate cannot be overridden by
Q. The governments of Japan and the averse interpretations made through mere
Philippines executed an Exchange of Notes, administrative issuances, which - as argued
whereby the former agreed to extend a loan by the CIR - shifts to the executing agencies
amounting to Forty Billion Four Hundred the power to refund the subject taxes.
Million Japanese Yen (¥40,400,000,000) to (Mitsubishi Corporation – Manila Branch v.
the latter for the implementation of a Coal- Commissioner of Internal Revenue, G.R. No.
Fired Thermal Power Plant Project. In 175772, June 29, 2017)
Paragraph 5 (2) of the Exchange of Notes,
the Philippine Government, by itself or INCOME TAX
through its executing agency, i.e. National
Power Corporation, undertook to assume all
Q. ABC Airways is a foreign airline. While it
taxes imposed by the Philippines on
did not carry passengers and/or cargo to or
Japanese contractors, i.e. Mitsubishi
from the Philippines, ABC maintains a
Corporation, engaged in the Project.
general sales agent of its tickets in the
Mitsubishi Corporation included in its
Philippines. Is the sale of the tickets taxable
income tax payments to the BIR income
as income from sources within the
pertaining to the Japanese Government-
Page 3 of 36
NOTICE
This material supplements the author’s 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar
Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
are made. No stamping is allowed.
QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
A. The properties are not among the Q. A law was passed granting income tax
exclusions enumerated in Section 39(A)(1) of exemption for minimum wage earners
the National Internal Revenue Code of 1997 (MWE) as well as increase in personal and
which defines “ordinary assets.” None of the additional exemptions. The law became
properties were used in trade or ordinary effective on July 6, 2008. The BIR issued a
course of business because petitioner never revenue regulation providing for (a) the
commenced operations. They were not part of prorated application of the personal and
the inventory. None of them were stocks in additional exemptions for taxable year 2008
trade. Based on the definition of capital assets and for the period of applicability of the
under Section 39 of the National Internal MWE exemption for taxable year 2008 to
Revenue Code of 1997, they are capital begin only on 6 July 2008; and (b) the
assets. (SMI-ED Philippines v. Commissioner disqualification of MWEs who earn purely
of Internal Revenue, G.R. No. 175410, compensation income, whether in the
November 12, 2014) private or public sector, from the privilege of
availing themselves of the MWE exemption
Q. Differentiate between the tax treatment in case they receive compensation related
of capital gains of individuals and benefits exceeding the statutory ceiling of
corporations from the sale of real properties. P30,000 (now P82,000). Is the revenue
regulation valid?
A. Capital gains of individuals and
Page 4 of 36
NOTICE
This material supplements the author’s 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar
Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
are made. No stamping is allowed.
QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
No. The personal and additional exemptions payments, shall be paid in full without
should be applied to the entire taxable year deductions, as MERALCO shall bear the
2008. The test is whether the new set of obligation of paying and remitting to the BIR
personal and additional exemptions was the final withholding tax. MERALCO paid
available at the time of the filing of the income and remitted to the BIR the corresponding
tax return. In other words, while the status of final withholding taxes. Is the income
the individual taxpayers is determined at the derived by NORD/LB subject to income tax?
close of the taxable year, their personal and
additional exemptions - and consequently the A. No. NORD/LB is owned, controlled or
computation of their taxable income - are enjoying refinancing from the Federal
reckoned when the tax becomes due, and not Republic of Germany, a foreign government.
while the income is being earned or received. Section 32(B)(7)(a) of the Tax Code, as
As in the case of the adjusted personal and amended, exempts from income tax income
additional exemptions, the MWE exemption derived from investments in the Philippines in
should apply to the entire taxable year 2008, loans by financing institutions owned,
and not only from 6 July 2008 onwards. controlled, or enjoying refinancing from
foreign governments. (Commissioner of
The revenue regulations adds a requirement Internal Revenue v. Meralco, G.R. No.
not found in the law by effectively declaring 181459, June 9, 2014)
that an MWE who receives other benefits in
excess of the statutory limit is no longer In 2001, the Caucus of Development NGO
entitled to the exemption provided by the law. Networks (CODE-NGO) with the assistance
To be exempt, one must be an MWE, a term of its financial advisors, requested an
that is clearly defined. Section 22(HH) says approval from the Department of Finance
he/she must be one who is paid the statutory for the issuance by the Bureau of Treasury
minimum wage if he/she works in the private of 10-year zero-coupon treasury bonds. The
sector, or not more than the statutory said bonds would initially be purchased by a
minimum wage in the non-agricultural sector special purpose vehicle on behalf of CODE-
where he/she is assigned, if he/she is a NGO and then repackaged and sold at a
government employee. Thus, one is either an premium to investors as Poverty Eradication
MWE or he/she is not. Simply put, MWE is the and Alleviation Certificates or PEACe Bonds.
status acquired upon passing the litmus test - The net proceeds from the sale will be used
whether one receives wages not exceeding to endow a permanent fund to finance
the prescribed minimum wage.(Soriano v. meritorious activities and projects of
Secretary of Finance, G.R. Nos. 184450, accredited non-government organizations
184508, 184538, and 185234, January 24, (NGOs) throughout the country. The BIR
2017) issued BIR Ruling No. 020-2001 which
confirmed that the PEACe Bonds would not
Q. MERALCO obtained a loan from be classified as deposit substitutes and
Norddeutsche Landesbank Girozentrale would not be subject to the corresponding
(NORD/LB) Singapore Branch, which is a withholding tax. This was reiterated in
foreign government-owned financing subsequent rulings. During the auction,
institution of Germany. Under the loan RBCB which participated on behalf of
agreement, the income received by CODE-NGO was declared the winning
NORD/LB, by way of MERALCO’s interest bidder having tendered the lowest bids.
Page 5 of 36
NOTICE
This material supplements the author’s 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar
Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
are made. No stamping is allowed.
QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
BIR Ruling No. 370-2011 is void because it It must be noted, however, that interest
completely disregarded the 20 or more lender income received by individuals from long-term
rule. The transactions executed for the sale of deposits or investments with a holding period
the PEACe Bonds are: (1) the issuance of the of not less than five (5) years is exempt from
Page 6 of 36
NOTICE
This material supplements the author’s 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar
Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
are made. No stamping is allowed.
QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
the final tax. Thus, should the PEACe Bonds securities to final holders. When the GSED
be found to be within the coverage of deposit sells the government securities to 20 or more
substitutes, the proper procedure was for the investors, the government securities are
Bureau of Treasury to pay the face value of deemed to be in the nature of a deposit
the PEACe Bonds to the bondholders and for substitute, taxable as such. (Banco de Oro v.
the Bureau of Internal Revenue to collect the Republic, G.R. No. 198756, August 16, 2016)
unpaid final withholding tax directly from
RCBC Capital/CODE-NGO, or any lender or Q. The taxpayer initially opted to be
investor if such be the case, as the withholding refunded of its excess creditable tax for
agents. (Banco de Oro v. Republic, G.R. No. 2006 through the issuance of a tax credit
G.R. No. 198756, January 13, 2015) certificate. The taxpayer subsequently
indicated in its 2007 ITR that it carried over
Q. The BIR contends that the 20-lender rule the 2006 excess creditable tax and applied
should not strictly apply to issuances of the same against income tax due for 2007.
government debt instruments, which by The taxpayer filed with the BIR a claim for
nature, are borrowings from the public. refund and/or issuance of a TCC for the
Considering that the PEACe Bonds were alleged excess credit for 2006. This was later
intended to be freely tradable in the elevated to the Court of Tax Appeals (CTA).
secondary market to 20 or more Both CTA Division and CTA En Banc ruled
lenders/investors, they, like other similarly that the taxpayer effectively exercised the
situated government securities-awarded to carry-over option when it included the
19 or less Government Securities Eligible excess tax credit for 2006 in the original ITR
Dealers (GSEDs) in the primary market but for 2007. The taxpayer, on the other hand,
freely tradable to 20 or more contended that the option to be refunded
lenders/investors in the secondary market through the issuance of a TCC is irrevocable.
should be treated as deposit substitutes Thus, when it indicated in its annual ITR for
subject to the 20% final withholding tax. Is 2006 the option “To be issued a Tax Credit
the BIR’s contention correct? Certificate,” such choice precluded the other
option to carry over. Is the taxpayer correct?
