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Taxation law
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 Table of Contents
Sitel Philippines Corporation (formerly Clientlogic Phils., Inc.) vs. Commissioner of
Internal Revenue
G.R. No. 201326, February 08, 2017....................................................................................... 1

Marubeni Philippines Corporation vs. Commissioner of Internal Revenue

825 SCRA 401, June 05, 2017………………………………………….…………………… 3

Commissioner of Internal Revenue vs. Semirara Mining Corporation

G.R. No. 202922, June 19, 2017……………………………………………………….….… 4

Commissioner of Internal Revenue vs. Systems Technology Institute, Inc.

G.R. No. 220835, July 26, 2017 …………………………………………………………..… 5

Beaumont Holdings Corporation vs. Reyes

G.R. No. 207306, August 07, 2017 …………………………………..……………………… 6

Procter & Gamble Asia PTE LTD. vs.Commissioner of Internal Revenue

G.R. No. 205652, September 06, 2017 …………………………………………………….... 7

Commissioner of Internal Revenue vs. Hedcor Sibulan, Inc.

G.R. No. 209306, September 27,2017………………………………….….………………... 8

Mindanao I Geothermal Partnership vs. Commissioner of Internal Revenue

844 SCRA 386, November 08, 2017 ……………………………………………..………… 9

PAGCOR vs. Commissioner of Internal Revenue

846 SCRA 340, November 22, 2017 ………………………………………………………... 9

Confederation for Unity, Recognition and Advancement of Government Employees

(COURAGE) vs. CIR
G.R. No. 213446, July 03, 2018 ……………………………………………………………. 10

Melendres vs. Catambay

887 SCRA 245, November 28, 2018 …………………………………………………..…… 11
 Sitel Philippines Corporation (formerly Clientlogic Phils., Inc.) vs. Commissioner of
Internal Revenue (CIR)
817 SCRA 193, February 8, 2017

Problem: On March 28, 2006, Sitel filed an administrative claim for tax refund or issuance of
tax credit (TCC) with the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center
of the Department of Finance. The administrative claim is for its unutilized input VAT arising
from domestic purchases of goods and services attributable to its zero-rated transactions (i.e.,
call center services to offshore businesses) and purchases/importations of capital goods for the
1st, 2nd, 3rd, and 4th quarters of 2004 in the aggregate amount of P23, 093, 899. 59. On March
30, 2006, Sitel filed the judicial claim via a petition for review before the Court of Tax Appeals
(CTA) Division.

The CTA Division partially granted Sitel's claim for ₱11,155,276.591. However, it denied the
claim on the unused input VAT on zero-rated sales amounting to ₱7,170,276.02 grounded on
Sitel’s failure to prove that the recipients of the zero-rated services are actually doing business
outside the Philippines. Sitel filed a motion for partial reconsideration but it was denied.

Sitel then filed a Petition for Review with the CTA En Banc, claiming that it is entitled to the
amount denied by the CTA Division. The CTA En Banc reversed and set aside the ruling of
the CTA Division and denied Sitel's entire claim on the ground of prematurity. Sitel moved for
reconsideration, but the same was denied for lack of merit.

1) Is Sitel entitled to a refund or tax credit of its unutilized input VAT from domestic
purchases of goods and services attributable to zero-rated transactions?

2) Was the refund claim filed prematurely?

Suggested Answer:

1) No, Sitel is not entitled to a refund. An essential condition to qualify for zero-rating
under Section 112(A) of the NIRC is that the service recipient must be doing business outside
the Philippines (CIR v. Burmeister and Wain Scandinavian Contractor Mindanao, Inc.). A
taxpayer claiming a VAT refund or credit under Section 108(B) of the NIRC has the burden to
prove not only that the recipient of the service is a foreign corporation but also that said
corporation is doing business outside the Philippines (Accenture, Inc. v. CIR).

