CIR- petitioner vs. San Miguel Corporation- respondent GR no.

180740

and

San Miguel Corporation- petitioner vs. CIR –respondent GR. No.180910

11 NOV 2019

Hernando, J;

FACTS: Petitioner San Miguel Corporation (SMC) is a domestic corporation engaged in

manufacturing of fermented liquors for sale in the domestic and export markets. On January 1,
1997, RA 8240 took effect, adopting a specific tax system instead of ad valorem tax system
imposed on, among others, fermented liquors. As a result, it was subjected to excise tax.

Under the law, the rates of excise tax on specified fermented liquor shall increase 12%

Prior to effectivity of RA 8240, SMC had been paying ad valorem tax on Red Horse at the rate of
7pesos liter.

On December 16, 1999, the Secretary of Finance, upon recommendation of CIR, issued revenue
regulation(RR) no. 17-99 to implement 12% increase on excise tax on, among others, fermented
liquor.

SMC contend that RR did not conform to the letter and intent of RA no. 8240, SMC filed on
January 3, 2003 a letter with BIR to claim tax refund or credit of the alleged excise taxes it paid
on its Red Horse beer product from January 11,2001 to December 31, 2001.

Without waiting for CIR to act, SMC filed Petition for Review in CTA. CTA said that, although
the SMC was able to present evidence in support of its total claim for tax refund or credit,
without the CIR presenting any controverting evidence, the CTA disallowed the claim of SMC
because it was already barred by prescription.

CTA explained that the reckoning point for computing two year prescriptive period for the
refund of erroneously paid taxes shall be from the date of payment or prior to removal of the
subject products from the place of production. Since the petition for review was filed on
February 24, 2003, the two year prescriptive period started to run on feb. 24 2001, hence the
petition for review was partially granted. the excess excise tax payment on march 1, 2001 to
December 31, 2002 was granted.

Issue:

Whether or not SMC is entitled to the full amount of its claim for the tax refund/credit of
excess taxes paid from January 11, 2001 to December 31, 2002.

Ruling: The SC said the section 1 of RR no. 17-99 is unauthorized administrative legislation.
In the case of CIR vs Fortune Tobacco Corporation, the issue regarding the validity of the RR
was already addressed.

Section 1 of RR no. 17-99 imposed 12% increase on specific tax rates on distilled spirits, wines,
fermented liquors, and cigars and cigarettes packed by machine pursuant to RA 8240, with
qualifications “that the new specific tax rate for any existing brand of cigars, cigarettes packed
by machine, distilled wines, and fermented liquors shall not be lower than the excise tax that is
actually being paid prior to January 21, 2000.”

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 paid prior to January 11, 2000, such interpretation is clearly invalid exercise of
the power of Secretary of Finance to interpret for the effective enforcement of the Tax Reform
act of 1997. Said qualification must, perforce be stuck down as invalid and of no effect.

It bears reiterating that the tax burdens are not to be imposed, nor presumed to be imposed
beyond the statute expressly and clearly import, tax statutes being construed strictissimi juris
against the government. In case of discrepancy between the basic law and a rule or regulation
issued to implement said law, the basic law prevails as said rule or regulation cannot go beyond
the terms and provisions of basic law.

The purpose of BIR revenue regulation is to establish parameters or guidelines within which our
tax laws should be implemented, and not to amend or modify its substantive meaning and
import.

The claim for refund/credit for the excess excise tax payments of the SMC from January 11
to February 11, 2001 is disallowed on the ground of prescription and insufficient evidence.

As provided under Tax reform Act of 1997, section 204(c) no credit or refund of taxes or
penalties shall be allowed unless the taxpayer files in writing with the commissioner a claim for
credit or refund within two years after payment of the tax or penalty.
It provided further under section 229 that, no such suit or proceeding shall be filed after the
expiration of 2 years from the date of payment of the tax or penalty regardless of any
supervening cause that may arise after payment.
Mindanao Shopping Destination Corporation et al. vs. Hon. Rodrigo R. Duterte, in his
capacity as Mayor of Davao City, et al. Supreme Court En Banc, G.R. No. 211093,
promulgated 6 June 2017
PERALTA, J.:
FACTS

