Case 1: Lasallian Educationa Taxability of non-stock, non-profit educational institution

Foundation
ADE used for educational purposes not taxable.

Case 2: Sec of Finance vs CIR Act of importation into FEZs not taxable

Merchandise and goods brought to FEZs are considered as

goods that remains in a foreign territory, and not introduced to
PH territory, thus not subject to PH import and tax laws.

RR in unconsti because it illegally imposes taxes on FEZs

which are accorded by law a tax exempt status, and it
effectively amends a law which is a power only vested by
the Consti to the Congress.

Case 3: CIR vs St Lukes Medical Does not lose its tax exempt status but liable to a preferential
Center rate of 10% of its income from paying patients.
.
Claims to be a charitable institution but fails to meet the
"operated exclusively for charitable purposes" on its income
from its paying patients.

Test of charitability: non-stock corp, organized and operated

exclusively for charitable purposes, and no income inures to
benefit of any member or specific person.

Case 4: UP vs City Treasurer Ayala liable for RPT.

Ayala rented out a portion of UP's area which is non-taxable

being a government owner property

Generally, government owned property is not taxable.

However, it the beneficial use thereof has been given for
consideration or to a taxable person, the said property shall be
listed, assessed, and valued in the name of the beneficial
owner, which thus becomes taxable to real property.

Case 5: CIR vs AVON

Case 6: Film Development vs Colon Constitutional because the constitution did not removed the
Heritage municipal corporation's power to impose amusement taxes.

Municipal corporations are accorded with a local taxing power

subject to the guidelines and limitations provided by the
COngress.

Case 7: CEPALCO vs City of CDO Local government do not possess inherent power to tax.

Only the constitution provides for it to exercise local taxing

power. As such, LGUs may enact legislation that could help
create its sources of revenues consistent with the Constitution
and under the limitations that may be provided by the
Congress.

Being such, it may impose fees, and charges which must only
be for purposes of regulation of a business or activity.

If purpose is to raise revenue, that's tax. If purpose is only to

regulate, that's fee, although revenue is incidentally
generated.

Case 8: Agusan Wood vs DENR Forest charges are internal revenue taxes although the
collection and invoicing thereof is vested upon the Forest
Management Bureau of the DENR.

When responsibility of collection is transferred to another

 institution, the nature of tax remains to a tax and under BIR

Case 9: Mitsubishi vs CIR Mitsubishi entitled to refund by virtue of the exchange of notes
it executed with the government.

Case law provides that Excahnge of notes is in the nature of

executive agreement, which is thus binding on the state even
withhout the Senate concurrence. The exchange of notes in
this case provided for a tax assumption, rather than tax
exemption which is one that requires concurrence of the
majority vote of the Congress voting separately.

Given that this is tax assumption, the BIR may properly collect
the subject taxes from those who assumed the petitioner's
liability

Case 10: CIR vs. Standard The RTC acted without jurisdiction when it granted the petition
Insurance for declaratory relief and enjoining the collection of taxes.

Jurisprudence provides that taxes are the lifeblood of the

government which would not operate without its existence.
Hence, it must be collected promptly, and without uncessary
hindrance or delay.

Tax Code provides that no court shall have the authority to

grant an injunction or restrain the collection of taxes, except to
the opinion of the CTA that the collection thereof may
jeopardize the interest of the government and/or the taxpayer.

MODULE 2

CIR v. Covanta Energy Yes. CEPHI is entitled to the immunities and privileges of
the tax amnesty program upon full compliance with the
requirements of R.A. No. 9480.

The implementing rules and regulations of R.A. No. 9480, laid

down the procedure for availing of the tax amnesty which
provides that, Upon the taxpayer’s full compliance with
documentary submissions to the BIR and thereafter
paying the applicable amnesty tax, the taxpayer is
immediately entitled to the enjoyment of the immunities
and privileges of the tax amnesty program.