1 Amount of Input VAT Claim ₱ 23,093,899.59

Less: Input VAT Claim on Zero-Rated Sales 7,170,276.02
Input VAT Claim on Capital Goods Purchases 15,923,623.57
Less: Not properly substantiated Input VAT Claim on Capital Goods
Purchased per ICPA Report (₱15,932,623.57 less ₱13,824,129.14) 2,099,494.43
Per this Court’s further verification 2,668,852.55
Refundable Input VAT on Capital Goods Purchases ₱ 11,155,276.59

1
In a claim for refund or tax credit, the applicant must prove not only entitlement to the grant
of the claim under substantive law, he or she must also satisfy all documentary and evidentiary
requirements and compliance with the invoicing and accounting requirements mandated by the
Tax Code as well as revenue regulations implementing it. Tax refunds, like tax exemptions,
are construed strictly against the taxpayer.

In this case, Sitel fell short of proving that the recipients of its call center services were foreign
corporations doing business outside the Philippines. While Sitel's documentary evidence,
which includes Certifications issued by the Securities and Exchange Commission and
Agreements between Sitel and its foreign clients, may have established that Sitel rendered
services to foreign corporations in 2004 and received payments therefor through inward
remittances, said documents failed to specifically prove that such foreign clients were
doing business outside the Philippines or have a continuity of commercial dealings
outside the Philippines.

Thus, the Court found no reason to reverse the ruling of the CTA Division, which denied the
refund of ₱7,170,276.02, representing Sitel's input VAT attributable to zero-rated sales.

2) No, the claim was not prematurely filed. Sitel filed its administrative and judicial claim
within the excepted period, which is after the issuance of BIR Ruling No. DA-489-03 (i.e.
December 10, 2003), but before the date when Aichi was promulgated (i.e. October 6, 2010).
Thus, even though Sitel filed its judicial claim prematurely, i.e., without waiting for the
expiration of the 1202-day mandatory period, the CTA may still take cognizance of the case
because the claim was filed within the excepted period as discussed in San Roque (excerpt
found below). In other words, Sitel's judicial claim was deemed timely filed and should not
have been dismissed by the CTA En Banc.

In Visayas Geothermal Power Company v. CIR, the Court summarized the pronouncements in
San Roque with regard to claims for refund or tax credit of unutilized creditable input VAT, to
wit:

1. When to file an administrative claim with the CIR:

a. General rule: Within 2 years from the close of the taxable quarter when the sales
were made (Section 112(A) and Mirant)

b. Exception: Within 2 years from the date of payment of the output VAT, if the
administrative claim was filed from June 8, 2007 (promulgation of Atlas) to
September 12, 2008 (promulgation of Mirant).

2. When to file a judicial claim with the CTA:

a. General rule — Section 112(D); not Section 229

i. Within 30 days from the full or partial denial of the administrative claim
by the CIR; or

2 Now ninety (90) days under TRAIN Law, RR No. 13-2018, RR No. 26-2018

2
 ii. Within 30 days from the expiration of the 1203-day period provided to the
CIR to decide on the claim. This is mandatory and jurisdictional beginning
January 1, 1998 (effectivity of 1997 NIRC).

b. Exception — BIR Ruling No. DA-489-03

The judicial claim need not await the expiration of the 1204-day period if such
was filed from December 10, 2003 (issuance of BIR Ruling No. DA-489-03) to
October 6, 2010 (promulgation of Aichi)."

Note: the TRAIN amended the 120+30 day rule in judicial claim for refund/tax credit of excess
input VAT from zero-rated transaction. Under Sec. 112, as amended, the CIR “shall” within
90 days, decide either to grant or deny the refund. Within 30 days from receipt of the decision
denying the claim, the taxpayer may appeal to the CTA. Thus, the new rule is 90+30 days.
Further, the 90-day period for the CIR to decide is mandatory, as the law used the term “shall.”
For the purposes of the bar exam, apply the 90+30 day rule.

