Digest (1986 To 2016)

[G.R. No. 216130. August 3, 2016.
COMMISSIONER OF INTERNAL REVENUE v. GOODYEAR PHILIPPINES, INC.
FACTS:
Respondent is a domestic corporation duly organized and existing under the laws of the Philippines. All its
preferred shares are solely and exclusively subscribed by Goodyear Tire and Rubber Company (GTRC), which is a
foreign company organized and existing under the laws of the United States of America and is unregistered in the
Philippines.
On May 2008, respondent's Board of Directors authorized the redemption of GTRC's preferred shares.
Subsequently, respondent filed an application for relief from double taxation before the International Tax Affairs
Division of the BIR to confirm that the redemption was not subject to Philippine income tax pursuant to the
Republic of the Philippines (RP)-US Tax Treaty. It then filed an administrative claim for refund or issuance of a Tax
Credit Certificate representing the fifteen percent (15%) Final Withholding Tax it withheld and remitted to the BIR.
The Court of Tax Appeals (CTA) Division granted the petition and ordered for the refund or issuance of a TCC in
favor of respondent for its erroneous withholding and remittance of FWT. It found that the redemption of shares
issued to GTRC which were then converted to treasury shares are not subject to Philippine income tax.
Dissatisfied, petitioner files present petition questioning the grant of refund or issuance of a TCC in favor of
respondent. It maintains that the CTA erred in finding that the gain derived by GTRC was not subject to fifteen
percent (15%) FWT.
ISSUE:
Whether the gain derived by GTRC is subject to fifteen percent (15%) FWT.
HELD:
The gain derived by GTRC is not subject to fifteen percent (15%) FWT.
Section 28 (B)(5)(b) of the NIRC of 1997 provides that a final withholding tax (FWT) of fifteen percent (15%) is
imposed on the amount of cash and/or property dividends received from a domestic corporation. In this case
however, GTRC is a non-resident foreign corporation, specifically, a resident of the United States. Consequently, it
is the RP-US Tax treaty that will complementarily govern the tax implications of respondent's transactions with
GTRC.
Article 11(%) of the RP-US Tax Treaty provides that the term "dividends" should be construed in accordance to the
taxation law of the State in which the corporation making the distribution is a resident, which in this case, pertains
to respondent, a resident of the Philippines. Pursuant to our tax laws, the term "dividends" means any distribution
made by a corporation to its shareholders out of its earnings or profits and payable to its shareholders, whether in
money or property.
The Court finds that the redemption price received by GTRC cannot be considered as accumulated dividends that
could be subject to a FWT because according to respondent's financial statements, it did not have unrestricted
retained earnings. Therefore, pursuant to the Corporation Code of the Philippines, absent the availability of
unrestricted retained earnings, the board of directors cannot issue dividends.
The Court, in a prior case held that if the distribution is in the nature of a recurring return of stock, it is an ordinary
dividend. However, if the corporation is winding up its business, the distribution may be considered as a complete
or partial liquidation and as payment by the corporation to the stockholder of its stock. In the case at bar, the
amount received by GTRC from respondent were not accumulated dividends in arrears, and hence, cannot be
subject to a fifteen percent (15%) FWT.
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia (2017.1) 1
[G.R. No. 212530. August 10, 2016.]
BLOOMBERRY RESORTS AND HOTELS INC. v. BUREAU OF INTERNAL REVENUE
FACTS:
Petitioner was granted by PAGCOR a provisional license to establish and operate an integrated resort and casino
complex at the Entertainment City project site of PAGCOR. As a licensee, it only pays PAGCOR license fees, in
lieu of all taxes pursuant to the PAGCOR Charter or Presidential Decree (PD) No. 1869.
When Republic Act (RA) No. 9337 took effect on November 2005, it amended Section 27(C) of the NIRC of 1997,
which excluded PAGCOR rom the enumeration of government-owned or controlled corporations (GOCCs) exempt
from paying corporate income tax. Thereafter, Revenue Memorandum Circular (RMC) No. 33-2013 was issued to
implement the aforementioned amendment. RMC No. 33-2013 provides that PAGCOR, in addition to the five
percent (5%) franchise tax of its gross revenue, is now subject to corporate income tax. In addition, PAGCOR's
contractees and licensees are likewise subject to the said income tax.
Petitioner now comes to Court assailing the said issuance after being found by respondent liable for corporate
income tax in addition to the five percent (5%) franchise tax. It claims that the provision under RMC No. 33-2013
subjecting the contractees and licensees of PAGCOR to income tax under the NIRC of 1997 was issued with
grave abuse of discretion amounting to lack or excess of jurisdiction.
ISSUE:
Whether petitioner is liable for corporate income tax.
HELD:
Petitioner is not liable for corporate income tax.
PAGCOR's tax privilege of paying a five percent (5%) franchise tax in lieu of all other taxes with respect to its
income from gaming operations is not repealed or amended by RA No. 9337.
The Court finds that there is no conflict between PD No. 1869 and RA No. 9337. The former provides for the taxes
imposable upon PAGCOR, i.e., five percent (5%) franchise tax in lieu of all other taxes, and income tax realized
from other necessary and related services. The latter on the other hand, withdrew the income tax exemption
granted to PAGCOR under the NIRC of 1997 on its income from other related services. This means that PAGCOR
remains to be entitled to the payment of a franchise tax in lieu of all other taxes on its income realized from its
operation of casinos. However, its income from other related services shall be subject to corporate income tax.
PD 1869 likewise provides that the income tax exemption inures to PAGCOR's licensees and contractees. This
means that petitioner, upon its payment of the five percent (5%) franchise tax shall likewise be exempted from all
other taxes, including corporate income tax realized from the operation of casinos. However, like PAGCOR, it is
liable to pay corporate income tax on income derived from other related services.
[G.R. No. 212346. July 7, 2016.]
FUNK v. SANTOS VENTURA HOCORMA FOUNDATION INC.
FACTS:
In 1983, petitioner represented one Teodoro Santos in a collection case against respondent Santos Ventura
Hocorma Foundation. The lower court ordered the respondent foundation to pay petitioner's attorney's fees in the
said collection case. Respondent foundation, however, remitted to the Bureau of Internal Revenue (BIR) a portion
of his attorney's fees as withholding taxes.
Petitioner claims that his fees should not have been subjected to withholding taxes. Rather, the sum withheld
should have been included in his gross income for the taxable year. Only after deductions of expenses should the
resulting net income, if any, be taxed.
ISSUE:
Whether petitioner can recover the amount withheld as taxes.
HELD:
Petitioner cannot recover the amount withheld as taxes.
The lower court had already ruled on the issue of withholding of taxes in its order. Since the order had become
final and immutable, it follows that the ruling on withholding taxes
Moreover, the Court stressed that the sum withheld had already been remitted to the BIR. This means that the
money is already in the hands of the Government. For the Court to declare outright that petitioner is entitled to a
refund would amount to bypassing the procedure on refund of taxes under the National Internal Revenue Code.
[G.R. No. 203538. June 27, 2016.]
ARTEX DEVELOPMENT CO., INC. v. OFFICE OF THE OMBUDSMAN
FACTS:
Petitioner owns two parcels of land located in Binondo, Manila, an eight-storey building, and machineries with an
appraised value of PHP 99,778,000.00 as of June 20, 2009. Due to its failure to pay real estate taxes, the Office of
the City Treasurer of Manila issued warrants of levy on the aforementioned properties. V. N. International
Development Corporation (VN) emerged as the winning bidder after paying for the properties at the amount of Php
9,637,219.81. Aggrieved with the outcome, petitioner filed a complaint with the Office of the Ombudsman against
respondents. It alleged that VN was given undue benefits by respondents when it was allowed to give an
unconscionably low bid for the properties given its market value.
The Ombudsman dismissed the complaint and held that there was no sufficient basis to hold respondents liable for
the violation of Republic Act No. 3019 or the Anti-Graft and Corrupt Practices Act.
ISSUE:
Whether the bid amount can be characterized as grossly unconscionable.
HELD:
The bid amount cannot be characterized as grossly unconscionable.
The Court in affirming the findings of the Ombudsman held that petitioner's contention is misplaced.
Section 260 of the Local Government Code provides that the local treasurer has the duty to publicly advertise for
sale or auction the property to satisfy the tax delinquency and the expenses of the sale, and that at any time before
the scheduled date for the dale, the owner of the property may stay the proceeding by paying the delinquent tax,
interest, and expenses of the sale. The Rules, Regulations and Conditions of the Auction Sale of the City of Manila
likewise provides that the bidder who offers to pay the highest purchase price from which the total amount of
delinquent taxes, penalties, and costs of sale due could be satisfied shall be entitled to the award of the property.
This means that what determines the minimum bid is not the fair market value, but rather the amount of the
delinquent taxes, plus interests and expenses of the sale.
The bid amount cannot be considered as grossly unconscionable because it is the amount of delinquent taxes,
interests and expenses that will determine the bid price and not the fair market value of the subject property.
[G.R. No. 194065. June 20, 2016.]
PHILIPPINE BANK OF COMMUNICATIONS v. COMMISSIONER OF INTERNAL REVENUE
FACTS:
Petitioner purchased documentary stamps from the Bureau of Internal Revenue and loaded them to its DS
metering machine. From March 23, 2004 to December 23, 2004, it executed several repurchase agreements with
the Bangko Sentral ng Pilipinas. The documentary stamps were imprinted on the Confirmation Letters
corresponding to those repurchase agreements through petitioner's DS metering machine.
Claiming that the said repurchase agreements are not subject to Documentary Stamp Tax (DST) under Section
199 of the National Internal Revenue Code, petitioner filed an administrative claim with the Bureau of Internal
Revenue.
Due to respondent's inaction, petitioner filed with the Court of Tax Appeals Division a Petition for review reiterating
its claim for refund. The CTA Division ruled in its favor but denied a portion of the amount for being barred by
prescription. The CTA en banc on the other hand ruled that insofar as taxpayers using the DS metering machine
were concerned, the DST was deemed paid upon the purchase of the documentary stamps for loading and
reloading on the DS metering machine, through the filing of the DST Declaration under BIR Form No. 2000.
ISSUE:
Whether the date of imprinting the documentary stamps on the document or the date of purchase of documentary
stamps for loading and reloading of the DS metering machine should be deemed as payment of the DST in order
to determine the reckoning point of the two-year prescriptive period for the filing of a claim for refund or tax credit.
HELD:
The date of imprinting the documentary stamps on the document should be considered as the date of payment of
the DST for the purpose of counting the two-year prescriptive period.
A DST is a tax on documents, instruments, loan agreements and papers evidencing the acceptance, assignment,
sale or transfer of an obligation, right or property incident thereto. It is an excise tax because it is imposed on the
transaction and not on the document. According to jurisprudence, the date of payment is when the tax liability falls
due.
For DS metering machine users, the payment of the DST upon loading or reloading is merely an advance payment
for future application. The liability for the payment of the DST falls due only upon the occurrence of a taxable
transaction. In this case, the taxable transaction is when petitioner and the Bangko Sentral ng Pilipinas entered
into repurchase agreements. This means that the corresponding DST falls due only when the said documentary
stamps are imprinted on the Confirmation Letters involved in the repurchase agreements.
The Court held that because the transactions between petitioner and the Bangko Sentral ng Pilipinas are exempt
from tax, the former is entitled to a refund. The prescriptive period for the filing of the said claim must be reckoned
from the date when the said documentary stamps were imprinted on the Confirmation Letters.
[G.R. No. 190506. June 13, 2016.]
CORAL BAY NICKEL CORP. v. COMMISSIONER OF INTERNAL REVENUE
FACTS:
Petitioner is a domestic corporation engaged in the manufacture of nickel and/or cobalt mixed sulphide. It is a VAT
entity registered with the Bureau of Internal Revenue. It is likewise registered with the Philippine Economic Zone
Authority (PEZA) as an Ecozone Export Enterprise.
On June 2004, it filed an application for a tax credit or refund of its alleged unutilized input tax for the third and
fourth quarters of the year 2002. The said application was denied by respondent. Aggrieved, petitioner elevated its
claim before the Court of Tax Appeals (CTA) in Division and en banc but both affirmed respondent's denial.
Hence, this appeal. Petitioner maintains that the Cross Border Doctrine is not applicable inasmuch as the
unutilized input VAT subject of its claim was incurred from May 1, 2002 to December 31, 2002, as a
VAT-registered taxpayer, not as a PEZA-registered enterprise; that during the period of its claim, it was not yet
registered with PEZA because it was only on December 27, 2002 that its Certificate of Registration was issued;
that until then, it could not have refused the payment of VAT on its purchases because it could not present any
valid proof of zero-rating to its VAT-registered suppliers.
ISSUE:
Whether petitioner is entitled to a refund of its unutilized input taxes incurred before it became a PEZA-registered
entity.
HELD:
Petitioner is not entitled to a refund of its unutilized input taxes incurred before it became a PEZA-registered entity.
Under the old VAT rule, for a PEZA-registered enterprise to be VAT-exempt would depend on the type of fiscal
incentives availed of by the said enterprise. The PEZA-registered enterprise has two fiscal incentive options: first,
a five percent (5%) preferential tax rate on its gross income shall be paid in lieu of all taxes will be paid, the it
would be VAT-exempt; or second, if the PEZA-registered enterprise will avail of the income tax holiday under
Executive Order No. 226, after such it will be subject to VAT at ten percent (10%). This rule however disregarded
the Cross Border Doctrine, and was later on abolished by RMC No. 74-99, which categorically declared that all
sales of goods, properties, and services made by a VAT-registered supplier from the Customs Territory to an
ECOZONE enterprise shall be subject to VAT, at zero-percent (0%) rate, regardless of the latter's type or class of
PEZA-registration.
Under RMC No. 74-99 and RA No. 7916, and following the VAT system's adherence to the Cross Border Doctrine
and Destination Principle, no VAT shall be imposed to form part of the cost of goods destined for consumption
outside the territorial border of the taxing authority. This means that sales made to enterprises located within
ECOZONES shall be VAT-exempt. This is because ECOZONES, by legal fiction are considered as foreign
territory.
In this case, petitioner's principal office is located inside the Rio Tuba Export Processing Zone, which is considered
as a special economic zone, or an ECOZONE. Consequently, the purchases of goods and services by petitioner
that were destined for consumption within the ECOZONE should be free of VAT. Therefore, no input VAT should
then be paid on such purchases, and thus making petitioner ineligible to claim for a refund or tax credit.
The Court likewise held that if the petitioner had paid the input VAT, its proper recourse should have been against
the seller and not the Government because it was the former who had shifted to it the output VAT.
[G.R. No. 205002. April 20, 2016.]
COMMISSIONER OF CUSTOMS v. PILIPINAS SHELL PETROLEUM CORP.
FACTS:
Respondent is engaged in the business of manufacturing and selling petroleum products for distribution in the
Philippines.
On January 30, 2009, petitioner Collector of Customs of the Port of Batangas issued a demand letter asking
respondent to pay the excise tax and VAT on its importation of gasoline for the years 2006 to 2008. Respondent
refused to heed the demand and issued a letter questioning the legal and factual basis of the demand instead.
Another letter of demand was issued by petitioner.
On March 5, 2009, respondent appealed the matter to petitioner Commissioner of Customs (COC). The COC
denied the appeal and ordered respondent to pay the unpaid taxes. Thereafter, respondent moved for its
reconsideration but the same was likewise denied. It then elevated its case to the Court of Tax Appeals by way of
Petition for Review. it also prayed for the issuance of a Suspension Order against the collection of taxes and for
the immediate issuance of a temporary restraining order (TRO).
The Court of Tax Appeals granted the application for a TRO but it denied the request for a suspension order.
In light of the denial of the request for a Suspension Order, petitioner District Collector issued a memorandum on
February 9, 2010 ordering the personal of the Bureau of Customs in the Port of Batangas to hold the delivery of all
import shipments of respondent to satisfy its excise tax liabilities.
On February 10, 2010, respondent filed with the Regional Trial Court (RTC) a Complaint for Injunction with prayer
for the ex-parte issuance of a 72-hour TRO to enjoin the implementation of the February 9, 2010 Memorandum.
Petitioners filed with the Court of Tax Appeals a motion to cite respondents for Contempt of Court for forum
shopping. The Court of Tax Appeals in Division denied the motion.
ISSUE:
Whether respondents committed forum shopping.
HELD:
Respondent did not commit forum shopping.
According to jurisprudence, there are three ways of committing forum shopping. First, by filing multiple cases
based on the same cause of action and with the same prayer, the previous case not having been resolved yet (litis
pendentia). Second, by filing multiple cases based on the same cause of action, with the same prayer, the
previous case having been finally resolved (res judicata). This means that in order 1.) identity of parties, or at least
of the parties who represent the same interest in both actions; 2.) identity of reliefs prayed for; and 3.) identity of
the two preceding elements such that any judgment rendered in one action will amount to res judicata in the other
or will constitute litis pendentia.
In this case, the elements of forum shopping are not present. The subject matter and causes of action of the two
proceedings are not the same. the case before the Court of Tax Appeals involves the alleged unpaid excise tax
and VAT on the importations made by respondent from 2006 to 2008. The Injunction case before the RTC on the
other hand, involves the importations or shipments of respondent for the period of January to February 2010.
The issues raised in the two proceedings are not the same.
The issue in the CTA case involves the question as to whether respondent is liable to pay the excise taxes and
VAT due on its importation of gasoline. As for the Injunction filed before the RTC, it involves the question of the
validity of the February 9, 2010 Memorandum.
The Court also held that a comparison of the reliefs prayed for in the Petition for Review and Verified Motion
before the CTA and the Complaint for Injunction before the RTC are not the same.
Finding no similarity in the subject matter, cause of action, issues raised and the reliefs prayed for, the Court finds
that respondents are not guilty of forum shopping.
[G.R. No. 167679. April 20, 2016.]
ING BANK N.V. v. COMMISSIONER OF INTERNAL REVENUE
FACTS:
The Court of Tax Appeals Second Division and En Banc ruled that petitioner is liable for deficiency document
stamp taxes, onshore taxes, and withholding taxes. Petitioner filed its opposition.
In this present Motion for Partial Reconsideration, respondent maintains that petitioner should be held liable for
deficiency documentary stamp taxes because the same is excluded from the tax amnesty granted by Republic Act
No. 9480. It argues that Revenue Memorandum Circular No. 19-2008 specifically excludes "cases which were
ruled by any court (even without finality) in favor of the Bureau of Internal Revenue prior to amnesty availment of
the taxpayer" from the coverage of RA No. 9480. It likewise claims that under Revenue Memorandum Circular
69-2007, documentary stamp taxes, being taxes that are passed-on and collected from customers for remittance
to the Bureau of Internal Revenue, are not covered by RA No. 9480.
ISSUE:
Whether documentary stamp taxes are excluded from the tax amnesty granted by RA No. 9480.
HELD:
Documentary stamp tax is one of the taxes covered by RA No. 9480.
RA No. 9480 provides a general grant of tax amnesty subject only to the cases specifically excepted by it.
Respondent's contention that documentary stamp taxes are not covered by the tax amnesty for being taxes that
are passed-on and collected from customers for remittance to the Bureau of Internal Revenue is misplaced.
Revenue memorandum circulars issued by the Commissioner of Internal Revenue are administrative rulings which
are considered as specific interpretations of tax laws. These issuances can be set aside by the Courts if found
erroneous. This means that such issuances must not amend, modify, or override the laws which they seek to
implement but rather must remain consistent and in harmony with the same.
Documentary stamp taxes are not taxes that are passed-on and collected from the customers for remittance to the
Bureau of Internal Revenue. It is a tax levied on the exercise of by persons of certain privileges conferred by law
for the creation, revision, or termination of specific legal relationships through the execution of specific instruments.
The Court held that petitioner is directly liable for the documentary stamp tax as the maker and issuer of the
instrument or any written memorandum evidencing the special savings account transaction. This means that it is
the petitioner who is responsible for the payment and remittance of the documentary stamp tax. The Court
therefore finds that petitioner cannot fall under the argued exception by respondent because of the lack of proof
that petitioner passed on and collected documentary stamp taxes from its clients.
Motion for Partial Reconsideration denied.
[G.R. No. 195054. April 4, 2016.]
CHAVEZ v. GARCIA
FACTS:
Petitioner was the former Register of Deeds of San Juan City. Private respondent filed a complaint with the Office
of the Ombudsman against petitioner for grave misconduct. The former claims that petitioner committed
irregularities in the cancellation of Transfer Certificates of Title (TCTs) registered in the name of his parents-in-law.
Private respondent claims that petitioner issued new TCTs in favor of one Hector P. Corpus. In a case before the
Regional Trial Court filed by private respondent's wife and mother-in-law prayed that the said TCTs be declared
void for being spurious. The lower court ruled in their favor.
Private respondent likewise maintains that, aside from the questionable TCTs, the sales taxes were not reported to
the Bureau of Internal Revenue and that the capital gains tax and documentary stamp tax were not paid.
Consequently, the Certificate Authorizing Registration (CAR) of the sales with the Registry of Deeds could not
have been issued. To prove the said allegation, certifications issued by the BIR that no sale was made between
his parents-in-law and Hector Corpus was reported to their office was submitted.
ISSUE:
Whether petitioner can be held liable for grave misconduct.
HELD:
Petitioner is liable for grave misconduct.
Petitioner committed grave misconduct when she issued the new TCTs in favor of Hector Corpus without the proof
of payment of taxes.
Based on the substantial evidence before the Office of the Ombudsman which were likewise appreciated by the
Court, it appears that there was no CAR when the subject TCTs were issued by petitioner. It was found out that
the new TCTs were issued on July 26, 2005. However, on October 4, 2005, it was certified by the BIR that the
capital gains tax and documentary stamp tax had not been paid on the sales. It was only on August 15, 2008 that
petitioner attached to her belatedly-filed counter affidavit the alleged CAR and other supporting documents proving
that the taxes were indeed paid.
This means that the CAR, the BIR Tax Payment Deposit Slip and Capital Gains Return were non-existent when
petitioner issued the TCTs in favor of Hector Corpus.
The Court therefore sustains the findings of the Office of the Ombudsman that petitioner is liable for grave
misconduct.
[G.R. No. 214430. March 9, 2016.]
MEJORADO v. ABAD
FACTS:
Sometime in December 1996 and the early part of 1997, petitioner provided confidential information detailing the
illegal importations of Union Refinery Corporation, OILINK Industrial Corporation, Union Global Trading, and
Philippine Airlines. Based on the information given by petitioner, the Bureau of Customs (BOC) investigated the
smuggled oil importations. The investigation resulted in the payment by the companies of millions of unpaid VAT,
excise, and ad valorem taxes from 1997 to 1998. Consequently, petitioner filed his first claim for informer's reward
with the BOC and Department of Finance (DOF). The BOC subsequently investigated additional smuggled oil
importations by the aforementioned companies. From the said investigation, deficiency taxes were once again
collected and prompted petitioner to file his second claim for informer's fee.
In response to an inquiry by the DOF in relation to the informer's reward, the Department of Justice (DOJ), through
the Secretary of Justice rendered Opinion No. 18 series of 2005 stating that there is no conflict between Section
3513 of the Tariff and Customs Code of the Philippines, which is a special law, and the National Internal Revenue
Code, which is a general law. The DOF thereafter favorably endorsed petitioner's second claim to the BOC.
However, in response to an inquiry from the DOF as to the percentage of fees that should be given to informers,
the DOJ issued Opinion No. 40, series of 2012 superseding its 2005 Opinion. In the 2012 Opinion, the DOJ
declared that Section 3513 of the Tariff and Customs Code of the Philippines impliedly repealed Section 282 (B) of
the NIRC of 1997 because they refer to the same subject matter and contain inconsistent provisions. The DOJ
thereafter issued Opinion No. 1, series of 2014 stating that its opinions are not administrative issuances but purely
advisory in nature.
In a letter, the Department of Budget and Management (DBM) informed petitioner that it is yet to receive a
favorable endorsement from the DOF on the reevaluation of its claim. This prompted petitioner to file present
petition for mandamus praying that respondent be directed to issue the Notice of Cash Allocation covering his
second claim.
ISSUE:
Whether respondent can be compelled by mandamus to issue the Notice of Cash Allocation in favor of the
petitioner.
HELD:
Respondent cannot be compelled by mandamus to issue the Notice of Cash Allocation corresponding to the
amount of petitioner's second claim.
The Rules of Court provide that mandamus is employed to compel an officer to perform a ministerial duty. The said
writ, however, will not issue to enforce a right which is in substantial dispute or as to which a substantial doubt
exists. Hence, it is necessary that the person praying for its issuance should have a clear legal right to the thing
demanded and it must be the imperative duty of the respondent to perform the act required.
In this case however, the Court finds that the writ of mandamus is not the proper remedy, and hence will not lie.
Petitioner's right to receive the Notice of Cash Allocation for his second claim is still under substantial dispute, as
shown by the different opinions rendered by the DOJ, BOC and DOF.
Petition for mandamus is denied.
[G.R. No. 205814. February 15, 2016.]
SPOUSES TEAÑO v. MUNICIPALITY OF NAVOTAS
FACTS:
Petitioners own several parcels of land with improvements situated in the National Housing Authority Industrial
Development Project (NHAIDP), Navotas. They are also the registered owners of a residential improvement in San
Jose, Navotas.
On July 2005, petitioners received a Final Notice to Collect Real Property Tax from the Municipal Treasurer's
Office demanding payment of real estate taxes on the aforementioned properties from the year 1990 to 2005. They
answered the Final Notice and argued that respondent's right to collect realty tax from 1990 to 2000 had already
prescribed. They also averred that they were exempt from the payment of real estate taxes from 2001 to 2003
because on 2001, a fire razed the machineries at the NHAIDP forcing them to lease another building. It was only in
2004 that they reoccupied the premises without any machinery. They likewise pleaded that respondent condone
the realty taxes on their properties.
Instead of answering, respondents issued a Warrant of Levy against petitioners. This prompted the latter to pray
for the issuance of a Temporary Restraining Order (TRO) to restrain respondents from enforcing the Warrant of
Levy. However, the Regional Trial Court did not issue a TRO. Thereafter, petitioners filed a Motion for Summary
Judgment which was granted on June 13, 2005. In the meantime, respondents pushed through with the public
auction.
On June 29, 2007, the RTC rendered its Summary Judgment dismissing the case on the ground that it does have
jurisdiction over the subject matter. It held that pursuant to Sections 226 and 229 of the Local Government Code
(LGC), petitioners should have appealed the Municipal Treasurer's assessment to the Local Board of Assessment
and Appeals (LBAA). If they remain unsatisfied with the decision of the LBAA, they may thereafter appeal to the
Central Board of Assessment and Appeals.
In an order dated September 21, 2007, the RTC held that pursuant to Sec. 250 and 270 of the LGC, respondent's
right to collect realty taxes from petitioner from 1990-2000 had already prescribed. As a result, it set aside its June
29, 2007 judgment and ordered the collection of taxes from 2001 to 2005.
Four years after the order became final and executory, petitioners filed a Petition for Annulment of Summary
Judgment with Prayer for Preliminary Mandatory Injunction and/or Temporary Restraining Order. However, the
same was dismissed by the appellate court.
ISSUE:
Whether the Court of Appeals erred in dismissing petitioners' Petition for Annulment of Summary Judgment.
HELD:
The dismissal of the Court of Appeals of the Petition for Annulment of Summary Judgment is proper.
According to jurisprudence, an annulment of judgment must be based only on the grounds of extrinsic fraud, and
or lack of jurisdiction. It is also required that it must be commenced by a verified petition that specifically alleges
the facts and law relied upon for annulment.
In this case, petitioners' petition before the Court of Appeals did not even include any particulars as to the
judgment, resolution or order of the RTC which it seeks to annul and the ground upon which it was based. The
Court held that the petition does not need to categorically state the exact words "extrinsic fraud" or "lack of
jurisdiction". However, it is necessary that the allegations must be made in a way that will establish the ground
relied upon in the petition.
Since there is no substantial merit in Petition for Annulment of Summary Judgment, the same was properly
dismissed by the appellate court.
[G.R. No. 180235. January 20, 2016.]
ALTA VISTA GOLF AND COUNTRY CLUB v. CITY OF CEBU
FACTS:
Petitioner is a non-stock and non-profit organization operating a golf course in Cebu City.
On June 1993, the Sangguniang Panlungsod of Cebu City enacted City Tax Ordinance No. LXIX or the Revised
Omnibus Tax Ordinance. Section 42 of the said tax ordinance provides that an amusement tax of twenty percent
(20%) of their gross receipts on entrance, playing green, and/or admission fees shall be paid to the Office of the
City treasurer by the proprietors, lessees, or operators of golf courses.
On August 1998, petitioner was assessed deficiency business taxes, fees, and other charges including
amusement tax on its golf course. It refused to pay the amusement tax arguing that the imposition of said tax was
irregular, improper, and illegal. It maintained that under the Local Government Code, an amusement tax can only
be imposed on operators of theaters, cinemas, concert halls, or places where one seeks to entertain himself by
seeing or viewing a show or performance.
ISSUE:
Whether the City of Cebu or any local government can validly impose amusement tax to the act of playing golf.
HELD:
The City of Cebu or any local government cannot validly impose amusement tax to the act of playing golf.
Section 42 of the Revised Omnibus Tax Ordinance is null and void as it is beyond the authority of respondent to
enact under the Local Government Code.
Section 140 of the Local Government Code provides that an amusement may be collected from the proprietors,
lessees, or operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other places of amusement.
The term "amusement places" has been defined under Section 131 of the same law as, "theaters, cinemas,
concert halls, circuses and other places of amusement where one seeks admission to entertain oneself by seeing
or viewing the show or performance."
The Court held that a golf course cannot be considered as a place of amusement. It upheld petitioner's contention
that people do not enter a golf course to see or view a show or performance but rather they go there to engage
themselves in a physical sport or activity. The Court does not find any basis for singling out golf courses for
amusement tax purposes. It likewise stressed that the same amounts to a contravention of a fundamental principle
of local taxation: that the taxation shall be uniform in each local government unit.
[G.R. No. 169507. January 11, 2016.]
AIR CANADA v. COMMISSIONER OF INTERNAL REVENUE
FACTS:
Petitioner is a foreign corporation organized and existing under the laws of Canada. It was granted an authority to
operate as an off-line carrier by the Civil Aeronautics Board. An off-line carrier is one which does not have flights
originating from or coming to the Philippines and does not operate any airline in the Philippines. On July 1999,
petitioner engaged the services of Aerotel Ltd., Corp. (Aerotel) as its general sales agent to sell its passage
documents in the Philippines.
Aerotel filed its quarterly and annual income tax returns and paid the income tax on Gross Philippine Billings.
Subsequently, petitioner filed a written claim for refund of alleged erroneously paid income taxes. It maintains that
pursuant to Section 28 (A) (3) (a) of the NIRC of 1997 it should not be subject to Gross Philippine Billings because
it does not have flights originating from the Philippines.
A Petition for Review before the Court of Tax Appeals was then filed in order to toll the running of the prescriptive
period. The Court of Tax Appeals First Division held that petitioner is engaged in business in the Philippines,
through a local agent (Aerotel) that sells airline tickets on its behalf, and hence it should be taxed as a resident
foreign corporation at the rate of thirty-two percent (32%) pursuant to Section 28 (A) (1) of the NIRC of 1997.
Therefore, while it is indeed not liable for Gross Philippine Billings, it is liable to pay corporate income tax on the
income derived from the sale of airline tickets within the Philippines.
ISSUE:
Whether petitioner is entitled to a refund of erroneously paid income taxes.
HELD:
Petitioner is not entitled to a refund.
Section 28 (A) (3) of the NIRC of 1997 provides that an international carrier doing business in the Philippines shall
be liable pay a tax on its Gross Philippine Billings. The term Gross Philippine Billings was defined as the amount of
gross revenue derived from the carriage of persons, excess baggage, cargo and mail originating in the Philippines.
The Court upheld the ruling of the Court of Tax Appeals First Division that petitioner cannot be liable for Gross
Philippine billings because as an offline international carrier, it does not have landing rights in the Philippines.
Petitioner, as an offline carrier, is a resident foreign corporation for income tax purposes.
Section 28 (A) (1) of the NIRC of 1997 provides that a resident foreign corporation is a foreign corporation
engaged in trade or business within the Philippines or having an office or place business therein. The Court finds
petitioner as a foreign corporation "doing business" or "engaged in trade or business" in the Philippines because of
its agent, Aerotel. It is its agent who performs acts or works or functions that are incidental and beneficial to the
purposes of its business. This means that its income from sale of airline tickets by Aerotel is income realized for
the pursuit of its business activities in the Philippines.
While petitioner is subject to the thirty-two percent (32%) tax rate under Section 28 (A) (1) of the NIRC of 1997, the
Court held that the provisions of the Republic of the Philippines-Canada tax treaty should likewise be given
consideration.
The Republic of the Philippines-Canada Tax Treaty defines "permanent establishment" as a fixed place of
business in which the business of the enterprise is wholly or partly carried on. This means that even if there is no
fixed place of business, an enterprise of a Contracting State is considered to be a permanent establishment in the
other Contracting State if under certain conditions there is a person acting for it. The Court once again held that
Aerotel can be deemed as a person acting for petitioner. Based on its Passenger General Sales Agency
Agreement, it has the authority or power to enter into contracts and bind petitioner to contracts entered into in the
Philippines. It was further held that Aerotel extends to the Philippines petitioner's transportation business.
Therefore, income attributable to Aerotel or from business activities effected by petitioner through Aerotel may be
taxed in the Philippines.
The Court ruled, however, that pursuant to the tax treaty between the Philippines and Canada, the tax imposed on
income derived from the operation of aircrafts in international traffic should not exceed 1 ½% of gross revenues
derived from Philippine Sources.
Despite its exemption from the payment of Gross Philippine Billings, the Court still finds the denial of petitioner's
claim for refund proper.
The Court ruled that the Court of Tax Appeals properly denied petitioner's claim for refund on the ground that
petitioner was instead liable for the regular tax on its taxable income from sources within the Philippines. It was
stressed that a taxpayer cannot simply refuse to pay tax on the ground that the tax liabilities were set-off against
any alleged claim the taxpayer may have against the government. Therefore, the Court finds that no refund should
be granted in favor of petitioner.
[G.R. No. 209324. December 9, 2015.]
REPUBLIC v. PILIPINAS SHELL PETROLEUM CORP.
FACTS:
Respondent is engaged in the importation, refining, and sale of petroleum products in the country. For its
importations, it was assessed and required to pay customs duties and internal revenue taxes.
Under a Deed of Assignment dated May 7, 1997, Filipino Way Industries (FWI) assigned Tax Credit Certificates
(TCC) to respondent. Believing that the Tax Credit Certificates are valid, petitioner allowed respondent to use them
to pay the customs duties and taxes due on its importations. However, the One-Stop Shop Inter-Agency Credit and
Duty Drawback Center informed the Customs Commissioner that the TCCs utilized by respondent have been
fraudulently issued and transferred.
On April 3, 2002, petitioner filed a collection suit before the Regional Trial Court (RTC) for the payment of the taxes
and duties stilled owed by respondent after the invalidation of its TCCs.
Meanwhile, respondent filed with the Court of Tax Appeals a petition for review questioning the factual and legal
bases of the Bureau of Customs' assessment. It also moved for the dismissal of the collection suit on the ground
that the RTC had no jurisdiction over the subject matter. it also averred that the complaint for collection was
prematurely filed given that it has a pending Petition for Review before the Court of Tax Appeals. The RTC denied
the motion. Thereafter, respondent filed a Motion for Summary Judgment arguing that petitioner's cause of action
had already prescribed when it attempted to collect its customs duties and taxes only four years later which was
beyond the one-year prescriptive period to file a collection case.
ISSUE:
Whether petitioner's claim is barred by prescription.
HELD:
Petitioner's collection suit is not barred by prescription.
Section 1204 of the Tariff and Customs Code of the Philippines (TCCP) provides that the liability for duties, taxes,
and other charges attaching on importation constitutes a personal debt due from the importer to the government
which can be discharged only by payment in full of all duties, taxes, fees and other charges legally accruing. This
means that import duties are a personal debt of the importer that must be paid in full. Its liability is a lien on the
article which the government may opt to enforce while the imported articles are either in its custody or under its
control.
In this case, because the TCCs used by respondent were cancelled, its liabilities under the original assessment
are deemed unpaid, and thus, the Bureau of Customs instituted an action for collection before the RTC.
The Court held that the assessed customs duties were previously assessed and paid by the taxpayer. However
because the TCCs turned out to be spurious and worthless, its tax liabilities were not extinguished. Since there is
still an existing tax liability, petitioner's claim for the payment of the taxes and duties are not barred by prescription.
[G.R. Nos. 200841-42. August 26, 2015.]
CE LUZON GEOTHERMAL POWER COMPANY, INC. v. COMMISSIONER OF INTERNAL REVENUE
FACTS:
On November 30, 2006, petitioner filed an administrative claim for refund of its unutilized input VAT. On January 3,
3007, it filed a judicial claim for refund by way of petition for review before the Court of Tax Appeals.
The Court of Tax Appeals Division partially granted petitioner's claim for refund. Dissatisfied, both parties moved
for partial reconsideration. The Court of Tax Appeals Division once again partially granted petitioner's motion.
Thereafter, both parties appealed to the Court of Tax Appeals En Banc which set aside the Division's findings. It
held that petitioner's claim for refund must be denied on the ground that it was prematurely filed, hence divesting
the Court of Tax Appeals jurisdiction.
ISSUE:
Whether petitioner is entitled to a tax refund of unutilized input VAT.
HELD:
Petitioner is not entitled to a refund of unutilized input VAT.
The Court sustained the ruling of the Court of Tax Appeals En Banc that petitioner's claim for refund must be
dismissed for being prematurely filed.
Section 112 of the NIRC of 1997 provides that a claim for refund of unutilized input VAT should be made within two
(2) years after the close of the taxable quarter when the sales were made. It was likewise provided that the
Commissioner shall grant a refund or issue a tax credit certificate for creditable input taxes within one hundred
twenty (120) days from the date of submission of complete documents. In case of a denial or inaction on the part
of the Commissioner, the taxpayer may appeal the decision to the Court of Tax Appeals within thirty (30) days from
the receipt of the denial or the lapse of the 120-day period, in which case the inaction shall be treated as a denial.
In the case of CIR vs. Aichi Forging Company of Asia, the Court held that the 120-day period is mandatory and
jurisdictional. It was likewise held that the two-year prescriptive period applies only to the filing of the administrative
claim. This means that once the administrative claim is filed within the two-year period, the taxpayer must wait for
the lapse of the 120-day period and thereafter, he has a 30-day period to file a judicial claim before the Court of
Tax Appeals, even if the said 120-day and 30-day periods would exceed the aforementioned two-year period.
However, in the case of CIR vs. San Roque Power Corporation, the Court held that pursuant to BIR Ruling No.
DA-489-03 dated December 10, 2003, the taxpayer need not wait for the lapse of the 120-day period before it can
file its judicial claim before the Court of Tax Appeals.
The Court in reconciling the two rulings held that in claims made from December 10, 2003 to October 6, 2010
(when the Aichi Case was promulgated) the taxpayers need not observe the mandatory 120-day period.
In this case, petitioner's administrative and judicial claims were filed on November 30, 2006 and January 3, 2007,
respectively or during the period of effectivity of BIR Ruling No. DA-489-03. This means that petitioner need not
await the expiration of the 120-day period before it can seek judicial relief before the Court of Tax Appeals.
The Court therefore finds that the Court of Tax Appeals En Banc erred in dismissing petitioner's petition on the
ground of prematurity.
[G.R. No. 167679. July 22, 2015.]
ING BANK N.V. v. COMMISSIONER OF INTERNAL REVENUE
FACTS:
Petitioner is the Philippine branch of Internationale Nederlanden Bank N.V., a foreign banking corporation
incorporated in the Netherlands. It is duly authorized by the Bangko Sentral ng Pilipinas to operate as a branch
with full banking authority in the Philippines.
It filed a Petition for Review before the Court of Tax Appeals for the cancelation and withdrawal of its deficiency tax
assessments including alleged deficiency documentary stamp tax on special savings accounts, deficiency onshore
tax, and deficiency withholding tax on compensation.
The Court of Tax Appeals Second Division upheld the assessments for deficiency withholding tax on
compensation and documentary stamp tax on special savings accounts against petitioner. Aggrieved, petitioner
appealed its case to the Court of Tax Appeals En Banc but the same was denied due course.
It later on filed a Manifestation and Motion informing the Court that it had availed itself of the tax amnesty provided
under Republic Act No. 9480 with respect to its liabilities for deficiency documentary stamp tax and deficiency tax
on onshore interest income. Respondent on the other hand insists that petitioner is not qualified to avail the tax
amnesty because both the Court of Tax Appeals En Banc and Second Division already ruled in its favor and
confirmed petitioner's liability for deficiency taxes.
Petitioner also maintains that it cannot be held liable for withholding tax on bonuses accruing to its officers and
employees. It argues that the liability of the employer to withhold the tax does not arise until such bonus is actually
distributed. Since the supposed bonuses were distributed in the succeeding year, its duty to withhold the tax during
the questioned taxable years did not arise.
ISSUE:
1.) Whether petitioner can avail of the tax amnesty under RA No. 9480.
2.) Whether petitioner is liable for deficiency withholding tax on accrued bonuses.
HELD:
Petitioner can avail of the tax amnesty provided under RA No. 9480.
Respondent based its contention that petitioner cannot avail of the tax amnesty on BIR Revenue Memorandum
Circular No. 19-2008. The said circular provides that issues and cases ruled by any court, even without finality, in
favor of the BIR prior to the amnesty availment are not covered by the tax amnesty under RA No. 9480. However,
the Court held that such contention is misplaced. According to jurisprudence, the said exception is invalid because
it went beyond the true intention of RA No. 9480. The law specifically provided that the tax amnesty program
exempts tax cases subject to final and executory judgments by the courts.
Petitioner is liable for deficiency withholding tax on accrued bonuses.
The NIRC of 1997 provides that every form of compensation for personal services is subject to income tax, and
consequently, to withholding tax. Bonuses, allowances, fringe benefits, pensions, and other income of similar
nature fall within the purview of the term "compensation", and are therefore taxable. The tax on compensation
income it withheld at source under the creditable withholding tax system. This means that the tax withheld is equal
or approximate to the tax due of the payee of the said income.
Petitioner recorded the bonuses as deductible expenses in its books. Consequently, it has the obligation to
withhold the related withholding tax due from the deductions for accrued bonuses from the time they accrued and
not from the time of actual payment. The Court held that petitioner cannot insist that it has no duty to withhold and
remit income taxes because the bonuses have not yet been distributed given the fact that it had already written-off
the same as its expenses in its books.
[G.R. No. 187631. July 8, 2015.]
GERON v. PILIPINAS SHELL PETROLEUM CORP.
FACTS:
Respondent operates an oil refinery and depot in Tabagao, Batangas City which manufactures and produces
petroleum.
Petitioner sent a notice of assessment to respondent demanding the payment of business taxes for its
manufacture and distribution of petroleum products.
Respondent protested the assessment. It argued that it cannot be held liable for the payment of the local business
tax either as a manufacturer or distributor of petroleum products. It likewise asserted that petitioner does not have
the authority to impose such taxes and that the same is contrary to law.
Petitioner on the other hand insist that any activity that involved the production or manufacture and distribution or
selling of any kind or nature as a means of livelihood or with a view to profit can be taxed by the local government
unit (LGU).
ISSUE:
Whether petitioner can impose business taxes on persons or entities engaged in the business of manufacturing
and distribution of petroleum products.
HELD:
Petitioner does not have the authority to impose business taxes on persons or entities engaged in the business of
manufacturing and distribution of petroleum products.
Section 133 of the Local Government Code provides an enumeration of the common limitations on the taxing
powers of LGUs. Under the said provision, the taxing powers of LGUs shall not extend to excises taxes on articles
enumerated under the National Internal Revenue Code, and taxes, fees, or charges on petroleum products.
Petitioner's contention that Sec. 143 (h) of the Local Government Code granting them the authority to impose
business taxes is so broad that it practically covers any business is misplaced. While the said provision indeed
grants LGUs authority to impose business taxes, the Court held that the same authority is limited by Section 133 of
the same Code. Moreover, the limitation under Section 133 is clear because it not only states that LGUs cannot
impose excise taxes, but also all taxes, fees, or charges on petroleum products.
[G.R. No. 181756. June 15, 2015.]
MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY v. CITY OF LAPU-LAPU
FACTS:
Petitioner was created by virtue of Republic Act No. 6958 to undertake the economical, efficient, and effective
control, management and supervision of the airports established in the Province of Cebu. Upon its creation, it
enjoyed exemption from realty taxes.
On September 1996, the Court rendered a decision in the case of Mactan-Cebu International Airport Authority vs.
Marcos (1996 MCIAA Case) declaring that upon the effectivity of the Local Government Code, petitioner was no
longer exempt from real estate taxes.
On 1997, respondent issues to petitioner a Statement of Real Estate Tax.
On December 2003, the Secretary of Department of Justice issued Opinion No. 50, series of 2008 upon the
request of petitioner's General Manager. According to the said opinion, the properties used for airport purposes
such as the airfield, runway, taxiway, and the lots on which the runway and taxiway are situated, are owned by the
Republic of the Philippines and are merely held in trust by the MCIAA, notwithstanding that the certificates of titles
thereto may have been issued in the name of the MCIAA.
Based on the Department of Justice opinion, the Department of Finance issued an indorsement to the City
Treasurer of Lapu-Lapu instructing the transfer of the said properties from the Taxable Roll to the Exempt Roll of
real properties.
ISSUE:
Whether petitioner is exempt from the payment of real estate taxes imposed by the respondent.
HELD:
Petitioner is exempt from the payment of real estate taxes.
Petitioner is an instrumentality of the government, hence its properties are actually, solely, and exclusively used for
public purposes, hence are exempt from real estate taxes.
The Court held that petitioner despite being vested with corporate powers is not a stock or non-stock corporation
which is a requirement before an agency or instrumentality is deemed a government-owned or controlled
corporation.
It was also ruled that petitioner's lands and buildings are properties of public dominion because they are intended
for public use. In reiterating an earlier case, the Court ruled that such lands and buildings are at the very least
intended for public service. Whether intended for public use or service, the petitioner's properties are of public
dominion. As properties of public dominion, they are owned by the State and are exempt from real estate taxes
pursuant to the Local Government Code. Consequently, unless such properties are leased to a taxable person, the
said properties cannot be subject to real estate taxes. This means that only the portions of petitioner's properties
which are leased to taxable persons like private parties are subject to real estate taxes.
In fine, the Court held that petitioner's properties that are actually, solely, and exclusively used for public purposes
consisting of the airport terminal building, airfield, runway and taxiway and the lots on which they are situated are
exempt from real property tax imposed by respondent.
[G.R. No. 185666. February 4, 2015.]
NIPPON EXPRESS (PHILIPPINES) CORP. vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
On September 24, 2001, petitioner filed applications for tax credit/refund. Due to the respondent’s inaction, it filed
a Petition for Review on April 24, 2002 in accordance with Sections 112 and 229 of the NIRC.
Both the Court of Tax Appeals in Division and En Banc ruled that the claim for refund must be denied because of
petitioner’s failure to properly substantiate the same. It was held that its sales of services must have been properly
supported by VAT official receipts which were not presented and submitted as evidence during the trial. Aggrieved
by such decisions, petitioner filed the present Petition for Review on Certiorari.
ISSUE:
Whether petitioner is entitled to a tax refund.
HELD:
Petitioner is not entitled to a refund.
Section 112 of the NIRC provides that a VAT-registered person whose sales are zero-rated or effectively
zero-rated may apply for a refund or issuance of a tax credit certificate within two (2) years after the close of the
taxable quarter when the said sales were made. This claim for a tax credit/refund shall be decided by the
Commissioner within one hundred twenty (120) days from the submission of the complete documents in support of
the application. In case of full or partial denial of the claim, or inaction on the part of the Commissioner, the
aggrieved taxpayer has thirty (30) days from the receipt of the adverse decision or after the expiration of the
120-day period to appeal the decision or unacted claim with the Court of Tax Appeals.
This means that the taxpayer has 30 days from the receipt of the decision denying his claim or in case of inaction,
30 days from the lapse of the 120-day period to appeal the same before the Court of Tax Appeals. The failure of
the taxpayer to comply with the given prescriptive period would lead to the denial of his judicial claim on the ground
of prescription or for being filed out of time.
In this case, the Court finds that petitioner’s judicial claim was filed beyond the 30-day periods. It filed its
administrative claim on September 24, 2001. According to Sec. 112 (D) of the NIRC, the 120-day period would
have expired on January 22, 2002 and it would have until February 21, 2002 to file its judicial claim. However, it
appears that its judicial claim was filed only on April 24, 2002, way beyond the mandatory 120+30-day prescriptive
period to file an appeal before the Court of Tax Appeals. Therefore, the Court of Tax Appeals does not have
jurisdiction over the instant claim for being belatedly filed.
[G.R. No. 172509. February 4, 2015.]
CHINA BANKING CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
From 1982 to 1986 petitioner was engaged in transactions involving sales of foreign exchange to the Central Bank
of the Philippines, commonly known as SWAP transactions. It did not file tax returns or pay tax on the SWAP
transactions for those taxable years.
On April 19, 1989, it received an assessment from the Bureau of Internal Revenue (BIR) finding it liable for
deficiency Documentary Stamp Tax (DST) on the sales of foreign bills of exchange to the Central Bank. On May 8,
1989, petitioner sent a letter of protest to the BIR and requested for a reinvestigation.
After more than twelve years, or on December 6, 2001, respondent rendered a decision reiterating the DST
deficiency and ordered the payment of the same. This prompted petitioner to file a petition for review before the
Court of Tax Appeals (CTA). However, the CTA Second Division ruled that the SWAP arrangement should be
treated as a telegraphic transfer subject to DST. The Court of Tax Appeals En Banc affirmed the decision of the
Court in Division.
Petitioner insists that the right of the government to collect the assessed DST had already been barred by
prescription. It maintains that the government only had three years from April 19, 1989, the date when it received
the assessment, to collect the tax.
Respondent for its defense maintains that the prescriptive period had been tolled when the petitioner requested for
a reinvestigation in its letter protest.
ISSUE:
Whether the right of the BIR to collect the assessed DST from petitioner is barred by prescription.
HELD:
The right of the BIR to collect the assessed DST is barred by the statute of limitations.
Section 319 of the NIRC of 1977 provides that the time limit for the government to collect the assessed tax is set at
three years, from the date when the BIR mails/releases/sends the assessment notice to the taxpayer. It further
provides that the assessed tax must be collected by distraint or levy and/or court proceeding within the stated
period.
In this case, the Court finds that prescription has set in. The records do not reveal when the notice of assessment
was mailed, released or sent to petitioner. Nonetheless, the latest possible date that the BIR could have sent,
mailed, or released it was on the same date it was received by the petitioner, which was on April 19, 1989.
Assuming that April 19, 1989 is the reckoning date, the BIR had three years to collect the said assessment.
However, records of the case show that there was neither a warrant of levy or distraint served on petitioner nor a
collection case against it filed in court during the given period. Respondent’s demand for payment was made
almost thirteen years from the date from which the prescriptive period is to be reckoned.
The Court also finds respondent’s contention that the running of the statute of limitations was suspended by the
request for reinvestigation without merit.
Sec. 320 of the same Tax Code states that when a taxpayer requests for a reinvestigation and the same is granted
by the Commissioner, the statute of limitations shall be suspended. This means that in order for the suspension to
take effect, two instances must occur: first, the taxpayer requested for a reinvestigation, and second, the
Commissioner granted the same.
In this case, there is no showing that the respondent ever granted the request for reinvestigation made by
petitioner. Therefore the running of the prescriptive period cannot be considered to have been effectively
suspended.
[G.R. Nos. 193383-84 & 193407-08. January 14, 2015.]
CBK POWER COMPANY LIMITED vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
Petitioner is engaged in the development and operation of hydroelectric power generating plants in Laguna. To
finance the said endeavor, it obtained a syndicated loan from several foreign banks.
In February 2001, it borrowed money from the Industrial Bank of Japan, Fortis-Netherlands, Raiffesen Bank,
Fortis-Belgium and Mizuho Bank for which it remitted interest payments from May 2001 to May 2003. It allegedly
withheld final taxes from the said payments based on the following rates and paid the same to the Bureau of
Internal Revenue: fifteen percent (15%) for Fortis-Belgium, Fortis-Netherlands, and Raiffesen Bank (Austria); and
twenty percent (20%) for Industrial Bank of Japan and Mizuho Bank (Japan).
Relying on the tax treaties with the countries where the said banks are residents, which imposes only a 10%
preferential tax rate to interest income derived by said banks, petitioner filed a claim for refund of its excess final
withholding taxes allegedly erroneously withheld and collected for the years 2001 and 2002.
Due to the respondent’s inaction, petitioner filed a Petition for Review before the Court of Tax Appeals in Division.
The Court granted the petition and held that it was entitled to a refund. It declared that the required International
Tax Affairs Division (ITAD) ruling was not a condition sine qua non for the entitlement of the tax relief sought by
petitioner. However, upon motion for reconsideration by the respondent, the Court amended its earlier decision on
the ground that petitioner failed to obtain an ITAD ruling before it availed of the preferential tax rate, pursuant to
Revenue Memorandum Order (RMO) 1-2000. On appeal, the Court En Banc affirmed the same.
ISSUE:
Whether an ITAD ruling is required before petitioner can be entitled to a refund.
HELD:
A prior ITAD ruling is not required for the entitlement to the tax relief sought by petitioner.
The Court held that the obligation to comply with a tax treaty must take precedence over the objective of RMO
1-2000. The objective of RMO 1-2000 in requiring an ITAD ruling before a taxpayer can avail of the preferential tax
rate is to prevent the consequences of any erroneous interpretation and/or application of tax treaty provisions,
such as claims for refund/credit for the overpayment of taxes. However, it pointed out that the prior application
becomes moot in refund cases where the very basis of the claim is the erroneous or excessive payment resulting
from the non-availment of the tax treaty relief at the first instance.
The Court, in this case, finds the prior application for an ITAD ruling illogical because petitioner could not possibly
apply for a tax treaty relief 15 days before payment precisely because it erroneously paid said tax based on the
regular rate provided by the Tax Code and not the preferential tax rate under the respective tax treaties. Moreover,
the Court held that the requirement for an ITAD ruling is not even found on the respective tax treaties and thus the
BIR should not impose additional requirements that would negate the availment of the reliefs given under
international agreements.
[G.R. No. 198756. January 13, 2015.]
BANCO DE ORO, BANK OF COMMERCE, CHINA BANKING CORPORATION, METROPOLITAN BANK &
TRUST COMPANY, PHILIPPINE BANK OF COMMUNICATIONS, PHILIPPINE NATIONAL BANK, PHILIPPINE
VETERANS BANK AND PLANTERS DEVELOPMENT BANK, petitioners, RIZAL COMMERCIAL BANKING
CORPORATION AND RCBC CAPITAL CORPORATION, petitioners-intervenors, CAUCUS OF
DEVELOPMENT NGO NETWORKS, petitioner-intervenor, vs. REPUBLIC OF THE PHILIPPINES, THE
COMMISSIONER OF INTERNAL REVENUE, BUREAU OF INTERNAL REVENUE, SECRETARY OF FINANCE,
DEPARTMENT OF FINANCE, THE NATIONAL TREASURER AND BUREAU OF TREASURY
FACTS:
Petitioner Caucus of Development NGO Networks (CODE-NGO) together with petitioner RCBC requested an
approval from the Department of Finance for the issuance by the Bureau of Treasury of 10-year zero-coupon
Treasury Certificates (T-Notes), repackaged and sold at a premium to investors as PEACe Bonds. Respondent
BIR then issued BIR Ruling No. 020-2011 on the tax treatment of the PEACe Bonds. It said that such PEACe
Bonds would not be classified as deposit substitutes and therefore not subject to the corresponding withholding
tax.
The Bureau of Treasury then issued Government Bonds to RCBC. The latter then sold these Government Bonds
as PEACe Bonds in the secondary market. Petitioners purchased the said bonds on different dates.
On October 7, 2011, the BIR issued BIR Ruling No. 370-2011 imposing a 20% Final Withholding Tax (FWT) on the
Government Bonds and directing the Bureau of Treasury to withhold said final tax at the maturity thereof.
Petitioners insist that the subject bonds are not deposit substitutes as defined under Section 22(Y) of the NIRC of
1997 because there was only one lender, RCBC, to whom the Bureau of Treasury issued the Bonds.
ISSUE:
Whether a FWT of 20% should be imposed on the PEACe Bonds.
HELD:
The PEACe Bonds are not subject to a 20% FWT.
Section 22 of the NIRC of 1997 defines the term deposit substitute as "an alternative form of obtaining funds from
the public". The term "public" was also defined in the same provision as "borrowing money from twenty (20) or
more individual or corporate lenders at any one time other than deposits, through the issuance, endorsement, or
acceptance of debt instruments for the borrower’s own account". This means that the number of lenders will
determine whether a debt instrument will be considered as a deposit substitute subject to a 20% FWT.
In this case, it appears that there is only one lender, RCBC, on behalf of CODE-NGO to whom the PEACe Bonds
were issued. However, based on the parties’ underwriting agreement, it appears that when the PEACe Bonds
were issued to CODE-NGO/RCBC, the dates of distribution and sale by the latter of the Bonds falls on the same
day of the said issuance by the Bureau of Treasury. These Bonds were said to have been sold and distributed to
various undisclosed investors. The Court held that should there have been a simultaneous sale to 20 or more
lenders/investors, then the PEACe Bonds shall be deemed as deposit substitutes within the purview of Sec. 22 of
the NIRC of 1997. Consequently, the corresponding 20% FWT must be withheld. Since the number of investors is
undisclosed, the Court ordered the Bureau of Treasury to cease from withholding the 20% FWT on the subject
bonds.
[G.R. No. 215427. December 10, 2014.]
PHILIPPINE AMUSEMENT AND GAMING CORPORATION (PAGCOR) vs. THE BUREAU OF INTERNAL
REVENUE, represented by JOSE MARIO BUÑAG, in his capacity as Commissioner of Internal Revenue and
JOHN DOE and JANE DOE, who are persons acting for, in behalf of, or under the authority of respondent
FACTS:
Petitioner filed before the Court this Petition for Review on Certiorari seeking the declaration of nullity of Section 1
of Republic Act 9337 insofar as it amends Sec. 27 (C) of the NIRC of 1997 by excluding it from the enumeration of
government-owned or controlled corporations (GOCCs) exempted from liability for corporate income tax. The
Court partially granted the same and held that Sec. 1 of RA 9337 is valid and constitutional, while Revenue
Regulations No. 16-2005 insofar as it subjects petitioner to 10% VAT is null and void.
Consequently, respondent issued Revenue Memorandum Circular (RMC) No. 33-2013 which clarifies the "Income
Tax and Franchise Tax Due from the Philippine Amusement and Gaming Corporation (PAGCOR), its Contractees
and Licensees." According to the said RMC, petitioner is no longer exempt from the payment of corporate income
tax because it has been effectively removed from the enumeration in the NIRC of 1997 of GOCCs that are exempt
from income tax. It also provides that pursuant to Presidential Decree 1869, or the PAGCOR Charter, PAGCOR is
subject to a franchise tax of five percent (5%) of the gross revenue or earnings it derives from its operations and
licensing of gambling casinos, gaming clubs and other similar recreation or amusement laces, gaming pools, and
other related operations.
Petitioner then wrote to the Bureau of Internal Revenue (BIR) Commissioner requesting for a reconsideration of
the tax treatment of its income from its gaming operations but the same was denied. It maintains that its income
tax from its gaming operations is subject only to five percent (5%) franchise tax under its charter, while its income
from other related activities is subject to corporate income tax.
ISSUE:
Whether petitioner's income is subject to corporate income tax pursuant to RA 9337 or to a franchise tax of five
percent (5%) pursuant to its charter.
HELD:
Petitioner's income from its gaming operations is subject to the five percent (5%) franchise tax, while its income
from other related activities is subject to corporate income tax.
PD 1869 classifies petitioner's income into two: first, income from its operations conducted under its franchise, or
its income from gaming operations; and second, income from its operation of necessary and related services, or
income from other related services.
The same law provides that a franchise tax of five percent (5%) is imposed on petitioner's gross revenues or
earnings from its operations under its franchise in lieu of all taxes of any kind or form including fees, charges or
levies of whatever nature. "In lieu of all taxes" necessarily includes corporate income tax. This means that a tax
exemption to petitioner with respect to its income from its gaming operations need not be granted because it is
already exempted from the same and is only liable for the five percent (5%) franchise tax.
Sec. 14 of PD 1869 provides any income of PAGCOR from its necessary and related services shall not be
included as part of its income for the purposes of applying the franchise tax. This means that its income from its
contractees and licensees in their operation of petitioner's casinos, as well as its own income from operating
necessary and related services, shows, and entertainment are considered as income from related operations and
therefore not included as part of its corporate income for the purpose of applying the five percent (5%) franchise
tax.
The Court held that while Sec. 1 of RA 9337 remains valid, petitioner's five percent (5%) franchise tax privilege
remains in so far as its income from its gaming operations is concerned while its income from other related
services is subject to corporate income tax only.
[G.R. No. 187589. December 3, 2014.]
COMMISSIONER OF INTERNAL REVENUE vs. THE STANLEY WORKS SALES (PHILS.), INCORPORATED
FACTS:
On April 21, 1993, respondent received an Assessment Notice from the petitioner finding it liable for deficiency
income tax. On May 19, 1993, it filed a protest letter and requested the reconsideration and cancellation of the
same. On November 16, 1993, a certain Mr. John Ang, acting on behalf of respondent, executed a "Waiver of
Defense of Prescription under the Statute of Limitations of the National Internal Revenue Code". The said waiver
was not signed by the petitioner or any of its authorized representatives and did not state the date of acceptance
as prescribed under Revenue Memorandum Order (RMO) 20-90.
On March 22, 2004, petitioner rendered a decision denying the request for reconsideration and ordering
respondent to pay the deficiency income tax.
Claiming that the period to collect the deficiency taxes had already prescribed, respondent filed a Petition for
Review before the Court of Tax Appeals First Division. After trial on the merits, the Court in Division held that the
request for reconsideration did not suspend the running of the prescriptive period to collect the deficiency income
tax, hence the period to collect had already prescribed. This ruling was affirmed by the Court of Tax Appeals En
Banc.
ISSUE:
Whether petitioner's right to collect the deficiency income taxes had already prescribed.
HELD:
Petitioner's right to collect the deficiency income taxes had already prescribed.
Section 222 (b) of the NIRC provides that the period to assess and collect deficiency taxes may be extended only
upon written agreement between the CIR and the taxpayer before the expiration of the three-year prescribed
period. In relation to the said provision, RMO 20-90 provides for the guidelines on the proper execution of the
Waiver of the Statute of Limitations. One of the requirements under the RMO is that the CIR or an authorized
revenue official must sign the waiver indicating that the BIR has accepted and agreed to the waiver. The date of
acceptance must also be indicated. This means that the waiver is not a unilateral act of the taxpayer; and therefore
the BIR must act on it, either by conforming or disagreeing with the extension.
In this case, it does not appear that the waiver has been signed by the petitioner; it also did not state the date of its
acceptance. The Court held that petitioner cannot avail of the extended period to collect as a consequence of the
execution of the waiver because it was to its own inaction which caused the defect of the waiver. Therefore, the
subject waiver is defective and invalid and thus produces no effect. Being the case, the prescriptive period to
collect was never tolled or suspended, and as a consequence, the right to enforce the collection has already
prescribed.
[G.R. Nos. 184203 & 187583. November 26, 2014.]
CITY OF LAPU-LAPU vs. PHILIPPINE ECONOMIC ZONE AUTHORITY
FACTS:
The City of Lapu-Lapu and the Province of Bataan, through their respective municipal and provincial treasurers,
demanded from the Philippine Economic Zone Authority (PEZA), real property taxes for its properties located in the
Mactan Economic Zone and Bataan Economic Zone.
Believing that its properties are not subject to real property tax, it filed with the Regional Trial Court separate
petitions for declaratory relief praying that it be declared exempt from the payment of real property taxes.
ISSUE:
Whether PEZA is exempt from payment of real property taxes.
HELD:
PEZA is exempt from the payment of real property taxes.
Real property taxes are annual taxes levied on real property such as lands, buildings, machinery and other
improvements not otherwise specifically exempted under the Local Government Code. As a general rule, real
properties are subject to real property tax. One of the exceptions to such rule is given under Section 133 (o) of the
Local Government Code. It provides that local government units have no power to levy taxes of any kind on the
national government, its agencies and instrumentalities.
PEZA is an instrumentality of the National Government.
The term "instrumentality" means any agency of the National Government, not integrated within the department
framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational autonomy, usually through a charter. Being an
instrumentality of the government, PEZA is not integrated within the departmental framework but is attached to the
Department of Trade and Industry. Therefore, it cannot be taxed by local government units. Furthermore, the lands
that it owns are deemed as real properties owned by the Republic of the Philippines, hence the City of Lapu-Lapu
and Province of Bataan cannot collect real property taxes from it. Finally, PEZA is exempt from real property taxes
by virtue of its charter. It assumed the real property exemption of EPZA, its predecessor, under PD 66.
[G.R. Nos. 175707, 180035, & 181092. November 19, 2014.]
FORT BONIFACIO DEVELOPMENT CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE and

