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ABRA VALLEY COLLEGE, INC., represented by PEDRO V.

BORGONIA vs The following are exempted from real property tax under the Assessment Law:
HON. JUAN P. AQUINO, Judge, Court of First Instance, Abra; ARMIN M. (c) churches and parsonages or convents appurtenant thereto, and all lands,
CARIAGA, Provincial Treasurer, Abra; GASPAR V. BOSQUE, Municipal buildings, and improvements used exclusively for religious, charitable, scientific or
Treasurer, Bangued, Abra; HEIRS OF PATERNO MILLARE educational purposes.
G.R. No. L-39086
June 15, 1988 The test of exemption from taxation is the use of the property for purposes
mentioned in the Constitution.
FACTS
It must be stressed however, that while this Court allows a more liberal and non-
Abra Valley College is an educational institution duly incorporated with the SEC in restrictive interpretation of the phrase "exclusively used for educational purposes" as
1948, it filed a complaint to annul and declare void the "Notice of Seizure' and the provided for in Article VI, Section 22, paragraph 3 of the 1935 Philippine Constitution,
"Notice of Sale" of its lot and building in Bangued, Abra, for non-payment of real reasonable emphasis has always been made that exemption extends to facilities
estate taxes and penalties amounting to P5,140.31. The "Notice of Seizure" of the which are incidental to and reasonably necessary for the accomplishment of the main
college lot and building registered in the name of AVC was made by the Municipal purposes. Otherwise stated, the use of the school building or lot for commercial
Treasurer and Provincial Treasurer for the satisfaction of real property taxes purposes is neither contemplated by law, nor by jurisprudence. Thus, while the use of
amounting to P5,140.31. The "Notice of Sale" was caused for the sale at public the second floor of the main building in the case at bar for residential purposes of the
auction of the college lot and building. These properties were sold at public auction Director and his family, may find justification under the concept of incidental use,
for the satisfaction of the unpaid real property taxes and was sold to Paterno Millare which is complimentary to the main or primary purposeeducational, the lease of the
who offered the highest bid of P6,000.00 and whose Certificate of Sale was issued by first floor thereof to the Northern Marketing Corporation cannot by any stretch of the
the Municipal Treasurer. Millare then filed a motion to dismiss the complaint. With the imagination be considered incidental to the purpose of education. It will be noted
sale of the school premises at public auction, Judge, Hon. Juan P. Aquino of the CFI however that the aforementioned lease appears to have been raised for the first time
of Abra ordered the provincial and municipal treasurers to deliver to the Clerk of in this Court.
Court the proceeds of the auction sale. AVC, through Director Borgonia, deposited
with the trial court the sum of P6,000.00 evidenced by a PNB Check. Facts not raised in the lower court cannot be taken up for the first time on appeal.
Nonetheless, as an exception to the rule, this Court has held that although a factual
The school is recognized by the government and is offering Primary, High School and issue is not squarely raised below, still in the interest of substantial justice, this Court
College Courses, and has a school population of more than one thousand students all is not prevented from considering a pivotal factual matter. "The Supreme Court is
in all. The elementary pupils are housed in a two-storey building across the street and clothed with ample authority to review palpable errors not assigned as such if it finds
the high school and college students are housed in the main building. It was found that their consideration is necessary in arriving at a just decision.
that the Director with his family resided in the second floor of the main building.
Under the 1935 Constitution, the trial court correctly arrived at the conclusion that
The Provincial Fiscal opined that the school building and school lot used for the school building as well as the lot where it is built, should be taxed, not because
educational purposes of the AVC are exempted from the payment of taxes but the the second floor of the same is being used by the Director and his family for
trial court disagreed because of the use of the second floor by the Director of AVC residential purposes, but because the first floor thereof is being used for commercial
school for residential purposes. Court ruled in favor of the government. purposes. However, since only a portion is used for purposes of commerce, it is only
fair that half of the assessed tax be returned to the school involved.

ISSUE
WON the lot and building in question is used exclusively for educational purposes.

RULING
No.
Sec. 22 (3), Article VI, of the then 1935 Philippine Constitution, which expressly
grants exemption from realty taxes for "Cemeteries, churches and parsonages or
convents appurtenant thereto, and all lands, buildings, and improvements used
exclusively for religious, charitable or educational purposes ...

Relative thereto, Sec. 54 (c), Commonwealth Act No. 470 as amended by Republic
Act No. 409, otherwise known as the Assessment Law, provides:
COMMISSIONER OF INTERNAL REVENUE vs THE ESTATE OF BENIGNO P. RULING
TODA, JR., Represented by Special Co-administrators Lorna Kapunan and 1. Tax Evasion.
Mario Luza Bautista Tax avoidance is the tax saving device within the means sanctioned by law. This
G.R. No. 147188 method should be used by the taxpayer in good faith and at arms length. Tax evasion
September 14, 2004 is a scheme used outside of those lawful means and when availed of, it usually
subjects the taxpayer to further or additional civil or criminal liabilities.
FACTS
Cibeles Insurance Corporation authorized Benigno P. Toda, Jr., President and owner Tax evasion connotes the integration of three factors:
of 99.991% of its issued and outstanding capital stock, to sell the Cibeles Building (1) the end to be achieved, i.e., the payment of less than that known by the
and the two parcels of land where the building stands for not less than P90 million. taxpayer to be legally due, or the non-payment of tax when it is shown that a tax
Toda sold the property for P100 million to Rafael Altonaga, who sold it on the same is due;
day to Royal Match Inc. for P200 million. These two transactions were evidenced by (2) an accompanying state of mind which is described as being evil, in bad faith,
Deeds of Absolute Sale notarized on the same day by the same notary public. willfull,or deliberate and not accidental; and
Altonaga paid capital gains tax in the amount of P10 million for the sale of the (3) a course of action or failure of action which is unlawful.
property to RMI.
All these factors are present. As early as 4 May 1989, prior to the purported sale of
Toda sold his entire shares of stocks in CIC to Le Hun Choa for P12.5 million. Three the Cibeles property to Altonaga on 30 August 1989, CIC received P40 million from
and a half years later Toda died. The Bureau of Internal Revenue sent an assessment RMI and not from Altonaga. That P40 million was debited by RMI and reflected in its
notice and demand letter to the CIC for deficiency income tax for the year 1989 in trial balance as other Cibeles Bldg. Another P40 million was debited and reflected in
the amount of P79,099,999.22. The new CIC asked for a reconsideration, asserting RMIs trial balance as other Cibeles Bldg. This shows that the real buyer of the
that the assessment should be directed against the old CIC, and not against the new properties was RMI, and not the intermediary Altonaga.
CIC, which is owned by an entirely different set of stockholders. Toda had also
undertaken to hold the buyer of his stockholdings and the CIC free from all tax The investigation conducted by the BIR disclosed that Altonaga was a close business
liabilities for the fiscal years 1987-1989. associate and one of the many trusted corporate executives of Toda.

The Estate of Benigno P. Toda, Jr. received a Notice of Assessment from the CIR for Tax planning is by definition to reduce, if not eliminate altogether, a tax. The scheme
deficiency income tax for the year 1989 in the amount of P79,099,999.22. The Estate resorted to by CIC in making it appear that there were two sales of the subject
thereafter filed a letter of protest but the Commissioner dismissed it, stating that a properties cannot be considered a legitimate tax planning. Such scheme is tainted
fraudulent scheme was done by CIC wholly owned and controlled by Toda by with fraud. Fraud in its general sense, is deemed to comprise anything calculated to
covering up the additional gain of P100 million and that the two transactions actually deceive, including all acts, omissions, and concealment involving a breach of legal or
constituted a single sale of the property by CIC to RMI. Altonaga was neither the equitable duty, trust or confidence justly reposed, resulting in the damage to another,
buyer of the property from CIC nor the seller of the same property to RMI. The or by which an undue and unconscionable advantage is taken of another.
additional gain of P100 million realized by CIC was taxed at the rate of only 5%
purportedly as capital gains tax of Altonaga, instead of at the rate of 35% as The objective of the sale to Altonaga was to reduce the amount of tax to be paid
corporate income tax of CIC. The income tax return filed by CIC for 1989 with intent especially that the transfer from him to RMI would then subject the income to only
to evade payment of the tax was thus false or fraudulent. 5% individual capital gains tax, and not the 35% corporate income tax. Altonagas
sole purpose of acquiring and transferring title of the subject properties on the same
CTA held that the Commissioner failed to prove that CIC committed fraud to deprive day was to create a tax shelter. Altonaga never controlled the property and did not
the government of the taxes due it. It ruled that even assuming that a pre-conceived enjoy the normal benefits and burdens of ownership. The sale to him was merely a
scheme was adopted by CIC, the same constituted mere tax avoidance, and not tax tax ploy, a sham, and without business purpose and economic substance.The
evasion. intermediary transaction which was prompted more on the mitigation of tax liabilities
than for legitimate business purposes constitutes one of tax evasion.
ISSUE
1. WON this a case of tax evasion or tax avoidance Generally, a sale or exchange of assets will have an income tax incidence only when
2. WON the period for assessment of deficiency income tax for the year 1989 it is consummated.The incidence of taxation depends upon the substance of a
prescribed transaction. The tax consequences arising from gains from a sale of property are not
3. WON Estate can be held liable for the deficiency income tax of CIC for the year finally to be determined solely by the means employed to transfer legal title. Rather,
1989 if any the transaction must be viewed as a whole, and each step from the commencement
of negotiations to the consummation of the sale is relevant. A sale by one person
cannot be transformed for tax purposes into a sale by another by using the latter as a Clearly, the issuance of the correct assessment for deficiency income tax was well
conduit through which to pass title. To permit the true nature of the transaction to be within the prescriptive period.
disguised by mere formalisms, which exist solely to alter tax liabilities, would seriously
impair the effective administration of the tax policies of Congress. 3. Yes.
A corporation has a juridical personality distinct and separate from the persons
Accordingly, the tax liability of CIC is governed by Sec. 27 (a) of of the Tax Reform owning or composing it. Thus, the owners or stockholders of a corporation may not
Act: generally be made to answer for the liabilities of a corporation and vice versa. There
Sec. 27. Rates of tax on corporations. (a) Tax on domestic corporations.- A tax is are, however, certain instances in which personal liability may arise. It has been held
hereby imposed upon the taxable net income received during each taxable year from in a number of cases that personal liability of a corporate director, trustee, or officer
all sources by every corporation organized in, or existing under the laws of the along, albeit not necessarily, with the corporation may validly attach in certain
Philippines, and partnerships, no matter how created or organized but not including circumstances.
general professional partnerships, in accordance with the following: Twenty-five
percent upon the amount by which the taxable net income does not exceed one When Toda sold his shares of stock to Le Hun T. Choa, he knowingly and voluntarily
hundred thousand pesos; and Thirty-five percent upon the amount by which the held himself personally liable for all the tax liabilities of CIC and the buyer for the
taxable net income exceeds one hundred thousand pesos. years 1987, 1988, and 1989.
Respondent estate cannot, therefore, deny liability for CICs deficiency income tax for
CIC is therefore liable to pay a 35% corporate tax for its taxable net income in 1989. the year 1989 by invoking the separate corporate personality of CIC, since its
The 6% individual capital gains tax provided for in Sec. 24 (D) (1) of the Tax Reform obligation arose from Todas contractual undertaking, as contained in the Deed of
Act of 1997 is inapplicable.The assessment for the deficiency income tax issued by Sale of Shares of Stock.
the BIR must be upheld.

