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Commissioner of Internal Revenue V Pascor Realty &

Development Corporation et. Al. GR No. 128315, June 29, 1999

Facts: Authorized revenue officers examined the books of

accounts and accounting records of Pascor Realty (PRDC),
which resulted in a recommendation for the issuance of an
assessment (P7.5M for 1986 and P3M for 1987). CIR filed a
criminal complaint for tax evasion before the DOJ against PRDC,
its President and Treasurer. The latter filed a request for
reconsideration/reinvestigation. CIR denied such request and
the respondents elevated the CIRs decision to the CTA. CIR
filed a Motion to Dismiss on the ground that CTA has no
jurisdiction over the subject matter since no formal assessment
has been issued against PRDC. The CTA denied the Motion
stating that the criminal case for tax evasion is already an
assessment. The amount and kind of tax due and the covered
period are sufficient details for an assessment. CA agreed with
the decision of the CTA.

Issue: Whether the criminal complaint for tax evasion can be

construed as an assessment

Held: NO.

Neither the NIRC nor the RRs define the word assessment.
However, the specific functions and effects of an assessment
are defined in the NIRC. To consider the affidavit attached to
the complaint as a proper assessment is to subvert the nature
of an assessment and set a bad precedent that will prejudice
innocent taxpayers. An assessment informs the taxpayer that
he has a tax liability. It must be sent to and received by a
taxpayer and must demand payment of the taxes within a
specific period. It is made only when the Collector of internal
revenue releases, mails, or sends such notice to the taxpayer.
In this case, the affidavit merely contained the computation of
PRDCs tax liability. It did not state a demand or a period for
payment. Also, it was addressed to the justice secretary and
not to the taxpayer.
II. MARCOS II v. Court of Appeals GR No. 120880, June 5, 1997
293 SCRA 77

FACTS: Bongbong Marcos sought for the reversal of the ruling of

the Court of Appeals to grant CIR's petition to levy the
properties of the late Pres. Marcos to cover the payment of his
tax delinquencies during the period of his exile in the US. The
Marcos family was assessed by the BIR, and notices were
constructively served to the Marcoses, however the assessment
were not protested administratively by Mrs. Marcos and the
heirs of the late president so that they became final and
unappealable after the period for filing of opposition has
prescribed. Marcos contends that the properties could not be
levied to cover the tax dues because they are still pending
probate with the court, and settlement of tax deficiencies could
not be had, unless there is an order by the probate court or
until the probate proceedings are terminated.

Issue: Is the contention of Bongbong Marcos correct?

Held: No. The deficiency income tax assessments and estate

tax assessment are already final and unappealable -and-the
subsequent levy of real properties is a tax remedy resorted to
by the government, sanctioned by Section 213 and 218 of the
National Internal Revenue Code. This summary tax remedy is
distinct and separate from the other tax remedies (such as
Judicial Civil actions and Criminal actions), and is not affected
or precluded by the pendency of any other tax remedies
instituted by the government.

The approval of the court, sitting in probate, or as a

settlement tribunal over the deceased is not a mandatory
requirement in the collection of estate taxes. It cannot
therefore be argued that the Tax Bureau erred in proceeding
with the levying and sale of the properties allegedly owned by
the late President, on the ground that it was required to seek
first the probate court's sanction. There is nothing in the Tax
Code, and in the pertinent remedial laws that implies the
necessity of the probate or estate settlement court's approval
of the state's claim for estate taxes, before the same can be
enforced and collected. On the contrary, under Section 87 of
the NIRC, it is the probate or settlement court which is bidden
not to authorize the executor or judicial administrator of the
decedent's estate to deliver any distributive share to any party
interested in the estate, unless it is shown a Certification by the
Commissioner of Internal Revenue that the estate taxes have
been paid. This provision disproves the petitioner's contention
that it is the probate court which approves the assessment and
collection of the estate tax.

III. Meralco Securities Corporation vs Savellano GR No. L-36181

October 23, 1982

In 1967, Juan Maniago informed the Commissioner of Internal

Revenue (CIR) that MERALCO Securities Corporation did not pay
the proper taxes from 1962 to 1966. The CIR conducted an
investigation and it found out that MERALCO did actually pay
the proper amount of tax due within said period. The CIR then
informed Maniago of its decision and also informed him that
since no deficiency tax was collected, Maniago is not entitled to
the informers reward then offered to individuals who report tax

Maniago then filed a petition for mandamus against the CIR.

After hearing, Judge Victorino Savellano granted Maniagos
petition and ordered the CIR to collect the deficiency taxes and
further ordered the CIR to pay Maniagos informers reward.

Issue: Whether or not Judge Savellano is correct.

Held: No. The power to assess or not to assess tax deficiency

against a taxpayer is a discretionary function vested in the CIR.
As such, the CIR may not be compelled by mandamus.
Mandamus only lies to enforce the performance of a ministerial
act or duty and not to control the performance of a
discretionary power. Especially so in this case where the CIR
found that no tax deficiency is due. It should be noted further
that regular courts have no jurisdiction over the subject matter
of this case. Section 7 of Republic Act No. 1125, enacted June
16, 1954, granted to the Court of Tax Appeals exclusive
appellate jurisdiction to review by appeal, among others,
decisions of the Commissioner of Internal Revenue in cases
involving disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties imposed in relation
thereto, or other matters arising under the National Internal
Revenue Code or other law or part of law administered by the
Bureau of Internal Revenue.

IV. SY PO vs. Court of Tax Appeals G.R. No. 81446; August 18,
Facts: Po Bien Sing, the sole proprietor of Silver Cup Wine
Factory (SCWF), engaged in the business of manufacture and
sale of compounded liquors. On the basis of a denunciation
against SCWF allegedly for tax evasion amounting to millions of
pesos, Secretary of Finance directed the Finance-BIR--NBI team
to investigate.

On the basis of the team's report of investigation, the

respondent Commissioner of Internal Revenue assessed Mr. Po
Bien Sing deficiency income tax for 1966 to 1970 in the amount
of P7,154,685.16 and for deficiency specific tax for January
2,1964 to January 19, 1972 in the amount of P5,595,003.68

Petitioner protested the deficiency assessments. The BIR

recommended the reiteration of the assessments in view of the
taxpayer's persistent failure to present the books of accounts
for examination.

Issue: WON the assessments have valid and legal basis.

Held: The law is specific and clear. The rule on The Best
Evidence Obtainable applies when a tax report required by law
for the purpose of assessment is not available or when tax
report is incomplete or fraudulent.

The tax assessment by tax examiners are presumed correct

and made in good faith. The taxpayer has the duty to prove
otherwise. In the absence of proof of irregularities in the
performance of duties, an assessment duly made by the BIR
examiner and approved by his superior officers will not be
disturbed. All presumptions are in favor of the correctness of
tax assessments.
V. Commissioner of Internal Revenue vs. Court of Appeals, Court
of Tax Appeals and Fortune Tobacco Corp.. G.R. No. 119761;
August 29, 1996

Facts: Fortune Tobacco Corporation (Fortune Tobacco),

engaged in the manufacture of different brands of cigarettes,
registered Champion,, Hope, and More cigarettes. BIR
classified them as foreign brands since they were listed in the
World Tobacco Directory as belonging to foreign companies.
However, Fortun changed the names of 'Hope' to 'Hope Luxury'
and 'More' to 'Premium More,' thereby removing the said
brands from the foreign brand category.

A 45% Ad Valorem taxes were imposed on these brands. Then

Republic Act (RA) No. 7654 was enacted 55% for locally
manufactured foreign brand while 45% for locally manufactured
brands. 2 days before the effectivity of RA 7654, Revenue
Memorandum Circular No. 37-93 (RMC 37-93), was issued by
the BIR saying since there is no showing who the real owners
are of Champion, Hope and More, it follows that the same shall
be considered locally manufactured foreign brand for purposes
of determining the ad valorem tax - 55%. BIR sent via telefax a
copy of RMC 37-93 to Fortune Tobacco addressed to no one in
particular. Then Fortune Tobacco received, by ordinary mail, a
certified xerox copy of RMC 37-93. CIR assessed Fortune
Tobacco for ad valorem tax deficiency amounting to

Fortune Tobacco filed a petition for review with the CTA. 8 CTA
upheld the position of Fortune. CA affirmed.

Issue: WON it was necessary for BIR to follow the legal

requirements when it issued its RMC

Held. YES. CIR may not disregard legal requirements in the

exercise of its quasi-legislative powers which publication, filing,
and prior hearing.