REVENUE DISTRICT OFFICER, REVENUE DISTRICT NO. 44, TAGUIG and PATEROS, BUREAU OF
INTERNAL REVENUE
FACTS:
Petitioner owns, develops and sells parcels of land within Fort Bonifacio Global City in Taguig.
In May 1996, it started developing the Global City and had been selling lots since October 1996. Back then,
value-added tax (VAT) was not yet imposed on the sale of real properties.
On January 1, 1996, Republic Act No. 7716 or the E-VAT Law took effect and amended the Tax Code so as to
include the sale of real properties as one of the transactions subject to VAT. Thus, the sale of the parcels of land
by petitioner became subject to a 10% VAT, which was increased to 12% with the enactment of RA 9337.
Petitioner afterwards became a VAT-registered taxpayer.
Believing that it was entitled to a refund pursuant to Sec. 105 of the NIRC, petitioner submitted an inventory list of
its properties and subsequently claimed for transitional or presumptive input tax credit.
Respondents maintain that the transitional input tax credit may be claimed only on the improvements on the real
properties and the corresponding business taxes such as sales tax and VAT on the land must first be paid before
petitioner may claim for a refund.
ISSUE:
Whether petitioner is entitled to a refund of transitional input tax.
HELD:
Petitioner is entitled to a refund.
The transitional input tax credit that may be claimed is not limited to the improvements on the real properties.
Sec. 105 of the NIRC does not prohibit the inclusion of real properties as well as the improvements thereon in the
beginning inventory of goods, materials and supplies based on which inventory the transitional input tax is
computed. When Sec. 100 of the NIRC was amended by RA 7716, it made every sale, barter or exchange of
"goods or properties" subject to VAT. These "goods or properties" were defined as "all tangible and intangible
objects which are capable of pecuniary estimation" which included real properties held primarily for sale to
customers or held for lease in the ordinary course of trade or business. This means that such real properties,
whether or not they contain improvements, as long as they are used in the ordinary course of trade or business,
are considered as goods.
The prior payment of taxes is not necessary before petitioner can avail of the transitional input tax credit.
Sec. 105 provides that in order for the taxpayer to avail of the transitional input tax credit, it must file a beginning
inventory with the BIR. The law only requires that the taxpayer file an application and submit the beginning
inventory and nothing more.
The Court also held that a transitional input tax credit is not a refund per se but a tax credit. A refund would mean
that a return of what has been overpaid must be made, while a tax credit, on the other hand would mean that a
certain amount is subtracted directly from one's tax liability.
[G.R. Nos. 125346, 136328-29, etc. November 11, 2014.]
LA SUERTE CIGAR & CIGARETTE FACTORY vs. COURT OF APPEALS and COMMISSIONER OF INTERNAL
REVENUE
FACTS:
La Suerte Cigar & Cigarette Factory, Fortune Tobacco Corp. and Sterling Tobacco Corp. import leaf tobacco and
buy locally produced leaf tobacco used as raw material in manufacturing cigars and cigarettes. They were found to
be taxable for specific tax on business transactions conducted during the effectivity of the 1986 Tax Code, as
amended by EO 273.
They maintain that since there is no explicit reference to stemmed leaf tobacco in the Tax Code, then such product
cannot be considered to be subject to specific tax. They also argue that the intention of the law was to impose
excise taxes on products of tobacco that are not to be used as raw materials in the manufacture of other tobacco
products. Furthermore, they insist that they were doubly taxed because they were paying the specific tax on the
raw material and on the finished product in which the raw material was a part.
Respondent Commissioner on the other hand argues that stemmed-leaf tobacco is subject to tax because it falls
under the definition of "partially manufactured tobacco".
ISSUE:
Whether the cigarette manufacturers are liable for excise tax.
HELD:
The cigarette manufacturers are liable for excise tax.
Excise tax is a tax on the production, sale, or consumption of specific commodity in a country. The excise tax
based on the weight, volume capacity, or any other physical unit of measurement is called the specific tax.
Section 141 of the 1986 Tax Code subjects partially prepared tobacco, including stemmed-leaf tobacco, to excise
tax. Stemmed-leaf tobacco, as defined in the 1997 Tax Code, is leaf tobacco which has had the stem or midrib
removed. The removal of the midrib or stem from the tobacco leaf makes it a prepared or partially prepared
tobacco.
There is no double taxation in the case at bar.
Double taxation in its prohibited sense means taxing the same property for the same purpose by the same taxing
authority during the same taxing period and the tax must also be of the same character.
In this case, there is no double taxation because the law had been explicit on imposing the taxes on two specific
products, namely the stemmed-leaf tobacco and on the cigar or cigarette.
[G.R. No. 204142. November 9, 2014.]
HONDA CARS PHILIPPINES, INC. vs. HONDA CARS TECHNICAL SPECIALIST AND SUPERVISORS UNION
FACTS:
Petitioner and respondent entered into a Memorandum of Agreement converting the transportation allowance into
a monthly gasoline allowance. This allowance answers for the gasoline consumed by the union members for
official business purposes and for home to office travel and vice-versa.
Petitioner claimed that the said gasoline allowance is tied up to a similar company policy for managers and
assistant vice presidents, which provides that in the event that the amount of gasoline is not fully consumed, the
gasoline not used may be converted to cash, subject to whatever tax may be applicable. Since the cash
conversion is paid in the monthly payroll as an excess gas allowance, the company considers the amount as part
of the managers’ and assistant vice presidents’ compensation that is subject to income tax on compensation.
Consequently, the company deducted from the respondents’ salaries the withholding tax corresponding to the
conversion of cash of their unsold gasoline allowance.
Respondent insists that the gasoline allowance and its unused gas equivalent are fringe benefits under the
Collective Bargaining Agreement and the Tax Code, and therefore not subject to withholding tax on compensation
income. Furthermore, the same benefit should not also be subject to fringe benefit tax because it is required by the
nature of, or necessary to the trade or business of the company.
ISSUE:
Whether respondent can demand a refund or the non-withholding of tax from petitioner.
HELD:
Respondent cannot demand a refund or the non-withholding of tax from petitioner.
Respondent does not have a cause of action against petitioner.
Section 79 of the NIRC provides that under the withholding tax system, the employer as withholding agent acts as
both agent of the Government and the taxpayer. Except in the case of a minimum wage earner, the employer has
the duty to deduct and withhold from the employee’s wages a certain amount of tax.
This means that as the Government’s agent, the employer shall collect the tax and serve as the payee by fiction of
law. On the other hand, it is considered as the employee’s agent because it shall file the necessary income tax
return and remit the corresponding tax to the Government.
In this case, the petitioner only performed its duty as required by the law, which was to withhold the tax in
accordance with the provisions of the NIRC. Therefore, if the tax was actually illegally or erroneously collected
from the union members, then its recourse would be against the Bureau of Internal Revenue, and not against the
petitioner.
[G.R. No. 190021. October 22, 2014.]
COMMISSIONER OF INTERNAL REVENUE vs. BURMEISTER AND WAIN SCANDINAVIAN CONTRACTOR
MINDANAO, INC.
FACTS:
On January 21, 1999, respondent filed its Quarterly VAT Return for the fourth quarter of the taxable year 1998
indicating zero-rated sales on its domestic purchase of goods and services for the same period. On July 21, 1999,
it filed an Application for Tax Credit/Refund but the same was not acted upon by petitioner. This prompted
respondent to file for a Petition for Review before the Court of Tax Appeals on January 9, 2001 praying that a
refund or a tax credit certificate be issued in its favor.
The Court of Tax Appeals First Division ruled in its favor but reduced the amount of refund/credit to which it is
entitled. Aggrieved, petitioner elevated the case to the Court of Tax Appeals En Banc. It argued that respondent
failed to observe the proper prescriptive periods and therefore should not be entitled to a refund/credit. The latter
court dismissed the petition and held that petitioner could not raise for the first time on appeal the issue of
prescription.
ISSUE:
Whether respondent is entitled to a refund or tax credit.
HELD:
Respondent is not entitled to a refund or tax credit.
Section 112 of the NIRC of 1997 provides that a VAT-registered person whose sales are zero-rated or effectively
zero-rated may apply for the issuance of a tax credit or refund within two (2) years after the close of the taxable
quarter when the sales were made. The Commissioner shall decide on the tax credit or refund within one hundred
twenty (120) days from the submission of the complete documents in support of the application. In case of a full or
partial denial, or inaction of the Commissioner after the expiration of the 120-day period, the aggrieved taxpayer
may appeal the decision or unacted claim before the Court of Tax Appeals within thirty (30) days from its receipt of
the decision denying the claim or after the expiration of the 120-day period.
This means that the taxpayer may file its administrative claim any time within the two-year prescriptive period. After
receiving the application and supporting documents, the Commissioner has 120 days to decide on the same. If the
Commissioner does not decide on the claim, the taxpayer has 30 days from the expiration of the 120-day period to
file its judicial claim with the Court of Tax Appeals.
In this case, the claim was filed on July 21, 1999, therefore petitioner had until November 18, 1999 to act on the
same. Since it did not act at all, respondent had until December 18, 1999, the last day of the 30-day period to file
its judicial claim. However, it appears that its judicial claim was made only on January 9, 2001, more than a year
beyond the allowable period. Therefore, being belatedly filed, the court cannot be said to have acquired jurisdiction
on the matter.
[G.R. No. 186223. October 1, 2014.]
COMMISSIONER OF INTERNAL REVENUE vs. PHILIPPINE ASSOCIATED SMELTING AND REFINING

CORPORATION
FACTS:
Respondent is a PEZA-registered enterprise. It uses petroleum products for its manufacturing and other
processes. These products are bought from local distributors which import the same and pay the corresponding
excise taxes. The excise taxes paid are then passed on by the local distributors to its purchasers.
From January 2005 to October 2005 respondent purchased petroleum products from Petron and paid the
corresponding excise taxes. It subsequently filed a claim for refund and/or tax credit but the same was denied by
petitioner. Petitioner argues that respondent is not the proper party to claim for the refund/credit.
ISSUE:
Whether respondent is the proper party to file a claim for the refund and/or credit for excise taxes.
HELD:
Respondent is the proper party to file a claim for refund/credit.
Section 17 of Presidential Decree 66 or the PEZA Law provides for the tax benefits granted to PEZA-registered
enterprises. According to the said provision, the supplies that are used whether directly or indirectly by a
PEZA-registered enterprise are not subject to customs and internal revenue rules and regulations or local tax
ordinances. The Court held that the law was clear; respondent is exempted from the payment of excise taxes.
Petitioner's contention that since respondent is not the statutory taxpayer, it is not the proper party to claim for a
refund is without merit.
If the law grants an exemption for both direct and indirect taxes, a claimant may apply for a refund even if it only
bears the economic burden of the applicable tax. However, if the exemption given only applies to direct taxes, then
it is only the statutory taxpayer who is considered to be the proper party to claim for a refund. In this case, the
subject tax is an indirect tax. Therefore, even if respondent is not the statutory taxpayer, it may claim for the a
refund.
[G.R. No. 180651. July 30, 2014.]
NURSERY CARE CORPORATION; SHOEMART, INC.; STAR APPLIANCE CENTER, INC.; and HARDWARE
WORKSHOP, INC. vs. ANTHONY ACEVEDO, in his capacity as THE TREASURER OF MANILA; and THE
CITY OF MANILA
FACTS:
The City of Manila assessed and collected taxes from the individual petitioners pursuant to Section 15 (Tax on
Wholesalers, Distributors, or Dealers) and Section 17 (Tax on Retailers) of the Revenue Code of Manila. It also
imposed additional taxes upon the petitioners pursuant to Section 21 of the same Code (Tax on Business Subject
to Excise, Value-Added or Percentage Taxes under the NIRC).
Petitioners paid under protest the tax imposed under Section 21 and subsequently formally requested for the
refund of the same from the Office of the City Treasurer. However, their request was denied.
ISSUE:
Whether petitioners are entitled to a refund or credit of the taxes paid under Section 21 of the Revenue Code of
Manila.
HELD:
Petitioners are entitled to a refund.
The tax imposed under Section 21 of the Revenue Code of Manila constitutes double taxation, and the taxes
collected pursuant thereto must be refunded.
Double taxation is taxing the same property twice when it should only be taxed once. There is direct double
taxation or double taxation in its obnoxious sense when the two taxes are imposed on the same subject matter, for
the same purpose, by the same taxing authority, within the same jurisdiction, during the same taxing period and
the said taxes are of the same kind or character.
In this case, all the elements of double taxation are present. First, Section 21 of the Revenue Code of Manila
imposed the tax on a person who sold goods and services in the course of trade or business based on a certain
percentage of his gross receipts, while Sections 15 and 17 also imposed the tax on a person who sold goods and
services but only specified who these persons were, e.g., wholesalers, distributors, retailers, or dealers. Moreover,
all these taxes are imposed on the privilege of doing business in the City of Manila to contribute to its revenues.
Second, these taxes were all imposed by the same taxing authority which was the City of Manila and within the
same jurisdiction and for the same taxing period, which was per calendar year. Third, all the taxes imposed were
of the same nature as they were all local business taxes.
[G.R. No. 181836. July 9, 2014.]
BANK OF THE PHILIPPINE ISLANDS vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
On June 16, 1989, petitioner received an assessment notice and formal letter of demand from the Bureau of
Internal Revenue (BIR) finding it liable for deficiency Documentary Stamp Tax (DST) on its sales of foreign bills of
exchange to the Central Bank. Believing that the assessment lacked factual and legal basis, it filed a protest letter
and requested for a reinvestigation and/or reconsideration of the same on June 23, 1989. The request was
allegedly denied on August 4, 1998, thus prompting petitioner to file a Petition for Review before the Court of Tax
Appeals.
The Court of Tax Appeals ruled in favor of petitioner and ordered the cancellation of the assessment. Respondent
then appealed to the Court of Appeals and the Court reversed the assailed decision.
Petitioner maintains that respondent's right to collect the assessed DST had already prescribed pursuant to the
NIRC of 1977. Respondent on the other hand argues that the protest letter sent by petitioner on June 1989
effectively interrupted the prescriptive period to collect the deficiency tax.
ISSUE:
Whether respondent has a right to collect the assessed DST from petitioner.
HELD:
Respondent cannot collect the assessed deficiency DST on the ground of prescription.
Section 319 (c) [now 222 (c)] of the NIRC of 1977 provides that any internal revenue tax which has been assessed
within the period of limitation may be collected by distraint or levy, and/or court proceeding within three years after
the assessment of the tax. The assessment of the tax is considered to be made and the three-year period for the
collection of the assessed tax begins to run on the date the assessment notice has been released, mailed or sent
by the BIR to the taxpayer.
This means that the BIR has three years to collect the assessed tax from the time it has released, mailed or sent
the assessment notice to the taxpayer.
In this case, there was no allegation as to when the subject assessment had been released, mailed or sent to
petitioner. The latest date that the BIR could have released, mailed or sent it would have been on June 16, 1989,
the date it was received by petitioner. It is from the said date that the three-year prescriptive period will begin to
run. Therefore, the BIR had until June 15, 1992 to collect the assessed deficiency tax. However, there was no
evidence presented to show that a warrant of levy or distraint or any judicial proceeding has been commenced by
the BIR during the three-year period. It appears that its earliest attempt to collect the assessed tax was on
February 1999, six years after the prescriptive period.
Respondent's contention that the request for reconsideration and/or reinvestigation its without merit.
Sec. 320 (now 223) of the NIRC of 1977 provides that the running of the statute of limitations on the assessment
and collection of taxes is deemed suspended when the taxpayer requests for a reinvestigation and the same is
granted by the Commissioner.
This means that two things must concur in order to toll the running of the prescriptive period: first, a request for a
reinvestigation is made by the taxpayer; and second, the same is granted by the Commissioner.
In this case, petitioner's request did not suspend the running of the prescriptive period to collect the taxes because
the same was actually denied by the BIR.
Since the prescriptive period was not actually suspended, the Court finds that respondent had lost its right to
collect the assessed taxes on the ground of prescription.
[G.R. No. 197192. June 4, 2014.]
COMMISSIONER OF INTERNAL REVENUE vs. INSULAR LIFE ASSURANCE CO., LTD.
FACTS:
Respondent received an Assessment Notice with Formal Letter of Demand from petitioner finding it liable for
deficiency Documentary Stamp Tax (DST) on its premiums on direct business/sums assured for the calendar year
2002. Believing that it should be exempt from the payment of DST on the insurance policies it grants to its
members, it filed its protest letter against the assessment but the same was denied by respondent. Undaunted, it
filed a Petition for Review before the Court of Tax Appeals. The Court of Tax Appeals Second Division and En
Banc both ruled in favor of respondent.
Petitioner maintains that because petitioner is not registered with the Cooperative Development Authority (CDA), it
should not be considered as a cooperative company and thus not entitled to the exemption provided under Section
199(a) of the NIRC of 1997.
ISSUE:
Whether respondent is exempt from paying DST.
HELD:
Respondent is exempt from the payment of DST.
Sec.199 of the NIRC of 1997 provides that policies of insurance granted by a cooperative company shall be
exempt from DST. The same law defines a cooperative company or association as one that is "conducted by the
members thereof with the money collected from among themselves and solely for their own protection and not for
profit".
From the given definition, it can be seen that as long as the said requisites are complied with, a company or
association is considered a cooperative insofar as taxation is concerned.
The Court held that the NIRC of 1997 does not expressly require prior registration with the CDA in order to avail of
the tax exemption benefit. Although Revenue Memorandum Circular 48-91 requires that a Certificate of registration
with the CDA must be submitted before the issuance of a tax exemption certificate, the Revenue Memorandum
Circular requirement cannot prevail over the clear absence of the same requirement under the NIRC of 1997.
[G.R. No. 182399. March 12, 2014.]
CS GARMENT, INC. vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
Petitioner filed a Petition for Review before the Court of Tax Appeals En Banc contesting the Court in Division's
decision finding it liable for deficiency VAT, Documentary Stamp Tax, and Income Tax. While the case is pending,
it filed a Manifestation and Motion stating that it had availed itself of the government's tax amnesty program under
the 2007 Tax Amnesty Law. it prays that the Court take note of its availment of the tax amnesty and confirm that it
is entitled to all the immunities and privileges under the said law.
The Office of the Solicitor General filed its Comment objecting to the Manifestation and Motion of petitioner. It
maintains that the filing of an application for tax amnesty does not by itself entitle petitioner to the benefits of the
law.
ISSUE:
Whether petitioner is already immune from paying the deficiency taxes stated in the assessment of the
respondent.
HELD:
Petitioner is already immune from the payment of taxes.
The Court refers to tax amnesty as an absolute waiver by a sovereign of its right to collect taxes and power to
impose penalties on persons or entities guilty of violating a tax law. It aims to grant a general reprieve to tax
evaders who want to come clean by giving them a chance to straighten out their records.
Section 6 of RA 9480 or the Tax Amnesty Law provides that all those who availed themselves of the benefits of the
law "become immune from the payment of taxes, as well as additions thereto, and the appurtenant civil, criminal or
administrative penalties under the National Internal Revenue Code of 1997…arising from the failure to pay any and
all internal revenue taxes for the taxable year 2005 and the prior years."
The Court held that pursuant to the aforementioned law, amnesty tax payers may immediately enjoy the privileges
and immunities under it as soon as they fulfill the suspensive conditions therein.
Sec. 2 of RA 9480 requires the taxpayer that wishes to avail of the tax amnesty to file a notice and a Tax Amnesty
Return together with a Statement of Assets, Liabilities and Net Worth (SALN) before the Bureau of Internal
Revenue and pay the applicable amnesty tax.
The Court finds that petitioner was able to comply with all the necessary documentary requirements and thus
entitled to invoke the immunities and privileges of RA 9480.
It was also held that it may avail of the amnesty program despite its pending case before the Court of Tax Appeals
En Banc. RA 9480 and Department of Finance Order No. 29-07 excludes tax cases that are subject of a final and
executory judgment by the courts. This means that if a tax case or issue has not become final and executory, such
as in the case at bar, then the taxpayer may avail of the tax amnesty program.
Being qualified under the Tax Amnesty Law to avail of its benefits and having found that it was able to comply with
the requirements of the same, the petitioner is deemed to have been absolved of its obligation and is already
immune from the payment of the assessed deficiency taxes.
[G.R. No. 196907. March 13, 2013.]
NIPPON EXPRESS (PHILIPPINES) CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
Petitioner filed its administrative claim for refund of excess input tax it paid attributable to its zero-rated sales in
2001. Before the respondent could decide on the matter, petitioner filed a petition for review with the Court of Tax
Appeals requesting the issuance of a tax credit certificate in its favor.
The CTA First Division denied the petition for insufficiency of evidence. However, upon motion for reconsideration
and taking judicial notice of case records involving petitioner, it amended its decision and partially granted the
petition, ordering the respondent to issue a tax credit certificate in favor of the petitioner.
The respondent appealed to the CTA En Banc which reversed and set aside the amended decision of the CTA
First Division. It ruled that the sales invoices that were issued by the petitioner were insufficient to establish its
zero-rated sale of services. Without the proper VAT official receipts issued to its clients, the payments it received
could not qualify for zero-rating for VAT purposes.
The CTA En Banc later on changed its stand and issued an Amended Decision granting the petitioner's motion for
reconsideration.
Aggrieved by such decision, respondent filed a motion for reconsideration. It argued that the sales invoice which
supported the sale of goods is not the same as the official receipt which must support the sale of services. It also
argued that the CTA does not have jurisdiction over the petition for review because it was filed before the lapse of
the 120-day period accorded to the CIR to decide on its administrative claim for input VAT refund.
The CTA En Banc reversed its earlier decision and dismissed the petition for review for lack of jurisdiction. It held
that the 120-day period in Section 112 (D) of the NIRC which granted the CIR the opportunity to act on the claim
for refund, was jurisdictional in nature such that the petitioner's failure to observe the said period before resorting
to judicial action warranted the dismissal of its petition for review for having been prematurely filed.
ISSUE:
Whether the CTA has jurisdiction to entertain the case at bar.
HELD:
Sec. 112 (D) of the NIRC provides that a taxpayer may appeal the denial or inaction of the CIR only within thirty
days from the receipt of the decision denying the claim or after the expiration of the 120-day period given to the
CIR to decide the claim. Failure to observe the said period before filing a judicial claim with the CTA would not only
make such petition premature, but would also result in the non-acquisition by the CTA of jurisdiction to hear the
said case.
In this case, the petitioner filed its petition for review on April 25, 2003, only a day after it filed its administrative
claim for refund. It failed to wait for the lapse of the required period by law before elevating its claim to the CTA by
way of petition for review.
Therefore, since the petition for review was prematurely filed, the CTA had no jurisdiction to hear the case.
Petition for review denied.
[G.R. No. 197117. April 10, 2013.]
FIRST LEPANTO TAISHO INSURANCE CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
Petitioner, a non-life insurance corporation, received from the respondent, assessments for deficiency income,
withholding, expanded withholding, final withholding, value-added, and documentary stamp taxes for the year
1997. It subsequently protested the said assessments. During the pendency of its protests, petitioner availed of the
respondent's amnesty program. Consequently, it was ordered by the Court of Tax Appeals Second Division to pay
its reduced tax liability.
Dissatisfied, it filed a Motion for Partial Reconsideration but the same was denied by the CTA Second Division.
It then filed a petition for review before the CTA en banc but the same was also denied. Petitioner maintains that it
is not liable to pay Withholding Tax on Compensation on the Director's Bonus to its directors because they were
not employees and the amount was already subject to Expanded Withholding Tax. Hence, this petition.
ISSUE:
Whether petitioner is liable for deficiency withholding taxes.
HELD:
For taxation purposes, Section 5 of Revenue Regulations No. 12-86 considers a director as an employee. The
non-inclusion of the names of some of the petitioner's director's in its Alpha List does not automatically create a
presumption that they are not employees of the corporation, because the imposition of withholding tax on
compensation depends upon the nature of the work performed by such individuals in the company.
As for its deficiency withholding tax on transportation, subsistence and lodging, and representation expense,
commission expense, direct loss expense, occupancy cost, service/contractor and purchases, petitioner failed to
prove with sufficient evidence that the said expenses were actual expenses incurred by its employees in
connection with their duties. It also failed to prove its direct loss expense occupancy cost and service/contractor
purchases.
Petition for review denied.
[G.R. No. 183137. April 10, 2013.]
PELIZLOY REALTY CORPORATION vs. THE PROVINCE OF BENGUET
FACTS:
Petitioner is the owner of Palm Grove Resort, a place designed for recreation which has facilities like swimming
pools, function halls, and a spa. It is located in Tuba, Benguet.
The Provincial Board of the Province of Benguet approved Provincial Tax Ordinance No. 05-107, or the Benguet
Revenue Code of 2005. Section 59 of the said Ordinance levied a ten percent (10%) amusement tax on gross
receipts from admissions to "resorts, swimming pools, bath houses, hot springs, and tourist spots."
Petitioner in its appeal/petition before the Secretary of Justice claims that the Ordinance is an ultra vires act on the
part of the Province of Benguet. Due to the failure of the Secretary of Justice to act on the appeal/petition, the
petitioner was constrained to file a Petition for Declaratory Relief and Injunction before the Regional Trial Court of
La Trinidad, Benguet.
Respondent for its defense maintains that Sec. 140 of the Local Government Code (LGC) allows a province to
collect amusement tax from the proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses,
boxing stadia, and other places of amusement. It argues that the phrase "other places of amusement" includes
resorts, swimming pools, bath houses, hot springs, and tourist spots. It also cited the definition of "amusement" in
the LGC as a "pleasurable diversion and entertainment. It is synonymous to relaxation, avocation, pastime, or fun."
The Court dismissed the Petition for Declaratory Relief and Injunction for lack of merit. Petitioner subsequently filed
a motion for reconsideration but the same was denied. Hence, this petition for review.
ISSUE:
Whether provinces are authorized to impose amusement taxes on admission fees to resorts, swimming pools,
bath houses, hot springs, and tourist spots for being "amusement places" under the Local Government Code.
HELD:
The power to tax is inherent in the State. However, such is not the same for provinces, cities, municipalities, and
barangays because they are not sovereign. They are mere territorial and political subdivisions of the State. A
public corporation's charter or statute must clearly show the intent to confer the power of taxation since such
power cannot be assumed. While local legislative bodies are now directly authorized by the Constitution to levy
taxes, such authority is "subject to such guidelines and limitations as the Congress may provide". In this case, the
LGC establishes the parameters of the taxing powers of LGUs.
Sec. 140 of the LGC expressly allows the imposition by provinces of amusement taxes on the "proprietors,
lessees, or operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other places of amusement."
However, resorts, swimming pools, bath houses hot springs, and tourist spots are not among the places included
in the enumeration in the aforementioned provision. Neither can it be embraced in the phrase "and other places of
amusement". The definition of "amusement places" under Sec. 131 (c) of the LGC refers to venues primarily used
to stage spectacles or hold public shows, exhibitions, performance, and other events meant to be viewed by an
audience.
Under the principle of ejusdem generis, "resorts, swimming pools, bath houses, hot springs and tourist spots" do
not belong to the same category as those mentioned in the enumeration in Sec. 140 of the LGC.
Petition for review is granted.
[G.R. No. 174385. February 20, 2013.]
REPUBLIC OF THE PHILIPPINES vs. HON. RAMON S. CAGUIOA, et al.
FACTS:
Private respondents, including lower court petitioners, are importers and traders duly licensed to operate inside the
Subic Special Economic and Freeport Zone (SSEFZ).
Under RA 7227 or the Bases Conversion and Development Act of 1992, the Subic Bay Metropolitan Authority
(SBMA) granted the lower court petitioners Certificates of Registration and Tax Exemption. The certificates
allowed them to engage in the business of import and export of general merchandise, including alcohol and
tobacco products and were uniformly granted tax exemptions on such importations.
On February 7, 2005, the SBMA, in a Memorandum based on Sec. 6 of RA 9334, required SSEFZ importers to
pay duties and taxes on tobacco and alcohol product importations before clearance and release from the freeport.
In response, the lower court petitioners filed before the respondent judge a petition for declaratory relief with a
prayer for temporary restraining order and preliminary mandatory injunction against the Secretary of Finance. Their
petition sought to nullify the implementation of Sec. 6 of RA 9334.
The respondent judge granted the application for preliminary injunction despite the petitioner's opposition.
The petitioner then filed before the Supreme Court a petition for certiorari and prohibition to annul the judge's order
and the writ issued pursuant to the said order. The private respondents filed before the same judge motions for
leave to intervene and to admit complaint-in-intervention. Without acting on the petitioner's motion to suspend
proceedings, the respondent judge granted the private respondent's motions on the ground that they are also to be
adversely affected by the implementation of RA 9334. Petitioner moved to reconsider the order on the ground that
it had been denied due process because it never received copies of the motions and complaints-in-intervention.
ISSUE:
Whether the petitioner was denied due process.
HELD:
The petitioner was denied due process. A motion for intervention, just like any other motion, must comply with the
mandatory requirements of notice and hearing as well as proof of its service, except for those that the courts can
act upon without causing prejudice to the rights of the parties.
Records show that the Republic never received a copy of the motions and complaints-in-intervention. Respondent
judge had therefore no reason to consider them. In admitting them despite the absence of prior notice, respondent
judge denied the Republic of its right to due process. Furthermore, while a motion for intervention is addressed to
the sound discretion of the court, the basic precepts of fair play and the protection of all interests must be
considered in the exercise of such discretion.
However, the subject motions are already mooted by subsequent events due to the dismissal of the respondent
judge for gross ignorance of the law and conduct prejudicial to the best interest of the service.
[G.R. No. 169899. February 6, 2013.]
PHILACOR CREDIT CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
Petitioner is a domestic corporation engaged in the business of retail financing. Under retail financing, a buyer may
purchase appliance on installment basis by executing a unilateral promissory note in favor of the appliance dealer.
The latter subsequently assigns the promissory note to the petitioner.
On February 3, 1998, it received demand letters from the respondent for deficiency income tax, percentage tax
and documentary stamp tax (DST) for the fiscal year ended 1993.
Protesting the said assessments, petitioner claims that the deficiency income tax was erroneously computed. It
also alleged that the BIR failed to consider the reversing entries of repossessions, legal accounts and write-offs
when it computed the percentage tax. As for its deficiency DST, it maintains that the appliance dealers were the
ones required by law to affix the documentary stamps on all promissory notes purchased until the enactment of RA
7660 which took effect on January 15, 1994.
Petitioner then filed a petition for review before the Court of Tax Appeals. The Court of Tax Appeals Division held
that it was liable for deficiency income tax, percentage tax, and DST. Thereafter, it filed a motion for
reconsideration which was partially granted by the CTA when its assessment for deficiency percentage tax and
income tax was cancelled.
Dissatisfied, petitioner filed a petition for review before the CTA En Banc but the latter affirmed the ruling of the
Court in Division. Hence, this petition.
ISSUE:
Whether the petitioner is liable for deficiency DST.
HELD:
Section 180 of the 1986 Tax Code imposes a stamp tax on promissory notes, bills of exchange, drafts, certificates
of indebtedness, debt instruments used for deposit substitutes and others not payable on sight or on demand. On
the other hand, Section 173 of the 1997 NIRC states the persons who are primarily liable for the payment of DST.
These persons include those making, signing, issuing, accepting or transferring the taxable documents,
instruments or papers.
In this case, the petitioner cannot be held liable for the DST on the issuance of promissory notes because it did not
make, sign, issue, accept or transfer the promissory notes. It was the buyers who made, signed and issued the
documents, while it was the appliance dealers that transferred these documents to the petitioner. Although it
accepted these documents, its "acceptance" was not the one contemplated by law. The term "acceptance" under
Section 132 of the Negotiable Instruments Law refers only to bills of exchange and not promissory notes. This
means that the object of the term "acceptance" is not to receive, but to actually bind the drawee of a bill and make
him an actual and bound party to the instrument.
It cannot also be held liable for DST on the assignment of promissory notes as this transaction was not taxed
under the law.
It is a settled rule that in case of doubt, tax laws are to be construed strictly against the taxing authority and
liberally in favor of the taxpayer because the burdens which must be endured by the taxpayer should not be
presumed to go beyond what the law expressly and clearly declares.
Petition for review granted.
[G.R. No. 183553. November 12, 2012.]
DIAGEO PHILIPPINES, INC. vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
Petitioner is engaged in the business of importing, exporting, manufacturing, marketing, distributing, buying and
selling, by wholesale, all kinds of beverages and liquors.
From November 1, 2003 to December 31, 2004, it purchased raw alcohol from its supplier for its use and
manufacture of its beverage and liquor products. The supplier imported the raw alcohol and paid the corresponding
excise taxes thereon before selling them to the petitioner. The purchase price paid by the petitioner included the
excise taxes paid by its supplier.
It then exported its locally manufactured liquor products to several countries and received the corresponding
foreign currency proceeds.
Within two years from its aforementioned transaction with its supplier, it filed an application for refund/issuance of
tax credit certificate with the BIR. It claims that it is entitled to a refund because the excise taxes which its supplier
paid but passed on to it as part of the purchase price falls under the purview of Sec. 130 (D) of the Tax Code.
Due to the respondent's inaction, the petitioner filed a Petition for Review before the Court of Tax Appeals. The
Court denied its petition due to the petitioner's lack of legal personality to file a claim for refund/tax credit.
Hence, this petition for review.
ISSUE:
Whether the petitioner is entitled to a refund of excise tax.
HELD:
The petitioner is not entitled to a refund of excise tax.
Sec. 130 (D) of the Tax Code provides that the right to claim a refund or be credited with the excise taxes belongs
to the supplier or the same person who paid the excise tax.
An excise tax partakes the nature of indirect taxes.
Indirect taxes are those wherein the liability for the payment falls on one person but the burden thereof can be
passed to another person. When the seller passes on the tax to his buyer, he in effect, shifts the tax burden to the
purchaser as part of the selling price of the goods.
When its supplier paid the excise tax on the raw alcohol, what was shifted to the petitioner when it paid the former
was not the tax liability but an additional cost of the goods sold.
The statutory taxpayer is the proper party to claim refund of indirect taxes.
Sec. 204 (C) of the Tax Code provides that the person entitled to claim a tax refund is the person liable for or
subject to such tax. In this case, because there is no law allowing the petitioner to claim for a refund, even if the
supplier shifts to it the burden of tax, it still has no right to claim for a refund.
Petition for review is denied.
[G.R. No. 192945. September 5, 2012.]
CITY OF IRIGA vs. CAMARINES SUR III ELECTRIC COOPERATIVE, INC. (CASURECO III)
FACTS:
Respondent is engaged in the business of electric power distribution to various end users within the City of Iriga
and the Rinconada area of Camarines Sur.
In 2003, it was required to submit a report of its gross receipts for the period 1997 to 2002 to serve as basis for the
computation of franchise taxes, fees and other taxes. Upon the latter's compliance, it was assessed of its taxes.
In January 2004, petitioner made a final demand on the respondent to pay the franchise taxes due for the period
1998-2003 and real property taxes for the period 1995-2003. The latter refused to pay such taxes on the ground
that it is an electric cooperative registered with the Cooperative Development Authority and therefore exempt from
the payment of local taxes.
The petitioner then filed a complaint for the collection of local taxes against the respondent before the Regional
Trial Court. However, the RTC ruled that the real property taxes had already prescribed, but it is still liable for
franchise taxes for the years 2000-2003.
On appeal, the Court of Appeals held that the respondent is exempt from paying franchise taxes because it is a
non-profit entity and therefore not falling within the purview of "business enjoying a franchise" as provided by Sec.
137 of the Local Government Code.
Hence, this petition to set aside the ruling of the Appellate Court.
ISSUE:
1. Whether the respondent is exempt from paying franchise tax; and
2. Whether the petitioner is liable for franchise tax on gross receipts within Iriga City and
Rinconada area.
HELD:
The respondent is not exempt from payment of franchise tax.
When the Local Government Code took effect on January 1, 1992, its Section 193 withdrew the tax exemptions or
incentives previously granted to "all persons, whether natural or juridical, including government-owned or
controlled corporations, except…cooperatives duly registered under RA 6938…", or those registered with the
Cooperative Development Authority.
This means that tax privileges and exemptions granted to electric cooperatives registered under the National
Electrification Administration, such as the respondent, were validly withdrawn. Thus, only those registered under
the Cooperative Development Authority can claim for an exemption from local taxes, including franchise tax.
The respondent is also liable for franchise tax within Iriga City and the Rinconada Area.
The Local Government Code provides that franchise tax shall be based on gross receipts because it is a tax on
business rather than on persons or property. Since a franchise tax is a tax on the exercise of a privilege, the situs
of taxation should be the place where such privilege is exercised.
In this case, it is in the City of Iriga where the respondent has its principal office and from where it operates, not
considering the place where its services or products are delivered. Therefore, the franchise tax covers all gross
receipts from Iriga City and the Rinconada area.
Petition is granted and the Court of Appeals decision is set aside.
[G.R. No. 171251. March 5, 2012.]
LASCONA LAND CO., INC. vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
Commissioner of Internal Revenue issued an Assessment Notice against the petitioner, informing the latter of its
alleged deficiency income tax. Consequently, petitioner filed a letter of protest but the same was denied. According
to the BIR Regional Director, the office cannot give due course to the petitioner’s request because the case was
not yet elevated to the CTA as required by the provisions of the last paragraph of Sec. 228 of the Tax Code and
thus making the assessment final, executory and demandable.
Petitioner appealed before the CTA and alleged that the Regional Director erred in ruling that the failure to appeal
to the CTA within thirty (30) days from the lapse of the 180-day period rendered the assessment final and
executory.
The CTA nullified the subject assessment. CIR moved for reconsideration but the CTA denied the same.
Respondent maintains that in case of inaction by the Commissioner on the protested assessment within the
180-day reglementary period, petitioner should have appealed the inaction to the CTA.
Respondent then elevated its case to the CA which granted its petition and declared the subject assessment to be
final, executory and demandable.
ISSUE:
Whether the subject assessment has become final, executory and demandable due to the failure of the petitioner
to file an appeal before the CTA within 30 days from the lapse of the 180-day period as provided for in Sec. 228.
HELD:
Sec. 228 of the NIRC provides that, “If the protest is denied in whole or in part, or is not acted upon within one
hundred eighty (180) days from the submission of documents, the taxpayer adversely affected by the decision or
inaction may appeal to the CTA within thirty (30) days from receipt of the said decision, or from the lapse of the
180-day period; otherwise the decision shall become final, executory, and demandable”.
In case the Commissioner failed to act on the disputed assessment, the taxpayer can either file a petition for
review before the CTA within thirty days from the expiration of the 180-day period; or await the final decision of the
Commissioner and appeal such decision within 30 days to the CTA from the receipt of the copy of the decision.
The two options are mutually exclusive and the resort to one bars the application of the other.
When a taxpayer protested an assessment, he naturally expects the CIR to decide on the matter either positively
or negatively.
A taxpayer cannot be prejudiced if he chooses to wait for the final decision of the CIR on the protested
assessment. In the case at bar, petitioner chose to await the final decision of the Commissioner on the protested
assessment. It then has the right to appeal the final decision before the CTA within thirty days from the receipt of
the decision even when the 180-day period fixed by law for the Commissioner to act on the disputed assessment
has already lapsed.
[G.R. No. 179579. February 1, 2012.]
COMMISSIONER OF CUSTOMS and the DISTRICT COLLECTOR OF THE PORT OF SUBIC vs. HYPERMIX
FEEDS CORPORATION
FACTS:
Petitioner Commissioner of Customs issued CMO 27-2003 which classified wheat according to importer or
consignee; country of origin; and port of discharge for tariff purposes. The wheat would be classified either as food
grade, with a corresponding tariff of 3%, or as feed grade, with a corresponding tariff rate of 7%, depending on the
given factors. Aside from providing an exclusive list of corporations, ports of discharge, commodities description
and countries of origin, the said memorandum also provided for the proper procedure for protest or Valuation and
Classification Review Committee cases. Under the said procedure, the release of the articles that were the subject
of protest required the importer to post a cash bond to cover the tariff differential.
Respondent filed a Petition for Declaratory Relief with the RTC. It contended that the regulation summarily
adjudged it to be a feed grade supplier without the benefit of a prior assessment and examination, and thus
despite having imported food grade wheat, it would be subjected to the 7% tariff upon the arrival of the shipment
from China and force them to pay more than the proper amount.
The RTC granted the petition and ruled that the memorandum is invalid and of no force and effect.
Dissatisfied with the decision, petitioner elevated the case to the CA. The appellate court, however, dismissed the
appeal.
ISSUE:
Whether Customs Memorandum Order No. 27-2003 is valid.
HELD:
The application of the regulation forecloses the possibility that other corporations are not included in the list of
import food grade wheat. At the same time, it gives an assumption that those who do not meet the criteria do not
import feed grade wheat. In the first scenario, importers are unnecessarily burdened to prove the classification of
their imports, while on the latter, the State carries the burden.
Petitioner went beyond his powers of delegated authority when the subject memorandum limited the customs
officer’s duties mandated by Sec. 1043 of the Tariff and Customs Law.
Sec. 1043 provides, "The customs officer tasked to examine, classify, and appraise imported articles shall
determine whether the packages designated for examination and their contents are in accordance with the
declaration in the entry, invoice and other pertinent documents and shall make return in such a manner as to
indicate whether the articles have been truly and correctly declared in the entry as regard their quantity,
measurement, weight, and tariff classification….the customs officer shall determine the unit of quantity in which
they are usually bought and sold, and appraise the imported articles in accordance to Sec. 201 of this Code." The
provision requires that the customs officer must first assess and determine the classification of the imported article
before the imposition of the tariff. The memorandum, however, has already classified the wheat even before the
customs officer had the opportunity to examine it.
[G.R. No. 166482. January 25, 2012.]
SILKAIR (SINGAPORE) PTE. LTD. vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
Petitioner is an on-line international carrier operating in the Philippines. In the course of its international flight
operations, petitioner purchased aviation fuel from Petron Corporation, paying excise tax thereon.
Claiming erroneous payment of said excise tax, petitioner filed an administrative claim for refund. The said claim
was based on Sec. 135 (a) and (b) of the 1997 Tax Code which provides that petroleum products sold to
international carriers of Philippine or foreign registry are exempt from excise tax if said products are stored in a
bonded storage tank and; to entities or agencies covered by tax treaties, conventions and other international
agreements.
Due to the inaction of the Commissioner of Internal Revenue, petitioner filed a petition for review with the CTA
which was later on denied by the said court. Petitioner then elevated the case to the CA which affirmed the denial
of the claim for refund. It ruled that while the petitioner is exempt from paying excise taxes on petroleum products
purchased in the Philippines, the petitioner is not the proper party to seek for a refund of the excise taxes paid.
ISSUE:
Whether petitioner is the proper party to claim for a tax refund.
HELD:
Excise taxes apply to articles manufactured or produced in the Philippines for domestic sale or consumption or for
any other disposition and to things imported into the Philippines. Excise tax is deemed as indirect tax. While the
tax is directly levied upon the manufacturer/importer upon the removal of the goods from its place of production,
the tax is actually passed on to the end consumer as part of the selling price of the goods sold, bartered or
exchanged.
In previous cases involving the same parties and the same issue, and following the principle of stare decisis, it was
held that the petitioner is not the proper party to claim for a tax refund.
Petron remains to be the taxpayer since the excise tax is imposed directly on Petron as the manufacturer.
Therefore, Petron, as the statutory taxpayer, is the proper party that can claim for a tax refund.
[G.R. No. 184428. November 23, 2011.]
COMMISSIONER OF INTERNAL REVENUE vs. SAN MIGUEL CORPORATION
FACTS:
Respondent San Miguel Corp., maker and seller of fermented liquor, produces "Red Horse" beer which is sold in
500-ml. and 1-liter bottles.
On December 16, 1999, the Secretary of Finance issued Revenue Regulations No. 17-99 increasing the applicable
tax rates on fermented liquor by 12%. This increase, however, was qualified by the last paragraph of Section 1 of
Revenue Regulations No. 17-99 which reads:
Provided, however, that the new specific tax rate for any existing brand of cigars, cigarettes packed by
machine, distilled spirits, wines and fermented liquors shall not be lower than the excise tax that is actually
being paid prior to January 1, 2000.
From June 1, 2004 to December 31, 2004, respondent was assessed and paid excise taxes amounting to
P2,286,488,861.58 for the 323,407,194 liters of Red Horse beer products removed from its plants. Said amount
was computed based on the tax rate of P7.07/liter or the tax rate which was being applied to its products prior to
January 1, 2000, as the last paragraph of Section 1 of Revenue Regulations No. 17-99 provided that the new
specific tax rate for fermented liquors "shall not be lower than the excise tax that is actually being paid prior to
January 1, 2000."
Respondent, however, argued that its excise taxes should have been only P2,228,275,566.66 since the applicable
rate was only the P6.89/liter tax rate stated in Revenue Regulations No. 17-99. It contended that the qualification
in the last paragraph of Section 1 of Revenue Regulations No. 17-99 has no basis in the plain wording of Section
143 of R.A. No. 8424.
Thus, on May 22, 2006, respondent filed a claim for refund or tax credit of the amount of P60,778,519.56 as
erroneously paid excise taxes for the period of May 22, 2004 to December 31, 2004. Later, said amount was
reduced to P58,213,294.92 because of prescription.
The CTA Second Division granted the petition and ordered petitioner to refund P58,213,294.92 to respondent or to
issue in the latter's favor a Tax Credit Certificate for the said amount for the erroneously paid excise taxes. The
CTA held that Revenue Regulations No. 17-99 modified or altered the mandate of Section 143 of the Tax Reform
Act of 1997.
After the CTA Second Division denied its motion for reconsideration and the CTA En Banc affirmed such denial,
petitioner elevated the case to the Supreme Court.
ISSUE:
Whether the provision in the last paragraph of Section 1 of Revenue Regulations No. 17-99 is an invalid
administrative interpretation of Section 143 of the Tax Reform Act of 1997.
HELD:
Section 143 of the Tax Reform Act of 1997 provides for two periods: the first is the 3-year transition period
beginning January 1, 1997, the date when R.A. No. 8240 took effect, until December 31, 1999; and the second is
the period thereafter. During the 3-year transition period, Section 143 provides that "the excise tax from any brand
of fermented liquor . . . shall not be lower than the tax which was due from each brand on October 1, 1996." After
the transitory period, Section 143 provides that the excise tax rate shall be the figures provided under paragraphs
(a), (b) and (c) of Section 143 but increased by 12%, without regard to whether such rate is lower or higher than
the tax rate that is actually being paid prior to January 1, 2000 and therefore, without regard to whether the
revenue collection starting January 1, 2000 may turn out to be lower than that collected prior to said date.
Revenue Regulations No. 17-99, however, created a new tax rate when it added in the last paragraph of Section 1
thereof, the qualification that the tax due after the 12% increase becomes effective "shall not be lower than the tax
actually paid prior to January 1, 2000." As there is nothing in Section 143 of the Tax Reform Act of 1997 which
clothes the BIR with the power or authority to rule that the new specific tax rate should not be lower than the
excise tax that is actually being paid prior to January 1, 2000, such interpretation is clearly an invalid exercise of
the power of the Secretary of Finance to interpret tax laws and to promulgate rules and regulations necessary for
the effective enforcement of the Tax Reform Act of 1997. Said qualification must, perforce, be struck down as
invalid and of no effect.
[G.R. No. 170257. September 7, 2011.]
RCBC vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
Petitioner RCBC received a Formal Letter of Demand together with Assessment Notices from the BIR for
deficiency tax assessments totalling P4,170,058,634.49. Disagreeing with such assessments, RCBC filed a protest
and later a petition for review before the CTA.
After reinvestigation, RCBC received another Formal Letter of Demand with Assessment Notices. This time, the
amount of deficiency taxes assessed was drastically reduced to P303,160,496.55. Petitioner promptly paid
P15,421,668.96, but refused to pay assessments for deficiency onshore tax and documentary stamp tax, arguing
that the waivers of the Statute of Limitations which it earlier executed were not valid because the same were not
signed or conformed to by the BIR Commissioner as required by the Tax Code.
The CTA-First Division considered as closed and terminated the assessments for the other deficiency taxes but
upheld the assessment for deficiency final tax on FCDU onshore income and deficiency documentary stamp tax for
1994 and 1995.
Upon elevation of the case, the CTA-En Banc ruled that by receiving, accepting and paying portions of the reduced
assessment, RCBC impliedly recognized the validity of the waivers. As to the deficiency onshore tax, it held that
because the payor-borrower was merely designated by law to withhold and remit the said tax, it would then follow
that the tax should be imposed on RCBC as the payee-bank.
ISSUES:
1. Whether petitioner is estopped from questioning the validity of the waivers of the statute of
limitations with respect to the assessment of deficiency onshore tax.
2. Whether RCBC can be held liable for deficiency onshore tax.
HELD:
1. RCBC is estopped from questioning the validity of the waivers because it impliedly admitted
validity of said waivers by making partial payment of the revised assessments. On the same day
petitioner received the revised assessment, RCBC paid the uncontested taxes. If it believed that
the waivers were invalid, then it should have not paid the reduced amount of taxes in the revised
assessment.
2. RCBC is liable for payment of deficiency onshore tax on interest income derived from foreign
currency loans under Sec. 24 (e) (3) of the NIRC of 1993. Contrary to RCBC’s contention that it
is the payor-borrower, as withholding agent, who is directly liable for the payment of onshore tax
under Rev. Reg. No. 2-98, it should be pointed out that Rev. Reg. No. 2-98 governs collection at
source on income paid only on or after January 1, 1998. Since the subject deficiency withholding
tax was supposed to have been withheld on income paid during taxable years 1994 and 1995,
Rev. Reg. No. 2-98 does not apply.
[G.R. No. 187425. March 28, 2011.]
COMMISSIONER OF CUSTOMS vs. AGFHA INCORPORATED
FACTS:
A shipment containing bales of textile grey cloth arrived at the Manila International Container Port (MICP). The
Commissioner, however, held the subject shipment because its owner/consignee was allegedly fictitious. AGFHA
intervened and alleged that it was the owner and actual consignee of the subject shipment.
After seizure and forfeiture proceedings took place, the District Collector of Customs, MICP, rendered a decision
ordering the forfeiture of the subject shipment in favor of the government. AGFHA filed an appeal, which the
Commissioner dismissed.
The CTA-Second Division reversed the Commissioner's Decision and ordered the immediate release of the
subject shipment to AGFHA. The CTA Second Division found petitioner Commissioner liable and was made to
pay respondent AGFHA the amount of US$160,348.08 for the value of the seized shipment which was lost while
in petitioner's custody. The CTA En Banc affirmed the CTA Second Division.
ISSUE:
Whether or not the Court of Tax Appeals was correct in awarding the respondent the amount of US$160,348.08,
as payment for the value of the subject lost shipment that was in the custody of the petitioner.
HELD:
The Court agrees with the ruling of the CTA that AGFHA is entitled to recover the value of its lost shipment
based on the acquisition cost at the time of payment.
The Commissioner of Customs should pay AGFHA the value of the subject lost shipment, which liability may be
paid in Philippine currency computed at the exchange rate prevailing at the time of the actual payment.
The Court affirmed the Decision of the CTA En Banc and ordered the Commissioner of Customs to pay the value
of the subject lost shipment, computed at the exchange rate prevailing at the time of actual payment after
payment of the necessary customs duties.
[G.R. No. 180909. January 19, 2011.]
EXXONMOBIL PETROLEUM AND CHEMICAL HOLDINGS, INC.-PHILIPPINE BRANCH vs. COMMISSIONER