No. The definition of deposit substitutes in
Section 22(Y) specifically defined "public" to No. The irrevocability rule is limited only to the
mean "twenty (20) or more individual or option of carry-over. There is nothing in the
corporate lenders at any one time." Hence, law which prevents the taxpayer who
reckoning of whether there are 20 or more originally opted for a refund or TCC to shift to
individuals or corporate lenders is crucial in the carry-over of the excess creditable taxes
determining the tax treatment of the yield to the taxable quarters of the succeeding
from the debt instrument. In other words, if taxable years. However, if the taxpayer
there are 20 or more lenders, the debt decides to shift its option to carry-over, it may
instrument is considered a deposit substitute no longer revert to its original choice due to
and subject to 20% final withholding tax. the irrevocability rule. Here, the taxpayer is
barred from recovering its excess creditable
The existence of 20 or more lenders should be tax for 2006 through refund or TCC since it
reckoned at the time when the successful constructively chose the option of carry-over
GSED-bidder distributes (either by itself or when, despite its initial option to refund, it
through an underwriter) the government subsequently indicated in its 2007 ITR that it
Page 7 of 36
NOTICE
This material supplements the author’s 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar
Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
are made. No stamping is allowed.
QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
carried over the 2006 excess creditable tax 1. Section 72 (now Section 79), which
and applied the same against income tax due provides that an employer is required to
for 2007. (University Physicians Services, deduct and pay the income tax on
Inc. – Management, Inc. v. Commissioner of compensation paid to its employees,
Internal Revenue, G.R. No. 205955, 7 March either actually or constructively.
2018) 2. Section 39 (now Section 35), which
provides that deductions from gross
Q. When is the payor/employer obliged to income are taken for the taxable year in
deduct and withhold the related withholding which “paid or accrued” or “paid or
taxes on accrued bonuses? incurred” is dependent upon the
method of accounting income and
The obligation of the payor/employer to expenses adopted by the taxpayer. If
deduct and withhold the related withholding the taxpayer is on cash basis, the
tax arises at the time the income was paid or expense is deductible in the year it was
accrued or recorded as expense in the paid, regardless of the year it was
payor’s/employer’s books, whichever comes incurred. If he is on the accrual method,
first. he can deduct the expense upon
In ING Bank v. Commissioner of Internal accrual thereof.
Revenue, G.R. No. 167679, July 22, 2015, at 3. Section 29(j) (now Section 34(K)), which
issue is whether ING Bank was liable for provides that, as a condition for
deficiency withholding tax on accrued deductibility of an expense, the tax
bonuses for the taxable years 1996 and 1997. required to be withheld on the amount
The accrued bonuses were recorded in ING paid or payable must be shown to have
Bank’s books as expenses for taxable years been remitted to the BIR by the
1996 and 1997, although no withholding of withholding agent.
tax was effected. ING Bank asserted that the Reconciling the above provisions, the
liability of the employer to withhold the tax Court held that the obligation of the
does not arise until such bonus is actually payor/employer to deduct and withhold
distributed. Since the supposed bonuses were the related withholding tax arises at the
not distributed to the officers and employees time the income was paid or accrued or
in 1996 and 1997 but were distributed in the recorded as an expense in the
succeeding year when the amounts of the payor’s/employer’s books, whichever
bonuses were finally determined, ING Bank comes first.
asserts that its duty as employer to withhold
the tax during these taxable years did not Q. The BIR assessed ABC with deficiency
arise. final withholding taxes (FWT) on interest
The Supreme Court ruled that ING bank is payments on loan agreements with XYZ for
liable for the withholding tax on the bonuses the taxable year 2000. The CTA found that
since it claimed the same as expenses in the ABC was not liable for the said deficiency
year they were accrued. Three provisions of FWT since its liability for interest payment
the NIRC of 1997, as amended, were became due and demandable only on June 1,
reconciled: 2002. The BIR contends that ABC was liable
to pay the interest from the date of the
execution of the contract on January 5, 2000,
Page 8 of 36
NOTICE
This material supplements the author’s 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar
Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
are made. No stamping is allowed.
QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
not from the date of first payment on June 1, shall be the fair market value. The difference
2002. Is the BIR correct? between the book value and the selling price
in the sales transaction is taxable donation
No. Under Section 2.57.4 of RR No. 2-98, the subject to donor’s tax. (Philippine American
obligation of ABC to deduct or withhold tax Life and General Insurance Company v. The
arises at the time an income is paid or Secretary of Finance and Commissioner of
payable, whichever comes first. Further, the Internal Revenue, G.R. No. 210987,
same Section provides that the term November 24, 2014)
“payable” refers to the date the obligation
becomes due, demandable or legally VALUE-ADDED TAX
enforceable. (Edison (Bataan) Cogeneration
Corporation v. Commissioner of Internal Q. Invoking Section 108(B)(2) of the Tax
Revenue, G.R. No. 201665, August 30, 2017) Code, a business process outsourcing
company filed a claim for refund or credit of
input VAT attributable to zero-rated sales of
DONOR’S TAX its call services to foreign corporations. Is it
indispensable that the said company prove
Q. Philamlife owns 498,590 shares in Philam that the recipient of its call services are
Care Health Systems. To divest itself of foreign corporations doing business outside
interests in the health maintenance the Philippines?
organization industry, Philamlife sold the
said shares to STI Investments at a price Yes. An essential condition to qualify for zero-
lower than their book value. The BIR rating under Section 108(B)(2) of the Tax
contends that donor’s tax became Code is that the service-recipient must be
imposable on the price difference. Philamlife doing business outside the Philippines. A
argues that the same is not subject to taxpayer claiming for a VAT refund or credit
donor’s tax as there was no donative intent. under Section 108(B)(2) has the burden to
Is the Philamlife correct? prove not only that the recipient of the service
is a foreign corporation, but also that said
No. The absence of donative intent, if that be corporation is doing business outside the
the case, does not exempt the sales of stock Philippines. (Sitel v. Commissioner of Internal
transaction from donor's tax since Sec. 100 of Revenue, G.R. No. 201326, February 8, 2017)
the Tax Code categorically states that the
amount by which the fair market value of the Q. What are the rules on the determination
property exceeded the value of the of the prescriptive period for filing a tax
consideration shall be deemed a gift. Thus, refund or credit of unutilized input VAT?
even if there is no actual donation, the
difference in price is considered a donation by The rules are as follows:
fiction of law. Pursuant to RR 6-2008, “fair
market value” shall be, in the case of shares of 1. An administrative claim must be filed
stock not listed and traded in the local stock with the CIR within two years after the
exchanges, the book value of the shares of close of the taxable quarter when the
stock as shown in the financial statements zero-rated or effectively zero-rated
duly certified by an independent certified sales were made.
public accountant nearest to the date of sale
Page 9 of 36
NOTICE
This material supplements the author’s 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar
Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
are made. No stamping is allowed.
QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
2. The CIR has 120 days from the date of Internal Revenue, G.R. No. 197519,
submission of complete documents in November 8, 2017; Commissioner of
support of the administrative claim Internal Revenue, G.R. No. 209306,
within which to decide whether to September 27, 2017; Harte-Hanks
grant a refund or issue a tax credit Philippines v. Commissioner of
certificate. The 120-day period may Internal Revenue, G.R. No. 205721,
extend beyond the two-year period September 14, 2016; Tekenaka
from the filing of the administrative Corporation v. Commissioner of
claim if the claim is filed in the later part Internal Revenue, G.R. No. 193321,
of the two-year period. If the 120-day October 19, 2016; Commissioner of
period expires without any decision Internal Revenue v. Deutsche
from the CIR, then the administrative Knowledge Services, G.R. No. 211072,
claim may be considered to be denied November 7, 2016; Deutsche
by inaction. Knowledge Services Pte v.
Commissioner of Internal Revenue,
3. A judicial claim must be filed with the G.R. No. 197980, December 1, 2016;
CTA within 30 days from the receipt of Sitel v. Commissioner of Internal
the CIR’s decision denying the Revenue, G.R. No. 201326, February 8,
administrative claim or from the 2017; Visayas Geothermal v.
expiration of the 120-day period Commissioner of Internal Revenue,
without any action from the CIR. G.R. No. 205279, April 26 2017;
Marubeni Philippines v. Commissioner
4. All taxpayers, however, can rely on BIR of Internal Revenue, G.R. 198485, June
Ruling No. DA-489-03 from the time of 5, 2017; Cargill Philippines, Inc. v. CIR,
its issuance on 10 December 2003 up G.R. No. 203774, March 11, 2015;
to its reversal by this Court in Aichi on 6 Commissioner of Internal Revenue v.
October 2010, as an exception to the Air Liquide, G.R. No. 210646, July 29,
mandatory and jurisdictional 120+30 2015; Commissioner of Internal
day periods. (Team Energy Revenue v. Toledo Power Company,
Corporation v. Commissioner of G.R. No. 195175 & 199645, August 10,
Internal Revenue, G.R. No. 197663 & 2015; Commissioner of Internal
G.R. No. 197770, March 14, 2018; Revenue v. Toledo Power Company,
Team Sual Corporation v. G.R. No. 196415 & 196451, December
Commissioner of Internal Revenue, 2, 2015; Commissioner of Internal
G.R. Nos. 201225-26, April 18, 2018; Revenue v. Mirant Pagbilao
CE Luzon Geothermal v. Corporation, G.R. No. 180434, January
Commissioner of Internal Revenue, 20, 2016; Silicon Philippines v.
G.R. No. 197526, July 26, 2017; Aichi Commissioner of Internal Revenue,
Forging Company v. Commissioner of G.R. No. 182737, March 2, 2016;
Internal Revenue, G.R. No. 193525, Miramar Fish Company Inc. v. CIR,
August 30, 2017; Procter & Gamble G.R. No. 185432, June 4, 2014; Visayas
Asia v. Commissioner of Internal Geothermal Power Company v. CIR,
Revenue, G.R. No. 205652, September G.R. No. 197525, June 4, 2014; CIR v.
6, 2017; Mindanao I Geothermal Mindanao II Geothermal Partnership,
Partnership v. Commissioner of G.R. No. 189440, June 18, 2014;
Page 10 of 36
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QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
Page 11 of 36
NOTICE
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Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
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QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
Page 12 of 36
NOTICE
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Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
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QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
Page 13 of 36
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Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
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QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
Page 14 of 36
NOTICE
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Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
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QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
taxable year 1998 only or, since the taxpayer void for having been unspecified on separate
adopted a fiscal year, for the period April 1, LOAs. (Commissioner of Internal Revenue v.
1997 to March 31, 1998. The deficiency tax De La Salle University, G.R. No. 196596,
assessment which the BIR eventually issued 198841, and 198941, November 9, 2016)
against the taxpayer was based on
disallowance of expenses reported in fiscal Q. Is an assessment based merely on a
year 1999, or for the period April 1, 1998 to Letter Notice (LN) valid?
March 31, 1999. Is the assessment valid?
No. An assessment based only on a LN is void.
No. The LOA gives notice to the taxpayer that A Letter of Authority (LOA) cannot be
it is under investigation for possible deficiency dispensed with just because none of the
tax assessment; at the same time it authorizes financial books or records being physically
or empowers a designated revenue officer to kept was examined. The SC opined that the
examine, verify, and scrutinize a taxpayer's statutory requirement of a LOA is not
books and records, in relation to internal dependent on whether the taxpayer may be
revenue required to physically open his books or
financial records but only on whether a
tax liabilities for a particular period. In this taxpayer is being subject to examination. A
case, the LOA shows that the period of LN is issued only for the purpose of notifying
examination is the taxable year 1998. A valid the taxpayer that a discrepancy is found
LOA does not necessarily clothe validity to an based on the BIR’s RELIEF System and
assessment issued on it, as when the revenue nothing more.
officers designated in the LOA act in excess or
outside of the authority granted them under Revenue Memorandum Order (RMO) No. 32-
said LOA. The taxable year covered by the 2005 states that in case the discrepancies
assessment being outside of the period shown in the LN remained unresolved within
specified in the LOA, the assessment issued 120 days from issuance of the LN, the revenue
against the taxpayer is void. (Commissioner officer shall recommend the issuance of a LOA
of Internal Revenue v. Lancaster, G.R. No. to replace the LN. Due process requires that
183408, July 12, 2017) the revenue officer should secure first a LOA
before proceeding with the further
Q. The BIR issued a Letter of Authority examination and assessment of a taxpayer.
authorizing its revenue officers to examine The Court cannot convert or treat the LN into
the taxpayer’s books of accounts and other the LOA required under the law. If no LOA is
accounting records for all internal revenue secured, the assessment on the basis of a LN
taxes for the period “Fiscal Year Ending is void. (Medicard Philippines v.
2003 and Unverified Prior Years.” Is the Commissioner of Internal Revenue, G.R. No.
assessment made pursuant to this Letter of 222743, April 5, 2017)
Authority valid?
Q. (1) What is the consequence if a FAN does
Partly. A LOA which contains a specified year not contain a definite due date for payment
and unverified prior years is not entirely void. by the taxpayer? (2) Can the reckoning date
The assessment for the year clearly specified of the accrual of the penalties and
remains to be valid while the assessments surcharges be considered as the due date for
which pertain to the unverified prior years are payment?
Page 15 of 36
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Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
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QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
1 Commissioner of Internal Revenue v BASF Coating + Inks Phils.,
Page 16 of 36
NOTICE
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Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
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author. Possessors may reproduce and distribute this supplement provided the name of the author
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QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
Q. What is the effect of failure of the waiver requirements specified under RMO No. 20-
to strictly conform to the requirements of a 90 and RDAO No. 01-05 become valid?
waiver of the statute of limitations under
RMO 20-90? Yes. Generally, a waiver of the statute of
limitations that does not comply with the
The requirements are mandatory and must requisites for its validity specified under RMO
strictly be followed. Defective and invalid No. 20-90 and RDAO 01-05 is invalid, but
waivers of Statute of Limitations do not may still be valid due to peculiar
extend the CIR's period to issue assessments. circumstances. In Commissioner of Internal
Thus, the right of the government to assess or Revenue v. Next Mobile, G.R. No. 212825,
collect the alleged deficiency taxes is already December 7, 2015, five (5) waivers were
barred by prescription. Assessments issued executed by the taxpayer and the BIR. The
by the BIR beyond the three-year prescriptive, CTA found the following defects: (1) they were
are considered void and of no legal effect. executed without a notarized board authority;
(Commissioner of Internal Revenue v. (2) the dates of acceptance by the BIR were
Systems Technology Institute, G.R. No. not indicated therein; and (3) the fact of
220835, July 26, 2017; Philippine Daily receipt by respondent of its copy of the
Inquirer v. Commissioner of Internal Second Waiver was not indicated on the face
Revenue, G.R. No. 213943, March 22, 2017) of the original Second Waiver.