Marubeni Philippines Corporation (Marubeni) vs. CIR

825 SCRA 401, June 5, 2017

Problem: Marubeni is a domestic corporation registered with the BIR as a VAT taxpayer. On
April 25, 2000, Marubeni filed its 1st Quarterly VAT Return for CY 2000. On March 27, 2002,
Marubeni filed an administrative claim with the BIR for a refund and/or the issuance of a TCC,
which it later amended on April 25, 2002, reducing its claim to ₱3,887,419.31. On the same
date, Marubeni filed the judicial claim before the CTA via a petition for review.

The CTA Second Division ruled that following CIR v. Mirant Pagbilao Corporation (Mirant),
Marubeni timely filed its administrative claim on March 27, 2002, which was within the two-
year period from the close of the 1st quarter of CY 2000, but the judicial claim filed on April
25, 2002 (or the same day Marubeni amended its administrative claim) was late because it
should have also been filed within the two-year period from the close of the 1st quarter of CY
2000. As a result, Marubeni moved for reconsideration. As a result, Marubeni moved for
reconsideration, contending that the two-year period for filing of claims for refund or issuance
of TCC must be counted from the date of filing of the quarterly VAT, as ruled in Atlas.
However, the motion was denied.

The matter was elevated to the CTA En Banc. Although the CTA En Banc agreed with the
CTA Second Division that Marubeni timely filed its administrative claim, it ruled that the filing
of the judicial claim was premature following Section 112 (D) of the Tax Code and the Court’s
ruling in CIR v. Aichi Forging Company of Asia, Inc. where it was held that the 1205+30 day
period is not only mandatory but also jurisdictional.

Does Aichi apply to Marubeni's claim?

3 Now ninety (90) days (supra)

4 Now ninety (90) days (supra)
5 Now ninety (90) days (supra)

3
Suggested Answer: Yes, the doctrine in Aichi pronouncing the mandatory and jurisdictional
periods of 1206+30 days applies.

In Atlas, the Court held that the two-year period for filing claims for refund and/or issuance of
TCC for input VAT must be counted from the date of filing of the quarterly VAT return. On
the other hand, in Aichi, the Court ruled that compliance with the 1207+30 day periods in
Section 112 (C) of the 1997 Tax Code was mandatory and jurisdictional.

The Court ruled that a taxpayer cannot claim that Atlas, which was only promulgated on June
8, 2007 (and reversed by Mirant on September 12, 2008), is controlling on the timeliness of a
judicial claim that was filed prior to June 8, 2007. According to the Court, the 1997 Tax
Code, which took effect on January 1, 1998, applies to the taxpayer.

Section 112(C) of the Tax Code basically states that a taxpayer can file his administrative claim
for refund or credit anytime within the two-year prescriptive period. If he files his claim on the
last day of the two-year prescriptive period, his claim is still filed on time. The CIR will have
1208 days from such filing to decide the claim. If the CIR decides the claim on the 120th9 day
or does not decide it on that day, the taxpayer still has 30 days to file his judicial claim with
the CTA.

Marubeni, therefore, failed to comply with the mandatory and jurisdictional requirement of
Section 112(C) when it filed its petition for review with the CTA on April 25, 2002, or just 29
days after filing its administrative claim before the BIR on March 27, 2002.

Commissioner of Internal Revenue vs. Semirara Mining Corporation

G.R. No. 202922, June 19, 2017

Problem: Semirara Mining Corporation (SMC) is a domestic corporation registered with the
BIR as a non-VAT taxpayer engaged in the coal mining business under P.D. No. 972 or the
Coal Development Act of 1976. SMC has been selling coal to National Power Corporation
(NPC) for years without paying VAT under the exemption granted by Section 16 of P.D. No.
972.