OF INTERNAL REVENUE
FACTS:
Petitioner Exxon is a foreign corporation duly organized and existing under the laws of the State of Delaware,
United States of America, authorized to do business in the Philippines through its Philippine Branch.
Exxon is engaged in the business of selling petroleum products to domestic and international carriers. In pursuit
of its business, Exxon purchased from Caltex Philippines, Inc. (Caltex) and Petron Corporation (Petron) Jet A-1
fuel and other petroleum products, the excise taxes on which were paid for and remitted by both Caltex and
Petron. Said taxes, however, were passed on to Exxon which ultimately shouldered the excise taxes on the fuel
and petroleum products.
On October 30, 2003, Exxon filed a petition for review with the CTA claiming a refund or tax credit in the amount
of Php105,093,536.47, representing the amount of excise taxes paid on Jet A-1 fuel and other petroleum
products it sold to international carriers from November 2001 to June 2002.
During Exxon's preparation of evidence, the CIR filed a motion to first resolve the issue of whether or not Exxon
was the proper party to ask for a refund. Exxon then filed its opposition to the motion.
The CTA First Division issued a resolution sustaining the CIR's position and dismissing Exxon's claim for refund.
Exxon filed a motion for reconsideration, but this was denied.
Exxon filed a petition for review with the CTA En Banc assailing the Resolutions of the CTA First Division which
dismissed the petition for review.
The CTA En Banc dismissed the petition for review and affirmed the two resolutions of the CTA First Division.
ISSUES:
I. Whether the assailed decision and resolution erroneously prohibited petitioner, as the distributor and vendor
of petroleum products to international carriers registered in foreign countries which have existing bilateral
agreements with the Philippines, from claiming a refund of the excise taxes paid thereon; and
II. Whether the assailed decisions erred in affirming the dismissal of petitioner's claim for refund based on
respondent's "motion to resolve first the issue of whether or not the petitioner is the proper party that may ask
for a refund," since said motion is essentially a motion to dismiss, which should have been denied outright by
the court of tax appeals for having been filed out of time.
HELD:
The Supreme Court denied the petition.
I. On respondent's "motion to resolve first the issue of whether or not the petitioner is the proper party that may
ask for a refund."
The Supreme Court held that this case is a clear cut application of Rule 16, Section 6 of the 1997 Rules of
Civil Procedure. The CIR did not file a motion to dismiss. Thus, he pleaded the grounds for dismissal as
affirmative defenses in its Answer and thereafter prayed for the conduct of a preliminary hearing to determine
whether petitioner was the proper party to apply for the refund of excise taxes paid.
If Exxon was not the proper party to apply for the refund of excise taxes paid, then it would be useless to
proceed with the case. It would not make any sense to proceed to try a case when petitioner had no standing
to pursue it.
II. On whether petitioner, as the distributor and vendor of petroleum products to international carriers registered
in foreign countries which have existing bilateral agreements with the Philippines, can claim a refund of the
excise taxes paid thereon.
The excise tax, when passed on to the purchaser, becomes part of the purchase price.
Excise taxes are imposed under Title VI of the NIRC. They apply to specific goods manufactured or produced
in the Philippines for domestic sale or consumption or for any other disposition, and to those that are
imported. In effect, these taxes are imposed when two conditions concur: first, that the articles subject to tax
belong to any of the categories of goods enumerated in Title VI of the NIRC; and second, that said articles
are for domestic sale or consumption, excluding those that are actually exported.
There are, however, certain exemptions to the coverage of excise taxes, such as petroleum products sold to
international carriers and exempt entities or agencies. Under Section 135, petroleum products sold to
international carriers of foreign registry on their use or consumption outside the Philippines are exempt from
excise tax, provided that the petroleum products sold to such international carriers shall be stored in a
bonded storage tank and may be disposed of only in accordance with the rules and regulations to be
prescribed by the Secretary of Finance, upon recommendation of the Commissioner.
The confusion in this case stems from the fact that excise taxes are of the nature of indirect taxes, the liability
for payment of which may fall on a person other than he who actually bears the burden of the tax.
As petitioner is not the statutory taxpayer, it is not entitled to claim a refund of excise taxes paid. If the party
statutorily liable for the tax is different from the party who bears the burden of such tax, who is entitled to
claim a refund of the tax paid?
The Supreme Court cited Sections 129 and 130 of the NIRC and a body of jurisprudence holding that the
proper party to question, or to seek a refund of, an indirect tax, is the statutory taxpayer, or the person on
whom the tax is imposed by law and who paid the same, even if he shifts the burden thereof to another.
The determination of who is the taxpayer plays a pivotal role in claims for refund because the same law
provides that it is only the taxpayer who has the legal personality to ask for a refund in case of erroneous
payment of taxes.
Therefore, as Exxon is not the party statutorily liable for payment of excise taxes under Section 130, in
relation to Section 129 of the NIRC, it is not the proper party to claim a refund of any taxes erroneously paid.
Lastly, the Supreme Court ruled that there is no unilateral amendment of existing bilateral agreements of the
Philippines with other countries when the CTA En Banc held that only petroleum products purchased directly
from the manufacturers or producers are exempt from excise taxes.
[G.R. No. 179617. January 19, 2011.]
COMMISSIONER OF INTERNAL REVENUE vs. ASIAN TRANSMISSION CORPORATION
FACTS:
Respondent Asian Transmission Corporation (ATC) is a domestic corporation engaged in the manufacture of
automotive parts. It filed its annual Income Tax Return (ITR) for the year 2000 on April 10, 2001 where it
declared a gross income of P370,532,082.00, a net loss of P279,926,225.00 and a minimum corporate income
tax (MCIT) of P7,410,642.00. The MCIT due was offset against the P38,301,198.00 existing tax credits and
creditable taxes withheld of the ATC, thereby leaving an excess tax credit or overpayment of P30,890,556.00.
For the P30,890,556.00 overpayment, ATC opted "To be issued a Tax Credit Certificate."
In its ITR for the year 2001, respondent declared a gross income of P322,839,802.00, a net loss of
P37,869,455.00, and MCIT of P6,456,796.00. After deducting its MCIT due against its existing tax credits and
creditable taxes, respondent was left with a total tax credit of P51,760,312.00.
Respondent, however, applied part of its unutilized creditable taxes for the year 2000 amounting to
P7,639,822.00 to its MCIT due of P6,456,796.00 for the year 2001. Left unapplied of its 2000 creditable taxes,
therefore, was the amount of P1,183,026.00.
Again, respondent opted "To be issued a Tax Credit Certificate" for the excess income tax payment.
On April 9, 2003, respondent filed with CIR's Large Taxpayers Service an administrative claim for the issuance of
tax credit certificate or cash refund in the amount of P28,509,578.00, representing excess/unutilized creditable
income taxes withheld as of December 31, 2001.
ATC then filed a petition for review with the CTA without waiting for an action from the CIR to avoid the
prescriptive period under Section 229 of the Tax Code.
The CTA-First Division rendered its Decision partially granting ATC's claim for refund on its unutilized creditable
withholding taxes for the taxable year 2001. It, however, noted that ATC could not be issued a tax credit
certificate for the remaining 2000 unutilized creditable taxes pursuant to Section 78 of the Tax Code, considering
that ATC initially declared that it would opt "To be Issued a Tax Credit Certificate" for its 2000 creditable taxes,
but never really exercised this option. Instead, it made use of the option to carry-over its excess income tax
payments, when it applied the same in reducing its 2001 MCIT.
The CTA-First Division ordered the CIR to issue a tax credit certificate in favor of ATC in the reduced amount of
P24,325,856.58 representing the unutilized creditable withholding taxes for the taxable year 2001 based on its
own computation.
Both parties sought reconsideration. Finding merit only in the motion for reconsideration of ATC, the CTA-First
Division issued the Amended Decision on August 4, 2006, and ordered respondent to refund or in the alternative,
issue a tax credit certificate in favor of the petitioner the amount of P27,325,856.58 representing unutilized
creditable withholding taxes for taxable year 2001.
On appeal, the CTA-En Banc was convinced that ATC was able to provide sufficient evidence to establish its
claim for refund or issuance of a tax credit certificate.
Hence, the petition for review on certiorari.
ISSUE:
Whether or not respondent is entitled to refund in the amount of P27,325,856.58 representing the alleged
unutilized creditable withholding taxes for the taxable year 2001.
HELD:
The CIR argues that while the certificates of withholding taxes and the annual income tax returns for the years
2000 and 2001 submitted by ATC may prove the inclusion of income payments which were the bases of the
withholding taxes and the fact of withholding, they are not sufficient to prove entitlement to the tax refund
requested. According to the CIR, since Section 2.58.3 (B) of Revenue Regulations provides that "claims for
refund or tax credit shall be given due course upon showing that income payment has been declared as part of
gross income and the fact of withholding is established," the mere submission of the withholding tax statements
shall only mean that ATC's claim shall be given due course, i.e., heard or considered. Accordingly, the CIR posits
that ATC still has to show that it is entitled to the refund requested by proving not only the income payments
made but also the reported losses.
The Supreme Court pointed out that the arguments raised by the CIR in support of its position have already been
thoroughly discussed both by the CTA-First Division and the CTA-En Banc. It reiterated the rule that the Court
will not lightly set aside the conclusions reached by the CTA which, by the very nature of its function of being
dedicated exclusively to the resolution of tax problems, has accordingly developed an expertise on the subject,
unless there has been an abuse or improvident exercise of authority.
At any rate, the CIR is correct in stating that the taxpayer bears the burden of proof to establish not only that a
refund is justified under the law but also that the amount that should be refunded is correct. In this case,
however, the CTA-First Division and the CTA-En Banc uniformly found that from the evidence submitted, ATC
has established its claim for refund or issuance of a tax credit certificate for unutilized creditable withholding
taxes for the taxable year 2001 in the amount of P27,325,856.58. The Court finds no cogent reason to rule
differently.
With respect to the losses incurred by the ATC, it is true that the taxpayer bears the burden to establish the
losses, but it is quite clear from the evidence presented that ATC has fulfilled its duty. Moreover, other than the
bare assertion that ATC must establish its losses, the CIR fails to point to any circumstance or evidence that
would cast doubt on ATC's sworn declaration that it incurred losses in 2000 and 2001.
[G.R. No. 166829. April 19, 2010.]
TFS, INCORPORATED vs. COMMISSIONER OF INTERNAL REVENUE.
FACTS:
Petitioner, corporation engaged in the pawnshop business, received a Preliminary Assessment Notice (PAN) for
deficiency VAT, expanded withholding tax, and compromise penalty for taxable year 1998. Insisting that there was
no basis for the issuance of PAN, petitioner requested the Bureau of Internal Revenue to withdraw and set aside
the assessments.
Respondent Commissioner of Internal Revenue informed petitioner that a Final Assessment Notice (FAN) was
issued on January 25, 2002, and gave it until February 22, 2002 to file a protest letter.
Petitioner protested the FAN in a letter dated February 19, 2002.
The CTA upheld the assessment issued against petitioner representing deficiency VAT for the year 1998, inclusive
of 25% surcharge and 20% deficiency interest, plus 20% delinquency interest. The CTA also ruled that pawnshops
are subject to VAT under Section 108 (A) of the NIRC as they are engaged in the sale of services for a fee,
remuneration or consideration.
Petitioner’s motion for reconsideration was denied by the CTA.
Petitioner filed before the CA a Motion for Extension of Time to File Petition for Review but it was dismissed by the
CA for lack of jurisdiction in view of the enactment of RA 9282. Realizing its error, petitioner filed a Petition for
Review with the CTA En Banc. The petition, however, was dismissed for having been filed out of time. Petitioner
filed a Motion for Reconsideration but it was denied.
ISSUE:
1. Whether the CTA en banc should have given due course to the petition for review and not strictly applied
the technical rules of procedure.
2. Whether or not petitioner is subject to the 10% VAT.
HELD:
The Petition is granted.
1. Procedural rules may be relaxed in the interest of substantial justice.
Although a client is bound by the acts of his counsel, including the latter's mistakes and negligence, a departure
from this rule is warranted where such mistake or neglect would result in serious injustice to the client. Procedural
rules may thus be relaxed for persuasive reasons to relieve a litigant of an injustice not commensurate with his
failure to comply with the prescribed procedure. Such is the situation in this case.
Dismissing this case on a mere technicality would lead to the unjust enrichment of the government at the expense
of petitioner considering that the government has no right at all to collect or to receive the deficiency VAT.
Technicalities should never be used as a shield to perpetrate or commit an injustice.
2. Imposition of VAT on pawnshops for the tax years 1996 to 2002 was deferred.
Guided by First Planters Pawnshop, Inc. v. Commissioner of Internal Revenue (G.R. No. 174134, July 30, 2008,
where it was held that a non-bank financial intermediary is not liable for VAT for the tax years 1996 to 2002
because the levy, assessment and collection of VAT from non-bank financial intermediaries were specifically
deferred by law, petitioner TFS, Inc. is likewise not liable for VAT for the year 1998.
Consequently, the VAT deficiency assessment issued by the BIR against petitioner has no legal basis and must be
cancelled. The imposition of surcharge and interest must also be deleted.
[G.R. No. 173854. March 15, 2010.]
COMMISSIONER OF INTERNAL REVENUE vs. FAR EAST BANK & TRUST CO.
FACTS:
Far East Bank & Trust Co. filed with the BIR two Corporate Annual Income Tax Returns: one for its Corporate
Banking Unit (CBU) and another for its Foreign Currency Deposit Unit. The return for the CBU consolidated the
respondent's overall income tax liability for 1994, which reflected a refundable income tax, the amount of which
was carried over and applied against its income tax liability for the taxable year ending December 31, 1995.
Respondent then filed its 1995 Annual Income Tax Return, which showed a total overpaid income tax of
P17,443,133.00. Out of this amount, respondent sought the refund of P13,645,109.00 and opted to carry over
the remaining portion of the refundable income tax to the next taxable year.
When the Commissioner of Internal Revenue failed to act on the claim for refund, respondent elevated the
matter to the CTA.
The CTA found that respondent failed to prove that the income derived from rentals and sale of real property
from which the taxes were withheld were reflected in its 1994 Annual Income Tax Return. The CA found
otherwise; hence, this Petition for Review on Certiorari.
ISSUE:
Whether or not respondent is entitled to the refund.
RULING:
Respondent failed to prove its entitlement to the refund.
A taxpayer claiming for a tax credit or refund of creditable withholding tax must comply with the following
requisites:
1) The claim must be filed with the CIR within the two-year period from the date of payment of the tax;
2) It must be shown on the return that the income received was declared as part of the gross income;
and
3) The fact of withholding must be established by a copy of a statement duly issued by the payor to the
payee showing the amount paid and the amount of the tax withheld.
Respondent complied with the first requirement since the filing of the administrative claim for refund and judicial
claim for refund were well within the two-year period from the date of the filing of the return.
However, respondent failed to comply with the second and third requirements because while its Annual Income
Tax Return shows that the gross income was derived solely from sales of services, its proof of withholding was
evidenced by Certificates of Creditable Tax Withheld at Source which pertained to rentals and Monthly
Remittance Returns of Income Taxes Withheld which pertained to sales of real property. In fact, the phrase
"NOT APPLICABLE" was printed on the schedules pertaining to rent, sale of real property, and trust income.
Thus, based on the entries in the return, the income derived from rentals and sales of real property upon which
the creditable taxes were withheld were not included in respondent's gross income as reflected in its return.
Since no income was reported, it follows that no tax was withheld. It is incumbent upon the taxpayer to reflect in
his return the income upon which any creditable tax is required to be withheld at the source.
[G.R. No. 160756. March 9, 2010.]
CHAMBER OF REAL ESTATE AND BUILDERS' ASSOCIATIONS, INC. vs. ALBERTO ROMULO, ET AL.
FACTS:
Chamber of Real Estate and Builders' Associations, an association of real estate developers and builders,
challenges the validity of the imposition of minimum corporate income tax (MCIT) on corporations. Arguing that
MCIT violates the due process clause because it levies income tax even if there is no realized gain, petitioner
explains that gross income as defined under Section 27 (E) of RA 8424 only considers the cost of goods sold
and other direct expenses and does not take into account administrative and interest expenses which are also
necessary to produce gross income. Pegging the tax base of the MCIT to a corporation's gross income is
tantamount to a confiscation of capital because gross income, unlike net income, is not "realized gain."
Petitioner further alleges that RR 9-98 is a deprivation of property without due process of law because the MCIT
is being imposed and collected even when there is actually a loss, or a zero or negative taxable income.
ISSUES:
1 Whether or not the imposition of the MCIT on domestic corporations is unconstitutional.
2. Whether or not the imposition of CWT on income from sales of real properties classified as ordinary
assets is unconstitutional.
RULING:
1. The MCIT is not a tax on capital. It is imposed on gross income which is arrived at by deducting the
capital spent by a corporation in the sale of its goods, i.e., the cost of goods and other direct
expenses from gross sales. In addition, the MCIT is not an additional tax imposition. It is imposed in
lieu of the normal net income tax, and only if the normal income tax is suspiciously low. The MCIT
merely approximates the amount of net income tax due from a corporation, pegging the rate at only
2% and uses as the base the corporation's gross income. Besides, there is no legal objection to a
broader tax base or taxable income by eliminating all deductible items and at the same time reducing
the applicable tax rate. Thus, the assignment of gross income, instead of net income, as the tax base
of the MCIT, taken with the reduced rate of 2%, is not constitutionally objectionable.
2. The CWT is creditable against the tax due from the seller of the property at the end of the taxable
year. The seller will be able to claim a tax refund if its net income is less than the taxes withheld.
Nothing is taken that is not due so there is no confiscation of property repugnant to the constitutional
guarantee of due process. More importantly, the due process requirement applies to the power to tax.
The CWT does not impose new taxes nor does it increase taxes. It relates entirely to the method and
time of payment. The practical problems encountered in claiming a tax refund do not affect the
constitutionality and validity of the CWT as a method of collecting the tax.
The real estate industry cannot be treated similarly as manufacturing enterprises because what distinguishes the
real estate business from other manufacturing enterprises, for purposes of the imposition of the CWT, is not their
production processes but the prices of their goods sold and the number of transactions involved. The income
from the sale of a real property is bigger and its frequency of transaction limited, making it less cumbersome for
the parties to comply with the withholding tax scheme.
[G.R. No. 183505. February 26, 2010.]
COMMISSIONER OF INTERNAL REVENUE vs. SM PRIME HOLDINGS, INC., ET AL.
FACTS:
Respondents SM Prime Holdings, Inc. (SM Prime) and First Asia Realty Development Corp. are engaged in the
business of operating cinema houses, among others.
The CTA First Division ruled that the showing of cinematographic films is not an activity covered by VAT under the
NIRC of 1997, as amended, but one subject to amusement tax under RA 7160 (Local Government Code of 1991).
Holding that the national government should avoid imposing its own business tax, the CTA First Division decided
that only one business tax should apply to theaters and movie houses, that is, the 30% amusement tax imposed by
cities and provinces under RA 7160.
On appeal by the CIR, the CTA En Banc held that the showing or exhibition of motion pictures, films or movies by
cinema operators or proprietors is not among the activities enumerated under Section 108 of the NIRC which are
contemplated in the phrase "sale or exchange of services". Thus, gross receipts derived by cinema/theater
operators or proprietors from admission tickets in showing motion pictures, films or movies are not subject to VAT.
Instead, the said activity is subject to amusement tax under RA 7160.
ISSUE:
Whether the gross receipts derived by operators or proprietors of cinema/theater houses from admission tickets
are subject to VAT.
RULING:
The enumeration of services subject to VAT under Section 108 of the NIRC is not exhaustive and is given only by
way of example. Legislative history also reveals that the intent of the legislature was not to impose VAT on
persons already covered by the amusement tax. To impose VAT on persons already covered by the amusement
tax would result in injustice since cinema/theater houses operators or proprietors would be paying an additional
10% VAT in addition to the 30% amusement tax imposed by Section 140 of RA 7160, or a total of 40% tax. This is
true even in the case of cinema/theater operators taxed under the Local Government Code of 1991 because the
VAT law was intended to replace the percentage tax on certain services. It is immaterial that they are taxed by the
local government unit and not by the national government. The Local Tax Code, in transferring the power to tax
gross receipts derived by cinema/theater operators or proprietors from admission tickets to the local government,
did not intend to treat cinema/theater houses as a separate class. No distinction must, therefore, be made
between the places of amusement taxed by the national government and those taxed by the local government.
[G.R. No. 182722. January 22, 2010.]
DUMAGUETE CATHEDRAL CREDIT COOPERATIVE vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
Dumaguete Cathedral Credit Cooperative received Pre-Assessment Notices for deficiency withholding taxes for
taxable years 1999 and 2000. It then availed of BIR’s Voluntary Assessment and Abatement Program and paid
withholding taxes on the payments for the compensation, honorarium of the Board of Directors, security and
janitorial services, and legal and professional services.
After receiving Letters of Demand to pay the deficiency withholding taxes, inclusive of penalties, petitioner filed a
protest before the Commissioner of Internal Revenue. When the protest remained unacted upon, it filed a
petition for review before the CTA. The CTA First Division ruled against petitioner, ordering it to pay deficiency
withholding taxes on interests from savings and time deposits of its members and 20% delinquency interest.
Through a Petition for Review, the case reached the CTA En Banc.
The CTA En Banc affirmed the CTA First Division’s ruling, holding that Section 57 of the NIRC requires the
withholding of tax at source and that Revenue Regulations No. 2-98 enumerated the income payments subject to
final withholding tax, among which is "interest from any peso bank deposit and yield, or any other monetary
benefit from deposit substitutes and from trust funds and similar arrangements . . .". According to the CTA En
Banc, petitioner's business falls under the phrase "similar arrangements;" as such, it should have withheld the
corresponding 20% final tax on the interest from the deposits of its members.
Through a Petition for Review on Certiorari with the Supreme Court, petitioner sought to set aside the CTA
decision.
ISSUE:
Whether petitioner is liable to pay the deficiency withholding taxes on interest from savings and time deposits of
its members for the taxable years 1999 and 2000, as well as the delinquency interest of 20% per annum.
RULING:
Petitioner is not liable to pay the assessed deficiency withholding taxes on interest from the savings and time
deposits of its members, as well as the delinquency interest of 20% per annum.
BIR Ruling No. 551-888 clearly states, without any qualification, that since interest from any Philippine currency
bank deposit and yield or any other monetary benefit from deposit substitutes are paid by banks, cooperatives
are not required to withhold the corresponding tax on the interest from savings and time deposits of their
members.
The legislative intent to give cooperatives a preferential tax treatment is apparent in Articles 61 and 62 of RA
6938. This exemption extends to members of cooperatives. It must be emphasized that cooperatives exist for the
benefit of their members. In fact, the primary objective of every cooperative is to provide goods and services to
its members to enable them to attain increased income, savings, investments, and productivity. Therefore,
limiting the application of the tax exemption to cooperatives would go against the very purpose of a credit
cooperative. Extending the exemption to members of cooperatives, on the other hand, would be consistent with
the intent of the legislature. Thus, although the tax exemption only mentions cooperatives, this should be
construed to include the members, pursuant to Article 126 of RA 6938.
The amendment in Article 61 of RA 9520, specifically providing that members of cooperatives are not subject to
final taxes on their deposits, affirms the interpretation of the BIR that Section 24 (B) (1) of the NIRC does not
apply to cooperatives and confirms that such ruling carries out the legislative intent.
[G.R. No. 179085. January 21, 2010.]
TAMBUNTING PAWNSHOP, INC. vs. COMMISSIONER OF INTERNAL REVENUE.
FACTS:
Respondent CIR sent petitioner, Tambunting Pawnshop, an assessment notice for deficiency VAT, deficiency DST
on pawn tickets, withholding tax on compensation, and deficiency EWT, all inclusive of interests and surcharges
for the taxable year 1999.
Petitioner protested the assessment. As the protest merited no response, it filed a Petition for Review with the CTA
pursuant to Section 228 of the NIRC.
The CTA ruled that petitioner is liable for VAT and documentary stamp tax but not for withholding tax on
compensation and expanded withholding tax.
Petitioner's Motion for Partial Reconsideration having been denied, it filed a Petition for Review before the CTA En
Banc which dismissed it as it did petitioner's Motion for Reconsideration. Hence, the present Petition for Review on
Certiorari.
ISSUE:
1. Whether pawnshops are liable to pay VAT.
2. Whether pawn tickets are subject to documentary stamp tax.
3. Whether petitioner is liable for surcharges and interest.
HELD:
The petition is in part meritorious.
1. In light of the ruling in First Planters Pawnshop, Inc. v. Commissioner of Internal Revenue (G.R. No.
174134, July 30, 2008) where pawnshops were classified as Other Non-bank Financial
Intermediaries, since the imposition of VAT on pawnshops which are non-bank financial
intermediaries, was deferred for the tax years 1996 to 2002, petitioner is not liable for VAT for the
tax year 1999.
2. Petitioner’s argument that pawn tickets are neither securities nor printed evidence of indebtedness
hence not liable to documentary stamp tax is baseless. The Supreme Court held that pursuant to
Section 195 of the NIRC and in the ruling in Michel J. Lhuillier Pawnshop, Inc. v. Commissioner of
Internal Revenue (G.R. No. 166786, May 3, 2006), a pledge is subject to documentary stamp tax.
While a pawn ticket is not considered as an evidence of security or indebtedness, for purposes of
taxation, the same pawn ticket is proof of an exercise of a taxable privilege of concluding a contract
of pledge.
3. Petitioner's argument against liability for surcharges and interest meritorious. Indeed, it was in good
faith in not paying documentary stamp taxes, it having relied on the rulings of respondent CIR and
the CTA that pawn tickets are not subject to documentary stamp taxes.
It is settled that good faith and honest belief that one is not subject to tax on the basis of previous interpretations of
government agencies tasked to implement the tax law are sufficient justification to delete the imposition of
surcharges and interest.
[G.R. No. 167330. September 18,2009.]
PHILIPPINE HEALTH CARE PROVIDERS, INC. vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
The Commissioner of Internal Revenue sent petitioner, Philippine Health Care Providers, a health maintenance
organization, a formal demand letter and assessment notices demanding the payment of deficiency taxes for 1996
and 1997. The deficiency (documentary stamp tax) assessment was imposed on petitioner's health care
agreement with the members of its health care program pursuant to Section 185 of the 1997 Tax Code. Petitioner
protested the assessment. When respondent did not act on the protest, it filed a petition for review with the CTA
seeking cancellation of the deficiency VAT and DST assessments.
The CTA ordered petitioner to pay the deficiency VAT but cancelled the deficiency DST assessment against it.
Respondent appealed this decision to the Court of Appeals, which held that petitioner's health care agreement was
in the nature of a non-life insurance contract subject to DST. This decision was affirmed by the Supreme Court.
Petitioner then filed a motion for reconsideration, revealing for the first time that it availed of a tax amnesty under
RA 9480 (Tax Amnesty Act of 2007) by fully paying the amount representing 5% of its net worth as of the year
ending December 31, 2005.
ISSUES:
1. Whether petitioner is an HMO or an insurance company.
2. Whether or not petitioner is liable for DST on its health care agreements.
RULING:
1. Petitioner is an HMO. Under RA 7875 (The National Health Insurance Act of 1995), an HMO is "an entity that
provides, offers or arranges for coverage of designated health services needed by plan members for a fixed
prepaid premium".
U.S. courts have determined that HMOs are not in the insurance business applying the “Principal Objects and
Purpose Test”. Under this test, they determine whether the assumption of risk and indemnification of loss (which
are elements of an insurance business) are the principal object and purpose of the organization or whether they
are merely incidental to its business. If these are the principal objectives, the business is that of insurance. But if
they are merely incidental and service is the principal purpose, then the business is not insurance.
As an HMO, its obligation is to maintain the good health of its members. Thus, its health care programs are
designed to prevent or to minimize the possibility of any assumption of risk on its part. Therefore, its undertaking
under its agreements is not to indemnify its members against any loss or damage arising from a medical condition
but to provide the health and medical services needed to prevent such loss or damage.
Lastly, as an HMO, is not part of the insurance industry, it being supervised by the Department of Health, and not
by the Insurance Commission.
2. The agreements between petitioner and its members do not possess all the elements of an insurance
contract.
There is nothing in petitioner's agreements that gives rise to a monetary liability on the part of the member to any
third-party provider of medical services which might in turn necessitate indemnification from petitioner. The terms
"indemnify" or "indemnity" presuppose that a liability or claim has already been incurred. There is no indemnity
precisely because the member merely avails of medical services to be paid or already paid in advance at a
pre-agreed price under the agreements.
According to the agreement, a member can take advantage of the bulk of the benefits anytime, even in the
absence of any peril, loss or damage on his or her part. Furthermore, in case of emergency, petitioner is obliged to
reimburse the member who receives care from a non-participating physician or hospital. However, this is only a
very minor part of the list of services available. The assumption of the expense by petitioner is not confined to the
happening of a contingency but includes incidents even in the absence of illness or injury.
And even if a contract contains all the elements of an insurance contract, if its primary purpose is the rendering of
service, it is not a contract of insurance.
3. There was no legislative intent to impose DST on health care agreements of HMOs.
When the law imposing the DST was first passed, HMOs were yet unknown in the Philippines. However, when the
various amendments to the DST law were enacted, they were already in existence in the Philippines and the term
had in fact already been defined by RA 7875. If it had been the intent of the legislature to impose DST on health
care agreements, it could have done so in clear and categorical terms. It had many opportunities to do so. But it
did not. The fact that the NIRC contained no specific provision on the DST liability of health care agreements of
HMOs at a time they were already known as such, belies any legislative intent to impose it on them. As a matter of
fact, petitioner was assessed its DST liability only on January 27, 2000, after more than a decade in the business
as an HMO.
4. Petitioner's liability for DST for the taxable years 1996 and 1997 was totally extinguished by its availment of
the tax amnesty under RA 9480.
[G.R. No. 181845. August 4, 2009.]
CITY OF MANILA, ET AL. vs. COCA-COLA BOTTLERS PHIL., INC.
FACTS:
Respondent Coca-Cola Bottlers Phil., Inc. had been paying the local business tax only under Sec. 14 of Tax
Ordinance No. 7794, being expressly exempted from the business tax under Sec. 21 of the same ordinance.
On Feb. 25, 2000, petitioner City of Manila, approved Tax Ordinance No. 7988, amending certain sections of Tax
Ordinance No. 7794, particularly: (1) Section 14, by increasing the tax rates applicable to certain establishments
operating within the territorial jurisdiction of the City of Manila; and (2) Section 21, by deleting the proviso: "that all
registered businesses in the City of Manila that are already paying the aforementioned tax shall be exempted from
payment thereof". After a year, petitioner also approved Tax Ordinance No. 8011, amending Tax Ordinance No.
7988.
Tax Ordinances No. 7988 and No. 8011 were later declared by the Supreme Court null and void in Coca-Cola
Bottlers Philippines, Inc. v. City of Manila (Coca-Cola case) for the following reasons: (1) Tax Ordinance No. 7988
was enacted in contravention of the provisions of the Local Government Code of 1991 and its implementing rules
and regulations; and (2) Tax Ordinance No. 8011 could not cure the defects of Tax Ordinance No. 7988, which did
not legally exist.
However, before the Supreme Court could declare both ordinances null and void, petitioner assessed respondent
on the basis of Section 21 of Tax Ordinance No. 7794, as amended, for deficiency local business taxes for the
third and fourth quarters of the year 2000.
Respondent then filed a protest on the ground that the said assessment amounted to double taxation, as
respondent was taxed twice, i.e., under Sections 14 and 21 of Tax Ordinance No. 7794, as amended.
ISSUES:
1. Whether or not petitioners substantially complied with the reglementary period to timely appeal the
case for review before the CTA division.
2. Whether or not the ruling of the Supreme Court in the Coca-Cola case is doctrinal and controlling in
the instant case.
3. Whether or not petitioner can still assess taxes under Sections 14 and 21 of Tax Ordinance No.
7794, as amended.
4. Whether or not the enforcement of Sec. 21 of Tax Ordinance No. 7794, as amended, constitutes
double taxation.
RULING:
1. Petitioners complied with the reglementary period for filing the petition.
From 20 April 2007, the date petitioners received a copy of the 4 April 2007 Order of the RTC,
denying their Motion for Reconsideration of the 16 November 2006 Order, petitioners had 30 days,
or until 20 May 2007, within which to file their Petition for Review with the CTA. Hence, the Motion
for Extension filed by petitioners on 4 May 2007 — grounded on their belief that the reglementary
period for filing their Petition for Review with the CTA was to expire on 5 May 2007, thus,
compelling them to seek an extension of 15 days, or until 20 May 2007, to file said Petition — was
unnecessary and superfluous. Even without said Motion for Extension, petitioners could file their
Petition for Review until 20 May 2007, as it was still within the 30-day reglementary period provided
for under Section 11 of Republic Act No. 9282; and implemented by Section 3 (a), Rule 8 of the
Revised Rules of the CTA.
2. The Coca-Cola case is applicable to the instant case.
The pivotal issue raised therein was whether Tax Ordinance No. 7988 and Tax Ordinance No.
8011 were null and void, which this Court resolved in the affirmative. Tax Ordinance No. 7988 was
declared by the DOJ Secretary as null and void and without legal effect due to the failure of
petitioner City of Manila to satisfy the requirement under the law that said ordinance be published
for three consecutive days. Petitioner City of Manila never appealed said declaration of the DOJ
Secretary; thus, it attained finality after the lapse of the period for appeal of the same. The passage
of Tax Ordinance No. 8011, amending Tax Ordinance No. 7988, did not cure the defects of the
latter, which, in any way, did not legally exist. By virtue of the Coca-Cola case, Tax Ordinance No.
7988 and Tax Ordinance No. 8011 are null and void and without any legal effect. Therefore,
respondent cannot be taxed and assessed under the amendatory laws — Tax Ordinance No. 7988
and Tax Ordinance No. 8011.
3. The Court infers that petitioners themselves believed that prior to Tax Ordinance No. 7988 and Tax
Ordinance No. 8011, respondent was exempt from the local business tax under Section 21 of Tax
Ordinance No. 7794. Hence, petitioners had to wait for the deletion of the exempting proviso in
Section 21 of Tax Ordinance No. 7794 by Tax Ordinance No. 7988 and Tax Ordinance No. 8011
before they assessed respondent for the local business tax under said section. Yet, with the
pronouncement by this Court in the Coca-Cola case that Tax Ordinance No. 7988 and Tax
Ordinance No. 8011 were null and void and without legal effect, then Section 21 of Tax Ordinance
No. 7794, as it has been previously worded, with its exempting proviso, is back in effect.
Accordingly, respondent should not have been subjected to the local business tax under Section 21
of Tax Ordinance No. 7794 for the third and fourth quarters of 2000, given its exemption therefrom
since it was already paying the local business tax under Section 14 of the same ordinance.
4. There is indeed double taxation if respondent is subjected to the taxes under both Sections 14 and
21 of Tax Ordinance No. 7794, since these are being imposed: (1) on the same subject matter —
the privilege of doing business in the City of Manila; (2) for the same purpose — to make persons
conducting business within the City of Manila contribute to city revenues; (3) by the same taxing
authority — petitioner City of Manila; (4) within the same taxing jurisdiction — within the territorial
jurisdiction of the City of Manila; (5) for the same taxing periods — per calendar year; and (6) of the
same kind or character — a local business tax imposed on gross sales or receipts of the business.
When a municipality or city has already imposed a business tax on manufacturers, etc. of
liquors, distilled spirits, wines, and any other article of commerce, pursuant to Section 143 (a) of the
LGC, said municipality or city may no longer subject the same manufacturers, etc. to a business tax
under Section 143 (h) of the same Code. Section 143 (h) may be imposed only on businesses that
are subject to excise tax, VAT, or percentage tax under the NIRC, and that are "not otherwise
specified in preceding paragraphs". In the same way, businesses such as respondent's, already
subject to a local business tax under Section 14 of Tax Ordinance No. 7794 [which is based on
Section 143 (a) of the LGC], can no longer be made liable for local business tax under Section 21 of
the same Tax Ordinance [which is based on Section 143 (h) of the LGC].
[G.R. No. 178797. August 4, 2009.]
METROBANK vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
Respondent Commissioner of Internal Revenue issued a Pre-Assessment Notice assessing petitioner Metrobank
for deficiency documentary stamp tax on its Universal Savings Account (UNISA), based on Section 180 of the
NIRC. UNISA is for a depositor able to maintain a savings deposit with Metrobank with substantial average daily
balance under which he is entitled to a higher interest rate than in a regular savings account. A protest was
thereafter filed by petitioner. When respondent issued an assessment notice and formal letter of demand,
Metrobank filed another protest which was denied, prompting it to file a Petition for Review with the CTA. After
dismissal of the petition by the CTA 2nd Division, the case reached the CTA en banc which affirmed the
questioned ruling.
According to the CTA en banc, the decisive issue of whether special savings accounts evidenced by passbooks,
such as the UNISA of Metrobank, were subject to DST under Section 180 of the NIRC, had already been resolved
in the affirmative by the Supreme Court in its Jan. 15, 2007 Resolution in Banco de Oro Universal Bank v.
Commissioner of Internal Revenue (BDO case) and its April 4, 2007 Decision in International Exchange Bank v.
Commissioner of Internal Revenue (IEB case).
ISSUE:
Whether or not the UNISA was subject to DST under Sec. 180 of the NIRC, prior to its amendment by R.A. No.
924.
RULING:
The Court agrees with the CTA en banc that the pivotal issue in this case had been squarely resolved in the BDO
case and the IEB case, which involved assessments issued by the BIR against the banks BDO and IEB for DST
on their respective special savings accounts, closely similar to the UNISA of Metrobank.
Indeed, the UNISA — the special savings account of Metrobank, granting a higher tax rate to depositors able to
maintain the required minimum deposit balance for the specified holding period, and evidenced by a passbook —
is a certificate of deposit bearing interest, already subject to DST even under the then Section 180 of the NIRC.
Hence, the assessment by the CIR against Metrobank for deficiency DST on the UNISA for 1999 was only proper.
However, during the pendency of the present Petition, Metrobank manifested that it had availed itself of the Tax
Amnesty Program under R.A. No. 9480. To avail of the tax amnesty, it paid 5% of the resulting increase in its net
worth.
The factual determination made by the CTA en banc in C.T.A. EB No. 269 and by this Court in the PBC case —
that Metrobank had complied with the requirements for its application and was qualified for the tax amnesty under
Republic Act No. 9480 — is binding on this Court. Therefore, by virtue of the availment by Metrobank of the Tax
Amnesty Program under R.A. No. 9480, it is already immune from the payment of taxes, including the deficiency
DST on the UNISA for 1999, as well as the addition thereto.
[G.R. No. 171586. July 15, 2009.]
NATIONAL POWER CORP. vs. PROVINCE OF QUEZON, ET AL.
FACTS:
Petitioner National Power Corp. (NPC), a government-owned and controlled corporation, entered into an Energy
Conversion Agreement (ECA) with Mirant Pagbilao Corp. Under the agreement, Mirant will build and finance a
thermal power plant in Pagbilao, Quezon, and operate and maintain the same for 25 years, after which, Mirant will
transfer the power plant to the NPC without compensation. The NPC, in turn, will supply the necessary fuel and
use the power generated by Mirant to supply the country’s electric power needs. NPC also undertook to pay all
taxes that the government may impose on Mirant.
However, when the Municipality of Pagbilao assessed Mirant's real property taxes on the power plant and its
machineries, NPC objected to the same by filing a petition before the Local Board of Assessment Appeals claiming
that it (NPC) is entitled to the tax exemptions provided in Sec. 234, paragraphs (c) and (e) of the LGC. The LBAA
dismissed the petition.
NPC then appealed the denial of its petition with the Central Board of Assessment Appeals (CBAA) but to no avail.
A motion for reconsideration was likewise denied by the CBAA, prompting the NPC to institute an appeal before
the CTA. Before the CTA, the NPC claimed it was procedurally erroneous for the CBAA to exercise jurisdiction
over its appeal because the LBAA issued a sin perjuicio decision, that is, the LBAA pronounced a judgment
without any finding of fact. It argued that the CBAA should have remanded the case to the LBAA.
The CTA en banc dismissed the NPC's petition. From this ruling, the NPC filed the present petition seeking the
reversal of the CTA en banc's decision.
ISSUES:
1. Whether or not the CBAA can exercise jurisdiction over the case after the LBAA issued a sin
perjuicio decision.
2. Whether or not the NPC can claim tax exemption under Sec. 234 of the Local Government Code for
the taxes due from Mirant Pagbilao Corp. whose tax liabilities it has assumed.
RULING:
1. The NPC can no longer divest the CBAA of the power to decide the appeal after invoking and
submitting itself to the board's jurisdiction. A basic jurisdictional rule is that a party cannot invoke a
court's jurisdiction to secure affirmative relief and, after failing to obtain the requested relief,
repudiate or question that same jurisdiction.
2. The NPC's claim of tax exemptions is completely without merit. To successfully claim exemption
under Section 234 (c) of the LGC, the claimant must prove two elements: a) the machineries and
equipment are actually, directly, and exclusively used by local water districts and
government-owned or controlled corporations; and b) the local water districts and
government-owned and controlled corporations claiming exemption must be engaged in the supply
and distribution of water and/or the generation and transmission of electric power.
As applied to the present case, the government-owned or controlled corporation claiming