Page 17 of 36
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Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
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QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
benefit from the flaws in its own taxpayer is obviously in bad faith.
waivers and successfully insist on their (Commissioner of Internal Revenue v.
invalidity in order to evade its Next Mobile, G.R. No. 212825, December
responsibility to pay taxes. 7, 2015)
3. Taxpayer is estopped from questioning Q. ABC received a Letter of Authority for the
the validity of its waivers. The taxpayer examination of its books of accounts for
executed 5 waivers and delivered them internal revenue purposes for the taxable
to the BIR and did not raise any year 2004. On October 9, 2007, the parties
objection against their validity until the executed a Waiver to extend the prescriptive
BIR assessed taxes against it. In its period for the year 2004 to June 20, 2008. On
Letter Protest to the BIR, respondent the part of ABC, this was signed by its
did not even question the validity of the Finance Manager. The waiver was followed
Waivers or call attention to their by another waiver extending the
alleged defects. prescriptive period to November 30, 2008.
4. The Court cannot tolerate a highly Thereafter, the BIR issued a PAN. ABC filed
suspicious situation. In this case, after a protest against the PAN arguing that it not
the taxpayer voluntarily executing the liable for the deficiency taxes. It did not raise
waivers, insisted on their invalidity by as an issue the invalidity of the waiver and
raising the very same defects it caused. the prescription of the BIR’s right to assess.
On the other hand, the BIR miserably In its protest against the FAN, ABC argued
failed to exact from the taxpayer that the year being audited in the FAN has
compliance with its rules. The BIR’s already prescribed at the time such FAN was
negligence in the compliance of its mailed on December 4, 2008. ABC received
duties was so gross such that it seemed the FAN on December 5, 2008 which is 5
that it consented to the mistakes in the days after the waiver it issued had
waivers. Such a situation is dangerous prescribed. In the CTA, ABC further argued
and open to abuse by unscrupulous that the signatories in the waivers were not
taxpayers who intend to escape their duly sanctioned to act on its behalf.
responsibility to pay taxes by mere
expedient of hiding behind (1) Are the two waivers valid?
technicalities. (2) Is the assessment barred already by
prescription?
Further, the Court said that while the BIR
was also at fault here because it was (1) Estoppel applies against a taxpayer who
careless in complying with the did not only raise at the earliest opportunity its
requirements of RMO No. 20-90 and representative's lack of authority to execute
RDAO 01-05, such negligence may be two (2) waivers of defense of prescription, but
addressed by enforcing the provisions was also accorded, through these waivers,
imposing administrative liabilities upon the more time to comply with the audit
officers responsible for these errors. The requirements of the Bureau of Internal
BIR's right to assess and collect taxes Revenue.
should not be jeopardized merely because
of the mistakes and lapses of its officers, Citing its previous ruling in Commissioner of
especially in cases like this where the Internal Revenue v. Next Mobile, Inc., G.R. No.
Page 18 of 36
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Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
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QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
Page 19 of 36
NOTICE
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Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
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QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
Page 20 of 36
NOTICE
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Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
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QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
No. In claims for refund of tax erroneously or a claim for refund/credit must commence. For
illegally collected, both the administrative and DS metering machine users, the payment of
judicial claims for refund should be filed within DST upon loading/reloading is merely an
the two-year prescriptive period. The two- advanced payment for future application. The
year prescriptive period is counted from the liability of the payment of DST falls due only
date of the payment of the tax or penalty. upon occurrence of the taxable transaction.
(Philippine Bank of Communications v.
In this case, the tax involved in the case is the Commissioner of Internal Revenue, G.R. No.
final withholding tax on the taxpayer’s 194065, June 20, 2016)
interest income on its foreign currency
denominated loan. Final withholding taxes Q. Whether evidence not presented in the
are considered as full and final payment of the administrative claim for refund in the Bureau
income tax due and thus are not subject to of Internal Revenue can be presented in the
any adjustments. Thus, the two-year Court of Tax Appeals?
prescriptive period shall commence to run
from the time the refund is ascertained, i.e. Yes. The Court of Tax Appeals is not limited by
date such tax was paid, and not upon the evidence presented in the administrative
discovery of the taxpayer of the erroneous or claim in the Bureau of Internal Revenue. The
excessive payment of taxes. (Metropolitan claimant may present new and additional
Bank and Trust Company v. Commissioner evidence to the Court of Tax Appeals to
of Internal Revenue, G.R. No. 182582, April support its case for tax refund. The power of
17, 2017) the Court of Tax Appeals to exercise its
appellate jurisdiction does not preclude it from
Q. For taxpayers using the On-line Electronic considering evidence that was not presented
Documentary Stamp Metering Machine (DS in the administrative claim in the Bureau of
metering machine), what should be deemed Internal Revenue.
the “date of payment” of the DST for the
purpose of counting the two-year Parties are expected to litigate and prove
prescriptive period for filing a claim for a every aspect of their case anew and formally
refund or tax credit? offer all their evidence. No value is given to
documentary evidence submitted in the
The “date of payment” of the DST when the Bureau of Internal Revenue unless it is
prescriptive period to file a claim for formally offered in the Court of Tax Appeals.
refund/credit must commence shall be the Thus, the review of the Court of Tax Appeals
date when the documentary stamps are is not limited to whether or not the
imprinted upon the documents and not the Commissioner committed gross abuse of
date of purchase of documentary stamps for discretion, fraud, or error of law, as contended
loading or reloading on the DS metering by the Commissioner. As evidence is
machine. considered and evaluated again, the scope of
the Court of Tax Appeals' review covers
The payment of the DST and the filing of the factual findings. (Philippine Airlines v.
DST Declaration Return upon Commissioner of Internal Revenue, G.R. No.
loading/reloading of the DS Metering machine 206079-80 & 206309, January 17, 2018)
must not be considered as the “date of
payment” when the prescriptive period to file
Page 21 of 36
NOTICE
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Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
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QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
Note: The case involved a claim for refund business tax is consistent with the intent of
pursuant to Section 229 of the Tax Code. our laws, which is to prevent the duplication
of the so-called common carriers tax. (City of
Q. What are the requisites for claiming a Manila v Hon. Colet and Malaysian Air
refund of excess creditable withholding System, G.R. No. 120051, December 10,
taxes? 2014)
The requisites for claiming a refund of excess Q. Do LGUs have the power to impose taxes
creditable withholding taxes are: on persons or entities engaged in the
business of manufacturing and distribution
1. The claim for refund was filed within of petroleum products?
the two-year prescriptive period;
No. Among the common limitations on the
2. The fact of withholding is established taxing powers of LGUs provided under
by a copy of a statement Section 133 of the LGC are “excise taxes on
duly issued by the payor (withholding articles enumerated under the National
agent) to the payee, showing the Internal Revenue Code, as amended, and
amount of tax withheld therefrom; and taxes, fees or charges on petroleum products.”
The prohibition with respect to petroleum
3. The income upon which the taxes products extends not only to excise taxes
were withheld was included in the thereon, but all “taxes, fees or charges.”
income tax return of the recipient as (Batangas City v. Pilipinas Shell, G.R. No.
part of the gross income. 187631, July 8, 2015)
(Commissioner of Internal Revenue v.
