TAXATION LAW
GENERAL PRINCIPLES On February 8, 1971, the Commissioner of Internal Revenue issued
Non-retroactive application to taxpayers
Section 246, NIRC
ABS-CBN Broadcasting Corp. v. Court of Tax Appeals
G.R. No. 52306, October 12, 1981
DOCTRINE: Any rulings or circulars promulgated by the CIR have no
retroactive application when it would be prejudicial to taxpayers.
Any revocation, modification, or reversal of and of the rules and
regulations promulgated in accordance with the preceding section or any
of the rulings or circulars promulgated by the Commissioner of Internal
Revenue shall not be given retroactive application if the relocation,
modification, or reversal will be prejudicial to the taxpayers, except in the
following cases: (a) where the taxpayer deliberately mis-states or omits
material facts from his return or any document required of him by the
Bureau of Internal Revenue: (b) where the facts subsequently gathered
by the Bureau of Internal Revenue are materially different from the facts
on which the ruling is based; or (c) where the taxpayer acted in bad faith.
FACTS:
ABS-CBN Broadcasting Corporation was engaged in the business of
telecasting local as well as foreign films acquired from foreign
corporations not engaged in trade or business with the Philippines for
which ABS-CBN paid rentals after withholding income tax of 30% of one-
half of the film rentals. In implementing Section 4(b) of the Tax Code, the
Commissioner issued General Circular V-334. Pursuant thereto, ABS-
CBN Broadcasting Corp. dutifully withheld and turned over to the BIR
30% of ½ of the film rentals paid by it to foreign corporations not
engaged in trade or business in the Philippines. The last year that the
company withheld taxes pursuant to the Circular was in 1968.
On 27 June 1968, RA 5431 amended Section 24 (b) of the Tax Code
increasing the tax rate from 30% to 35% and revising the tax basis from
“such amount” referring to rents, etc. to “gross income.”
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Revenue Memorandum Circular No. 4-71, revoking General Circular No.
V-334, and holding that the latter was "erroneous for lack of legal basis,"
because "the tax therein prescribed should be based on gross income
without deduction whatever.
In 1971, the Commissioner issued a letter of assessment and demand for
deficiency withholding income tax for years 1965 to 1968. The company
requested for reconsideration; where the Commissioner did not act upon.
ISSUE:
Whether Revenue Memorandum Circular 4-71, revoking General Circular
V-334, may be retroactively applied.
RULING:
No. Any rulings or circulars promulgated by the CIR have no retroactive
application when it would be prejudicial to taxpayers. The retroactive
application of Memorandum Circular No. 4-71 prejudices ABS-CBN since
(1) the assessment and demand on petitioner to pay deficiency
withholding income tax was also made three years after 1968 for a period
of time commencing in 1965; and, (2) ABS-CBN was no longer in a
position to withhold taxes due from foreign corporations because it had
already remitted all film rentals and no longer had any control over them
when the new Circular was issued.
Commissioner of Internal Revenue v. Burroughs, Ltd.
G.R. No. 66653, June 19, 1986
DOCTRINE: Any revocation, modification, or reversal of any of the rules
and regulations promulgated in accordance with the preceding section or
any of the rulings or circulars promulgated by the Commissioner shag
not be given retroactive application if the revocation, modification, or
reversal will be prejudicial to the taxpayer except in the following cases
(a) where the taxpayer deliberately misstates or omits material facts from
his return or in any document required of him by the Bureau of Internal
Revenue; (b) where the facts subsequently gathered by the Bureau of
Internal Revenue are materially different from the facts on which the
ruling is based, or (c) where the taxpayer acted in bad faith.
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FACTS:
Burroughs is a foreign corporation. On March 1979, the corporation’s
branch applied with the Central Bank an authority to remit to its parent
company abroad the branch profit:
Amount Applied for: P7,647,058.00
15% Branch Profit Remittance Tax: P1,147,048.70
Amount Actually Remitted: P6,499,999.30
On 24 December 1980, Burroughs claims a tax refund/credit of
P172,058.90. Based on the Ruling of Acting Commissioner of Internal
Revenue, the branch profit remittance tax should be 15% of the amount
actually remitted.
The CTA granted the tax credit but CIR argued that Burroughs is no
longer entitled to refund because Memorandum Circular No. 8-82 dated
17 March 1982 had revoked and/or repealed the BIR ruling of 21 Jan
1980.
ISSUE:
Whether Memorandum Circular No. 8-82 (MC 8-82) dated 17 March
1982 can be given retroactive effect.