exemption must be the entity actually, directly, and exclusively using the real properties, and the use
must be devoted to the generation and transmission of electric power. Neither the NPC nor Mirant
satisfies both requirements. Although the plant's machineries are devoted to the generation of
electric power, Mirant, a private corporation, uses and operates them. That Mirant operates the
machineries solely in compliance with the will of the NPC only underscores the fact that NPC does
not actually, directly, and exclusively use them. The machineries must be actually, directly, and
exclusively used by the government-owned or controlled corporation for the exemption under
Section 234 (c) to apply.
That it utilizes all the power plant's generated electricity in supplying the power needs of its
customers is not a defense because it is the machineries that are exempted from the payment of
real property tax, not the water or electricity that these machineries generate and distribute.
Even the NPC's claim of beneficial ownership is unavailing. The test of exemption is the use,
not the ownership of the machineries devoted to generation and transmission of electric power.
Finally, from the viewpoint of fairness and the integrity of our tax system, it is wrong to allow
the NPC to assume in its BOT contracts the liability of the other contracting party for taxes that the
government can impose on that other party, and at the same time allow NPC to turn around and say
that no taxes should be collected because the NPC is tax-exempt as a government-owned and
controlled corporation. To allow it without congressional authority is to intrude into the realm of
policy and to debase the tax system that the Legislature established. It would also be grossly unfair
to the people of the Province of Quezon and the Municipality of Pagbilao who, by law, stand to
benefit from the tax provisions of the LGC.
[G.R. No. 156946. July 15, 2009.]
SECRETARY OF FINANCE vs. ORO MAURA SHIPPING LINES
FACTS:
The Maritime Industry Authority authorized the importation of M/V "HARUNA" under a Bareboat Charter for a
period of 5 years from its actual delivery to the charterer, Glory Shipping Lines. The Department of Finance
allowed the temporary registration of the vessel and its tax and duty-free release to Glory Shipping Lines, subject
to the conditions imposed by MARINA. Glory Shipping Lines then posted a bond in compliance with the
requirements of the Bureau of Customs.
However, a year after the vessel’s arrival, Glory Shipping Lines' re-export bond expired. It then sent a Letter of
Guarantee to the Collector guaranteeing to renew the Re-Export Bond on vessel M/V "HARUNA" on or before May
20, 1994; otherwise, it would pay the duties and taxes on said vessel. Glory Shipping Lines never complied with its
Letter of Guarantee; neither did it pay the duties and taxes and other charges due on the vessel despite repeated
demands made by the Collector of the Port of Mactan. Because of this, the Collector of the Port of Mactan
assessed it customs duties and other charges and sent demand letters to Glory Shipping Lines but the latter failed
to pay.
Meanwhile, Glory Shipping Lines sold the M/V “HARUNA” to the respondent, Oro Maura Shipping Lines without
informing the Collector of the Port of Mactan. After a few days, Kariton and Co., paid the duties and taxes due on
the vessel at the Port of Manila on behalf of the respondent.
After discovering the sale, the Collector of the Port of Mactan sent the respondent a demand letter for the unpaid
customs duties and charges of Glory Shipping Lines. When the respondent failed to pay, the Collector of the Port
of Mactan instituted seizure proceedings against the vessel for violation of Section 2530, par. 1, subpar. (1) to (5)
of the Tariff and Customs Code of the Philippines and ordered the forfeiture of the vessel in favor of the
Government, after a finding of fraud.
The Cebu District Collector, acting on the respondent's appeal, reversed the decision of the Collector of the Port of
Mactan, concluding that there was no proof that the respondent was a party to the fraud. These factual findings
and conclusion were affirmed by the Commissioner of Customs, by the CTA and, ultimately, by the CA. Although in
agreement with the conclusion, the Secretary of Finance, however, ordered a reassessment of the dutiable value
of the vessel based on the original entered value, without allowance for depreciation.
ISSUES:
1. Whether the Court of Appeals erred in holding that the assessment made by the Manila Customs
Collector on the subject vessel had become final and conclusive upon all parties.
2. Whether the Court of Appeals erred in holding that respondent was an "innocent purchaser."
3. Whether the Court of Appeals erred in not holding that a lien in favor of the government and against
the vessel exists.
4. Whether the Secretary of Finance can order a re-assessment of the vessel M/V "HARUNA."
RULING:
1. The drop from the undisputed original entry valuation of P6,171,092.00 to the respondent's new
valuation of P1,100,000.00 (or a decrease of 80% from the original valuation) is already a prima
facie evidence of fraud and renders the consideration and application of Section 2503 of the TCCP
unavoidable. This finding of fraud leads to the conclusion that the assessment of the Collector of the
Port of Manila cannot become final and conclusive pursuant to Section 1603 of the TCCP.
2. That the respondent fully participated in moves to defraud the BOC, as shown by the recital of the
four phases [(1) the original tax and duty-free entry of the MV Haruna; (2) the offer of Glory Shipping
Lines to sell the vessel to the respondent; (3) the inquiry of respondent's representative from the
DOF if it could pay the duties and taxes due on the vessel; and (4) when the Collector of the Port of
Mactan acted after learning of the sale of the vessel to the respondent] is further supported by the
respondent's acknowledgment to the DOF that the vessel M/V "HARUNA" conditionally entered the
country under a re-export bond filed with the BOC.
Knowing the facts that preceded its purchase of the vessel, the conclusion that the respondent
fully cooperated with Glory Shipping Lines in avoiding the original charges and duties due is
unavoidable; the respondent provided the medium (1) to disregard the original duties due on the
vessel's first entry; and (2) to avoid the Port of Mactan where demands for payment of overdue
customs duties already existed. In the process, it of course acted for its own interest by securing for
itself lower dutiable values and lesser duties due. The fact that the respondent did all these confirms
that it participated in the moves to defraud the BOC of the legitimate taxes due as originally
assessed.
3. An important factual circumstance that the CTA and the CA appear to have completely overlooked
is that the vessel first entered the Philippines through the Port of Mactan and it was the Collector of
the Port of Mactan who first acquired jurisdiction over the vessel when he approved the vessel's
temporary release from the custody of the BOC, after Glory Shipping Lines filed Ordinary Re-Export
Bond. Thus, when the respondent bought the vessel from Glory Shipping Lines, the obligation to
pay the Bureau of Customs P1,296,710.00 as customs duties had already attached to the vessel
and the non-renewal of the re-export bond made this liability due and demandable. The subsequent
transfer of ownership of the vessel from Glory Shipping Lines to the respondent did not extinguish
this liability.
4. Taxes are the lifeblood of the nation. Tariff and customs duties are taxes constituting a significant
portion of the public revenue which enables the government to carry out the functions it has been
ordained to perform for the welfare of its constituents. Hence, their prompt and certain availability is
an imperative need and they must be collected without unnecessary hindrance.
The order of the Secretary of Finance calling for the re-assessment of the value of the vessel
based on the entered value is therefore upheld.
[G.R. No. 155491. July 15, 2009.]
SMART COMMUNICATIONS, INC. vs. CITY OF DAVAO
FACTS:
Petitioner Smart, averring that its telecenter in Davao City is exempt from paying franchise tax to the city, filed a
special civil action for declaratory relief for the ascertainment of its rights and obligations under the Davao City Tax
Code. The said Tax Code imposes a franchise tax on businesses enjoying a franchise within the territorial
jurisdiction of Davao.
The RTC denied the petition. Smart then filed a motion for reconsideration, which was likewise denied. After a
denial of an appeal filed before the Supreme Court, Smart filed the instant motion for reconsideration.
ISSUES:
1. Whether or not the “in lieu of all taxes” clause in Smart’s franchise (R.A. No. 7294) covers local
taxes.
2. Whether or not the “in lieu of all taxes” clause is rendered ineffective by the Expanded VAT Law.
3. Whether or not the imposition of a local franchise tax on Smart violates the constitutional prohibition
against impairment of the obligation of contracts.
RULING:
1. Pursuant to the rulings in Digitel v. Province of Pangasinan, and in PLDT v. Province of Laguna, the
franchisee is still liable to pay the local franchise tax, aside from the national franchise tax, unless it
is expressly and unequivocally exempted from the payment thereof under its legislative franchise.
The "in lieu of all taxes" clause in a legislative franchise should categorically state that the
exemption applies to both local and national taxes; otherwise, the exemption claimed should be
strictly construed against the taxpayer and liberally in favor of the taxing authority.
2. The Expanded VAT Law (R.A. No. 7716) did not remove or abolish the payment of local franchise
tax. It merely replaced the national franchise tax that was previously paid by telecommunications
franchise holders and in its stead imposed a ten percent (10%) VAT in accordance with Section 108
of the Tax Code. VAT replaced the national franchise tax, but it did not prohibit nor abolish the
imposition of local franchise tax by cities or municipalities.
3. The power to tax by local government units emanates from Section 5, Article X of the Constitution
which empowers them to create their own sources of revenues and to levy taxes, fees and charges
subject to such guidelines and limitations as the Congress may provide. The imposition of local
franchise tax is not inconsistent with the advent of the VAT, which renders functus officio the
franchise tax paid to the national government. VAT inures to the benefit of the national government,
while a local franchise tax is a revenue of the local government unit.
[G.R. No. 180043. July 14, 2009.]
COMMISSIONER OF INTERNAL REVENUE vs. PAL
FACTS:
For the period Jan. to Dec. 2001, PLDT collected from respondent PAL the 10% Overseas Communications Tax
(OCT) imposed by Sec. 120 of the NIRC of 1997 on the amount paid by the latter for overseas telephone calls it
had made through the former.
Respondent later filed with the BIR an administrative claim for refund of the amount it alleged to have erroneously
paid in 2001, claiming that other than being liable for basic corporate income tax or the franchise tax, whichever
was lower, respondent was clearly exempted from all other taxes, including OCT, by virtue of the "in lieu of all
taxes" clause in Sec. 13 of P.D. No. 1590.
When petitioner failed to act on the request for refund, respondent filed a Petition for Review with the CTA in
Division.
The CTA First Division granted the petition, ordering the petitioner to refund the amount paid. Not satisfied with the
decision, petitioner filed a Motion for Reconsideration, which was denied.
Petitioner then filed an appeal with the CTA En Banc. The same was likewise denied. The CTA En Banc ruled that
P.D. No. 1590 does not provide that only the actual payment of basic corporate income tax or franchise tax by
respondent would entitle it to the tax exemption provided under Sec. 13 of the latter's franchise. Like the CTA First
Division, the CTA en banc ruled that by providing for net loss carry-over, P.D. No. 1590 recognized the possibility
that respondent would end up with a net loss in the computation of its taxable income, which would mean zero
liability for basic corporate income tax.
The CTA En Banc denied petitioner's Motion for Reconsideration; hence, the present Petition for Review.
ISSUES:
1. Whether the CTA En Banc erred in holding that the phrase "in lieu of all other taxes" in Sections 13
and 14 of P.D. No. 1590 does not contemplate the fulfilment of a condition before the exemption
from all other taxes may be applied.
2. Whether tax refunds are in the nature of tax exemptions, and as such, they should be construed
strictissimi juris against the person or entity claiming the exemption.
RULING:
1. The language used in Sec. 13 of P.D. No. 1590, granting respondent tax exemption, is clearly all-inclusive.
The basic corporate income tax or franchise tax paid by respondent shall be "in lieu of all other taxes, duties,
royalties, registration, license, and other fees and charges of any kind, nature, or description imposed, levied,
established, assessed or collected by any municipal, city, provincial, or national authority or government agency,
now or in the future . . .", except only real property tax. Even a meticulous examination of P.D. No. 1590 will not
reveal any provision therein limiting the tax exemption of respondent to final withholding tax on interest income or
excluding from said exemption the OCT.
In CIR vs. PAL, G.R. No. 160528, October 9, 2006, the Supreme Court held: “A careful reading of Section 13
rebuts the argument of the CIR that the "in lieu of all other taxes" proviso is a mere incentive that applies only
when PAL actually pays something. It is clear that PD 1590 intended to give respondent the option to avail itself of
Subsection (a) or (b) as consideration for its franchise. Either option excludes the payment of other taxes and dues
imposed or collected by the national or the local government. PAL has the option to choose the alternative that
results in lower taxes. It is not the fact of tax payment that exempts it, but the exercise of its option.”
In the event that respondent incurs a net loss, it shall have zero liability for basic corporate income tax, the lowest
possible tax liability. There being no qualification to the exercise of its options under Section 13 of Presidential
Decree No. 1590, then respondent is free to choose basic corporate income tax, even if it would have zero liability
for the same in light of its net loss position for the taxable year.
2. Indeed, a tax refund, which is in the nature of a tax exemption, should be construed strictissimi juris against
the taxpayer. However, when the claim for refund has clear legal basis and is sufficiently supported by evidence,
as in the present case, then the Court shall not hesitate to grant the same.
[G.R. No. 180066. July 7, 2009.]
COMMISSIONER OF INTERNAL REVENUE vs. PAL
FACTS:
For fiscal year 2000-2001, PAL allegedly incurred zero taxable income, which left it with unapplied creditable
withholding tax. It did not pay any MCIT for the period and requested for the refund of its unapplied creditable
withholding tax for FY 2000-2001. BIR denied the claim for refund and assessed PAL for deficiency MCIT. PAL
protested. Upon Petition for Review, the CTA Second Division ruled in favor of PAL, a decision affirmed by the
CTA en banc. Hence, this Petition for Review on Certiorari.
ISSUE:
Whether PAL is liable for deficiency MCIT for FY 2000-2001.
RULING:
PAL cannot be subjected to MCIT for FY 2000-2001.
First, Sec. 13 (a) of P.D. No. 1590, the franchise of PAL, refers to "basic corporate income tax." It is already settled
that the "basic corporate income tax", under this provision relates to the general rate of 35% (reduced to 32% by
the year 2000) as stipulated in Sec. 27 (A) of the NIRC of 1997.
Second, Sec. 13 (a) of P.D. No. 1590 further provides that the basic corporate income tax of PAL shall be based
on its annual net taxable income. This is consistent with Sec. 27 (A) of the NIRC of 1997, which provides that the
rate of basic corporate income tax, which is 32% beginning 1 January 2000, shall be imposed on the taxable
income of the domestic corporation.
There is an apparent distinction under the NIRC of 1997 between taxable income, which is the basis for basic
corporate income tax under Sec. 27 (A); and gross income, which is the basis for the MCIT under Section 27 (E).
The two terms have their respective technical meanings, and cannot be used interchangeably.
Third, even if the basic corporate income tax and the MCIT are both income taxes under Section 27 of the NIRC of
1997, and one is paid in place of the other, the two are distinct and separate taxes. The MCIT is different from the
basic corporate income tax, not just in the rates, but also in the bases for their computation. Not being covered by
Sec. 13 (a) of P.D. No. 1590, which makes PAL liable only for basic corporate income tax, then MCIT is included in
"all other taxes" from which PAL is exempted.
That, under general circumstances, the MCIT is paid in place of the basic corporate income tax, when the former is
higher than the latter, does not mean that these two income taxes are one and the same. The said taxes are
merely paid in the alternative, giving the Government the opportunity to collect the higher amount between the two.
Fourth, the evident intent of Sec. 13 of P.D. No. 1520 is to extend to PAL tax concessions not ordinarily available
to other domestic corporations. It permits PAL to pay whichever is lower of the basic corporate income tax or the
franchise tax; and the tax so paid shall be in lieu of all other taxes, except only real property tax. Hence, under its
franchise, PAL is to pay the least amount of tax possible.
Fifth, as ruled in Commissioner of Internal Revenue v. PAL, G.R. No. 160528, October 9, 2006: “A careful reading
of Section 13 rebuts the argument of the CIR that the "in lieu of all other taxes" proviso is a mere incentive that
applies only when PAL actually pays something. It is clear that PD 1590 intended to give respondent the option to
avail itself of Subsection (a) or (b) as consideration for its franchise. Either option excludes the payment of other
taxes and dues imposed or collected by the national or the local government. PAL has the option to choose the
alternative that results in lower taxes. It is not the fact of tax payment that exempts it, but the exercise of its
option.”
[G.R. No. 178490. July 7, 2009.]
COMMISSIONER OF INTERNAL REVENUE vs. BPI
FACTS:
For the taxable year ending Dec. 31, 1998, respondent BPI filed with the BIR its final adjusted Corporate Annual
Income Tax Return. It credited certain amounts against the total tax due from it at the end of 1998 and computed
an overpayment of income taxes to the BIR. This excess tax credit was carried over by BPI to the succeeding
taxable year. However, for 1999, BPI ended up with a net loss; its still unapplied excess tax credit carried over
from 1998; and more excess tax credit acquired in 1999. Thus, the total excess tax credits of BPI increased to
P46,922,851.00 in 1999, which it chose again to carry over to the following taxable year.
For the taxable year ending Dec. 31, 2000, BPI declared in its Corporate Annual ITR: (1) zero taxable income; (2)
excess tax credit carried over from 1998 and 1999; and (3) even more excess tax credit, gained in 2000. This time,
BPI failed to indicate in its ITR its choice of whether to carry over its excess tax credits or to claim the refund of or
issuance of a tax credit certificate for the said amounts.
BPI then filed a claim for refund in the amount of P33,947,101.00, representing its excess creditable income tax for
1998. When the petitioner CIR failed to act on its claim, BPI filed a Petition for Review before the CTA. Relying on
the irrevocability rule, the CTA ruled that BPI was barred from filing a claim for refund because it had opted to carry
over its 1998 excess tax credit to 1999 and 2000.
After its Motion for Reconsideration was denied by the CTA, BPI filed an appeal with the Court of Appeals which
reversed the CTA’s decision based on BPI-Family Savings Bank, Inc. v. CA, 386 Phil. 719 (2000). The CIR then
filed a Motion for Reconsideration which was denied; hence, this Petition for Review.
ISSUE:
Whether the irrevocability rule under Sec. 76 of the Tax Code bars petitioner from asking for a tax refund.
RULING:
BPI’s choice to carry over its 1998 excess income tax credit to succeeding taxable years is irrevocable, regardless
of whether it was able to actually apply the said amount to a tax liability. The reiteration by BPI of the carry over
option in its ITR for 1999 was already a superfluity, as far as its 1998 excess income tax credit was concerned,
given the irrevocability of the initial choice made by the bank to carry over the said amount.
The Court categorically declared in Philam Asset Management, Inc. v. CIR (G.R. Nos. 156637 and 162004, Dec.
14, 2005) that: "Section 76 remains clear and unequivocal. Once the carry-over option is taken, actually or
constructively, it becomes irrevocable." It mentioned no exception or qualification to the irrevocability rule.
The Court of Appeals erred in relying on BPI-Family Savings Bank, Inc. v. CA, because when the case was
decided by this Court, it did not yet have the irrevocability rule to consider. This case involved tax credit acquired
by the bank in 1989, which it initially opted to carry over to 1990. The prevailing tax law then was the NIRC of
1985, Sec. 79, later reproduced as Sec. 76 of the NIRC of 1997, with the addition of one important sentence,
which laid down the irrevocability rule.
The Court of Appeals mistakenly understood the phrase "for that taxable period" as a prescriptive period for the
irrevocability rule. This would mean that since the tax credit in this case was acquired in 1998, and BPI opted to
carry it over to 1999, then the irrevocability of the option to carry over expired by the end of 1999, leaving BPI free
to again take another option as regards its 1998 excess income tax credit. This construal effectively renders
nugatory the irrevocability rule. The evident intent of the legislature, in adding the last sentence to Sec. 76 of the
NIRC of 1997, is to keep the taxpayer from flip-flopping on its options, and avoid confusion and complication as
regards said taxpayer's excess tax credit.
[G.R. Nos. 172045-46. June 16, 2009.]
COMMISSIONER OF INTERNAL REVENUE vs. FIRST EXPRESS PAWNSHOP CO., INC.
FACTS:
Petitioner issued assessment notices against First Express Pawnshop Co. for deficiency income tax, VAT and
documentary stamp tax on deposit on subscription and on pawn tickets. Respondent filed its written protest on the
assessments. When petitioner did not act on the protest during the 180-day period, respondent filed a petition
before the CTA. First Express later paid deficiency income tax inclusive of interest.
In its ruling, the CTA First Division ordered the CIR to cancel the assessments for deficiency DST and directed the
respondent to pay the deficiency VAT. Both parties filed their Motions for Reconsideration which were denied by
the CTA First Division. Thereafter, both parties filed their respective Petitions for Review with the CTA En Banc.
The CTA En Banc affirmed respondent's liability to pay the VAT and ordered it to pay DST on its pawnshop tickets.
However, it found that respondent's deposit on subscription was not subject to DST, pointing out that deposit on
subscription is not subject to DST in the absence of proof that an equivalent amount of shares was subscribed or
issued in consideration for the deposit.
Aggrieved by the CTA En Banc's Decision which ruled that respondent's deposit on subscription was not subject to
DST, petitioner elevated the case before this Court.
ISSUES:
1. Whether the CTA erred on a question of law in disregarding the rule on finality of assessments
prescribed under Section 228 of the Tax Code.
2. Whether respondent is liable to pay DST on deposit on subscription of capital stock.
RULING:
1. We reject petitioner's view that the assessment has become final and unappealable. It cannot be
said that respondent failed to submit relevant supporting documents that would render the
assessment final because when respondent submitted its protest, respondent attached the GIS and
Balance Sheet. Further, petitioner cannot insist on the submission of proof of DST payment
because such document does not exist as respondent claims that it is not liable to pay, and has not
paid, the DST on the deposit on subscription.
The term "relevant supporting documents" should be understood as those documents

necessary to support the legal basis in disputing a tax assessment as determined by the taxpayer.
The BIR can only inform the taxpayer to submit additional documents. The BIR cannot demand
what type of supporting documents should be submitted. Otherwise, a taxpayer will be at the mercy
of the BIR, which may require the production of documents that a taxpayer cannot submit.
Respondent has complied with the requisites in disputing an assessment pursuant to Section
228 of the Tax Code. Hence, the tax assessment cannot be considered as final, executory and
demandable.
2. Respondent is not liable for the payment of DST on its deposit on subscription because there is yet
no subscription that creates rights and obligations between the subscriber and the corporation. The
deposit on stock subscription is merely an amount of money received by a corporation with a view
of applying the same as payment for additional issuance of shares in the future, an event which may
or may not happen.
[G.R. Nos. 120935 & 124557, May 21, 2009.]
LUCAS G. ADAMSON, ET AL. vs. COURT OF APPEALS, ET AL.,
FACTS:
In G.R. No. 120925, Lucas Adamson, president of Adamson Management Corp. (AMC) and AMC sold common
shares of stock in Adamson and Adamson, Inc. (AAI) to APAC Holding Ltd. (APAC) for which capital gains tax
was paid. Subsequently, AMC again sold to APAC Phil. common shares of stock in AAI for which AMC likewise
paid capital gains tax.
The Commissioner of Internal Revenue issued a "Notice of Taxpayer" to AMC, Adamson, and AMC’s treasurer
and secretary, informing them of deficiencies on their payment of capital gains tax and VAT. The notice
contained a schedule for preliminary conference.
Shortly after, the CIR filed with the DOJ her Affidavit of Complaint against AMC, Adamson, and the two officers
for violation of Sections 45 (a) and (d), and 110, in relation to Section 100, as penalized under Section 255, and
for violation of Section 253, in relation to Section 252 (b) and (d) of the NIRC.
Charged before the RTC, the court ruled that the complaints for tax evasion filed by the CIR should be regarded
as a decision of the Commissioner regarding the tax liabilities of Adamson and appealable to the CTA. It further
held that the said cases cannot proceed independently of the assessment case pending before the CTA, which
has jurisdiction to determine the civil and criminal tax liability of the respondents therein.
The Court of Appeals reversed the trial court's decision and reinstated the criminal complaints. It held that, in a
criminal prosecution for tax evasion, assessment of tax deficiency is not required because the offense of tax
evasion is complete or consummated when the offender has knowingly and wilfully filed a fraudulent return with
intent to evade the tax.
In G.R. No. 124557, AMC, Adamson, and AMC’s treasurer and secretary filed a letter request for re-investigation
with the CIR of the "Examiner's Findings" earlier issued by the BIR, which pointed out the tax deficiencies.
Before the CIR could act on their letter-request, AMC, Adamson and the two other officers filed a Petition for
Review with the CTA, assailing the CIR's finding of tax evasion against them. The CTA denied the CIR’s Motion
to Dismiss. It considered the criminal complaint filed by the CIR with the DOJ as an implied formal assessment,
and the filing of the criminal informations with the RTC as a denial of petitioners' protest regarding the tax
deficiency.
On appeal, the Court of Appeals sustained the CTA's denial of the CIR's Motion to Dismiss.
ISSUES:
1. Whether the Commissioner's recommendation letter can be considered as a formal assessment of
private respondents' tax liability.
2. Whether the filing of the criminal complaints against the private respondents by the DOJ is
premature for lack of a formal assessment.
3. Whether the CTA has no jurisdiction to take cognizance of both the criminal and civil cases.
RULING:
1. The recommendation letter of the Commissioner cannot be considered a formal assessment. Even
a cursory perusal of the said letter would reveal three key points: (1) It was not addressed to the
taxpayers; (2) there was no demand made on the taxpayers to pay the tax liability, nor a period for
payment set therein; (3) the letter was never mailed or sent to the taxpayers by the Commissioner.
In fine, the said recommendation letter served merely as the prima facie basis for filing
criminal informations that the taxpayers had violated Section 45 (a) and (d), and 110, in relation to
Section 100, as penalized under Section 255, and for violation of Section 253, in relation to Section
252 9 (b) and (d) of the Tax Code.
2. When fraudulent tax returns are involved as in the cases at bar, a proceeding in court after the
collection of such tax may be begun without assessment.
Here, the private respondents had already filed the capital gains tax return and the VAT
returns, and paid the taxes they have declared due therefrom. Upon investigation of the examiners
of the BIR, there was a preliminary finding of gross discrepancy in the computation of the capital
gains taxes due from the sale of two lots of AAI shares, first to APAC and then to APAC Philippines,
Limited. The examiners also found that the VAT had not been paid for VAT-liable sale of services
for the third and fourth quarters of 1990. Arguably, the gross disparity in the taxes due and the
amounts actually declared by the private respondents constitutes badges of fraud.
3. RA 1125, RA 8424 and RA 9282 have expanded the jurisdiction of the CTA. However, they did not
change the jurisdiction of the CTA to entertain an appeal only from a final decision or assessment of
the Commissioner, or in cases where the Commissioner has not acted within the period prescribed
by the NIRC. In the cases at bar, the Commissioner has not issued an assessment of the tax
liability of private respondents.
[G.R. No. 163583. April 15, 2009.]
BRITISH AMERICAN TOBACCO vs. JOSE ISIDRO N. CAMACHO, ET AL.
FACTS:
On August 20, 2008, the Supreme Court rendered a Decision partially granting the petition in this case.
In said decision, the Court declared CONSTITUTIONAL, Section 145 of the NIRC, as amended by R.A. No. 9334.
It also declared Sec. 4(B)(e)(c), 2nd paragraph of Rev. Reg. No. 1-97, as amended by Sec. 2 of Rev. Reg. 9-2003,
and Sec. II(1)(b), II(4)(b), II(6), II(7), III (Large Tax Payers Assistance Division II) II(b) of RMO No. 6-2003, insofar
as pertinent to cigarettes packed by machine, INVALID insofar as they grant the BIR the power to reclassify or
update the classification of new brands every two years or earlier.
Hence, this Motion for Reconsideration.
ISSUES:
1. Whether the assailed provisions violate the equal protection and uniformity of taxation clauses of
the Constitution
2. Whether the assailed provisions contravene Section 19, Article XII of the Constitution on unfair
competition.
3. Whether the assailed provisions infringe the constitutional provisions on regressive and inequitable
taxation.
4. Whether petitioner is entitled to a downward reclassification of Lucky Strike from the