But when: (a) the taxpayer fails to file a SALN and the Tax
Amnesty Return; or (b) the net worth of the taxpayer in the
SALN as of December 31, 2005 is proven to be
understated to the extent of 30% or more, the taxpayer
shall cease to enjoy these immunities and privileges.
The underdeclaration of a taxpayer's net worth, as referred in
the second instance above, is proven through: (a) proceedings
initiated by parties other than the BIR or its agents, within one
(1) year from the filing of the SALN and the Tax Amnesty
Return; or (b) findings or admissions in congressional hearings
or proceedings in administrative agencies, and in courts.
Otherwise, the taxpayer's SALN is presumed true and
correct.

The tax amnesty law thus places the burden of overturning

this presumption to the parties who claim that there was an
underdeclaration of the taxpayer's net worth.

People v. Tuyay Tuyay may avail tax amnesty. The provision under the IRR of
the law where the disqualification of Tuyay to avail tax
amnesty is out of place for being void.

The provision in the IRR is a clear expansion of the law which

is strictly prohibited. It added another exception by
disqualifying those with pending criminal complaints before the
DOJ for tax evasion and other criminal offenses under Chapter

BIR v. Cagang
CIR v. Transfield
LRTA v. Quezon City, G.R. No.
221626
LRTA v. City of Pasay
II of Title X of the NIRC.
This is a clear deviation from the law as there is nothing in
Section 8(e) of RA 9480 to indicate that those with pending
criminal complaints with the DOJ are also excluded from
availing the tax amnesty.
Here, there is no dispute that Tuyay availed of the tax amnesty
under RA 9480 and complied with all the requirements thereof.
BIR is correct when it ruled that CEDCO is not qualified to
avail tax amnesty with respect to its withholding tax.
The law on tax amnesty provides that tax amnesty shall not
extend to Withholding agents with respect to their withholding
tax liabilities.
A tax amnesty, much like a tax exemption, is never favored or
presumed in law. The grant of a tax amnesty, similar to a tax
exemption, must be construed strictly against the taxpayer and
liberally in favor of the taxing authority.
THE LIGHT RAIL TRANSIT AUTHORITY (LRTA) IS NOT A
GOCC BECAUSE IT IS NEITHER A NON-STOCK
CORPORATION AS IT HAS NO MEMBERS, NOR A STOCK
CORPORATION AS IT DOES NOT HAVE CAPITAL STOCK
THAT IS DIVIDED INTO SHARES.— The LRTA has statutory
capital – but not capital stock or share capital.
THE LRTA IS A GOVERNMENT INSTRUMENTALITY
VESTED WITH CORPORATE POWERS AS IT PERFORMS
GOVERNMENTAL FUNCTIONS AND ENJOYS
OPERATIONAL AUTONOMY.
The LRTA performs governmental functions. It is primarily
responsible for the construction, operation, maintenance,
and/or lease of light rail transit systems in the country, giving
due regard to the reasonable requirements of the public
transportation system of the country. x x x [T]he LRTA’s
functions are less commercial than governmental, and
more for public use and public welfare than for
profit-oriented services. x x x The LRTA also enjoys
operational autonomy, as it exists by virtue of a Charter, and
its powers and functions are vested in and exercised by its
Board of Directors.
EXEMPT FROM REAL PROPERTY TAX, BUT THE
EXEMPTION SHALL NOT EXTEND TO TAXABLE PRIVATE
ENTITIES TO WHOM THE BENEFICIAL USE OF THE
GOVERNMENT INSTRUMENTALITY’S PROPERTIES HAS
BEEN VESTED.
The LRTA, being an instrumentality of the national
government, cannot be taxed by local governments.
LRTA is an agency of the government
An agency of the government refers to "any of the various
units of the Government, including a department, bureau,
office, instrumentality, or government-owned or controlled
corporation, or a local government or a distinct unit therein.
There is no dispute that LRTA is a unit of the government. It
performs public service, it is attached to the Department of
Transportation (DOTr), and its authorized capital is fully
subscribed by the Republic of the Philippines.
 THE LRTA IS A GOVERNMENT INSTRUMENTALITY
VESTED WITH CORPORATE POWERS AS IT PERFORMS
GOVERNMENTAL FUNCTIONS AND ENJOYS
OPERATIONAL AUTONOMY.