R.A. No. 9337 was enacted, amending provisions of the Tax Code. NPC started to deduct a
5% final withholding VAT against SMC, believing that SMC is no longer exempted. SMC
requested a BIR ruling that it is still exempted from tax, which was granted. SMC also filed a
claim for a refund of the tax withheld by NPC. Due to the CIR’s inaction, SMC filed a petition
for review with CTA. CTA granted the refund claim. CIR moved from reconsideration, but it
was denied. CIR argued that the enactment of RA 9337 had amended the provision that gives
tax exemption to SMC. Further, SMC failed to submit complete documents to support its claim.

1) Is SMC exempt from VAT?

6 Now ninety (90) days (supra)

7 Now ninety (90) days (supra)
8 Now ninety (90) days (supra)
9 Now ninety (90) days (supra)

4
2) Is SMC entitled to a tax refund despite failing to submit complete documents?

Suggested Answer:

1) Yes, SMC is exempt from VAT. SMC's claim for VAT exemption is based on the tax
incentives granted to operators of Coal Operating Contracts (COCs) executed under Section
16 of P.D. No. 972, not on the paragraph deleted by R.A. No. 9337 from the list of VAT-
exempt transactions under Section 109 of the NIRC of 1997, as amended. The Court held that
the tax exemption under Section 16 of P.D. No. 972 was not revoked, withdrawn, or repealed
with the enactment of R.A. No. 9337.

A special law cannot be repealed or modified by a subsequently enacted general law in

the absence of any express provision to that effect. Had Congress intended to withdraw or
revoke the tax exemptions under P.D. No. 972, it would have explicitly mentioned Section 16
of P.D. No. 972.

Thus, SMC is exempt from the payment of VAT on the sale of coal produced under its COC
because Section 16 of P.D. No. 972, a special law, grants SMC exemption from all national
taxes except income tax. Accordingly, SMC is entitled to claim a refund of the 5% final VAT.

2) Yes, SMC is entitled to a refund. RMO No. 53-98 is addressed to internal revenue
officers and employees, for purposes of equity and uniformity, to guide them as to what
documents they may require taxpayers to present upon audit of their tax liabilities. Nothing
stated in the issuance would show that it was intended to be a benchmark in determining
whether the documents submitted by a taxpayer are actually complete to support a claim for
tax credit or refund of excess unutilized excess VAT. Thus, non-submission of the documents
enumerated under RMO No. 53-98 at the administrative level is not fatal to the taxpayer's
judicial claim for VAT refund.

Commissioner of Internal Revenue vs. Systems Technology Institute, Inc.

G.R. No. 220835, July 26, 2017

Problem: On May 30, 2006, STI's Amiel C. Sangalang signed a “Waiver of the Defense of
Prescription under the Statute of Limitations”, with the proviso that the assessment and
collection of taxes of the fiscal year 2003 shall come "no later than December 31, 2006.
Another waiver was executed, extending the period to assess and collect to March 31, 2007.
Both waivers were signed by Sangalang and accepted by Cembrano, Large Taxpayers District
Officer. A third waiver was executed by the same signatories extending further the period to
June 30, 2007.

The CTA Division found the waivers executed by STI defective for failing to strictly comply
with the requirements provided by Revenue Memorandum Order (RMO) No. 20-90 and
Revenue Delegation Authority Order (RDAO) No. 05-01. Consequently, the periods for the
CIR to assess or collect internal revenue taxes were never extended, and the subject assessment
against STI, which the CIR issued beyond the three-year prescriptive period, was already

5
barred by prescription.

Is the right of the government to assess or collect the alleged deficiency taxes already
barred by prescription?

Suggested Answer: Yes, the right of the government to assess or collect is already barred by
prescription.