Cebu Holding, G.R. No. 189792, June Q. Uniwide conducted business in buildings
29, 2018; Commissioner of Internal and establishments constructed on parcels
Revenue v. Team (Philippines) of land covered by Transfer Certificates of
Operations Corporation, G.R. No. Title (TCTs) issued by the Registry of Deeds
179260, April 2, 2014.) of Pasig City. In the said TCTs, the location
of the parcels of land is indicated as being in
LOCAL GOVERNMENT TAXATION Pasig. From 1989 to 1996, Uniwide paid
business and realty taxes, fees, and other
Q. Do LGUs have the power to impose taxes charges to the City of Pasig. However,
on the gross receipts of keepers of garages, beginning 1997 and after receiving notice
cars for rent or hire driven by the lessee, from the Municipality of Cainta that the
transportation contractors, persons who subject properties were within its territorial
transport passenger or freight for hire, and jurisdiction, Uniwide no longer paid local
common carriers by land, air, or water? taxes to the City of Pasig. For purposes of
complying with local tax liabilities in case of
No. Section 133(j) of the LGC clearly and a boundary dispute between local
unambiguously proscribes LGUs from governments, to whom should the taxpayer
imposing a tax on the gross receipts of pay its local business tax and realty taxes?
transportation contractors and common
carriers. Exemption of transportation The taxpayer should pay its local business tax
contractors and common carriers from local to the City of Pasig who has the apparent
Page 22 of 36
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Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
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QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
right to levy and collect local business tax and provinces and municipalities. Unlike a city, a
realty taxes on the subject properties on the municipality is bereft of authority to levy
basis of the TCTs. Under the Local franchise tax, thus, the ordinance enacted for
Government Code, local business taxes are that purpose is void.
payable for every separate or distinct
establishment or place where business The ordinance in question was enacted in
subject to the tax is conducted, which must be 1992 when the local government of Pasig was
paid by the person conduct the same. The still a municipality and, as such, had no
situs of taxation shall be paid to the local authority to levy franchise tax. The conversion
government where such branch or sales outlet of the municipality into a city does not lend
is located. For real property taxes, collection is validity to the void ordinance. The ordinance is
vested in the locality where the property is void for being in direct contravention with
situated. In determining the location for Section 142 of the Local Government Code.
purposes of identifying the local government Being void, it cannot be given any legal effect.
entitled to collect taxes, the taxpayer should An assessment and collection pursuant to the
follow the location stated in the certificate of said ordinance is legally infirm. (City of Pasig
title until amended through proper judicial v. Manila Electric Company, G.R. No. 181710,
proceedings. (Municipality of Cainta v. City of March 7, 2018)
Pasig and Uniwide, G.R. No. 176703, June
28, 2017) Q. The City of Manila assessed ABC local
business taxes for the taxable year 2007
Q. On 26 December 1992, the Sangguniang using the gross sales for the calendar year
Bayan of the Municipality of Pasig enacted 2005. ABC argues that the computation of
Ordinance No. 25 which imposed a franchise the business tax should be on the basis of its
tax on all business venture operations gross sales in 2006 which amount was lower
carried out through a franchise within the than the gross sales in 2005. Is ABC correct?
municipality. On 25 January 1995, the
Municipality of Pasig was converted into a Yes. Section 14 of the Revenue Code of
highly urbanized city now known as the City Manila, which is derived from Section 143(a)
of Pasig. The City Treasurer assessed the of the Local Government Code, provides that
Manila Electric Company for deficiency an assessment for business tax should be
franchise taxes for the period 1996 to 1999 computed based on the taxpayer’s gross
pursuant to Municipal Ordinance No. 25. sales or receipts of the preceding calendar
Does the City of Pasig have valid basis for its year. (City of Manila v. Cosmos Bottling
imposition of franchise tax for the period Corporation, G.R. No. 196681, June 27, 2018)
1996 to 1999?
Q. In the imposition of the surcharge on local
No. The power to impose franchise tax taxes due and unpaid, should the 25%
belongs to the province by virtue of Section surcharge be computed yearly based on the
137 of the Local Government Code. On the unpaid tax due for each particular year?
other hand, Section 142 of the Code provides
that the municipalities are prohibited from No. Section 168 of the Local Government
levying the taxes specifically provided to Code categorically provides that the local
provinces. Section 151 empowers the cities to government unit may impose a surcharge not
levy taxes, fees and charges allowed to both exceeding 25% of the amount of taxes, fees,
Page 23 of 36
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Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
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QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
or charges not paid on time. The surcharge is inaction,” should be reckoned from January
a civil penalty imposed once for late payment 15, 2007, the date the taxpayer filed its
of a Contrast this with the succeeding protest, and not March 27, 2007. (China
provisions on interest, which was imposable Banking Corporation v. City Treasurer of
at the rate not exceeding 2% per month of the Manila, G.R. No. 204117, July 1, 2015)
unpaid taxes until fully paid. The fact that the
interest charge is made proportionate to the Note: The Court likewise stated that, at any
period of delay, whereas the surcharge is not, rate, the RTC has no jurisdiction. Following
clearly reveals the legislative intent for the R.A. No. 9282, the authority to exercise either
different modes in their application. If the original or appellate jurisdiction over local tax
legislative intent was to make the 25% cases depended on the amount of the claim.
surcharge proportionate to the period of In cases where the amount sought to be
delay, the law should have provided for the refunded is below the jurisdictional amount of
same in clear terms. (NPC v. City of the RTC, the Metropolitan, Municipal, and
Cabanatuan, G.R. No. 177332, October 1, Municipal Circuit Trial Courts (“MTC”) have
2014) jurisdiction. RTC has jurisdiction if amount
exceeds exceed P300,000 outside Metro
Q. On January 15, 2007, ABC protested, thru Manila (P400,000 in Metro Manila); MTC if
a letter, the imposition of business tax under amount does not exceed P300,000 outside
Section 21 of the Manila Revenue Code on Metro Manila (P400,000 in Metro Manila).
the ground that it constitutes double
taxation. The City Treasurer acknowledged Q. The City of Manila assessed ABC local
receipt of the letter but said that she will business taxes. ABC protested the
await the formal protest. On March 27, 2007, assessment arguing that it constitutes as
ABC wrote a letter-reply reiterating that double taxation. ABC tendered payment of
ABC already protested. On April 17, 2007, what they believe to be the correct
ABC filed a Petition for Review with the computation of their local business tax. The
Regional Trial Court (“RTC”). On appeal, the payment was refused by the City Treasurer.
CTA ruled that ABC belatedly filed its ABC also received a letter from the City
petition with RTC by 1 day. ABC countered it Treasurer denying their protest. ABC then
timely filed now claiming that reckoning paid the assessment and filed a claim for
point should be from March 27, 2007. Was refund with the Office of the City Treasurer
the petition timely filed? raising the same grounds in their protest.
ABC then filed its refund with the RTC of
No. Section 195 of the Local Government Manila. The City of Manila argues that the
Code states that the taxpayer shall have thirty assessment against ABC became final and
(30) days from the receipt of the denial of the executory when the latter effectively
protest or from the lapse of the sixty (60)-day abandoned its protest and instead sued in
period prescribed herein within which to court for the refund of the assessed taxes. Is
appeal with the court of competent the City of Manila correct?
jurisdiction otherwise the assessment
becomes conclusive and unappealable. No. A taxpayer who had protested and paid
an assessment is not precluded from later on
In the instant case, the period within which the instituting an action for refund or credit.
City Treasurer must act on the protest, and the
consequent period to appeal a “denial due to
Page 24 of 36
NOTICE
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Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
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QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
Page 25 of 36
NOTICE
This material supplements the author’s 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar
Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
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QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
or illegally collected tax as pursued serve the owner's business or tend to meet the
under Section 196 of the LGC. In such a needs of his industry or works that are on real
suit for refund, the taxpayer cannot estate. (Capitol Wireless v. Provincial
successfully prosecute his theory of Treasurer of Batangas, G.R. No. 180110,
erroneous payment or illegal collection May 30, 2016)
of taxes without necessarily assailing
the validity or correctness of the Q. Does the exemption from real property
assessment he had administratively taxes given to cooperatives exclude real
protested. property leased to other persons?