2. No.
Sec. 222 of the Tax Reform Act of 1997:
Sec. 269. Exceptions as to period of limitation of assessment and collection of taxes.-
(a) In the case of a false or fraudulent return with intent to evade tax or of failure to
file a return, the tax may be assessed, or a proceeding in court after the collection of
such tax may be begun without assessment, at any time within ten years after the
discovery of the falsity, fraud or omission: Provided, That in a fraud assessment
which has become final and executory, the fact of fraud shall be judicially taken
cognizance of in the civil or criminal action for collection thereof .

Put differently, in cases of (1) fraudulent returns; (2) false returns with intent to
evade tax; and (3) failure to file a return, the period within which to assess tax is ten
years from discovery of the fraud, falsification or omission, as the case may be.

Altonaga, through his counsel, asked the Opinion of the BIR on the tax consequence
of the two sale transactions.Thus, the BIR was amply informed of the transactions
even prior to the execution of the necessary documents to effect the transfer.
However, these circumstances do not negate the existence of fraud. As earlier
discussed those two transactions were tainted with fraud. Even the income tax return
filed by CIC for the year 1989 was false. It did not reflect the true or actual amount
gained from the sale of the Cibeles property. Obviously, such was done with intent to
evade or reduce tax liability.

The prescriptive period to assess the correct taxes in case of false returns is ten years
from the discovery of the falsity. The false return was filed on 15 April 1990, and the
falsity thereof was claimed to have been discovered only on 8 March 1991.The
assessment for the 1989 deficiency income tax of CIC was issued on 9 January 1995.
COMMISSIONER OF INTERNAL REVENUE VS. HON. RAUL M. GONZALEZ,
SECRETARY OF JUSTICE, L. M. CAMUS ENGINEERING CORPORATION Yes. The Supreme Court ruled in favor of the CIR.
G.R. NO. 177279, OCTOBER 13, 2010
For the crime of tax evasion in particular, compliance by the taxpayer with such
Villarama, Jr., J.: subpoena, if any had been issued, is irrelevant. As the Court held in Ungab v. Cusi,
Facts: Jr., the crime is complete when the taxpayer has x x x knowingly and willfully filed a
1. Pursuant to Letter of Authority (LA) No. 00009361, the Bureau of Internal fraudulent return with intent to evade and defeat x x x the tax.
Revenue conducted a fraud investigation for all internal revenue taxes to
determine the tax liabilities of L. M. Camus Engineering Corporation (LMCEC) LMCEC cannot claim as excuse from the reopening of its books of accounts the
for the taxable years 1997, 1998 and 1999 due to the information provided previous investigations and examinations. Respondent Secretarys other ground for
by an informer that it had substantial underdeclared income for the said assailing the course of action taken by petitioner in proceeding with the audit and
period. investigation of LMCECthe alleged violation of the general rule in Section 235 of the
2. LMCEC failed to comply with the subpoena duces tecum issued in connection NIRC allowing the examination and inspection of taxpayers books of accounts and
with the tax fraud investigation, hence, a criminal complaint was instituted other accounting records only once in a taxable year is likewise untenable. As
by the BIR for violation of Section 266 of the NIRC against LMCEC, Luis M. correctly pointed out by petitioner, the discovery of substantial underdeclarations of
Camus and Lino D. Mendoza, the latter two were sued in their capacities as income by LMCEC for taxable years 1997, 1998 and 1999 upon verified information
President and Comptroller, respectively. provided by an informer under Section 282 of the NIRC, as well as the necessity of
3. CIRs assessed and sent LMCEC Preliminary Assessment Notice with the total obtaining information from third parties to ascertain the correctness of the return
deficiency amounting to P430,958,005.90 covering the said period. Personal filed or evaluation of tax compliance in collecting taxes (as a result of the
service of formal demand letter was also made by CIR. However, due to disobedience to the summons issued by the Bureau against the private respondents),
refusal of representatives of LMCEC to receive said notices & demand letter, are circumstances warranting exception from the general rule in Section 235.
CIR resorted to constructive notice in accordance with Section 3, Revenue
Regulations (RR) No. 1299. Under Section 235 (a), an exception was provided in the rule on once a year audit
4. Camus and Mendoza assail the validity of the complaint claiming that examination in case of fraud, irregularity or mistakes, as determined by the
assessment notices are invalid since they dont have serial numbers. They Commissioner. The distinction between a Regular Audit Examination and Tax Fraud
further aver that the company had already undergone a series of routine Audit Examination lies in the fact that the former is conducted by the district offices
examinations for the years 1997, 1998 and 1999 for under the NIRC, only of the Bureaus Regional Offices, the authority emanating from the Regional Director,
one examination of the books of accounts is allowed per taxable year. while the latter is conducted by the Tax Fraud Division of the National Office only
5. LMCEC further averred that it had availed of the Bureaus Tax Amnesty when instances of fraud had been determined by the BIR.
Programs (Economic Recovery Assistance Payment (ERAP) Program and the
Voluntary Assessment Program (VAP) for 1998 and 1999 for 1997, its tax In this case, the non-declaration by LMCEC for the taxable years 1997, 1998 and
liability was terminated and closed under Letter of Termination. Such 1999 of an amount exceeding 30% income declared in its return is considered a
programs granted LMCEC of immunity from audit, thus, BIR is estopped substantial underdeclaration of income, which constituted prima facie evidence of
from further taking action concerning said taxable years. false or fraudulent return under Section 248(B) of the NIRC, as amended.
6. The Chief State Prosecutor dismissed the complaint instituted by BIR since
the payments were made by LMCEC under ERAP and VAP pursuant to the Further, RR No. 2-99 was issued providing for last priority in audit and investigation
provisions of RR Nos. 299 and 82001 which were offered to taxpayers by the of tax returns to accomplish the said objective without, however, compromising the
BIR itself, the latter is now in estoppel to insist on the criminal prosecution revenue collection that would have been generated from audit and enforcement
of the respondent taxpayer and that the voluntary payments made activities. The program Economic Recovery Assistance Payment (ERAP) Program
thereunder are in the nature of a tax amnesty. granted immunity from audit and investigation of income tax, VAT and percentage
7. The Secretary of Justice and the Court of Appeals concurred with the Chief tax returns for 1998. Since such immunity from audit and investigation does not
State Prosecutor. Hence, this petition was filed before the Supreme Court. preclude the collection of revenues generated from audit and enforcement activities,
it follows that the BIR is likewise not barred from collecting any tax deficiency
Issue: discovered as a result of tax fraud investigations.
Whether or not LMCEC and its corporate officers may be prosecuted for
violation of Sections 254 (Attempt to Evade or Defeat Tax) and 255 (Willful Failure to
Supply Correct and Accurate Information and Pay Tax) of the Tax Code

Ruling:
COMMISSION OF INTERNAL REVENUE vs. HANTEX TRADING CO., INC. Issue:
G.R. No. 136975-March 31, 2005
Whether or not the December 10, 1991 final assessment of the CIR against
Facts: Hantex 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.
Hantex Trading Co., a company organized under the Philippines, 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 Ruling:
required to file an Import Entry and Internal Revenue Declaration
(Consumption Entry) with the Bureau of Customs under Section 1301 of the No.
Tariff and Customs Code. Sometime in October 1989, Lt. Vicente Amoto, Acting
Chief of Counter-Intelligence Division of the Economic Intelligence and Investigation Central to the second issue is Section 16 of the NIRC of 1977, as amended
Bureau (EIIB), received confidential information that the respondent had which provides that the Commissioner of Internal Revenue has the power to make
imported synthetic resin amounting to P115,599,018.00 but only declared assessments and prescribe additional requirements for tax administration and
P45,538,694.57. enforcement. Among such powers are those provided in paragraph (b), which
provides that Failure to submit required returns, statements, reports and other
Hantex receive a subpoena to present its books of account, however, documents. When a report required by law as a basis for the assessment of any
it failed to do so. The original copies of Consumption Entries cannot be national internal revenue tax shall not be forthcoming within the time fixed by law or
produced because the copies in the possession of the Collection Division (official regulation or when there is reason to believe that any such report is false, incomplete
repository of said records) were eaten by termites. Hantex did not want to or erroneous, the Commissioner shall assess the proper tax on the best evidence
produce the said records because it alleged that it has been the subject of numerous obtainable. This provision applies when the Commissioner of Internal Revenue
investigations already and if they will provide their records, there will be no end to undertakes to perform her administrative duty of assessing the proper tax against a
the investigation. taxpayer, to make a return in case of a taxpayers failure to file one, or to amend a
return already filed in the BIR.
As such, the Investigation Division, in determining Hantexs alleged tax
deficiency, relied on the photocopied (xerox) copies submitted to them by The best evidence envisaged in Section 16 of the 1977 NIRC, as
their informant. After investigation, it was found that Hantexs amended, includes the corporate and accounting records of the taxpayer
importations amounted to Php 105 M. Hantex contested the findings as it who is the subject of the assessment process, the accounting records of
averred that the same was based on incompetent evidence considering other taxpayers engaged in the same line of business, including their gross
that it was based merely on xerox copies which were not even profit and net profit sales. Such evidence also includes data, record, paper,
authenticated or certified. document or any evidence gathered by internal revenue officers from other
taxpayers who had personal transactions or from whom the subject
The Commissioner however argued that under the National Internal Revenue taxpayer received any income; and record, data, document and information
Code, under the best evidence rule, if the taxpayer does not want to provide the secured from government offices or agencies, such as the SEC, the Central
required documents for taxation purposes, the taxing authorities can rely on other Bank of the Philippines, the Bureau of Customs, and the Tariff and Customs
evidences, in this case, the xerox copies, to determine tax liabilities. Commission. However, the best evidence obtainable under Section 16 of
the 1977 NIRC, as amended, does not include mere photocopies of
The case was submitted to the CTA which ruled that Hentex have tax deficiency records/documents. The petitioner, in making a preliminary and final tax
and is ordered to pay, per investigation of the Bureau. The CA ruled that the income deficiency assessment against a taxpayer, cannot anchor the said
and sales tax deficiency assessments issued by the petitioner were unlawful and assessment on mere machine copies of records/documents. Mere
baseless since the copies of the import entries relied upon in computing the photocopies of the Consumption Entries have no probative weight if
deficiency tax of the respondent were not duly authenticated by the public officer offered as proof of the contents thereof. The reason for this is that such
charged with their custody, nor verified under oath by the EIIB and the BIR copies are mere scraps of paper and are of no probative value as basis for
investigators. any deficiency income or business taxes against a taxpayer.
7794, as amended, constitutes double taxation.
NURSERY CARE CORPORATION vs. ACEVEDO
HELD:
G.R. 180651 March 31, 2005
Yes. On the basis of the rulings in City of Manila v. Coca-Cola Bottlers Philippines, Inc
and Swedish Match Philippines, Inc. v. The Treasurer of the City of Manila, the Court
FACTS: now holds that all the elements of double taxation concurred upon the City of
Manilas assessment on and collection from the petitioners of taxes for the first
The City of Manila assessed and collected taxes from the individual petitioners quarter of 1999 pursuant to Section 21 of the Revenue Code of Manila.
namely:
First: Because Section 21 of the Revenue Code of Manila imposed the tax on a
NURSERY CARE CORPORATION person who sold goods and services in the course of trade or business
SHOEMART, INC based on a certain percentage of his gross sales or receipts in the
STAR APPLIANCE CENTER, INC. preceding calendar year, while Section 15 and Section 17 likewise imposed the tax
H&B, INC.; SUPPLIES STATION, INC on a person who sold goods and services in the course of trade or business
HARDWARE WORKSHOP, INC. but only identified such person with particularity, namely, the wholesaler,
distributor or dealer (Section 15), and the retailer (Section 17), all the taxes
pursuant to Section 15 (Tax on Wholesalers, Distributors, or Dealers) and Section 17 being imposed on the privilege of doing business in the City of Manila in order to
(Tax on Retailers) of the Revenue Code of Manila. make the taxpayers contribute to the citys revenues were imposed on the same
subject matter and for the same purpose.
The City of Manila imposed additional taxes upon the petitioners pursuant to Section
21 of the Revenue Code of Manila, as amended, as a condition for the renewal of Second: the taxes were imposed by the same taxing authority (the City of
their respective business licenses for the year 1999. Section 21 of the Revenue Code Manila) and within the same jurisdiction in the same taxing period (i.e., per calendar
of Manila stated: year).