Compliance with the provisions of RMO 20-90 and RDAO 05-01 are mandatory and must be
strictly followed. In this case, the following deviations rendered the waiver invalid: a) It
became unlimited in time; b) It was signed by one other than the CIR or the latter’s duly
authorized representative; c) No date of acceptance; d) The taxpayer has no copy of the waiver;
e) No notarized written authority of the taxpayer’s representative to sign the waiver on its
behalf; and f) Failure to specify the kind and amount of the tax due. The waivers of Statute of
Limitations, being defective and invalid, did not extend the CIR's period to issue the subject
assessments. The Doctrine of Estoppel cannot be applied considering that there is a
detailed procedure for the proper execution of the waiver which the BIR must strictly
follow.

The Tax Code limits the period to assess and collect internal revenue taxes to three (3) years
counted from the last day prescribed by law for the filing of the return or from the day the
return was filed, whichever comes later. Thus, assessments issued after the expiration of such
period are no longer valid and effective.

The CTA Division found that the last day for the CIR to issue an assessment on STI's income
tax for fiscal year ending March 31, 2003 was on August 15, 2006; while the latest date for
the CIR to assess STI of EWT for the fiscal year ending March 31, 2003 was on April 17,
2006; and the latest date for the CIR to assess STI of deficiency VAT for the four quarters of
the same fiscal year was on May 25, 2006. Clearly, on the basis of these dates, the final
assessment notice dated June 16, 2007, assessing STI for deficiency income tax, VAT and
EWT for fiscal year 2003, which STI received on June 28, 2007, was issued beyond the three-
year prescriptive period.

Beaumont Holdings Corporation vs. Reyes

834 SCRA 477, August 7, 2017

Problem: BHC is the registered owner of two lots located in Fort Bonifacio, Taguig City. The
City Government of Taguig sent two letters to BHC on November 6, 2007, requiring the
settlement of real property taxes (RPT) on the two lots for the years 2005, 2006, and the 4th
quarter of 2007 within the same month. BHC paid the taxes on November 29, 2007, for which
an Official Receipt was issued.

However, the two lots were subjected to public auction due to delinquency taxes, even before
letters were sent to BHC. Thus, BHC filed a Complaint alleging that the public sale of the two
lots was invalid since, first, it had paid and settled the required RPT within the period
prescribed, and second, the subject lots were not tax delinquent.

6
Respondent City Officials and the Highest Bidder, however, seek the dismissal of the
Complaint for lack of merit. They alleged that BHC failed to comply with Section 267 of the
LGC requiring the deposit of the amount for which the property was sold plus interest before
a tax sale is assailed and that the two lots were validly sold at auction because of BHC's failure
to settle the delinquent RPT due thereon despite several reminders and to redeem them by
paying the correct amount.

Is Section 267 of the LGC applicable to BHC, thus requiring it to deposit the amount of
property plus interest before the complaint on tax sale is given due course?

Suggested Answer: No, Section 267 of the LGC is not applicable.

The deposit, equivalent to the value for which the real property was sold plus interest, is
essentially meant to reimburse the purchaser of the amount he had paid at the auction sale
should the court declare the sale invalid. The deposit precondition is an ingenious legal device
to guarantee the satisfaction of the tax delinquency. On the assumption that the subject two
lots are not tax delinquent, then there is no need for the deposit required under Section 267
because the realty taxes due have already been paid. Here, the RPT due on the subject two lots
appear to have been paid - with the Official Receipts issued having been appended to the
Complaint. With the presentation of the Official Receipts showing payment of the unpaid
realty taxes within the period prescribed, the delinquent status of the subject two lots is negated.

Procter & Gamble Asia PTE LTD. vs. Commissioner of Internal Revenue
G.R. No. 205652, September 6, 2017

Problem: Procter & Gamble Asia PTE LTD (P&G) seeks the reversal of the CTA decision
dismissing its claim for refund of unutilized input VAT attributable to its zero-rated sales
covering the 1st and 2nd quarters of 2005 for being prematurely filed.