premium-priced to the high-priced tax bracket.
RULING:
1. The instant case neither involves a suspect classification nor impinges on a fundamental right.
Consequently, the rational basis test was properly applied to gauge the constitutionality of the
assailed law in the face of an equal protection challenge. It has been held that "in the areas of social
and economic policy, a statutory classification that neither proceeds along suspect lines nor
infringes constitutional rights must be upheld against equal protection challenge if there is any
reasonably conceivable state of facts that could provide a rational basis for the classification."
Under the rational basis test, it is sufficient that the legislative classification is rationally related to
achieving some legitimate State interest.
Moreover, petitioner's contention that the assailed provisions violate the uniformity of taxation
clause is similarly unavailing. A tax "is uniform when it operates with the same force and effect in
every place where the subject of it is found." It does not signify an intrinsic but simply a geographical
uniformity. A levy of tax is not unconstitutional because it is not intrinsically equal and uniform in its
operation.
In the instant case, there is no question that the classification freeze provision meets the
geographical uniformity requirement because the assailed law applies to all cigarette brands in the
Philippines.
2. The totality of the evidence presented by petitioner before the trial court failed to convincingly
establish the alleged violation of the constitutional prohibition on unfair competition. It is a basic
postulate that the one who challenges the constitutionality of a law carries the heavy burden of proof
for laws enjoy a strong presumption of constitutionality as it is an act of a co-equal branch of
government. Petitioner failed to carry this burden.
3. The assailed provisions do not infringe the equal protection clause because the four-fold test is
satisfied. In particular, the classification freeze provision has been found to rationally further
legitimate State interests consistent with rationality review.
Anent the issue of regressivity, it may be conceded that the assailed law imposes an excise
tax on cigarettes which is a form of indirect tax, and thus, regressive in character. While there was
an attempt to make the imposition of the excise tax more equitable by creating a four-tiered taxation
system where higher priced cigarettes are taxed at a higher rate, still, every consumer, whether rich
or poor, of a cigarette brand within a specific tax bracket pays the same tax rate. To this extent, the
tax does not take into account the person's ability to pay. Nevertheless, this does not mean that the
assailed law may be declared unconstitutional for being regressive in character because the
Constitution does not prohibit the imposition of indirect taxes but merely provides that Congress
shall evolve a progressive system of taxation.
4. Petitioner is not entitled to a downward reclassification of Lucky Strike.
First, petitioner acknowledged that the initial tax classification of Lucky Strike may be modified
depending on the outcome of the survey which will determine the actual current net retail price of
Lucky Strike in the market.
Second, there was no upward reclassification of Lucky Strike because it was taxed based on
its suggested gross retail price from the time of its introduction in the market in 2001 until the BIR
market survey in 2003.
Third, the failure of the BIR to conduct the market survey within the three-month period under
the revenue regulations then in force can in no way make the initial tax classification of Lucky Strike
based on its suggested gross retail price permanent.
Last, the issue of timeliness of the market survey was never raised before the trial court
because petitioner's theory of the case was wholly anchored on the alleged unconstitutionality of the
classification freeze provision.
[G.R. No. 171138. April 7, 2009.]
H. TAMBUNTING PAWNSHOP, INC. vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
The case stemmed from a Pre-Assessment Notice issued by the Commissioner of Internal Revenue against H.
Tambunting Pawnshop, Inc. (Tambunting) for, among others, deficiency documentary stamp tax. Thereafter, the
CIR issued an assessment notice with the corresponding demand letters for the payment of the DST and the
corresponding compromise penalty for taxable year 1997.
Tambunting filed its written protest to the assessment notice alleging that it was not subject to documentary stamp
tax under Section 195 of the NIRC because documentary stamp taxes were applicable only to pledge contracts,
and the pawnshop business did not involve contracts of pledge.
When Tambunting's written protest was not acted upon by the CIR, the former filed a petition with the CTA which
ruled in its favour.
The CIR filed a motion for reconsideration but was denied by the CTA. Thus, the CIR elevated the case to the
Court of Appeals. The appellate court ruled in favor of the CIR; hence, this petition for review by Tambunting.
ISSUE:
Is Tambunting liable for documentary stamp taxes based on the pawn tickets that it issued?
RULING:
Yes.
First, the pawn ticket is required to contain the same essential information that would be found in a pledge
agreement. Only the nomenclature of the requirements in the pawn ticket is changed to refer to the specific kind of
pledge transactions undertaken by pawnshops. True, the pawn ticket is neither a security nor a printed evidence of
indebtedness. But, precisely being a receipt for a pawn, it documents the pledge. A pledge is a real contract,
hence, it is necessary in order to constitute the contract of pledge, that the thing pledged be placed in the
possession of the creditor, or of a third person by common agreement. Consequently, the issuance of the pawn
ticket by the pawnshop means that the thing pledged has already been placed in its possession and that the
pledge has been constituted.
Second, the law imposes DST on documents issued in respect of the specified transactions, such as pledge, and
not only on papers evidencing indebtedness. Therefore, a pawn ticket, being issued in respect of a pledge
transaction, is subject to documentary stamp tax.
Third, the issue in this case is not novel. The question of whether pawnshop transactions evidenced by pawn
tickets are subject to documentary stamp taxes has been answered in the affirmative in Michel J. Lhuillier
Pawnshop, Inc. v. Commissioner of Internal Revenue, (G.R. No. 166786, September 11, 2006): “… No law on
legal hermeneutics could change the fact that the entries contained in a pawnshop ticket spell out a contract of
pledge.”
[G.R. Nos. 158885 & 170680. April 2, 2009.]
FORT BONIFACIO DEV'T. CORP. vs. COMMISSIONER OF INTERNAL REVENUE, ET AL.
FACTS:
Petitioner Fort Bonifacio Development Corp. (FBDC), a real estate developer, bought from the national
government a tract of land that formerly formed part of the Fort Bonifacio military reservation. No VAT was paid
thereon since the sale was consummated prior to R.A. No. 7716. With the effectivity of R.A. No. 7716, which
imposed VAT for the first time on the sale of real properties, FBDC became obliged to remit to the BIR output VAT
payments it received from the sale of its properties. Despite its enactment, the provisions of Section 105 of the
NIRC, on the transitional input tax credit, remained intact.
Thus, when FBDC sold two parcels of land to Metro Pacific Corp., it used its presumptive input VAT on its land
inventory in partial payment of its output VAT for the fourth quarter of 1996. Upon FBDC’s inquiry, the BIR
disallowed the claimed presumptive input VAT credit. BIR then issued FBDC a Pre-Assessment Notice, followed
by an Assessment Notice representing deficiency VAT for the 4th quarter of 1996, including surcharge, interest
and penalty. After the Regional Director denied FBDC's motion for reconsideration/protest, FBDC filed a petition
for review with the Court of Tax Appeals which affirmed the assessment. This decision was partly affirmed by the
Court of Appeals upon a petition for review filed by FBDC; hence, the first petition.
The second petition involves the same parties and legal issues, but concerns the claim of FBDC that it is entitled to
claim a similar transitional/presumptive input tax credit, this time for the third quarter of 1997. This stemmed from
FBDC’s cash payments and usage of its regular input tax credit on purchases of goods and services. Utilizing the
same valuation of 8% of the total book value of its beginning inventory of real properties, FBDC argued that its
input tax credit was more than enough to offset the VAT paid by it for the third quarter of 1997.
ISSUES:
1. In determining the 10% value-added tax in Section 100 of the [Old NIRC] on the sale of real
properties by real estate dealers, is the 8% transitional input tax credit in Section 105 applied only to
the improvements on the real property or is it applied on the value of the entire real property?
2. Are Section 4.105.1 and paragraph (a)(III) of the Transitory Provisions of Revenue Regulations No.
7-95 valid in limiting the 8% transitional input tax to the improvements on the real property?.
RULING:
On its face, there is nothing in Section 105 of the Old NIRC that prohibits the inclusion of real properties, together
with the improvements thereon, in the beginning inventory of goods, materials and supplies, based on which
inventory the transitional input tax credit is computed.
Moreover, the amendments introduced by R.A. No. 7716 to Section 100, coupled with the fact that the said law left
Section 105 intact, reveal the lack of any legislative intention to make persons or entities in the real estate
business subject to a VAT treatment different from those engaged in the sale of other goods or properties or in any
other commercial trade or business.
The transitional input tax credit operates to benefit newly VAT-registered persons, whether or not they previously
paid taxes in the acquisition of their beginning inventory of goods, materials and supplies. During that period of
transition from non-VAT to VAT status, the transitional input tax credit serves to alleviate the impact of the VAT on
the taxpayer. At the very beginning, the VAT-registered taxpayer is obliged to remit a significant portion of the
income it derived from its sales as output VAT. The transitional input tax credit mitigates this initial diminution of
the taxpayer's income by affording the opportunity to offset the losses incurred through the remittance of the output
VAT at a stage when the person is yet unable to credit input VAT payments.
Under Section 105 of the Old NIRC, the rate of the transitional input tax credit is "8% of the value of such inventory
or the actual value-added tax paid on such goods, materials and supplies, whichever is higher." If indeed the
transitional input tax credit is premised on the previous payment of VAT, then it does not make sense to afford the
taxpayer the benefit of such credit based on "8% of the value of such inventory" should the same prove higher than
the actual VAT paid.
Section 4.100-1 of RR No. 7-95 itself includes in its enumeration of "goods or properties" such "real properties held
primarily for sale to customers or held for lease in the ordinary course of trade or business." Said definition was
taken from the very statutory language of Section 100 of the Old NIRC. By limiting the definition of goods to
"improvements" in Section 4.105-1, the BIR not only contravened the definition of "goods" as provided in the Old
NIRC, but also the definition which the same revenue regulation itself has provided.
Section 4.105.1 of RR No. 7-95, insofar as it disallows real estate dealers from including the value of their real
properties in the beginning inventory of goods, materials and supplies, has in fact already been repealed. The
offending provisions were deleted with the enactment of Revenue Regulations No. 6-97 (RR 6-97) dated 2 January
1997, which amended RR 7-95.
[G.R. No. 169352. February 13, 2009.]
COMMISSIONER OF CUSTOMS vs. GELMART INDUSTRIES PHIL., INC.
FACTS:
Respondent Gelmart Industries, manufacturer of embroidery and apparel products for export, is authorized to
operate a Bonded Manufacturing Warehouse. It was also granted two licenses to import tax and duty-free
materials and accessories for re-exportation. Under these licenses, petitioner was authorized to import
"FABRICS/YARNS/LEATHERS/SUBMATERIALS" from various foreign principals.
In 1999, Gelmart received three shipments of various textile materials and accessories from its supplier, to be
manufactured into finished products for subsequent exportation.
Prompted by the Warehouse and Assessment Monitoring Unit, the Commissioner of Customs required the
examination of all shipments consigned to Gelmart for alleged misdeclaration. The inspection yielded cotton fabrics
with 3% percent spandex for shirting and fleece textile materials, articles which were allegedly not normally used
for the manufacture of brassieres and/or lace, for the Bra and Lace Division of Gelmart. The Bureau of Customs
then issued seizure orders against the subject shipments. Respondent filed a protest with the District Collector of
Customs which ordered that the shipments be forfeited in favor of the government for alleged violation of the Tariff
and Customs Code. Upon appeal, the Customs Commissioner affirmed the forfeiture orders issued by the
Collector of Customs.
The Court of Tax Appeals reversed the decree of forfeiture issued by petitioner, lifted the Warrants of Seizure and
Detention, and ordered the release to Gelmart of its imported fabrics on the condition that the correct duties, taxes,
fees and other charges thereon be paid to the Bureau of Customs.
Upon respondent's motion, the CTA amended its decision and directed the release of the subject shipments
without the payment of duties and taxes on the ground that the same were imported tax and duty-free subject to
the condition that the imported materials will subsequently be re-exported as finished products.
Thereafter, petitioner, through the Office of the Solicitor General, filed this instant Petition.
ISSUES:
1. Whether the decision of the CTA division had become final and executory.
2. Whether the goods were correctly seized and forfeited in favor of the government on the ground of
misdeclaration.
3. Whether respondent had unlawfully sub-contracted a part of the manufacturing process for which
the subject shipments were intended.
RULING:
1. Petitioner's failure to file a motion for reconsideration of the assailed decision of the CTA First
Division, or at least a petition for review with the CTA en banc, invoking the latter's exclusive
appellate jurisdiction to review decisions of the CTA divisions, rendered the assailed decision final
and executory. Necessarily, all the arguments professed by petitioner on the validity of the seizure,
detention and ultimate forfeiture of the subject shipments have been foreclosed.
2. In a Certification, the GTEB itself clarified that respondent is authorized to import polyester, acrylic,
cotton and other natural or synthetic piece-goods; various types of yarns and threads, nylon,
polyester, wool and other synthetic or natural piece-goods; all types of leather and synthetic
leathers; non-woven fabrics and similar items; various types of staple fibers (synthetic and natural);
various drystuffs and chemicals; and various accessories and supplies.
The goods contained in the subject shipments undoubtedly fall under the category of raw
materials which respondent is authorized to import under the licenses which it had indubitably
obtained prior to the importation of the subject shipments. As such, there is no basis for the
forfeiture of the subject shipments on the ground of misdeclaration.
3. Sec. 1 (19), Part 1 of the Rules and Regulations of the GTEB defines a manufacturer as a firm
manufacturing textile and/or garments for export and provides that, "Manufacturers under R.A. No.
3137 may perform a portion of the manufacturing processes within the premises while other
processes to complete his finished products may be done through subcontractors and/or
homeworkers." Thus, unlike other manufacturers who are required to have at least one complete
production line within his manufacturing premises, which Gelmart nonetheless had complied with
because it has a complete manufacturing line for its lace and bra divisions, Gelmart is actually
required only to ensure that the goods released from its bonded manufacturing warehouse for
embroidery had been previously stamped or cut in accordance with the pattern to be manufactured
in accordance with R.A. No. 3137. Moreover, note should be taken of the fact that the
sub-contractors engaged by Gelmart were also duly certified by the GTEB.
[G.R. Nos. 150141, 157359 & 158644. February 12, 2009.]
AGENCIA EXQUISITE OF BOHOL, INC. vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
BIR Commissioner Jose U. Ong issued Revenue Memorandum Order No. 15-91 classifying the pawnshop
business as akin to the lending investor's business activity and imposing on both a 5% lending investor's tax based
on their gross income. The RMO was later clarified by Revenue Memorandum Circular No. 43-91.
Thus, BIR an issued Assessment Notice against Agencia Exquisite of Bohol, Inc. (AEBI) demanding payment of
the 5% lending investors' tax for 1995, plus interest and charges.
AEBI filed a protest which the BIR Revenue Regional Director denied. Consequently, AEBI filed with the CTA a
Petition for Review which ruled in favor of AEBI cancelling the Assessment Notice and declaring RMO No. 15-91
and RMC No. 43-91 null and void, in so far as they classify pawnshops as lending investors subject to 5% lending
investors' tax
Through a Petition for Review, the BIR sought recourse before the Court of Appeals which reversed and set aside
the CTA’s decision.
AEBI then filed a motion for reconsideration which was denied by the CA. Hence, the present Petition for Review
on Certiorari.
ISSUE:
Whether or not pawnshops are liable for the payment of the 5% lending investor's tax.
RULING:
In Commissioner of Internal Revenue v. Michel J. Lhuillier Pawnshop, Inc., [453 Phil. 1043 [2003]) and reiterated in
Commissioner of Internal Revenue v. Trustworthy Pawnshop, Inc., (G.R. No. 149834, May 2, 2006), this Court
held that pawnshops are not included in the term lending investors for the purpose of imposing the 5% percentage
tax under then Section 116 of the National Internal Revenue Code of 1977, as amended by E.O. No. 273. Thus,
while pawnshops are indeed engaged in the business of lending money, they cannot be deemed "lending
investors" for the purpose of imposing the 5% lending investor's tax.
The rulings are buttressed by the following reasons:
1. Under Section 192 of the NIRC of 1997, prior to its amendment by E.O. No. 273, as well as Section
161, paragraph 2, sub-paragraphs (dd) and (ff) of the NIRC of 1986, pawnshops and lending
investors were subjected to different tax treatments
2. Congress never intended pawnshops to be treated in the same way as lending investors.
3. Section 116 of the NIRC of 1977, as amended by E.O. No. 273, subjects to percentage tax dealers
in securities and lending investors only. There is no mention of pawnshops. Under the maxim
expressio unius est exclusio alterius, the mention of one thing implies the exclusion of another thing
not mentioned.
4. The BIR had ruled several times prior to the issuance of RMO No. 15-91 and RMC No. 43-91 that
pawnshops were not subject to the 5% percentage tax imposed by Section 116 of the NIRC of
1977, as amended by E.O. No. 273.
Under the doctrine of stare decisis et non quieta movere, it behooves the Court to apply its previous ruling in
Lhuillier and Trustworthy to the cases under consideration. Once a case has been decided one way, any other
case involving exactly the same point at issue, as in the present consolidated cases, should be decided in the
same manner.
[G.R. No. 171470. January 30, 2009.]
NAPOCOR vs. CENTRAL BOARD OF ASSESSMENT APPEALS, ET AL.
FACTS:
First Private Power Corp. (FPPC) entered into a BOT agreement with National Power Corp. (NAPOCOR) for the
construction of a power plant in Bauang, La Union. The BOT agreement provided, via an Accession Undertaking,
for the creation of the Bauang Private Power Corp. (BPPC) that will own, manage and operate the power
plant/station, and assume and perform FPPC's obligations under the BOT agreement. For a fee, BPPC will convert
NAPOCOR's supplied diesel fuel into electricity and deliver the product to NAPOCOR.
Initially, the Municipal Assessor's Office of Bauang declared BPPC's machineries and equipment as tax-exempt.
However, the Bureau of Local Government Finance (BLGF) ruled that they are subject to real property tax
prompting the Municipal Assessor to issue a Notice of Assessment and Tax Bill to BPPC.
NAPOCOR filed a petition with the Local Board of Assessment Appeals which denied the same, ruling that the
exemption provided by Sec. 234 (c) of the LGC applies only when a government-owned or controlled corporation
like NAPOCOR owns and/or actually uses machineries and equipment for the generation and transmission of
electric power.
On appeal, the Central Board of Assessment Appeals dismissed the appeal based on its finding that the BPPC,
and not NAPOCOR, is the actual, direct and exclusive user of the equipment and machineries; thus, the exemption
under Sec. 234 (c) does not apply.
The CTA ruled that NAPOCOR has no cause of action and no legal personality to question the assessment, as it is
not the registered owner of the machineries and equipment. Based on the BOT agreement, the CTA noted that
NAPOCOR shall have a right over the machineries and equipment only after their transfer at the end of the 15-year
co-operation period.
ISSUE:
Whether or not NAPOCOR is the actual user of the machineries and equipment.
RULING:
By the express terms of the BOT agreement, BPPC has complete ownership — both legal and beneficial — of the
project, including the machineries and equipment used, subject only to the transfer of these properties without cost
to NAPOCOR after the lapse of the period agreed upon. As agreed upon, BPPC provided the funds for the
construction of the power plant, including the machineries and equipment needed for power generation; thereafter,
it actually operated and still operates the power plant, uses its machineries and equipment, and receives payment
for these activities and the electricity generated under a defined compensation scheme. Notably, BPPC — as
owner-user — is responsible for any defect in the machineries and equipment.
Consistent with the BOT concept and as implemented, BPPC — the owner-manager-operator of the project — is
the actual user of its machineries and equipment. BPPC's ownership and use of the machineries and equipment
are actual, direct, and immediate, while NAPOCOR's is contingent and, at this stage of the BOT Agreement, not
sufficient to support its claim for tax exemption. Thus, the CTA committed no reversible error in denying
NAPOCOR's claim for tax exemption.
[G.R. No. 170574, January 30, 2009.]
PHIL. BANKING CORP. vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
For taxable years 1996 and 1997, petitioner Philippine Banking Corp., now Global Business Bank, offered to its
depositors, "Special/Super Savings Deposit Account" (SSDA), a form of a savings deposit evidenced by a
passbook and earning a higher interest rate than a regular savings account.
The Commissioner of Internal Revenue sent petitioner a Final Assessment Notice assessing deficiency
documentary stamp tax (DST) based on the outstanding balances of its SSDA, including increments for 1996
and 1997.
Petitioner maintains that the tax assessments are erroneous because Section 180 of the 1977 NIRC does not
include deposits evidenced by a passbook among the enumeration of instruments subject to DST.
The Court of Tax Appeals En Banc affirmed the Decision and Resolution of the CTA's Second Division, ruling
that a deposit account with the same features as a time deposit, i.e., a fixed term in order to earn a higher
interest rate, is subject to DST imposed in Section 180 of the 1977 NIRC.
ISSUE:
Whether petitioner's product called Special/Super Savings Account are "certificates of deposits drawing interest"
as used in Section 180 of the 1977 and therefore subject to DST.
RULING:
The SSDA is a certificate of deposit drawing interest subject to DST even if it is evidenced by a passbook and
non-negotiable in character.
The SSDA is for depositors who maintain savings deposits with substantial average daily balance and which
earn higher interest rates. The holding period of an SSDA floats at the option of the depositor at 30, 60, 90, 120
days or more and for maintaining a longer holding period, the depositor earns higher interest rates. There is no
pre-termination of accounts in an SSDA because the account is simply reverted to an ordinary savings status in
case of early or partial withdrawal or if the required holding period is not met.
Meanwhile, Metrobank, the surviving entity that absorbed petitioner's banking business, filed a Tax Amnesty
Return, paid the amnesty tax and fully complied with all the requirements of the Tax Amnesty Program under RA
9480.
The DST is one of the taxes covered by the Tax Amnesty Program under RA 9480. While petitioner is clearly
liable to pay the DST on its SSDA for the years 1996 and 1997, the petitioner, as the absorbed corporation, can
avail of the tax amnesty benefits granted to Metrobank.
Considering that the completion of the requirements shall be deemed full compliance with the tax amnesty
program, the law mandates that the taxpayer shall thereafter be immune from the payment of taxes, and
additions thereto, as well as the appurtenant civil, criminal or administrative penalties under the NIRC of 1997, as
amended, arising from the failure to pay any and all internal revenue taxes for taxable year 2005 and prior years.
[G.R. No. 169565, January 21, 2009.]
COMMISSIONER OF INTERNAL REVENUE vs. UNITED INTERNATIONAL PICTURES, AB
FACTS:
Respondent United International Pictures filed a petition for review with the CTA asking for the refund of its
excess income tax payments in 1996. While the said petition was pending, respondent filed an administrative
claim for refund of its excess income tax payments in 1997 with RDO No. 34 of the BIR.
In a decision, the CTA ordered petitioner, Commissioner of Internal Revenue, to deduct respondent's 1996 tax
liability from the amount claimed and to make a refund (or to issue tax credit certificates). Neither party assailed
the decision; thus, it attained finality.
Because of this, respondent revised its pending administrative claim for refund. It added the amount of its 1996
tax liability and claimed the creditable tax withheld in 1997 as the amount of total refund. When the BIR failed to
act on its administrative claim, respondent filed a petition for review with the CTA which granted the same but
ordered the BIR to refund (or to issue tax credit certificates) only to the extent of P6,285,892.05.
Aggrieved, petitioner filed a petition for certiorari with the Court of Appeals asserting that the CTA committed
grave abuse of discretion when it granted respondent a tax refund. However, the CA affirmed the findings of the
CTA and dismissed the petition. Its motion for reconsideration was denied; hence, this recourse.
ISSUE:
Whether or not the CA erred in dismissing the CIR’s petition for certiorari.
HELD:
Under our tax system, the CTA is a highly specialized body that reviews tax cases. For this reason, its findings of
fact are binding on the Court unless such findings are not supported by substantial evidence.
In this case, the CTA concluded that respondent was entitled to refund but only to the extent of P6,285,892.05.
As pointed out by the CA, the CTA exhaustively explained why it granted the refund albeit less than what
respondent claimed. We find no reason to disturb the CTA's findings of fact.
Accordingly, the petition is hereby denied.
[G.R. No. 166387, January 19, 2009.]
COMMISSIONER OF INTERNAL REVENUE vs. ENRON SUBIC POWER CORP.
FACTS:
Respondent, Enron Subic Power Corp. (Enron), a domestic corporation registered with the Subic Bay
Metropolitan Authority as a freeport enterprise, filed its annual income tax return for 1996 indicating a net loss.
The Bureau of Internal Revenue informed it of a proposed assessment of an alleged deficiency income tax.
Enron disputed the proposed deficiency assessment in its first protest letter. It likewise protested the deficiency
tax assessment contained in the subsequent formal assessment notice.
Due to the non-resolution of its protest within the 180-day period, Enron filed a petition for review with the Court
of Tax Appeals which granted Enron's petition and ordered the cancellation of its deficiency tax assessment for
the year 1996, reasoning that the assessment notice failed to comply with the requirements of a valid written
notice under Section 228 of the NIRC and RR No. 12-99.
The CIR appealed the CTA decision to the CA but the CA affirmed it, holding that the audit working papers did
not substantially comply with Section 228 of the NIRC and RR No. 12-99 because they failed to show the
applicability of the cited law to the facts of the assessment. The CIR filed a motion for reconsideration but this
was deemed abandoned when he filed a motion for extension to file a petition for review with the Supreme Court.
ISSUE:
Was Enron informed of the legal and factual bases of the deficiency assessment against it?
HELD:
The advice of tax deficiency, given by the CIR to an employee of Enron, as well as the preliminary five-day letter,
were not valid substitutes for the mandatory notice in writing of the legal and factual bases of the assessment.
The requirement for issuing a preliminary or final notice, as the case may be, informing a taxpayer of the
existence of a deficiency tax assessment is markedly different from the requirement of what such notice must
contain. Just because the CIR issued an advice, a preliminary letter during the pre-assessment stage and a final
notice, in the order required by law, does not necessarily mean that Enron was informed of the law and facts on
which the deficiency tax assessment was made.
The law requires that the legal and factual bases of the assessment be stated in the formal letter of demand and
assessment notice. Thus, such cannot be presumed. Otherwise, the express provisions of Article 228 of the
NIRC and RR No. 12-99 would be rendered nugatory. The alleged "factual bases" in the advice, preliminary letter
and "audit working papers" did not suffice.
In view of the absence of a fair opportunity for Enron to be informed of the legal and factual bases of the
assessment against it, the assessment in question was void.
[G.R. Nos. 171383 & 172379. November 14, 2008.]
SILKAIR (SINGAPORE) PTE. LTD. vs. COMMISSIONER OF INTERNAL REVENUE.
FACTS:
Petitioner Silkair, an international carrier, purchased aviation jet fuel from Petron for use on its international flights.
Excise (specific) tax was added to the amount paid by petitioner on its purchases of the said fuel. Singapore
Airlines Ltd., a sister company of Silkair, paid excise taxes for its purchases of the aviation jet fuel from Petron.
However, contending that it is exempt from the payment of excise taxes under Section 135 of the 1997 NIRC, and
under Article 4 of the Air Transport Agreement between the Philippines and Singapore, petitioner filed a formal
claim for refund with the Commissioner of Internal Revenue.
The Court of Tax Appeals En Banc denied petitioner's claim for refund or issuance of a tax credit certificate
pointing out that since the liability for the payment of excise taxes is imposed upon the manufacturer or producer of
the petroleum products, such manufacturer or producer is the taxpayer; hence, only the taxpayer may ask for a
refund in case of erroneous payment of taxes. The CTA further ruled that even with the agreement, the shifting of
the burden of the excise tax to Silkair did not transform the latter into a taxpayer. Thus, Petron, being the
manufacturer or producer of the aviation jet fuel, remains the proper party to claim for refund.
ISSUE:
Whether petitioner is the proper party to claim a refund for the excise taxes paid.
HELD:
An excise tax is an indirect tax where the tax burden can be shifted to the consumer but the tax liability remains
with the manufacturer or producer.
In the refund of indirect taxes, the statutory taxpayer is the proper party who can claim the refund.
The excise tax is due from the manufacturers of the petroleum products and is paid upon removal of the products
from their refineries. Even before the aviation jet fuel is purchased from Petron, the excise tax is already paid by
Petron. Petron, being the manufacturer, is the "person subject to tax". In this case, Petron, which paid the excise
tax upon removal of the products from its Bataan refinery, is the "person liable for tax". Petitioner is neither a
"person liable for tax" nor "a person subject to tax". There is also no legal duty on the part of petitioner to pay the
excise tax; hence, petitioner cannot be considered the taxpayer.
Even if the tax is shifted by Petron to its customers and even if the tax is billed as a separate item in the aviation
delivery receipts and invoices issued to its customers, Petron remains the taxpayer because the excise tax is
imposed directly on Petron as the manufacturer. Hence, Petron, as the statutory taxpayer, is the proper party that
can claim the refund of the excise taxes paid to the BIR.
[G.R. No. 157264. January 31, 2008.]
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY vs. COMMISSIONER OF INTERNAL REVENUE.
FACTS:
Petitioner PLDT terminated in 1995 the employment of several rank-and-file, supervisory, and executive
employees due to redundancy. In compliance with labor law requirements, PLDT paid those separated employees
separation pay and other benefits but deducted from their separation pay, withholding taxes in the total amount of
P23,707,909.20 which it remitted to the BIR.
PLDT filed with the BIR a claim for tax credit or refund of the P23,707,909.20, invoking Section 28 (b) (7) (B) of the
1977 National Internal Revenue Code which excluded from gross income "[a]ny amount received by an official or
employee or by his heirs from the employer as a consequence of separation of such official or employee from the
service of the employer due to death, sickness or other physical disability or for any cause beyond the control of
the said official or employee."
The CTA denied PLDT's claim on the ground that it "failed to sufficiently prove that the terminated employees
received separation pay and that taxes were withheld therefrom and remitted to the BIR."
PLDT filed a Motion for New Trial/Reconsideration, praying for an opportunity to present the receipts and
quitclaims executed by the employees and prove that they received their separation pay. The CTA denied PLDT's
motion.
PLDT thus filed a Petition for Review before the Court of Appeals which dismissed the same. Hence, this petition.
ISSUE:
1. Whether or not proof of payment of separation pay to the employees is required in order to avail of
refund of taxes erroneously paid to the BIR
2. Whether or not the Court of Appeals committed grave abuse of discretion in not ordering a new trial.
HELD:
1. PLDT must prove that the employees received the income payments as part of gross income and the fact of
withholding. The CTA found that PLDT failed to establish that the redundant employees actually received
separation pay and that it withheld taxes therefrom and remitted the same to the BIR. This finding was
affirmed by the CA.
While SGV certified that it had "been able to trace the remittance of the withheld taxes summarized in the
C[ash] S[alary] V[ouchers] to the Monthly Remittance Return of Income Taxes Withheld for the appropriate
period covered by the final payment made to the concerned executives, supervisors, and rank and file staff
members of PLDT," the same cannot be appreciated in PLDT's favor as the courts cannot verify such claim.
While the records of the case contain the Alphabetical List of Employees from Whom Taxes Were Withheld
for the year 1995 and the Monthly Remittance Returns of Income Taxes Withheld for December 1995, the
documents from which SGV "traced" the former to the latter have not been presented. Failure to present
these documents is fatal to PLDT's case under CTA Circular 1-95.
2. On the denial of PLDT's motion for new trial, the Court held that newly discovered evidence as a basis of a
motion for new trial should be supported by affidavits of the witnesses by whom such evidence is expected to
be given, or by duly authenticated documents which are proposed to be introduced in evidence. And the
grant or denial of a new trial is, generally speaking, addressed to the sound discretion of the court which
cannot be interfered with unless a clear abuse thereof is shown. PLDT has not shown any such abuse,
however.
The affirmance by the appellate court of the CTA's denial of PLDT's motion for new trial on the ground of
"newly discovered evidence," is in order.
At all events, the alleged "newly discovered evidence" that PLDT seeks to offer does not suffice to establish its
claim for refund, as it would still have to comply with Revenue Regulations 6-85 by proving that the redundant
employees, on whose behalf it filed the claim for refund, declared the separation pay received as part of their gross
income.
[G.R. No. 121666. October 10, 2007.]
COMMISSIONER OF INTERNAL REVENUE vs. MANILA ELECTRIC CO.
FACTS:
Manila Electric Co., a legislative franchise grantee, had been paying a 2% franchise tax based on its gross
receipts, in lieu of all other taxes and assessments of whatever nature. However, upon the effectivity of E.O. No.
72 on February 10, 1987, respondent became subject to the payment of regular corporate income tax. For the last
quarter ending December 31, 1987, respondent filed on April 15, 1988 its tentative income tax.
Acting on a yearly routinary Letter of Authority, an investigation was conducted which showed respondent’s liability
for deficiency income tax and deficiency franchise tax.
On April 17, 1989, respondent filed an amended final corporate Income Tax Return ending December 31, 1988
reflecting a refundable amount of P107,649,729. It then filed a letter-claim for refund or credit in the same amount
of P107,649,729 representing overpaid income taxes for the years 1987 and 1988. When no action was made on
its request, respondent filed a judicial claim for refund or credit with the CTA which ruled in its favor. Petitioner then
elevated the case to the CA but the appellate court affirmed the tax court's decision; hence, the present petition.
ISSUES:
Did the respondent adduce sufficient evidence to prove its entitlement to a refund?
RULING:
Yes. If the sum of the quarterly tax payments made during a taxable year is not equal to the total tax due on the
entire taxable income of that year as shown in its final adjustment return, the corporation has the option to either:
(a) pay the excess tax still due, or (b) be refunded the excess amount paid. The returns submitted are "merely
pre-audited which consist mainly of checking mathematical accuracy of the figures in the return." After such
checking, the purpose of which being to "insure prompt action on corporate annual income tax returns showing
refundable amounts arising from overpaid quarterly income taxes," the refund or tax credit is granted. A corporate
taxpayer's option to avail of tax credit does not, however, mean that it is ipso facto granted. For petitioner has still
to investigate and ascertain the veracity of the claim.
It bears noting that the tax court and the appellate court found respondent's claim for tax refund or credit
meritorious on the basis of the testimonial and documentary evidence adduced by the parties. It bears noting too
that petitioner did not dispute the validity and authenticity of respondent's quarterly income tax returns as well as
the final adjustment returns for the years 1987 and 1988 and proofs of payment of its tax liabilities.
It is doctrinal that the factual findings of the Court of Tax Appeals, when supported by substantial evidence, will not
be disturbed on appeal, unless it is shown that it committed gross error in the appreciation of facts. Hence, as a
matter of practice and principle, this Court will not set aside the conclusion reached by the said court, especially if
affirmed by the Court of Appeals.
[G.R. No. 162155. August 28, 2007.]
COMMISSIONER OF INTERNAL REVENUE, ET AL. vs. PRIMETOWN PROPERTY GROUP, INC.
FACTS:
Gilbert Yap, vice chair of Primetown Property Group, Inc., applied for the refund or credit of income tax paid in
1997. He explained that the increase in the cost of labor and materials and difficulty in obtaining financing for
projects and collecting receivables caused the real estate industry to slowdown. As a consequence, while business
was good during the first quarter of 1997, respondent suffered losses amounting to P71,879,228 that year. Yap
claimed that because Primetown suffered losses, it was not liable for income taxes. Nevertheless, respondent paid
its quarterly corporate income tax and remitted creditable withholding tax from real estate sales to the BIR. HcISTE
On May 13, 1999, respondent was required to submit additional documents to support its claim. Respondent
complied but its claim was not acted upon. Thus, on April 14, 2000, it filed a petition for review with the CTA.
However, the CTA dismissed the petition as it was filed beyond the two-year prescriptive period for filing a judicial
claim for tax refund or tax credit.
Upon denial of its motion for reconsideration, respondent filed an appeal with the CA which reversed the CTA
decision. Petitioners moved for reconsideration but it was denied; hence, this appeal.
ISSUE:
How should the two-year prescriptive period be computed?
RULING:
Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the Administrative Code of 1987 deal with
the same subject matter — the computation of legal periods. Under the Civil Code, a year is equivalent to 365 days
whether it be a regular year or a leap year. Under the Administrative Code of 1987, however, a year is composed
of 12 calendar months; thus, the number of days is irrelevant. caTESD
There being a manifest incompatibility in the manner of computing legal periods under the Civil Code and the
Administrative Code of 1987, the more recent law, the Administrative Code of 1987, governs the computation of
legal periods.
Applying Section 31, Chapter VIII, Book I of the Administrative Code of 1987, the two-year prescriptive period
(reckoned from the time respondent filed its final adjusted return on April 14, 1998) consisted of 24 calendar
months.
Since respondent's petition (filed on April 14, 2000) was filed on the last day of the 24th calendar month from the
day respondent filed its final adjusted return, it was filed within the reglementary period.
[G.R. No. 146941. August 9, 2007.]
FILINVEST DEVELOPMENT CORP. vs. COMMISSIONER OF INTERNAL REVENUE, ET AL.
FACTS:
Filinvest filed with the CIR, a claim for refund, or in the alternative, the issuance of a tax credit certificate
representing excess creditable withholding taxes for taxable years 1994, 1995, and 1996. When the CIR had not
resolved petitioner's claim for refund and the two-year prescriptive period was about to lapse, Filinvest filed a
Petition for Review with the CTA which was dismissed for insufficiency of evidence. A petition for review filed with
the CA was likewise denied until the case reached the Supreme Court. EcDSHT
ISSUE:
Is petitioner entitled to the tax refund or tax credit?
RULING:
Yes. Petitioner has complied with all the requirements to prove its claim for tax refund. While it is true that
petitioner has the burden of proving that it is entitled to refund, however, it has already been held that once the
claimant has submitted all the required documents, it is the function of the BIR to assess these documents with
purposeful dispatch.
The CIR is given the power to grant a tax credit or refund even without a written claim therefor, if the former
determines from the face of the return that payment had clearly been erroneously made. Evidently, the CIR's
function is not merely to receive the claims for refund but it is also given the positive duty to determine the veracity
of such claim.
That no one shall unjustly enrich oneself at the expense of another is a long-standing principle prevailing in our
legal system. This applies not only to individuals but to the State as well. In the field of taxation where the State
exacts strict compliance upon its citizens, the State must likewise deal with taxpayers with fairness and honesty.
The harsh power of taxation must be tempered with evenhandedness. Hence, under the principle of solutio
indebiti, the Government has to restore to petitioner the sums representing erroneous payments of taxes.
[G.R. No. 154068. August 3, 2007.]
COMMISSIONER OF INTERNAL REVENUE vs. ROSEMARIE ACOSTA
FACTS:
Rosemarie Acosta, an employee of Intel Manufacturing Phils., Inc., was assigned in a foreign country from January
1, 1996 to December 31, 1996. During that period, Intel withheld the taxes due on her compensation income and
remitted to the BIR the amount of P308,084.56. Claiming that the income taxes withheld and paid resulted in an
overpayment, respondent filed a petition for review with the CTA. The CTA dismissed the same, ruling that
respondent failed to file a written claim for refund with the CIR, a condition precedent to the filing of a petition for
review before the CTA and that her failure to allege in her petition the date of filing the final adjustment return,
deprived the court of its jurisdiction over the subject matter of the case.
Upon review, the Court of Appeals reversed the CTA, ruling that respondent's filing of an amended return
indicating an overpayment was sufficient compliance with the requirement of a written claim for refund. Petitioner
sought reconsideration, but was denied. Hence, the instant petition.
ISSUES:
1. Does the amended return filed by respondent indicating an overpayment constitute the written claim
for refund required by law, thereby vesting the CTA with jurisdiction over this case?
2. Can the 1997 NIRC be applied retroactively?
RULING:
1. No. The law is clear. A claimant must first file a written claim for refund, categorically demanding
recovery of overpaid taxes with the CIR, before resorting to an action in court. This obviously is
intended, first, to afford the CIR an opportunity to correct the action of subordinate officers; and
second, to notify the government that such taxes have been questioned, and the notice should then
be borne in mind in estimating the revenue available for expenditure.
Tax refunds are in the nature of tax exemptions which are construed strictissimi juris against
the taxpayer and liberally in favor of the government. As tax refunds involve a return of revenue
from the government, the claimant must show indubitably the specific provision of law from which
her right arises; it cannot be allowed to exist upon a mere vague implication or inference nor can it
be extended beyond the ordinary and reasonable intendment of the language actually used by the
legislature in granting the refund.
2. No. Section 204 (c) of RA 8424 cannot be given retroactive application. Tax laws are prospective in
operation, unless the language of the statute clearly provides otherwise.
At the time respondent filed her amended return, the 1997 NIRC was not yet in effect. Hence,
respondent had no reason at that time to think that the filing of an amended return would constitute
the written claim for refund required by applicable law. HTcADC
[G.R. No. 166494. June 29, 2007.]
CARLOS SUPERDRUG CORP., ET AL. vs. DSWD, ET AL.
FACTS:
Petitioners are drugstores assailing the constitutionality of Sec. 4 (a) of R.A. No. 9257 (Expanded Senior Citizens
Act of 2003). They assert that the law constitutes deprivation of private property as it compels drugstore owners
and establishments to grant discounts to senior citizens. They allege that this will result in a loss of profit and
capital because 1) drugstores impose a mark-up of only 5% to 10% on branded medicines; and 2) the law failed to
provide a scheme whereby drugstores will be justly compensated for the discount. caHCSD
ISSUE:
Is Sec. 4 (a) of R.A. No. 9257 unconstitutional?
RULING:
No.
One of the policies of R.A. No. 9257 is "to recognize the important role of the private sector in the improvement of
the welfare of senior citizens and to actively seek their partnership." To implement this policy, the law grants a 20%
discount to senior citizens for purchases of their medicines, among others. As a form of reimbursement, the law
provides that business establishments extending the 20% discount to senior citizens may claim the discount as a
tax deduction.
Based on the July 10, 2004 DOF Opinion, the tax deduction scheme does not fully reimburse petitioners for the
discount privilege accorded to senior citizens. This is because the discount is treated as a deduction, a
tax-deductible expense that is subtracted from the gross income and results in a lower taxable income. The
permanent reduction in their total revenues is a forced subsidy corresponding to the taking of private property for
public use or benefit. This constitutes compensable taking for which petitioners would ordinarily become entitled to
a just compensation. However, a tax deduction does not offer full reimbursement of the senior citizen discount. As
such, it would not meet the definition of just compensation.
The law is a legitimate exercise of police power which has general welfare for its object. Thus, when the conditions
so demand as determined by the legislature, property rights must bow to the primacy of police power because
property rights, though sheltered by due process, must yield to general welfare. EcHAaS
Moreover, the right to property has a social dimension. While Article XIII of the Constitution provides the precept
for the protection of property, various laws and jurisprudence, continuously serve as a reminder that the right to
property can be relinquished upon the command of the State for the promotion of public good. The success of the
senior citizens program rests largely on the support imparted by petitioners and the other private establishments
concerned. This being the case, the means employed in invoking the active participation of the private sector, in
order to achieve the purpose or objective of the law, is reasonably and directly related.
[G.R. No. 166732. April 27, 2007.]
INTEL TECHNOLOGY PHIL., INC. vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
Petitioner is a domestic corporation engaged in the business of designing, developing, manufacturing and
exporting advanced and large-scale integrated circuit components (ICs). It is registered with the Bureau of Internal
Revenue (BIR) as a value-added tax (VAT) entity in 1996. It is likewise registered with the Philippine Economic
Zone Authority (PEZA) as an Ecozone export enterprise.
As a VAT-registered entity, petitioner filed with the Commissioner of Internal Revenue its Monthly VAT
Declarations and Quarterly VAT Return for the second quarter of 1998 declaring zero-rated export sales of
P2,538,906,840.16 and VAT input taxes from domestic purchases of goods and services in the total amount of
P11,770,181.70. Petitioner alleged that its zero-rated export sales were paid for in acceptable foreign currency and
were inwardly remitted in accordance with the regulations of the Bangko Sentral ng Pilipinas (BSP).
On May 18, 1999, petitioner filed with the Commissioner of Internal Revenue a claim for tax credit/refund of VAT
input taxes on its domestic purchases of goods and services directly used in its commercial operations. Petitioner's
claim for refund amounted to P11,770,181.70 covering the period April 1, 1998 to June 30, 1998. ACDTcE
ISSUES:
Whether petitioner is entitled to the tax credit/refund sought
HELD:
Yes.
Under Sections 106 (A)(2)(a)(1) in relation to 112(A) of the Tax Code, a taxpayer engaged in zero-rated or
effectively zero-rated transactions may apply for a refund or issuance of a tax credit certificate for input taxes paid
attributable to such sales upon complying with the following requisites: (1) the taxpayer is engaged in sales which
are zero-rated (like export sales) or effectively zero-rated; (2) the taxpayer is VAT-registered; (3) the claim must be
filed within two years after the close of the taxable quarter when such sales were made; (4) the creditable input tax
due or paid must be attributable to such sales, except the transitional input tax, to the extent that such input tax
has not been applied against the output tax; and (5) in case of zero-rated sales under Section 106 (A) (2) (a) (1)
and (2), Section 106 (B), and Section 108 (B) (1) and (2), the acceptable foreign currency exchange proceeds
thereof had been duly accounted for in accordance with BSP rules and regulations. CAacTH
Documentary evidence submitted by petitioner, e.g., summary of export sales, sales invoices, official receipts,
airway bills and export declarations, prove that it is engaged in the "sale and actual shipment of goods from the
Philippines to a foreign country." Thus, petitioner is considered engaged in export sales (a zero-rated transaction if
made by a VAT-registered entity). Moreover, the certification of inward remittances attests to the fact of payment
"in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the
rules and regulations of the BSP." Therefore, petitioner's evidence, together with the requirements of Sections 106
(A)(2)(a)(1) and 112(A) of the Tax Code, as enumerated earlier, sufficiently establish that it is entitled to a claim for
refund or issuance of a tax credit certificate for creditable input taxes.
[G.R. No. 168129. April 24, 2007.]
COMMISSIONER OF INTERNAL REVENUE vs. PHILIPPINE HEALTH CARE PROVIDERS, INC.
FACTS:
Respondent is a corporation operating a prepaid group practice health care delivery system.
Under its prepaid group practice health care delivery system, individuals enrolled in the health care program are
entitled to preventive, diagnostic, and corrective medical services to be dispensed by respondent’s duly licensed
physicians, specialists, and other professional technical staff participating in said group practice health care
delivery system established and operated by Health Care. Such medical services will be dispensed in a hospital or
clinic owned, operated, or accredited by Health Care. To be entitled to receive such medical services from Health
Care, an individual must enroll in Health Care's health care program and pay an annual fee. Enrollment in Health
Care's health care program is on a year-to-year basis and enrollees are issued identification cards.
Moreover, this court adheres to its conclusion that petitioner is a service contractor subject to VAT since it does
not actually render medical service but merely acts as a conduit between the members and petitioner's accredited
and recognized hospitals and clinics. HEDSCc
ISSUE:
Whether respondent’s business activity is subject to VAT
HELD:
Yes.
Section 103 of the 1977 NIRC (now Sec. 109 of the 1997 Tax Code) specifies the transactions exempt from VAT,
thus:
SEC. 103. Exempt Transactions. — The following shall be exempt from the value-added tax:
xxx xxx xxx
(l) Medical, dental, hospital and veterinary services except those rendered by professionals
xxx xxx xxx
The import of the above provision is plain. It requires no interpretation. It contemplates the exemption from VAT of
taxpayers engaged in the performance of medical, dental, hospital, and veterinary services. In Commissioner of
Internal Revenue v. Seagate Technology (Philippines), it held that an exempt transaction is one involving goods or
services which, by their nature, are SPECIFICALLY LISTED in and EXPRESSLY EXEMPTED from the VAT,
under the Tax Code, without regard to the tax status of the party in the transaction. Commissioner of Internal
Revenue v. Toshiba Information Equipment (Phils.) Inc. reiterated this definition.
From the respondent’s business activity, the CTA made the following conclusions:
a) Respondent "is not actually rendering medical service but merely acting as a conduit between the
members and their accredited and recognized hospitals and clinics."
b) It merely "provides and arranges for the provision of pre-need health care services to its members
for a fixed prepaid fee for a specified period of time."
c) It then "contracts the services of physicians, medical and dental practitioners, clinics and hospitals
to perform such services to its enrolled members;" and
d) Respondent "also enters into contract with clinics, hospitals, medical professionals and then
negotiates with them regarding payment schemes, financing and other procedures in the delivery of
health services."
The factual findings of the CTA were neither modified nor reversed by the Court of Appeals. It is a doctrine that
findings of fact of the CTA, a special court exercising particular expertise on the subject of tax, are generally
regarded as final, binding, and conclusive upon this Court, more so where these do not conflict with the findings of
the Court of Appeals. SETAcC
Perforce, as respondent DOES NOT ACTUALLY PROVIDE medical and/or hospital services, as provided under
Section 103 on exempt transactions, but merely arranges for the same, its services are not VAT-exempt.
[G.R. No. 168498. April 24, 2007.]
RIZAL COMMERCIAL BANKING CORP. vs. COMMISSIONER OF INTERNAL REVENUE

FACTS:
In this Motion for Reconsideration, petitioner, Rizal Commercial Banking Corp., reiterates its claim that its former
counsel's failure to file petition for review with the Court of Tax Appeals within the period set by Section 228 of the
National Internal Revenue Code of 1997 (NIRC) was excusable. ACIEaH
ISSUE:
Whether the counsel's failure to file petition for review with the Court of Tax Appeals within the period set by
Section 228 of the National Internal Revenue Code of 1997 (NIRC) is excusable.
HELD:
No.
Petitioner maintains that its counsel's neglect in not filing the petition for review within the reglementary period was
excusable. It alleges that the counsel's secretary misplaced the Resolution hence the counsel was not aware of its
issuance and that it had become final and executory.
Relief cannot be granted on the flimsy excuse that the failure to appeal was due to the neglect of petitioner's
counsel. Otherwise, all that a losing party would do to salvage his case would be to invoke neglect or mistake of
his counsel as a ground for reversing or setting aside the adverse judgment, thereby putting no end to litigation.
Negligence to be "excusable" must be one which ordinary diligence and prudence could not have guarded against
and by reason of which the rights of an aggrieved party have probably been impaired. Petitioner's former counsel's
omission could hardly be characterized as excusable, much less unavoidable.
The Court has repeatedly admonished lawyers to adopt a system whereby they can always receive promptly,
judicial notices and pleadings intended for them. Apparently, petitioner's counsel was not only remiss in complying
with this admonition but he also failed to check periodically, as an act of prudence and diligence, the status of the
pending case before the CTA Second Division. The fact that counsel allegedly had not renewed the employment of
his secretary, thereby making the latter no longer attentive or focused on her work, did not relieve him of his
responsibilities to his client. It is a problem personal to him which should not in any manner interfere with his
professional commitments. DcIHSa
[G.R. No. 134062. April 17, 2007.]
COMMISSIONER OF INTERNAL REVENUE vs. BANK OF THE PHILIPPINE ISLANDS
FACTS:
In two notices dated October 28, 1988, Commissioner of Internal Revenue (CIR), assessed Bank of the Philippine
Islands' (BPI's) deficiency percentage and documentary stamp taxes for the year 1986.
On December 10, 1988, BPI replied that the "deficiency assessments" are no assessments at all because the
taxpayer is not informed, even in the vaguest terms, why it is being assessed a deficiency. BPI requested that the
examiner concerned be required to state, even in the briefest form, why he believes the taxpayer has a deficiency
documentary and percentage taxes. ASDCaI
It was only on June 27, 1991, when BPI received a letter from CIR dated May 8, 1991, explaining the basis of the
assessments.
On July 6, 1991, BPI requested reconsideration of the assessments stated in the CIR's May 8, 1991 letter. This
was denied on December 12, 1991, received by BPI on January 21, 1992.
On February 18, 1992, BPI filed a petition for review in the CTA. The CTA dismissed the case for lack of
jurisdiction since the subject assessments had become final and unappealable. It ruled that BPI failed to protest on
time under Section 270 of the National Internal Revenue Code (NIRC) of 1986 and Section 7 in relation to Section
11 of RA 1125. Reconsideration was denied. IHSTDE
On appeal, the CA reversed and remanded the case to the CTA for a decision on the merits. It ruled that the
October 28, 1988 notices were not valid assessments because they did not inform the taxpayer of the legal and
factual bases therefor. It declared that the proper assessments were those contained in the May 8, 1991 letter
which provided the reasons for the claimed deficiencies. Thus, it held that BPI filed the petition for review in the
CTA on time.
Hence, the CIR elevated the case to the Supreme Court.
ISSUE:
Which of the "assessments" – the NOTICES of October 28, 1988 or the May 8, 1991 LETTER EXPLAINING THE
BASES for the assessments – is the RECKONING DATE for purposes of computing PRESCRIPTION of
PROTEST? TSHIDa
HELD:
The NOTICES of October 28, 1998.
Admittedly, the CIR did not inform BPI in writing of the law and facts on which the assessments of the deficiency
taxes were made. He merely notified BPI of his findings, consisting only of the computation of the tax liabilities and
a demand for payment thereof within 30 days after receipt.
In merely notifying BPI of his findings, THE CIR RELIED ON THE PROVISIONS OF THE FORMER SECTION 270
PRIOR TO ITS AMENDMENT BY RA 8424 (Tax Reform Act of 1997).
Accordingly, when the assessments were made pursuant to the former Section 270, the only requirement was for
the CIR to "notify" or inform the taxpayer of his "findings." NOTHING IN THE OLD LAW REQUIRED A WRITTEN
STATEMENT TO THE TAXPAYER OF THE LAW AND FACTS ON WHICH THE ASSESSMENTS WERE
BASED. The Court cannot read into the law what obviously was not intended by Congress. That would be judicial
legislation, nothing less. aSTHDc
Jurisprudence simply required that the assessments contain a COMPUTATION OF TAX LIABILITIES, the
AMOUNT the taxpayer was to pay and a DEMAND FOR PAYMENT within a prescribed period. Everything
considered, there was no doubt the October 28, 1988 notices sufficiently met the requirements of a valid
assessment under the old law and jurisprudence.
Considering that the October 28, 1988 notices were valid assessments, BPI should have protested the same
within 30 days from receipt thereof. The December 10, 1988 reply it sent to the CIR did not qualify as a protest. As
a matter of fact, BPI never deemed it a protest since it did not even consider the October 28, 1988 notices as valid
or proper assessments. cTAaDC
The inevitable conclusion is that BPI's failure to protest the assessments within the 30-day period provided in the
former Section 270 meant that they became final and unappealable. Thus, the CTA correctly dismissed BPI's
appeal for lack of jurisdiction. BPI was, from then on, barred from disputing the correctness of the assessments or
invoking any defense that would reopen the question of its liability on the merits.
The sentence: "The taxpayers shall be informed in writing of the law and the facts on which the assessment is
made; otherwise, the assessment shall be void" was not in the old Section 270 but was only later on inserted in the
renumbered Section 228 in 1997. Evidently, the legislature saw the need to modify the former Section 270 by
inserting the aforequoted sentence. The fact that the amendment was necessary showed that, prior to the
introduction of the amendment, the statute had an entirely different meaning. CSAcTa
[G.R. Nos. 142369-70. April 13, 2007.]
JUANITO T. MERENCILLO vs. PEOPLE OF THE PHIL.
FACTS:
Accused, a BIR Group Supervising Examiner, directly demanded and extorted from Mrs. Maria Angeles Ramasola
Cesar the amount of P20,000 in exchange for the release of the certification of her payment of the capital gains tax
for the land purchased by the Ramasola [Superstudio] Inc. from one Catherine Corpuz Enerio, a transaction
wherein the accused has to intervene in his official capacity.
Charged for violation of Section 3 (b) of RA 3019 and for direct bribery under Article 210 of the Revised Penal
Code, petitioner was found guilty of both.
ISSUE:
Whether accused was placed in double jeopardy
HELD:
No.
Section 3 of RA 3019 begins with the statement:
Sec. 3. In addition to acts or omissions of public officers already penalized by existing

law, the following [acts] shall constitute corrupt practices of any public officer and are hereby declared
unlawful:
One may therefore be charged with violation of RA 3019 in addition to a felony under the Revised Penal Code for
the same delictual act, that is, either concurrently or subsequent to being charged with a felony under the Revised
Penal Code. There is no double jeopardy if a person is charged simultaneously or successively for violation of
Section 3 of RA 3019 and the Revised Penal Code.
The rule against double jeopardy prohibits twice placing a person in jeopardy of punishment for the same offense.
The test is whether one offense is identical with the other or is an attempt to commit it or a frustration thereof; or
whether one offense necessarily includes or is necessarily included in the other, as provided in Section 7 of Rule
117 of the Rules of Court. An offense charged necessarily includes that which is proved when some of the
essential elements or ingredients of the former, as alleged in the complaint or information, constitute the latter; and
an offense charged is necessarily included in the offense proved when the essential ingredients of the former
constitute or form a part of those constituting the latter.
A comparison of the elements of the crime of direct bribery defined and punished under Article 210 of the Revised
Penal Code and those of violation of Section 3 (b) of RA 3019 shows that there is neither identity nor necessary
inclusion between the two offenses.
The elements of the crime penalized under Section 3 (b) of RA 3019 are:
(1) the offender is a public officer;
(2) he requested or received a gift, present, share, percentage or benefit;
(3) he made the request or receipt on behalf of the offender or any other person;
(4) the request or receipt was made in connection with a contract or transaction with the government
and
(5) he has the right to intervene, in an official capacity under the law, in connection with a contract or
transaction.
On the other hand, direct bribery has the following essential elements:
(1) the offender is a public officer;
(2) the offender accepts an offer or promise or receives a gift or present by himself or through another;
(3) such offer or promise be accepted or gift or present be received by the public officer with a view to
committing some crime, or in consideration of the execution of an act which does not constitute a
crime but the act must be unjust, or to refrain from doing something which it is his official duty to do;
and
(4) the act which the offender agrees to perform or which he executes is connected with the
performance of his official duties.
Clearly, the violation of Section 3 (b) of RA 3019 is neither identical nor necessarily inclusive of direct bribery.
While they have common elements, not all the essential elements of one offense are included among or form part
of those enumerated in the other. Whereas the mere request or demand of a gift, present, share, percentage or
benefit is enough to constitute a violation of Section 3 (b) of RA 3019, acceptance of a promise or offer or receipt
of a gift or present is required in direct bribery. Moreover, the ambit of Section 3 (b) of RA 3019 is specific. It is
limited only to contracts or transactions involving monetary consideration where the public officer has the authority
to intervene under the law. Direct bribery, on the other hand, has a wider and more general scope: (a)
performance of an act constituting a crime; (b) execution of an unjust act which does not constitute a crime and (c)
agreeing to refrain or refraining from doing an act which is his official duty to do.
Although the two charges against petitioner stemmed from the same transaction, the same act gave rise to two
separate and distinct offenses. No double jeopardy attached since there was a variance between the elements of
the offenses charged. The constitutional protection against double jeopardy proceeds from a second prosecution
for the same offense, not for a different one.
[G.R. No. 171266. April 4, 2007.]
INTERNATIONAL EXCHANGE BANK vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
Petitioner was assessed of deficiency documentary stamp tax on its purchases of securities from the Bangko
Sentral ng Pilipinas or Government Securities Purchased-Reverse Repurchase Agreement (RRPA) and its
Savings Account-Fixed Savings Deposit (FSD) for the taxable years 1996 and 1997.
Petitioner argued that its FSD is not subject to DST since it was not one of the documents enumerated either
under the 1977 Tax Code (Tax Code) or the 1997 National Internal Revenue Code (NIRC). Respondent on the
other hand argued that petitioner should be liable not only for DST on its FSD but also on its RRPA. DaScCH
ISSUE:
Is a Savings Account-Fixed Savings Deposit (FSD) evidenced by a passbook issued by International Exchange
Bank (petitioner) subject to documentary stamp tax (DST) for the years 1996 and 1997?
HELD:
Yes.
The applicable provision is Section 180 of the Tax Code, as amended by R.A. 7660.
A passbook representing an interest earning deposit account issued by a bank qualifies as a certificate of deposit
drawing interest. TIaCAc
A document to be deemed a certificate of deposit requires no specific form as long as there is some written
memorandum that the bank accepted a deposit of a sum of money from a depositor. What is important and
controlling is the nature or meaning conveyed by the passbook and not the particular label or nomenclature
attached to it, inasmuch as substance, not form, is paramount.
Orders for the payment of sum of money payable at sight or on demand are of course explicitly exempted from the
payment of DST. Thus, a regular savings account with a passbook which is withdrawable at any time is not subject
to DST, unlike a time deposit which is payable on a fixed maturity date.
As for petitioner's argument that its FSD is similar to a regular savings deposit because it is evidenced by a
passbook, and that based on the legislative deliberations on the bill which was to become R.A. 9243 which
amended Section 180 of the NIRC (which is to a large extent the same as Section 180 of the Tax Code, as
amended by R.A. 7660), Congress admitted that deposits evidenced by passbooks which have features akin to
time deposits are not subject to DST, the same does not lie.
The FSD, like a time deposit, provides for a higher interest rate when the deposit is not withdrawn within the
required fixed period; otherwise, it earns interest pertaining to a regular savings deposit. Having a fixed term and
the reduction of interest rates in case of pre-termination are essential features of a time deposit.
The same feature is present in a time deposit. A depositor is allowed to withdraw his time deposit even before its
maturity subject to bank charges on its pre-termination and the depositor loses his entitlement to earn the interest
rate corresponding to the time deposit. Instead, he earns interest pertaining only to a regular savings deposit.
Thus, petitioner's argument that the savings deposit-FSD is withdrawable anytime as opposed to a time deposit
which has a maturity date, is not tenable. In both cases, the deposit may be withdrawn anytime but the depositor
gets to earn a lower rate of interest. The only difference lies on the evidence of deposit, a savings deposit-FSD is
evidenced by a passbook, while a time deposit is evidenced by a certificate of time deposit. cSICHD
In order for a depositor to earn the agreed higher interest rate in a SA-FSD, the amount of deposit must be
maintained for a fixed period. Such being the case, We agree with the finding that the SA-FSD is a deposit
account with a fixed term. Withdrawal before the expiration of said fixed term results in the reduction of the interest
rate. Having a fixed term and reduction of interest rate in case of pre-termination are essentially the features of a
time deposit. Hence, this Court concurs with the conclusion reached in the assailed Decision that petitioner's
SA-FSD and time deposit are substantially the same. IATSHE
[G.R. No. 155682. March 27, 2007.]
BANCO FILIPINO SAVINGS AND MORTGAGE BANK vs. COURT OF APPEALS, ET AL.
FACTS:
Petitioner filed with the Commissioner of Internal Revenue an administrative claim for refund of creditable taxes
withheld for the year 1995.
As the CIR failed to act on its claim, petitioner filed a Petition for Review with the CTA. It attached to its Petition
several documents, including: 1) Certificate of Income Tax Withheld on Compensation (BIR Form No. W-2) for the
Year 1995 executed by Oscar Lozano covering P720.00 as tax withheld on rental income paid to petitioner (Exhibit
"II"); and 2) Monthly Remittance Return of Income Taxes Withheld under BIR Form No. 1743W issued by
petitioner, indicating various amounts it withheld and remitted to the BIR (Exhibits "C" through "Z").
In his Answer, respondent CIR interposed special and affirmative defenses, specifically that petitioner's claim is not
properly documented.
Both the CTA and the CA denied the petition on ground that the documentary evidence presented lacked probative
value.
ISSUE:
Whether the CA erred in affirming the disallowance by the CTA of petitioner's claim for tax refund on ground that
the latter's Exhibit "II" and Exhibits "C" through "Z" lack probative value. acHDTA
HELD:
No.
There are three conditions for the grant of a claim for refund of creditable withholding tax: 1) the claim is filed with
the CIR within the two-year period from the date of payment of the tax; 2) it is shown on the return of the recipient
that the income payment received was declared as part of the gross income; and, 3) the fact of withholding is
established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the
amount of the tax withheld therefrom.
The third condition is specifically imposed under Section 10 of Revenue Regulations No. 6-85 (as amended), thus:
Sec. 10. Claim for tax credit or refund. — (a) Claims for Tax Credit or Refund of income
tax deducted and withheld on income payments shall be given due course only when it is shown on
the return that the income payment received has been declared as part of the gross income and the
fact of withholding is established by a copy of the Withholding Tax Statement duly issued by the payor
to the payee showing the amount paid and the amount of tax withheld therefrom . . . .
There is no doubt that petitioner complied with the first two requirements. The question is whether it complied with
the third condition by presenting merely a Certificate of Income Tax Withheld on Compensation or BIR Form No.
W-2 (Exhibit "II") and Monthly Remittance Return of Income Taxes Withheld under BIR Form No. 1743W (Exhibits
"C" through "Z"). HICSTa
Petitioner argues that its Exhibit "II" and Exhibits "C" through "Z" should be accorded the same probative value as
a BIR Form No. 1743.1, for said documents are also official BIR forms and they reflect the fact that taxes were
actually withheld and remitted. It appeals for liberality considering that its annual return clearly shows that it is
entitled to creditable withholding tax.
The document which may be accepted as evidence of the third condition, that is, the fact of withholding, must
emanate from the payor itself, and not merely from the payee, and must indicate the name of the payor, the
income payment basis of the tax withheld, the amount of the tax withheld and the nature of the tax paid.
At the time material to this case, the requisite information regarding withholding taxes from the sale of acquired
assets can be found in BIR Form No. 1743.1. As described in Section 6 of Revenue Regulations No. 6-85, BIR
Form No. 1743.1 is a written statement issued by the payor as withholding agent showing the income or other
payments made by the said withholding agent during a quarter or year and the amount of the tax deducted and
withheld therefrom. It readily identifies the payor, the income payment and the tax withheld. It is complete in the
relevant details which would aid the courts in the evaluation of any claim for refund of creditable withholding taxes.
EcDSHT
In relation to withholding taxes from rental income, the requisite information can be found in BIR Form No.
1743-750. Petitioner is well aware of this for its own Exhibits "AA" through "HH" are all in BIR Form No. 1743-750.
As earlier stated, the CTA approved petitioner's claim for refund to the extent of P18,884.40, which is the portion of
its claim supported by its Exhibits "AA" through "HH."
In the present case, the disputed portions of petitioner's claim for refund is supported merely by Exhibits "C"
through "Z" and Exhibit "II." Exhibits "C" through "Z" were issued by petitioner as payee purportedly acting as
withholding agent, and not by the alleged payors in the transactions covered by the documents. Moreover, the
documents do not identify the payors involved or the nature of their transaction. They do not indicate the amount
and nature of the income payments upon which the tax was computed or the nature of the transactions from which
the income payments were derived, specifically whether it resulted from the sale of petitioner's acquired assets.
As to petitioner's Exhibit "II," while it was issued by a payor, the document does not state the amount and nature of
the income payment. Hence, it cannot be verified from the document if the tax withheld is correct.
For all its deficiencies, therefore, petitioner's Exhibits "C" through "Z" cannot take the place of BIR Form No.
1743.1 and its Exhibit "II," of BIR Form No. 1743-750. Petitioner cannot fault the CA and CTA for finding said
evidence insufficient to support its claim for tax refund.
[G.R. No. 145526. March 16, 2007.]
ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORP. vs. COMMISSIONER OF INTERNAL

REVENUE
FACTS:
On March 31, 1993, petitioner presented to respondent Commissioner of Internal Revenue, applications for refund
or tax credit of excess input taxes for the second, third and fourth quarters of 1992. Petitioner attributed these
claims to its sales of gold to the Central Bank, copper concentrates to Philippine Associated Smelting and Refining
Corporation (PASAR) and pyrite to Philippine Phosphates, Inc. (Philphos) on the theory that these were zero-rated
transactions resulting in refundable or creditable input taxes under Section 106(b) of the Tax Code of 1986. ASHICc
Respondent's continuous inaction and the imminent expiration of the two-year period for beginning a court action
for tax credit or refund prompted petitioner to bring its claims to the Court of Tax Appeals (CTA).
Both the CTA and the CA denied petitioner's claims on, among others, insufficiency of evidence.
ISSUE:
Whether the documentary evidence adduced by petitioner suffice for the purpose of its application for tax credit or
refund cCTAIE
HELD:
No.
It has always been the rule that those seeking tax refunds or credits bear the burden of proving the factual bases
of their claims and of showing, by words too plain to be mistaken, that the legislature intended to entitle them to
such claims. The rule, in this case, required petitioner to (1) show that its sales qualified for zero-rating under the
laws then in force and (2) present sufficient evidence that those sales resulted in excess input taxes.
There is no dispute that respondent had approved petitioner's applications for the zero-rating of its sales to the
Central Bank, PASAR and Philphos prior to the transactions from which these claims arose. Thus, on the strength
of the ruling in Atlas Consolidated Mining and Development Corp. v. Commissioner of Internal Revenue that
respondent's approval of petitioner's application for zero-rating of its sales to Philphos and PASAR "indubitably
signified" that such sales qualified for zero-rating, it could well be conceded that petitioner had complied with the
first requirement. TCIEcH
However, petitioner must also submit sufficient evidence to justify the grant of refund or tax credit. It was here that
petitioner fell short.
The CTA and the CA both found that petitioner failed to comply with the evidentiary requirements for claims for tax
credits or refunds set forth in Section 2 (c) of Revenue Regulations 3-88 and in CTA Circular 1-95, as amended by
CTA Circular 10-97.
CTA Circular 1-95 likewise required submission of invoices or receipts showing the amounts of tax paid:
1. The party who desires to introduce as evidence such voluminous documents must, after motion and
approval by the Court, present: (a) a Summary containing, among others, a chronological listing of
the numbers, dates and amounts covered by the invoices or receipts and the amount/s of tax paid;
and (b) a Certification of an independent Certified Public Accountant attesting to the correctness of
the contents of the summary after making an examination, evaluation and audit of the voluminous
receipts and invoices. . . .
2. The method of individual presentation of each and every receipt, invoice or account for marking,
identification and comparison with the originals thereof need not be done before the Court or Clerk
of Court anymore after the introduction of the summary and CPA certification. It is enough that the
receipts, invoices, vouchers or other documents covering the said accounts or payment to be
introduced in evidence must be pre-marked by the party concerned and submitted to the Court in
order to be made accessible to the adverse party who desires to check and verify the correctness of
the summary and CPA certification. Likewise the originals of the voluminous receipts, invoices or
accounts must be ready for verification and comparison in case doubt on the authenticity thereof is
raised during the hearing or resolution of the formal offer of evidence.
Both courts correctly observed that petitioner never submitted any of the invoices or receipts required by the
foregoing rules and held this omission to be fatal to its cause. IScaAE
[G.R. No. 168557 and 170628. February 16, 2007.]
FELS ENERGY, INC. vs. PROVINCE OF BATANGAS, ET AL.
FACTS:
NPC entered into a lease contract with Polar Energy, Inc. over 3x30 MW diesel engine power barges moored at
Balayan Bay in Calaca, Batangas. The contract stipulated that NPC shall be responsible for the payment of,
among others, "all real estate taxes and assessments, rates and other charges in respect of the Power Barges".
Subsequently, Polar Energy, Inc. assigned its rights under the Agreement to FELS.
On August 7, 1995, FELS received an assessment of real property taxes on the power barges from the Provincial
Assessor of Batangas City. FELS referred the matter to NPC, reminding it of its obligation under the Agreement to
pay all real estate taxes. It then gave NPC the full power and authority to represent it in any conference regarding
the real property assessment of the Provincial Assessor.
In a letter dated September 7, 1995, NPC sought reconsideration of the Provincial Assessor's decision to assess
real property taxes on the power barges. The motion was denied on September 22, 1995, and the Provincial
Assessor advised NPC to pay the assessment.
NPC filed a petition with the Local Board of Assessment Appeals (LBAA) for the setting aside of the assessment
and the declaration of the barges as non-taxable items.
In denying the petition, the LBAA ruled that the power plant facilities, while they may be classified as movable or
personal property, are nevertheless considered real property for taxation purposes because they are installed at a
specific location with a character of permanency; that the owner of the barges — FELS, a private corporation — is
the one being taxed, not NPC; that a mere agreement making NPC responsible for the payment of all real estate
taxes and assessments will not justify the exemption of FELS; such a privilege can only be granted to NPC and
cannot be extended to FELS; and, that the petition was filed out of time.
ISSUES:
1. Whether NPC’s appeal to the LBAA is already barred by prescription
2. Whether FELS is liable for real property tax on the power barges
HELD:
1. Yes
The LBAA acted correctly when it dismissed the petitioners' appeal for having been filed out of time; the CBAA and
the appellate court were likewise correct in affirming the dismissal. Elementary is the rule that the perfection of an
appeal within the period therefor is both mandatory and jurisdictional, and failure in this regard renders the decision
final and executory.
Section 226 of R.A. No. 7160, otherwise known as the Local Government Code of 1991, provides:
SECTION 226. Local Board of Assessment Appeals. — Any owner or person having legal
interest in the property who is not satisfied with the action of the provincial, city or municipal assessor
in the assessment of his property may, within sixty (60) days from the date of receipt of the written
notice of assessment, appeal to the Board of Assessment Appeals of the province or city by filing a
petition under oath in the form prescribed for the purpose, together with copies of the tax declarations
and such affidavits or documents submitted in support of the appeal. IDTSEH
The Notice of Assessment which the Provincial Assessor sent to FELS on August 7, 1995, contained the following
statement:
"If you are not satisfied with this assessment, you may, within sixty (60) days from the date of
receipt hereof, appeal to the Board of Assessment Appeals of the province by filing a petition under
oath on the form prescribed for the purpose, together with copies of ARP/Tax Declaration and such
affidavits or documents submitted in support of the appeal."
Instead of appealing to the Board of Assessment Appeals (as stated in the notice), NPC opted to file a motion for
reconsideration of the Provincial Assessor's decision, a remedy NOT sanctioned by law.
The remedy of appeal to the LBAA is available from an adverse ruling or action of the provincial, city or municipal
assessor in the assessment of the property. It follows then that the determination made by the respondent
Provincial Assessor with regard to the taxability of the subject real properties falls within its power to assess
properties for taxation purposes subject to appeal before the LBAA.
In the case of Callanta v. Office of the Ombudsman, the Court held that under Section 226 of R.A. No 7160, the
LAST ACTION of the local assessor on a particular assessment shall be the notice of assessment; it is this last
action which gives the owner of the property the right to appeal to the LBAA. The procedure likewise does NOT
permit the property owner the remedy of filing a MOTION FOR RECONSIDERATION before the LOCAL
ASSESSOR. To allow this procedure would indeed invite corruption in the system of appraisal and assessment. It
conveniently courts a graft-prone situation where values of real property may be initially set unreasonably high, and
then subsequently reduced upon the request of a property owner. In the latter, allusions of a possible covert, illicit
trade-off cannot be avoided, and in fact can conveniently take place. Such occasion for mischief must be
prevented and excised from our system.
Also, in CA-G.R. SP No. 67491, the Court announced: Whenever the local assessor sends a notice to the owner
or lawful possessor of real property of its revised assessed value, the former shall NO longer have any jurisdiction
to entertain any request for a review or readjustment. The appropriate forum where the aggrieved party may bring
his appeal is the LBAA as provided by law.
To reiterate, if the taxpayer fails to appeal in due course, the right of the local government to collect the taxes due
with respect to the taxpayer's property becomes absolute upon the expiration of the period to appeal. Taxpayer's
failure to question the assessment in the LBAA renders the assessment of the local assessor final, executory and
demandable, thus, precluding the taxpayer from questioning the correctness of the assessment, or from invoking
any defense that would reopen the question of its liability on the merits.
2. Yes.
Petitioners maintain nevertheless that the power barges are exempt from real estate tax under Sec. 234 (c) of the
LGC because they are actually, directly and exclusively used by petitioner NPC, a government-owned and
controlled corporation engaged in the supply, generation, and transmission of electric power.
Real property tax is a tax on ownership. The OWNER of the taxable properties is petitioner FELS which is the
entity being taxed by the local government. It follows then that FELS cannot escape liability from the payment of
realty taxes by invoking the above-cited provision.
It is a basic rule that obligations arising from a contract have the force of law between the parties. Not being
contrary to law, morals, good customs, public order or public policy, the parties to the contract are bound by its
terms and conditions. Time and again, the Supreme Court has stated that taxation is the rule and exemption is the
exception. The law does not look with favor on tax exemptions and the entity that would seek to be thus privileged
must justify it by words too plain to be mistaken and too categorical to be misinterpreted. Thus, applying the rule of
strict construction of laws granting tax exemptions, and the rule that doubts should be resolved in favor of
provincial corporations, FELS is considered a taxable entity.
The mere undertaking of petitioner NPC under the lease contract that it shall be responsible for the payment of all
real estate taxes and assessments, does not justify the exemption. The privilege granted to petitioner NPC cannot
be extended to FELS. The covenant is between FELS and NPC and does not bind a third person not privy thereto,
in this case, the Province of Batangas.
[G.R. No. 147295. February 16, 2007.]
COMMISSIONER OF INTERNAL REVENUE vs. ACESITE (PHIL.) HOTEL CORP.
FACTS:
Acesite is the owner and operator of the Holiday Inn Manila Pavilion Hotel. It leases a portion of the hotel's
premises to PAGCOR for casino operations. It also caters food and beverages to PAGCOR's casino patrons
through the hotel's restaurant outlets.
For the period January 1996 to April 1997, Acesite incurred VAT amounting to P30,152,892.02 from its rental
income and sale of food and beverages to PAGCOR during said period. Acesite tried to shift the said taxes to
PAGCOR by incorporating it in the amount assessed to PAGCOR but the latter refused to pay the taxes on
account of its tax-exempt status.
PAGCOR paid the amount due to Acesite minus the P30,152,892.02 VAT; while Acesite paid the VAT as it feared
the legal consequences of non-payment of the tax.
However, Acesite belatedly arrived at the conclusion that its transaction with PAGCOR was subject to zero rate as
it was rendered to a tax-exempt entity. Acesite filed an administrative claim for refund.
ISSUE:
Whether the zero percent (0%) VAT rate under then Section 102 (b) (3) of the Tax Code (now Section 108 (B) (3)
of the Tax Code of 1997) legally applies to Acesite
HELD:
Yes. HEIcDT
It was proper for PAGCOR not to pay the 10% VAT charged by Acesite; and the latter is not liable for the payment
of the same as it is exempt in this particular transaction by operation of law to pay the indirect tax.
Section 13 of P.D. 1869, the charter creating PAGCOR, grants the latter an exemption from the payment of taxes.
A close scrutiny of the said provision clearly gives PAGCOR a BLANKET EXEMPTION to taxes with no distinction
on whether the taxes are direct or indirect.
This VAT exemption extends to Acesite pursuant to former Section 102 (b) (3) of the 1977 Tax Code, as amended
(now Sec. 108 [b] [5] of R.A. 8424).
The rationale for the exemption from indirect taxes provided for in P.D. 1869 and the extension of such exemption
to entities or individuals dealing with PAGCOR in casino operations are best elucidated from the 1987 case of
Commissioner of Internal Revenue v. John Gotamco & Sons, Inc., where the absolute tax exemption of the World
Health Organization (WHO) upon an international agreement was upheld. It was held in said case that the
exemption of contractee WHO should be implemented to mean that the entity or person exempt is the contractor
itself who constructed the building owned by contractee WHO, and such does not violate the rule that tax
exemptions are personal because the manifest intention of the agreement is to exempt the contractor so that no
contractor's tax may be shifted to the contractee WHO. Thus, the proviso in P.D. 1869, extending the exemption to
entities or individuals dealing with PAGCOR in casino operations, is clearly to proscribe any indirect tax, like VAT,
that may be shifted to PAGCOR. HcISTE
[G.R. No. 172231. February 12, 2007.]
COMMISSIONER OF INTERNAL REVENUE vs. ISABELA CULTURAL CORP.
FACTS:
The BIR disallowed respondent's claimed expense deductions for professional and security services for the taxable
year 1986; hence, it issued Assessment Notices for deficiency income tax.
The BIR contended that, since respondent uses the accrual method of accounting, expenses for professional
services which accrued in 1984 and 1985, should have been declared as deductions during said years and failure
of respondent to do so bars it from claiming said expenses as deduction for the taxable year 1986.
Both the CTA and the CA cancelled the Assessment Notices holding that the claimed deductions were properly
claimed in 1986 because it was only in said year when the bills demanding payment were sent to respondent;
hence, even if these professional services were rendered in 1984 or 1985, respondent could not declare the same
as deduction for said years as the amount thereof could not be determined at that time. cCAaHD
ISSUE:
For taxpayers adopting the accrual method of accounting, when is an expense deemed to have accrued for
purposes of availing the deduction allowed therefor under Sec. 34 of the Tax Code?
HELD:
The accrual method relies upon the taxpayer's RIGHT TO RECEIVE amounts or its OBLIGATION TO PAY them,
in opposition to actual receipt or payment, which characterizes the cash method of accounting. Amounts of income
ACCRUE where the right to receive them become FIXED; where there is created an ENFORCEABLE liability.
Similarly, liabilities are accrued when fixed and determinable in amount, without regard to indeterminacy merely of
time of payment. DaCEIc
The accrual of income and expense is permitted when the ALL-EVENTS TEST has been met. This test requires:
(1) fixing of a right to income or liability to pay; and (2) the availability of the reasonable accurate determination of
such income or liability.
The test does not demand that the amount of income or liability be known absolutely, only that a taxpayer has at
his disposal the information necessary to compute the amount with reasonable accuracy.
In the instant case, the expenses for legal services pertain to the 1984 and 1985 legal and retainer fees of the law
firm Bengzon Zarraga Narciso Cudala Pecson Azcuna & Bengson. The firm has been respondent’s counsel since
the 1960s. Respondent can be expected to have reasonably known the retainer fees charged by the firm as well
as the compensation for its legal services. Failure to determine the exact amount of the expense during the taxable
year when they could have been claimed as deductions cannot thus be attributed solely to the delayed billing of
these liabilities by the firm. For one, respondent, in the exercise of due diligence, could have inquired into the
amount of their obligation to the firm, especially so that it is using the accrual method of accounting. For another, it
could have reasonably determined the amount of legal and retainer fees owing to its familiarity with the rates
charged by their long time legal consultant.
Similarly, the professional fees of SGV & Co. for auditing the financial statements of respondent for the year 1985
cannot be validly claimed as expense deductions in 1986 because respondent failed to present evidence showing
that even with only "reasonable accuracy," as the standard to ascertain its liability to SGV & Co. in the year 1985, it
cannot determine the professional fees which said company would charge for its services.
The accrual method presents largely a question of fact and the taxpayer bears the burden of establishing the
accrual of an expense or income. Respondent failed to discharge this burden.
Hence, per Revenue Audit Memorandum Order No. 1-2000, they cannot be validly deducted from respondent's
gross income for 1986 and were therefore properly disallowed by the BIR.
[G.R. No. 153205. January 22, 2007.]
COMMISSIONER OF INTERNAL REVENUE vs. BURMEISTER AND WAIN SCANDINAVIAN CONTRACTOR