Section 21. Tax on Business Subject to the Excise, Value- Added or Percentage Taxes Third: the taxes were all in the nature of local business taxes.
under the NIRC.On any of the following businesses and articles of commerce
subject to the excise, value-added or percentage taxes under the National Internal All the elements of double taxation concurring there indeed was a double taxation
Revenue Code, hereinafter referred to as NIRC, as amended, a tax of FIFTY PERCENT
(50%) OF ONE PERCENT (1%) per annum on the gross sales or receipts of the
preceding calendar year is hereby imposed:

On person who sells goods and services in the course of trade or businesses.

PROVIDED, that all registered businesses in the City of Manila already paying the
aforementioned tax shall be exempted from payment thereof.

To comply with the City of Manilas assessment of taxes under Section 21, supra, the
petitioners paid under protest the following amounts corresponding to the first
quarter of 1999, to wit:

By letter dated March 1, 1999, the petitioners formally requested the Office of the
City Treasurer for the tax credit or refund of the local business taxes paid under
protest.

ISSUE:

Whether or not the collection of taxes under Section 21 of Ordinance No.


SWEDISH MATCH PHILIPPINES, INC., vs. THE TREASURER OF THE CITY OF Yes. Double taxation means taxing the same property twice when it should be taxed
MANILA only once that is, taxing the same person twice by the same jurisdiction for the
G.R. No. 181277. July 3, 2013. same thing. It is obnoxious when the taxpayer is taxed twice, when it should be but
once. Otherwise described as direct duplicate taxation, the two taxes must be
TOPIC: Double Taxation imposed on the same subject matter, for the same purpose, by the same taxing
authority, within the same jurisdiction, during the same taxing period and the taxes
FACTS must be of the same kind or character.

Petitioner paid business taxes in the total amount of P470,932.21. 4 The assessed The very source of the power of municipalities and cities to impose a local business
amount was based on Sections 14 5 and 21 6 of Ordinance No. 7794, otherwise tax, and to which any local business tax imposed by petitioner City of Manila must
known as the Manila Revenue Code, as amended by Ordi nance Nos. 7988 and 8011. conform. It is apparent from a perusal thereof that when a municipality or city
Assenting that it was not liable to pay taxes under Section 21, petitioner wrote a has already imposed a business tax on manufacturers, etc. of liquors,
letter to herein respondent claiming a refund of business taxes the former had paid distilled spirits, wines, and any other article of commerce, pursuant to
pursuant to the said provision. Petitioner argued that payment under Section 21 Section 143(a) of the LGC, said municipality or city may no longer subject
constituted double taxation in view of its payment under Section 14. Petitioner filed a the same manufacturers, etc. to a business tax under Section 143(h) of the
Petition for Refund of Taxes 9 with the RTC of Manila in accordance with Section 196 same Code. Section 143(h) may be imposed only on businesses that are
of the Local Government Code of 1991 for the alleged failure of respondent to act on subject to excise tax, VAT, or percentage tax under the NIRC, and that are
its claim for a refund. not otherwise specified in preceding paragraphs. In the same way,
businesses such as respondents, already subject to a local business tax
ARGUMENT: under Section 14 of Tax Ordinance No. 7794 [which is based on Section
143(a) of the LGC], can no longer be made liable for local business tax
Petitioner maintains that the enforcement of Section 21 of the Manila Revenue Code under Section 21 of the same Tax Ordinance [which is based on Section
constitutes double taxation in view of the taxes collected under Section 14 of the 143(h) of the LGC].
same code.
Petitioner points out that Section 21 is not in itself invalid, but the enforcement of this Petitioner should not have been subjected to taxes under Section 21 of the Manila
provision would constitute double taxation if business taxes have already been paid Revenue Code for the fourth quarter of 2001, considering that it had already been
under Section 14 of the same revenue code. paying local business tax under Section 14 of the same ordinance
Petitioner further argues that since Ordinance Nos. 7988 and 8011 have already It is undisputed that petitioner paid business taxes based on Sections 14 and 21 for
been declared null and void in CocaCola Bottlers Philippines, Inc. v. City of Manila, 26 the fourth quarter of 2001 in the total amount of P470,932.21. 31 Therefore, it is
all taxes collected and paid on the basis of these ordinances should be refunded. entitled to a refund of P164,552.04 32 corresponding to the payment under Section
RESPONDENT 21 of the Manila Revenue Code.
Respondent argues that Sections 14 and 21 pertain to two different objects of tax Wherefore, petition is GRANTED
thus, they are not of the same kind and character so as to constitute double taxation.
Section 14 is a tax on manufacturers, assemblers, and other processors, while Section
21 applies to businesses subject to excise, valueadded, or percentage tax.
RTC: Dismissed the Petition for the failure of petitioner to plead the latters capacity
to sue and to state the authority of Tiarra T. BatilaranBeleno (Ms. Beleno), who had
executed the Verification and Certification of NonForum Shopping.
CTA: CTA Second Division affirmed the RTCs dismissal of the Petition for Refund of
Taxes on the ground that petitioner had failed to state the authority of Ms. Beleno to
institute the suit.

Issue
Whether the imposition of tax under Section 21 of the Manila Revenue Code
constitutes double taxation in view of the tax collected and paid under Section 14 of
the same code
Ruling
COMMISSIONER OF INTERNAL REVENUE v. NEXT MOBILE, INC. GR No. and collect taxes should not be jeopardized merely because of mistakes and lapses of
212825 December 7, 2015 its officers, especially in cases like this where the taxpayer is obviously in bad faith.
Wherefore, petition is GRANTED. Appealed decision reversed and set aside. Case be
VELASCO, JR., J: remanded to the CTA for further proceedings.
FACTS:

On April 15, 2002, respondent Next Mobile, Inc. filed with the BIR the following for
taxable year ending December 2001, to wit: *Annual Income Tax Return *Monthly
Remittance Returns of Final Income Taxes Withheld *Monthly Remittance Returns
of Expanded Withholding Tax *Monthly Remittance Return of Income Taxes
Withheld on Compensation. On September 2003, respondent received a copy of a
Letter of Authority to examine respondents books of accounts and other accounting
records for income and withholding taxes for the period covering Jan. 1 Dec. 31,
2001. Subsequently, Ma. Lida Sarmiento, respondents Director of Finance executed
several waivers of the statute of limitations to extend the prescriptive period of
assessment of taxes due in taxable year ending in Dec. 2001. On September 2005,
respondent received a Preliminary Assessment Notice form the BIR, and a Formal
Letter of Demand on October 2005, demanding payment for its delinquency taxes.
When respondent sought reinvestigation and protest against FLD it was denied by the
BIR. Thus, respondent filed a petition with the CTA. CTA ruled in favor of
respondent, declaring the FLD cancelled on the ground that it was issued beyond the
three-year prescriptive period provide by law. Hence this petition.

ISSUE:

Whether or not the CIRs right to assess respondents deficiency taxes had already
prescribed.