When an administrative rule is merely interpretative in nature,

its applicability needs nothing further than its bare issuance for
it gives no real consequence more than what the law itself has
already prescribed. BUT when, upon the other hand, the
administrative rule goes beyond merely providing for the
means that can facilitate or render least cumbersome the
implementation of the law but substantially increases the
burden of those governed, the agency must accord, at least to
those directly affected, a chance to be heard, before that new
issuance is given the force and effect of law.

RMC 37-93 cannot be viewed simply as construing Section

142(c)(1) of the NIRC, as amended, but has, in fact and most
importantly, been made in order to place Hope Luxury
Premium More and Champion within the classification of
locally manufactured cigarettes bearing foreign brands and to
thereby have them covered by RA 7654 which subjects
mentioned brands to 55% the BIR not simply interpreted the
law; verily, it legislated under its quasi-legislative authority. The
due observance of the requirements of notice, of hearing, and
of publication should not have been then ignored.

VI. Commissioner of Internal Revenue v. Benguet Corp G.R. Nos.

134587 and 134588; January 8, 2005

Facts: Benguet Corporation is a domestic corporation engaged

in the exploration, development and operation of mineral
resources, and the sale or marketing thereof to various entities.
It is a VAT registered enterprise.

The transactions in question occurred during the period

between 1988 and 1991. Under Sec. 99 of NIRC as amended by
E.O. 273 s. 1987 then in effect, any person who, in the course
of trade or business, sells, barters or exchanges goods, renders
services, or engages in similar transactions and any person who
imports goods is liable for output VAT at rates of either 10% or
0% (zero-rated) depending on the classification of the
transaction under Sec. 100 of the NIRC.

In January of 1988, Benguet applied for and was granted by the

BIR zero-rated status on its sale of gold to Central Bank. On 28
August 1988 VAT Ruling No. 3788-88 was issued which declared
that the sale of gold to Central Bank is considered as export
sale subject to zero-rate pursuant to Section 100 of the Tax
Code, as amended by EO 273.

Relying on its zero-rated status and the above issuances,

Benguet sold gold to the Central Bank during the period of 1
August 1989 to 31 July 1991 and entered into transactions that
resulted in input VAT incurred in relation to the subject sales of
gold. It then filed applications for tax refunds/credits
corresponding to input VAT.

However, such request was not granted due to BIR VAT Ruling
No. 008-92 dated 23 January 1992 that was issued subsequent
to the consummation of the subject sales of gold to the Central
Bank which provides that sales of gold to the Central Bank shall
not be considered as export sales and thus, shall be subject to
10% VAT. BIR VAT Ruling No. 008-92 withdrew, modified, and
superseded all inconsistent BIR issuances.

Both petitioner and Benguet agree that the retroactive

application of VAT Ruling No. 008-92 is valid only if such
application would not be prejudicial to the Benguet pursuant
Sec. 246 of the NIRC.

Issues: (1) WON Benguets sale of gold to the Central Bank

during the
period when such was classified by BIR issuances as zerorated
could be taxed validly at a 10% rate after the consummation of
the transactions involved; (2) WON there was prejudice to
Benguet Corp due to the new BIR VAT Ruling.

Held: (1) NO. At the time when the subject transactions were
consummated, the prevailing BIR regulations relied upon by
Benguet ordained that gold sales to the Central Bank were
zero-rated. Benguet should not be faulted for relying on the
BIRs interpretation of the said laws and regulations.

While it is true, as CIR alleges, that government is not estopped

from collecting taxes which remain unpaid on account of the
errors or mistakes of its agents and/or officials and there could
be no vested right arising from an erroneous interpretation of
law, these principles must give way to exceptions based on and
in keeping with the interest of justice and fair play. (then the
Court cited the ABS-CBN case).

(2) YES. The adverse effect is that Benguet Corp became the
unexpected and unwilling debtor to the BIR of the amount
equivalent to the total VAT cost of its product, a liability it
previously could have recovered from the BIR in a zero-rated
scenario or at least passed on to the Central Bank had it known
it would have been taxed at a 10% rate. Thus, it is clear that
Benguet suffered economic prejudice when it consummated
sales of gold to the Central Bank were taken out of the zero-
rated category. The change in the VAT rating of Benguets
transactions with the Central Bank resulted in the twin loss of
its exemption from payment of output VAT and its opportunity
to recover input VAT, and at the same time subjected it to the
10% VAT sans the option to pass on this cost to the Central
Bank, with the total prejudice in money terms being equivalent
to the 10% VAT levied on its sales of gold to the Central Bank.

Even assuming that the right to recover Benguets excess

payment of income tax has not yet prescribed, this relief would
only address Benguets overpayment of income tax but not the
other burdens discussed above. Verily, this remedy is not a
feasible option for Benguet because the very reason why it was
issued a deficiency tax assessment is that its input VAT
was not enough to offset its retroactive output VAT. Indeed, the
burden of having to go through an unnecessary and
cumbersome refund process is prejudice enough.
VII. Commissioner of Internal Revenue v Bursmeiters & Wain
Scandinavian GR 153205; January 22, 2007

Facts: A foreign consortium, parent company of Burmeister,

entered into an O&M contract with NPC. The foreign entity then
subcontracted the actual O&M to Burmeister. NPC paid the
foreign consortium a mixture of currencies while the
consortium, in turn, paid Burmeister foreign currency inwardly
remitted into the Philippines. BIR did not want to grant refund
since the services are not destined for consumption abroad
(or the destination principle).

Issue: Are the receipts of Burmeister entitled to VAT zero-rated


Held: PARTIALLY. Respondent is entitled to the refund prayed for

BUT ONLY for the period covered prior to the filing of CIRs
Answer in the CTA.

The claim has no merit since the consortium, which was the
recipient of services rendered by Burmeister, was deemed
doing business within the Philippines since its 15-year O&M
with NPC can not be interpreted as an isolated transaction.

In addition, the services referring to processing,

manufacturing, repacking and services other than those in (1)
of Sec. 102 both require (i) payment in foreign currency; (ii)
inward remittance; (iii) accounted for by the BSP; AND (iv) that
the service recipient is doing business outside the Philippines.
The Court ruled that if this is not the case, taxpayers can
circumvent just by stipulating payment in foreign currency.

The refund was partially allowed since Burmeister secured a

ruling from the BIR allowing zero-rating of its sales to foreign
consortium. However, the ruling is only valid until the time that
CIR filed its Answer in the CTA which is deemed revocation of
the previously-issued ruling. The Court said the revocation can
not retroact since none of the instances in Section 246 (bad
faith, omission of facts, etc.) are present.

VIII. Commissioner of Internal Revenue vs. Hantex Trading Co.

Inc. G.R. No. 136975; March 31, 2005

Facts: Hantex Trading Co is a company organized under the

Philippines. It is engaged in the sale of plastic products, it
imports synthetic resin and other chemicals for the
manufacture of its products. For this purpose, it is required to
file an Import Entry and Internal Revenue Declaration
(Consumption Entry) with the Bureau of Customs under Section
1301 of the Tariff and Customs Code. Sometime in October
1989, Lt. Vicente Amoto, Acting Chief of Counter-Intelligence
Division of the Economic Intelligence and Investigation Bureau
(EIIB), received confidential information that the respondent
had imported synthetic resin amounting to P115,599,018.00
but only declared P45,538,694.57. Thus, Hentex receive a
subpoena to present its books of account which it failed to do.
The bureau cannot find any original copies of the products
Hentex imported since the originals were eaten by termites.
Thus, the Bureau relied on the certified copies of the
respondents Profit and Loss Statement for 1987 and 1988 on
file with the SEC, the machine copies of the Consumption
Entries, Series of 1987, submitted by the informer, as well as
excerpts from the entries certified by Tomas and Danganan.
The case was submitted to the CTA which ruled that Hentex
have tax deficiency and is ordered to pay, per investigation of
the Bureau. The CA ruled that the income and sales tax
deficiency assessments issued by the petitioner were unlawful
and baseless since the copies of the import entries relied upon
in computing the deficiency tax of the respondent were not
duly authenticated by the public officer charged with their
custody, nor verified under oath by the EIIB and the BIR

Issue: Whether or not the final assessment of the petitioner

against the respondent for deficiency income tax and sales tax
for the latters 1987 importation of resins and calcium
bicarbonate is based on competent evidence and the law.