Note that where an assessment is issued, the No. The Local Government Code exempts duly
taxpayer cannot choose to pay the registered cooperatives from payment of real
assessment and thereafter seek a refund at property taxes without distinction. Nothing in
any time within the full period of two years the law suggests that real property tax
from the date of payment as Section 196 may exemption only applies when the property is
suggest. If refund is pursued, the taxpayer used by the cooperative itself. Thus, the
must administratively question the validity or exemption from real property taxes given to
correctness of the assessment in the 'letter cooperatives applies regardless of whether or
claim for refund' within 60 days from receipt not the land owned is leased. The instance
of the notice of assessment, and thereafter that the real property is leased to either an
bring suit in court within 30 days from either individual or corporation is not a ground for
decision or inaction by the local treasurer. withdrawal of tax exemption. (Provincial
(City of Manila v. Cosmos Bottling Assessor of Agusan del Sur v. Filipinas Palm
Corporation, G.R. No. 196681, June 27, 2018) Oil Plantation, G.R. No. 183416, October 5,
2016)
REAL PROPERTY TAXATION
Q. Is the Philippine Economic Zone Authority
Q. May submarine communications cables (PEZA) exempt from the payment of real
be classified as taxable real property by the property taxes?
local governments?
Yes. The PEZA is exempt from the payment of
Yes. Submarine or undersea communications real property taxes. The general rule is that
cables are akin to electric transmission lines real properties are subject to real property
which the Court has previously declared as taxes. This is true especially since the Local
“machinery” subject to real property tax under Government Code has withdrawn exemptions
the Local Government Code to the extent that from real property taxes of all persons,
the equipment's location is determinable to be whether natural or juridical. Exceptions to the
within the taxing authority's jurisdiction. Both rule are however also provided in the Local
electric lines and communications cables, in Government Code. Under Section 133(o), local
the strictest sense, are not directly adhered to government units have no power to levy taxes
the soil but pass through posts, relays or of any kind on the national government, its
landing stations, but both may be classified agencies and instrumentalities and local
under the term "machinery" as real property government units. Specifically on real
under Article 415(5) of the Civil Code for the property taxes, Section 234 enumerates the
simple reason that such pieces of equipment persons and real property exempt from real
Page 26 of 36
NOTICE
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Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
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QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
property taxes, which includes “real property exclusively accrue to the Special Education
owned by the Republic of the Philippines or Fund (SEF).” The operative phrase in Section
any of its political subdivisions except when 235’s grant to municipalities in Metro Manila,
the beneficial use thereof has been granted, cities, and provinces of the power to impose
for consideration or otherwise, to a taxable an additional levy for the special education
person.” The PEZA is an instrumentality of the fund is prefixed with “may,” thus, “may levy
national government. Being an and collect an annual tax of one percent
instrumentality of the national government, (1%).” There is no limiting qualifier to the
the PEZA cannot be taxed by local articulated rate of 1% which unequivocally
government units. Further, the real properties indicates that any and all special education
under the PEZA’s title are owned by the fund collections must be at such rate. Setting
Republic of the Philippines. Properties of the rate of the additional levy for the special
public dominion, even if titled in the name of education fund at less than 1% is within the
an instrumentality as in this case, remain taxing power of local government units.
owned by the Republic of the Philippines. (City (Demaala v. COA, G.R. No. 199752, February
of Lapu-Lapu v. PEZA, G.R. No. 184203 & 17, 2015)
187583, November 26, 2014)
Q. The Provincial Treasurer assessed ABC
NOTE: Even the PEZA’s lands and buildings for real property taxes on its submarine
whose beneficial use have been granted to cables. Thereafter, ABC received a Warrant
other persons may not be taxed with real of Levy and a Notice of Auction Sale. ABC
property taxes. The PEZA may only lease its filed a Petition for Prohibition and
lands and buildings to PEZA-registered Declaration of Nullity of Warrant of Levy,
economic zone enterprises and entities. These Notice of Auction Sale and/or Auction Sale
PEZA-registered enterprises and entities, with the RTC. ABC argues that the
which operate within economic zones, are not submarines cables are not subject to tax.
subject to real property taxes. Under Section Further, ABC argues that such issue involves
24 of the Special Economic Zone Act of 1995, purely questions of law and, thus,
no taxes, whether local or national, shall be exhaustion of administrative remedies is not
imposed on all business establishments required. Is ABC’s remedy proper?
operating within the economic zones.
No. In disputes involving real property
Q. May a municipality within the taxation, the general rule is to require the
Metropolitan Manila Area, a city, or a taxpayer to first avail of administrative
province have an additional levy on real remedies and pay the tax under protest before
property for the special education fund at allowing any resort to a judicial action, except
the rate of less than 1%.? when the assessment itself is alleged to be
illegal or is made without legal authority. The
Yes. Section 235 of the Local Government instant case, however, is one replete with
Code provides that “a province or city, or a questions of fact instead of pure questions of
municipality within the Metropolitan Manila law, which renders its filing in a judicial forum
Area, may levy and collect an annual tax of improper because it is instead cognizable by
one percent (1%) on the assessed value of real local administrative bodies like the Board of
property which shall be in addition to the basic Assessment Appeals, which are the proper
real property tax. The proceeds thereof shall venues for trying these factual issues such as
Page 27 of 36
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Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
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QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
Page 28 of 36
NOTICE
This material supplements the author’s 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar
Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
are made. No stamping is allowed.
QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
Q. A taxpayer argues that payment under Q. Who has jurisdiction to hear and
protest is not required before it could determine questions involving the seizure
challenge the authority of the local and forfeiture of dutiable goods?
government to assess tax on its tax exempt
properties before the LBAA. Is the taxpayer The Collector of Customs has exclusive
correct? jurisdiction over seizure and forfeiture
proceedings, and regular courts cannot
No. Settled is the rule that should the interfere with his exercise thereof or stifle or
taxpayer/real property owner question the put it at naught. The Collector of Customs
excessiveness or reasonableness of the sitting in seizure and forfeiture proceedings
assessment, the law directs that the taxpayer has exclusive jurisdiction to hear and
should first pay the tax due before his protest determine all questions touching on the
can be entertained. seizure and forfeiture of dutiable goods.
Regional trial courts are devoid of any
A claim for exemption from the payment of competence to pass upon the validity or
real property taxes does not question the regularity of seizure and forfeiture
assessor’s authority to assess and collect proceedings conducted by the BOC and to
such taxes, but pertains to the enjoin or otherwise interfere with these
reasonableness or correctness of the proceedings. Regional trial courts are
assessment by the local assessor. Thus, precluded from assuming cognizance over
payment under protest is required. (National such matters even through petitions for
Power Corporation v. The Provincial certiorari, prohibition or mandamus. (Agriex
Treasurer of Benguet, G.R. No. 209303, Co. Ltd. v. Commissioner of Customs, G.R.
November 14, 2016) No. 158150, September 10, 2014)
Page 29 of 36
NOTICE
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Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
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QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
Page 30 of 36
NOTICE
This material supplements the author’s 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar
Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
are made. No stamping is allowed.
QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
No. When a tax case is pending on appeal of Appeals would have been precluded from
with the CTA, the CTA has exclusive taking cognizance of the case. (Philippine
jurisdiction to enjoin the levy of taxes and Ports Authority v. The City of Davao, G.R. No.
auction of the taxpayer’s properties in 190324, June 6, 2018)
relation to that case. Section 7(a)(5) of RA No.