RULING: No. Sec.23 of the 1997 NIRC mandates the BIR to assess internal revenue
taxes within three years from the last day prescribed by law for the filing of the tax
return or the actual date of filing of such return, whichever comes later. Hence, an
assessment notice issued after the thre-year prescriptive period is not valid and
effective. Exceptions to this rule are provided under Sec.222 of the NIRC. Sec.
222(b) of the NIRC provides that the period to assess and collect taxes may only be
extended upon a written agreement between CIR and taxpayer executed before the
expiration of the three-year period.
The flaw in the appellate courts reasoning stems from its assumption that the waiver
is a unilateral ac of the taxpayer when it is in fact and in law an agreement between
the taxpayer and the BIR. When petitioners comptroller signed the waiver on
September 1997, it was not yet complete and final because the BIR had not yet
assented. There is compliance with the provision of the RMO No. 20-90, a mandatory
requirement before a waiver is deemed satisfactory, only after the taxpayer received
a copy of the waiver accepted by the BIR. The requirement to furnish the taxpayer
with the copy of the waiver is not only to give notice of the existence of the
document but of the acceptance by the BIR and the perfection of the agreement. To
be sure, both parties are at fault. Here, respondent Sarmiento executed the waivers
in favor of petitioner without proper authority to sign being present upon submission
to the BIR. Similarly, BIR is at fault for violating its own rules and was careless in
performing its functions with respect to these waivers. However, BIRs right to assess
SMIED Philippines Technology, Inc. vs. Commissioner of Internal Revenue The BIR is not mandated to make an assessment relative to every return
G.R. No. 175410. November 12, 2014 filed with it. Tax returns filed with the BIR enjoy the presumption that these are in
accordance with the law. Tax returns are also presumed correct since these are filed
LEONEN, J. under the penalty of perjury. Generally, however, the BIR assesses taxes when it
Facts: appears, after a return had been filed, that the taxes paid were incorrect, false, or
SMIEd Philippines is a PEZAregistered corporation authorized to engage in fraudulent. The BIR also assesses taxes when taxes are due but no return is filed.
the business of manufacturing ultra highdensity microprocessor unit package. After its Thus, the BIR first has to make an assessment of the taxpayers liabilities.
registration, SMIEd Philippines constructed buildings and purchased machineries and When the BIR makes the assessment, the taxpayer is allowed to dispute that
equipment. SMIEd Philippines failed to commence operations. Its factory was assessment before the BIR. If the BIR issues a decision that is unfavorable to the
temporarily closed and it sold its buildings and some of its installed machineries and taxpayer or if the BIR fails to act on a dispute brought by the taxpayer, the BIRs
equipment to Ibiden Philippines, Inc., another PEZAregistered enterprise. Thereafter, decision or inaction may be brought on appeal to the Court of Tax Appeals. The Court
SMIEd Philippines was dissolved. of Tax Appeals then acquires jurisdiction over the case.
In its quarterly income tax return for year 2000, SMIEd Philippines subjected
the entire gross sales of its properties to 5% final tax on PEZAregistered corporations.
On February 2, 2001, after requesting the cancellation of its PEZA registration and
amending its articles of incorporation to shorten its corporate term, SMIEd Philippines
filed an administrative claim for the refund of the 5% final tax paid with the BIR. The
BIR did not act on SMIEd Philippines claim, which prompted the latter to file a
petition for review before the Court of Tax Appeals which was however denied
because it did not commence operations. After finding that SMIEd Philippines sold
properties that were capital assets, the Court of Tax Appeals subjected the sale to
6% capital gains tax.
On July 17, 2005, SMIEd Philippines filed a petition for review before the
Court of Tax Appeals En Banc arguing that the Court of Tax Appeals Second Division
erroneously assessed the 6% capital gains tax. It also argued that the Court of Tax
Appeals Second Division cannot make an assessment at the first instance. In its
decision, the Court of Tax Appeals En Banc dismissed SMIEd Philippines petition.
Hence, this present recourse.

Issue:
Who has the power to make an assessment for the first time?

Ruling:
The Bureau of Internal Revenue.
The term assessment refers to the determination of amounts due from a
person obligated to make payments. In the context of national internal revenue
collection, it refers the determination of the taxes due from a taxpayer under the
National Internal Revenue Code of 1997. The power and duty to assess national
internal revenue taxes are lodged with the BIR. Section 2 of the National Internal
Revenue Code of 1997 provides:
SEC. 2. Powers and Duties of the Bureau of Internal Revenue.The Bureau of
Internal Revenue shall be under the supervision and control of the Department of
Finance and its powers and duties shall comprehend the assessment and collection of
all national internal revenue taxes, fees, and charges, and the enforcement of all
forfeitures, penalties, and fines connected therewith, including the execution of
judgments in all cases decided in its favor by the Court of Tax Appeals and the
ordinary courts. The Bureau shall give effect to and administer the supervisory and
police powers conferred to it by this Code or other laws. (Emphasis supplied)
* ISSUE:
G.R. No. 170389. October 20, 2010.
REPUBLIC OF THE PHILIPPINES, represented by the Honorable Whether or not the CIR is correct in re-classifying the subject properties
COMMISSIONER OF INTERNAL REVENUE (CIR), petitioner, vs. AQUAFRESH from residential to commercial, consequently raising the zonal value of the
SEAFOODS, INC., respondent. properties.

FACTS: HELD:
1. Aquafresh Seafoods sold to Philips Seafood two parcels of land located at Barrio NO.
Banica, Roxas City. Aqua fresh paid the Capital Gains Tax (P186,000) and
Documentary Stamp Tax (P46,500). Taxation; Capital Gains Tax (CGT); Zonal Valuation; While the Commissioner of
2. BIR received a report that the purchase price of the sale was undervalued for Internal Revenue (CIR) has the authority to prescribe real property values and divide
tax purposes; BIR then conducted an investigation and concluded that the the Philippines into zones, the law is clear that the same has to be done upon
subject properties were commercial and had a higher zonal value (P2000). consultation with competent appraisers both from the public and private sectors.
While the CIR has the authority to prescribe real property values and divide
3. Assessment notice was sent to Aquafresh for tax deficiencies. Aquafresh the Philippines into zones, the law is clear that the same has to be done
protested but the protest was denied. upon consultation with competent appraisers both from the public and
4. Aquafresh filed a petition for review with the CTA seeking the reversal of the private sectors. It is undisputed that at the time of the sale of the subject
decision. AQUAFRESHs contention: The properties were located in Barrio properties found in Barrio Banica, Roxas City, the same were classified as
Banica, classified as residential and given a zonal value of P650 per sq/m in the RR, or residential, based on the 1995 Revised Zonal Value of Real
Properties. Petitioner, thus, cannot unilaterally change the zonal valuation
1995 Revised Zonal Values of Real Property, the prescribed zonal value should of such properties to commercial without first conducting a reevaluation
prevail. Aquafresh contends that the BIR had no business in re-classifying the of the zonal values as mandated under Section 6(E) of the NIRC.
subject properties to commercial. Same; Same; Same; The Commissioner of Internal Revenue (CIR) cannot reclassify
5. The CTA decided in favor of Aquafresh stating that while the CIR is given the properties from residential to commercial without first complying with the procedures
authority to determine the zonal values, the same is not without limitation - it prescribed by law. To this Courts mind, petitioners act of reclassifying the
subject properties from residential to commercial cannot be done without
should be done in consulation with competent appraisers both from the public first complying with the procedures prescribed by law. It bears to stress
and private sectors in accordance with Sec. 6e of NIRC. that ALL the properties in Barrio Banica were classified as residential,
6. The CIR now assails the CTA decision. under the 1995 Revised Zonal Values of Real Properties. Thus, petitioners
act of classifying the subject properties involves a reclassification and
CIRs contention: revision of the prescribed zonal values.
a. It argues that the requirement of consultation is mandatory only
when it is prescribing real property values that is when a formulation or
change is made in the schedule of zonal values.
b. He argues that what they did was not to prescribe the zonal
value, but merely classify the same as commercial and apply the
corresponding zonal value for such classification based on the existing
schedule of zonal values.
c. That their act was pursuant to their Zonal Valuation Guidelines.
According to the CIR, the guidelines provide that All real properties,
regardless of actual use, located in a street/barangay zone, the use of which
are predominantly commercial shall be classified as Commercial for
purposes of zonal valuation.
BATANGAS TRANSPORTATION COMPANY and LAGUNA-TAYABAS modify his assessment subject of the appeal by increasing the same, on the
BUS COMPANY COLLECTOROF INTERNAL REVENUE ground that he had committed error in good faith in making said appealed
assessment.
FACTS:
RULING:
Batangas Transportation Company and Laguna - Tayabas Bus Company are
two distinct and separate corporations engaged in the business of land
transportation by means of motor buses, and operating distinct and separate The Collector of Internal Revenue, after appeal from his decision to the CTA has
lines. Each company also kept and maintained separate books, fleets of buses, been perfected, and after the Tax Court had acquired jurisdiction over the appeal,
management, personnel, maintenance and repair shops, and other facilities. Joseph but before the answer is filed with the court, may still modify his assessment,
Benedict managed the Batangas Transportation, while Martin Olson was the subject of the appeal, by increasing the same. If the Collector of Internal Revenue
manager of the Laguna Bus. Max Blouse was the President of both corporations. is not allowed to amend his assessment before the CTA, and since he may make a
subsequent reassessment to collect additional sums within the same subject of his
In March, 1947, after the resignation of Martin Olson as Manager of the original assessment, provided it is done within the prescriptive period, that would
Laguna Bus, Joseph Benedict, who was then managing the Batangas lead to multiplicity of suit which law does not encourage.
Transportation, was appointed Manager of both companies by their respective
Board of Directors. The joint management was called, "Joint Emergency
Operation.

Under the theory that the two companies had pooled their resources in the
establishment of the Joint Emergency Operation, thereby forming a joint venture,
the Collector wrote the bus companies that there was due from them the amount
of P422,210.89 as deficiency income tax and compromise for the years 1946 to
1949, inclusive.

After some exchange of communications between the parties, the Collector, on


January 8, 1955, informed the respondents "that after crediting the
overpayment made by them of their alleged income tax liabilities for the
aforesaid years, pursuant to the doctrine of equitable recoupment, the income tax
due from the `Joint Emergency Operation' for the years 1946 to 1949, inclusive, is
in the total amount of P54,143.54." The respondent companies appealed from said
assessment of P54,143.54 to the Court of Tax Appeals, but before filing his answer,
the Collector set aside his original assessment of P54,143.54 and reassessed the
alleged income tax liability of respondents of P148,890.14, claiming that he had
later discovered that said companies had been "erroneously credited in the last
assessment with 100 per cent of their income taxes paid when they should in fact
have been credited with only 75 per cent thereof, since under Section 24 of the
Tax Code dividends received by them from the Joint Operation as a domestic
corporation are returnable to the extent of 25 per cent". That corrected and
increased reassessment was embodied in the answer filed by the Collector with
the Court of Tax Appeals.