Held: Central to the second issue is Section 16 of the NIRC of

1977, as amended which provides that the Commissioner of
Internal Revenue has the power to make assessments and
prescribe additional requirements for tax administration and
enforcement. Among such powers are those provided in
paragraph (b), which provides that Failure to submit required
returns, statements, reports and other documents. When a
report required by law as a basis for the assessment of any
national internal revenue tax shall not be forthcoming within
the time fixed by law or regulation or when there is reason to
believe that any such report is false, incomplete or erroneous,
the Commissioner shall assess the proper tax on the best
evidence obtainable. This provision applies when the
Commissioner of Internal Revenue undertakes to perform her
administrative duty of assessing the proper tax against a
taxpayer, to make a return in case of a taxpayers failure to file
one, or to amend a return already filed in the BIR. The best
evidence envisaged in Section 16 of the 1977 NIRC, as
amended, includes the corporate and accounting records of the
taxpayer who is the subject of the assessment process, the
accounting records of other taxpayers engaged in the same line
of business, including their gross profit and net profit sales.
Such evidence also includes data, record, paper, document or
any evidence gathered by internal revenue officers from other
taxpayers who had personal transactions or from whom the
subject taxpayer received any income; and record, data,
document and information secured from government offices or
agencies, such as the SEC, the Central Bank of the Philippines,
the Bureau of Customs, and the Tariff and Customs
Commission. However, the best evidence obtainable under
Section 16 of the 1977 NIRC, as amended, does not include
mere photocopies of records/documents. The petitioner, in
making a preliminary and final tax deficiency assessment
against a taxpayer, cannot anchor the said assessment on
mere machine copies of records/documents. Mere photocopies
of the Consumption Entries have no probative weight if offered
as proof of the contents thereof. The reason for this is that such
copies are mere scraps of paper and are of no probative value
as basis for any deficiency income or business taxes against a
IX. Bank of the Philippine Islands v Commissioner of Internal
Revenue G.R No. 139786O; October 17, 2005

Facts: The BIR issued an Assessment for a deficiency of

Documentary Stamp Tax (DST). The petitioner filed a protest
letter, requesting for reconsideration with BIR however the
latter did not reply. Instead, BIR issued a warrant for distraint or
levy against petitioner BPI. The petitioner did not hear from BIR
until September 11, 1997 when then Commissioner Liwayway
Vinzons-Chado, denied its request for reconsideration.
Subsequently, the petitioner filed a petition for review with the
CTA, raising the defense of prescription. The CTA denied the
petition and held that the period of prescription had not yet
prescribed nonetheless, it held that the petitioner was not liable
for the deficiency of DST. On appeal, the CA reversed the ruling
of CTA on the issue of DST tax and held that the petitioner was
indeed liable for DST.

Issue: Whether or not the right of the respondent to collect

from petitioner BPI is barred by prescription?

Held: Yes, the Court ruled that the period to collect has already
prescribed. The BIR has three years, counted from the date of
actual filing of the return or from the last date prescribed by
law for the filing of such return, whichever comes later, to
assess a national internal revenue tax or to begin a court
proceeding or the collection thereof without an assessment. In
case of a false or fraudulent return with intent to evade tax or
the failure to file any return at all, the prescriptive period for
assessment of the tax due shall be 10 years from discovery by
the BIR of the falsity, fraud, or omission. When the BIR validly
issues an assessment, within either the three-year or ten-year
period, whichever is appropriate, then the BIR has another
three years after the assessment within which to collect the
national internal revenue tax due thereon by distraint, levy,
and/or court proceeding. The assessment of the tax is deemed
made and the three-year period for collection of the assessed
tax begins to run on the date the assessment notice had been
released, mailed or sent by the BIR to the taxpayer.
In their Decisions, both the CTA and the Court of Appeals found
that the filing by petitioner BPI of a protest letter suspended the
running of the prescriptive period for collecting the assessed
DST. This Court, however, takes the opposing view, and, based
on the succeeding discussion, concludes that there is no valid
ground for suspending the running of the prescriptive period for
collection of the deficiency DST assessed against petitioner BPI.

The statute of limitations on assessment and collection of taxes

is for the protection of the taxpayer and, thus, shall be
construed liberally in his favor.

X. Estate of the Late Juliana Diez vda. De Gabreil v

Commissioner of Internal Revenue GR. No. 155541 January 27,

Facts: During the lifetime of the decedent Juliana vda. De

Gabriel, her business affairs were managed by the Philippine
Trust Company (PhilTrust). The decedent died on April 3, 1979
but two days after her death, PhilTrust filed her income tax
return for 1978 not indicating that the decedent had died. The
BIR conducted an administrative investigation of the
decedents tax liability and found a deficiency income tax for
the year 1997 in the amount of P318,233.93. Thus, in
November 18, 1982, the BIR sent by registered mail a demand
letter and assessment notice addressed to the decedent c/o
PhilTrust, Sta. Cruz, Manila, which was the address stated in her
1978 income tax return. On June 18, 1984, respondent
Commissioner of Internal Revenue issued warrants of distraint
and levy to enforce the collection of decedents deficiency
income tax liability and serve the same upon her heir, Francisco
Gabriel. On November 22, 1984, Commissioner filed a motion
to allow his claim with probate court for the deficiency tax. The
Court denied BIRs claim against the estate on the ground that
no proper notice of the tax assessment was made on the proper
party. On appeal, the CA held that BIRs service on PhilTrust of
the notice of assessment was binding on the estate as PhilTrust
failed in its legal duty to inform the respondent of antecedents
death. Consequently, as the estate failed to question the
assessment within the statutory period of thirty days, the
assessment became final, executory, and incontestable.

Issue: (1) Whether or not the CA erred in holding that the

service of deficiency tax assessment on Juliana through
PhilTrust was a valid service as to bind the estate; (2) Whether
or not the CA erred in holding that the tax assessment had
become final, executory, and incontestable.

Held: (1) Since the relationship between PhilTrust and the

decedent was automatically severed the moment of the
taxpayers death, none of the PhilTrusts acts or omissions
could bind the estate of the taxpayer. Although the
administrator of the estate may have been remiss in his legal
obligation to inform respondent of the decedents death, the
consequence thereof merely refer to the imposition of certain
penal sanction on the administrator. These do not include the
indefinite tolling of the prescriptive period for making
deficiency tax assessment or waiver of the notice requirement
for such assessment.

(2) The assessment was served not even on an heir or the

estate but on a completely disinterested party. This improper
service was clearly not binding on the petitioner. The most
crucial point to be remembered is that PhilTust had absolutely
no legal relationship with the deceased or to her Estate. There
was therefore no assessment served on the estate as to the
alleged underpayment of tax. Absent this assessment, no
proceeding could be initiated in court for collection of said tax;
therefore, it could not have become final, executory and
incontestable. Respondents claim for collection filed with the
court only on November 22, 1984 was barred for having been
made beyond the five-year prescriptive period set by law.

XI. Commissioner of Internal Revenue v. Tulio GR 139858

October 25, 2005

Facts: This involves the collection of percentage taxes for 1986

and 1987. Tulio did not file tax returns. BIR discovered on
September 14 1989. RTC dismissed BIR collection case on the
ground of prescription. It counted 3 years from the return was
supposed to be filed with the BIR instead of 10 yrs from
discovery of omission to file return by the respondent.

Issue: Whether petitioners cause of action for the collection of

deficiency percentage taxes against respondent has prescribed.
The lower court erroneously applied Section 203 of the same
Code providing for the three-year prescriptive period from the
filing of the tax return within which internal revenue taxes shall
be assessed. It held that such period should be counted from
the day the return was filed, or from August 15, 1990 up to
August 15, 1993. However, as shown by the records,
respondent failed to file a tax return, forcing petitioner to
invoke the powers of his office in tax administration and
enforcement. Respondents failure to file his tax returns is thus
covered by Section 223 providing for a ten-year prescriptive
period within which a proceeding in court may be filed.

Here, respondent failed to file his tax returns for 1986 and
1987. On September 14, 1989, petitioner found respondents
omission. Hence, the running of the ten-year prescriptive period
within which to assess and collect the taxes due from
respondent commenced on that date until September 14, 1999.
The two final assessment notices were issued on February 28,
1991, well within the prescriptive period of three (3) years.
When respondent failed to question or protest the deficiency
assessments thirty (30) days therefrom, or until March 30,
1991, the same became final and executory.
XII. Oceanic Wireless v. Commissioner of Internal Revenue GR
NO. 148380, December 9, 2005

Facts: On March 17, 1988, petitioner received from the Bureau

of Internal Revenue (BIR) deficiency tax assessments for the
taxable year 1984 in the total amount of P8,644,998.71.
Petitioner filed its protest against the tax assessments and
requested a reconsideration or cancellation of the same in a
letter to the BIR Commissioner.