RULING:
No. Petitioner's aforesaid contention is without merit. What is applicable
in the case at bar is still the Revenue Ruling of January 21, 1980
because private respondent Burroughs Limited paid the branch profit
remittance tax in question on March 14, 1979. Memorandum Circular
No. 8-82 dated March 17, 1982 cannot be given retroactive effect in the
light of Section 327 of the National Internal Revenue Code which
provides:
Sec. 327. Non-retroactivity of rulings. Any revocation,
modification, or reversal of any of the rules and regulations
promulgated in accordance with the preceding section or any of
the rulings or circulars promulgated by the Commissioner shag
not be given retroactive application if the revocation,
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modification, or reversal will be prejudicial to the taxpayer except
in the following cases (a) where the taxpayer deliberately
misstates or omits material facts from his return or in any
document required of him by the Bureau of Internal Revenue; (b)
where the facts subsequently gathered by the Bureau of Internal
Revenue are materially different from the facts on which the
ruling is based, or (c) where the taxpayer acted in bad faith.
The prejudice that would result to private respondent Burroughs Limited
by a retroactive application of Memorandum Circular No. 8-82 is beyond
question for it would be deprived of the substantial amount of
P172,058.90. And, insofar as the enumerated exceptions are concerned,
admittedly, Burroughs Limited does not fall under any of them.
Commissioner of Internal Revenue v. Mega Gen. Mdsg. Corp.
G.R. No. L-69316, September 30, 1988
DOCTRINE: Any revocation, modification, or reversal of and of the rules
and regulations promulgated in accordance with the preceding section or
any of the rulings or circulars promulgated by the Commissioner of
Internal Revenue shall not be given retroactive application if the
relocation, modification, or reversal will be prejudicial to the taxpayers,
except in the following cases: (a) where the taxpayer deliberately mis-
states or omits material facts from his return or any document required
of him by the Bureau of Internal Revenue: (b) where the facts
subsequently gathered by the Bureau of Internal Revenue are materially
different from the facts on which the ruling is based; or (c) where the
taxpayer acted in bad faith.
FACTS:
On April 22, 1975, the respondent corporation wrote the Commissioner
of Internal Revenue for clarification as to whether imported crude
paraffin wax is subject to specific tax under the Tax Code.
Former Commissioner Misael P. Vera in his reply to said that it
essentially certain kinds of wax (not including paraffin) was subject.
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Respondent corporation in a letter, dated 27 November 1975, requested
for a refund or tax credit of the amount of P321,436.79 representing the
difference between the amount paid as specific tax and the 7% advance
sales tax.
Since the law (Section 142(i) of the Tax Code, amended by P.D. No. 392)
does not make any distinction as to the kind of wax subject to specific
tax, then Acting Commissioner of Internal Revenue Efren I. Plana, 28
January 1977 denied respondent Corporation's claim for refund or tax
credit of the amount of P321,436,79. On this ruling, respondent
corporation filed a request for reconsideration. This was denied by
petitioner.
On 11 January 1978, however, Plana granted the corporation’s claim for
refund or credit pertaining to the importation made 18 April 1975. The
Corporation protested the tax assessment of 8 May 1978, which was
denied by the Commissioner.
ISSUE:
Whether respondent corporation's importation of crude paraffin wax on
June 21 and August 17, 1977 are subject to specific tax under Section
142 (i) of the Tax Code, as amended by P.D. No. 392, promulgated on
February 18, 1974.
RULING:
Yes. Contrary to the Court of Tax Appeals' ruling, We believe that the
letter of Commissioner Plana dated January 11, 1978 did not in any way
revoke his ruling dated January 28, 1977 which ruling applied the
specific tax to wax (without distinction). The reason he removed in 1978
private respondent's liability for the specific tax was NOT (as erroneously
pointed out by the Court of Tax Appeals) because he wanted to revoke,
expressly or implicitly, his ruling of January 28, 1977 but because the
P321,436.79 tax referred to importation BEFORE January 28, 1977 and
hence still covered by the ruling of Commissioner Vera, and not by the
January 28, 1977 ruling of Commissioner Plana. Hence, Mega should
pay the assessed tax.
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Commissioner of Internal Revenue v. Telefunken Semiconductor
(Phils.) Inc.
G.R. No. 103915, October 23, 1995
DOCTRINE: BIR rulings may not be given retroactive effect, if the same
is prejudicial to the taxpayer.
Any revocation, modification or reversal of any of the rules and
regulations promulgated in accordance with the preceding Sections or
any of the rulings or circulars promulgated by the Commissioner shall
not be given retroactive application if the revocation, modification or
reversal will be prejudicial to the taxpayers, except in the following cases:
(a) Where the taxpayer deliberately misstates or omits material facts from
his return or any document required of him by the Bureau of Internal
Revenue;(b) Where the facts subsequently gathered by the Bureau of
Internal Revenue are materially different from the facts on which the
ruling is based; or(c) Where the taxpayer acted in bad faith.
