Mercury Drug Corp.

v CIR FACTS:
Mercury Drug granted 20% sales discount to qualified senior citizens on their purchases of medicines. They subsequently filed a refund for taxable years 1993 and 1994 given that the then prevailing rule allowed that the sales discounts be claimed as tax credits. BIR claimed that the credit should only be based only on the COST OF DISCOUNT alone.

ISSUE:
Is the claim for tax credit to be based on the full amount of the 20% senior citizen discount or the cost of the item sold? acquisition

HELD:
The tax credit should be equivalent to the actual 20% sales discount granted to the senior citizens. The previous ruling of the CTA that the tax credit is based only on the cost of the discount which was interpreted to cover only direct acquisition cost, excluding administrative and other incremental costs, was struck down by the Court.

N.B. The March 3, 2008 case of M.E. Holdings Corporation vs. CIR & CTA clarified that the rule will be -- (i) prior to March 21, 2004 (effectivity of Expanded Senior Citizens Act) the discounts are treated as tax credit; (ii) after March 21, 2004 the same are treated as deductions.

PRUDENTIAL BANK, vs. CIR Facts: On July 23, 1999, Prudential bank received from the CIR a Final Assessment Notice and a Demand Letter for deficiency Documentary Stamp Tax (DST) for the taxable year 1995 on its Repurchase Agreement with the BSP, Purchase of Treasury Bills from the BSP, and on its Savings Account Plus [SAP] product, in the amount of P18,982,734.38. Prudential Bank protested the assessment on the ground that the documents subject matter of the assessment are not subject to DST. CIR denied the protest, thus a Petition for Review before the CTA was filed. The First Division of the CTA affirmed the assessment for deficiency DST insofar as the SAP is concerned, but cancelled and set aside the assessment on petitioner's repurchase agreement and purchase of treasury bills with the BSP. Prudential moved for partial reconsideration but the same was denied thus the appeal to the CTA En Banc. The CTA En Banc denied the appeal for lack of merit. It affirmed the ruling of its First Division that

petitioner's SAP is a certificate of deposit bearing interest subject to DST under Section 180 of the old NIRC, as amended by RA 7660. Prudential sought reconsideration but later moved to withdraw the same in view of its availment of the Improved Voluntary Assessment Program (IVAP) pursuant to Revenue Regulations and Revenue Memo Order. On October 30, 2007, the CTA En Banc rendered a Resolution denying petitioner's motion to withdraw for non-compliance with the requirements for abatement. In the same Resolution, the CTA En Banc denied petitioner's motion for reconsideration for lack of merit. Issue: WON the Savings account Plus is not subject to Documentary Stamp Tax Ruling: Prudential Bank's Savings Account Plus is subject to Documentary Stamp Tax. DST is imposed on certificates of deposit bearing interest pursuant to Section 180 of the old NIRC, as amended, to wit:Sec. 180.Stamp tax on all loan agreements, promissory notes, bills of exchange, drafts, instruments and securities issued by the government or any of its instrumentalities, certificates of deposit bearing interest and others not payable on sight or demand.