Acting in behalf of the BIR Commissioner, then Chief of the BIR

Accounts Receivable and Billing Division, Mr. Severino B. Buot,
reiterated the tax assessments while denying petitioners
request for reinvestigation. Said letter likewise requested
petitioner to pay within 10 days from receipt thereof, otherwise
the case shall be referred to the Collection Enforcement
Division of the BIR National Office for the issuance of a warrant
of distraint and levy without further notice.

Upon petitioners failure to pay the subject tax assessments

within the prescribed period, the Assistant Commissioner for
Collection, acting for the Commissioner of Internal Revenue,
issued the corresponding warrants of distraint and/or levy and

Petitioner filed a Petition for Review with the Court of Tax

Appeals (CTA) to contest the issuance of the warrants to
enforce the collection of the tax assessments. The CTA
dismissed the petition for lack of jurisdiction.

Petitioner filed a Motion for Reconsideration arguing that the

demand letter cannot be considered as the final decision of the
Commissioner of Internal Revenue on its protest because the
same was signed by a mere subordinate and not by the
Commissioner himself.

With the denial of its motion for reconsideration, petitioner

consequently filed a Petition for Review with the Court of
Appeals contending that there was no final decision to speak of
because the Commissioner had yet to make a personal
determination as regards the merits of petitioners case.

The Court of Appeals denied the petition.

Issue: Whether the demand letter for tax deficiency issued and
signed by a subordinate officer who was acting in behalf of the
CIR is deemed final and executor and subject to an appeal to
the CTA.

Held: YES. A demand letter for payment of delinquent taxes

may be considered a decision on a disputed or protested
assessment. The determination on whether or not a demand
letter is final is conditioned upon the language used or the
tenor of the letter being sent to the taxpayer. In this case, the
letter of demand, unquestionably constitutes the final action
taken by the Bureau of Internal Revenue on petitioners request
for reconsideration when it reiterated the tax deficiency
assessments due from petitioner, and requested its payment.
Failure to do so would result in the issuance of a warrant of
distraint and levy to enforce its collection without further
notice. In addition, the letter contained a notation indicating
that petitioners request for reconsideration had been denied
for lack of supporting documents. The demand letter received
by petitioner verily signified a character of finality. Therefore, it
was tantamount to a rejection of the request for

This now brings us to the crux of the matter as to whether said

demand letter indeed attained finality despite the fact that it
was issued and signed by the Chief of the Accounts Receivable
and Billing Division instead of the BIR Commissioner.

The general rule is that the Commissioner of Internal Revenue

may delegate any power vested upon him by law to Division
Chiefs or to officials of higher rank. He cannot, however,
delegate the four powers granted to him under the National
Internal Revenue Code (NIRC) enumerated.

As amended by Republic Act No. 8424, Section 7 of the Code

authorizes the BIR Commissioner to delegate the powers
vested in him under the pertinent provisions of the Code to any
subordinate official with the rank equivalent to a division chief
or higher, except the following:

(a) The power to recommend the promulgation of rules and

regulations by the Secretary of Finance;
(b) The power to issue rulings of first impression or to reverse,
revoke or modify any existing ruling of the Bureau;

(c) The power to compromise or abate under Section 204(A)

and (B) of this Code, any tax deficiency: Provided, however,
that assessments issued by the Regional Offices involving basic
deficiency taxes of five hundred thousand pesos (P500,000) or
less, and minor criminal violations as may be determined by
rules and regulations to be promulgated by the Secretary of
Finance, upon the recommendation of the Commissioner,
discovered by regional and district officials, may be
compromised by a regional evaluation board which shall be
composed of the Regional Director as Chairman, the Assistant
Regional Director, heads of the Legal, Assessment and
Collection Divisions and the Revenue District Officer having
jurisdiction over the taxpayer, as members; and

(d) The power to assign or reassign internal revenue officers to

establishments where articles subject to excise tax are
produced or kept.

It is clear from the above provision that the act of issuance of

the demand letter by the Chief of the Accounts Receivable and
Billing Division does not fall under any of the exceptions that
have been mentioned as non-delegable.

Thus, the authority to make tax assessments may be delegated

to subordinate officers. Said assessment has the same force
and effect.

XIII. Philam Asset Management, Inc. vs Court of Tax Appeals

G.R.156637 and 162004; December 14, 2005

Facts: Petitioner acts as investment manager of PFI &PBFI. It

provides management &technical services and thus
respectively paid for its services. PFI & PBFI withhold the
amount of equivalent to 5% creditable tax regulation. On April
3, 1998, filed ITR with a net loss thus incurred withholding tax.
Petitioner filed for refund from BIR but was unanswered. CTA
denied the petition for review. CA held that to request for either
a refund or credit of income tax paid, a corporation must signify
its intention by marking the corresponding box on its annual
corporate adjustment return.

Issue: Whether or not petitioner is entitled to a refund of its

creditable taxes.

Held: Any tax income that is paid in excess of its amount due to
the government may be refunded, provided that a taxpayer
properly applies for the refund. One can not get a tax refund
and a tax credit at the same time for the same excess to
income taxes paid. Failure to signify ones intention in Final
Assessment Return (FAR) does not mean outright barring of a
valid request for a refund

Requiring that the ITR on the FAR of the succeeding year be

presented to the BIR in requesting a tax refund has no basis in
law and jurisprudence. The Tax Code likewise allows the refund
of taxes to taxpayer that claims it in writing within 2 years after
payment of the taxes. Technicalities and legalism should not be
misused by the government to keep money not belonging to it,
and thereby enriched itself at the expense of its law-abiding
XIV. Philippine Journalist, Inc. v. Commissioner of Internal
Revenue G.R. No. 162852; December 16, 2004

Facts: In 1995, the Bureau of Internal Revenue (BIR) issued

Letter of Authority for two Revenue Officers to examine
petitioners books of account and other accounting records for
internal revenue taxes for the period January 1, 1994 to
December 31, 1994.

In 1997, petitioners Comptroller, executed a Waiver of the

Statute of Limitation under the National Internal Revenue Code
(NIRC). The document waived the running of the prescriptive
period provided by Sections 223 and 224 and other relevant
provisions of the NIRC and consented to the assessment and
collection of taxes which may be found due after the
examination at any time after the lapse of the period of
limitations fixed by said Sections 223 and 224 and other
relevant provisions of the NIRC, until the completion of the

In 1998, Revenue Officer submitted his audit report

recommending the issuance of an assessment and finding that
petitioner had deficiency taxes. Subsequently, the Assessment
Division of the BIR issued Pre-Assessment Notices which
informed petitioner of the results of the investigation. Thus, BIR
issued Assessment/Demand stating the deficiency taxes,
inclusive of interest and compromise penalty.

On March 16, 1999, a Preliminary Collection Letter was sent by

Deputy Commissioner Romeo S. Panganiban to the petitioner to
pay the assessment within ten (10) days from receipt of the
letter. On November 10, 1999, a Final Notice Before Seizure was
issued by the same deputy commissioner giving the petitioner
ten (10) days from receipt to pay. Petitioner received a copy of
the final notice on November 24, 1999. By letters dated
November 26, 1999, petitioner asked to be clarified how the tax
liability of P111,291,214.46 was reached and requested an
extension of thirty (30) days from receipt of the clarification
within which to reply.

The BIR received a follow-up letter from the petitioner asserting

that its (PJI) records do not show receipt of Tax
Assessment/Demand. Petitioner also contested that the
assessment had no factual and legal basis. On March 28, 2000,
a Warrant of Distraint and/or Levy was received by the

Petitioner filed a Petition for Review with the Court of Tax

Appeals (CTA) which was amended on May 12, 2000. Petitioner
complains: (a) that no assessment or demand was received
from the BIR; (b) that the warrant of distraint and/or levy was
without factual and legal bases as its issuance was premature;
(c) that the assessment, having been made beyond the 3-year
prescriptive period, is null and void; (d) that the issuance of the
warrant without being given the opportunity to dispute the
same violates its right to due process; and (e) that the grave
prejudice that will be sustained if the warrant is enforced is
enough basis for the issuance of the writ of preliminary
injunction. CTA ruled in favor of PJI. It declared that the
deficiency income, value-added and expanded withholding tax
assessments issued by the respondent against the petitioner on
December 9, 1998, in the total amount of P111,291,214.46 for
the year 1994 cancelled, withdrawn and with no force and
effect. Likewise, it declared that the Warrant of Distraint and/or
Levy No. 33-06-046 NULL and VOID. On appeal CA ruled that
Mere assessment notices which have become final after the
lapse of the thirty (30)-day reglementary period are not
appealable. Thus, the CTA should not have entertained the
petition at all. Also, it ruled that there is a valid waiver thus the
running of the prescriptive period is tolled.