On November 16, 2005, respondent Sangguniang Panglungsod... of Davao City (Sanggunian),

after due notice and hearing, enacted the... assailed Davao City Ordinance No. 158-05, Series of
2005, otherwise... known as "An Ordinance Approving the 2005 Revenue Code of the City of
Davao... etitioners claimed that they used to pay only 50% of 1% of the... business tax rate under
the old Davao City Ordinance No. 230, Series of
1990, but in the assaile
Petitioners claimed that they used to pay only 50% of 1% of the... business tax rate under the old
Davao City Ordinance No. 230, Series of
1990, but in the assailed new ordinance, it will require them to pay a... tax rate of 1.5%, or an
increase of 200% from the previous rate.
Petitioners believe that the increase is not allowed under Republic Act (RA) No. 7160, The Local
Government Code (LGC).
asserting the unconstitutionality... and illegality of Section 69 (d), for being unjust, excessive,...
oppressive, confiscatory and contrary to the 1987 Constitution and the... provisions of the LGC.
Petitioners prayed that the questioned ordinance,... particularly Section 69 (d) thereof be declared
as null and void ab initio.
Davao City Ordinance No. 0253, Series of 2006 (Amended Ordinance),... amended Section 69
(d) of the questioned ordinance. In it, tax rate on... retailers with gross receipts in excess of
P400,000.00 was reduced from... one and one-half percent (1 ½%) to one and one-fourth
percent... respondents maintained that the... adjustment in the tax base no longer exceeds the
limitation as set forth... in Section 191 of the LGC considering that the current Davao City tax...
rate of 1.25% on retailers with gross receipts/sales of over P400,000.00... under the assailed
ordinance is way below or 0.25% short of the maximum... tax rates of 1.5% for cities sanctioned
by the LGC. Respondents insist... that there is thus no increase or adjustment to speak of under
the... premises which is violative of Section 191 of the LGC.
Issues:
WHETHER OR NOT THE HONORABLE COURT OF APPEALS DESPITE THE
PATENT ILLEGALITY AND UNCONSTITUTIONALITY, UPHELD THE VALIDITY
OF THE ORDINANCE AS WELL AS THE LOCAL SANGGUNIAN'S ARBITRARY
EXERCISE OF ITS POWER TO TAX

Held:

It can be shown that the assailed ordinance does not violate the limitation imposed by Section
191 of the LGC on the adjustment of tax rate for the following reasons:
Firstly, Section 191 of the LGC presupposes that the following requirements are present
for it to apply, to wit: (i) there is a tax ordinance that already imposes a tax in accordance
with the provisions of the LGC; and (ii) there is a second tax ordinance that made
adjustment on the tax rate fixed by the first tax ordinance. In the instant case, both
elements are not present.

Secondly, Section 191 of the LGC will not apply because with the assailed tax ordinance,
there is no outright or unilateral increase of tax to speak of. The resulting increase in the
tax rate for retailers was merely incidental.

The assailed ordinance merely imposes and collects the proper and legal tax due to the
local government pursuant to the LGC. While it may appear that there was indeed a
significant adjustment on the tax rate of retailers which affected the petitioners, it must,
however, be emphasized that the adjustment was not by virtue of a unilateral increase of
the tax rate of petitioners as retailers, but again, merely incidental as a result of the
correction of the classification of wholesalers and retailers and its corresponding tax rates
in accordance with the provisions of the LGC.

Indeed, as correctly pointed out by the appellate court, Section 191 is a limitation upon the
adjustment, specifically on the increase in the tax rates imposed by the local government units.
We quote the appellate court's ruling with approval, to wit:

x x x Section 191 has no bearing in the instant case because what actually took place in the
questioned Ordinance was the correction of an erroneous classification, and not, an upward
adjustment or increase of tax rates. The fact that there occurred an increase in payment due to the
reclassification is of no moment, because: (1) reclassification is not prohibited; (2)
reclassification was made to effect a correction; and (3) the taxes imposed upon the reclassified
taxpayers, was not amended or increased from that stated in the Local Government Code. And, it
is worthwhile to mention that petitioners have not denied that they are engaged in the retail
business, hence, the reclassification was right, proper and legal.
MACARIO LIM GAW, JR., PETITIONER, VS. COMMISSIONER OF INTERNAL
REVENUE, RESPONDENT.

[ G.R. No. 222837, July 23, 2018 ]

TIJAM, J.:

FACTS: Macrio Lim Gaw is the petitioner and the CIR is the respondent
On July 11, 2008, petitioner conveyed the 10 parcels of land to Eagle I Landholdings, Inc. (Eagle
I), via an Agreement to Sell.