MINDANAO, INC.
FACTS:
A foreign consortium composed of Burmeister and Wain Scandinavian Contractor A/S (BWSC-Denmark), Mitsui
Engineering and Shipbuilding, Ltd., and Mitsui and Co., Ltd. entered into a contract with NAPOCOR for the
operation and maintenance of NAPOCOR's 2 power barges. CSDcTA
The Consortium appointed BWSC-Denmark as its coordination manager. BWSC-Denmark established respondent
domestic corporation which subcontracted the actual operation and maintenance of said 2 power barges as well as
the performance of other duties and acts which necessarily have to be done in the Philippines.
NAPOCOR paid capacity and energy fees to the Consortium in a mixture of currencies (Mark, Yen, and Peso).
The freely convertible non-Peso component is deposited directly to the Consortium's bank accounts in Denmark
and Japan, while the Peso-denominated component is deposited in a separate and special designated bank
account in the Philippines. On the other hand, the Consortium paid respondent in foreign currency inwardly
remitted to the Philippines through the banking system. EHCDSI
To ascertain the tax implications of the above transactions, respondent sought a ruling from the BIR which
responded with BIR Ruling No. 023-95 dated February 14, 1995, declaring that, if respondent chooses to register
as a VAT person and the consideration for its services is paid for in acceptable foreign currency and accounted for
in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas, the aforesaid services shall be
subject to VAT at zero-rate.
Respondent opted to register as a VAT taxpayer and acted accordingly.
On December 29, 1997, respondent availed of the Voluntary Assessment Program (VAP) of the BIR. It allegedly
misinterpreted Revenue Regulations No. 5-96 dated February 20, 1996 to be applicable to its case and subjected
its sale of services to the Consortium to 10% VAT.
On January 7, 1999, respondent was able to secure VAT Ruling No. 003-99 from the VAT Review Committee
which reconfirmed BIR Ruling No. 023-95 "insofar as it held that the services being rendered by BWSCMI is
subject to VAT at zero percent (0%)." DCHaTc
On the strength of the aforementioned rulings, respondent filed a claim for the issuance of a tax credit certificate.
Respondent believed that it erroneously paid the output VAT for 1996 due to its availment of the Voluntary
Assessment Program (VAP) of the BIR.
ISSUE:
Whether respondent’s services are subject to 0% VAT
HELD:
No.
Section 102 (b) of the Tax Code, the applicable provision in 1996 when respondent rendered the services and paid
the VAT in question, enumerates which services are zero-rated. Insisting that its services should be zero-rated,
respondent claims that it complied with the requirements of the Tax Code for zero rating under the second
paragraph of Sec. 102 (b). Respondent asserts that (1) the payment of its service fees was in acceptable foreign
currency, (2) there was inward remittance of the foreign currency into the Philippines, and (3) accounting of such
remittance was in accordance with BSP rules.
Respondent is mistaken.
The Tax Code not only requires that the services be other than "processing, manufacturing or repacking of goods"
and that payment for such services be in acceptable foreign currency accounted for in accordance with BSP rules.
Another essential condition for qualification to zero-rating under Section 102 (b) (2) is that the recipient of such
services is DOING BUSINESS OUTSIDE THE PHILIPPINES. While this requirement is not expressly stated in the
second paragraph of Section 102 (b), this is clearly provided in the first paragraph of Section 102 (b) where the
listed services must be "for other persons doing business outside the Philippines." The phrase "for other persons
doing business outside the Philippines" not only refers to the services enumerated in the first paragraph of Section
102 (b), but also pertains to the general term "services" appearing in the second paragraph of Section 102 (b). In
short, services other than processing, manufacturing, or repacking of goods must likewise be performed for
persons doing business outside the Philippines.
This can only be the logical interpretation of Section 102 (b) (2). If the provider and recipient of the "other services"
are both doing business in the Philippines, the payment of foreign currency is irrelevant. Otherwise, those subject
to the regular VAT under Section 102 (a) can avoid paying the VAT by simply stipulating payment in foreign
currency inwardly remitted by the recipient of services. To interpret Section 102 (b) (2) to apply to a payer-recipient
of services doing business in the Philippines is to make the payment of the regular VAT under Section 102 (a)
dependent on the generosity of the taxpayer. The provider of services can choose to pay the regular VAT or avoid
it by stipulating payment in foreign currency inwardly remitted by the payer-recipient. Such interpretation removes
Section 102(a) as a tax measure in the Tax Code, an interpretation this Court cannot sanction. A tax is a
mandatory exaction, not a voluntary contribution.
When Section 102(b)(2) stipulates payment in "acceptable foreign currency" under BSP rules, the law clearly
envisions the payer-recipient of services to be doing business outside the Philippines. Only those not doing
business in the Philippines can be required under BSP rules to pay in acceptable foreign currency for their
purchase of goods or services from the Philippines. In a domestic transaction, where the provider and recipient of
services are both doing business in the Philippines, the BSP cannot require any party to make payment in foreign
currency.
As the Court held in Commissioner of Internal Revenue v. American Express International, Inc. (Philippine
Branch), the place of payment is immaterial, much less is the place where the output of the service is ultimately
used. An essential condition for entitlement to 0% VAT under Section 102 (b) (1) and (2) is that the recipient of the
services is a person doing business outside the Philippines. In this case, the recipient of the services is the
Consortium, which is doing business not outside, but within the Philippines because it has a 15-year contract to
operate and maintain NAPOCOR's two 100-megawatt power barges in Mindanao.
The Court recognizes the rule that the VAT system generally follows the "destination principle" (exports are
zero-rated whereas imports are taxed). However, as the Court stated in American Express, there is an exception
to this rule. This exception refers to the 0% VAT on services enumerated in Section 102 and performed in the
Philippines. For services covered by Section 102 (b) (1) and (2), the recipient of the services must be a person
doing business outside the Philippines. Thus, to be exempt from the destination principle under Section 102 (b) (1)
and (2), the services must be (a) performed in the Philippines; (b) for a person doing business outside the
Philippines; and (c) paid in acceptable foreign currency accounted for in accordance with BSP rules.
[G.R. No. 159991. November 16, 2006.]
CARMELINO F. PANSACOLA vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
On April 13, 1998, petitioner Carmelino F. Pansacola filed his income tax return for the taxable year 1997 that
reflected an overpayment of P5,950. In it he claimed the increased amounts of personal and additional exemptions
under Section 35 4 of the NIRC, although his certificate of income tax withheld on compensation indicated the
lesser allowed amounts on these exemptions. He claimed a refund of P5,950 with the BIR, which was denied.
Later, the CTA also denied his claim because according to the tax court, "it would be absurd for the law to allow
the deduction from a taxpayer's gross income earned on a certain year of exemptions availing on a different
taxable year. . ." Petitioner sought reconsideration, but the same was denied.
On appeal, the Court of Appeals denied his petition for lack of merit. The appellate court ruled that the NIRC took
effect on January 1, 1998, thus the increased exemptions were effective only to cover taxable year 1998 and
cannot be applied retroactively.
ISSUE:
Could the exemptions under Section 35 of the NIRC, which took effect on January 1, 1998, be availed of for the
taxable year 1997?
HELD:
No.
Prefatorily, personal and additional exemptions under Section 35 of the NIRC are fixed amounts to which certain
individual taxpayers (citizens, resident aliens) 12 are entitled. Personal exemptions are the theoretical personal,
living and family expenses of an individual allowed to be deducted from the gross or net income of an individual
taxpayer. These are arbitrary amounts which have been calculated by our lawmakers to be roughly equivalent to
the minimum of subsistence, taking into account the personal status and additional qualified dependents of the
taxpayer. They are fixed amounts in the sense that the amounts have been predetermined by our lawmakers as
provided under Section 35 (A) and (B). Unless and until our lawmakers make new adjustments on these personal
exemptions, the amounts allowed to be deducted by a taxpayer are fixed as predetermined by Congress.
A careful scrutiny of the provisions of the NIRC specifically shows that Section 79 (D) provides that the personal
and additional exemptions shall be determined in accordance with the main provisions in Title II of the NIRC. Its
main provisions pertain to Section 35 (A) and (B).
Section 35 (A) and (B) allow the basic personal and additional exemptions as deductions from gross or net
income, as the case may be, to arrive at the correct taxable income of certain individual taxpayers. Section 24 (A)
(1) (a) imposed income tax on a resident citizen's taxable income derived for each taxable year.
Section 31 defines "taxable income" as the pertinent items of gross income specified in the NIRC, less the
deductions and/or personal and additional exemptions, if any, authorized for such types of income by the NIRC or
other special laws. As defined in Section 22 (P), "taxable year" means the calendar year, upon the basis of which
the net income is computed under Title II of the NIRC. Section 43 also supports the rule that the taxable income of
an individual shall be computed on the basis of the calendar year. In addition, Section 45 provides that the
deductions provided for under Title II of the NIRC shall be taken for the taxable year in which they are "paid or
accrued" or "paid or incurred."
Moreover, Section 79 (H) requires the employer to determine, on or before the end of the calendar year but prior to
the payment of the compensation for the last payroll period, the tax due from each employee's taxable
compensation income for the entire taxable year in accordance with Section 24 (A). This is for the purpose of
either withholding from the employee's December salary, or refunding to him not later than January 25 of the
succeeding year, the difference between the tax due and the tax withheld.
Therefore, as provided in Section 24 (A) (1) (a) in relation to Sections 31 and 22 (P) and Sections 43, 45 and 79
(H) of the NIRC, the income subject to income tax is the taxpayer's income as derived and computed during the
calendar year, his taxable year.
Clearly from the abovequoted provisions, what the law should consider for the purpose of determining the tax due
from an individual taxpayer is his status and qualified dependents at the close of the taxable year and not at the
time the return is filed and the tax due thereon is paid.
Now comes Section 35 (C) of the NIRC which allows a taxpayer to still claim the corresponding full amount of
exemption for a taxable year, e.g. if he marries; have additional dependents; he, his spouse, or any of his
dependents die; and if any of his dependents marry, turn 21 years old; or become gainfully employed. It is as if the
changes in his or his dependents' status took place at the close of the taxable year.
Consequently, his correct taxable income and his corresponding allowable deductions e.g. personal and additional
deductions, if any, had already been determined as of the end of the calendar year.
In the case of petitioner, the availability of the aforementioned deductions if he is thus entitled, would be reflected
on his tax return filed on or before the 15th day of April 1999 as mandated by Section 51 (C) (1). Since the NIRC
took effect on January 1, 1998, the increased amounts of personal and additional exemptions under Section 35,
can only be allowed as deductions from the individual taxpayer's gross or net income, as the case may be, for the
taxable year 1998 to be filed in 1999. The NIRC made no reference that the personal and additional exemptions
shall apply on income earned before January 1, 1998.
[G.R. No. 167146. October 31, 2006.]
COMMISSIONER OF INTERNAL REVENUE vs. PHIL. GLOBAL COMMUNICATION, INC.
FACTS:
Phil. Global Communication, a corporation engaged in telecommunications, received a Formal Assessment Notice
dated April 14, 1994, for deficiency income tax in the total amount of P118,271,672.00. Through counsel,
respondent filed two formal protest letters against the assessment alleging lack of factual and legal basis. More
than eight years after the assessment was presumably issued, respondent received from the CIR a Final Decision
denying its protest and affirming the assessment in toto.
Respondent then filed a Petition for Review with the CTA which ruled that the CIR’s right to collect has prescribed.
It decided that the protest letters filed by the respondent cannot constitute a request for reinvestigation, hence,
they cannot toll the running of the prescriptive period to collect the assessed deficiency income tax.
After a motion for reconsideration and a Petition for Review with the CTA en banc were denied, the CIR went to
the Supreme Court on a Petition for Review on Certiorari. SAcaDE
ISSUE:
Whether or not CIR's right to collect respondent's alleged deficiency income tax is barred by prescription under
Section 269(c) of the Tax Code of 1977.
RULING:
The three-year statute of limitations on the collection of an assessed tax provided under Section 269(c) of the Tax
Code of 1977, a law enacted to protect the interests of the taxpayer, must be given effect. In providing for
exceptions to such rule in Section 271, the law strictly limits the suspension of the running of the prescription
period to, among other instances, protests wherein the taxpayer requests for a reinvestigation. EDACSa
In this case, where the taxpayer merely filed two protest letters requesting for a reconsideration, and where the
BIR could not have conducted a reinvestigation because no new or additional evidence was submitted, the running
of statute of limitations cannot be interrupted. The tax which is the subject of the Decision issued by the CIR on 8
October 2002 affirming the Formal Assessment issued on 14 April 1994 can no longer be the subject of any
proceeding for its collection. Consequently, the right of the government to collect the alleged deficiency tax is
barred by prescription. CTEDSI
[G.R. No. 159268. October 27, 2006.]
BALAGTAS MULTI-PURPOSE COOPERATIVE, INC., ET AL. vs. COURT OF APPEALS, ET AL.
FACTS:
In an illegal dismissal case filed by private respondent against petitioner cooperative decided against the latter,
aggrieved petitioner-cooperative appealed the decision to the NLRC but failed to post either a cash or surety bond
as required by Article 223 of the Labor Code. Instead, petitioners filed a manifestation and motion, stating, among
others, that under Republic Act No. 6938, Article 62(7) of the Cooperative Code of the Philippines, petitioners are
exempt from putting up a bond in an appeal from the decision of the inferior court.
ISSUES:
1. Whether cooperatives are exempted from filing a cash or surety bond required to perfect an
employer's appeal under Section 223 of Presidential Decree No. 442 (the Labor Code). ITcCaS
2. Whether a certification issued by the Cooperative Development Authority constitutes substantial

compliance with the requirement for the posting of a bond.
HELD:
1. No.
Article 62(7) of the Cooperative Code of the Philippines cannot be taken in isolation and must be interpreted in
relation to the Cooperative Code in its entirety. The enactment of the Cooperative Code is pursuant to the State's
declared policy of fostering the "creation and growth of cooperatives as a practical vehicle for prompting
self-reliance and harnessing people power towards the attainment of economic development and social justice."
Towards this end, the government has been mandated to "ensure the provision of technical guidance, financial
assistance and other services to enable said cooperatives to develop into viable and responsive economic
enterprises and thereby bring about a strong cooperative movement that is free from any conditions that might
infringe upon the autonomy or organizational integrity of cooperatives."
In line with this, certain benefits and privileges were expressly granted to cooperative entities under the statute.
The provision invoked by petitioners regarding the exemption from payment of an appeal bond is only one among
a number of such privileges which appear under the article entitled "Tax and Other Exemptions" of the code.
Considering that the provision relates to "tax and other exemptions," the same must be strictly construed. This
follows the well-settled principle that exceptions are to be strictly but reasonably construed; they extend only so far
as their language warrants, and all doubts should be resolved in favor of the general provision rather than the
exceptions.
An express exception, exemption, or saving clause excludes other exceptions. Express exceptions constitute the
only limitations on the operation of a statute and no other exception will be implied. The rule proceeds from the
premise that the legislative body would not have made specific enumerations in a statute, if it had the intention not
to restrict its meaning and confine its terms to those expressly mentioned.
The term "court" has a settled meaning in this jurisdiction which cannot be reasonably interpreted as extending to
quasi-judicial bodies like the NLRC unless otherwise clearly and expressly indicated in the wording of the statute.
Simply because these tribunals or agencies exercise quasi-judicial functions does not convert them into courts of
law.
In any event, Article 119 of the Cooperative Code itself expressly embodies the legislative intention to extend the
coverage of labor statutes to cooperatives.
For this reason, petitioners must comply with the requirement set forth in Article 223 of the Labor Code in order to
perfect their appeal to the NLRC. The right to appeal is not a constitutional, natural or inherent right. It is a privilege
of statutory origin and, therefore, available only if granted or provided by statute. The law may validly provide
limitations or qualifications thereto or relief to the prevailing party in the event an appeal is interposed by the losing
party.
In this case, the obvious and logical purpose of an appeal bond is to insure, during the period of appeal, against
any occurrence that would defeat or diminish recovery by the employee under the judgment if the latter is
subsequently affirmed. This is consistent with the State's constitutional mandate to afford full protection to labor in
order to forcefully and meaningfully underscore labor as a primary social and economic force.
[G.R. No. 139786. September 27, 2006.]
COMMISSIONER OF INTERNAL REVENUE vs. CITYTRUST INVESTMENT PHILS., INC.
[G.R. No. 140857. September 27, 2006.]
ASIANBANK CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
Citytrust is a domestic corporation engaged in quasi-banking activities. In 1994, it reported the amount of
P110,788,542.30 as its total gross receipts and paid the amount of P5,539,427.11 corresponding to its 5% GRT.
Meanwhile, on January 30, 1996, the CTA, in Asian Bank Corporation v. Commissioner of Internal Revenue
(ASIAN BANK case), ruled that the basis in computing the 5% GRT is the gross receipts minus the 20% FWT. In
other words, the 20% FWT on a bank's passive income does not form part of the taxable gross receipts.
On July 19, 1996, Citytrust, inspired by the above-mentioned CTA ruling, filed with the Commissioner a written
claim for the tax refund or credit in the amount of P326,007.01. It alleged that its reported total gross receipts
included the 20% FWT on its passive income amounting to P32,600,701.25. Thus, it sought to be reimbursed of
the 5% GRT it paid on the portion of 20% FWT or the amount of P326,007.01.
On the same boat is Asianbank, a domestic corporation also engaged in banking business. For the taxable
quarters ending June 30, 1994 to June 30, 1996, Asianbank filed and remitted to the Bureau of Internal Revenue
(BIR) the 5% GRT on its total gross receipts.
On the strength of the January 30, 1996 CTA Decision in the ASIAN BANK case, Asianbank, likewise, filed with
the Commissioner a claim for refund of the overpaid GRT amounting to P2,022,485.78.
ISSUE:
1. Does the twenty percent (20%) final withholding tax (FWT) on a bank's passive income form part of
the taxable gross receipts for the purpose of computing the five percent (5%) gross receipts tax
(GRT)?
2. Sect. 4(e) of Revenue Regulations No. 12-80 states that "the rates of taxes to be imposed on the
gross receipts of such financial institutions shall be based on all items of income actually received."
Since the 20% FWT is withheld at source and is paid directly to the government by the entities from
which the banks derived the income, can they be considered “actually received”; hence, must be
excluded from the taxable gross receipts?
3. Does the imposition of the 20% FWT and 5% GRT constitute double taxation?
HELD:
1. Yes.
The issue of whether the 20% FWT on a bank's interest income forms part of the taxable gross receipts for the
purpose of computing the 5% GRT has been previously resolved in a catena of cases, such as China Banking
Corporation v. Court of Appeals, Commissioner of Internal Revenue v. Solidbank Corporation, Commissioner of
Internal Revenue v. Bank of Commerce, and the latest, Commissioner of Internal Revenue v. Bank of the
Philippine Islands.
The above cases are unanimous in defining "gross receipts" as "the entire receipts without any deduction." From
these cases, "gross receipts" refer to the total, as opposed to the net income. These are therefore the total
receipts before any deduction for the expenses of management. Webster's New International Dictionary, in fact,
defines gross as "whole or entire."
In China Banking Corporation, the Court explained that the legislative intent to apply the term in its plain and
ordinary meaning may be surmised from a historical perspective of the levy on gross receipts. From the time the
GRT on banks was first imposed in 1946 under Republic Act No. 39 and throughout its successive re-enactments,
the legislature has not established a definition of the term "gross receipts." Under Revenue Regulations No. 12-80
and No. 17-84, as well as several numbered rulings, the BIR has consistently ruled that the term "gross receipts"
does not admit of any deduction. This interpretation has remained unchanged throughout the various
re-enactments of the present Section 121 of the Tax Code. On the presumption that the legislature is familiar with
the contemporaneous interpretation of a statute given by the administrative agency tasked to enforce the statute,
the reasonable conclusion is that the legislature has adopted the BIR's interpretation. In other words, the
subsequent re-enactments of the present Section 121, without changes in the term interpreted by the BIR, confirm
that its interpretation carries out the legislative purpose.
2. Yes.
First, Sect. 4(e) merely recognizes that income may be taxable either at the time of its actual receipt or its accrual,
depending on the accounting method of the taxpayer. It does not really exclude accrued interest income from the
taxable gross receipts but merely postpones its inclusion until actual payment of the interest to the lending bank.
Thus, while it is true that Section 4(e) states that "the rates of taxes to be imposed on the gross receipts of such
financial institutions shall be based on all items of income actually received," it goes on to distinguish actual receipt
from accrual, i.e., that "mere accrual shall not be considered, but once payment is received in such accrual or in
case of prepayment, then the amount actually received shall be included in the tax base of such financial
institutions."
And second, Revenue Regulations No. 12-80, issued on November 7, 1980, had been superseded by Revenue
Regulations No. 17-84 issued on October 12, 1984. Section 4(e) of Revenue Regulations No. 12-80 provides that
only items of income actually received shall be included in the tax base for computing the GRT. On the other hand,
Section 7(c) of Revenue Regulations No. 17-84 includes all interest income in computing the GRT.
Revenue Regulations No. 17-84 categorically states that if the recipient of the above-mentioned items of income
are financial institutions, the same shall be included as part of the tax base upon which the gross receipts tax is
imposed. There is, therefore, an implied repeal of Section 4(e). There exists a disparity between Section 4(e)
which imposes the GRT only on all items of income actually received (as opposed to their mere accrual) and
Section 7(c) which includes all interest income (whether actual or accrued) in computing the GRT. As held in
Commissioner of Internal Revenue v. Solidbank Corporation, "the exception having been eliminated, the clear
intent is that the later R.R. No. 17-84 includes the exception within the scope of the general rule." Clearly, then, the
current Revenue Regulations require interest income, whether actually received or merely accrued, to form part of
the bank's taxable gross receipts.
Moreover, in the Bank of Commerce case, it has been settled that "actual receipt may either be physical receipt or
constructive receipt," Actual receipt of interest income is not limited to physical receipt. Actual receipt may either
be physical receipt or constructive receipt. When the depositary bank withholds the final tax to pay the tax liability
of the lending bank, there is prior to the withholding a constructive receipt by the lending bank of the amount
withheld. From the amount constructively received by the lending bank, the depositary bank deducts the final
withholding tax and remits it to the government for the account of the lending bank. Thus, the interest income
actually received by the lending bank, both physically and constructively, is the net interest plus the amount
withheld as final tax.
The concept of a withholding tax on income obviously and necessarily implies that the amount of the tax withheld
comes from the income earned by the taxpayer. Since the amount of the tax withheld constitute income earned by
the taxpayer, then that amount manifestly forms part of the taxpayer's gross receipts. Because the amount
withheld belongs to the taxpayer, he can transfer its ownership to the government in payment of his tax liability.
The amount withheld indubitably comes from the income of the taxpayer, and thus forms part of his gross receipts.
3. No.
Double taxation means taxing for the same tax period the same thing or activity twice, when it should be taxed but
once, for the same purpose and with the same kind of character of tax. This is not the situation in the case at bar.
The GRT is a percentage tax under Title V of the Tax Code ([Section 121], Other Percentage Taxes), while the
FWT is an income tax under Title II of the Code (Tax on Income). The two concepts are different from each other.
In Solidbank Corporation, the Court defined that a percentage tax is a national tax measured by a certain
percentage of the gross selling price or gross value in money of goods sold, bartered or imported; or of the gross
receipts or earnings derived by any person engaged in the sale of services. It is not subject to withholding. An
income tax, on the other hand, is a national tax imposed on the net or the gross income realized in a taxable year.
It is subject to withholding. Thus, there can be no double taxation here as the Tax Code imposes two different
kinds of taxes.
[G.R. No. 153793. August 29, 2006.]
COMMISSIONER OF INTERNAL REVENUE vs. JULIANE BAIER-NICKEL, as represented by Marina Q.

Guzman (Attorney-in-fact)
FACTS:
Respondent Juliane Baier-Nickel, a non-resident German citizen, is the President of JUBANITEX, Inc., a domestic
corporation engaged in "[m]anufacturing, marketing on wholesale only, buying or otherwise acquiring, holding,
importing and exporting, selling and disposing embroidered textile products." Through JUBANITEX's General
Manager, Marina Q. Guzman, the corporation appointed and engaged the services of respondent as commission
agent. It was agreed that respondent will receive 10% sales commission on all sales actually concluded and
collected through her efforts.
In 1995, respondent received the amount of P1,707,772.64, representing her sales commission income from which
JUBANITEX withheld the corresponding 10% withholding tax amounting to P170,777.26, and remitted the same to
the BIR. On October 17, 1997, respondent filed her 1995 income tax return reporting a taxable income of
P1,707,772.64 and a tax due of P170,777.26.
On April 14, 1998, respondent filed a claim to refund the amount of P170,777.26 alleged to have been mistakenly
withheld and remitted by JUBANITEX to the BIR.
Respondent contended that her sales commission income is not taxable in the Philippines because the same was
a compensation for her services rendered in Germany and therefore considered as income from sources outside
the Philippines.
Both the CTA and the CIR contended that the commissions received by respondent were actually her
remuneration in the performance of her duties as President of JUBANITEX and not as a mere sales agent thereof.
The income derived by respondent is therefore an income taxable in the Philippines because JUBANITEX is a
domestic corporation.
ISSUE:
Whether respondent's sales commission income is taxable in the Philippines.
HELD:
Pursuant to Section 25 of the NIRC, non-resident aliens, whether or not engaged in trade or business, are subject
to Philippine income taxation on their income received from all sources within the Philippines. Thus, the keyword in
determining the taxability of non-resident aliens is the income's "source." In construing the meaning of "source" in
Section 25 of the NIRC, resort must be had on the origin of the provision.
Both the petitioner and respondent cited the case of Commissioner of Internal Revenue v. British Overseas
Airways Corporation in support of their arguments, but the correct interpretation of the said case favors the theory
of respondent that it is the situs of the activity that determines whether such income is taxable in the Philippines.
The conflict between the majority and the dissenting opinion in the said case has nothing to do with the underlying
principle of the law on sourcing of income. In fact, both applied the case of Alexander Howden & Co., Ltd. v.
Collector of Internal Revenue. The divergence in opinion centered on whether the sale of tickets in the Philippines
is to be construed as the "activity" that produced the income, as viewed by the majority, or merely the physical
source of the income, as ratiocinated by Justice Florentino P. Feliciano in his dissent. The majority, through Justice
Ameurfina Melencio-Herrera, as ponente, interpreted the sale of tickets as a business activity that gave rise to the
income of BOAC. Petitioner cannot therefore invoke said case to support its view that source of income is the
physical source of the money earned. If such was the interpretation of the majority, the Court would have simply
stated that source of income is not the business activity of BOAC but the place where the person or entity
disbursing the income is located or where BOAC physically received the same. But such was not the import of the
ruling of the Court. It even explained in detail the business activity undertaken by BOAC in the Philippines to
pinpoint the taxable activity and to justify its conclusion that BOAC is subject to Philippine income taxation.
cDEHIC
Having disposed of the doctrine applicable in this case, we will now determine whether respondent was able to
establish the factual circumstances showing that her income is exempt from Philippine income taxation.
The decisive factual consideration here is not the capacity in which respondent received the income, but the
sufficiency of evidence to prove that the services she rendered were performed in Germany. Though not raised as
an issue, the Court is clothed with authority to address the same because the resolution thereof will settle the vital
question posed in this controversy.
The settled rule is that tax refunds are in the nature of tax exemptions and are to be construed strictissimi juris
against the taxpayer. To those therefore, who claim a refund rest the burden of proving that the transaction
subjected to tax is actually exempt from taxation.
In the instant case, the appointment letter of respondent as agent of JUBANITEX stipulated that the activity or the
service which would entitle her to 10% commission income, are "sales actually concluded and collected through
[her] efforts." What she presented as evidence to prove that she performed income producing activities abroad,
were copies of documents she allegedly faxed to JUBANITEX and bearing instructions as to the sizes of, or
designs and fabrics to be used in the finished products as well as samples of sales orders purportedly relayed to
her by clients. However, these documents do not show whether the instructions or orders faxed ripened into
concluded or collected sales in Germany. At the very least, these pieces of evidence show that while respondent
was in Germany, she sent instructions/orders to JUBANITEX. As to whether these instructions/orders gave rise to
consummated sales and whether these sales were truly concluded in Germany, respondent presented no such
evidence. Neither did she establish reasonable connection between the orders/instructions faxed and the reported
monthly sales purported to have transpired in Germany.
In sum, the faxed documents presented by respondent did not constitute substantial evidence, or that relevant
evidence that a reasonable mind might accept as adequate to support the conclusion that it was in Germany
where she performed the income producing service which gave rise to the reported monthly sales in the months of
March and May to September of 1995. She thus failed to discharge the burden of proving that her income was
from sources outside the Philippines and exempt from the application of our income tax law. Hence, the claim for
tax refund should be denied.
[G.R. No. 168118. August 28, 2006.]
MANILA BANKING CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
Petitioner, Manila Banking Corporation, was incorporated in 1961 and since then had engaged in the commercial
banking industry until 1987 when the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) issued Resolution
No. 505, pursuant to Section 29 of Republic Act (R.A.) No. 265 (the Central Bank Act), prohibiting petitioner from
engaging in business by reason of insolvency. Thus, petitioner ceased operations that year and its assets and
liabilities were placed under the charge of a government-appointed receiver.
Meanwhile, R.A. No. 8424, otherwise known as the Comprehensive Tax Reform Act of 1997, became effective on
January 1, 1998. One of the changes introduced by this law is the imposition of the minimum corporate income tax
on domestic and resident foreign corporations. Implementing this law is Revenue Regulations No. 9-98 stating that
the law allows a four (4) year period from the time the corporations were registered with the Bureau of Internal
Revenue (BIR) during which the minimum corporate income tax should not be imposed.
On June 23, 1999, after 12 years since petitioner stopped its business operations, the BSP authorized it to operate
as a thrift bank. The following year, specifically on April 7, 2000, it filed with the BIR its annual corporate income
tax return and paid P33,816,164.00 for taxable year 1999.
Prior to the filing of its income tax return, petitioner sent a letter to the BIR requesting a ruling on whether it is
entitled to the four (4)-year grace period reckoned from 1999. In other words, petitioner's position is that since it
resumed operations in 1999, it will pay its minimum corporate income tax only after four (4) years thereafter.
On February 22, 2001, the BIR issued BIR Ruling No. 007-2001 stating that petitioner is entitled to the four
(4)-year grace period. Since it reopened in 1999, the minimum corporate income tax may be imposed "not earlier
than 2002, i.e. the fourth taxable year beginning 1999."
Pursuant to the above Ruling, petitioner filed with the BIR a claim for refund of the sum of P33,816,164.00
erroneously paid as minimum corporate income tax for taxable year 1999.
ISSUE:
Whether petitioner is entitled to a refund of its minimum corporate income tax paid to the BIR for taxable year
1999.
HELD:
Yes, under RR 4-95 (but NOT under RR 9-98 implementing RA 8424).
Section 27(E) of the Tax Code provides:
Sec. 27. Rates of Income Tax on Domestic Corporations. — . . .
(E) Minimum Corporate Income Tax on Domestic Corporations. —
(1) Imposition of Tax. — A minimum corporate income tax of two percent (2%) of the gross
income as of the end of the taxable year, as defined herein, is hereby imposed on a corporation
taxable under this Title, beginning on the fourth taxable year immediately following the year in which
such corporation commenced its business operations, when the minimum corporate income tax is
greater than the tax computed under Subsection (A) of this Section for the taxable year.
(2) Carry Forward of Excess Minimum Tax. — Any excess of the minimum corporate income
tax over the normal income tax as computed under Subsection (A) of this Section shall be carried
forward and credited against the normal income tax for the three (3) immediately succeeding taxable
years.
xxx xxx xxx
On the other hand, Revenue Regulations No. 9-98 specifies the period when a corporation becomes subject to the
minimum corporate income tax, thus:
(5) Specific Rules for Determining the Period When a Corporation Becomes Subject to the
MCIT (minimum corporate income tax) —
For purposes of the MCIT, the taxable year in which business operations commenced shall be
the year in which the domestic corporation registered with the Bureau of Internal Revenue (BIR).
Firms which were registered with BIR in 1994 and earlier years shall be covered by the MCIT
beginning January 1, 1998.
xxx xxx xxx
The intent of Congress relative to the minimum corporate income tax is to grant a four (4)-year suspension of tax
payment to newly formed corporations. Corporations still starting their business operations have to stabilize their
venture in order to obtain a stronghold in the industry. It does not come as a surprise then when many companies
reported losses in their initial years of operations.
Thus, in order to allow new corporations to grow and develop at the initial stages of their operations, the
lawmaking body saw the need to provide a grace period of four years from their registration before they pay their
minimum corporate income tax.
Significantly, on February 23, 1995, Congress enacted R.A. No. 7906, otherwise known as the "Thrift Banks Act of
1995." It took effect on March 18, 1995. This law provides for the regulation of the organization and operations of
thrift banks. Under Section 3, thrift banks include savings and mortgage banks, private development banks, and
stock savings and loans associations organized under existing laws.
On June 15, 1999, the BIR issued Revenue Regulations No. 4-95 implementing certain provisions of the said R.A.
No. 7906. Section 6 provides:
Sec. 6. Period of exemption. — All thrift banks created and organized under the
provisions of the Act shall be exempt from the payment of all taxes, fees, and charges of whatever
nature and description, except the corporate income tax imposed under Title II of the NIRC and as
specified in Section 2(A) of these regulations, for a period of five (5) years from the date of
commencement of operations; while for thrift banks which are already existing and operating as of the
date of effectivity of the Act (March 18, 1995), the tax exemption shall be for a period of five (5) years
reckoned from the date of such effectivity.
For purposes of these regulations, "date of commencement of operations" shall be understood

to mean the date when the thrift bank was registered with the Securities and Exchange Commission
or the date when the Certificate of Authority to Operate was issued by the Monetary Board of the
Bangko Sentral ng Pilipinas, whichever comes later.
xxx xxx xxx
Petitioner bank was registered with the BIR in 1961. However, in 1987, it was found insolvent by the Monetary
Board of the BSP and was placed under receivership. After twelve (12) years, or on June 23, 1999, the BSP
issued to it a Certificate of Authority to Operate as a thrift bank. Earlier, or on January 21, 1999, it registered with
the BIR. Then it filed with the SEC its Articles of Incorporation which was approved on June 22, 1999. EHScCA
It is clear from the above-quoted provision of Revenue Regulations No. 4-95 that the date of commencement of
operations of a thrift bank is the date it was registered with the SEC or the date when the Certificate of Authority to
Operate was issued to it by the Monetary Board of the BSP, whichever comes later.
Revenue Regulations No. 9-98, implementing R.A. No. 8424 imposing the minimum corporate income tax on
corporations, provides that for purposes of this tax, the date when business operations commence is the year in
which the domestic corporation registered with the BIR. However, under Revenue Regulations No. 4-95, the date
of commencement of operations of thrift banks, such as herein petitioner, is the date the particular thrift bank was
registered with the SEC or the date when the Certificate of Authority to Operate was issued to it by the Monetary
Board of the BSP, whichever comes later.
Clearly then, Revenue Regulations No. 4-95, not Revenue Regulations No. 9-98, applies to petitioner, being a thrift
bank. It is, therefore, entitled to a grace period of four (4) years counted from June 23, 1999 when it was
authorized by the BSP to operate as a thrift bank. Consequently, it should only pay its minimum corporate income
tax after four (4) years from 1999.
[G.R. No. 150812. August 22, 2006.]
COMMISSIONER OF INTERNAL REVENUE vs. CITYTRUST BANKING CORPORATION
FACTS:
The CTA ordered the CIR to grant respondent, Citytrust, a refund in the amount of P13,314,506.14 representing its
overpaid income taxes for 1984 and 1985. The CIR filed a motion for reconsideration (MR) on the ground that the
Certificate of Tax Withheld was inconclusive evidence of payment and remittance of tax to the Bureau of Internal
Revenue. In its supplemental MR, the CIR alleged an additional ground: that Citytrust had outstanding deficiency
income and business tax liabilities of P4,509,293.71 for 1984, thus, the claim for refund was not in order. The tax
court denied both motions. EaHATD
The case was elevated to the CA but the appellate court affirmed.
On petition for review on certiorari to the Supreme Court, however, it ruled that there was an apparent
contradiction between the claim for refund and the deficiency assessments against Citytrust, and that the
government could not be held in estoppel due to the negligence of its officials or employees, especially in cases
involving taxes. For that reason, the case was remanded to the CTA for further reception of evidence.
The tax court thereafter conducted the necessary proceedings. One of the exhibits presented and offered in the
hearings was a letter, signed by the CIR, stating certain further assessments against Citytrust for 1984. Citytrust
paid these deficiency tax liabilities. DCcHAa
Except for a pending issue in another CTA proceeding, Citytrust considered all its deficiency tax liabilities for 1984
fully settled; hence, it prayed that it be granted a refund.
The CIR objected alleging that Citytrust still had unpaid deficiency income, business and withholding taxes for the
year 1985. Due to these deficiency assessments, the CIR insisted that Citytrust was not entitled to any tax refund.
The CTA set aside the CIR’s objections and granted the refund. The CA affirmed.
ISSUE:
Whether the CTA’s grant of refund in favor of Citytrust covering alleged overpaid income taxes for 1984 should be
sustained NOTWITHSTANDING allegations of outstanding income tax liabilities for 1985.
HELD:
YES
Because of the CTA’s recognized expertise in taxation, its findings are not ordinarily subject to review specially
where there is no showing of grave error or abuse on its part. CcHDaA
In resolving the case, the CTA did not allow a set-off or legal compensation of the taxes involved. The CTA
reasoned:
First, respondent’s position violates the order of the Supreme Court in directing the CTA to
conduct further proceedings for the reception of petitioner’s evidence, and the disposition of the
present case. Although the Supreme Court did not specifically mention what kind of petitioner’s
evidence should be entertained, the CTA is of the opinion that the evidence should pertain only to the
1984 assessments which were the only assessments raised as a defense on appeal to the Court of
Appeals and the Supreme Court. The assessments embodied in Exhibit “5” of respondent were never
raised on appeal to the higher courts. Hence, evidence related to said assessments should not be
allowed as this will lead to endless litigation.
Second, the CTA has no jurisdiction to try an assessment case which was never appealed to
it. With due respect to the Supreme Court’s decision, it is the CTA’s firm stand that in hearing a
refund case, the CTA cannot hear in the same case an assessment dispute even if the parties
involved are the same parties.
There is indeed a contradiction between a claim for refund and the assessment of deficiency tax.
[G.R. No. 130838. August 22, 2006.]
SECURITY BANK CORPORATION vs. THE COMMISSIONER OF INTERNAL REVENUE
FACTS:
Sometime before March 19, 1987, Security Bank Corporation (SBC) received a Pre-Assessment Notice dated
March 6, 1987 from the Bureau of Internal Revenue (BIR) for deficiency Documentary Stamp Tax (DST). AHCcET
SBC claims that the BIR's DST assessment on its SALES OF SECURITIES WITH REPURCHASE
AGREEMENTS lacks factual and legal bases. It claimed that these conveyances are instruments covered under
Section 229 (now Section 180) of the National Internal Revenue Code (NIRC) that are not subject to DST imposed
by Section 225 (now 176) of the NIRC.
ISSUE:
Whether said sales of securities with repurchase agreements are subject to documentary stamp tax (DST).
HELD:
Yes.
The NIRC levies DST upon documents, instruments and papers as follows:
SEC. 173. Stamp taxes upon documents, instruments, and papers — Upon documents,
instruments, and papers, and upon acceptances, assignments, sales, and transfers of the obligation,
right, or property incident thereto, there shall be levied, collected and paid for, and in respect of the
transaction so had or accomplished, the corresponding documentary stamp taxes prescribed in the
following sections of this Title, by the person making, signing, issuing, accepting, or transferring the
same, and at the same time such act is done or transaction had: Provided, That whenever one party
to the taxable document enjoys exemption from the tax herein imposed, the other party to thereto who
is not exempt shall be the one directly liable for the tax.
Particularly covering sales of securities, which SBC has been assessed by the BIR in this case, and the
corresponding DST rates due thereon at the time the said tax accrued, the former Section 225 (now Section 176)
of the NIRC provides:
SEC. 225. Stamp tax on sales, agreements to sell, memorandum of sales, deliveries or
transfer of bonds, due-bills, certificates of obligations, or shares or certificates of stocks — On all
sales, or agreements to sell or memorandum of sales, or deliveries, or transfer of bonds, due-bills,
certificates of obligation, or shares or certificates of stock in any association, company or corporation,
or transfer of such securities by assignment in blank, or by delivery, or by any paper or agreement, or
memorandum or other evidences of transfer or sale whether entitling the holder in any manner to the
benefit of such bond, due-bills, certificates of obligation or stock, or to secure the future payment of
money, or for the future transfer of any bond, due-bill, certificates of obligation or stock, there shall be
collected a documentary stamp tax of twenty-five centavos on each two hundred pesos, or fractional
part thereof, of the par value of such bond, due-bill, certificates of obligation or stock; Provided, That
only one tax shall be collected of each sale or transfer of stock or securities from one person to
another, regardless of whether or not a certificate of stock or obligation is issued, indorsed, or
delivered in pursuance of such sale or transfer; and provided, further, That in case of stock without
par value the amount of the documentary stamp tax herein prescribed shall be equivalent to
twenty-five percentum of the documentary stamp tax paid upon the original issue of said stock.
It is clear from the plain language of the law that all sales of securities, WITHOUT MAKING ANY DISTINCTION as
to the nature or type of the sale, i.e., whether it be with a repurchase agreement or not, are taxable. On the other
hand, all securities consisting of bonds, due-bills, certificates of obligation, or shares or certificates of stock in any
association, company or corporation, of whatever type or nature are within the scope of this section.
SBC contends, however, that the sales of securities being levied upon are not covered by Section 225 (now
Section 176), but instead fall under Section 229 (now Section 180) of the Tax Code. In this respect, SBC invokes
Revenue Memorandum Circulars No. 13-87 and No. 33-86 and BIR Ruling No. 119-91.
This is untenable for the simple reason that the BIR circulars and ruling relied upon were all issued after 1983, the
tax period involved in this case. Those circulars and ruling cannot prevail over the clear and plain language of the
Tax Code. CHEIcS
[G.R. No. 144696. August 16, 2006.]
COMMISSIONER OF INTERNAL REVENUE vs. PHILIPPINE GLOBAL COMMUNICATIONS, INC.
FACTS:
Respondent operates under a legislative franchise granted by Republic Act No. 4617 to construct, maintain and
operate communications systems by radio, wire, satellite and other means known to science for the reception and
transmission of messages between any points in the Philippines to points exterior thereto.
As such, it was subject to 3% franchise tax under Sec. 117 (b) of the Tax Code, as amended by EO No. 72, which
provided:
SEC. 117. Tax on franchises. — Any provision of general or special laws to the contrary
notwithstanding, there shall be levied, assessed and collected in respect to all franchise, upon the
gross receipts from the business covered by the law granting the franchise, a tax in accordance with
the schedule prescribed hereunder:
(a) On electric utilities, city gas and