ISSUE:
WON the Collector of Internal Revenue, after the appeal from his decision has been
perfected, and after the Court of Tax Appeals has acquired jurisdiction over the
same, but before said Collector has filed his answer with that court, may still
(CONSOLIDATED CASE) commissioning of the Power Station and shall operate and maintain the same, subject
COMMISSIONER OF INTERNAL REVENUE vs. SAN ROQUE POWER to NPC instructions.
CORPORATION
G.R. No. 187485 February 12, 2013 During the cooperation period of twenty-five (25) years commencing from
the completion date of the Power Station, NPC will take and pay for all electricity
(PETITION FOR REVIEW) available from San Roque Power Station. On the construction and development of the
The CTA 2nd Division San Roque Multi- Purpose Project, San Roque allegedly incurred, excess input VAT
ordered the CIR to refund or issue a tax credit to San Roque Power Corporation (San which it declared in its Quarterly VAT Returns filed for the same year.
Roque)
for unutilized input value-added tax (VAT) on purchases of capital goods and services San Roque filed with the BIR separate claims for refund, representing
for the unutilized input taxes as declared in its VAT returns for taxable year 2001.
taxable year 2001.
On March 28, 2003, San Roque filed amended Quarterly VAT Returns for the
X----------------------------X year 2001 since it increased its unutilized input VAT. Consequently, San Roque filed
with the BIR a separate
TAGANITO MINING CORPORATION vs. COMMISSIONER OF INTERNAL amended claims for refund. CIRs inaction on the subject claims led to the filing of the
REVENUE Petition for Review with the CTA-Division on April 10, 2003.
G.R. No. 196113
(PETITION FOR REVIEW) CTA DIVISIONS RULING:
assailing the Decision and the Resolution promulgated The CTA Second Division initially denied San Roques claim on the following
by the CTA EB reversing the decision and resolution of the CTA Second Division and grounds:
granted lack ofrecorded zero-rated or effectively zero-rated sales;
the CIRs petition for review. The CTA EB dismissed, for having been prematurely failure to submit documents specifically dentifying the purchased
filed goods/services related to the claimed input VAT which were included in
its Property, Plant and Equipment account;
x----------------------------x and failure to prove that the related construction costs were capitalized
PHILEX MINING CORPORATION vs. COMMISSIONER OF INTERNAL in its books of account and subjected to depreciation.
REVENUE
G.R. No. 197156 Section 112(B) of Republic Act No. 8424 (RA 8424)17 requirement to be
(PETITION FOR REVIEW) entitled to a tax
assailing the decision and resolution promulgated by refund or credit of input VAT attributable to capital goods imported or locally
the CTA EB affirming the decisionand resolution of the CTA 2nd Division in denying, purchased:
due to (1) it is a VAT-registered entity;
prescription, Philex Mining Corporations (Philex) judicial claim for tax refund or credit. (2) its input taxes claimed were paid on capital goods duly supported by
VAT invoices and/or official receipts;
FACTS (3) it did not offset or apply the claimed input VAT payments on capital
goods against any output VAT liability; and
(4) its claim for refund was filed within the two-year prescriptive period
both in the administrative and judicial levels.
COMMISSIONER OF INTERNAL REVENUE vs. SAN ROQUE POWER
CORPORATION
San Roque complied with the first, third, and fourth requirements, thus
partially granting the refund. The CTA Second Division ordered the Commissioner
San Roque Power Corporation is a domestic corporation. It was incorporated
to refund or issue a tax credit in favor of San Roque 483,797,599.65, which
to design, construct, erect, assemble, own, commission and operate power-
represents San Roques unutilized input VAT on its purchases of capital goods
generating plants and related facilities pursuant to and under contract with the Phil.
and services for the taxable year 2001.
Government.
On April 10, 2003, a mere 13 days after it filed its amended
In 1997, San Roque entered into a Power Purchase Agreement ("PPA") with
administrative claim with the CIR on March 28, 2003, San Roque filed a Petition
National Power Corporation. The Power Purchase Agreement provides that San Roque
shall be responsible for the design, construction, installation, completion, testing and
for Review with the CTA. CIR alleged that the claim by San Roque was Taganito must prove that it has complied with the provisions of
prematurely filed with the CTA Sections 112 (A) and (D) and 229 of the National Internal Revenue
Code of 1997 (1997 Tax Code) on the prescriptive period for
THE COURT OF TAX APPEALS RULING: EN BANC claiming tax refund/credit;
Proof of compliance with the prescribed checklist of requirements
Claim for refund with the BIR and the subsequent appeal to the to be submitted involving claim for VAT refund pursuant to
Court of Tax Appeals must be filed within the two-year period. Revenue Memorandum Order No. 53-98, otherwise there would be
no sufficient compliance with the filing of administrative claim for
TWO YEAR PESCRIPTIVE PERIOD FOR FILING A CLAIM FOR INPUT refund, the administrative claim thereof being mere proforma,
TAX is reckoned from the date of the filing of the quarterly VAT return and which is a condition sine qua non prior to the filing of judicial claim
payment of the tax due. If the said period is about to expire but the BIR has in accordance with the provision of Section 229 of the 1997 Tax
not yet acted on the application for refund, the taxpayer may interpose a Code. Further, Section 112 (D) of the Tax Code,
petition for review with this Court within the two year period.
Taganitos failure to submit proof of compliance with the above-stated
requirements warrants immediate dismissal of the petition
TAGANITO MINING CORPORATION V. CIR
Taganito Mining Corporation, is a corporation of mining lode and/or placer Taganito filed the administrative claim for refund with the Bureau of Internal
mining, developing, exploiting, extracting, milling, preparing for market, Revenue on November 14, 2006. On February 14, 2007, the instant petition was filed.
manufacturing, buying, selling, exchanging, shipping, transporting, and otherwise Obviously the 120 days given to the Commissioner to decide on the claim has not yet
producing and dealing all kinds of ores, metals and their by-products. lapsed when the petition was filed. The petition was prematurely filed, hence it must
From its amended Quarterly VAT Returns, Taganito reported zero-rated be dismissed for lack of jurisdiction.
sales amounting to P1,446,854,034.68; input VAT on its domestic purchases and
importations of goods (other than capital goods) and services amounting to During trial, Taganito] presented testimonial and documentary evidence primarily
P2,314,730.43; and input VAT on its domestic purchases and importations of capital aimed at proving its supposed entitlement to the refund. The CIR], on the other
goods amounting to P6,050,933.95 hand, opted not to present evidence.

On November 14, 2006, Taganito filed with the CIR, through BIRs Large COURT OF TAX APPEALS RULING
Taxpayers Audit Partially granted Taganitos claim.
and Investigation Division II (LTAID II), a letter dated November 13, 2006 claiming a Taganito, filed a Motion for Partial Reconsideration on 15
tax February2010.
credit/refund the periods:
(1) January 1, 2004 to December 31, 2004 Second Division denied the CIRs motion. Section 112 (Refunds or
(2) January 1, 2005 to December 31, 2005. Tax Credits of Input Tax) should be read in isolation from Section 229
(Recovery of Tax Erroneously or Illegally Collected) or vice versa. The CTA
On November 29, 2006, Taganito sent again another letter to the CIR, to Second Division applied the mandatory statute of limitations in seeking
correct the period of the above claim for tax credit/refund in the said amount of judicial recourse prescribed under Section 229 to claims for refund or
8,365,664.38 as actually referring to the period covering January 1, 2005 to tax credit under Section 112.
December 31, 2005.
As the statutory period within which to file a claim for refund for said input THE COURT OF TAX APPEALS RULING: EN BANC
VAT is about to lapse without action on the part of the CIR, Taganito filed the instant
Petition for Review Taganito filed its administrative claim on 14 November 2006, which
was well within the period prescribed under Section 112(A) and (B) of the
The CIR] interposes the following defenses: 1997 Tax Code. However, the CTA EB found that Taganitos judicial claim
Taganitos] alleged claim for refund is subject to administrative was prematurely filed. Taganito filed its Petition for Review before the CTA
investigation/examination by the Bureau of Internal Revenue (BIR); Second Division on 14 February 2007. The judicial claim was filed after the
The amount being claimed by Taganito as alleged unutilized input lapse of only 92 days from the filing of its administrative claim before the
VAT on domestic purchases of goods and services and on CIR, in violation of the 120-day period prescribed in Section 112(D) of the
importation of capital goods for the period January 1, 2005 to 1997 Tax Code.
December 31, 2005 is not properly documented;
a taxpayer claimant has the option of seeking judicial redress for refund or Denied Philexs claim due to Prescription.
tax credit of excess or unutilized input tax with this Court, either within 30 1. Philexs claim covered the 3rd quarter of 2005, its administrative claim
days from receipt of the denial of its claim, or after the lapse of the 120-day filed on 20 March 2006 was timely filed.
period in the event of inaction by the Commissioner, provided that both 2. Judicial claim filed on 17 October 2007 was filed late and therefore
administrative and judicial remedies must be undertaken within the 2-year barred by prescription.
period.
CTA Second Division denied Philexs Motion for Reconsideration.
Taganito filed its Motion for Reconsideration on 29 December 2010.
The Commissioner filed an Opposition on 26 January 2011. (28 DAYS
AFTER) THE COURT OF TAX APPEALS RULING: EN BANC
The CTA EB denied for lack of merit Taganitos motion in a Resolution dated
14 March 2011. Denied Philexs petition and affirmed.
The CTA EB did not see any justifiable reason to depart from this Courts
rulings in Aichi and Mirant. Philexs administrative claim for refund was filed within the two-
year prescriptive period; however, as to its judicial claim for refund/credit,
records show that on March 20, 2006, Philex applied the administrative claim
PHILEX MINING CORPORATION V. CIR for refund of unutilized input VAT with the One Stop Shop Center of the
Department of Finance, per Application No. 52490. From March 20, 2006,
which is also presumably the date Philex submitted supporting documents,
Philex is a corporation duly organized and existing under the laws of the together with the aforesaid application for refund, the CIR has 120 days, or
Republic of the Philippines, which is principally engaged in the mining business, which until July 18, 2006, within which to decide the claim.
includes the exploration and operation of mine properties and commercial production
and marketing of mine products. Within 30 days from the lapse of the 120-day period, or from July
19, 2006 until August 17, 2006, Philex should have elevated its claim for
On October 21, 2005, Philex filed its Original VAT Return for the third refund to the CTA. Philex filed its Petition for Review only
quarter of taxable year on October 17, 2007 (426 days way beyond the 30- day period prescribed
2005 and Amended VAT Return for the same quarter on December 1, 2005. by law).

On March 20, 2006, Philex filed its claim for refund/tax credit of the amount ISSUES:
of 23,956,732.44
with the One Stop Shop Center of the Department of Finance. CIR V. SAN ROQUE POWER CORPORATION

Due to The CIR's failure to act on such claim, on October 17, 2007, pursuant to 1. Whether or not CIR IS CORRECT that the claim by San Roque was
Sections 112 and 229 of the NIRC of 1997, as amended, Philex filed a Petition for prematurely filed with the CTA.
Review. 2. Whether of not San Roque is entitled to tax refund because of its excess
input VAT.
CIR alleged the following special and affirmative defenses: 3. Whether or not the Atlas and Mirant doctrine is applicable in the said case.
Claims for refund are strictly construed against the taxpayer as the same 4. Whether or not the CTA have no jurisdiction over the said case.
partake the nature
of an exemption; TAGANITO MINING CORPORATION V. CIR
The taxpayer has the burden to show that the taxes were erroneously or
illegally paid. Failure 1. Whether or not the Aichi doctrine should be applied in the case.
on the part of Philex to prove the same is fatal to its cause of action;
Philex should prove its legal basis for claiming for the amount being PHILEX MINING CORPORATION V. CIR
refunded. 1. Whether or not the Atlast Doctrine should be applied.
2. Whether or not The CTA En Banc erred in denying the petition due to
alleged prescription.
THE COURT OF TAX APPEALS SECOND DIVISION RULING
___________________________________________________________ output taxes. The application may be made only within two (2) years after the close
RULING of the taxable quarter when the importation or purchase was made.