1125, as amended by RA No. 9282 provides Q. Does the CTA have exclusive jurisdiction
that the CTA has exclusive appellate to determine the constitutionality or validity
jurisdiction over decisions of the CBAA in the of tax laws, rules and regulations, and other
exercise of its appellate jurisdiction over cases administrative issuances of the CIR?
involving the assessment and taxation of real
property originally decided by the provincial or Yes. The CTA has exclusive jurisdiction to
city board of assessment appeals. determine the constitutionality or validity of
tax laws, rules and regulations, and other
The CTA has the power to determine whether administrative issuances of the Commissioner
or not there has been grave abuse of of Internal Revenue.
discretion in cases falling within its exclusive
appellate jurisdiction and its power to issue The CTA has not only jurisdiction to pass upon
writs of certiorari. the constitutionality or validity of a tax law or
regulation when raised by the taxpayer as a
The Court of Tax Appeals had jurisdiction over defense in disputing or contesting an
PPA’s appeal to resolve the question of assessment or claiming a refund, but also
whether or not it was liable for jurisdiction to take cognizance of cases
real property tax. The real property tax liability directly challenging the constitutionality or
was the very reason for the acts which validity of a tax law or regulation or
petitioner wanted to have enjoined. It was, administrative issuance (revenue orders,
thus, the Court of Tax Appeals, and not the revenue memorandum circulars, rulings).
Court of Appeals, that had the power to
preserve the subject of the appeal, to give The law intends the CTA to have exclusive
effect to its final determination, and, when jurisdiction to resolve all tax problems.
necessary, to control auxiliary and incidental Petitions for writs of certiorari against the acts
matters and to prohibit or restrain acts which and omissions of the said quasi-judicial
might interfere with its exercise of jurisdiction agencies should, thus, be filed before the CTA.
over petitioner's appeal. Except for local tax cases, actions directly
challenging the constitutionality or validity of
Even if the law had vested the Court of a tax law or regulation or administrative
Appeals with jurisdiction to issue injunctive issuance may be filed directly before the CTA.
relief in real property tax cases such as this,
the Court of Appeals was still correct in With respect to administrative issuances
dismissing the petition before it. Once a court (revenue orders, revenue memorandum
acquires jurisdiction over a case, it also has circulars, or rulings), these are issued by the
the power to issue all auxiliary writs Commissioner under its power to make rulings
necessary to maintain and exercise its or opinions in connection with the
jurisdiction, to the exclusion of all other courts. implementation of the provisions of internal
Thus, once the Court of Tax Appeals acquired revenue laws. Tax rulings, on the other hand,
jurisdiction over petitioner's appeal, the Court are official positions of the Bureau on inquiries
Page 31 of 36
NOTICE
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Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
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QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
of taxpayers who request clarification on Taxpayers should comply with the doctrine of
certain provisions of the National Internal administrative remedies and the rule on
Revenue Code, other tax laws, or their hierarchy of courts. (Bloomberry Resorts and
implementing regulations. Hence, the Hotels v. Bureau of Internal Revenue, G.R.
determination of the validity of these No. 212530, August 10, 2016)
issuances clearly falls within the exclusive
appellate jurisdiction of the CTA, subject to Interpretative rulings of the Bureau of Internal
prior review by the Secretary of Finance. Revenue are reviewable by the Secretary of
(Steel Corporation v. Bureau of Customs & Finance. However, in one case, the Supreme
Bureau of Internal Revenue, G.R. No. Court has held that because of special
220502, February 12, 2018; Banco de Oro v. circumstances - namely: the question involved
Republic, G.R. No. 198756, August 16, 2016) is purely legal; the urgency of judicial
intervention given impending maturity of the
NOTE: This reverses the previous ruling of the PEACe Bonds; and the futility of an appeal to
Supreme Court in Clark Investors and the Secretary of Finance as the latter
Locators Association v. Secretary of appeared to have adopted the challenged
Finance, G.R. No. 200670, July 6, 2015 where Bureau of Internal Revenue rulings - there
it held that the proper remedy to assail a was no need to exhaust all administrative
Revenue Regulation is via a special civil action remedies before seeking judicial relief directly
of declaratory relief under Rule 63 which falls with the Supreme Court. (Banco de Oro v.
under the exclusive jurisdiction of the Regional Republic, G.R. No. 198756, August 16, 2016)
Trial Courts.
Q. The National Power Corporation (NPC)
This likewise reverses the ruling of the received a notice of franchise tax
Supreme Court in Commissioner of Internal delinquency from the Provincial Government
Revenue v. Court of Tax Appeals and Petron of Bataan. NPC argued that it was exempt
Corporation, G.R. No. 207843, July 15, 2015 from the local franchise tax. Eventually, the
where it held that the CTA has no jurisdiction Provincial Government issued Warrants of
to determine the validity of a ruling issued by Levy on 14 properties owned by NPC in
the CIR or the COC in the exercise of their Limay, Bataan. The same were likewise sold
quasi-legislative powers to interpret tax laws. via public auction where the Provincial
Government was the winning bidder. NPC
Q. Can a taxpayer directly question a tax filed a Petition for declaration of nullity of
ruling with the Supreme Court? foreclosure sale with prayer for preliminary
mandatory injunction with the Regional Trial
No. Rulings of the CIR (including Revenue Court (RTC). The RTC dismissed the same.
Memorandum Circulars) are appealable to the NPC appealed to the Court of Appeals (CA).
Court of Tax Appeals, and not to any other The Provincial Government of Bataan
courts. If a remedy in the administrative moved to dismiss the same for lack of
machinery can still be resorted to, then such jurisdiction of the CA over the subject matter
remedy must first be exhausted before the as the suit was essentially a local tax case
court’s power of judicial review can be sought. questioning the validity of the imposition of
In questioning the validity of a Revenue the local franchise tax. Is the Provincial
Memorandum Circular, taxpayers should not Government of Bataan correct?
resort directly to the Supreme Court.
Page 32 of 36
NOTICE
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Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
are made. No stamping is allowed.
QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
Yes. The Court of Tax Appeals is vested with corporations, shall be administratively settled
the exclusive appellate jurisdiction over, or adjudicated by the Secretary of Justice, the
among others, appeals from the "decisions, Solicitor General, or the Government
orders or resolutions of the Regional Trial Corporate Counsel, depending on the issues
Courts in local tax cases originally decided or and government agencies involved. The use of
resolved by them in the exercise of their the word "shall" in PD 242 means that
original or appellate jurisdiction." administrative settlement or adjudication of
disputes and claims between government
The case a quo is a local tax case that is within agencies and offices, including government
the exclusive appellate jurisdiction of the owned or controlled corporations, is not
Court of Tax Appeals. Parenthetically, the merely permissive but mandatory and
case arose from the dispute between Napocor imperative.
and the Provincial Government of Bataan over
the purported franchise tax delinquency of The second paragraph of Section 4 of the
Napocor. Although the complaint filed with 1997 NIRC, providing for the exclusive
the trial court is a “Petition for declaration of appellate jurisdiction of the CTA as regards
nullity of foreclosure sale with prayer for the CIR's decisions on matters involving
preliminary mandatory injunction,” the disputed assessments, refunds in internal
petition essentially assails the correctness of revenue taxes, fees or other charges, penalties
the local franchise tax assessments by the imposed in relation thereto, or
Provincial Government of Bataan. (Napocor v. other matters arising under NIRC, is in conflict
Provincial Government of Bataan, G.R. No. with PD 242. To harmonize Section 4 of the
180654, March 6, 2017) 1997 NIRC with PD 242, the following
interpretation should be adopted:
Q. Does the CTA have jurisdiction over cases
asking for the cancellation and withdrawal 1. As regards private entities and the
of a warrant of distraint and/or levy? BIR, the power to decide disputed
assessments, refunds of internal
Yes. Section 7 of RA No. 9282 provides that revenue taxes, fees or other charges,
the CTA has jurisdiction over other matters penalties in relation thereto, or other
arising under the National Internal Revenue matters arising under the NIRC or other
Code or other laws administered by the laws administered by the. BIR is vested
Bureau of Internal Revenue. (Commissioner in the CIR subject to the exclusive
of Internal Revenue v. Bank of the Philippine appellate jurisdiction of the CTA, in
Islands, G.R. No. 224327, June 11, 2018) accordance with Section 4 of the NIRC;
and
Q. Does the Secretary of Justice have
jurisdiction to review disputed assessments 2. Where the disputing parties
involving government owned and controlled are all public entities (covers disputes
corporations? between the BIR and other
government entities), the case shall be
No. Under Presidential Decree No. 242 (PD governed by PD 242.