On all loan agreements signed abroad wherein the object of the contract is located or used in the Philippines; bills of exchange (between points within the Philippines), drafts, instruments and securities issued by the Government or any of its instrumentalities or certificates of deposits drawing interest, or orders for the payment of any sum of money otherwise than at the sight or on demand, or on all promissory notes, whether negotiable or non-negotiable, except bank notes issued for circulation, and on each renewal of any such note, there shall be collected a documentary stamp tax of Thirty centavos (P0.30) on each Two hundred pesos, or fractional part thereof, of the face value of any such agreement, bill of exchange, draft, certificate of deposit, or note: Provided, That only one documentary stamp tax shall be imposed on either loan agreement, or promissory note issued to secure such loan, whichever will yield a higher tax: provided, however, that loan agreements or promissory notes the aggregate of which does not exceed Two hundred fifty thousand pesos (P250,000.00) executed by an individual for his purchase on installment for his personal use or that of his family and not for business, resale, barter or hire of a house, lot, motor vehicle, appliance or furniture shall be exempt from the payment of the documentary stamp tax provided under this section. (Emphasis supplied.) A certificate of deposit is defined as "a written acknowledgment by a bank or banker of the receipt of a sum of money on deposit which the bank or banker promise to pay to the depositor, to the order of the depositor, or to some other person or his order, whereby the relation of debtor and creditor between the bank and the depositor is created." Similarly, in this case, although the money deposited in a SAP is payable anytime, the withdrawal of the money before the expiration of 30 days results in the reduction of the interest rate. In the same way, a time deposit withdrawn before its maturity results to a lower interest rate and payment of bank charges or penalties. The fact that the SAP is evidenced by a passbook likewise cannot remove its coverage from Section 180 of the old NIRC, as amended. A document to be considered a certificate of deposit need not be in a specific form. Thus, a passbook issued by a bank qualifies as a certificate of deposit drawing interest because it is considered a written acknowledgement by a bank that it has accepted a deposit of a sum of money from a depositor

CIR vs. Petron Corporation, GR No. 185568, march 21, 2012 Facts: Petron, a Board of Investment (BOI)-registered enterprise, was an assignee of several Tax Credit Certificates (TCCs) from various BOI-registered enterprises for the taxable years 1995-1998. Petron subsequently utilized said TCCs to pay its excise taxes for said taxable years.The TCCs had a Liability Clause which provided: Both the TRANSFEROR and the TRANSFEREE shall be jointly and severally liable for any fraudulent act or violation of the pertinent laws, rules and regulations relating to the transfer of this TAX CREDIT CERTIFICATE. Sometime in 1999, a post-audit of saidTCCs was conducted by the DOF. The TCCs and the TDMs were cancelled by reason of fraud.The DOF found that said TCCs were fraudulently obtained by the transferors and subsequently the same was fraudulently transferred to Petron. Thus, On January 30, 2002, The CIR issued an assessment against Petron for deficiency excise taxes for the taxable years 1995 to 1998based on the ground that the TCCs utilized by petitioner in its payment of excise taxes have been cancelled by the DOF for having been fraudulently issued and transferred. Subsequently, petron filed a protest letter regarding said assessment. In 2002, the CIR served a Warrant of Distraint and/or Levy on petitioner to enforce payment of the tax deficiencies. Construing the Warrant of Distraint and/or Levy as the final adverse decision of the BIR on its protest of the assessment, Petron filed a petition before the CTA contending that the assignment/transfer of the TCCs to petitioner by the TCC holders was submitted to, examined and approved by the concerned government agencies which processed the assignment in accordance with law and revenue regulations and that the assessment and collection of alleged excise tax deficiencies sought to be collected by the BIR against petitioner through the January 30, 2002 letter are already barred by prescription. The CTA Second Division ruled for the CIR. Petron appealed the decision to the CTA En banc which, in turn, reversed the CTA 2nd Division decision, based on the following on the ground that Petron was considered an innocent transferee of the subject TCCs and may not be prejudiced by a re-assessment of excise tax liabilities that respondent has already settled, when due, with the use of the TCCs. Issue: WON Petron is liable to pay its excise taxes Held: PETRONS NON-PARTICIPATION IN FRAUDULENT ACTS

NO, RR 5-2000 prescribes the regulations governing the manner of issuance of TCCs and the conditions for their use, revalidation and transfer. Which PETRON were able to comply. The processing of a TCC is entrusted to a specialized agency called the One-Stop-Shop Inter-Agency Tax Credit and Duty Drawback Center to expedite the processing and approval of tax credits and duty drawbacks. A TCC may be assigned through a Deed of Assignment, which the assignee submits to the Center for its approval. Upon approval of the deed, the Center will issue a DOF Tax Debit Memo (DOF-TDM), which will be utilized by the assignee to pay the latters tax liabilities for a specified period. Upon surrender of

the TCC and the DOF-TDM, the corresponding Authority to Accept Payment of Excise Taxes (ATAPET) will be issued by the BIR Collection Program Division and will be submitted to the issuing office of the BIR for acceptance by the Assistant Commissioner of Collection Service. This act of the BIR signifies its acceptance of the TCC as payment of the assignees excise taxes. Thus, it is apparent that a TCC undergoes a stringent process of verification by various specialized government agencies before it is accepted as payment of an assignees tax liability The CIR had no allegation that there was a deviation from the process for the approval of the TCCs, which Petron used as payment to settle its excise tax liabilities for the years 1995 to 1998.