For ready reference, the following are the provisions of the Tax Code applicable to (C) Cancellation of VAT Registration. A person whose registration has
the present been cancelled due to retirement from or cessation of business, or due to changes in
cases: or cessation of status under Section 106(C) of this Code may, within two (2) years
from the date of cancellation, apply for the issuance of a tax credit certificate for any
Section 105: Persons Liable. Any person who, in the course of trade or business, unused input tax which may be used in payment of his other internal revenue taxes.
sells, barters, exchanges, leases goods or properties, renders services, and any
person who imports goods shall be subject to the value-added tax (VAT) imposed in (D) Period within which Refund or Tax Credit of Input Taxes shall be Made.
Sections 106 to 108 of this Code. The value-added tax is an indirect tax and the In proper cases, the Commissioner shall grant a refund or issue the tax credit
amount of tax may be shifted or passed on to the buyer, transferee or lessee of the certificate for creditable input taxes within one hundred twenty (120) days from the
goods, properties or services. This rule shall likewise apply to existing contracts of date of submission of complete documents in support of the application filed in
sale or lease of goods, properties or services at the time of the effectivity of Republic accordance with Subsection (A) and (B) hereof.In case of full or partial denial of the
Act No. 7716. claim for tax refund or tax credit, or the failure on the part of the Commissioner to
act on the application within the period prescribed above, the taxpayer affected may,
xxxx within thirty (30) days from the receipt of the decision denying the claim or after the
expiration of the one hundred twenty day-period, appeal the decision or the unacted
Section 110(B):Sec. 110. Tax Credits. (B) Excess Output or Input Tax. If at the claim with the Court of Tax Appeals.
end of any taxable quarter the output tax exceeds the input tax, the excess shall be
paid by the VAT-registered person. If the input tax exceeds the output tax, the (E) Manner of Giving Refund. Refunds shall be made upon warrants
excess shall be carried over to the succeeding quarter or quarters: [Provided, That drawn by the Commissioner or by his duly authorized representative without the
the input tax inclusive of input VAT carried over from the previous quarter that may necessity of being countersigned by the Chairman, Commission on Audit, the
be credited in every quarter shall not exceed seventy percent (70%) of the output provisions of the Administrative Code of 1987 to the contrary notwithstanding:
VAT: Provided, that refunds under this paragraph shall be subject to post audit by the
Commission on Audit.
Provided, however, That any input tax attributable to zero-rated sales by a VAT-
registered person may at his option be refunded or credited against other internal Section 229: Recovery of Tax Erroneously or Illegally Collected. No suit or
revenue taxes, subject to the provisions of Section 112. proceeding shall be maintained in any court for the recovery of any national internal
revenue tax hereafter alleged to have been erroneously or illegally assessed or
Section 112:Sec. 112. Refunds or Tax Credits of Input Tax. collected, or of any penalty claimed to have been collected without authority, or of
(A) Zero-Rated or Effectively Zero-Rated Sales. Any VAT-registered any sum alleged to have been excessively or in any manner wrongfully collected, until
person, whose sales are zero-rated or effectively zero-rated may, within two (2) years a claim for refund or credit has been duly filed with the Commissioner; but such suit
after the close of the taxable quarter when the sales were made, apply for the or proceeding may be maintained, whether or not such tax, penalty, or sum has been
issuance of a tax credit certificate or refund of creditable input tax due or paid paid under protest or duress. In any case, no such suit or proceeding shall be filed
attributable to such sales, except transitional input tax, to the extent that such input after the expiration of two (2) years from the date of payment of the tax or penalty
tax has not been applied against output tax: Provided, however, That in the case of regardless of any supervening cause that may arise after payment: Provided,
zero-rated sales under Section 106(A)(2) (a)(1), (2) and (B) and Section however, That the Commissioner may, even without a written claim therefor, refund
108(B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had or credit any tax, where on the face of the return upon which payment was made,
been duly accounted for in accordance with the rules and regulations of the Bangko such payment appears clearly to have been erroneously paid.
Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in
zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods
or properties or services, and the amount of creditable input tax due or paid cannot CIR V. SAN ROQUE POWER CORPORATION
be directly and entirely attributed to any one of the transactions, it shall be allocated
proportionately on the basis of the volume of sales. 1. YES. The claim by San Roque was prematurely filed with the CTA.

(B) Capital Goods.- A VAT registered person may apply for the issuance of The San Roque failed to comply with the 120-day waiting period, the time
a tax credit certificate or refund of input taxes paid on capital goods imported or expressly given by law to the Commissioner to decide whether to grant or deny
locally purchased, to the extent that such input taxes have not been applied against San Roques application for tax refund or credit. Mere 13 days after it filed its
amended administrative claim with the Commissioner, San Roque filed a Petition
for Review with the CTA hastwo crucial facts: The burden is on the taxpayer to show that he has strictly complied with the
conditions for the grant of the tax refund or credit. This Court cannot disregard
San Roque did not wait for the 120-day period to lapse before filing its mandatory and jurisdictional conditions mandated by law simply because the
judicial claim; Commissioner chose not to contest the numerical correctness of the claim for
San Roque filed its judicial claim more than four (4) years before the tax refund or credit of the taxpayer. Non-compliance with mandatory periods,
Atlas doctrine, which was promulgated by the Court on 8 June 2007. non-observance of prescriptive periods, and non-adherence to exhaustion of
administrative remedies bar a taxpayers claim for tax refund or credit, whether
Compliance with the 120-day waiting period is mandatory and jurisdictional. The or not the Commissioner questions the numerical correctness of the claim of the
waiting period, originally fixed at 60 days only, was part of the provisions of the taxpayer. This Court should not establish the precedent that non-compliance with
first VAT law, Executive Order No. 273, which took effect on 1 January 1988. The mandatory and jurisdictional conditions can be excused if the claim is otherwise
waiting period was extended to 120 days effective 1 January 1998 under RA meritorious, particularly in claims for tax refunds or credit. Such precedent will
8424 or the Tax Reform Act of 1997. Thus, the waiting period has been in the render meaningless compliance with mandatory and jurisdictional requirements,
statute books for more than fifteen (15) years before San Roque filed its judicial for then every tax refund case will have to be decided on the numerical
claim. correctness of the amounts claimed, regardless of non-compliance with
mandatory and jurisdictional conditions.
Failure to comply with the 120-day waiting period violates a mandatory provision
of law. It violates the doctrine of exhaustion of administrative remedies and 3. NO. Atlas and Mirant doctrine is NOT applicable in the said case.
renders the petition premature and thus without a cause of action, with the
effect that the CTA does not acquire jurisdiction over the taxpayers petition. THE ATLAS DOCTRINE counts the two-year prescriptive period from the date
of payment of the output VAT, which means within 20 days after the close of the
San Roques failure to comply with the 120-day mandatory period renders its taxable quarter. The output VAT at that time must be paid at the time of filing of
petition for review with the CTA void. the quarterly tax returns, which were to be filed "within 20 days following
the end of each quarter."
Article 5 of the Civil Code provides, "Acts executed against
provisions of mandatory or prohibitory laws shall be void, except when the The Atlas doctrine did not exist at the time San Roque failed to comply with the
law itself authorizes their validity." 120- day period. Thus, San Roque cannot invoke the Atlas doctrine as an excuse
for its failure to wait for the 120-day period to lapse. In any event, the Atlas
San Roques void petition for review cannot be legitimized by the doctrine merely stated that the two-year prescriptive period should be counted
CTA or this Court because Article 5 of the Civil Code states that such void from the date of payment of the output VAT,not from the close of the taxable
petition cannot be legitimized "except when the law itself authorizes its quarter when the sales involving the input VAT were made.
validity." There is no law authorizing the petitions validity.
The Atlas doctrine does not interpret, expressly or impliedly, the 120+3052 day
It is hornbook doctrine that a person committing a void act contrary periods.In fact, Section 106(b) and (e) of the Tax Code of 1977 as amended,
to a mandatory provision of law cannot claim or acquire any right from his which was the law cited by the Court in Atlas as the applicable provision of the
void act. A right cannot spring in favor of a person from his own void or law did not yet provide for the 30-day period for the taxpayer to appeal to the
illegal act. CTA from the decision or inaction of the Commissioner.

Thus, San Roques petition with the CTA is a mere scrap of paper. Thus, the Atlas doctrine cannot be invoked by anyone to disregard compliance
with the 30-day mandatory and jurisdictional period. Also, the difference
2. San Roque is not entitled to tax refund because of its excess input VAT. between the Atlas doctrine on one hand, and the

The mere fact that a taxpayer has excess input VAT, or that the tax was MIRANT DOCTRINE is a mere 20 days.
admittedly illegally, erroneously or excessively collected from him, does not
entitle him as a matter of right to a tax refund or credit. Strict compliance with Whether the Atlas doctrine or the Mirant doctrine is applied to San Roque is
the mandatory and jurisdictional conditions prescribed by law to claim such tax immaterial because what is at issue in the present case is San Roques non-
refund or credit is essential and necessary for such claim to prosper. Well-settled compliance with the 120-day mandatory and jurisdictional period, which is
is the rule that tax refunds or credits, just like tax exemptions, are strictly counted from the date it filed its administrative claim with the Commissioner.
construed against the taxpayer.
The 120-day period may extend beyond the two-year prescriptive period, as long in case of inaction by the BIR. Thus, the prior practice of filing the judicial
as the administrative claim is filed within the two-year prescriptive period. claim within the two-year period was held in most cases as either premature
However, San Roques fatal mistake is that it did not wait for the Commissioner or delayed. Hence, the period for filing the judicial claim under Sec. 112(C)
to decide within the 120-day period, a mandatory period whether the Atlas or the may stretch out beyond the 2-year threshold provided in Sec. 112(A) as long
Mirant doctrine is applied. as the administrative claim is filed within the said 2-year period.