The CTA Division, citing Aichi, ruled that P&G failed to observe the 12010-day period granted
to the CIR which is both mandatory and jurisdictional. Its judicial claims were filed on March
28, 2007 and June 8, 2007, or only six (6) days and thirty-seven (37) days, respectively, after
its administrative claim with the BIR was lodged.

Should the Aichi doctrine be retroactively applied in the petition?

Suggested Answer: No, the Aichi doctrine should not be applied in this case.

While the Court recognized the mandatory and jurisdictional nature of the 120 11 +30 day
periods, it recognized BIR Ruling No. DA-489-03 (December 10, 2003) as an exception, issued
before the promulgation of Aichi (October 6, 2010), where the BIR expressly allowed the filing
of judicial claims with the CTA even before the lapse of the 120-day period. The Court held
that BIR Ruling No. DA-489-03 furnished a valid basis to hold the CIR in estoppel because

10 Now ninety (90) days (supra)

11 Now ninety (90) days (supra)

7
the CIR had misled taxpayers into filing judicial claims with the CTA even before the lapse of
the 120-day period.

In this case, P&G filed its judicial claims for refund on March 28, 2007 and June 8, 2007,
respectively, or after the issuance of BIR Ruling No. DA-48903, but before the date when
Aichi was promulgated, and hence, was filed within the excepted period. Thus, P&G's judicial
claims were deemed timely filed.

Commissioner of Internal Revenue vs. Hedcor Sibulan, Inc.

G.R. No. 209306, September 27, 2017

Problem: The CIR filed for a petition for review on certiorari with the Court of Appeals (CA)
decision which affirmed the CTA Third Division dismissal of Hedcor Sibulan, Inc.'s (HSI)
judicial claim on the ground of prematurity. HSI did not have any output VAT liability against
which its unutilized input VAT could be applied or credited. HSI filed its judicial claim on
March 30, 2010 - one day after filing its administrative claim.

1) Does the Aichi doctrine apply to the petition?

2) Is a Deputy Commissioner authorized to interpret tax matters?

Suggested Answer:

1) No, the Aichi doctrine does not apply. The rule is that during the period from December
10, 2003 (when BIR Ruling No. DA-489-03 was issued) to October 6, 2010 (when the Aichi
case was promulgated), taxpayers-claimants need not observe the 12012-day period before it
could file a judicial claim for refund of excess input VAT before the CTA. The CTA En Banc
was therefore correct in setting aside its earlier Decision dismissing HSI's claim on the ground
of prematurity, and remanding the case to the CTA Division for a complete determination of
HSI's entitlement to the claimed VAT refund.

2) Yes, a Deputy Commissioner is authorized to interpret tax matters. The Court upheld
in San Roque the authority of a Deputy Commissioner to issue interpretative rules. The Court
held that the Tax Code does not prohibit the delegation of the CIR's power to interpret tax-
related laws and issuances. The CIR may delegate the powers vested in him under the pertinent
provisions of the NIRC to any or such subordinate officials with the rank equivalent to a
division chief or higher, subject to such limitations and restrictions as may be imposed under
rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of
the CIR.

12 Now ninety (90) days (supra)

8
 Mindanao I Geothermal Partnership vs. Commissioner of Internal Revenue
844 SCRA 386, November 08, 2017

Problem: Mindanao I Geothermal Partnership (M1) filed a letter request for the issuance of
TCC with the BIR Large Taxpayers Service arising from its excess and unutilized creditable
input VAT accumulated from the first to fourth quarters of the taxable year 2004. However,
said application for issuance of TCC remains unacted upon by the CIR despite the lapse of the
12013-day period. Hence, M1 filed a Petition for Review with the CTA.

The CTA First Division granted M1's claim for unutilized input VAT for the third and fourth
quarters of 2004, but denied M1's claim corresponding to the second quarter of the same year
for having been filed out of time. CIR filed for a Petition for Review with the CTA En Banc
arguing that M1 failed to comply with Section 112(C) since M1 elevated its judicial claim
beyond the 30-day period following the expiration of the CIR's period to act. The CTA En
Banc granted CIR's Petition for Review.