In compliance with Revenue Memorandum Order No. 15-2003, petitioner requested the BIR-
RDO to compute the tax liabilities due on the sale of the 10 parcels of land to Eagle I.

In accordance with the One Time Transactions (ONETT) Computation sheets, petitioner paid
Capital Gains Tax amounting to P505,177,213.81 and Documentary Stamp Tax amounting to
P330,390.00.

On July 23, 2008, the BIR-RDO No. 52 issued the corresponding Certificates Authorizing
Registration and Tax Clearance Certificates.

Two years later, the CIR said petitioner is liable NOT for the 6% capital gains tax but for
the 32% regular income tax and 12% value added tax, on the theory that the properties petitioner
sold were ordinary assets and not capital assets. Further, respondent found petitioner to have
misdeclared his income, misclassified the properties and used multiple tax identification numbers
to avoid being assessed the correct amount of taxes.

CIR issued a Letter of Authority to commence investigation on petitioner's tax account.

The next day, CIR filed with the DOJ a Joint Complaint Affidavit for tax evasion against
petitioner.

The DOJ then filed two criminal informations for tax evasion against petitioner in the CTA. At
the time the Informations were filed, CIR had not yet issued a final decision on the deficiency
assessment against petitioner.

Halfway through the trial, the respondent issued a Final Decision on Disputed Assessment
(FDDA) against petitioner, assessing him of deficiency income tax and VAT covering taxable
years 2007 and 2008.
With respect to the deficiency assessment against petitioner for the year 2007, petitioner filed a
petition for review with the CTA, docketed as CTA Case No. 8502. The clerk of court of the
CTA assessed petitioner for filing fees which the latter promptly paid.

However, with respect to the deficiency assessment against petitioner for the year 2008, the same
involves the same tax liabilities being recovered in the pending criminal cases. Thus, petitioner
filed before the CTA a motion to clarify as to whether petitioner has to file a separate petition to
question the deficiency assessment for the year 2008.

On June 6, 2012, the CTA issued a Resolution granting petitioner's motion and held that the
recovery of the civil liabilities for the taxable year 2008 was deemed instituted with the
consolidated criminal cases.

However, as a caution, petitioner still filed a Petition for Review Ad Cautelam (with Motion for
Consolidation with CTA Criminal Case Nos. O-206 and O-207). Upon filing of the said petition,
the clerk of court of the CTA assessed petitioner with "zero filing fees."

ISSUES:

Is the civil action filed by petitioner to question the FDDA deemed instituted in the criminal case
for tax evasion?

is the Petition for Review Ad Cautelam filed by petitioner deemed instituted in the civil action
for recovery of taxes?

What tax is petitioner liable for? In other words, is petitioner liable for the assessed tax
deficiency?

Held :

FIRST ISSUE: Under the Revised Rules of the Court of Tax Appeals (RRCTA), the civil action
filed by the petitioner to question the FDDA is not deemed instituted with the criminal case for
tax evasion. Civil liability arising from a different source of obligation, such as when the
obligation is created by law, such civil liability is not deemed instituted with the criminal action.

It is well-settled that the taxpayer's obligation to pay the tax is an obligation that is created by
law and does not arise from the offense of tax evasion, as such, the same is not deemed
instituted in the criminal case.
SECOND ISSUE: The civil action for the recovery of civil liability for taxes and penalties is
deemed instituted with the criminal action, not the Petition for Review Ad Cautelam filed by
petitioner.
Under Sections 254 and 255 of the NIRC, the government can file a criminal case for tax evasion
against any taxpayer who willfully attempts in any manner to evade or defeat any tax imposed in
the tax code or the payment thereof. The crime of tax evasion is committed by the mere fact that
the taxpayer knowingly and willfully filed a fraudulent return with intent to evade and defeat a
part or all of the tax. It is therefore not required that a tax deficiency assessment must first be
issued for a criminal prosecution for tax evasion to prosper.

What is deemed instituted with the criminal action is only the government's recovery of the taxes
and penalties relative to the criminal case. The remedy of the taxpayer to appeal the disputed
assessment is not deemed instituted with the criminal case. To rule otherwise would be to render
nugatory the procedure in assailing the tax deficiency assessment.

FOURTH ISSUE: The Supreme Court cannot rule on the merits of the CTA case.

