Taxation I Case Digests

G.R. No. 203514 COMMISSIONER OF INTERNAL REVENUE, vs. ST. LUKE’S MEDICAL CENTER, INC.
Petitioner , Respondent

February 13, 2017

On December 14, 2007, respondent St. Luke’s Medical Center, Inc. (SLMC) received from the
Bureau of Internal Revenue Audit Results/Assessment Notice regarding a deficit income tax. On
January 14, 2008, SLMC filed with petitioner Commissioner of Internal Revenue (CIR) an
adminisrative protest assailing the assessments. SLMC claimed that as a non-stock, non-profit charitable
and social welfare organization under the provision of 1997 NIRC, it is exempted from paying income tax.
On 25 April 2008, SMLC received CIR's Final Decision on the Disputed Assessment increasing the
deficiency for the taxable year 2005 and 2006. SLMC filed a Petition for Review with the CTA Division
which ruled in favor of SLMC. CIR moved for reconsideration but CTA Division denied the motion. CIR
filed a Petition for Review before the CTA En Banc which denied the said motion. Hence this instant
petition.

ISSUE:

WON SMLC is liable for income tax under Sec 27 (B) of the 1997 NIRC?

RULING:

SLMC is liable for income tax under Section 27(B) of the 1997 NIRC insofar as its revenues from paying
patients are concerned. This section imposes a 10% preferential tax rate on the income (1) proprietary
non-profit educational institutions and (2) proprietary non-profit hospitals. The only qualifucations for
hospitals are that they must be proprietary and non-profit.

G.R. No. SITEL PHILIPPINES CORPORATION vs COMMISSIONER OF INTERNAL REVENUE

February 8, 2017

Sitel is a BPO company providing call center services from Philippines to domestic and offshore business.
It is registered with the BIR as a VAT tax payer, as well as with the Board of Investment on pioneer status
as a new information technology service firm. From January 1,2004-December 31, 2004, Sitel filed with
BIR its quarterly VAT returns.

GR No. 201326 SITEL PHILIPPINES CORPORATION v. CIR February 8, 2017

Facts

Sitel, a corporation engaged in the business of providing call center services from the Philippines
to domestic and offshore businesses and registered with the Bureau of Internal Revenue (BIR)
as a VAT taxpayer, as well as with the Board of Investments on pioneer status as a new
information technology service firm in the field of call center.
For the period from January 1, 2004 to December 31, 2004, Sitel filed with the BIR its Quarterly
VAT Returns.

On March 28, 2006, Sitel filed separate formal claims for refund or issuance of tax credit with
the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the Department of
Finance for its unutilized input VAT arising from domestic purchases of goods and services
attributed to zero-rated transactions and purchases/importations of capital goods.

On March 30, 2006, Sitel filed a judicial claim for refund or tax credit via a petition for review
before the CTA.

CTA Division rendered a Decision partially granting Sitel's claim for VAT refund or tax credit but
denied Sitel's claim for unutilized input VAT attributable to its zero-rated sales for the four
quarters of 2004.

CTA Division found that Sitel failed to prove that the recipients of its services are doing business
outside the Philippines.

Aggrieved, Sitel filed a motion for partial reconsideration. CTA Division denied Sitel's Motion for
Reconsideration.

Sitel filed a Petition for Review with the CTA En Banc claiming that it is entitled to the amount
denied by the CTA Division.

CTA En Banc reversed and set aside the ruling of the CTA Division and denied Sitel's entire
refund claim on the ground of prematurity.

Sitel moved for reconsideration, but the same was denied by the Court En Banc for lack of
merit. Hence, the instant petition raising the following issues:

Issue:

WHETHER OR NOT PETITIONER IS ENTITLED TO A REFUND OR TAX CREDIT OF ITS UNUTILIZED

INPUT VAT ARISING FROM PURCHASES OF GOODS AND SERVICES ATTRIBUTABLE TO ZERO-
RATED SALES AND PURCHASES/IMPORTATIONS OF CAPITAL GOODS FOR THE 1ST, to 4TH
QUARTERS OF TAXABLE YEAR 2004.

Ruling

SC ruled: "In order that a foreign corporation may be regarded as doing business within a State,
there must be continuity of conduct and intention to establish a continuous business, such as
the appointment of a local agent, and not one of a temporary character."
A taxpayer claiming a tax credit or refund has the burden of proof to establish the factual basis
of that claim. Tax refunds, like tax exemptions, are construed strictly against the taxpayer.

In the same vein, Sitel fell short of proving that the recipients of its call services were foreign
corporations doing business outside the Philippines.

Thus, the Court finds no reason to reverse the ruling of the CTA Division denying the refund of
P7,170,276.02, allegedly representing Sitel's input VAT attributable to zero-rated sales.

G.R. No. 198146

POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT CORPORATION, vs COMMISSIONER OF

INTERNAL

August 08, 2017

FACTS

Petitioner Power Sector Assets and Liabilities Management Corporation (PSALM) is a government-owned
and controlled corporation created under Republic Act No. 9136 (RA 9136), also known as the Electric
Power Industry Reform Act of 2001 (EPIRA). Section 50 of RA 9136 states that the principal purpose of
PSALM is to manage the orderly sale, disposition, and privatization of the National Power Corporation
(NPC) generation assets, real estate and other disposable assets, and Independent Power Producer (IPP)
contracts with the objective of liquidating all NPC financial obligations and stranded contract costs in an
optimal manner.

PSALM conducted public biddings for the privatization of the Pantabangan-Masiway Hydroelectric Power
Plant and Magat Hydroelectric Power Plant First Gen Hydropower Corporation SN Aboitiz Power
Corporation were the winning bidders for the Pantabangan-Masiway Plant and Magat Plant.

On 28 August 2007, the NPC received a letter from the Bureau of Internal Revenue (BIR) demanding
immediate payment of deficiency value-added tax (VAT) for the sale of the Pantabangan-Masiway Plant
and Magat Plant. The NPC indorsed BIR's demand letter to PSALM.

On 21 September 2007, PSALM filed with the Department of Justice (DOJ) a petition for the adjudication
of the dispute with the BIR to resolve the issue of whether the sale of the power plants should be
subject to VAT.

On 13 March 2008, the DOJ ruled in favor of PSALM.

BIR Commissioner (Commissioner of Internal Revenue) filed with the Court of Appeals a petition for
certiorari, seeking to set aside the DOJ's decision for lack of jurisdiction.
The Court of Appeals held that the petition filed by PSALM with the DOJ was really a protest against the
assessment of deficiency VAT, which under Section 204 of the NIRC of 1997 is within the authority of the
Commissioner of Internal Revenue (CIR) to resolve.

The Court of Appeals declared the Decision of DOJ NULL and VOID for having been issued without
jurisdiction.

PSALM moved for reconsideration, which the Court of Appeals denied in its 3 August 2011 Resolution.
Hence, this petition.

Issues

WON the sale of the power plants is subject to VAT.

RULING:

Petition granted.

To resolve the issue of whether the sale of the Pantabangan-Masiway and Magat Power Plants by
petitioner PSALM to private entities is subject to VAT, the Court must determine whether the sale is "in
the course of trade or business" as contemplated under Section 105 of the NIRC, "Any person who, in
the course of trade or business, 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 Sections 106
to 108 of this Code."