Issues: (1) whether or not CTA has jurisdiction over the issues in
this case. (2) Whether or not the Waiver of the Statute of
Limitations is valid and binding on the petitioner

Held: (1) No. The appellate jurisdiction of the CTA is not limited
to cases which involve decisions of the Commissioner of
Internal Revenue on matters relating to assessments or
refunds. The second part of the provision covers other cases
that arise out of the NIRC or related laws administered by the
Bureau of Internal Revenue. The wording of the provision is
clear and simple. It gives the CTA the jurisdiction to determine
if the warrant of distraint and levy issued by the BIR is valid and
to rule if the Waiver of Statute of Limitations was validly

(2) No. As found by the CTA, the Waiver of Statute of

Limitations, signed by petitioners comptroller on September
22, 1997 is not valid and binding because it does not conform
with the provisions of RMO No. 20-90. It did not specify a
definite agreed date between the BIR and petitioner, within
which the former may assess and collect revenue taxes. Thus,
petitioners waiver became unlimited in time, violating Section
222(b) of the NIRC.
The waiver document is being incomplete and defective, the
three-year prescriptive period was not tolled or extended and
continued to run until April 17, 1998. Consequently, the
Assessment/Demand No. 33-1-000757-94 issued on December
9, 1998 was invalid because it was issued beyond the three (3)
year period. In the same manner, Warrant of Distraint and/or
Levy No. 33-06-046 which petitioner received on March 28,
2000 is also null and void for having been issued pursuant to an
invalid assessment.

XV. Rafael Arsenio S. Dizon, v. Court of Tax Appeals and

Commissioner of Internal Revenue G.R. No. 140944; April 30,

Facts: Jose P. Fernandez died in November 7, 1987. Thereafter,

a petition for the probate of his will was filed. The probate
court appointed Atty. Rafael Arsenio P. Dizon as administrator of
the Estate of Jose Fernandez.

An estate tax return was filed later on which showed ZERO

estate tax liability. BIR thereafter issued a deficiency estate tax
assessment, demanding payment of Php 66.97 million as
deficiency estate tax. This was subsequently reduced by CTA
to Php 37.42 million. The CA affirmed the CTAs ruling, hence,
the instant petition.

The petitioner claims that in as much as the valid claims of

creditors against the Estate are in excess of the gross estate,
no estate tax was due. On the other hand, respondents argue
that since the claims of the Estates creditors have been
condoned, such claims may no longer be deducted from the
gross estate of the decedent.

Issue: Whether the actual claims of creditors may be fully

allowed as deductions from the gross estate of Jose despite the
fact that the said claims were reduced or condoned through
compromise agreements entered into by the Estate with its

Held: Yes. Following the US Supreme Courts ruling in Ithaca

Trust Co. v. United States, the Court held that post-death
developments are not material in determining the amount of
deduction. This is because estate tax is a tax imposed on the
act of transferring property by will or intestacy and, because
the act on which the tax is levied occurs at a discrete time, i.e.,
the instance of death, the net value of the property transferred
should be ascertained, as nearly as possible, as of the that
time. This is the date-of-death valuation rule.

The Court, in adopting the date-of-death valuation principle,

explained that: First. There is no law, nor do we discern any
legislative intent in our tax laws, which disregards the date-of-
death valuation principle and particularly provides that post-
death developments must be considered in determining the net
value of the estate. It bears emphasis that tax burdens are not
to be imposed, nor presumed to be imposed, beyond what the
statute expressly and clearly imports, tax statutes being
construed strictissimi juris against the government. Second.
Such construction finds relevance and consistency in our Rules
on Special Proceedings wherein the term claims required to
be presented against a decedent's estate is generally
construed to mean debts or demands of a pecuniary nature
which could have been enforced against the deceased in his
lifetime, or liability contracted by the deceased before his
death. Therefore, the claims existing at the time of death are
significant to, and should be made the basis of, the
determination of allowable deductions.

XVI. Pilipinas Shell Petrolium Corp v. Commissioner of Internal

Revenue G.R. No. 172598; December 21, 2007

Facts: In 1988, BIR sent a collection letter to Petitioner Pilipinas

Shell Petroleum Corporation (PSPC) for alleged deficiency
excise tax liabilities of PhP 1,705,028,008.06 for the taxable
years 1992 and 1994 to 1997, inclusive of delinquency
surcharges and interest. As basis for the collection letter, the
BIR alleged that PSPC is not a qualified transferee of the TCCs it
acquired from other BOI-registered companies. These alleged
excise tax deficiencies covered by the collection letter were
already paid by PSPC with TCCs acquired through, and issued
and duly authorized by the Center, and duly covered by Tax
Debit Memoranda (TDM) of both the Center and BIR, with the
latter also issuing the corresponding Accept Payment for Excise
Taxes (APETs). PSPC protested the collection letter, but it was
denied. Because of respondent inaction on a motion for
reconsideration PSPC filed a petition for review before the CTA.

In 1999, the CTA ruled that the use by PSPC of the TCCs was
legal and valid, and that respondents attempt to collect
alleged delinquent taxes and penalties from PSPC without an
assessment constitutes denial of due process. Respondent
elevated CTA Decision to the Court of Appeals (CA) through a
petition for review. Despite the pendency of this case, PSPC
received assessment letter from respondent for excise tax
deficiencies, surcharges, and interest based on the first batch
of cancelled TCCs and TDM covering PSPCs use of the TCCs.
All these cancelled TDM and TCCs were also part of the subject
matter of the now pending before the CA.
PSPC protested the assessment letter, but the protest was
denied by the BIR, constraining it to file another case before the
CTA. Subsequently, CTA ruled in favor of PSPC and accordingly
cancelled and set aside the assessment issued by the
respondent. Respondent motion for reconsideration of the
above decision which was rejected thus respondent appealed
the above decision before the CTA En Banc. The CTA En Banc
ruled in favor of respondent and ordered PSPC to pay the
amount of P570,577,401.61 as deficiency excise tax for the
taxable years 1992 and 1994 to 1997, inclusive of 25%
surcharge and 20% interest.

Issue: Whether or not petitioner is liable for the assessment of

deficiency excise tax after the validly issued TCCs were
subsequently cancelled for having been issued fraudulently

Held: No. Petitioner is not liable for the assessment of

deficiency excise tax.

In the instant case, with due application, approval, and

acceptance of the payment by PSPC of the subject TCCs for its
then outstanding excise tax liabilities in 1992 and 1994 to
1997, the subject TCCs have been canceled as the money value
of the tax credits these represented have been used up.
Therefore, the DOF through the Center may not now cancel the
subject TCCs as these have already been canceled and used up
after their acceptance as payment for PSPCs excise tax
liabilities. What has been used up, debited, and canceled
cannot anymore be declared to be void, ineffective, and
canceled anew.

Besides, it is indubitable that with the issuance of the

corresponding TDM, not only is the TCC canceled when fully
utilized, but the payment is also final subject only to a post-
audit on computational errors. Under RR 5-2000, a TDM is a
certification, duly issued by the Commissioner or his duly
authorized representative, reduced in a BIR Accountable Form
in accordance with the prescribed formalities, acknowledging
that the taxpayer named therein has duly paid his internal
revenue tax liability in the form of and through the use of a Tax
Credit Certificate, duly issued and existing in accordance with
the provisions of these Regulations. The Tax Debit Memo shall
serve as the official receipt from the BIR evidencing a
taxpayers payment or satisfaction of his tax obligation. The
amount shown therein shall be charged against and deducted
from the credit balance of the aforesaid Tax Credit Certificate.

Thus, with the due issuance of TDM by the Center and TDM by
the BIR, the payments made by PSPC with the use of the
subject TCCs have been effected and consummated as the
TDMs serve as the official receipts evidencing PSPCs payment
or satisfaction of its tax obligation. Moreover, the BIR not only
issued the corresponding TDM, but it also issued ATAPETs which
doubly show the payment of the subject excise taxes of PSPC.

Based on the above discussion, we hold that respondent

erroneously and without factual and legal basis levied the
assessment. Consequently, the CTA En Banc erred in
sustaining respondents assessment.

XVII. Commissioner of Internal Revenue v. Primetown Property

Group GR 161155; August 28, 2007

Facts: Gilbert Yap, vice chair of respondent Primetown Property

Group, Inc., applied for the refund or credit of income tax
respondents paid in 1997.

The CTA found that respondent filed its final adjusted return on
April 14, 1998. Thus, its right to claim a refund or credit
commenced on that date. According to the CTA, the two-year
prescriptive period under Section 229 of the NIRC for the filing
of judicial claims was equivalent to 730 days. Because the year
2000 was a leap year, respondent's petition, which was filed
731 days after respondent filed its final adjusted return, was
filed beyond the reglementary period.