The LRTA performs governmental functions. It is primarily

responsible for the construction, operation, maintenance,
and/or lease of light rail transit systems in the country, giving
due regard to the reasonable requirements of the public
transportation system of the country. x x x [T]he LRTA’s
functions are less commercial than governmental, and
more for public use and public welfare than for
profit-oriented services

PHILIPPINE HEART CENTER vs. THE PROPERTIES OF THE PHC ARE PROPERTIES OF
QUEZON CITY PUBLIC DOMINION DEVOTED TO PUBLIC USE AND
WELFARE AND THEREFORE, EXEMPT FROM REAL
PROPERTY TAXES AND LEVY.

Given the mandate and purpose of the PHC, its properties are
thus properties of public dominion intended for public use or
service. As such, they are exempt from real property tax under
Section 234(a) of the Local Government Code.

REAL PROPERTY OWNED BY THE REPUBLIC IS EXEMPT

FROM REAL PROPERTY TAXES EXCEPT WHEN THE
BENEFICIAL USE THEREOF HAS BEEN GRANTED TO A
TAXABLE PERSON.

The Philippine Heart Center (PHC) [is a government

instrumentality with corporate powers.] Although not integrated
in the department framework, the PHC is under supervision of
the DOH and carries out government policies in pursuit of its
objectives in Section 4 of PD 673, x x x [T]he PHC’s
enumerated functions are less commercial than governmental,
and more for public use and public welfare than for
profit-oriented services.

Section 2(10) of Executive Order (EO) 292, the Administrative

Code of 1987, defines an “Instrumentality” as “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.” From this definition, the category of an
instrumentality with corporate powers was born.

MODULE 3

Department of Finance (DOF) v. The CIR is empowered to interpret our tax laws but not
Asia United Bank expand or alter them. Taxpayers have the right to choose
their accounting methods.

RR 4-2011 amounts to a tax legislation.

Administrative issuances must not override, supplant, or

modify the law; they must remain consistent with the law they
intend to carry out. To be valid, the following tests must be
satisfied:
(1) Completeness test - when it sets forth therein the policy to
be executed, carried out or implemented by the delegate; AND
(2) SuƯicient standard test – it lays down a suƯicient
standard when it provides adequate guidelines or limitations in
the law to map out the boundaries of the delegate's authority
and prevent the delegation from running riot. To be suƯicient,
the standard must specify the limits of the delegate's authority,
announce the legislative policy and identify the conditions
under which it is to be implemented.

BIR expanded or modified the law when it curtailed the income

 tax deductions of respondents and when it sanctioned the
method of accounting the respondents should use, without any
basis found in the Tax Code.

RR 4-2011 contravenes Sec. 43 of the Tax Code which

provides the general rule for taxpayer's accounting periods
and methods of accounting that taxpayers are allowed to
self-determine the most applicable accounting method. The
CIR may only prescribe an accounting method if any of the
following conditions exist: (a) no accounting method has been
employed by the taxpayer; or (b) while an accounting method
has been employed, it does not clearly reflect the income of
the taxpayer. Accounting methods for tax purposes "comprise
a set of rules for determining when and how to report income
and deductions."

Pilipinas Shell v. CIR (2021) The nature of excise taxes is that it is a property tax and
an indirect tax. A buyer, when shouldering the tax burden,
does not become the statutory taxpayer.

Petroleum products, once manufactured or imported, are

subject to excise tax. The one on whom the excise tax is
imposed is the manufacturer or importer depending on how
the petroleum products come into existence.