Did the CTA En Banc err when it dismissed M1's judicial claim for being filed out of
time?

Suggested Answer: No, the CTA En Banc was correct to deny the judicial claim for being
filed out of time.

A judicial claim must be filed within 30 days from the receipt of the CIR's decision denying
the administrative claim or from the expiration of the 12014-day period without any action from
the CIR. The Court clarified that the two (2)-year period only applies to administrative claims
and does not extend to judicial claims. Anent judicial claims, the Court held that the 12015-day
and 30-day periods under Section 112(C) are mandatory and jurisdictional, such that judicial
claims filed before the denial of the taxpayers' administrative claim or the lapse of the 12016-
day period in case of the CIR's inaction would be deemed premature, while judicial claims
filed beyond the 30-day period after such denial or lapse would be deemed filed out of time.

PAGCOR vs. Commissioner of Internal Revenue

846 SCRA 340, November 22, 2017

Problem: Section 13(2) of P.D. No. 1869 provides that "no tax of any kind or form, income
or otherwise, as well as fees, charges or levies of whatever nature, whether National or Local,
shall be assessed and collected under this Franchise from PAGCOR; nor shall any form of tax
or charge attach in any way to the earnings of PAGCOR, except a Franchise Tax of five (5%)
percent of the gross revenue or earnings derived by PAGCOR from its operation under this
Franchise.” (Gaming Income)

Section 14(5) also states that PAGCOR "is authorized to operate such necessary and related

13 Now ninety (90) days (supra)

14 Now ninety (90) days (supra)
15 Now ninety (90) days (supra)
16 Now ninety (90) days (supra)

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services, shows and entertainment;" and "any income that may be realized from these related
services shall not be included as part of the income of PAGCOR for the purpose of applying
the franchise tax, but the same shall be considered as a separate income of the PAGCOR and
shall be subject to income tax." (Income from the Operation of Related Services)

On January 1, 1998, R.A. No. 8424 or Tax Code of 1997 took effect wherein PAGCOR was
included among the GOCCs exempt from the payment of income tax. Subsequently, on July
1, 2005, R.A. No. 9337 amended Section 27(C) of the Tax Code by removing PAGCOR from
the list of the GOCCs exempt from payment of income tax.

Thereafter, PAGCOR received assessment notices issued by the Head of Revenue Executive
Assistant (HREA) of the Large Taxpayers Service and CIR from 2008 to 2009 regarding their
deficiency taxes for taxable years 2005 and 2006.

Is PAGCOR's tax privilege of paying 5% franchise tax in lieu of all other taxes with
respect to its gaming income repealed by Section 1 (C) of R.A. 9337?

Suggested Answer: No, PAGCOR’s tax privilege was not repealed.

The repealing clause of R.A. 9337 never mentioned PAGCOR's Charter as one of the laws
being repealed. Therefore, when PAGCOR's franchise was extended on June 20, 2007 without
revoking or withdrawing its tax exemption for its gaming income, it effectively reinstated and
reiterated all of PAGCOR's rights, privileges, and authority granted under its Charter. The tax
exemption withdrawn by R.A. 9337 (by repealing Section 1 of RA 8424) pertains only to
PAGCOR's income from the operation of related services. Under P.D. 1869, as amended,
PAGCOR is subject to income tax only with respect to its operation of related services.