On appeal, the CA reversed and set aside the decision of the

CTA. It ruled that Article 13 of the Civil Code did not distinguish
between a regular year and a leap year. According to the CA,
even if the year 2000 was a leap year, the periods covered by
April 15, 1998 to April 14, 1999 and April 15, 1999 to April 14,
2000 should still be counted as 365 days each or a total of 730
days. A statute which is clear and explicit shall be neither
interpreted nor construed.

Issue: Whether or not the counting of the 2-year prescriptive

period for filing claim of refund is governed by the Civil Code.

Held: Counting of 2-year period for filing claim for refund is no

longer in accordance with Art 13 of the Civil Code but under
Sec 31 of EO 227 - The Administrative Code of 1987.

As between the Civil Code, which provides that a year is

equivalent to 365 days, and the Administrative Code of 1987,
which states that a year is composed of 12 calendar months, it
is the latter that must prevail being the more recent law,
following the legal maxim, Lex posteriori derogat priori.

In the case at bar, there are 24 calendar months in 2 years. For

a Final Corporate ITR filed on Apr 14, 1998, the counting should
start from Apr 15, 1998 and end on Apr 14, 2000. The
procedure is 1st month -Apr 15, 1998 to May 14, 1998 24th
month March 15, 2000 to Apr 14, 2000. National Marketing v.
Tecson, 139 Phil 584 (1969) is no longer controlling. The 2-year
period should start to run from filing of the final adjusted

We therefore hold that respondent's petition (filed on April 14,

2000) was filed on the last day of the 24th calendar month from
the day respondent filed its final adjusted return. Hence, it was
filed within the reglementary period

XVIII. Commissioner of Internal Revenue vs. Reyes and Reyes

vs. Commissioner of Internal Revenue GR Nos. 159694 &

Facts: Decedent Tancinco left a 1,292 square-meter residential

lot and an old house thereon. The heirs of the decedent
received a final estate tax assessment notice and a demand
letter, both dated April 22, 1998, for the amount of
P14,912,205.47, inclusive of surcharge and interest. The CIR
issued a preliminary collection letter to Reyes, followed by a
Final Notice Before Seizure. Subsequently, a Warrant of
Distraint and/or Levy was served upon the estate. Reyes
initially protested the notice of levy but then the heirs proposed
a compromise settlement of P1,000,000.00. The CIR rejected
Reyess offer, pointing out that since the estate tax is a charge
on the estate and not on the heirs, the latters financial
incapacity is immaterial as, in fact, the gross value of the
estate amounting to P32,420,360.00 is more than sufficient to
settle the tax liability. As the estate failed to pay its tax liability
within the deadline, BIR notified Reyes that the subject property
would be sold at public auction on August 8, 2000. Reyes filed a
protest with the BIR Appellate Division. Assailing the scheduled
auction sale, she asserted that the assessment, letter of
demand, and the whole tax proceedings against the estate are
void ab initio. She offered to file the corresponding estate tax
return and pay the correct amount of tax without surcharge or

Issue: WON the assessment in this case can be used as a basis

for the perfection of a tax compromise.

Held: NO. The 2nd paragraph of Sec. 228 of NIRC is clear and
mandatory insofar as taxpayers shall be informed in writing of
the law and the facts on which the assessment is made,
otherwise the assessment shall be void. RA 8424 has already
amended the provisions of Sec. 229 of NIRC on protesting an
assessment. The old requirement of merely notifying the
taxpayer of the CIRs findings was changed in 1998 of informing
the taxpayer of not only the law, but also of the facts on which
an assessment would be made, otherwise, the assessment
itself would be invalid. Being invalid, the assessment canot be
in turn be used as a basis for the perfection of a tax

Hence, it is premature to declare the compromise on the tax

liability of the estate perfected and consummated considering
that the tax assessment is void. While administrative agencies,
like the BIR, were not bound by procedural requirements, they
were still required by law and equity to observe substantive due
process. The reason behind this requirement, said the CA, was
to ensure that taxpayers would be duly apprised of -- and could
effectively protest -- the basis of tax assessments against
them.7 Since the assessment and the demand were void, the
proceedings emanating from them were likewise void, and any
order emanating from them could never attain finality.

XX. Commissioner of Internal Revenue vs. First Express

Pawnshop Company, Inc. G.R. Nos. 172045-46; June 16 2009

Facts: CIR issued assessment notices against Respondent for

deficiency income tax, VAT and documentary stamp tax on
deposit on subscription and on pawn tickets. Respondent filed
its written protest on the assessments. When CIR did not act on
the protest during the 180-day period, respondent filed a
petition before the CTA.

Issue: Has Respondents right to dispute the assessment in the

CTA prescribed?

Held: No. The assessment against Respondent has not become

final and unappealable. It cannot be said that respondent failed
to submit relevant supporting documents that would render the
assessment final because when respondent submitted its
protest, respondent attached all the documents it felt were
necessary to support its claim. Further, CIR cannot insist on the
submission of proof of DST payment because such document
does not exist as respondent claims that it is not liable to pay,
and has not paid, the DST on the deposit on subscription.

The term relevant supporting documents are those

documents necessary to support the legal basis in disputing a
tax assessment as determined by the taxpayer. The BIR can
only inform the taxpayer to submit additional documents and
cannot demand what type of supporting documents should be
submitted. Otherwise, a taxpayer will be at the mercy of the
BIR, which may require the production of documents that a
taxpayer cannot submit. Since the taxpayer is deemed to have
submitted all supporting documents at the time of filing of its
protest, the 180-day period likewise started to run on that same
XXI. Commissioner of Internal Revenue vs. Enron Subic Power
Corp. GR No. 166387 January 19, 2009

Facts: The BIR assessed Enron which countered by filing a

Petition for Review with the CTA stating that the assessment
disregarded the provisions of the Tax Code and of RR No. 12-99,
when the assessment failed to provide the legal and factual
bases of the assessment. The CTA and CA ruled that the
assessment notice must not only refer to the supporting
revenue laws or regulations for the assessment but must also
justify their applicability to the factual milieu of the

Issue: Is the disputed assessment valid?

Held: NO. The assessment is not valid. Although the revenue

examiners discussed their findings with Respondents
representative during the pre-assessment stage, the same,
together with the Preliminary Five-Day Letter and Petitioners
Annex G, were not sufficient to comply with the procedural
requirement of due process. The Tax Code provides that a
taxpayer shall be informed (and not merely notified as was
the requirement before) in writing of the law and the facts on
which the assessment is made; otherwise, the assessment shall
be void. The use of the word shall indicates the mandatory
nature of the requirement.
XXII. TFS Inc. v. Commissioner of Internal Revenue G.R. No.
166829; April 19, 2010

Facts: The CTA rendered a Decision upholding the assessment

issued against petitioner in the amount of P11,905,696.32,
representing deficiency VAT for the year 1998, inclusive of 25%
surcharge and 20% deficiency interest, plus 20% delinquency
interest from February 25, 2002 until full payment, pursuant to
Sections 248 and 249(B) of the National Internal Revenue Code
of 1997 (NIRC). The CTA ruled that pawnshops are subject to
VAT under Section 108(A) of the NIRC as they are engaged in
the sale of services for a fee, remuneration or consideration.

Petitioner filed before the Court of Appeals a Petition for Review

but it was dismissed by the CA for lack of jurisdiction in view of
the enactment of Republic Act No. 9282 (RA 9282).

Realizing its error, petitioner filed a Petition for Review with the
CTA En Banc. The petition, however, was dismissed for having
been filed out of time. Petitioner filed a Motion for
Reconsideration but it was denied.

Issues: (1) Whether the Honorable court of Tax Appeal en banc

should have given due course to the petition for review and not
strictly applied the technical rules of procedure to the
detriment of justice; (2) Whether or not petitioner is subject to
the 10% VAT.

Held: (1) The petition is meritorious. Jurisdiction to review

decisions or resolutions issued by the Divisions of the CTA is no
longer with the CA but with the CTA En Banc. This rule is
embodied in Section 11 of RA 9282.

In the instant case, we are constrained to disregard procedural

rules because we cannot in conscience allow the government to
collect deficiency VAT from petitioner considering that the
government has no right at all to collect or to receive the same.
Besides, dismissing this case on a mere technicality would lead
to the unjust enrichment of the government at the expense of
petitioner, which we cannot permit. Technicalities should never
be used as a shield to perpetrate or commit an injustice.

(2) Petitioner disputes the assessment made by the BIR for VAT
deficiency in the amount of P11,905,696.32 for taxable year
1998 on the ground that pawnshops are not included in the
coverage of VAT.