water supplies Two (2%) percent
(b) On telephone and/or telegraph

systems, and radio/or broadcasting
stations Three (3%) percent
(c) On other franchises Five (5%) percent
The said provision of the Tax Code was amended by Sec. 12 of the E-VAT Law which was passed in 1994,
reading:
SEC. 12. Section 117 of the National Internal Revenue Code, as amended, is hereby
further amended to read as follows:
SEC. 117. Tax on Franchises. — Any provision of general or special law to the contrary
notwithstanding there shall be levied, assessed and collected in respect to all franchises on electric,
gas and water utilities a tax of two percent (2%) on the gross receipts derived from the business
covered by the law granting the franchise. SACHcD
Notice that the amendment omitted the payment of 3% franchise tax by a telecommunications company required
under the previous law.
The E-VAT Law took effect on May 28, 1994.
On June 30, 1994, the SC issued a Temporary Restraining Order (TRO) enjoining the "enforcement and/or
implementation" of said law. The TRO was later to be lifted, however, on October 30, 1995.
On account of the suspension, respondent filed a claim for refund of the 3% franchise tax it allegedly erroneously
paid during the 2nd quarter of 1994 until the 4th quarter of 1995.
Respondent: With the passage and effectivity of the E-VAT Law on May 24, 1994, it was no longer obliged to pay
the 3% franchise tax under Section 117 (b) of the Tax Code. The TRO issued enjoining the enforcement and/or
implementation of the E-VAT Law did not have the effect of extending its obligation under Section 117 (b) of the
Tax Code to pay the 3% franchise tax since with the effectivity of the E-VAT Law on May 24, 1994, it was
benefited by the tax exemption from or removal of liability for said franchise tax under the E-VAT Law which was
self-operative and required no implementation to take effect. IEDHAT
ISSUE:
Is respondent telecommunications company, liable to pay the 3% franchise tax under Section 117 (b) of
Presidential Decree No. 1158 of the 1977 National Internal Revenue Code (Tax Code) during the suspension of
the enforcement or implementation of Republic Act No. 7716 or the Expanded Value Added Tax Law (E-VAT Law)
which was passed in 1994 amending such provision of the Tax Code?
HELD:
Yes. From the suspension of the effectivity of the E-VAT Law on June 30, 1994 up to October 30, 1995 when the
TRO was lifted, the tax liability of respondent was governed by Sec. 117 (b) of the Tax Code in which case it was
liable to pay the 3% franchise tax. With the lifting of the TRO on October 30, 1995, respondent would have ceased
to be liable to pay the 3% franchise tax. The abolition of the 3% franchise tax on telecommunications companies,
and its replacement by the 10% VAT, was effective and implemented only on January 1, 1996, however, following
the passage of Revenue Regulations No. 7-95 (CONSOLIDATED VALUE-ADDED TAX REGULATIONS). DHacTC
To grant a refund of the franchise tax it paid prior to the effectivity and implementation of the VAT would create a
vacuum and thereby deprive the government from collecting either the VAT or the franchise tax.
Under Sec. 12 of the E-VAT Law, only the franchise tax on "electric, gas and water utilities" was retained. The 3%
franchise tax on "telephone and/or telegraph systems and radio broadcasting stations" to which category
respondent belongs was omitted.
Under Sec. 3 of the E-VAT Law, however, respondent's sale of services is subject to VAT, thus:
SEC. 3. Section 102 of the National Internal Revenue Code, as amended, is hereby
further amended to read as follows:
SEC. 102. Value-added tax on sale of services and use or lease of properties. — (a) Rate
and base of tax. — There shall be levied, assessed and collected, as value-added tax equivalent to
10% of gross receipts derived from the sale or exchange of services, including the use or lease of
properties.
Therefore, under the E-VAT Law, respondent ceased to be liable to pay the 3% franchise tax. Instead, it is made
liable to pay 10% VAT on sale of services.
With the issuance of the TRO, the enforcement and/or implementation of the entire E-VAT law was stopped. The
wording of the order leaves no doubt that what was restrained by the TRO was the implementation of the E-VAT
law in its entirety.
Therefore, the provisions of the Tax Code including Section 117(b), prior to their amendment by the E-VAT Law,
were to apply in the interim. HAIaEc
[G.R. No. 157064. August 7, 2006.]
BARCELON, ROXAS SECURITIES, INC. vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
Petitioner filed its Annual Income Tax Return for taxable year 1987 on 14 April 1988. The last day for filing by
petitioner of its return was on 15 April 1988, thus, giving respondent until 15 April 1991 within which to send an
assessment notice. While respondent avers that it sent the assessment notice dated 1 February 1991 on 6
February 1991, within the three (3)-year period prescribed by law, petitioner denies having received an
assessment notice from respondent. Petitioner alleges that it came to know of the deficiency tax assessment only
on 17 March 1992 when it was served with the Warrant of Distraint and Levy. caADSE
ISSUE:
Whether respondent’s right to assess petitioner’s alleged deficiency income tax is barred by prescription.
HELD:
Yes.
Under Section 203 of the National Internal Revenue Code (NIRC), respondent had three (3) years from the last
day for the filing of the return to send an assessment notice to petitioner. In the case of Collector of Internal
Revenue v. Bautista, the Court held that an assessment is made within the prescriptive period if notice to this
effect is released, mailed or sent by the CIR to the taxpayer within said period. Receipt thereof by the taxpayer
within the prescriptive period is not necessary. At this point, IT SHOULD BE CLARIFIED THAT THE RULE DOES
NOT DISPENSE WITH THE REQUIREMENT THAT THE TAXPAYER SHOULD ACTUALLY RECEIVE, EVEN
BEYOND THE PRESCRIPTIVE PERIOD, THE ASSESSMENT NOTICE WHICH WAS TIMELY RELEASED,
MAILED AND SENT. IDETCA
In Protector’s Services, Inc. v. Court of Appeals, the Court ruled that when a mail matter is sent by registered mail,
there exists a presumption, set forth under Section 3(v), Rule 131 of the Rules of Court, that it was received in the
regular course of mail. The facts to be proved in order to raise this presumption are: (a) that the letter was properly
addressed with postage prepaid; and (b) that it was mailed. While a mailed letter is deemed received by the
addressee in the ordinary course of mail, this is still merely a disputable presumption subject to controversion, and
a direct denial of the receipt thereof shifts the burden upon the party favored by the presumption to prove that the
mailed letter was indeed received by the addressee.
In the case of Nava v. Commissioner of Internal Revenue, the Court stressed on the importance of proving the
release, mailing or sending of the notice.
While we have held that an assessment is made when sent within the prescribed period, even if received by the
taxpayer after its expiration (Coll. of Int. Rev. vs. Bautista, L-12250 and L-12259, May 27, 1959), this ruling makes
it the more imperative that the release, mailing, or sending of the notice be clearly and satisfactorily proved. Mere
notations made without the taxpayer’s intervention, notice, or control, without adequate supporting evidence,
cannot suffice; otherwise, the taxpayer would be at the mercy of the revenue offices, without adequate protection
or defense.
In the present case, petitioner denies receiving the assessment notice, and the respondent was unable to present
substantial evidence that such notice was, indeed, mailed or sent by the respondent before the BIR’s right to
assess had prescribed and that said notice was received by the petitioner:
The respondent presented the BIR record book where the name of the taxpayer, the kind of tax assessed, the
registry receipt number and the date of mailing were noted. The BIR records custodian, Ingrid Versola, also
testified that she made the entries therein. Respondent offered the entry in the BIR record book and the testimony
of its record custodian as entries in official records in accordance with Section 44, Rule 130 of the Rules of Court.
In this case, however, the entries made by Ingrid Versola were not based on her personal knowledge as she did
not attest to the fact that she personally prepared and mailed the assessment notice. Nor was it stated in the
transcript of stenographic notes how and from whom she obtained the pertinent information. Moreover, she did not
attest to the fact that she acquired the reports from persons under a legal duty to submit the same. Hence, Rule
130, Section 44 finds no application in the present case. Thus, the evidence offered by respondent does not qualify
as an exception to the rule against hearsay evidence.
Furthermore, independent evidence, such as the registry receipt of the assessment notice, or a certification from
the Bureau of Posts, could have easily been obtained. Yet respondent failed to present such evidence.
[G.R. No. 146984. July 28, 2006.]
COMMISSIONER OF INTERNAL REVENUE vs. MAGSAYSAY LINES, INC., ET AL.
FACTS/ISSUE:
Whether the sale by the National Development Company (NDC) of five (5) of its vessels to the private respondents
pursuant to a government program of privatization is subject to value-added tax (VAT) under the National Internal
Revenue Code of 1986 (Tax Code) then prevailing at the time of the sale.
BIR: Said sale is subject to VAT because it may fall under one of those transactions "deemed sale" under Sec. 100
of the NIRC. aSIETH
HELD:
The sale is NOT subject to VAT pursuant to Sec. 99 of the Tax Code, no matter how the said sale may hew to
those transactions "deemed sale" as defined under Sec. 100.
The sale was NOT in the course of the trade or business of NDC. The normal VAT-registered activity of NDC is
leasing personal property. This finding is confirmed by the Revised Charter of the NDC which bears no indication
that the NDC was created for the primary purpose of selling real property.
Based on jurisprudence, "course of business" or "doing business" connotes regularity of activity. In the instant
case, the sale was an isolated transaction. ASHaDT
The sale which was involuntary and made pursuant to the declared policy of Government for privatization could no
longer be repeated or carried on with regularity.
Sec. 99 is the very first provision in Title IV of the Tax Code, the Title that covers VAT in the law. Before any
portion of Sec. 100, or the rest of the law for that matter, may be applied in order to subject a transaction to VAT, it
must first be satisfied that the taxpayer and transaction involved is liable for VAT in the first place under Sec. 99.
Any sale, barter or exchange of goods or services not in the course of trade or business is not subject to VAT.
It would become necessary to ascertain whether under those two provisions the transaction may be "deemed a
sale", only if it is settled that the transaction occurred in the course of trade or business in the first place. If the
transaction transpired outside the course of trade or business, it would be irrelevant for the purpose of determining
VAT liability whether the transaction may be deemed sale, since it anyway is not subject to VAT. AIcaDC
Even if Section 100 or Section 4 of R.R. No. 5-87 were to find application in this case, Section 4(E) of R.R. No.
5-87, reflecting Section 100 of the Tax Code, clarifies that such "change of ownership" is only an attending
circumstance to "retirement from or cessation of business with respect to all goods on hand of the date of such
retirement or cessation."
[G.R. No. 137002. July 27, 2006.]
FACTS:
From 28 February 1986 to 8 October 1986, petitioner, Bank of the Philippine Islands (BPI), sold to the Central
Bank of the Philippines (now Bangko Sentral ng Pilipinas) U.S. dollars for P1,608,541,900.00.
BPI instructed, by cable, its correspondent bank in New York to transfer U.S. dollars deposited in BPI's account
therein to the Federal Reserve Bank in New York for credit to the Central Bank's account therein.
Thereafter, the Federal Reserve Bank sent to the Central Bank confirmation that such funds had been credited to
its account and the Central Bank promptly transferred to petitioner's account in the Philippines the corresponding
amount in Philippine pesos. cTCADI
ISSUE:
Whether BPI is liable for documentary stamp taxes in connection with said sale of foreign exchange to the Central
Bank in 1986 under Section 195 (now Section 182) of the NIRC.
HELD:
Yes.
In this case, BPI ordered its correspondent bank in the U.S. to pay the Federal Reserve Bank in New York a sum
of money, which is to be credited to the account of the Central Bank. These are the same acts described under
Section 51 of Regulations No. 26, interpreting the documentary stamp tax provision in the Administrative Code of
1917, which is substantially identical to Section 195 (now Section 182) of the NIRC. These acts performed by BPI
incidental to its sale of foreign exchange to the Central Bank are included among those taxed under Section 195
(now Section 182) of the NIRC. EcATDH
BPI alleges that the assailed decision must be reversed since the sale between BPI and the Central Bank of
foreign exchange, as distinguished from foreign bills of exchange, is not subject to the documentary stamp taxes
prescribed in Section 195 (now Section 182) of the NIRC. This argument is untenable. In this case, it is not the
sale of foreign exchange per se that is being taxed under Section 195 of the NIRC. This section refers to a
documentary stamp tax, which is an excise upon the facilities used in the transaction of the business separate and
apart from the business itself. IT IS NOT A TAX UPON THE BUSINESS ITSELF WHICH IS SO TRANSACTED,
but IT IS A DUTY UPON THE FACILITIES MADE USE OF AND ACTUALLY EMPLOYED IN THE TRANSACTION
OF THE BUSINESS, AND SEPARATE AND APART FROM THE BUSINESS ITSELF.
The facts show that BPI, while in the Philippines, ordered its correspondent bank by cable to make a payment, and
that payment is to be made to the Federal Reserve Bank in New York. Thus, BPI MADE USE OF THE
AFOREMENTIONED FACILITY. As a result, BPI need not have sent a representative to New York, nor did the
Federal Reserve Bank have to go to the Philippines to collect the funds which were to be credited to the Central
Bank's account with them. The transaction was made at the shortest time possible and at the greatest
convenience to the parties. The tax was laid upon this privilege or facility used by the parties in their transactions,
transactions which they may effect through our courts, and which are regulated and protected by our government.
ECaITc
[G.R. No. 148083. July 21, 2006.]
COMMISSIONER OF INTERNAL REVENUE vs. BICOLANDIA DRUG CORPORATION
FACTS:
In 1995, respondent Bicolandia Drug Corporation, a corporation engaged in the business of retailing
pharmaceutical products under the business style of "Mercury Drug," granted 20 percent sales discount to qualified
senior citizens purchasing their medicines in compliance with R.A. No. 7432. Respondent treated this discount as
a deduction from its gross income in compliance with Revenue Regulations No. 2-94, which implemented R.A. No.
7432. On April 15, 1996, respondent filed its 1995 Corporate Annual Income Tax Return declaring a net loss
position with nil income tax liability.
Respondent filed a claim for tax refund or credit with the Appellate Division of the Bureau of Internal Revenue —
because its net losses for the year 1995 prevented it from benefiting from the treatment of sales discounts as a
deduction from gross sales during the said taxable year. It alleged that the petitioner Commissioner of Internal
Revenue erred in treating the 20 percent sales discount given to senior citizens as a deduction from its gross
income for income tax purposes or other percentage tax purposes rather than as a tax credit.
On April 6, 1998, respondent appealed to the Court of Tax Appeals in order to toll the running of two (2)-year
prescriptive period to file a claim for refund pursuant to Section 230 of the Tax Code then. Respondent argued that
since Section 4 of R.A. No. 7432 provided that discounts granted to senior citizens may be claimed as tax credit,
Section 2(i) of Revenue Regulations No. 2-94, which referred to the tax credit as the amount representing the 20
percent discount that "shall be deducted by the said establishments from their gross income for income tax
purposes and from their gross sales for value-added tax or other percentage tax purposes," is illegal, void and
without effect for being inconsistent with the statute it implements.
ISSUE:
Whether the 20 percent sales discount granted to qualified senior citizens by respondent pursuant to R.A. No.
7432 may be claimed as a tax credit, instead of a deduction from gross income or gross sales.
HELD:
The problem stems from the issuance of Revenue Regulations No. 2-94, which was supposed to implement R.A.
No. 7432, and the radical departure it made when it defined the "tax credit" that would be granted to
establishments that give 20 percent discount to senior citizens. Under Revenue Regulations No. 2-94, the tax
credit is "the amount representing the 20 percent discount granted to a qualified senior citizen by all
establishments relative to their utilization of transportation services, hotels and similar lodging establishments,
restaurants, drugstores, recreation centers, theaters, cinema houses, concert halls, circuses, carnivals and other
similar places of culture, leisure and amusement, which discount shall be deducted by the said establishments
from their gross income for income tax purposes and from their gross sales for value-added tax or other
percentage tax purposes." It equated "tax credit" with "tax deduction," contrary to the definition in Black's Law
Dictionary, which defined tax credit as: “An amount subtracted from an individual's or entity's tax liability to arrive at
the total tax liability. A tax credit reduces the taxpayer's liability . . . , compared to a deduction which reduces
taxable income upon which the tax liability is calculated. A credit differs from deduction to the extent that the
former is subtracted from the tax while the latter is subtracted from income before the tax is computed.”
The interpretation of an administrative government agency, which is tasked to implement the statute, is accorded
great respect and ordinarily controls the construction of the courts. Be that as it may, the definition laid down in the
questioned Revenue Regulations can still be subjected to scrutiny. Courts will not hesitate to set aside an
executive interpretation when it is clearly erroneous. There is no need for interpretation when there is no ambiguity
in the rule, or when the language or words used are clear and plain or readily understandable to an ordinary
reader. The definition of the term "tax credit" is plain and clear, and the attempt of Revenue Regulations No. 2-94
to define it differently is the root of the conflict.
Revenue Regulations No. 2-94 is still subordinate to R.A. No. 7432, and in cases of conflict, the implementing rule
will not prevail over the law it seeks to implement. While seemingly conflicting laws must be harmonized as far as
practicable, in this particular case, the conflict cannot be resolved in the manner the petitioner wishes. There is a
great divide separating the idea of "tax credit" and "tax deduction," as seen in the definition in Black's Law
Dictionary.
Finally, petitioner argues that should private establishments, which count respondent in their number, be allowed to
claim tax credits for discounts given to senior citizens, they would be earning and not just be reimbursed for the
discounts given.
It cannot be denied that R.A. No. 7432 has a laudable goal. Moreover, it cannot be argued that it was the intent of
lawmakers for private establishments to be the primary beneficiaries of the law. However, while the purpose of the
law to benefit senior citizens is praiseworthy, the concerns of the affected private establishments were also
considered by the lawmakers. As in other cases wherein private property is taken by the State for public use, there
must be just compensation. In this particular case, it took the form of the tax credit granted to private
establishments, purposely chosen by the lawmakers. In the similar case of Commissioner of Internal Revenue v.
Central Luzon Drug Corporation, scrutinizing the deliberations of the Bicameral Conference Committee Meeting on
Social Justice on February 5, 1992 which finalized R.A. No. 7432, the discussions of the lawmakers clearly
showed the intent that the cost of the 20 percent discount may be claimed by the private establishments as a tax
credit.
It must be concluded, therefore, that Revenue Regulations No. 2-94 is null and void for failing to conform to the law
it sought to implement. In case of discrepancy between the basic law and a rule or regulation issued to implement
said law, the basic law prevails because said rule or regulation cannot go beyond the terms and provisions of the
basic law.
Revenue Regulations No. 2-94 being null and void, it must be ruled then that under R.A. No. 7432, which was
effective at the time, respondent is entitled to its claim of a tax credit, and the ruling of the Court of Appeals must
be affirmed.
But even as this particular case is decided in this manner, it must be noted that the concerns of the petitioner
regarding tax credits granted to private establishments giving discounts to senior citizens have been addressed.
R.A. No. 7432 has been amended by Republic Act No. 9257, the "Expanded Senior Citizens Act of 2003." In this,
the term "tax credit" is no longer used. The 20 percent discount granted by hotels and similar lodging
establishments, restaurants and recreation centers, and in the purchase of medicines in all establishments for the
exclusive use and enjoyment of senior citizens is treated in the following manner:
“The establishment may claim the discounts granted under (a), (f), (g) and (h) as tax deduction
based on the net cost of the goods sold or services rendered: Provided, That the cost of the discount
shall be allowed as deduction from gross income for the same taxable year that the discount is
granted. Provided, further, that the total amount of the claimed tax deduction net of value added tax if
applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to
proper documentation and to the provisions of the National Internal Revenue Code, as amended.”
This time around, there is no conflict between the law and the implementing Revenue Regulations. Under Revenue
Regulations No. 4-2006, "only the actual amount of the discount granted or a sales discount not exceeding 20% of
the gross selling price can be deducted from the gross income, net of value added tax, if applicable, for income tax
purposes, and from gross sales or gross receipts of the business enterprise concerned, for VAT or other
percentage tax purposes." Under the new law, there is no tax credit to speak of, only deductions.
Petitioner can find some vindication in the amendment made to R.A. No. 7432 by R.A. No. 9257, which may be
more in consonance with the principles of taxation, but as it was R.A. No. 7432 in force at the time this case arose,
this law controls the result in this particular case, for which reason the petition must fail.
This case should remind all heads of executive agencies which are given the power to promulgate rules and
regulations, that they assume the roles of lawmakers. It is well-settled that a regulation should not conflict with the
law it implements. Thus, those drafting the regulations should study well the laws their rules will implement, even
to the extent of reviewing the minutes of the deliberations of Congress about its intent when it drafted the law.
They may also consult the Secretary of Justice or the Solicitor General for their opinions on the drafted rules.
Administrative rules, regulations and orders have the efficacy and force of law so long as they do not contravene
any statute or the Constitution. It is then the duty of the agencies to ensure that their rules do not deviate from or
amend acts of Congress, for their regulations are always subordinate to law.
[G.R. No. 149671. July 21, 2006.]
COMMISSIONER OF INTERNAL REVENUE vs. SEKISUI JUSHI PHILIPPINES, INC.
FACTS:
Respondent is a domestic corporation with principal office located at the Special Export Processing Zone, Laguna
Technopark, Biñan, Laguna. It is principally engaged in the business of manufacturing, importing, exporting,
buying, selling, or otherwise dealing in, at wholesale such goods as strapping bands and other packaging materials
and goods of similar nature, and any and all equipment, materials, supplies used or employed in or related to the
manufacture of such finished products. IASTDE
Having registered with the Bureau of Internal Revenue (BIR) as a value-added tax (VAT) taxpayer, respondent
filed its quarterly returns with the BIR, for the period January 1 to June 30, 1997, reflecting input taxes in the
amount of P4,631,132.70 in connection with its domestic purchase of capital goods and services. Said input taxes
remained unutilized since respondent has not engaged in any business activity or transaction for which it may be
liable for output tax and for which said input taxes may be credited.
Respondent filed 2 separate applications for tax credit/refund of VAT input taxes paid for the period January 1 to
March 31, 1997 and April 1 to June 30, 1997, respectively.
ISSUE:
Whether respondent is entitled to the refund or issuance of tax credit certificate in the amount of P4,377,102.26 as
alleged unutilized input taxes paid on domestic purchase of capital goods and services for the period covering
January 1 to June 30, 1997.
HELD:
Yes.
Business enterprises registered with the Philippine Export Zone Authority (PEZA) may choose between two fiscal
incentive schemes: (1) to pay a five percent preferential tax rate on its gross income and thus be exempt from all
other taxes; or (b) to enjoy an income tax holiday, in which case it is not exempt from applicable national revenue
taxes including the value-added tax (VAT). The present respondent, which availed itself of the second tax incentive
scheme, has proven that all its transactions were export sales. Hence, they should be VAT zero-rated.
Respondent can claim a refund for the input VAT previously charged by its suppliers. The amount of
P4,377,102.26 is excess input taxes that justify a refund.
Notably, while an ecozone is geographically within the Philippines, it is deemed a separate customs territory and is
regarded in law as foreign soil. Sales by, suppliers from outside the borders of the ecozone to this separate
customs territory are deemed as exports and treated as export sales. These sales are zero-rated or subject to a
tax rate of zero percent.
Notwithstanding the fact that its purchases should have been zero-rated, respondent was able to prove that it had
paid input taxes in the amount of P4,377,102.26. The CTA found, and the CA affirmed, that this amount was
substantially supported by invoices and Official Receipts; and petitioner has not challenged the computation.
On the other hand, since 100% of the products of respondent are exported, all its transactions are deemed export
sales and are thus VAT zero-rated. It has been shown that respondent has no output tax with which it could offset
its paid input tax. Since the subject input tax it paid for its domestic purchases of capital goods and services
remained unutilized, it can claim a refund for the input VAT previously charged by its suppliers. The amount of
P4,377,102.26 is excess input taxes that justify a refund. DaIAcC
[G.R. No. 149834. May 2, 2006.]
COMMISSIONER OF INTERNAL REVENUE vs. TRUSTWORTHY PAWNSHOP, INC.
FACTS:
On March 11, 1991, the CIR issued Revenue Memorandum Order (RMO) No. 15-91, classifying the pawnshop
business as "akin to the lending investor's business activity" and subjecting both to the 5% lending investor's tax
based on their gross income, pursuant to then Section 116 of the National Internal Revenue Code (NIRC) of 1977,
as amended.
This RMO was clarified by Revenue Memorandum Circular (RMC) No. 43-91 mandating inter alia that pawnshop
operators "shall become liable to the lending investor's tax on their gross income beginning January 1, 1991;" that
"(s)ince the deadline for the filing of percentage tax return and the payment of the tax on lending investors covering
the first quarter of 1991 has already lapsed, taxpayers are given up to June 30, 1991 within which to pay the said
tax without penalty;" that if the tax is paid after said date, "the corresponding penalties shall be assessed and
computed from April 21, 1991;" and that since pawnshops are considered lending investors, they are also subject
to documentary stamp taxes.
Pursuant to these issuances, the BIR Revenue Region No. 7, Cebu City, issued an Assessment Notice against
respondent Pawnshop demanding payment of deficiency percentage tax for the year 1994 amounting to
P2,108,335.19, inclusive of surcharges and interests.
Feeling aggrieved, respondent Pawnshop, on July 4, 1997, filed an administrative protest, alleging that a
pawnshop business is different from a lending investor's business, hence, should not be subjected to the 5%
lending investor's tax.
ISSUE:
Whether pawnshops are considered lending investors under the provisions of the NIRC of 1977, as amended, for
the purpose of subjecting the former to the 5% lending investor's tax. AEITDH
HELD:
No.
In Commissioner of Internal Revenue v. Michael J. Lhuillier Pawnshop, where the Court was already confronted
with this same issue, it was held that while pawnshops are indeed engaged in the business of lending money, they
cannot be deemed "lending investors" for the purpose of imposing the 5% lending investor's tax. The ruling is
anchored on the following reasons:
First. Under Section 192, paragraph 3, sub-paragraphs (dd) and (ff) of the NIRC of 1997, prior to its amendment by
E.O. No. 273, as well as Section 161, paragraph 2, sub-paragraphs (dd) and (ff) of the NIRC of 1986, pawnshops
and lending investors were subjected to different tax treatments.
Second. Congress never intended pawnshops to be treated in the same way as lending investors. Section 116 of
the NIRC of 1977, as renumbered and rearranged by E.O. No. 273, was basically lifted from Section 175 (formerly
Sec. 209, NIRC of 1977, as amended by P.D. 1739, Sept. 17, 1980) of the NIRC of 1986, which treated both tax
subjects differently. cAaDHT
Note that the definition of lending investors found in Section 157 (u) of the NIRC of 1986 is not found in the NIRC
of 1977, as amended by E.O. No. 273, where Section 116 invoked by the CIR is found. However, as emphasized
earlier, both the NIRC of 1986 and NIRC of 1977 dealt with pawnshops and lending investors differently. Verily
then, it was the intent of Congress to deal with both subjects differently. Hence, we must likewise interpret the
statute to conform to such legislative intent.
Third. Section 116 of the NIRC of 1977, as amended by E.O. No. 273, subjects to percentage tax dealers in
securities and lending investors only. There is no mention of pawnshops. Under the maxim expressio unius est
exclusio alterius, the mention of one thing implies the exclusion of another thing not mentioned. Thus, if a statute
enumerates the things upon which it is to operate, everything else must necessarily and by implication be excluded
from its operation and effect (Vera v. Fernandez, L-31364, March 30, 1979, 89 SCRA 199, 203). This rule, as a
guide to probable legislative intent, is based upon the rules of logic and natural workings of the human mind
(Republic v. Estenzo, L-35376, September 11, 1980, 99 SCRA 651, 656).
Fourth. The BIR had ruled several times prior to the issuance of RMO No. 15-91 and RMC No. 43-91 that
pawnshops were not subject to the 5% percentage tax imposed by Section 116 of the NIRC of 1977, as amended
by E.O. No. 273. This was even admitted by the CIR in RMO No. 15-91 itself. Considering that Section 116 of the
NIRC of 1977, as amended, was practically lifted from Section 175 of the NIRC of 1986, as amended, and there
being no change in the law, the interpretation thereof should not have been altered.
Under the principle of stare decisis et non quieta movere (follow past precedents and do not disturb what has been
settled), it is our duty to apply our previous ruling in Commissioner of Internal Revenue v. Michael J. Lhuillier
Pawnshop to the instant case. Once a case has been decided one way, any other case involving exactly the same
point at issue, as in the case at bar, should be decided in the same manner.
[G.R. No. 138919. May 2, 2006.]
FAR EAST BANK AND TRUST CO. vs. COMMISSIONER OF INTERNAL REVENUE, ET AL.
FACTS:
Petitioner is the trustee of various retirement plans established by several companies for its employees. As trustee,
petitioner was authorized to hold, manage, invest and reinvest the assets of these plans. Petitioner utilized such
authority to invest these retirement funds in various money market placements, bank deposits, deposit substitute
instruments and government securities. These investments necessarily earned interest income. Petitioner's claim
for refund centers on the tax withheld by the various withholding agents, and paid to the CIR for the four (4)
quarters of 1993, on the aforementioned interest income.
On four dates, 12 May 1993, 16 August 1993, 31 January 1994, and 29 April 1994, petitioner filed its written claim
for refund with the BIR for the first, second, third and fourth quarters of 1993, respectively. The claims for refund
were denied.
By this time, petitioner already had a pending petition before the CTA, docketed as CTA Case No. 4848, and
apparently involving the same legal issue but a previous taxable period. Hoping to comply with the two (2)-year
period within which to file an action for refund under Section 230 of the then Tax Code, petitioner filed a Motion to
Admit Supplemental Petition in CTA Case No. 4848 on 28 April 1995, seeking to include in that case the tax refund
claimed for the year 1993. The CTA denied the admission of the Supplemental Petition in a Resolution dated 25
August 1995. Nonetheless, the CTA advised that petitioner could instead file a separate petition for review for the
refund of the withholding taxes paid in 1993.
Following the CTA's advice, on 9 October 1995, it filed another petition for review with the CTA, docketed as CTA
Case No. 5292, concerning its claim for refund for the year 1993. The CIR posed various defenses, among them,
that the claim for refund had already prescribed.
On 11 September 1998, the CTA promulgated its decision in CTA Case No. 5292, denying the claim for refund for
the year 1993. While the CTA noted that the income from employees' trust funds were exempt from income taxes,
the claims for refund had already prescribed insofar as they covered the first, second and third quarters of 1993, as
well as from the period of 1 October to 8 October 1993.
As to the claim for refund covering the period 9 October 1993 up to 31 December 1993, the CTA ruled that such
could not be granted, the evidence being insufficient to establish the fact "that the money or assets of the funds
were indeed used or placed in money market placements, bank deposits, other deposit substitute instruments and
government securities, more particularly treasury bills." The CTA faulted petitioner for failing to submit such
necessary documentary proof of transactions, such as confirmation receipts and purchase orders that would
ordinarily show the fact of purchase of treasury bills or money market placements by the various funds, together
with their individual bank account numbers.
Petitioner filed a Motion for Reconsideration and/or New Trial, which the CTA denied in a Resolution dated 4
December 1998.
Petitioner then filed a Petition for Review under Rule 43 with the CA which was denied outright in a Resolution
dated 12 January 1999. The CA held that petitioner had failed to observe the requirement, under Section 2, Rule
42 of the 1997 Rules of Civil Procedure that the petition should be accompanied by other material portions of the
record as would support the allegations of the petition. DcSTaC
Petitioner moved for reconsideration attaching to its motion the required certified copies of the required
documents. Nonetheless, the CA denied the motion for reconsideration through a Resolution dated 3 June 1999,
holding that the belated compliance did not cure the defect of the petition.
ISSUES:
1. Whether the CA erred when it dismissed petitioner’s Petition "on a mere technicality"
2. Whether prescription had already set in
3. Whether the filing of the Supplemental Pleading tolled the running of the prescriptive period
4. What documentary evidence are required? ECcDAH
HELD:
1. No.
The dismissal by the CA on procedural grounds is wholly sanctioned by the relevant provisions of the Rules of
Court. Section 6 of Rule 43, 1997 Rules of Civil Procedure, then governing the procedure of appeals from
decisions of the CTA to the CA, explicitly provides that the petition for review be accompanied by "certified true
copies of such material portions of the record referred to [in the petition] and other supporting papers". Under
Section 7, Rule 43, the failure to attach such documents which should accompany the petition is sufficient ground
for the dismissal of the petition.
It is only when the petition has been given due course, after a prima facie finding that the CTA had committed
errors of fact or law that would warrant reversal, that the case record would be transmitted from the court of origin
to the Court of Appeals. Clearly, upon the filing of the petition, the appellate court would have no documentary
basis to discern whether the required prima facie standard has been met except the petition itself and the
documents that accompany it. While the submissions in the petition may refer to other documents in the record, or
may even quote at length from those documents, the Court of Appeals would have no way to ascertain the veracity
of the submissions unless the certified true copies of these documents are attached to the petition itself.
The requirement that certified true copies of such portions of the record referred to in the petition be attached is not
a mere technicality that can be overlooked with ease, but an essential requisite for the determination of prima
facie basis for giving due course to the petition. Thus, it does not constitute error in law when the CA dismissed the
petition on such ground. Moreover, while the court a quo is capacitated to give cognizance to the belated
compliance attempted by petitioner, acquiescence to such belated compliance is a matter of sound discretion on
the part of the lower court, and one not ordinarily disturbed by the Court.
2. Yes.
Petitioner paid the income tax it was not liable for when it withheld such tax on interest income for the year 1993.
Such taxes were erroneously assessed or collected, and thus, Section 230 of the National Internal Revenue Code
then in effect comes into full application.
Since the petition for review was only filed on 9 October 1995, petitioner could no longer claim the refund of such
tax withheld for the period of January to 8 October 1995, the two (2)-year prescriptive period having elapsed.
Petitioner submits that the two (2)-year prescriptive period should be reckoned from the date of its filing of the
Supplemental Petition on 28 April 1995, not from the filing of its new petition for review after the Supplemental
Petition was denied. Even granting that this should be the case, such argument would still preclude the refund of
taxes wrongfully paid from January to 27 April 1993, the two (2)-year prescriptive period for those taxes paid then
having already become operative.
Yet, let us assume that the filing of the Supplemental Petition could have tolled the two (2)-year prescriptive period
insofar as the 1993 taxes paid after 28 April 1993 were concerned. There may even be cause to entertain this
assumption, considering that this two (2)-year prescriptive period is not jurisdictional and may be suspended under
exceptional circumstances. Yet a closer look at the case does not indicate the presence of such exceptional
circumstances, but instead affirm that the petition is still bereft of merit.
3. No.
Petitioner argues that Section 230 of the then Tax Code does not specify the form in which the judicial claim
should be made. That may be so, but it does not follow that the two (2)-year period may be suspended by the filing
of just any judicial claim with any court.
In this case, there is no doubt that the CTA has jurisdiction over actions seeking the refund of income taxes
erroneously paid. But it should be borne in mind that petitioner initially sought to bring its claim for refund for the
taxes paid in 1993 through a supplemental petition in another case pending before the CTA, and not through an
original action. The admission of supplemental pleadings, including supplemental complaints, does not arise as a
matter of right on the petitioner, but remains in the sound discretion of the court, which is well within its right to
deny the admission of the pleading. Section 6, Rule 10 of the 1997 Rules of Civil Procedure, governing
supplemental pleadings, is clear that the court only "may" admit the supplemental pleading, and is thus not obliged
to do so.
It is only upon the admission by the court of the supplemental complaint that it may be deem to augment the
original complaint. Until such time, the court acquires no jurisdiction over such new claims as may be raised in the
supplemental complaint. Assuming that the CTA erred in refusing to admit the Supplemental Petition, such action
is now beyond the review of this Court, the order denying the same having long lapsed into finality, and it
appearing that petitioner did not attempt to elevate such denial for judicial review with the proper appellate court.
The Supplemental Petition cannot be treated as having any judicial effect. It cannot even be deemed as having
been filed, the CTA refusing to admit the same. Moreover, the CTA could not have acquired jurisdiction over the
causes of action stated in the Supplemental Petition by virtue of the same pleading owing to that court's
non-admission of that complaint. The CTA acquired jurisdiction over the claim for refund for taxes paid by
petitioner in 1993 only upon the filing of the new Petition for Review on 9 October 1995. aDSHCc
4. The tax exemption enjoyed by employees' trusts was absolute, irrespective of the nature of the tax. There
was no need for the petitioner to particularly show that the tax withheld was derived from interest income from
money market placements, bank deposits, other deposit substitute instruments and government securities, since
the source of the interest income does not have any effect on the exemption enjoyed by employees' trusts.
What has to be established, as a matter of evidence, is that the amount sought to be refunded to petitioner actually
corresponds to the tax withheld on the interest income earned from the exempt employees' trusts. The need to be
determinate on this point especially militates, considering that petitioner, in the ordinary course of its banking
business, earns interest income not only from its investments of employees' trusts, but on a whole range of
accounts which do not enjoy the same broad exemption as employees' trusts. caIACE
Petitioner should have submitted documentary proof of transactions, such as confirmation receipts and purchase
orders, as the best evidence on the participation of the funds from these employees’ trusts. These documents are
vital insofar as they establish the extent of the investments made by petitioner from the employees' trusts, as
distinguished from those made from other account sources, and correspondingly, the amount of taxes withheld
from the interest income derived from these employees' trusts alone.
A necessary consequence of the special exemption enjoyed alone by employees' trusts would be a necessary
segregation in the accounting of such income, interest or otherwise, earned from those trusts from that earned by
the other clients of petitioner. The Court has no desire to impose unnecessarily pernickety documentary
requirements in obtaining a valid tax refund. Yet, the taxpayer needs to establish not only that the refund is justified
under the law, but also the correct amount that should be refunded. If the latter requisite cannot be ascertained
with particularity, there is cause to deny the refund, or allow it only to the extent of the sum that is actually proven
as due. Tax refunds partake the nature of tax exemptions and are thus construed strictissimi juris against the
person or entity claiming the exemption. The burden in proving the claim for refund necessarily falls on the
taxpayer, and petitioner in this case failed to discharge the necessary burden of proof.
[G.R. No. 148443. April 24, 2006.]
COMMISSIONER OF INTERNAL REVENUE vs. ROSE MARIE ALONZO-LEGASTO, ET AL.
FACTS:
The CIR filed with the COMELEC a request for exemption from the ban on the transfer, promotion, reassignment,
and recruitment of public sector employees during the election period for the May 14, 2001 elections.
The COMELEC granted the request.
On May 24, 2001, or during the election period for the May 14, 2001 elections, petitioner issued a Revenue Travel
Assignment Order (RTAO) reassigning private respondents as Technical Assistants in the Taxpayer Assistance
Service at its National Office in Quezon City. The RTAO was issued pursuant to Section 17 of the Tax Reform Act
of 1997 (Republic Act No. 8424) authorizing the BIR Commissioner to assign and reassign personnel in the
exigencies of the service.
On May 25, 2001, petitioner submitted to the COMELEC the names and positions of the said personnel detailed to
other posts who were exempted from the ban on transfer during the election period.
On June 1, 2001, private respondents filed with the RTC a Complaint for Injunction with Prayer for a Temporary
Restraining Order (TRO) and/or Preliminary Injunction. They sought to enjoin petitioner from implementing the
RTAO, as well as the Memorandum ordering them to comply therewith. The complaint alleged that their
transfer/reassignment pursuant to the RTAO was tantamount to a removal without cause, hence, illegal; that while
there was no diminution in salaries, however, they suffered a demotion in terms of rank or status; and that the
RTAO is void as it does not bear the imprimatur of the Secretary of Finance.
On June 5, 2001, respondent judge issued a TRO enjoining petitioner from implementing the RTAO. Thereafter,
she conducted hearings on private respondents' application for the issuance of a writ of preliminary injunction. SEHTAC
On June 25, 2001, respondent judge issued an Order declaring the reassignment under the RTAO neither a
demotion nor a removal without cause. Moreover, that the RTAO is in accordance with law. Still, respondent judge
issued a preliminary injunction on the ground that petitioner had not "obtained any exemption from the election
ban."
ISSUE:
Whether respondent judge committed grave abuse of discretion amounting to lack or excess of jurisdiction in
holding that petitioner violated the election ban on the transfer of BIR personnel during election period
HELD:
Yes.
Section 261(h) of the Omnibus Election Code prohibits the transfer or detail of any public officer or employee, such
as private respondents herein, during an election period, except upon prior approval of the COMELEC.
It is on record that petitioner, thru the Secretary of Finance, filed a request with the COMELEC for exemption from
the election ban on the transfer, assignment, promotion, and recruitment of its officers and employees. The
COMELEC granted the request on January 24, 2001, subject to the submission by petitioner of certain supporting
documents. On March 27, 2001, petitioner complied with the COMELEC's requirement by submitting copies of
Executive Order No. 175 and the BIR Organizational Structure as of March 27, 2001. On May 25, 2001, petitioner
furnished the COMELEC with the names and positions of the BIR officers and employees transferred or
reassigned to other places of work pursuant to RTAO No. 4-2001.
But respondent judge ruled that a subsequent approval by the COMELEC of petitioner's compliance is still
required. This is untenable and unnecessary.
Resolution No. 3499 of the COMELEC is clear and categorical. It granted petitioner's request for exemption from
the election ban on the transfer of personnel subject only to submission of certain documents. Clearly, the
COMELEC's further approval of these requirements is no longer necessary. Otherwise, the COMELEC should
have withdrawn its favorable action had it found that petitioner's compliance was not in order.
Therefore, in issuing the assailed Order granting private respondents' application for preliminary injunction,
respondent judge gravely abused her discretion. Grave abuse of discretion exists where an act of a court or
tribunal is performed with a capricious or whimsical exercise of judgment equivalent to lack of jurisdiction, as in this
case. CHATcE
[G.R. No. 159694 and 163581. January 27, 2006.]
COMMISSIONER OF INTERNAL REVENUE vs. AZUCENA T. REYES
FACTS:
Maria C. Tancinco died, leaving a 1,292 square-meter residential lot and an old house thereon.
On the basis of a sworn information-for-reward filed by a certain Raymond Abad, the BIR conducted an
investigation on decedent's estate. Subsequently, it issued a Return Verification Order. But without the required
preliminary findings being submitted, it issued Letter of Authority for the regular investigation of the estate tax case.
Azucena T. Reyes, one of the decedent's heirs, received the Letter of Authority on March 14, 1997.
On February 12, 1998, the BIR issued a preliminary assessment notice against the estate in the amount of
P14,580,618.67. On May 10, 1998, the heirs of the decedent received a final estate tax assessment notice and a
demand letter, both dated April 22, 1998, for the amount of P14,912,205.47, inclusive of surcharge and interest.
On November 12, 1998, the CIR issued a preliminary collection letter to Reyes, followed by a Final Notice Before
Seizure dated December 4, 1998.
On January 5, 1999, a Warrant of Distraint and/or Levy was served upon the estate, followed on February 11,
1999 by Notices of Levy on Real Property and Tax Lien against it.
As the estate failed to pay its tax liability within the April 15, 2000 deadline, the Chief, Collection Enforcement
Division, BIR, notified Reyes on June 6, 2000 that the subject property would be sold at public auction on August
8, 2000.
On June 13, 2000, [Reyes] filed a protest with the BIR Appellate Division. Assailing the scheduled auction sale,
she asserted that the assessment, letter of demand, and the whole tax proceedings against the estate are void ab
initio.
ISSUE:
Whether the assessment against the estate is valid.
HELD:
No.
In the present case, Reyes was not informed in writing of the law and the facts on which the assessment of estate
taxes had been made. She was merely notified of the findings by the CIR, who had simply relied upon the
provisions of former Section 229 prior to its amendment by R.A. No. 8424 (Tax Reform Act of 1997).
First, RA 8424 has already amended the provision of Section 229 on protesting an assessment. The old
requirement of merely notifying the taxpayer of the CIR's findings was changed in 1998 to informing the taxpayer of
not only the law, but also of the facts on which an assessment would be made; otherwise, the assessment itself
would be invalid. DaHSIT
It was on February 12, 1998, that a preliminary assessment notice was issued against the estate. On April 22,
1998, the final estate tax assessment notice, as well as demand letter, was also issued. During those dates, RA
8424 was already in effect. The notice required under the old law was no longer sufficient under the new law.
To be simply informed in writing of the investigation being conducted and of the recommendation for the
assessment of the estate taxes due is nothing but a perfunctory discharge of the tax function of correctly assessing
a taxpayer. The act cannot be taken to mean that Reyes already knew the law and the facts on which the
assessment was based. It does not at all conform to the compulsory requirement under Section 228. Moreover,
the Letter of Authority received by respondent on March 14, 1997 was for the sheer purpose of investigation and
was not even the requisite notice under the law.
The procedure for protesting an assessment under the Tax Code is found in Chapter III of Title VIII, which deals
with remedies. Being procedural in nature, can its provision then be applied retroactively? The answer is yes.
The general rule is that statutes are prospective. However, statutes that are remedial, or that do not create new or
take away vested rights, do not fall under the general rule against the retroactive operation of statutes. Clearly,
Section 228 provides for the procedure in case an assessment is protested. The provision does not create new, or
take away vested, rights. In both instances, it can surely be applied retroactively. Moreover, RA 8424 does not
state, either expressly or by necessary implication, that pending actions are excepted from the operation of Section
228, or that applying it to pending proceedings would impair vested rights.
Second, the non-retroactive application of Rev. Reg. No. 12-99 is of no moment, considering that it merely
implements the law.
A tax regulation is promulgated by the finance secretary to implement the provisions of the Tax Code. While it is
desirable for the government authority or administrative agency to have one immediately issued after a law is
passed, the absence of the regulation does not automatically mean that the law itself would become inoperative.
At the time the pre-assessment notice was issued to Reyes, RA 8424 already stated that the taxpayer must be
informed of both the law and facts on which the assessment was based. Thus, the CIR should have required the
assessment officers of the Bureau of Internal Revenue (BIR) to follow the clear mandate of the new law. The old
regulation governing the issuance of estate tax assessment notices ran afoul of the rule that tax regulations — old
as they were — should be in harmony with, and not supplant or modify, the law.
Moreover, an administrative rule interpretive of a statute, and not declarative of certain rights and corresponding
obligations, is given retroactive effect as of the date of the effectivity of the statute. RR 12-99 is one such rule.
Being interpretive of the provisions of the Tax Code, even if it was issued only on September 6, 1999, this
regulation was to retroact to January 1, 1998 — a date prior to the issuance of the preliminary assessment notice
and demand letter.
Third, neither Section 229 nor RR 12-85 can prevail over Section 228 of the Tax Code. aTEHIC
No doubt, Section 228 has replaced Section 229. The provision on protesting an assessment has been amended.
Furthermore, in case of discrepancy between the law as amended and its implementing but old regulation, the
former necessarily prevails. Thus, between Section 228 of the Tax Code and the pertinent provisions of RR 12-85,
the latter cannot stand because it cannot go beyond the provision of the law. The law must still be followed, even
though the existing tax regulation at that time provided for a different procedure. The regulation then simply
provided that notice be sent to the respondent in the form prescribed, and that no consequence would ensue for
failure to comply with that form.
Fourth, petitioner violated the cardinal rule in administrative law that the taxpayer be accorded due process. Not
only was the law here disregarded, but no valid notice was sent, either. A void assessment bears no valid fruit.
The law imposes a substantive, not merely a formal, requirement. To proceed heedlessly with tax collection
without first establishing a valid assessment is evidently violative of the cardinal principle in administrative
investigations: that taxpayers should be able to present their case and adduce supporting evidence. In the instant
case, respondent has not been informed of the basis of the estate tax liability. Without complying with the
unequivocal mandate of first informing the taxpayer of the government's claim, there can be no deprivation of
property, because no effective protest can be made. The haphazard shot at slapping an assessment, supposedly
based on estate taxation's general provisions that are expected to be known by the taxpayer, is utter chicanery.
Even a cursory review of the preliminary assessment notice, as well as the demand letter sent, reveals the lack of
basis for — not to mention the insufficiency of — the gross figures and details of the itemized deductions indicated
in the notice and the letter. This Court cannot countenance an assessment based on estimates that appear to
have been arbitrarily or capriciously arrived at. Although taxes are the lifeblood of the government, their
assessment and collection "should be made in accordance with law as any arbitrariness will negate the very
reason for government itself." IHCSTE
Fifth, the rule against estoppel does not apply. Although the government cannot be estopped by the negligence or
omission of its agents, the obligatory provision on protesting a tax assessment cannot be rendered nugatory by a
mere act of the CIR.
Tax laws are civil in nature. Under our Civil Code, acts executed against the mandatory provisions of law are void,
except when the law itself authorizes the validity of those acts. Failure to comply with Section 228 does not only
render the assessment void, but also finds no validation in any provision in the Tax Code. We cannot condone
errant or enterprising tax officials, as they are expected to be vigilant and law-abiding.
[G.R. No. 139736. October 17, 2005.]
FACTS:
On two separate occasions, particularly on 06 June 1985 and 14 June 1985, petitioner BPI sold United States (US)
$500,000.00 to the Central Bank of the Philippines (Central Bank), for the total sales amount of US$1,000,000.00.
On 10 October 1989, the BIR issued an Assessment finding petitioner BPI liable for deficiency DST on its
afore-mentioned sales of foreign bills of exchange to the Central Bank.
Petitioner BPI received the Assessment, together with the attached Assessment Notice on 20 October 1989.
Petitioner BPI protested the Assessment in a letter dated 16 November 1989, and filed with the BIR on 17
November 1989.
Petitioner BPI did not receive any immediate reply to its protest letter. However, on 15 October 1992, the BIR
issued a Warrant of Distraint and/or Levy against petitioner BPI for the assessed deficiency DST for taxable year
1985. It served the Warrant on petitioner BPI only on 23 October 1992.
Then again, petitioner BPI did not hear from the BIR until 11 September 1997, when its counsel received a letter,
dated 13 August 1997, signed by then BIR Commissioner Liwayway Vinzons-Chato, denying its "request for
reconsideration," and addressing the points raised by petitioner BPI in its protest letter, dated 16 November 1989.
Upon receipt of this letter, petitioner BPI proceeded to file a Petition for Review with the CTA on 10 October 1997;
to which respondent BIR Commissioner, represented by the Office of the Solicitor General, filed an Answer on 08
December 1997.
Petitioner BPI raised in its Petition for Review before the CTA, in addition to the arguments presented in its protest
letter, dated 16 November 1989, the defense of prescription of the right of respondent BIR Commissioner to
enforce collection of the assessed amount. It alleged that respondent BIR Commissioner only had three years to
collect on the Assessment, but she waited for seven years and nine months to deny the protest.
ISSUE:
Whether the right of respondent BIR Commissioner to collect from petitioner BPI the alleged deficiency DST for
taxable year 1985 had prescribed.
HELD:
Yes.
As enunciated in Secs. 203, 223 and 224 of the Tax Code, the BIR has three years, counted from the date of
actual filing of the return or from the last date prescribed by law for the filing of such return, whichever comes later,
to assess a national internal revenue tax or to begin a court proceeding for the collection thereof without an
assessment. In case of a false or fraudulent return with intent to evade tax or the failure to file any return at all, the
prescriptive period for assessment of the tax due shall be 10 years from discovery by the BIR of the falsity, fraud,
or omission. When the BIR validly issues an assessment, within either the three-year or ten-year period, whichever
is appropriate, then the BIR has another three years after the assessment within which to collect the national
internal revenue tax due thereon by distraint, levy, and/or court proceeding. The assessment of the tax is deemed
made and the three-year period for collection of the assessed tax begins to run on the date the assessment notice
had been released, mailed or sent by the BIR to the taxpayer. cAEDTa
In the present Petition, there is no controversy on the timeliness of the issuance of the Assessment, only on the
prescription of the period to collect the deficiency DST following its Assessment. While the Assessment and the
corresponding Assessment Notice were both dated 10 October 1989 and were received by petitioner BPI on 20
October 1989, there was no showing as to when the said Assessment and Assessment Notice were released,
mailed or sent by the BIR. Still, it can be granted that the latest date the BIR could have released, mailed or sent
the Assessment and Assessment Notice to petitioner BPI was on the same date they were received by the latter,
on 20 October 1989. Counting the three-year prescriptive period, for a total of 1,095 days, from 20 October 1989,
then the BIR only had until 19 October 1992 within which to collect the assessed deficiency DST. TEacSA
The earliest attempt of the BIR to collect on the Assessment was its issuance and service of a Warrant of Distraint
and/or Levy on petitioner BPI. Although the Warrant was issued on 15 October 1992, previous to the expiration of
the period for collection on 19 October 1992, the same was served on petitioner BPI only on 23 October 1992.
In their Decisions, both the CTA and the Court of Appeals found that the filing by petitioner BPI of a protest letter
suspended the running of the prescriptive period for collecting the assessed DST.
The statute of limitations on assessment and collection of national internal revenue taxes may be suspended if the
taxpayer executes a valid waiver thereof, as provided in paragraphs (b) and (d) of Section 223 of the Tax Code of
1977, as amended; and in specific instances enumerated in Section 224 of the same Code, which include a
request for reinvestigation granted by the BIR Commissioner. Outside of these statutory provisions, however, this
Court also recognized one other exception to the statute of limitations on collection of taxes in the case of Collector
of Internal Revenue v. Suyoc Consolidated Mining Co.
i. Execution of a valid waiver
The statute of limitations on assessment and collection of national internal revenue taxes may be waived, subject
to certain conditions, under paragraphs (b) and (d) of Section 223 of the Tax Code of 1977, as amended,
respectively. Petitioner BPI, however, did not execute any such waiver in the case at bar.
According to paragraphs (b) and (d) of Section 223 of the Tax Code of 1977, as amended, the prescriptive periods
for assessment and collection of national internal revenue taxes, respectively, could be waived by agreement.
The agreements so described are often referred to as waivers of the statute of limitations. The waiver of the
statute of limitations, whether on assessment or collection, should not be construed as a waiver of the right to
invoke the defense of prescription but, rather, an agreement between the taxpayer and the BIR to extend the
period to a date certain, within which the latter could still assess or collect taxes due. The waiver does not mean
that the taxpayer relinquishes the right to invoke prescription unequivocally.
A valid waiver of the statute of limitations under paragraphs (b) and (d) of Section 223 of the Tax Code of 1977, as
amended, must be: (1) in writing; (2) agreed to by both the Commissioner and the taxpayer; (3) before the
expiration of the ordinary prescriptive periods for assessment and collection; and (4) for a definite period beyond
the ordinary prescriptive periods for assessment and collection. The period agreed upon can still be extended by
subsequent written agreement, provided that it is executed prior to the expiration of the first period agreed upon.
The BIR had issued Revenue Memorandum Order (RMO) No. 20-90 on 04 April 1990 to lay down an even more
detailed procedure for the proper execution of such a waiver. RMO No. 20-90 mandates that the procedure for
execution of the waiver shall be strictly followed, and any revenue official who fails to comply therewith resulting in
the prescription of the right to assess and collect shall be administratively dealt with.
A request for reconsideration or reinvestigation by the taxpayer, without a valid waiver of the prescriptive periods
for the assessment and collection of tax, as required by the Tax Code and implementing rules, will not suspend the
running thereof.
The protest filed by petitioner BPI did not constitute a request for reinvestigation, granted by the respondent BIR
Commissioner, which could have suspended the running of the statute of limitations on collection of the assessed
deficiency DST under Section 224 of the Tax Code of 1977, as amended.
ii. Request for reinvestigation which is granted by the Commissioner
There is a distinction between a request for reconsideration and a request for reinvestigation. Revenue
Regulations (RR) No. 12-85, issued on 27 November 1985 by the Secretary of Finance, upon the recommendation
of the BIR Commissioner, governs the procedure for protesting an assessment and distinguishes between the two
types of protest, as follows —
(a) Request for reconsideration. — refers to a plea for a re-evaluation of an assessment on the basis of
existing records without need of additional evidence. It may involve both a question of fact or of law
or both.
(b) Request for reinvestigation. — refers to a plea for re-evaluation of an assessment on the basis of
newly-discovered or additional evidence that a taxpayer intends to present in the reinvestigation. It
may also involve a question of fact or law or both.
With the issuance of RR No. 12-85 on 27 November 1985 providing the above-quoted distinctions between a
request for reconsideration and a request for reinvestigation, the two types of protest can no longer be used
interchangeably and their differences so lightly brushed aside. It bears to emphasize that under Section 224 of the
Tax Code of 1977, as amended, the running of the prescriptive period for collection of taxes can only be
suspended by a request for reinvestigation, not a request for reconsideration. Undoubtedly, a reinvestigation,
which entails the reception and evaluation of additional evidence, will take more time than a reconsideration of a
tax assessment, which will be limited to the evidence already at hand; this justifies why the former can suspend the
running of the statute of limitations on collection of the assessed tax, while the latter cannot.
The protest letter of petitioner BPI, dated 16 November 1989 and filed with the BIR the next day, on 17 November
1989, did not specifically request for either a reconsideration or reinvestigation. A close review of the contents
thereof would reveal, however, that it protested Assessment No. FAS-5-85-89-002054 based on a question of law,
in particular, whether or not petitioner BPI was liable for DST on its sales of foreign currency to the Central Bank in
taxable year 1985. The same protest letter did not raise any question of fact; neither did it offer to present any new
evidence. In its own letter to petitioner BPI, dated 10 September 1992, the BIR itself referred to the protest of
petitioner BPI as a request for reconsideration. These considerations would lead this Court to deduce that the
protest letter of petitioner BPI was in the nature of a request for reconsideration, rather than a request for
reinvestigation and, consequently, Section 224 of the Tax Code of 1977, as amended, on the suspension of the
running of the statute of limitations should not apply.
Even if, for the sake of argument, this Court glosses over the distinction between a request for reconsideration and
a request for reinvestigation, and considers the protest of petitioner BPI as a request for reinvestigation, the filing
thereof could not have suspended at once the running of the statute of limitations. Article 224 of the Tax Code of
1977, as amended, very plainly requires that the request for reinvestigation had been granted by the BIR
Commissioner to suspend the running of the prescriptive periods for assessment and collection.
That the BIR Commissioner must first grant the request for reinvestigation as a requirement for suspension of the
statute of limitations is even supported by existing jurisprudence.
The burden of proof that the taxpayer's request for reinvestigation had been actually granted shall be on
respondent BIR Commissioner. The grant may be expressed in communications with the taxpayer or implied from
the actions of the respondent BIR Commissioner or his authorized BIR representatives in response to the request
for reinvestigation.
In the present Petition, (1) the protest filed by petitioner BPI was a request for reconsideration, not a
reinvestigation, of the assessment against it; and (2) even granting that the protest of petitioner BPI was a request
for reinvestigation, there was no showing that it was granted by respondent BIR Commissioner and that actual
reinvestigation had been conducted.
iii. Collector of Internal Revenue v. Suyoc Consolidated Mining Co.
The only exception to the statute of limitations on collection of taxes, other than those already provided in the Tax
Code, was recognized in the Suyoc case.
In the Suyoc case, this Court expressly conceded that a mere request for reconsideration or reinvestigation of an
assessment may not suspend the running of the statute of limitations. It affirmed the need for a waiver of the
prescriptive period in order to effect suspension thereof. However, even without such waiver, the taxpayer may be
estopped from raising the defense of prescription because by his repeated requests or positive acts, he had
induced Government authorities to delay collection of the assessed tax.
By the principle of estoppel, taxpayer Suyoc was not allowed to raise the defense of prescription against the efforts
of the Government to collect the tax assessed against it. This Court adopted the following principle from American
jurisprudence: "He who prevents a thing from being done may not avail himself of the nonperformance which he
has himself occasioned, for the law says to him in effect 'this is your own act, and therefore you are not
damnified.'"
Conclusion
To summarize all the foregoing discussion, this Court lays down the following rules on the exceptions to the statute
of limitations on collection. DAETcC
The statute of limitations on collection may only be interrupted or suspended by a valid waiver executed in
accordance with paragraph (d) of Section 223 of the Tax Code of 1977, as amended, and the existence of the
circumstances enumerated in Section 224 of the same Code, which include a request for reinvestigation granted
by the BIR Commissioner.
Even when the request for reconsideration or reinvestigation is not accompanied by a valid waiver or there is no
request for reinvestigation that had been granted by the BIR Commissioner, the taxpayer may still be held in
estoppel and be prevented from setting up the defense of prescription of the statute of limitations on collection
when, by his own repeated requests or positive acts, the Government had been, for good reasons, persuaded to
postpone collection to make the taxpayer feel that the demand is not unreasonable or that no harassment or
injustice is meant by the Government, as laid down by this Court in the Suyoc case.
[G.R. No. 168056. September 1, 2005.]
ABAKADA GURO PARTY LIST, ET AL. vs. EDUARDO ERMITA, ET AL.
FACTS:
R.A. No. 9337 entitled "An Act Amending Sections 27, 28, 34, 106, 107, 108, 109, 110, 111, 112, 113, 114, 116,
117, 119, 121, 148, 151, 236, 237, and 288 of the National Internal Revenue Code of 1997, as Amended and for
Other Purposes," is a consolidation of three legislative bills. It was enacted to meet mounting budget deficit,
revenue generation, inadequate fiscal allocation for education, increased emoluments for health workers, and
wider coverage for full value-added tax benefits. Various groups and individuals led by ABAKADA GURO Party
List, Sen. Aquilino Q. Pimentel, Jr., Association of Pilipinas Shell Dealers, Inc., Rep. Francis Joseph G. Escudero
and Governor Enrique T. Garcia questioned the constitutionality of several portions of R.A. No. 9337.
PROCEDURAL ISSUES:
Whether R.A. No. 9337 violates the following provisions of the Constitution:
a. Article VI, Section 24, and
b. Article VI, Section 26(2)
SUBSTANTIVE ISSUES:
1. Whether Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108 of the NIRC,
violate the following provisions of the Constitution:
a. Article VI, Section 28(1), and
b. Article VI, Section 28(2)
2. Whether Section 8 of R.A. No. 9337, amending Sections 110(A)(2) and 110(B) of the NIRC; and
Section 12 of R.A. No. 9337, amending Section 114(C) of the NIRC, violate the following provisions
of the Constitution:
a. Article VI, Section 28(1), and
b. Article III, Section 1
RULING:
R.A. No. 9337 is not unconstitutional.
Procedural Issues
A. THE BICAMERAL CONFERENCE COMMITTEE
The Bicameral Conference Committee was created to address a situation where the two houses of Congress
disagree over changes or amendments introduced by the other house in a bill. Under the Rules of the House of
Representatives and Senate Rules, the Bicameral Conference Committee is mandated to settle the differences
between the disagreeing provisions in the House bill and the Senate bill. The term "settle" is synonymous to
"reconcile" and "harmonize." In the present case, the changes introduced by the Bicameral Conference Committee
on disagreeing provisions were meant only to reconcile and harmonize the disagreeing provisions for it did not
inject any idea or intent that is wholly foreign to the subject embraced by the original provisions. Thus, the Court
does not see any grave abuse of discretion amounting to lack or excess of jurisdiction committed by the Bicameral
Conference Committee.
The main purpose of the bills emanating from the House of Representatives is to bring in sizeable revenues for the
government to supplement our country's serious financial problems, and improve tax administration and control of
the leakages in revenues from income taxes and value-added taxes. As these house bills were transmitted to the
Senate, the latter, approaching the measures from the point of national perspective, can introduce amendments
within the purposes of those bills. Since there is no question that the revenue bill exclusively originated in the
House of Representatives, the Senate was acting within its constitutional power to introduce amendments to the
House bill when it included provisions in Senate Bill No. 1950 amending corporate income taxes, percentage,
excise and franchise taxes. Indeed, Article VI, Section 24 of the Constitution does not contain any prohibition or
limitation on the extent of the amendments that may be introduced by the Senate to the House revenue bill.
B. R.A. NO. 9337 DOES NOT VIOLATE ARTICLE VI, SECTION 26(2) OF THE CONSTITUTION ON THE
"NO-AMENDMENT RULE"
The "no-amendment rule" refers only to the procedure to be followed by each house of Congress with regard to
bills initiated in each of said respective houses, before said bill is transmitted to the other house for its concurrence
or amendment. To construe said provision in a way as to proscribe any further changes to a bill after one house
has voted on it would lead to absurdity as this would mean that the other house of Congress would be deprived of
its constitutional power to amend or introduce changes to said bill. Thus, Article VI, Sec. 26 (2) of the Constitution
cannot be taken to mean that the introduction by the Bicameral Conference Committee of amendments and
modifications to disagreeing provisions in bills that have been acted upon by both houses of Congress is
prohibited.
Substantive Issues
A. NO UNDUE DELEGATION OF LEGISLATIVE POWER
Giving the President the stand-by authority to raise the VAT rate from 10% to 12% when a certain condition is met
does not constitute a delegation of legislative power. It is simply a delegation of ascertainment of facts upon which
enforcement and administration of the increase rate under the law is contingent. The legislature has made the
operation of the 12% rate effective January 1, 2006, contingent upon a specified fact or condition. It leaves the
entire operation or non-operation of the 12% rate upon factual matters outside of the control of the executive. No
discretion would be exercised by the President.
The Secretary of Finance, in making his recommendation to the President on the existence of certain conditions, is
not acting as the alter ego of the President or even her subordinate. In such instance, he is not subject to the
power of control and direction of the President. He is acting as the agent of the legislative department, to
determine and declare the event upon which its expressed will is to take effect. Thus, being the agent of Congress
and not of the President, the President cannot alter or modify or nullify, or set aside the findings of the Secretary of
Finance and to substitute the judgment of the former for that of the latter. If either of the two instances has
occurred, the Secretary of Finance, by legislative mandate, must submit such information to the President. Then
the 12% VAT rate must be imposed by the President effective January 1, 2006. There is no undue delegation of
legislative power but only of the discretion as to the execution of a law. This is constitutionally permissible.
B. THE 12% INCREASE VAT RATE DOES NOT IMPOSE AN UNFAIR AND UNNECESSARY ADDITIONAL
TAX BURDEN
Under the common provisos of Sections 4, 5 and 6 of R.A. No. 9337, if any of the two conditions set forth therein
are satisfied, the President shall increase the VAT rate to 12%. The provisions of the law are clear. It does not
provide for a return to the 10% rate nor does it empower the President to so revert if, after the rate is increased to
12%, the VAT collection goes below the 2 4/5 of the GDP of the previous year or that the national government
deficit as a percentage of GDP of the previous year does not exceed 1 1/2%. There is no basis for petitioners' fear
of a fluctuating VAT rate because the law itself does not provide that the rate should go back to 10% if the
conditions provided in Sections 4, 5 and 6 are no longer present.
II
A. DUE PROCESS AND EQUAL PROTECTION CLAUSES
Petitioners’ claim that Section 8 of R.A. No. 9337, amending Section 110(B) of the NIRC imposes limitations on the
amount of input tax that may be claimed assumes that the input tax exceeds 70% of the output tax, and therefore,
the input tax in excess of 70% remains uncredited. However, to the extent that the input tax is less than 70% of the
output tax, then 100% of such input tax is still creditable. Furthermore, unapplied/unutilized input tax may be
credited in the subsequent periods as allowed by the carry-over provision of Section 110(B) or may later on be
refunded through a tax credit certificate under Section 112(B).
Section 8 of R.A. No. 9337, amending Section 110(A) of the NIRC imposes a 60-month period within which to
amortize the creditable input tax on purchase or importation of capital goods with acquisition cost of P1 Million
pesos, exclusive of the VAT component. Such spread out only poses a delay in the crediting of the input tax, and
the taxpayer is not permanently deprived of his privilege to credit the input tax. Whatever is the purpose of the
60-month amortization, this involves executive economic policy and legislative wisdom in which the Court cannot
intervene.
With regard to the 5% creditable withholding tax imposed on payments made by the government for taxable
transactions, Section 12 of R.A. No. 9337 amending Section 114 of the NIRC deleted the different rates of
value-added taxes to be withheld. Instead, it now provides for a uniform rate of 5% except for the 10% on lease or
property rights payment to non-residents. However, the law now uses the word “final” as opposed to “creditable”.
As applied to value-added tax, this means that taxable transactions with the government are subject to a 5% rate,
which constitutes as full payment of the tax payable on the transaction. The Court need not explore the rationale
behind the provision. It is clear that Congress intended to treat differently taxable transactions with the
government.
B. UNIFORMITY AND EQUITABILITY OF TAXATION
R.A. No. 9337 is uniform as it provides a standard rate of 0% or 10% (or 12%) on all goods and services. Sections
4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108, respectively, of the NIRC, provide for a rate of
10% (or 12%) on sale of goods and properties, importation of goods, and sale of services and use or lease of
properties. These same sections also provide for a 0% rate on certain sales and transaction. The rule of uniform
taxation does not deprive Congress of the power to classify subjects of taxation, and only demands uniformity
within the particular class.
R.A. No. 9337 is also equitable. The law is equipped with a threshold margin. The VAT rate of 0% or 10% (or 12%)
does not apply to sales of goods or services with gross annual sales or receipts not exceeding P1,500,000.00.
Also, basic marine and agricultural food products in their original state are still not subject to the tax, thus ensuring
that prices at the grassroots level will remain accessible. While the law puts premium on businesses with low profit
margins and unduly favors those with high profit margins, it seeks to place taxpayers on equal footing by imposing
a 3% percentage tax on VAT-exempt persons. The law also provides mitigating measures to cushion the impact of
the imposition of the tax on those previously exempt, and increases the income tax rates of corporations, in order
to distribute the burden of taxation.
C. PROGRESSIVITY OF TAXATION
While the VAT is an antithesis of progressive taxation and by its very nature, regressive, the Constitution does not
really prohibit the imposition of indirect taxes. What it simply provides is that Congress shall "evolve a progressive
system of taxation."
[G.R. No. 153866. February 11, 2005.]
COMMISSIONER OF INTERNAL REVENUE vs. SEAGATE TECHNOLOGY (PHIL.).
FACTS:
Seagate Technology, a VAT-registered and PEZA-registered manufacturer of recording components used in