At the time San Roque filed its petition for review with the CTA, the 120+30 day Section 112 (D) now Section 112 (C)] of the NIRC clearly provides that the
mandatory periods were already in the law. Section 112(C)56 expressly grants CIR has 120 days, from the date of the submission of the complete documents in
the Commissioner 120 days within which to decide the taxpayers claim. The law support of the application for tax refund/credit, within which to grant or deny the
is clear, plain, and unequivocal: claim. In case of full or partial denial by the CIR, the taxpayers recourse is to file an
appeal before the CTA within 30 days from receipt of the decision of the CIR.
"x x x the Commissioner shall grant a refund or issue the tax credit certificate for However, if after the 120-day period the CIR fails to act on the application for tax
creditable input taxes within one hundred twenty (120) days from the date of refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to CTA
submission of complete documents." within 30 days. In this case, the administrative and the judicial claims were
simultaneously filed on September 30, 2004.
4. NO. CTA have no jurisdiction over the said case.
Non-observance of the 120-day period is not fatal to the filing of a judicial
The taxpayer cannot simply file a petition with the CTA without waiting for the claim as long as both the administrative and the judicial claims are filed within the
Commissioners decision within the 120-day mandatory and jurisdictional period. two-year prescriptive period has no legal basis.
The CTA will have no jurisdiction because there will be no "decision" or "deemed
a denial" decision of the Commissioner for the CTA to review. Taganito is similarly situated as San Roque - both cannot claim being misled,
misguided, or confused by the Atlas doctrine. However, Taganito can invoke BIR
San Roque knowingly violated the mandatory 120-day period, and it cannot Ruling No. DA-489-0357 dated 10 December 2003, which expressly ruled that the
blame anyone but itself. Section 112(C) also expressly grants the taxpayer a 30- "taxpayer-claimant need not wait for the lapse of the 120-day period before it could
day period to appeal to the CTA the decision or inaction of the Commissioner, seek judicial relief with the CTA by way of Petition for Review." Taganito is deemed
thus: to have filed its judicial claim with the CTA on time.