We agree. x x x Since petitioner is a non-bank financial

intermediary, it is subject to 10% VAT for the tax years 1996 to
2002; however, with the levy, assessment and collection of VAT
from non-bank financial intermediaries being specifically
deferred by law, then petitioner is not liable for VAT during
these tax years. But with the full implementation of the VAT
system on non-bank financial intermediaries starting January 1,
2003, petitioner is liable for 10% VAT for said tax year. And
beginning 2004 up to the present, by virtue of R.A. No. 9238,
petitioner is no longer liable for VAT but it is subject to
percentage tax on gross receipts from 0% to 5%, as the case
may be.

Guided by the foregoing, petitioner is not liable for VAT for the
year 1998. Consequently, the VAT deficiency assessment issued
by the BIR against petitioner has no legal basis and must
therefore be cancelled. In the same vein, the imposition of
surcharge and interest must be deleted.
XXIII. Commissioner of Internal Revenue v United International

On April 14, 1998, respondent United International Pictures filed

a petition for review with the CTA for the refund of its excess
income tax payments in 1996 amounting to P5,791,194.
Pending the petition, respondent filed an administrative claim
for refund of its excess income tax payments for the year 1997
amounting to P4.6M with the RDO 34 of the BIR, for a total
claim for refund of P10.4M.

On October 1, 1999, the CTA rendered a decision ordering

petitioner Commissioner of Internal Revenue to deduct
respondents 1996 tax liability from the amount claimed and to
refund (or to issue tax credit certificates) in the amount of P4M.
Neither party assailed the decision; thus attained finality. UIP
amended its pending administrative claim for refund. It added
the amount of its 1996 tax liability and claimed the creditable
tax withheld in 1997 as the amount of total refund.

For failure to act on its administrative claim, respondent filed a

petition for review with the CTA. After trial, CTA found that the
UIP complied with all the requirements for the refund of
creditable withholding taxes. Nonetheless, in comparing UIPs
1997 income tax return and the certificate of tax withheld
issued by its withholding agent, it found that respondent
understated its income. Thus CTA granted the petition but
ordered the BIR to refund only to extent of P6.28M. Petitioner
filed for certiorari with the CA asserting that the CTA committed
grave abuse of discretion when it granted respondent a tax
refun. CA aaffirmed the findings of CTA, hence this petition.

Issue: Whether the CA erred in dismissing the certiorari

Held: No

Under our tax system, the CTA is a highly specialized body that
reviews tax cases. For this reason, its findings of fact are
binding on the Court unless such findings are not supported by
substantial evidence. In this case, the CTA concluded that
respondent was entitled to refund but only to the extent of
P6,285,892.05. As pointed out by the CA, the CTA exhaustively
explained why it granted the refund albeit less than what
respondent claimed. We find no reason to disturb the CTA's
findings of fact.

XXIV. CIR. Commissioner of Internal Revenue v. Fort Bonifacio

Development Corporation G.R. No. 167606, August 11, 2010
FACTS: Petitioner was a real estate developer that bought from
the national government a parcel of land that used to be the
Fort Bonifacio military reservation. At the time of the said sale
there was as yet no VAT imposed so Petitioner did not pay any
VAT on its purchase. Subsequently, Petitioner sold two parcels
of land to Metro Pacific Corp. In reporting the said sale for VAT
purposes (because the VAT had already been imposed in the
interim), Petitioner claimed transitional input VAT corresponding
to its inventory of land. The BIR disallowed the claim of
presumptive input VAT and thereby assessed Petitioner for
deficiency VAT.

Issue: Is Petitioner entitled to claim the transitional input VAT on

its sale of real properties given its nature as a real estate dealer
and if so (i) is the transitional input VAT applied only to the
improvements on the real property or is it applied on the value
of the entire real property and (ii) should there have been a
previous tax payment for the transitional input VAT to be

Held: Yes. Petitioner is entitled to claim transitional input VAT

based on the value of not only the improvements but on the
value of the entire real property and regardless of
whether there was in fact actual payment on the purchase of
the real property or not. The amendments to the VAT law do not
show any intention to make those in the real estate business
subject to a different treatment from those engaged in the sale
of other goods or properties or in any other commercial trade or
business. On the scope of the basis for determining the
available transitional input VAT, the CIR has no power to
limit the meaning and coverage of the term goods in Section
105 of the Tax Code without statutory authority or basis. The
transitional input tax credit operates to benefit newly VAT-
registered persons, whether or not they previously paid taxes in
the acquisition of their beginning inventory of goods, materials
and supplies. Appeal; right to appeal; Perfection of an appeal in
the manner and within the period laid down by law is not only
mandatory but also jurisdictional. The right to appeal is not a
natural right and is also not part of due process. It is merely a
statutory privilege and may be exercised only in the manner
and in accordance with the provisions of law. One who seeks to
avail of the right to appeal must comply with the requirements
for the Rules of Court and failure to do so often leads to the loss
of the right to appeal. The failure to timely perfect an appeal is
not a mere technicality for it is jurisdictional. The claim that the
government would suffer loss of substantial amount if not
allowed to recover the tax refund in the amount of more than
fifteen million pesos has been caused by petitioners own doing
or undoing. While the Court understands petitioners counsels
predicament of being burdened with a heavy case load, it
cannot always rule in favor of the government.

The failure to timely perfect an appeal cannot simply be

dismissed as a mere technicality, for it is jurisdictional. The
failure to perfect an appeal as required by the rules has the
effect of defeating the right to appeal of a party and precluding
the appellate court from acquiring jurisdiction over the case.
The dismissal of the petition for review and the denial of the
amended petition were premised on:
(1) the late filing of the original petition for review by the
Commissioner of Internal Revenue (CIR);
(2) the absence of a motion for reconsideration of the January
29, 2002 Resolution; and
(3) lack of authority of the legal officer of the BIR Region 8,
Makati City, to pursue the case on behalf of petitioner CIR.

Perfection of an appeal in the manner and within the period laid

down by law is not only mandatory but also jurisdictional. The
failure to timely perfect an appeal cannot simply be dismissed
as a mere technicality, for it is jurisdictional. The failure to
perfect an appeal as required by the rules has the effect of
defeating the right to appeal of a party and precluding the
appellate court from acquiring jurisdiction over the case. The
dismissal of the petition for review and the denial of the
amended petition were premised on: (1) the late filing of the
original petition for review by the Commissioner of Internal
Revenue (CIR); (2) the absence of a motion for reconsideration
of the January 29, 2002 Resolution; and (3) lack of authority of
the legal officer of the BIR Region 8, Makati City, to pursue the
case on behalf of petitioner CIR.
XXV. Central Luzon Drug Corp. v. Commissioner of Internal
Revenue G.R. No. 181371, March 02, 2011

Central Luzon Drug Corporation is a retailer of medicines and

other pharmaceutical products. For the period January 1995 to
December 1995, pursuant to the mandate of Section 4(a) of
Republic Act No. 7432, otherwise known as the Senior Citizens
Act, it granted a twenty percent (20%) discount on the sale of
medicines to qualified senior citizens amounting to
P219,778.00. It then deducted the same amount from its gross
income for the taxable year 1995, pursuant to Revenue
Regulations No. 2-94 implementing the Senior Citizens Act,
which states that the discount given to senior citizens shall be
deducted by the establishment from its gross sales for value-
added tax and other percentage tax purposes. For the said
taxable period, Central Luzon Drug reported a net loss of
P20,963.00 in its corporate income tax return, thus, it did not
pay income tax for 1995.

Subsequently, Central Luzon Drug filed a claim for refund in the

amount of P150,193.00, claiming that according to Sec. 4(a) of
the Senior Citizens Act, the amount of P219,778.00 should be
applied as a tax credit. The Commissioner of Internal Revenue
(CIR) was not able to decide the claim on time, hence, Central
Luzon Drug filed a Petition for Review with the Court of Tax
Appeals. The latter dismissed the petition, declaring that even
if the law treats the 20% discount granted to senior citizens as
a tax credit, the same cannot apply when there is no tax
liability or the amount of the tax credit is greater than the tax
due. In the latter case, the tax credit will only be to the extent
of the tax liability. Also, no refund can be granted as no tax was
erroneously, illegally and actually collected. Furthermore, the
law does not state that a refund can be claimed by the
establishment concerned as an alternative to the tax credit.

Central Luzon Drug filed a Petition for Review with the Court of
Appeals. The appellate court held that the 20% discount given
to senior citizens which is treated as a tax credit is considered
just compensation and, as such, may be carried over to the
next taxable period if there is no current tax liability.