FACTS:
Private respondent Telefunken is a domestic corporation registered with
the Board of Investments (BOI) as an export producer on a preferred
pioneer status under Republic Act No. 6135.
From October 1979 to September 1981, Telefunken produced semi-
conductor devices amounting to P92,843,774.00 which were entirely sold
to foreign markets.
It filed percentage tax returns on the said exportation declaring a total of
P2,482,042.35 as contractor's tax, which was paid and verified to have
been received by the government.
Telefunken wrote a letter to the Appellate Division of the Bureau of
Internal Revenue (BIR) dated January 19, 1982 stating that the payment
of contractor's tax of P2,482,042.35 was erroneous and requested its
refund or tax credit thereof. Telefunken contended that under the
provisions of Section 7 of Republic Act No. 6135 in relation to Section 8
(a) of Republic Act No. 5186 (The Investment Act), it was exempted from
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the payment of all national internal revenue taxes for the period in
question, except for income tax.
ISSUE:
Whether Telefunken is exempted from contractor’s tax under RA 6135 for
the period of October 1979-September 1981.
RULING:
Yes. Sec. 191(16) of the previous Tax Code, which was the basis of the
Asian Transmission ruling, employs essentially the same wording as that
of the 1977 version [Sec.205(16)], therefore the same construction
applies. Both Sec. 191(16) of the old NIRC and Sec.205(16) of the 1977
NIRC specifically mention pioneer industries registered with the Board of
Investments under Republic Act No. 5186 as exempt from payment of the
contractor's tax. Telefunken falls under the category of pioneer industries
contemplated in NIRC Sec. 205(16) and is entitled to the tax exemption
therein. Under Sec. 246 of the NIRC, BIR rulings may not be given
retroactive effect, if the same is prejudicial to the taxpayer.
Commissioner of Internal Revenue v. Court of Appeals
G.R. No. 117982, February 6, 1997
DOCTRINE: Any revocation, modification, or reversal of any rules and
regulations promulgated in accordance with the preceding section or any
of the rulings or circulars promulgated by the Commissioner of Internal
Revenue shall not be given retroactive application if the revocation,
modification, or reversal will be prejudicial to the taxpayers except in the
following cases: a) where the taxpayer deliberately misstates or omits
material facts from his return or in any document required of him by the
Bureau of Internal Revenue; b) where the facts subsequently gathered by
the Bureau of Internal Revenue are materially different from the facts on
which the ruling is based; or c) where the taxpayer acted in bad faith.
FACTS:
The present case arose from the discrepancy in the taxable base on
which the excise tax is to apply on account of two incongruous BIR
Rulings: (1) BIR Ruling 473-88 dated 4 October 1988 which excluded the
VAT from the tax base in computing the fifteen percent (15%) excise tax
due; and, (2) BIR Ruling 017-91 dated 11 February 1991 which included
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back the VAT in computing the tax base for purposes of the fifteen
percent (15%) ad valorem tax.
Alhambra industries, Inc. (Alhambra) is a domestic corporation engaged
in the manufacture and sale of cigar and cigarette products. On May 7,
1991 private respondent received a letter dated April 26, 1991 from the
Commissioner of Internal Revenue assessing its deficiency Ad Valorem
Tax (AVT) in the total amount of P488,396.62, inclusive of increments,
on the removals of cigarette products from their place of production
during the period Nov. 2, 1990 to January 22, 1991.
Alhambra filed protest against amount assessed by the CIR, however, it
was denied by the latter at the same time increasing the amount
assessed to P520,835.29. Alhambra filed a petition for review with the
CTA, despite payment under protest the amount of P520,835.29. On
December 1, 1993, CTA ordered petitioner to refund said amount to
Alhambra
ISSUE:
Whether the new ruling should be given retroactive effect thus, in effect
revoking the tax exemption given to the petitioner in the first BIR ruling.
RULING:
The court held in the negative. In its ruling, it states that well-entrenched
is the rule that rulings and circulars, rules and regulations promulgated
by the Commissioner of Internal Revenue would have no retroactive
application if to so apply them would be prejudicial to the taxpayers.
Section 246 provides for the Non-retroactivity of rulings: “Any revocation,
modification, or reversal of any rules and regulations promulgated in
accordance with the preceding section or any of the rulings or circulars
promulgated by the Commissioner of Internal Revenue shall not be given
retroactive application if the revocation, modification, or reversal will be
prejudicial to the taxpayers except in the following cases: a) where the
taxpayer deliberately misstates or omits material facts from his return or
in any document required of him by the Bureau of Internal Revenue; b)
where the facts subsequently gathered by the Bureau of Internal
Revenue are materially different from the facts on which the ruling is
based; or c) where the taxpayer acted in bad faith.”
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