x x x the taxpayer affected may, within thirty (30) days from the receipt of Taganito filed its judicial claim on February 14, 2007, 92 days after it filed its
the decision denying the claim or after the expiration of the one hundred administrative claim with the CIR and within the 120-day waiting period. Since its
twenty day-period, appeal the decision or the unacted claim with the Court judicial claim was filed after November 1, 2005 cannot validly claim reliance in good
of Tax Appeals. (Emphasis supplied) faith on the revenue regulations that considered the 120 and 30-day periods in Sec.
This law is clear, plain, and unequivocal. Following the well-settled verba 112(C) dispensable so long as the claims are filed within the 2-year period.
legis doctrine, this law should be applied exactly as worded since it is clear,
plain, and unequivocal. As this law states, the taxpayer may, if he wishes,
appeal the decision of the Commissioner to the CTA within 30 days from PHILEX MINING CORPORATION V. CIR
receipt of the Commissioners decision, or if the Commissioner does not act
on the taxpayers claim within the 120-day period, the taxpayer may appeal 1. NO. the Atlas doctrine is immaterial in this case. The Commissioner had until 17
to the CTA within 30 days from the expiration of the 120-day period. July 2006, the last day of the 120-day period, to decide Philexs claim. Since the
Commissioner did not act on Philexs claim on or before 17 July 2006, Philex had
until 17 August 2006, the last day of the 30-day period, to file its judicial claim.
TAGANITO MINING CORPORATION V. CIR The CTA EB held that 17 August 2006 was indeed the last day for Philex to file
its judicial claim. However, Philex filed its Petition for Review with the CTA only
NO. Aichi doctrine should not be applied in the case. Taganito filed a Petition on 17 October 2007, or four hundred twenty-six (426) days after the last day of
for Review on 14 February 2007 with the CTA. This is almost four months before the filing.
adoption of the Atlas doctrine on 8 June 2007.
2. No. CTA En Banc is Correct. The petition has already prescribed. Philex was late
AICHI DOCTRINE (promulgated October 6, 2010) by one year and 61 days in filing its judicial claim. As the CTA EB correctly found:
taxpayers must file the judicial claim within 30 days from the issuance of Evidently, that the Petition for Review was filed 426 days late. Thus, the Petition
the Bureau of Internal Revenue (BIR) decision or after the lapse of 120 days for Review should have been dismissed on the ground that the Petition for
Review was filed way beyond the 30-day prescribed period. No jurisdiction a void act contrary to a mandatory provision of law cannot claim or acquire any right
as acquired by the CTA Division. Unlike San Roque and Taganito, Philexs case is from his void act. A right cannot spring in favor of a person from his own void or
not one of premature filing but of late filing. Philex did not file any petition with illegal act.It is hornbook doctrine that a person committing a void act contrary to a
the CTA within the 120-day period. Philex did not also file any petition with the mandatory provision of law cannot claim or acquire any right from his void act. A
CTA within 30 days after the expiration of the 120-day period. Philex filed right cannot spring in favor of a person from his own void or illegal act. This doctrine
its judicial claim long after the expiration of the 120-day period, in fact 426 days is repeated in Article 2254 of the Civil Code, which states, No vested or acquired
after the lapse of the 120-day period. right can arise from acts or omissions which are against the law or which infringe
upon the rights of others. For violating a mandatory provision of law in filing its
DOCTRINES petition with the CTA, San Roque cannot claim any right arising from such void
petition. Thus, San Roques petition with the CTA is a mere scrap of paper.
TAX REFUND TAX CREDIT WAITING PERIOD
TAXATION TAX REFUND TAX CREDIT
It is indisputable that compliance with the 120-day waiting period is
mandatory and jurisdictional. The waiting period, originally fixed at 60 days only, was
The Supreme Court should not establish the precedent that non-compliance
part of the provisions of the first Value-Added Tax (VAT) law, Executive Order No.
with mandatory and jurisdictional conditions can be excused if the claim is otherwise
273, which took effect on 1 January 1988. The waiting period was extended to 120
meritorious, particularly in claims for tax refunds or credit.This Court cannot
days effective 1 January 1998 under RA 8424 or the Tax Reform Act of 1997.
disregard mandatory and jurisdictional conditions mandated by law simply because
Clearly, San Roque failed to comply with the 120-day waiting period, the time
the Commissioner chose not to contest the numerical correctness of the claim for tax
expressly given by law to the Commissioner to decide whether to grant or deny San
refund or credit of the taxpayer. Non-compliance with mandatory periods,
Roques application for tax refund or credit. It is indisputable that compliance with the
non-observance of prescriptive periods, and non-adherence to exhaustion of
120-day waiting period is mandatory and jurisdictional. The waiting period, originally
administrative remedies bar a taxpayers claim for tax refund or credit, whether or
fixed at 60 days only, was part of the provisions of the first VAT law, Executive Order
not the Commissioner questions the numerical correctness of the claim of the
No. 273, which took effect on 1 January 1988. The waiting period was extended to
taxpayer. This Court should not establish the precedent that non-compliance with
120 days effective 1 January 1998 under RA 8424 or the Tax Reform Act of 1997.
mandatory and jurisdictional conditions can be excused if the claim is otherwise
Thus, the waiting period has been in our statute books for more than fifteen (15)
meritorious, particularly in claims for tax refunds or credit. Such precedent will render
years before San Roque filed its judicial claim. Failure to comply with the 120-day
meaningless compliance with mandatory and jurisdictional requirements, for then
waiting period violates a mandatory provision of law. It violates the doctrine of
every tax refund case will have to be decided on the numerical correctness of the
exhaustion of administrative remedies and renders the petition premature and thus
amounts claimed, regardless of non-compliance with mandatory and jurisdictional
without a cause of action, with the effect that the CTA does not acquire jurisdiction
conditions
over the taxpayers petition. Philippine jurisprudence is replete with cases upholding
and reiterating these doctrinal principles.
APPEALS
COURT OF TAX APPEALS JURISDICTION
The taxpayer may, if he wishes, appeal the decision of the Commissioner to
the Court of Tax Appeals within 30 days from receipt of the Commissioners decision,
The charter of the Court of Tax Appeals expressly provides that its
or if the Commissioner does not act on the taxpayers claim within the 120day period,
jurisdiction is to review on appeal decisions of the Commissioner of Internal Revenue
the taxpayer may appeal to the Court of Tax Appeals within 30 days from the
in cases involving refunds of internal revenue taxes.The charter of the CTA
expiration of the 120-day period.Section 112(C) also expressly grants the taxpayer
expressly provides that its jurisdiction is to review on appeal decisions of the
a 30-day period to appeal to the CTA the decision or inaction of the Commissioner,
Commissioner of Internal Revenue in cases involving x x x refunds of internal revenue
thus: x x x the taxpayer affected may, within thirty (30) days from the receipt of the
taxes. When a taxpayer prematurely files a judicial claim for tax refund or credit with
decision denying the claim or after the expiration of the one hundred twenty
the CTA without waiting for the decision of the Commissioner, there is no decision
day-period, appeal the decision or the unacted claim with the Court of Tax Appeals.
of the Commissioner to review and thus the CTA as a court of special jurisdiction has
(Emphasis supplied) This law is clear, plain, and unequivocal. Following the
no jurisdiction over the appeal. The charter of the CTA also expressly provides that if
well-settled verba legis doctrine, this law should be applied exactly as worded since it
the Commissioner fails to decide within a specific period required by law, such
is clear, plain, and unequivocal. As this law states, the taxpayer may, if he wishes,
inaction shall be deemed a denial of the application for tax refund or credit.
appeal the decision of the Commissioner to the CTA within 30 days from receipt of
It is the Commissioners decision, or inaction deemed a denial, that the
the Commissioners decision, or if the Commissioner does not act on the taxpayers
taxpayer can take to the CTA for review. Without a decision or an inaction x x x
claim within the 120-day period, the taxpayer may appeal to the CTA within 30 days
deemed a denial of the Commissioner, the CTA has no jurisdiction over a petition for
from the expiration of the 120-day period.
review. Civil Law Human Relations It is hornbook doctrine that a person committing
period granted by law to the taxpayer to file an appeal before the CTA becomes
TAX REFUND TAX CREDIT utterly useless, even if the taxpayer complied with the law by filing his administrative
claim within the two-year prescriptive period
The taxpayer may, within two (2) years after the close of the taxable quarter
when the sales were made, apply for the issuance of a tax credit certificate or refund VALUEADDED TAX INPUT VALUEADDED TAX (VAT) WORDS AND
of the creditable input tax due or paid to such sales.Section 112(A) clearly, plainly, PHRASES
and unequivocally provides that the taxpayer may, within two (2) years after the
close of the taxable quarter when the sales were made, apply for the issuance of a The input Value-Added Tax (VAT) is a tax liability of, and legally paid by, a
tax credit certificate or refund of the creditable input tax due or paid to such sales. VAT-registered seller of goods, properties or services used as input by another
In short, the law states that the taxpayer may apply with the Commissioner for a VAT-registered person in the sale of his own goods, properties, or services.The
refund or credit within two (2) years, which means at anytime within two years. input VAT is not excessively collected as understood under Section 229 because at
Thus, the application for refund or credit may be filed by the taxpayer with the the time the input VAT is collected the amount paid is correct and proper. The input
Commissioner on the last day of the two-year prescriptive period and it will still VAT is a tax liability of, and legally paid by, a VAT-registered seller of goods,
strictly comply with the law. properties or services used as input by another VAT-registered person in the sale of
his own goods, properties, or services. This tax liability is true even if the seller
The two-year prescriptive period is a grace period in favor of the taxpayer passes on the input VAT to the buyer as part of the purchase price. The second
and he can avail of the full period before his right to apply for a tax refund or credit is VATregistered person, who is not legally liable for the input VAT, is the one who
barred by prescription. Same Same Same The twoyear prescriptive period in applies the input VAT as credit for his own output VAT. If the input VAT is in fact
Section 112(A) refers to the period within which the taxpayer can file an excessively collected as understood under Section 229, then it is the first
administrative claim for tax refund or credit. Stated otherwise, the two-year VATregistered personthe taxpayer who is legally liable and who is deemed to have
prescriptive period does not refer to the filing of the judicial claim with the Court of legally paid for the input VATwho can ask for a tax refund or credit under Section
Tax Appeals but to the filing of the administrative claim with the Commissioner. 229 as an ordinary refund or credit outside of the VAT System.
Section 112(C) provides that the Commissioner shall decide the application for refund
or credit within one hundred twenty (120) days from the date of submission of In such event, the second VAT-registered taxpayer will have no input VAT to
complete documents in support of the application filed in accordance with Subsection offset against his own output VAT.
(A). The reference in Section 112(C) of the submission of documents in support of
the application filed in accordance with Subsection A means that the application in
Section 112(A) is the administrative claim that the Commissioner must decide within SIMPLICITY AND EFFICIENCY IN TAX COLLECTION
the 120-day period. In short, the two-year prescriptive period in Section 112(A) refers the Value-Added Tax (VAT) is imposed not just on the value added by the
to the period within which the taxpayer can file an administrative claim for tax refund taxpayer, but on the entire selling price of his goods, properties or services.As its
or credit. Stated otherwise, the two-year prescriptive period does not refer to the name implies, the Value-Added Tax system is a tax on the value added by the
filing of the judicial claim with the CTA but to the filing of the administrative claim taxpayer in the chain of transactions. For simplicity and efficiency in tax collection,
with the Commissioner. As held in Aichi, the phrase within two years x x x apply for the VAT is imposed not just on the value added by the taxpayer, but on the entire
the issuance of a tax credit or refund refers to applications for refund/credit with the selling price of his goods, properties or services. However, the taxpayer is allowed a
CIR and not to appeals made to the CTA. refund or credit on the VAT previously paid by those who sold him the inputs for his
goods, properties, or services. The net effect is that the taxpayer pays the VAT only
If the 30-day period, or any part of it, is required to fall within the two-year on the value that he adds to the goods, properties, or services that he actually sells.
prescriptive period (equivalent to 730 days), then the taxpayer must file his Same Same Input ValueAdded Tax (VAT) A taxpayer can apply his input
administrative claim for refund or credit within the first 610 days of the two-year Value-Added Tax (VAT) only against his output VAT. The only exception is when the
prescriptive period.If the 30-day period, or any part of it, is required to fall within taxpayer is expressly zerorated or effectively zerorated under the law, like
the two-year prescriptive period (equivalent to 730 days), then the taxpayer must file companies generating power through renewable sources of energy.Under Section
his administrative claim for refund or credit within the first 610 days of the two-year 110(B), a taxpayer can apply his input VAT only against his output VAT. The only
prescriptive period. Otherwise, the filing of the administrative claim beyond the first exception is when the taxpayer is expressly zerorated or effectively zerorated
610 days will result in the appeal to the CTA being filed beyond the two-year under the law, like companies generating power through renewable sources of
prescriptive period. Thus, if the taxpayer files his administrative claim on the 611th energy. Thus, a non zero-rated VAT-registered taxpayer who has no output VAT
day, the Commissioner, with his 120-day period, will have until the 731st day to because he has no sales cannot claim a tax refund or credit of his unused input VAT
decide the claim. If the Commissioner decides only on the 731st day, or does not under the VAT System. Even if the taxpayer has sales but his input VAT exceeds his
decide at all, the taxpayer can no longer file his judicial claim with the CTA because output VAT, he cannot seek a tax refund or credit of his excess input VAT under the
the two-year prescriptive period (equivalent to 730 days) has lapsed. The 30-day VAT System. He can only carry-over and apply his excess input VAT against his
future output VAT. If such excess input VAT is an excessively collected tax, the
taxpayer should be able to seek a refund or credit for such excess input VAT
whether or not he has output VAT. The VAT System does not allow such refund or STATUTORY CONSTRUCTION
credit. Such excess input VAT is not an excessively collected tax under Section Taxpayers should not be prejudiced by an erroneous interpretation by the
229. The excess input VAT is a correctly and properly collected tax. However, such Commissioner, particularly on a difficult question of law.Taxpayers should not be
excess input VAT can be applied against the output VAT because the VAT is a tax prejudiced by an erroneous interpretation by the Commissioner, particularly on a
imposed only on the value added by the taxpayer. If the input VAT is in fact difficult question of law. The abandonment of the Atlas doctrine by Mirant and Aichi is
excessively collected under Section 229, then it is the person legally liable to pay proof that the reckoning of the prescriptive periods for input VAT tax refund or credit
the input VAT, is a difficult question of law. The abandonment of the Atlas doctrine did not result in
not the person to whom the tax was passed on as part of the purchase price and Atlas, or other taxpayers similarly situated, being made to return the tax refund or
claiming credit for the input VAT under the VAT System, who can file the judicial credit they received or could have received under Atlas prior to its abandonment. This
claim under Section 229. Court is applying Mirant and Aichi prospectively. Absent fraud, bad faith or
misrepresentation, the reversal by this Court of a general interpretative rule issued by
TAX REFUND TAX CREDIT the Commissioner, like the reversal of a specific BIR ruling under Section 246, should
also apply prospectively
It is clear that what can be refunded or credited is a tax that is erroneously,
illegally, excessively or in any manner wrongfully collected.From the plain text of
Section 229, it is clear that what can be refunded or credited is a tax that is JUDGMENTS COURT OF TAX APPEALS DECISIONS DO NOT CONSTITUTE
erroneously, x x x illegally, x x x excessively or in any manner wrongfully PRECEDENTS,
collected. In short, there must be a wrongful payment because what is paid, or part and do not bind the Supreme Court or the public.There is also the claim
of it, is not legally due. As the Court held in Mirant, Section 229 should apply only to that there are numerous CTA decisions allegedly supporting the argument that the
instances of erroneous payment or illegal collection of internal revenue taxes. filing dates of the administrative and judicial claims are inconsequential, as long as
Erroneous or wrongful payment includes excessive payment because they all refer to they are within the two-year prescriptive period. Suffice it to state that CTA decisions
payment of taxes not legally due. Under the VAT System, there is no claim or issue do not constitute precedents, and do not bind this Court or the public. That is why
that the excess input VAT is excessively or in any manner wrongfully collected. In CTA decisions are appealable to this Court, which may affirm, reverse or modify the
fact, if the excess input VAT is an excessively collected tax under Section 229, CTA decisions as the facts and the law may warrant. Only decisions of this Court
then the taxpayer claiming to apply such excessively collected input VAT to offset constitute binding precedents, forming part of the Philippine legal system. Same Tax
his output VAT may have no legal basis to make such offsetting. The person legally Refund Tax Credit Under the novel amendment introduced by RA 7716, mere
liable to pay the input VAT can claim a refund or credit for such excessively inaction by the Commissioner during the 60-day period is deemed a denial of the
collected tax, and thus there will no longer be any excess input VAT. This will upend claim. Thus, Section 4.106 (c) states that if no action on the claim for tax
the present VAT System as we know it. refund/credit has been taken by the Commissioner after the sixty (60) day period,
the taxpayer may already file the judicial claim even long before the lapse of the
A claim for tax refund or credit, like a claim for tax exemption, is construed two-year prescriptive period.Under the novel amendment introduced by RA 7716,
strictly against the taxpayer.A claim for tax refund or credit, like a claim for tax mere inaction by the Commissioner during the 60-day period is deemed a denial of
exemption, is construed strictly against the taxpayer. One of the conditions for a the claim. Thus, Section 4.1062(c) states that if no action on the claim for tax
judicial claim of refund or credit under the VAT System is compliance with the refund/credit has been taken by the Commissioner after the sixty (60) day period,
120+30 day mandatory and jurisdictional periods. Thus, strict compliance with the the taxpayer may already file the judicial claim even long before the lapse of the
120+30 day periods is necessary for such a claim to prosper, whether before, during, two-year prescriptive period. Prior to the amendment by RA 7716, the taxpayer had
or after the effectivity of the Atlas doctrine, except for the period from the issuance of to wait until the two-year prescriptive period was about to expire if the Commissioner
BIR Ruling No. DA-489-03 on 10 December 2003 to 6 October 2010 when the Aichi did not act on the claim. With the amendment by RA 7716, the taxpayer need not
doctrine was A reversal of a Bureau of Internal Revenue (BIR) regulation or ruling wait until the two-year prescriptive period is about to expire before filing the judicial
cannot adversely prejudice a taxpayer who in good faith relied on the BIR regulation claim because mere inaction by the Commissioner during the 60-day period is
or ruling prior to its reversal. Since the Commissioner has exclusive and original deemed a denial of the claim. This is the meaning of the phrase but before the lapse
jurisdiction to interpret tax laws, taxpayers acting in good faith should not be made to of the two (2) year period in Section 4.1062(c). As Section 4.106 2(c) reiterates
suffer for adhering to general interpretative rules of the Commissioner interpreting that the judicial claim can be filed only after the sixty (60) day period, this period
tax laws, should such interpretation later turn out to be erroneous and be reversed by remains mandatory and jurisdictional. Clearly, Section 4.106-2(c) did not amend
the Commissioner or this Court. Indeed, Section 246 of the Tax Code expressly Section 106(d) but merely faithfully implemented it.
provides that a reversal of a BIR regulation or ruling cannot adversely prejudice a
taxpayer who in good faith relied on the BIR regulation or ruling prior to its reversal. TAXES ARE THE LIFEBLOOD OF THE NATION.
Taxes are the lifeblood of the nation. The Philippines has been struggling to
improve its tax efficiency collection for the longest time with minimal success.
Consequently, the Philippines has suffered the economic adversities arising from poor
tax collections, forcing the government to continue borrowing to fund the budget
deficits. This Court cannot turn a blind eye to this economic malaise by being unduly
liberal to taxpayers who do not comply with statutory requirements for tax refunds or
credits. The tax refund claims in the present cases are not a pittance. Many other
companies stand to gain if this Court were to rule otherwise. The dissenting opinions
will turn on its head the well-settled doctrine that tax refunds are strictly construed
against the taxpayer.

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