Issue: Whether or not the 20% discount granted by Central

Luzon Drug to qualified senior citizens pursuant to Sec. 4(a) of
the Senior Citizens Act may be claimed as a tax credit or as a
deduction from gross sales in accordance with Sec. 2(1) of
Revenue Regulations No. 2-94

Held: The petition is denied.

Sec. 4(a) of the Senior Citizens Act provides:

Sec. 4. Privileges for the Senior Citizens. The senior citizens
shall be entitled to the following:
(a) the grant of twenty percent (20%) discount from all
establishments relative to utilization of transportations
services, hotels and similar lodging establishments, restaurants
and recreation centers and purchase of medicines anywhere in
the country:
Provided, That private establishments may claim the cost as
tax credit.

The above provision explicitly employed the term tax credit.

Nothing in the provision suggests for it to mean a deduction
from gross sales. Thus, the 20% discount required by the law to
be given to senior citizens is a tax credit, not a deduction from
the gross sales of the establishment concerned. As a corollary
to this, the definition of tax credit found in Sect. 2(1) of
Revenue Regulations No. 2-94 is erroneous as it refers to tax
credit as the amount representing the 20% discount that shall
be deducted by the said establishment from their gross sales
for value added tax and other percentage tax purposes. When
the law says that the cost of the discount may be claimed as a
tax credit, it means that the amount, when claimed, shall be
treated as a reduction from any tax liability. The law cannot be
amended by a mere regulation.

Finally, for purposes of clarity, Sec. 229 of the Tax Code does
not apply to cases that fall under Sec. 4 of the Senior Citizens
Act because the former provision governs exclusively all kinds
of refund or credit of internal revenue taxes that were
erroneously or illegally imposed and collected pursuant to the
Tax Code while the latter extends the tax credit benefit to the
private establishments concerned even before tax
payments have been made. The tax credit that is contemplated
under the Senior Citizens Act is a form of just compensation,
not a remedy for taxes that were erroneously or
illegally assessed and collected. In the same vein, prior
payment of any tax liability is not a precondition before a
taxable entity can benefit from the tax credit. The credit may
be availed of upon payment of the tax due, if any. Where there
is no tax liability or where a private establishment reports a net
loss for the period, the tax credit can be availed of and carried
over to the next taxable year.
XXVI. Visayas Geothermal vs Commissioner of Internal Revenue

Section 112 of the tax code applies to refund pertaining to

excess or unused input tax. In the case of Visayas Geothermal
Power Company v. Commissioner of Internal Revenue, dated
June 4 2014 (G.R. No. 197525), SC outlined the rules with
regard to claims for refund or tax credit of unutilized creditable
input VAT.

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
b. Exception - Within 2 years from the date of
payment of output VAT, if the administrative claim
was filed from June 8, 2007 to September 12,

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

a. General rule - (i) within 30 days from the full or
partial denial of the administrative claim by the
CIR or (ii) within 30 days from the expiration of
the 120 day period provided to the CIR to decide
on the claim
b. Exception - judicial claim filed from December 10,
2003 to October 6, 2010 which need not wait for
the expiration of the 120-day period.

The Court upheld that non-compliance with the mandatory

period of 30 days is fatal to its refund claim on ground of
prescription. Thus, the taxpayer's recourse in case of full or
partial denial of the claim by the CIR or in case of inaction by
the CIR is to appeal with the CTA. Failure to appeal within the
30 day period will render the decision final and unappealable.
It is also worth knowing that non-compliance with the invoicing
requirements is as fatal as not following the proper timing of
filing the claim. In Miramar v. CIR case, dated June 4, 2014 (G.R.
185432), its claim for refund of tax credits representing its
unutilized input VAT attributable to its zero-rated sales, for the
year 2003 was denied by the high court for its failure to
indicate in its invoices the word zero-rated.

Therefore we conclude that timeliness of the claim is very

crucial so, always think of the 120+30-day-period rule in
making VAT refund. Remember that the appeal to the CTA from
a decision or deemed-denial decision of the CIR is merely a
statutory privilege, not a constitutional right. Thus, exercise of
such privilege requires strict compliance with the conditions
attached thereat. Timing really has a lot to do with the outcome
of the rain-dance.

A) Administrative Remedies A) Administrative Remedies
1. Before payment of tax: 1. Protest
a. Protest Disputing a. Any importer or
the assessment by interested party
filing a motion for adversely affected
reconsideration or with the published
reinvestigation value of duties may
within 30 days from within 15 days from
receipt of the formal date of publication
assessment (Sec. file a written protest
220) b. If the legality of
b. B. Entering into a assessment or
compromise with the appraisal is
BIR (Sec. 204) questioned, taxpayer
2. After payment of the may protest within
tax: 15 days from
a. Filing claim for assessment.
refund or tax credit *Payment under
within 2 years protest is necessary
regardless of any 2. Refund Abatement or
supervening event. drawback (if
(Sec. 229) importation missing or
Note: Payment under deficient or if re-
protest is not exported). (Sections
necessary. 1701-1708 of TCC)
*Taxpayer is given the *Settlement of any seizure by
right of redemption payment of fine or redemption
within 1 year from date of foreclosed goods shall not
of sale or forfeiture of be allowed in any case where
the property sold. (Sec.
215) importation is absolutely
prohibited or if released
thereof is prohibited by law.
(Sec. 2307 of TCC)
B) Judicial Remedies B) Judicial Remedies
1. Civil Action: 1. Civil Action
a. Appeal to the CTA a. Appeal to the CTA
within 30 days from within 30 days from
receipt of the receipt of the
adverse decision of adverse decision of
the CIR of from lapse the Commissioner of
of 180 days inaction Secretary of Finance
of the CIR on the *Adverse decision of
dispute (Sec. 228) the Collector is
b. Action to contest appealable to the
forfeiture of chattel. Commissioner not to
(Sec. 231) the CTA within 15
c. Action for damages days from receipt
(Sec. 227) thereof (notice to the
d. Injustion when the collector of appeal to
collection of the tax the Commissioner is
may jeopardize required) (Sec. 2313
interest of taxpayer TCC)
or the government, b. Action to question
CTA may enjoin the the legality of the
collection and may seizure.
require the taxpayer c. Abandonment of the
to put in a bond. goods (Sec. 1802,
(Sec. 1, RA 1125) TCC)
2. Criminal Action:
Acting erring and
abusive tax officials
and/or employees of
the BIR
Note: The taxpayers judicial relief both under the NIRC and the
TCC may lie either with the CTA (exclusive in all cases
cognizable by it) or the ordinary courts (in all other cases).

Assessment Defined:
Assessment is a formal written notice/communication with the
computation of the tax liability sent to the taxpayer and
demanding for the settlement of a due tax liability within the
indicated period thereof.
An assessment is not an action or proceeding for the collection
of taxes but a step preliminary to warrant of distraint and levy if
that is still feasible.
It is also used to establish a sufficient cause for judicial action
under the pertinent provision of the
Tax Code.

Kinds of Assessment:
A. Self-Assessment one in which the tax is assessment by
the taxpayer himself. The amount of the tax assessed is
reflected in his tax return that he has to pay at the time of
filing of the tax return.
B. Deficiency Assessment This is an assessment made by
the tax assessor himself whereby the correct amount of
the tax is determined after the examination or
investigation is conducted.
C. Prospective Assessment informs the taxpayer of the
findings of the tax examiner who recommends a
deficiency assessment. The taxpayer is usually given
fifteen (15) days from notice within which to explain his
D. Official Assessment An assessment that is made by the
CIR within the reglamentary period sent to the taxpayer
informing him of his tax liability and demanding that he
settles the same within the given period.
E. Disputed Assessment is one where the taxpayer contests
the legality or validity of the assessment and asks that the
same be cancelled or withdrawn.
F. Final Assessment An official assessment what was not
disputed within the prescribed time or that which was not
contested on appeal by the taxpayer.
G. Illegal or Void Assessment An assessment that is made
by a person who has no power to act at all.
H. Erroneous Assessment An assessment that is made by a
person who has the authority to act but the same is
erroneous or he errs in the exercise of that power.
I. Jeopardy Assessment In one that is made by an
authorized person without the benefit of complete or
partial audit, in light of the said officials belief that the
assessment and collection of a deficiency tax will be
jeopardized by delay caused by the taxpayers failure to
(a) comply with audit and investigation requirements to
present his books of accounts and/or pertinent records, or
(b) substantiate all or any of the deductions, exemptions
or credits claimed in his return. To prevent the issuance of
a jeopardy assessment, the taxpayer may be required to
execute a waiver of the statute of limitations.