When the seller passes on the tax to his buyer, he, in

effect, shifts the tax burden, not the liability to pay it,
(seller still has to pay it) to the purchaser as part of the
price of goods sold or services rendered."

Meaning, even if the purchaser effectively pays the value of

the tax, the manufacturer [or] producer (in case of goods
manufactured or produced in the Philippines for domestic
sales or consumption or for any other disposition) or the owner
or importer (in case of imported goods) [is] still regarded as
the statutory [taxpayer] under the law.

To this end, the purchaser does not really pay the tax; rather,
he only pays the seller more for the goods because of the
latter's obligation to the government as the statutory taxpayer.

Despite being able to pass the burden of the tax to the

buyer as an inherent component of the total price of the
article, the onus to actually pay the excise tax and to remit
the returns incidental thereto remains with the statutory
taxpayer, who must correspondingly benefit from any tax
exemption.

Aces Philippines v. CIR (2022) Yes, the income is sourced from within PH, thus subject
to FWT.

The SC agreed with the CTA’s finding that the source of

income or the income-generating activity takes place
upon receipt of the telephone call which is routed by the
satellite signal to a gateway located within the Philippine
territory.

The SC identifies the gateway's receipt of the call as the

income source as it coincides with (i) the completion or
delivery of the service of Aces Bermuda, and (ii) the
inflow of economic benefits in favor of the latter.

The SC ruled that the situs of Aces Bermuda's income is

the Philippines because (i) the income-generating activity is
directly associated with the gateways located within the
Philippine territory, and (ii) engaging in the business of
providing satellite communication services in the Philippines is
a government-regulated industry that necessarily invokes
Philippine sovereignty and government intervention/protection.
 According to the SC, the fact that Aces Bermuda’s income
generation is dependent on the operations of facilities
within the Philippines contributes to the income’s
Philippine situs.

MODULE 4

IFC CAPITALIZATION (EQUITY) The petitioner is not exempt from payment of stock
FUND L.P. vs. CIR transaction tax because stock transaction tax is not an
income tax under Title II of the NIRC to which the exemption
under Section 32(B)(7)(a) pertains.

On the other hand, 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.

An income tax, on the other hand, is a national tax imposed on

the net or the gross income realized in a taxable year.

As held by the CTA En Banc, the exemption given under

Section 32(B)(7)(a) is applicable only to income tax under
Title II of the NIRC. Its application cannot be stretched to
Title V on Other Percentage Taxes.

PATRICIA ZAMORA RIINGEN vs.

WESTERN UNION FINANCIAL
SERVICES (HONG KONG) LIMITED,
PHILIPPINES REPRESENTATIVE
OFFICE

MODULE 5
NO ASSIGNED CASES

MODULE 6

CIR v. La Flor Dela Isabela, Inc.,

WITHHOLDING TAXES ARE INTERNAL REVENUE TAXES
COLLECTED BY WITHHOLDING AGENT FROM THE
INCOME EARNED BY THE TAXPAYER/ PAYEE, AND
REMITTED TO THE GOVERNMENT

The liability of the withholding agent is premised on its duty

to withhold the taxes paid to the payee. Should the
withholding agent fail to deduct the required amount from its
payment to the payee, it is liable for deficiency taxes and
applicable penalties.

Any person required to withhold, account for and remit any tax
imposed by this Code or who willfully fails to withhold such tax
in addition to other penalties provided for under this Chapter,
be liable upon conviction to a penalty equal to the total amount
of the tax not withheld, or not accounted for and remitted.

Based on the above-cited provisions, it is clear to see that the

“penalties” are amounts collected on top of the deficiency tax
assessments including deficiency withholding tax
assessments.

Waivers extending the prescriptive period of tax

assessments must be compliant with RMO No. 20-90 and
must indicate the nature and amount of the tax due, to wit:
1) Must indicate the specific tax involved and
2) must indicate the exact amount of the tax to be assessed or
collected.