Confederation for Unity, Recognition & Advancement of Government Employees

(COURAGE) vs. CIR
G.R. No. 213446, July 3, 2018

Problem: The CIR issued RMO No. 23-2014 in furtherance of the "Reiteration of the
Responsibilities of the Officials and Employees of Government Offices for the Withholding of
Applicable Taxes on Certain Income Payments and the Imposition of Penalties for Non-
Compliance Thereof," to clarify and consolidate the responsibilities of the public sector to
withhold taxes on its transactions as a customer and as an employer under the Tax Code. The
Confederation for Unity, Recognition & Advancement of Government Employees
(COURAGE) and other intervenors-organizations assailed and sought to nullify the order on
the following grounds: (i) RMO is ultra vires for subjecting to withholding taxes non-taxable
allowances, bonuses, and benefits received by government employees; (ii) It violates the equal
protection clause as it discriminates against government employees; (iii) It violates fiscal
autonomy enjoyed by government agencies; (iv) Its implementation results in a diminution of
benefits of government employees, a violation of Article 100 of the Labor Code; (v)
Respondents may be compelled through a writ of mandamus to increase the tax-exempt ceiling
for 13th-month pay and other benefits;

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1) Does the CIR have the power to issue the assailed RMO?

2) Was the constitutional guarantee of equal protection violated by the RMO?

Suggested Answer:

1) Yes, the CIR has the power to issue the assailed RMO. Section 4 of the Tax Code, as
amended, grants the CIR the power to issue rulings or opinions interpreting the provisions of
the Tax Code or other tax laws. However, the CIR cannot, in the exercise of such power, issue
administrative rulings or circulars inconsistent with the law sought to be applied. Indeed,
administrative issuances must not override, supplant or modify the law but must remain
consistent with the law they intend to carry out.

The RMO does not charge any new or additional tax. On the contrary, it merely mirrors the
relevant provisions of the Tax Code, as amended, and its implementing rules on the
withholding tax on compensation income. The assailed Sections simply reinforce the rule that
every form of compensation for personal services received by all employees arising from an
employer-employee relationship is deemed subject to income tax and, consequently, to
withholding tax unless specifically exempted or excluded by the Tax Code.

2) No, the constitutional guarantee of equal protection is not violated by an RMO that was
issued to simply reinforce existing taxes applicable to both the private and public sectors. The
withholding tax system embraces not only private individuals, organizations, and corporations
but also covers organizations exempt from income tax, including the Government of the
Philippines, its agencies, instrumentalities, and political subdivisions.

Melendres vs. Catambay

887 SCRA 245, November 28, 2018

Problem: The instant case pertains to conflicting claims of ownership of a property located in
Tanay, Rizal as a consequence of an error made in the surveying of the land owned by the
predecessors of Petitioner Narciso Melendres. The size of the original lot owned by petitioner
was greatly reduced by the survey and a portion of it was issued to the Respondents. Melendres
proffered, as one of his evidence of ownership, tax declaration and receipts paid by his
predecessor-in-interest spanning for several years, earliest dated back to 1940s issued in favor
of petitioner Narciso's grandmother, Maria Paz Catolos. On the contrary, the earliest tax
declarations produced by the respondent are TD No. 01-271765 registered on April 30, 1985
and TD No. 01-346066 registered on September 29, 1988.

Is a tax declaration conclusive evidence of ownership?

Suggested Answer: While tax declarations are not per se conclusive evidence of ownership,
they cannot simply be ignored especially where, as here, since the 1940s, tax declarations had
already been registered in the name of petitioners' predecessors-in-interest. While it is true that
tax receipts and tax declarations are not incontrovertible evidence of ownership, they constitute

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credible proof of a claim of title over the property. Coupled with actual possession of the
property, tax declarations become strong evidence of ownership.

The voluntary declaration of a piece of property for taxation purposes manifests not only one's
sincere and honest desire to obtain title to the property and announces his adverse claim against
the State and all other interested parties, but also the intention to contribute needed revenues
to the Government. Such an act strengthens one's bona fide claim of acquisition of ownership.

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 College of Law, New Era University
Professional Schools Building, No. 9 CentralAve., New Era, Quezon City, Philippines, 1107

The fear of the Lord is the beginning of wisdom, and knowledge of the Holy One is
understanding.
(Proverbs 9:10)