242), all disputes and claims solely between
government agencies and offices, including Even if the 1997 NIRC, a general statute, is a
government-owned or controlled later act, PD 242, which is a special law, will
Page 33 of 36
NOTICE
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Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
are made. No stamping is allowed.
QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
still prevail and is treated as an exception to Republic Act (RA) No. 9282 expanding the
the terms of the 1997 NIRC with regard solely CTA’s jurisdiction, it is no longer clear which
to intragovernmental disputes. PD 242 is a between the CA and the CTA has jurisdiction
special law while the 1997 NIRC is a general to review through a petition for certiorari the
law, insofar as disputes solely between or DOJ resolution in preliminary investigations
among government agencies are concerned. involving tax and tariff offenses. The Supreme
(Power Sector Assets and Liabilities Court then declared that the CA’s original
Management Corporation v. Commissioner jurisdiction over a petition for certiorari
of Internal Revenue, G.R. No. 198146, assailing the DOJ resolution in a preliminary
August 8, 2007) investigation involving tax and tariff offenses
was necessarily transferred to the CTA
NOTE: Previously, the Supreme Court ruled pursuant to Section 7 of RA No. 9282,
that the Secretary of Justice does not have amending R.A. No. 1125.
jurisdiction to review disputed assessments
and it is the CTA that has the exclusive Q. Does the CTA en banc have jurisdiction
appellate jurisdiction to review, among others, over interlocutory orders issued by the CTA
the decisions of the Commissioner of Internal Division?
Revenue in cases involving disputed
assessments. (Commissioner of Internal No. The CTA en banc has jurisdiction over final
Revenue v. Secretary of Justice and orders or judgments but not over interlocutory
Philippine Amusement and Gaming orders issued by the CTA in division. An
Corporation, G.R. No. 177387, November 9, interlocutory order may not be questioned on
2016) appeal. (Commissioner of Internal Revenue
v. Court of Tax Appeals and CBK Power, G.R.
Q. Does the CTA have jurisdiction over a No. 203054-55, July 29, 2015)
petition for certiorari assailing a Department
of Justice (DOJ) resolution in a preliminary Q. The BIR issued several assessment
investigation involving tax and tariff notices to the taxpayer for deficiency income
offenses? tax and VAT for the taxable years 1999 to
2002. The taxpayer filed protests, but they
Jurisdiction over a petition for certiorari were denied by the BIR. The taxpayer then
assailing a DOJ resolution in a preliminary filed a Petition for Review with the CTA in
investigation involving tax and tariff offenses Division. The CTA Division denied the
is now with the CTA, not the Court of Appeals Petition. The CTA Division likewise denied
(“CA”). the Motion for Reconsideration. The
taxpayer then appealed directly to the
In Bureau of Customs v. Hon. Devanadera, Supreme Court. Does the Supreme Court
G.R. No. 193253, September 8, 2015, the have jurisdiction?
Supreme Court said that the elementary rule
is that the Court of Appeals has jurisdiction to No. The Court is without jurisdiction to review
review the resolution of the DOJ through a decisions rendered by a division of the CTA,
petition for certiorari under Rule 65 of the exclusive appellate jurisdiction over which is
Rules of Court on the ground that the vested in the CTA en banc. RA 1125, as
Secretary of Justice committed grave abuse of amended by RA 9282, provides that the CTA
his discretion amounting to excess or lack of en banc shall have exclusive jurisdiction over
jurisdiction. However, with the enactment of
Page 34 of 36
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Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
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QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
appeals from the decision of its divisions. A Ilijan Corporation, G.R. No. 199422, June 21,
party adversely affected by the resolution of 2016)
the CTA division may, on motion for
reconsideration, file a petition for review with Q. What is the effect of filing a Petition for
the CTA en banc. Thereafter, the decision or Review with the CTA En Banc without filing
ruling of the CTA en banc may be elevated to a prior motion for reconsideration or new
this Court. Simply stated, no decision of the trial before the CTA Division?
CTA division may be elevated to this Court
under Rule 45 of the 1997 Rules of Civil The filing of a motion for reconsideration or
Procedure without passing through the CTA new trial before the CTA Division is an
en banc. (Duty Free Philippines v. BIR, G.R. No. indispensable requirement for filing an appeal
197228, October 8, 2014) before the CTA En Banc. Failure to file such
motion for reconsideration or new trial is
Q. Does the CTA En Banc have jurisdiction to cause for dismissal of the appeal before the
take cognizance of a petition for annulment CTA En Banc. (City of Manila v. Cosmos
of judgment to annul and set aside a final Bottling Corporation, G.R. No. 196681, June
decision of a CTA division ? 27, 2018)
No. The Revised Rules of the CTA and even Q. Within sixty days from receipt of the
the Rules of Court which apply suppletorily resolution of the CTA En Banc on the Motion
thereto provide for no instance in which the en for Reconsideration of the CTA En Banc
banc may reverse, annul or void a final Decision, the taxpayer filed a Petition for
decision of a division. The Revised Rules of the Certiorari with the Supreme Court alleging
CTA provide for no instance of an annulment grave abuse of discretion amounting to lack
of judgment at all. The Rules of Court are silent or excess of jurisdiction on the part of the
as to whether a collegial court sitting en banc CTA En Banc when it issued the assailed
may annul a final judgment of its own decision and resolution. Did the taxpayer
division.The silence of the Rules may be avail of the proper remedy?
attributed to the need to preserve the
principles that there can be no hierarchy No. The taxpayer adopted the wrong remedy
within a collegial court between its divisions in assailing the resolution of the CTA En Banc.
and the en banc, and that a court's judgment, What the petitioner should have done to
once final, is immutable. question the decision of the CTA En Banc was
to file before the Supreme Court a petition for
Further, a direct petition for annulment of a review under Rule 45 of the same Rules of
judgment of the CTA to the Supreme Court, Court in conformity with Section 11 of R.A. No.
meanwhile, is likewise unavailing, for the 9282. A petition for certiorari under Rule 65 of
same reason that there is no identical remedy the Rules of Court is a special civil action that
with the High Court to annul a final and may be resorted to only in the absence of
executory judgment of the Court of Appeals. appeal or any plain, speedy and adequate
The proper remedy of the taxpayer is to file a remedy in the ordinary course of law.54 In this
petition for certiorari under Rule 65, which can case, there is a plain, speedy and adequate
be filed as an original action with the Supreme remedy that is available - appeal by certiorari
Court and not before the CTA En Banc. under Rule 45. (Aichi Forging Company v.
(Commissioner of Internal Revenue v. Kepco Commissioner of Internal Revenue, G.R. No.
Page 35 of 36
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Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
are made. No stamping is allowed.
QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
PIERRE MARTIN D. REYES
193625, August 30, 2017; Bureau of Internal Appeals and Commissioner of Internal
Revenue v. Hon. Ernesto Acosta, G.R. No. Revenue, G.R. No. 215950, June 20, 2016)
195320, April 23, 2018)
***Nothing else follows***
Q. May the requirement of a bond for the
CTA to suspend the collection of tax be
dispensed with?
Page 36 of 36
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