As above-mentioned, these details are material as there

can be no true and valid agreement between the taxpayer
and the CIR absent these information.
PSE v. Secretary of Finance, G.R.
No. 213860
CIR v. Philippine National Bank,
G.R. No. 212699
CIR v. Philippine National Bank,
G.R. No. 180290
Winebrenner & Iñigo Insurance
Brokers, Inc. v. CIR, G.R. No.
206526
Withholding of taxes at source is a procedure for collecting
income tax that is sanctioned by Philippine tax laws.
There are two kinds of withholding taxes under Section 57:
(1) final withholding taxes under paragraph (a), and
(2) creditable withholding taxes under paragraph (b).
In withholding of final taxes, the amount withheld is already the
entire tax to be paid for the particular source of income.
The tax due therein is already paid, and the income recipient
is cleared of tax liability for that payment upon withholding
In withholding of creditable taxes, the amount withheld by the
payor can be credited against the income tax liability of the
income recipient for the taxable year.
The CTA correctly ruled that there is nothing under the
NIRC that requires the submission of the Quarterly ITRs
of the succeeding taxable year in a claim for refund. Even
the BIR's own regulations do not provide for such requirement.
Relatively, a taxpayer who seeks a refund of excess and
unutilized CWT must:
1) File the claim with the CIR within the two-year period from
the date of payment of the tax;
2) Show on the return that the income received was declared
as part of the gross income; and
3) Establish the fact of withholding by a copy of a statement
duly issued by the payor to the payee showing the amount
paid and the amount of tax withheld.
ONCE THE MINIMUM STATUTORY REQUIREMENTS HAVE
BEEN COMPLIED WITH, THE CLAIMANT SHOULD BE
CONSIDERED TO HAVE SUCCESSFULLY DISCHARGED
ITS BURDEN TO PROVE ITS ENTITLEMENT TO THE
REFUND.
IT IS NOT NECESSARY FOR THE PERSON WHO
EXECUTED AND PREPARED THE CERTIFICATE OF
CREDITABLE TAX WITHELD AT SOURCE TO BE
PRESENTED AND TO TESTIFY PERSONALLY TO PROVE
THE AUTHENTICITY OF THE CERTIFICATES.—
The certificate of creditable tax withheld at source is the
competent proof to establish the fact that taxes are
withheld. It is not necessary for the person who executed and
prepared the certificate of creditable tax withheld at source to
be presented and to testify personally to prove the authenticity
of the certificates. A certificate is complete in the relevant
details that would aid the courts in the evaluation of any claim
for refund of excess creditable withholding taxes.
PROOF OF ACTUAL REMITTANCE IS NOT A CONDITION
TO CLAIM FOR A REFUND OF UNUTILIZED TAX CREDITS.
BEING IN THE NATURE OF A CLAIM FOR EXEMPTION,
REFUND IS CONSTRUED IN STRICTISSIMI JURIS
AGAINST THE ENTITY CLAIMING THE REFUND AND IN
FAVOR OF THE TAXING POWER
a taxpayer who seeks a refund of excess and unutilized
CWT must:
1) File the claim with the CIR within the two-year period from
the date of payment of the tax;
2) Show on the return that the income received was declared
as part of the gross income; and
3) Establish the fact of withholding by a copy of a statement
duly issued by the payor to the payee showing the amount
paid and the amount of tax withheld.
 The irrevocability rule under Section 76 of the NIRC
means that once an option, either for refund or issuance
of tax credit certificate or carry-over of CWT has been
exercised, the same can no longer be modified for the
succeeding taxable years.

Rhombus Energy, Inc. v. CIR, G.R. TAX CREDIT OR REFUND; IRREVOCABILITY RULE; THE
No. 206362 CARRY-OVER OPTION, ONCE ACTUALLY OR
CONSTRUCTIVELY CHOSEN BY A CORPORATE
TAXPAYER, BECOMES IRREVOCABLE;

Section 76 of the NIRC of 1997 reads: “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 tax refund or issuance of a tax
credit certificate shall be allowed therefor.”

