SUMMARY OF SIGNIFICANT CTA DECISIONS (February 2011)

1.
Franchise grantee of radio and television broadcasting is not exempt from real
property tax.
Taxpayer cannot claim exemption from real property tax on its transmitter, building and
machineries actually, directly and exclusively used in its radio and television broadcasting
business. The phrase exclusive of this franchise in Section 8 of its franchise which says
the grantee, its successors or assigns shall be liable to pay the same taxes on their real
estate, buildings and personal property, exclusive of this franchise, as other persons are now
or hereafter may be required by law to pay simply means that the grantees franchise shall
not be subject to the taxes imposed in the first sentence of the section. Also, said clause
cannot be construed as a grant of tax exemption, but only an exclusion of the grantees
franchise from the imposition of tax. (GMA Network, Inc. vs. Ruby Fababier, in her
capacity as Provincial Treasurer, Province of Romblon, CTA EB No. 617, February 01,
2011)
2.
The Court has no jurisdiction to entertain petition for review (for refund of
input tax) if made before the lapse of 120 days from the filing of the administrative
claim.
Taxpayer filed the administrative claim for refund of input taxes for the year 2005 on
December 20, 2006. It later filed petition for review with the CTA on April 18, 2007. The CTA
ruled that since the petition for review was filed two (2) days earlier prior to the expiration of
the 120-day period on April 20, 2007 for the Commissioner to act on the administrative
claim, the Court has not acquired jurisdiction over the case. [Mirant (Navotas II)
Corporation vs. Commissioner of Internal Revenue, CTA Case No. 7619, February 03,
20111)
3.
NOLCO may be claimed in the year they were incurred as deduction against
adjustment to income and the creditable withholding tax for such period may be
claimed as credit against the computed taxes on such adjusted income.
In an assessment for income tax, the loss for the year was added back to the computed
adjusted taxable income allegedly on the ground that the tax benefit of the deduction was
carried forward and utilized in the subsequent year. The Court did not allow the NOLCO to
be added back in the year it was incurred since the same did not result in tax benefit to the
taxpayer in such year. There being no benefit, there is nothing to be added back. Similarly,
the creditable withholding taxes generated during the year was not applied by the BIR on the
computed income tax du on the same ground that it was utilized in the subsequent year as
prior years excess credit. The Court allowed this as credit in the year it was incurred,
holding that, at the most, the benefit will only be in the succeeding year (not in the year
1

The same decision was made in Commissioner of Internal Revenue vs. Visayas Geothermal Power Company,
CTA EB Case No. 561, February 07, 2011
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incurred) and may only be assessed in the same succeeding year. [Moneyline Telerate
(Philippines),Inc. vs. Commissioner of Internal Revenue, CTA Case No. 7658, February
04, 2011)
4.
Failure to imprint the word zero-rated in the invoices would result to the
denial of a claim for VAT refund.
Citing the case of Panasonic Matsushita Business Machine Corporation of the Philippines
vs. Commissioner of Internal Revenue (G.R. No. 178090, February 08, 2010), the Court
ruled that the failure to observe the invoicing requirements set forth under Section 4.108-1 of
RR 7-95 particularly the imprinting of the word zero-rated on the invoices would result to
the denial of a claim for VAT refund. The absence of the word zero-rated on the
invoices/receipts is fatal to a claim for credit/refund of input VAT. (Miramar Fish Company,
Inc. vs. Commissioner of Internal Revenue, CTA EB No. 627, February 15, 2011)
5.

Dealings of PAGCOR with other entities are subject to zero percent VAT.

The BIR assessed taxpayer, a casino operator, for VAT on its transactions with PAGCOR
for taxable year 2002. Taxpayer maintains that PAGCOR is not subject to VAT and such
exemption extends to it in accordance with the PAGCORs charter. On the other hand, it is
the contention of the BIR that PAGCORs charter had been effectively amended by RA 7716
and by Section 108 of the National Internal Revenue Code of 1997, making it subject to
VAT. Since PAGCOR is subject to VAT, no VAT exemption is extended to corporations in
which it has contractual relationship in connection with the operations of casinos. Relying on
the case of Commissioner of Internal Revenue vs. Acesite (Philippines) Hotel Corporation
(G.R. No. 147295, February 16, 2007), the CTA ruled that under PAGCORs charter, it is
granted exemption form payment of taxes except franchise tax, which shall be in lieu of all
kinds of taxes, levies, fees or assessments of any kind, nature or description, levied,
established or collected by any municipal, provincial or national government authority. Such
exemption extends to entities or individuals dealing with PAGCOR in casino operations.
(Grant Plaza Hotel Corporation vs. CIR, CTA Case No. 7794, February 18, 2011)
6.
A prior tax ruling is not required for the availment of the tax paring provision
under Section 28(B)(5)(b) of the NIRC.
Taxpayer, a resident of the United States, received dividends from a domestic company. The
latter subjected the dividend payments to 35% final withholding tax. Taxpayer applied for
refund on the ground that it is entitled to the preferential final withholding tax rate of 15%
under Section 28(B)(5)(b) of the National Internal Revenue Code (tax sparing provision).
Citing previous Supreme Court decisions and BIR ruling, the CTA confirmed that dividend
paid to a resident of the US is indeed entitled to the 15% final withholding tax and allowed
the refund. Among others though, the BIR argued that the taxpayer is not entitled to the 15%
preferential tax rate since it failed to adduce evidence that it filed a tax treaty relief
application with the BIR in accordance with RMO 1-2000. The Court ruled that RMO 1-2000
is irrelevant since the basis of the claim is Section 28(B)(5)(b) of the NIRC. Interestingly
though, the CTA also said that even with respect to the applicability of the 20% final
withholding tax rate under the RP-US Tax Treaty, the application for the tax treaty relief is
not made a condition precedent by law. (The Interpublic Group of Companies, Inc. vs.
CIR, CTA Case No. 7796, February 21, 2011)
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