Rule 4, Section 3(a), paragraph 1 of the RRCTA provides that the CTA First Division has
exclusive appellate jurisdiction over decisions of the Commissioner of Internal Revenue on
disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in
relation thereto, or other matters arising under the NIRC or other laws administered by
the BIR. This means that the CTA exercises exclusive appellate jurisdiction to resolve
decisions of the commissioner of internal revenue.

The Supreme Court has no jurisdiction to review tax cases at the first instance without first
letting the CTA to study and resolve the same

To determine as to whether the transaction between petitioner and Eagle I is an isolated

transaction or whether the 10 parcels of land sold by petitioner is classified as capital assets
or ordinary assets should properly be resolved by the CTA. The Supreme Court is not a
trier of facts; therefore, the case should be remanded to the CTA Division.
 March 7, 2018

G.R. No. 205955

UNIVERSITY PHYSICIANS SERVICES INC. - MANAGEMENT, INC., Petitioner

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent

MARTIRES, J.:

FACTS:

PSI-MI had, as of 31 December 2005, an outstanding amount of ₱2,331, 102.00 in excess and
unutilized creditable withholding taxes.

For the subsequent taxable year ending 31 December 2006, the total sum of creditable taxes
withheld on the management fees of UPSI-MI was ₱2,927,834.00. Per its 2006 Annual Income
Tax Return (ITR), UPSI-MI's income tax due amounted to ₱99,105.00. UPSI-MI applied its
"Prior Year's Excess Credits" of ₱2,331, 102.00 as tax credit against such 2006 Income Tax due,
leaving a balance of ₱2,231,507.00 of still unutilized excess creditable tax. Meanwhile, the
creditable taxes withheld for the year 2006 (₱2,927,834.00) remained intact and unutilized. In
said 2006 Annual ITR, UPSI-MI chose the option "To be issued a tax credit certificate" with
respect to the amount ₱2,927,834.00, representing unutilized excess creditable taxes for the
taxable year ending 31 December 2006.

In the following year, UPSI-MI changed its taxable period from calendar year to fiscal year
ending on the last day of March. Thus, it filed on 14 November 2007 an Annual ITR covering
the short period from January 1 to March 31 of 2007. In the original 2007 Annual ITR, UPSI-MI
opted to carry over as "Prior Year's Excess Credits" the total amount of ₱5,159,341.00 which
included the 2006 unutilized creditable withholding tax of ₱2,927,834.00. UPSI-MI amended the
return by excluding the sum of ₱2,927,834.00 under the line "Prior Year's Excess Credits" which
amount is the subject of the refund claim.

The CTA En Banc ruled that UPSI-MI is barred by Section 76 of the NIRC from claiming a
refund of its excess tax credits for the taxable year 2006. The barring effect applies after UPSI-
MI carried over its excess tax credits to the succeeding quarters of 2007, even if such carry-over
was allegedly done inadvertently. The court emphasized that the prevailing law and
jurisprudence admit of no exception or qualification to the irrevocability rule

Issue:
 Whether UPSI-MI may still be entitled to the refund of its 2006 excess tax credits in the amount
of ₱2,927,834.00 when it thereafter filed its income tax return (for the short period ending 31
March 2007) indicating the option of carry-over.

Held: The aforementioned Section 76 of the NIRC provides:

SECTION 76. Final Adjustment Return. (P2)

In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly
income taxes paid, the excess amount shown on its final adjustment return may be carried over
and credited against the estimated quarterly income tax liabilities for the taxable quarters of the
succeeding taxable years. Once the option to carry-over and apply the excess quarterly income
tax against income tax due for the taxable quarters of the succeeding taxable years has been
made, such option shall be considered irrevocable for that taxable period and no application
for cash refund or issuance of a tax credit certificate shall be allowed therefor. (emphasis
supplied)

Under the cited law, there are two options available to the corporation whenever it overpays its
income tax for the taxable year: (1) to carry over and apply the overpayment as tax credit
against the estimated quarterly income tax liabilities of the succeeding taxable years (also known
as automatic tax credit) until fully utilized (meaning, there is no prescriptive period); and (2) to
apply for a cash refund or issuance of a tax credit certificate within the prescribed
period.11 Such overpayment of income tax is usually occasioned by the over-withholding of taxes
on the income payments to the corporate taxpayer.

However, the petitioner remains entitled to the benefit of carry-over and thus may apply the 2006
overpaid income tax as tax credit in succeeding taxable years until fully exhausted. This is
because, unlike the remedy of refund or tax credit certificate, the option of carry-over under
Section 76 is not subject to any prescriptive period.