The phrase “for that taxable period” merely identifies the

excess income tax, subject of the option, by referring to the
taxable period when it was acquired by the taxpayer.”

In the case of Rhombus, therefore, its marking of the box "To

be refunded" in its 2005 annual ITR constituted its exercise of
the option, and from then onwards Rhombus became
precluded from carrying-over the excess creditable withholding
tax. The fact that the prior year's excess credits were reported
in its 2006 quarterly ITRs did not reverse the option to be
refunded exercised in its 2005 annual ITR. As such, the CTA
En Banc erred in applying the irrevocability rule against
Rhombus.

Irrevocability rule is not only exclusive to the carry-over

option but is also applicable to the option for tax refund.

CIR v. PBCom, G.R. No. 211348 The requisites for claiming a tax credit or a refund of CWT are
as follows:

1) The claim must be filed with the CIR within the

two (2)-year period from the date of payment of
the tax;

XXX

Two-year period in filing a claim for tax refund is crucial. The

two-year prescriptive period to claim a refund actually
commences to run, at the earliest, on the date of the filing
of the adjusted final tax return because this is where the
figures of the gross receipts and deductions have been
audited and adjusted, reflective of the results of the
operations of a business enterprise.

Thus, it is only when the Adjustment Return covering the

whole year is filed that the taxpayer would know whether a tax
is still due or a refund can be claimed based on the adjusted
and audited figures.

in determining the CWT amount to be credited, the same must

not only be supported by the required BIR Forms but it must
also correspond with the income included in the tax return of
the claimant, upon which the taxes were withheld.

BDO v. Republic, G.R. No. 198756

MODULE 7

Falcis III v. Civil Registrar General, Under the National Internal Revenue Code, as amended by
G.R. No. 217910 Republic Act No. 10963, the income taxes of married
individuals are generally computed separately based on
their respective total taxable income.