computers for export, filed VAT returns for the period 1 April 1998 to 30 June 1999.
On October 4, 1999, respondent filed an administrative claim for refund of VAT input taxes in the amount of
P28,369,226.38. This claim was not acted upon by petitioner prompting the respondent to elevate the case to the
CTA on July 21, 2000 by way of Petition for Review in order to toll the running of the two-year prescriptive period.
On July 19, 2001, the CTA rendered a decision granting the claim for refund.
The CA affirmed the Decision of the CTA granting the claim for refund or issuance of a tax credit certificate (TCC)
in favor of respondent in the reduced amount of P12,122,922.66, representing the unutilized but substantiated
input VAT paid on capital goods purchased for the period covering April 1, 1998 to June 30, 1999.
ISSUE:
Is respondent entitled to refund or issuance of Tax Credit Certificate?
RULING:
Yes.
No doubt, as a PEZA-registered enterprise within a special economic zone, respondent is entitled to the fiscal
incentives and benefits provided for in either PD 66 or EO 226. It shall, moreover, enjoy all privileges, benefits,
advantages or exemptions under both Republic Act Nos. 7227 and 7844.
From the above-cited laws, it is immediately clear that petitioner enjoys preferential tax treatment. It is not subject
to internal revenue laws and regulations and is even entitled to tax credits. The VAT on capital goods is an internal
revenue tax from which petitioner as an entity is exempt. Although the transactions involving such tax are not
exempt, petitioner as a VAT-registered person, however, is entitled to their credits.
Since the purchases of respondent are not exempt from the VAT, the rate to be applied is zero. Its exemption
under both PD 66 and RA 7916 effectively subjects such transactions to a zero rate, because the ecozone within
which it is registered is managed and operated by the PEZA as a separate customs territory.
Having determined that respondent's purchase transactions are subject to a zero VAT rate, the tax refund or credit
is in order.
As correctly held by both the CA and the Tax Court, respondent had chosen the fiscal incentives in EO 226 over
those in RA 7916 and PD 66. It opted for the income tax holiday regime instead of the 5 percent preferential tax
regime.
As a matter of law and procedure, its registration status entitling it to such tax holiday can no longer be questioned.
Its sales transactions intended for export may not be exempt, but like its purchase transactions, they are
zero-rated. No prior application for the effective zero rating of its transactions is necessary. Being VAT-registered
and having satisfactorily complied with all the requisites for claiming a tax refund of or credit for the input VAT paid
on capital goods purchased, respondent is entitled to such VAT refund or credit. CTEDSI
[CA-G.R. SP No. 77580. July 8, 2004.]
COMMISSIONER OF INTERNAL REVENUE vs. HONGKONG & SHANGHAI BANKING CORPORATION

LIMITED PHILIPPINE BRANCHES
FACTS:
Respondent HSBC-LPB performs custodial services on behalf of its investor-clients, corporate or individual,
resident or non-resident, with respect to the latter's passive investments in the Philippines.
The investor-clients maintain Philippine peso and/or foreign currency accounts. In the management of their funds
maintained in the said peso and/or foreign currency accounts, e.g. transfer and disbursements of funds payment or
for reinvestment, said investor-clients give instructions to respondent from outside the Philippines via electronic
messages. These electronic message instructions are standard forms known in the banking industry as SWIFT MT
100, MT 202 and/or MT 521. In case of purchase of shares of stock and other investment securities, the
investor-clients send electronic messages from abroad to respondent in the form of SWIFT MT 100, MT 202,
and/or MT 521, instructing the latter to debit its local or foreign currency account and to pay the purchase price
upon receipt of the securities.
From August to October 1997, respondent allegedly purchased and paid DST in the total amount of
P35,000,000.00.
According to respondent, for the period September 1997 to December 1997, it paid DST on electronic
instructions/advises (SWIFT MT 100, MT 202 and/or MT 521) received from abroad at the rate of P0.30 on each
P200.00 based on the settlement price on the face of the advise under Section 181 of the National Internal
Revenue Code (NIRC), totaling P19,572,992.10.
On August 23, 1999, the BIR issued BIR Ruling No. 132-99, stating that instructions/advises from abroad on the
management of funds located in the Philippines which do not involve transfer of from funds (sic) abroad are not
subject to DST. On the basis of this ruling, respondent filed with the BIR on October 8, 1999 an administrative
claim for refund of the DST it erroneously paid on the electronic instructions it received from its investor-clients
abroad during the period September to December 1997 in the amount of P19,572,992.10.
ISSUE:
Was the documentary stamp tax imposed in the instant case erroneously or illegally assessed and collected so as
to warrant the grant of tax refund or tax credit in favor of HSBC-LPB?
HELD:
No.
Section 181 of the National Internal Revenue Code, as amended by P.D. 1158, P.D. 1994, E.O. 273 and R.A.
7660, which was in effect at the time the subject documentary stamp tax was collected specifically provides:
"Upon any acceptance or payment of any bill of exchange or order for the payment of money
purporting to be drawn in a foreign country but payable in the Philippines, there shall be collected a
documentary stamp tax of thirty centavos on each two hundred pesos, or fractional part thereof, of the
face value of any such bill of exchange, or order, or the Philippine equivalent of such value, it
expressed in foreign currency."
Two concerns are immediately apparent from the foregoing provision. First, the documentary stamp tax is imposed
either: (a) upon any acceptance of a bill of exchange or order for the payment of money, or (b) upon any payment
of a bill of exchange or order for the payment of money. Second, the bill of exchange or the order for the payment
of money purports to be drawn in a foreign country but payable in the Philippines. Succinctly put, the documentary
stamp tax shall be assessed and collected each time a drawee or person so authorized either accepts a bill of
exchange or order for the payment of money, or pays a sum of money by virtue of the drawer's instructions therein,
provided that the said bill of exchange or order to pay money was drawn in a foreign country but payable in the
Philippines.
At bar, the respondent performs custodial services in behalf of its investor-clients as regards their passive
investments in the Philippines mainly involving shares of stocks in domestic corporations. These investor-clients
maintain Philippine peso and/or foreign currency accounts with HSBC-LPB. Should they desire to purchase shares
of stock and other investments securities in the Philippines, the investor-clients send their instructions and advises
via electronic messages from abroad to HSBC-LPB in the form of SWIFT MT 100, MT 202, or MT 521 directing the
latter to debit their local or foreign currency account and to pay the purchase price upon receipt of the securities.
Pursuant to Section 181 of the NIRC, respondent was thus required to pay documentary stamp taxes based on its
acceptance of these electronic messages — which, as HSBC-LPB readily admits in its petition filed before the
Court of Tax Appeals, were essentially orders to pay the purchases of securities made by its client-investors.
Appositely, the BIR correctly and legally assessed and collected the documentary stamp tax from respondent
considering that the said tax was levied against the acceptances and payments by HSBC-LPB of the subject
electronic messages/orders for payment. The issue of whether such electronic messages may be equated as a
written document and thus be subject to tax is beside the point. As already stressed, Section 181 of the law cited
earlier imposes the documentary stamp tax not on the bill of exchange or order for payment of money but on the
acceptance or payment of the said bill or order. The acceptance of a bill or order is the signification by the drawee
of its assent to the order of the drawer to pay a given sum of money while payment implies not only the assent to
the said order of the drawer and a recognition of the drawer's obligation to pay such aforesaid sum, but also a
compliance with such obligation (Philippine National Bank vs. Court of Appeals, 25 SCRA 693 [1968]; Prudential
Bank vs. Intermediate Appellate Court, 216 SCRA 257 [1992]).
What is vital to the valid imposition of the documentary stamp tax under Section 181 is the existence of the
requirement of acceptance or payment by the drawee (in this case, HSBC-LPB) of the order for payment of money
from its investor-clients and that the said order was drawn from a foreign country and payable in the Philippines:
These requisites are surely present here.
It would serve the parties well to understand the nature of the tax being imposed in the case at bar. In Philippine
Home Assurance Corporation vs. Court of Appeals (301 SCRA 443 [1999]), the Supreme Court ruled that
documentary stamp taxes are levied on the exercise by persons of certain privileges conferred by law for the
creation, revision, or termination of specific legal relationships through the execution of specific instruments,
independently of the legal status of the transactions giving rise thereto. In the same case, the High Court also
declared — citing Du Pont vs. United States (300 U.S. 150, 153 [1936]):
"The tax is not upon the business transacted but is an excise upon the privilege, opportunity,
or facility offered at exchanges for the transaction of the business. It is an excise upon the facilities
used in the transaction of the business separate and apart from the business itself."
To reiterate, the subject documentary stamp tax was levied on the acceptance and payment made by HSBC-LPB
pursuant to the order made by its client-investors as embodied in the cited electronic messages, through which the
herein parties' privilege and opportunity to transact business respectively as drawee and drawers was exercised,
separate and apart from the circumstances and conditions related to such acceptance and subsequent payment of
the sum of money authorized by the concerned drawers. Stated another way, the documentary stamp tax was
exacted on the respondent's exercise of its privilege under its drawee-drawer relationship with its client-investor
through the execution of a specific instrument which, in the case at bar, is the acceptance of the order for payment
of money. The acceptance of a bill or order for payment may be done in writing by the drawee in the bill or order
itself, or in a separate instrument (Prudential Bank vs. Intermediate Appellate Court, supra.). Here, the
respondent's acceptance of the orders for the payment of money was veritably "done in writing in a separate
instrument" each time it debited the local or foreign currency accounts of its client-investors pursuant to the latter's
instructions and advises sent by electronic messages to the respondent bank. The documentary stamp tax
therefore must be paid upon the execution of the specified instruments or facilities covered by the tax — in this
case, the acceptance by HSBC-LPB of the order for payment of money sent by the client-investors through
electronic messages (Philippine Home Assurance Corporation vs. Court of Appeals, supra.).
The Court of Tax Appeals nevertheless granted the respondent's entreated refund, ratiocinating that BIR Ruling
No. 132-99 exempts "electronic message instructions" from the payment of the documentary stamp tax under
Section 181 of the NIRC. The Tax Court committed a reversible error in this regard.
BIR Ruling No. 132-99 was issued by then Commissioner Beethoven L. Rualo on August 23, 1999 based on a
request made by Citibank and Standard Chartered Bank for a ruling on the issue of whether instructions sent by
overseas clients to their banks in the Philippines to debit their local or foreign currency accounts and pay a named
recipient in the Philippines is subject to documentary stamp tax. The ruling declared: cACEHI
Fittingly, the Court is not bound by such erroneous ruling of the BIR. The rule that the construction given to a
statute by an administrative agency charged with the interpretation and application of a statute is normally entitled
to great respect and should be accorded great weight by the courts is not absolute. The exception is when such
construction is clearly shown to be in sharp conflict with the governing statute and other laws, as is the case here
(United Harbor Pilots' Association of the Philippines, Inc. vs. Association of International Shipping Lines, Inc., 391
SCRA 522 [2002]). When an administrative agency renders an opinion or issues a statement of policy, it merely
interprets a pre-existing law and the administrative interpretation is at best advisory for it is the courts that finally
determine what the law means. Thus, an action by an administrative agency may be set aside by the judicial
department if there is an error of law clearly conflicting with the letter and spirit of the law (Energy Regulatory
Board vs. Court of Appeals, 357 SCRA 30 [2001]).
[G.R. No. 144104. June 29, 2004.]
LUNG CENTER OF THE PHILIPPINES vs. QUEZON CITY and CONSTANTINO P. ROSAS, in his capacity as
City Assessor of Quezon City
FACTS:
The petitioner Lung Center of the Philippines is a non-stock and non-profit entity established on January 16, 1981
by virtue of Presidential Decree No. 1823. It is the registered owner of a parcel of land located at Quezon Avenue,
Quezon City. Erected in the middle of the aforesaid lot is a hospital known as the Lung Center of the Philippines. A
big space at the ground floor is being leased to private parties, for canteen and small store spaces, and to medical
or professional practitioners who use the same as their private clinics for their patients whom they charge for their
professional services. Almost one-half of the entire area on the left side of the building along Quezon Avenue is
vacant and idle, while a big portion on the right side, at the corner of Quezon Avenue and Elliptical Road, is being
leased for commercial purposes to a private enterprise known as the Elliptical Orchids and Garden Center.
The petitioner accepts paying and non-paying patients. It also renders medical services to out-patients, both
paying and non-paying. Aside from its income from paying patients, the petitioner receives annual subsidies from
the government.
On June 7, 1993, both the land and the hospital building of the petitioner were assessed for real property taxes by
the City Assessor of Quezon City.
Petitioner filed a Claim for Exemption from real property taxes with the City Assessor, predicated on its claim that it
is a charitable institution.
Petitioner contends that under Section 28, paragraph 3 of the 1987 Constitution, the property is exempt from real
property taxes. It averred that a minimum of 60% of its hospital beds are exclusively used for charity patients and
that the major thrust of its hospital operation is to serve charity patients. It argues that it is a charitable institution
and, as such, exempt from real property taxes.
ISSUES:
1. Whether the petitioner is a charitable institution within the context of Presidential Decree No. 1823
and the 1973 and 1987 Constitutions and Section 234(b) of Republic Act No. 7160.
2. Whether the real properties of petitioner are exempt from real property taxes.
HELD:
1. Yes.
To determine whether an enterprise is a charitable institution/entity or not, the elements which should be
considered include the statute creating the enterprise, its corporate purposes, its constitution and by-laws, the
methods of administration, the nature of the actual work performed, the character of the services rendered, the
indefiniteness of the beneficiaries, and the use and occupation of the properties.
Under P.D. No. 1823, the petitioner is a non-profit and non-stock corporation which, subject to the provisions of the
decree, is to be administered by the Office of the President of the Philippines with the Ministry of Health and the
Ministry of Human Settlements. It was organized for the welfare and benefit of the Filipino people principally to help
combat the high incidence of lung and pulmonary diseases in the Philippines.
As a general principle, a charitable institution does not lose its character as such and its exemption from taxes
simply because it derives income from paying patients, whether out-patient, or confined in the hospital, or receives
subsidies from the government, so long as the money received is devoted or used altogether to the charitable
object which it is intended to achieve; and no money inures to the private benefit of the persons managing or
operating the institution. (Congregational Sunday School, etc. v. Board of Review; Lutheran Hospital Association of
South Dakota v. Baker)
Under P.D. No. 1823, the petitioner is entitled to receive donations. The petitioner does not lose its character as a
charitable institution simply because the gift or donation is in the form of subsidies granted by the government.
(Yorgason v. County Board of Equalization of Salt Lake County)
In this case, the petitioner adduced substantial evidence that it spent its income, including the subsidies from the
government for 1991 and 1992 for its patients and for the operation of the hospital. It even incurred a net loss in
1991 and 1992 from its operations.
2. Notwithstanding the finding that petitioner is a charitable institution, those portions of its real property that are
leased to private entities are not exempt from real property taxes as these are not actually, directly and exclusively
used for charitable purposes.
The settled rule is that laws granting exemption from tax are construed strictissimi juris against the taxpayer and
liberally in favor of the taxing power. Taxation is the rule and exemption is the exception. The effect of an
exemption is equivalent to an appropriation. Hence, a claim for exemption from tax payments must be clearly
shown and based on language in the law too plain to be mistaken. (Salvation Army v. Hoehn)
Section 2 of Presidential Decree No. 1823, relied upon by the petitioner, specifically provides that petitioner shall
enjoy tax exemptions and privileges. However, it is plain as day that under the decree, petitioner does not enjoy
any property tax exemption privileges for its real properties as well as the building constructed thereon. If the
intentions were otherwise, the same should have been among the enumeration of tax exempt privileges under
Section 2.
It is a settled rule of statutory construction that the express mention of one person, thing, or consequence implies
the exclusion of all others. The rule is expressed in the familiar maxim, expressio unius est exclusio alterius.
The tax exemption under Section 28(3), Article VI of the 1987 Philippine Constitution covers property taxes only.
As Chief Justice Hilario G. Davide, Jr., then a member of the 1986 Constitutional Commission, explained: ". . .
what is exempted is not the institution itself . . .; those exempted from real estate taxes are lands, buildings and
improvements actually, directly and exclusively used for religious, charitable or educational purposes."
Consequently, the constitutional provision is implemented by Section 234(b) of Republic Act No. 7160 (otherwise
known as the Local Government Code of 1991) as follows:
(Note the following substantial changes in the Constitution: Under the 1935 Constitution, ". . .
all lands, buildings, and improvements used 'exclusively' for … charitable . . . purposes shall be
exempt from taxation." However, under the 1973 and the present Constitutions, for "lands, buildings,
and improvements" of the charitable institution to be considered exempt, the same should not only be
"exclusively" used for charitable purposes; it is required that such property be used "actually" and
"directly" for such purposes.)
Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be entitled to the exemption, the
petitioner is burdened to prove, by clear and unequivocal proof, that (a) it is a charitable institution; and (b) its real
properties are ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes. "Exclusive" is defined as
possessed and enjoyed to the exclusion of others; debarred from participation or enjoyment; and "exclusively" is
defined, "in a manner to exclude; as enjoying a privilege exclusively." If real property is used for one or more
commercial purposes, it is not exclusively used for the exempted purposes but is subject to taxation. The words
"dominant use" or "principal use" cannot be substituted for the words "used exclusively" without doing violence to
the Constitutions and the law. Solely is synonymous with exclusively.
What is meant by actual, direct and exclusive use of the property for charitable purposes is the direct and
immediate and actual application of the property itself to the purposes for which the charitable institution is
organized. It is not the use of the income from the real property that is determinative of whether the property is
used for tax-exempt purposes.
The petitioner failed to discharge its burden to prove that the entirety of its real property is actually, directly and
exclusively used for charitable purposes. While portions of the hospital are used for the treatment of patients and
the dispensation of medical services to them, whether paying or non-paying, other portions thereof are being
leased to private individuals for their clinics and a canteen. Further, a portion of the land is being leased to a
private individual for her business enterprise under the business name "Elliptical Orchids and Garden Center."
Indeed, the petitioner's evidence shows that it collected P1,136,483.45 as rentals in 1991 and P1,679,999.28 for
1992 from the said lessees.
Accordingly, the portions of the land leased to private entities as well as those parts of the hospital leased to
private individuals are not exempt from such taxes. On the other hand, the portions of the land occupied by the
hospital and portions of the hospital used for its patients, whether paying or non-paying, are exempt from real
property taxes.
[G.R. No. 108576. January 20, 1999.]
COMMISSIONER OF INTERNAL REVENUE vs. THE COURT OF APPEALS, COURT OF TAX APPEALS and A.
SORIANO CORP.
FACTS:
Sometime in the 1930s, Don Andres Soriano, a citizen and resident of the United States, formed the corporation
"A. Soriano Y Cia", predecessor of ANSCOR, with a P1,000,000.00 capitalization divided into 10,000 common
shares at a par value of P100/share. ANSCOR is wholly owned and controlled by the family of Don Andres, who
are all non-resident aliens. In 1937, Don Andres subscribed to 4,963 shares of the 5,000 shares originally issued.
On September 12, 1945, ANSCOR's authorized capital stock was increased to P2,500,000.00 divided into 25,000
common shares with the same par value. Of the additional 15,000 shares, only 10,000 was issued which were all
subscribed by Don Andres, after the other stockholders waived in favor of the former their pre-emptive rights to
subscribe to the new issues. This increased his subscription to 14,963 common shares. A month later, Don Andres
transferred 1,250 shares each to his two sons, Jose and Andres, Jr., as their initial investments in ANSCOR. Both
sons are foreigners.
By 1947, ANSCOR declared stock dividends. Other stock dividend declarations were made between 1949 and
December 20, 1963. On December 30, 1964 Don Andres died. As of that date, the records revealed that he has a
total shareholdings of 185,154 shares— 50,495 of which are original issues and the balance of 134,659 shares as
stock dividend declarations. Correspondingly, one-half of that shareholdings or 92,577 shares were transferred to
his wife Doña Carmen Soriano, as her conjugal share. The other half formed part of his estate.
A day after Don Andres died, ANSCOR increased its capital stock to P20M and in 1966 further increased it to
P30M. In the same year (December 1966), stock dividends worth 46,290 and 46,287 shares were respectively
received by the Don Andres estate and Doña Carmen from ANSCOR. Hence, increasing their accumulated
shareholdings to 138,867 and 138,864 19 common shares each.
On March 31, 1968 Doña Carmen exchanged her whole 138,864 common shares for 138,860 of the newly
reclassified preferred shares. The estate of Don Andres in turn, exchanged 11,140 of its common shares for the
remaining 11,140 preferred shares, thus reducing its (the estate) common shares to 127,727.
On June 30, 1968, pursuant to a Board Resolution, ANSCOR redeemed 28,000 common shares from the Don
Andres' estate. By November 1968, the Board further increased ANSCOR's capital stock to P75M divided into
150,000 preferred shares and 600,000 common shares. About a year later, ANSCOR again redeemed 80,000
common shares from the Don Andres' estate, further reducing the latter's common shareholdings to 19,727. As
stated in the Board Resolutions, ANSCOR's business purpose for both redemptions of stocks is to partially retire
said stocks as treasury shares in order to reduce the company's foreign exchange remittances in case cash
dividends are declared.
In 1973, after examining ANSCOR's books of account and records, Revenue examiners issued a report proposing
that ANSCOR be assessed for deficiency withholding tax-at-source, pursuant to Sections 53 and 54 of the 1939
Revenue Code, for the year 1968 and the second quarter of 1969 based on the transactions of exchange and
redemption of stocks. The BIR made the corresponding assessments despite the claim of ANSCOR that it availed
of the tax amnesty under P.D. 23 which were amended by P.D.'s 67 and 157. However, petitioner ruled that the
invoked decrees do not cover Sections 53 and 54 in relation to Article 83(b) of the 1939 Revenue Act under which
ANSCOR was assessed. ANSCOR's subsequent protest on the assessments was denied in 1983 by petitioner.
ISSUE:
Whether ANSCOR's redemption of stocks from its stockholder as well as the exchange of common with preferred
shares can be considered as "essentially equivalent to the distribution of taxable dividend," making the proceeds
thereof taxable under the provisions of the above-quoted law.
HELD:
Yes.
General Rule
Section 83(b) of the 1939 NIRC was taken from Section 115(g)(1) of the U.S. Revenue Code of 1928. It laid down
the general rule known as the 'proportionate test' wherein stock dividends once issued form part of the capital and,
thus, not subject to income tax. Specifically, the general rule states that:
"A stock dividend representing the transfer of surplus to capital account shall not be subject to
tax."
Having been derived from a foreign law, resort to the jurisprudence of its origin may shed light. Under the US
Revenue Code, this provision originally referred to "stock dividends" only, without any exception. Stock dividends,
strictly speaking, represent capital and do not constitute income to its recipient. So that the mere issuance thereof
is not yet subject to income tax as they are nothing but an "enrichment through increase in value of capital
investment." As capital, the stock dividends postpone the realization of profits because the "fund represented by
the new stock has been transferred from surplus to capital and no longer available for actual distribution." Income
in tax law is "an amount of money coming to a person within a specified time, whether as payment for services,
interest, or profit from investment." It means cash or its equivalent. It is gain derived and severed from capital, from
labor or from both combined— so that to tax a stock dividend would be to tax a capital increase rather than the
income. In a loose sense, stock dividends issued by the corporation, are considered unrealized gain, and cannot
be subjected to income tax until that gain has been realized. Before the realization, stock dividends are nothing but
a representation of an interest in the corporate properties. As capital, it is not yet subject to income tax. It should
be noted that capital and income are different. Capital is wealth or fund; whereas income is profit or gain or the
flow of wealth. The determining factor for the imposition of income tax is whether any gain or profit was derived
from a transaction.
The Exception
However, if a corporation cancels or redeems stock issued as a dividend at such time and in such manner as to
make the distribution and cancellation or redemption, in whole or in part, essentially equivalent to the distribution of
a taxable dividend, the amount so distributed in redemption or cancellation of the stock shall be considered as
taxable income to the extent it represents a distribution of earnings or profits accumulated after March first,
nineteen hundred and thirteen.
In a response to the ruling of the American Supreme Court in the case of Eisner v. Macomber (that pro rata stock
dividends are not taxable income), the exempting clause above quoted was added because corporations found a
loophole in the original provision. They resorted to devious means to circumvent the law and evade the tax.
Corporate earnings would be distributed under the guise of its initial capitalization by declaring the stock dividends
previously issued and later redeem said dividends by paying cash to the stockholder. This process of
issuance-redemption amounts to a distribution of taxable cash dividends which was just delayed so as to escape
the tax. It becomes a convenient technical strategy to avoid the effects of taxation.
Thus, to plug the loophole — the exempting clause was added. It provides that the redemption or cancellation of
stock dividends, depending on the "time" and "manner" it was made, is "essentially equivalent to a distribution of
taxable dividends," making the proceeds thereof "taxable income" "to the extent it represents profits". The
exception was designed to prevent the issuance and cancellation or redemption of stock dividends, which is
fundamentally not taxable, from being made use of as a device for the actual distribution of cash dividends, which
is taxable.
Requisites:
For the exempting clause of Section 83(b) to apply, it is indispensable that: (a) there is redemption or cancellation;
(b) the transaction involves stock dividends and (c) the "time and manner" of the transaction makes it "essentially
equivalent to a distribution of taxable dividends." Of these, the most important is the third.
It is not the stock dividends but the proceeds of its redemption that may be deemed as taxable dividends. Here, it
is undisputed that at the time of the last redemption, the original common shares owned by the estate were only
25,247.5. This means that from the total of 108,000 shares redeemed from the estate, the balance of 82,752.5
(108,000 less 25,247.5) must have come from stock dividends. Besides, in the absence of evidence to the
contrary, the Tax Code presumes that every distribution of corporate property, in whole or in part, is made out of
corporate profits, such as stock dividends. The capital cannot be distributed in the form of redemption of stock
dividends without violating the trust fund doctrine — wherein the capital stock, property and other assets of the
corporation are regarded as equity in trust for the payment of the corporate creditors. Once capital, it is always
capital. That doctrine was intended for the protection of corporate creditors.
With respect to the third requisite, ANSCOR redeemed stock dividends issued just 2 to 3 years earlier. The time
alone that lapsed from the issuance to the redemption is not a sufficient indicator to determine taxability. It is a
must to consider the factual circumstances as to the manner of both the issuance and the redemption. The "time"
element is a factor to show a device to evade tax and the scheme of cancelling or redeeming the same shares is a
method usually adopted to accomplish the end sought. Was this transaction used as a "continuing plan," "device"
or "artifice" to evade payment of tax? It is necessary to determine the "net effect" of the transaction between the
shareholder-income taxpayer and the acquiring (redeeming) corporation. The "net effect" test is not evidence or
testimony to be considered; it is rather an inference to be drawn or a conclusion to be reached. It is also important
to know whether the issuance of stock dividends was dictated by legitimate business reasons, the presence of
which might negate a tax evasion plan.
The issuance of stock dividends and its subsequent redemption must be separate, distinct, and not related, for the
redemption to be considered a legitimate tax scheme. Redemption cannot be used as a cloak to distribute
corporate earnings. Otherwise, the apparent intention to avoid tax becomes doubtful as the intention to evade
becomes manifest.
Depending on each case, the exempting provision of Sec. 83(b) of the 1939 Code may not be applicable if the
redeemed shares were issued with bona fide business purpose, which is judged after each and every step of the
transaction have been considered and the whole transaction does not amount to a tax evasion scheme.
As stated above, the test of taxability under the exempting clause of Section 83(b) is, whether income was realized
through the redemption of stock dividends. The redemption converts into money the stock dividends which
become a realized profit or gain and consequently, the stockholder's separate property. Profits derived from the
capital invested cannot escape income tax. As realized income, the proceeds of the redeemed stock dividends can
be reached by income taxation regardless of the existence of any business purpose for the redemption. Otherwise,
to rule that the said proceeds are exempt from income tax when the redemption is supported by legitimate
business reasons would defeat the very purpose of imposing tax on income. Such argument would open the door
for income earners not to pay tax so long as the person from whom the income was derived has legitimate
business reasons. In other words, the payment of tax under the exempting clause of Section 83(b) would be made
to depend not on the income of the taxpayer, but on the business purposes of a third party (the corporation herein)
from whom the income was earned. This is absurd, illogical and impractical considering that the Bureau of Internal
Revenue (BIR) would be pestered with instances in determining the legitimacy of business reasons that every
income earner may interpose. It is not administratively feasible and cannot therefore be allowed.
Exchange of Common With Preferred Shares
ANSCOR reclassified its shares into common and preferred, and that parts of the common shares of the Don
Andres estate and all of Doña Carmen's shares were exchanged for the whole 150,000 preferred shares.
Thereafter, both the Don Andres estate and Doña Carmen remained as corporate subscribers except that their
subscriptions now include preferred shares. There was no change in their proportional interest after the exchange.
There was no cash flow. Both stocks had the same par value. Under the facts herein, any difference in their
market value would be immaterial at the time of exchange because no income is yet realized — it was a mere
corporate paper transaction. It would have been different, if the exchange transaction resulted into a flow of
wealth, in which case income tax may be imposed.
Reclassification of shares does not always bring any substantial alteration in the subscriber's proportional interest.
But the exchange is different — there would be a shifting of the balance of stock features, like priority in dividend
declarations or absence of voting rights. Yet neither the reclassification nor exchange per se, yields realized
income for tax purposes. A common stock represents the residual ownership interest in the corporation. It is a
basic class of stock ordinarily and usually issued without extraordinary rights or privileges and entitles the
shareholder to a pro rata division of profits. Preferred stocks are those which entitle the shareholder to some
priority on dividends and asset distribution. DcTAIH
Both shares are part of the corporation's capital stock. Both stockholders are no different from ordinary investors
who take on the same investment risks. Preferred and common shareholders participate in the same venture,
willing to share in the profits and losses of the enterprise. Moreover, under the doctrine of equality of shares — all
stocks issued by the corporation are presumed equal with the same privileges and liabilities, provided that the
Articles of Incorporation is silent on such differences.
In this case, the exchange of shares, without more, produces no realized income to the subscriber. There is only a
modification of the subscriber's rights and privileges — which is not a flow of wealth for tax purposes. The issue of
taxable dividend may arise only once a subscriber disposes of his entire interest and not when there is still
maintenance of proprietary interest.
[G.R. No. 124043. October 14, 1998.]
COMMISSIONER OF INTERNAL REVENUE vs. COURT OF APPEALS, ET AL.
FACTS:
YMCA, a welfare, educational and charitable non-profit corporation, earned an income from leasing out a portion of
its premises to small shop owners and from parking fees collected from non-members. The CIR issued an
assessment to YMCA including surcharge and interest, for deficiency income tax, deficiency expanded withholding
taxes on rentals and professional fees and deficiency withholding tax on wages. YMCA formally protested the
assessment but the CIR denied its claims. Contesting the denial of its protest, the YMCA filed a petition for review
at the CTA which ruled in its favor. Dissatisfied with the CTA ruling, the CIR elevated the case to the CA. The CA
initially decided in favor of the CIR but upon motion for reconsideration by YMCA the CA reversed itself. A denial of
the CIR’s motion for reconsideration prompted this petition for review.
ISSUE:
Is the income derived from rentals of real property owned by YMCA subject to income tax under the NIRC and the
Constitution?
RULING:
The exemption claimed by the YMCA is expressly disallowed by the very wording of the last paragraph of then
Section 27 of the NIRC which mandates that the income of exempt organizations (such as the YMCA) from any of
their properties, real or personal, be subject to the tax imposed by the same Code. Because the last paragraph of
said section unequivocally subjects to tax the rent income of the YMCA from its real property, the Court is
duty-bound to abide strictly by its literal meaning and to refrain from resorting to any convoluted attempt at
construction. The income from any property of exempt organizations, as well as that arising from any activity it
conducts for profit, is taxable. The phrase "any of their activities conducted for profit" does not qualify the word
"properties." This makes income from the property of the organization taxable, regardless of how that income is
used — whether for profit or for lofty non-profit purposes. The law does not make a distinction. The rental income
is taxable regardless of whence such income is derived and how it is used or disposed of. Where the law does not
distinguish, neither should we.
For the YMCA to be granted the exemption it claims under Article XIV, Section 4, par. 3 of the Constitution, it must
prove with substantial evidence that (1) it falls under the classification non-stock, non-profit educational institution;
and (2) the income it seeks to be exempted from taxation is used actually, directly, and exclusively for educational
purposes. However, the term "educational institution," when used in laws granting tax exemptions, refers to a ". . .
school seminary, college or educational establishment . . ." Therefore, YMCA cannot be deemed one of the
educational institutions covered by the said constitutional provision.
[G.R. No. L-66653. June 19, 1986.]
COMMISSIONER OF INTERNAL REVENUE vs. BURROUGHS LIMITED, ET AL.
FACTS:
Burroughs Limited, a foreign corporation authorized to engage in trade or business in the Philippines, applied with
the Central Bank for authority to remit branch profit to its parent company abroad and paid the 15% branch profit
remittance tax. Claiming that the 15% profit remittance tax should have been computed on the basis of the amount
actually remitted and not on the amount before profit remittance tax, Burroughs Ltd. filed a written claim for the
refund or tax credit of the amount representing alleged overpaid branch profit remittance tax. The CTA ordered to
grant a tax credit in favor of Burroughs Ltd.
Unable to obtain a reconsideration from the said decision, the CIR filed the instant petition before the Supreme
Court.
ISSUE:
Is Burroughs Limited legally entitled to a refund?
RULING:
The pertinent provision of the National Revenue Code is Sec. 24 (b) (2) (ii) of the NIRC, the pertinent provision
under consideration, had been interpreted by the BIR Ruling of January 21, 1980 to mean that "the tax base upon
which the 15% branch profit remittance tax . . . shall be imposed . . . (is) the profit actually remitted abroad and not
on the total branch profits out of which the remittance is to be made."
Applying the said ruling, the claim of Burroughs Ltd. that it made an overpayment in the amount of P172,058.90
which is the difference between the remittance tax actually paid of P1,147,058.70 and the remittance tax that
should have been paid of P974,999.89 is well-taken.

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[G.R. No. 216130. August 3, 2016.

COMMISSIONER OF INTERNAL REVENUE v. GOODYEAR PHILIPPINES, INC.

BLOOMBERRY RESORTS AND HOTELS INC. v. BUREAU OF INTERNAL REVENUE

Whether petitioner is liable for corporate income tax.

Petitioner is not liable for corporate income tax.

FUNK v. SANTOS VENTURA HOCORMA FOUNDATION INC.

Whether petitioner can recover the amount withheld as taxes.

Petitioner cannot recover the amount withheld as taxes.

[G.R. No. 203538. June 27, 2016.]

ARTEX DEVELOPMENT CO., INC. v. OFFICE OF THE OMBUDSMAN

Whether the bid amount can be characterized as grossly unconscionable.

The bid amount cannot be characterized as grossly unconscionable.

[G.R. No. 194065. June 20, 2016.]

PHILIPPINE BANK OF COMMUNICATIONS v. COMMISSIONER OF INTERNAL REVENUE

[G.R. No. 190506. June 13, 2016.]

CORAL BAY NICKEL CORP. v. COMMISSIONER OF INTERNAL REVENUE

[G.R. No. 205002. April 20, 2016.]

COMMISSIONER OF CUSTOMS v. PILIPINAS SHELL PETROLEUM CORP.

Whether respondents committed forum shopping.

Respondent did not commit forum shopping.

[G.R. No. 167679. April 20, 2016.]

ING BANK N.V. v. COMMISSIONER OF INTERNAL REVENUE

Documentary stamp tax is one of the taxes covered by RA No. 9480.

Motion for Partial Reconsideration denied.

[G.R. No. 195054. April 4, 2016.]

Whether petitioner can be held liable for grave misconduct.

Petitioner is liable for grave misconduct.

[G.R. No. 214430. March 9, 2016.]

Petition for mandamus is denied.

[G.R. No. 205814. February 15, 2016.]

SPOUSES TEAÑO v. MUNICIPALITY OF NAVOTAS

[G.R. No. 180235. January 20, 2016.]

ALTA VISTA GOLF AND COUNTRY CLUB v. CITY OF CEBU

[G.R. No. 169507. January 11, 2016.]

AIR CANADA v. COMMISSIONER OF INTERNAL REVENUE

Whether petitioner is entitled to a refund of erroneously paid income taxes.

Petitioner is not entitled to a refund.

REPUBLIC v. PILIPINAS SHELL PETROLEUM CORP.

Whether petitioner's claim is barred by prescription.

Petitioner's collection suit is not barred by prescription.

CE LUZON GEOTHERMAL POWER COMPANY, INC. v. COMMISSIONER OF INTERNAL REVENUE

Whether petitioner is entitled to a tax refund of unutilized input VAT.

Petitioner is not entitled to a refund of unutilized input VAT.

ING BANK N.V. v. COMMISSIONER OF INTERNAL REVENUE

Petitioner is liable for deficiency withholding tax on accrued bonuses.

[G.R. No. 187631. July 8, 2015.]

GERON v. PILIPINAS SHELL PETROLEUM CORP.

MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY v. CITY OF LAPU-LAPU

On 1997, respondent issues to petitioner a Statement of Real Estate Tax.

Petitioner is exempt from the payment of real estate taxes.

[G.R. No. 185666. February 4, 2015.]

NIPPON EXPRESS (PHILIPPINES) CORP. vs. COMMISSIONER OF INTERNAL REVENUE

Whether petitioner is entitled to a tax refund.

Petitioner is not entitled to a refund.

CHINA BANKING CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE

[G.R. Nos. 193383-84 & 193407-08. January 14, 2015.]

CBK POWER COMPANY LIMITED vs. COMMISSIONER OF INTERNAL REVENUE