We recognize the well-entrenched principle that estoppel does not apply to the government, especially on matters of taxation. Taxes are the nations lifeblood through which government agencies continue to operate and with which the State discharges its functions for the welfare of its constituents. As an exception, however, this general rule cannot be applied if it would work injustice against an innocent party.

PHILACOR Credit Corp. V CIR Facts: Philacor is a domestic corporation organized under Philippine laws and is engaged in the business of retail financing. Through retail financing, a prospective buyer of a home appliance with neither cash nor any credit card may purchase appliances on installment basis from an appliance dealer. After Philacor conducts a credit investigation and approves the buyers application, the buyer executes a unilateral promissory note in favor of the appliance dealer. The same promissory note is subsequently assigned by the appliance dealer to Philacor. Pursuant to Letter of Authority No. 17107 dated July 6, 1974, PHILACOR was examined and then received a Pre-Assessment Notice(PAN) with a deficiency in income tax, Percentage Tax and Documentary Stamp Tax. Philacor then Protested said assessment with the BIR. PHILACOR then appealed with the CTA division who ruled that PHILACOR was indeed liable for Income, Percentage tax deficiencies but reduced said Documentary stamp tax deficiency. PHILACOR then appealed to the CTA en banc wherein it cancelled the income and percentage tax deficiency but maintained the documentary stamp tax deficiency. PHILACOR appealed to the Supreme Court. Issue: WON PHILACOR is liable to pay DST on said Promissory Notes

Ruling: NO, under Sec. 173 and 180 of the NIRC, The persons primarily liable for the payment of the DST are the person (1) making; (2) signing; (3) issuing; (4) accepting; or (5) transferring the taxable documents, instruments or papers. Should these parties be exempted from paying tax, the other party who is not exempt would then be liable. Philacor did not make, sign, issue, accept or transfer the promissory notes. The acts of making, signing, issuing and transferring are unambiguous. The buyers of the appliances made, signed and issued the documents subject to tax, while the appliance dealer

transferred these documents to Philacor which likewise indisputably received or "accepted" them. "Acceptance," however, is an act that is not even applicable to promissory notes, but only to bills of exchange.22 Under Section 13223 of the Negotiable Instruments Law (which provides for how acceptance should be made), the act of acceptance refers solely to bills of exchange. Its object is to bind the drawee of a bill and make him an actual and bound party to the instrument.24 Further, in a ruling adopted by the BIR as early as 1955, acceptance has already been given a narrow definition with respect to incoming foreign bills of exchange, not the common usage of the word "accepting" as in receiving: The word "accepting" appearing in Section 210 of the National Internal Revenue Code has reference to incoming foreign bills of exchange which are accepted in the Philippines by the drawees thereof. Accordingly, the documentary stamp tax on freight receipts is due at the time the receipts are issued and from the transportation company issuing the same. The fact that the transportation contractor issuing the freight receipts shifts the burden of the tax to the shipper does not make the latter primarily liable to the payment of the tax.25 This ruling, to our mind, further clarifies that a party to a taxable transaction who "accepts" any documents or instruments in the plain and ordinary meaning of the act (such as the shipper in the cited case) does not become primarily liable for the tax. In the same way, Philacor cannot be made primarily liable for the DST on the issuance of the subject promissory notes, just because it had "accepted" the promissory notes in the plain and ordinary meaning. In this regard, Section 173 of the 1997 NIRC assumes materiality as it determines liability should the parties who are primarily liable turn out to be exempted from paying tax; the other party to the transaction then becomes liable.