De Leon v. Manufacturers Life
Insurance Co G.R. No. 243733,
Domato-Togonon v. Commission
on Audit G.R. No. 224516
However, for any income that “cannot be definitely attributed to
or identified as income exclusively earned or realized by either
of the spouses,” Section 24 of the National Internal Revenue
Code, as amended, provides that the amount shall be
equally divided between the spouses for the computation
of their respective taxable incomes.
On the filing of income tax returns, the National Internal
Revenue Code, as amended, provides that married
individuals, regardless of citizenship or residence, “who do not
derive income purely from compensation,” shall file an income
tax return that includes the income of both spouses, except
“where it is impracticable for the spouses to file one return,” in
which case each spouse may file separate income tax returns.
As for estate tax, the National Internal Revenue Code, as
amended, provides that “the capital of the surviving spouse of
a decedent” is not deemed part of the gross estate.
Consequently, “the net share of the surviving spouse in the
conjugal partnership property” is “deducted from the net
estate of the decedent.
Likewise, when the decedent is a Filipino citizen or a resident
of the Philippines, the National Internal Revenue Code, as
amended, allows a deduction of the “current fair market
value of the decedent’s family home” up to P10 million
from the amount of the gross estate.
Further, “any amount received by the heirs from the
decedent’s employee as a consequence of the death of
the decedent-employee in accordance with Republic Act
No. 4917” is also deducted from the amount of the gross
estate.
As a rule, the seller must bear all the expenses of the
sale's execution and registration. The parties may decide
on a different agreement, but it must be stipulated in their
contract. Without a contrary stipulation, the general rule
shall apply.
Here, as the Commission on Audit found, the Deed of
Absolute Sale has no stipulation on the expenses for the
sale's execution and registration being shouldered by the
vendee. Accordingly, the general rule shall apply: The vendor
shall bear the cost of the sale's execution and registration.
For CGT, the law provides that it is a gain derived by the
seller, and is regarded as a tax on passive income. Thus,
it is therefore the seller's liability, not the buyer.
For DST, the law provides that Any of the parties thereto
shall be liable for the full amount of the tax due:
The parties may, however, agree on who shall shoulder the
amount due. Nonetheless, when one of them enjoys
exemption from paying documentary stamp taxes, the
liability falls on the other party who is not tax-exempt.
For Estate tax, the law provides that it is the executor or
administrator of an estate which has the primary obligation to
pay the estate tax.
Accordingly, it is the heirs of Plomillo, as sellers, who are duty
bound to pay the taxes, fees, or charges relating to the
transfer of real property.
Lourdes College v. Commissioner
of Internal Revenue G.R. No.
226210
Linaac v. Heirs of Mercado, G.R.
No. 215808
McDonald's Philippines Realty
Corp. v. Commissioner of Internal
Revenue, G.R. No. 247737
As a rule, tax exemptions are construed strictly against the
taxpayer and liberally in favor of the taxing authority. Hence a
claim of tax exemption must be clearly shown by
substantial evidence, and based on language in law too
plain to be mistaken.
The Court of Tax Appeals aptly held that: ''Without any
supporting documents. this Court cannot determine the
intent of petitioner as to the sum of money given to the
Congregation.
Similarly, with regard to the disputed fringe benefit tax
assessment, not only must petitioner meet the convenience or
furtherance of business test, it must also substantially prove
by evidence or records the actual amount paid for scholarship
grants. No specification has been made by petitioner as to
how much of the Faculty Development account pertained to
scholarship grants. Mere verbal assertions do not justify the
cancellation of the assessment.
Since tax assessments are presumed correct and valid, the
burden of proof is upon the complaining taxpayer to show
clearly That it is erroneous.[84]
It is settled that all presumptions are in favor of the
correctness of tax assessments. The good faith of the tax
assessors and the validity of their actions are thus presumed.
They will be presumed to have taken into consideration all the
facts to which their attention was called Hence. it is incumbent
upon the taxpayer to credibly show that the assessment was
erroneous in order to relieve himself from the liability it
imposes.
[A FALSE RETURN, FOR THE PURPOSE OF INVOKING
THE 10-YEAR PRESCRIPTIVE PERIOD, MUST BE
INTENTIONAL & DONE WITH THE INTENT TO EVADE TAX]
[THE LAW ON PRESCRIPTION SHOULD BE LIBERALLY
INTERPRETED IN FAVOR OF TAXPAYERS & EXCEPTIONS
TO THE STATUTE OF LIMITATIONS SHOULD BE STRICTLY
CONSTRUED] [THE BURDEN OF PROVING THE FILING OF
A FALSE RETURN WITH INTENT TO EVADE TAX RESTS
UPON THE BIR]
In ruling, the Court held that CTA En Banc was not justified in
applying the 10-year assessment period. The Court
emphasized that the 10-year period should not be applied
automatically and that the tax authorities have the burden of
proving the existence of falsity or fraud. The Court also
emphasized importance of due process in tax assessments,
including the communication of the basis for extending the
assessment period and the avoidance of contradictory
positions by the tax authorities.
The Court explained that for the 10-year assessment period to
apply, the tax authorities must prove that the taxpayer filed a
false return with intent to evade tax. Mere errors or
inaccuracies in a return, without intent to evade tax, do
not constitute a false return. The Court abandoned its
previous strict interpretation of a false return as any deviation
from the truth, whether intentional or not.
Since the Formal Letter Demand (FLD) and/or Final
Assessment Notice (FAN) was issued beyond the basic three
(3)-year period and the Respondent’s invocation of the
extraordinary 10-year assessment period is unavailing, the
Court held that the VAT assessments have prescribed. Thus, it
is no longer necessary to discuss the correctness of the VAT
assessment.