Dean’s

Circle 2016
UNIVERSITY OF SANTO TOMAS

Editors: Tricia Lacuesta

Lorenzo Luigi Gayya
Cristopher Reyes
Macky Siazon
Janine Arenas
Ninna Bonsol
Lloyd Javier

TAXATION
LAW
Recent Jurisprudence
 Table of Contents
General Principles of Taxation
Doctrines in Taxation
Tax Amnesty .............................................................................................................................................. 2
Construction and Interpretation
Tax Exemption and Exclusion .................................................................................................................... 3
Scope and Limitations of Taxation
Constitutional Limitation
Exemption from Real Property Taxes ....................................................................................................... 4
NIRC
Income Taxation
Dealing in Property located in the Philippines .......................................................................................... 5
Value-Added Tax
Period to file a claim for refund/apply for issuance of tax credit certificate ............................................ 5
Invoicing Requirement ............................................................................................................................. 7
Tax Remedies under NIRC
Assessment ............................................................................................................................................... 9
When Assessment is made ....................................................................................................................... 9
Suspension of the running of the Statute of Limitation ......................................................................... 10
Local Government Code of 1991, as amended
Real Property Taxation
Issuance of Notice of Delinquency for Real Property Tax Payments ...................................................... 12
Resale of Real Estate taken for Taxes, Fees or Charges .......................................................................... 13
Tariff and Customs Code of 1978, as amended
Smuggling ................................................................................................................................................ 13
Other fraudulent practices...................................................................................................................... 14
Judicial Remedies
Jurisdiction of the Court of Tax Appeals ................................................................................................. 15
Documentary Stamp Tax ............................................................................................................................ 18
Excise Tax .................................................................................................................................................... 19

1
 TAXATION LAW 1

GENERAL PRINCIPLES OF TAXATION

Doctrines in Taxation

Tax Amnesty

COMMISSIONER OF INTERNAL REVENUE V. PUREGOLD DUTY FREE, INC.

G.R. No. 202789, June 22, 2015, VELASCO JR., J.

There is nothing in Sec. 1 of RA 9399 that excludes Sec. 131(A) of the 1997 NIRC from the amnesty. In
fact, there is no mention at all of any tax or duty imposed by the 1997 NIRC as being specifically excluded from
the coverage of the tax amnesty.

Facts:

As an enterprise located within Clark Special Economic Zone (CSEZ) and registered with the Clark
Development" Corporation (CDC), Puregold had been issued Certificate of Tax Exemption pursuant to Sec. 5
of EO 80, extending to business enterprises operating within the CSEZ all the incentives granted to
enterprises within the Subic Special Economic Zone (SSEZ) under RA 7227. In Coconut Oil Refiners v.
Torre, however, this Court annulled the adverted Sec. 5 of EO 80. Then Deputy Commissioner issued a
Preliminary Assessment Notice regarding unpaid VAT and excise tax on wines, liquors and tobacco products
imported by Puregold. The latter protested the assessment. Pending the resolution of Puregold's protest,
Congress enacted RA 9399, which provides that availment of the tax amnesty relieves the qualified taxpayers
of any civil, criminal and/or administrative liabilities arising from, or incident to, nonpayment of taxes, duties
and other charges. Puregold availed itself of the tax amnesty. However, it received a formal letter of demand
from the BIR for the payment of the deficiency VAT and excise taxes on its importations. In its response-letter,
Puregold requested the cancellation of the assessment on the ground that it has already availed of the tax
amnesty under RA 9399. This notwithstanding, the BIR issued a Final Decision stating that the availment of
the tax amnesty under RA 9399 did not relieve Puregold of its liability for deficiency VAT, excise taxes, and
inspection fees under Sec. 13l(A) of the 1997 NIRC.

Issue:

Whether or not RA 9399 grants amnesty from liability to pay VAT and excise tax under Section 131 of
the 1997 NIRC.

Ruling:

YES. It is worthy to note that Sec. 1 of RA 9399 explicitly and unequivocally mentions businesses
within the CSEZ as among the beneficiaries of the tax amnesty provided by RA 9399. Furthermore, Puregold
enjoyed duty free importations and exemptions from local and national taxes under EO 80, a privilege which
extended to business enterprises operating within the CSEZ all the incentives granted to enterprises within
SSEZ by RA 7227. Hence, Puregold was repeatedly issued tax exemption certificates and the BIR itself did not
assess any deficiency taxes from the time the 1997 NIRC took effect in January 1998. The special income tax
regime or tax incentives granted to enterprises registered within the secured area of Subic and Clark Special
Economic Zones have not been repealed by R.A. 8424. The court’s ruling in Coconut Oil cannot be
retroactively applied to obliterate the effect of Section 5 of EO 80 and the various rulings of the former CIR
prior to the promulgation of the Decision in 2005. Furthermore, a tax amnesty is designed to be a general
grant of clemency and the only exceptions are those specifically mentioned. The only exclusions that RA 9399
and its implementing rules mention are those taxes on goods that are taken out of the special economic zone.
If Congress intended Sec. 131 of the 1997 NIRC to be an exception to the general grant of amnesty given
under RA 9399, it could have easily so provided in either the law itself, or even the implementing rules.
______________________________________________________________________________________________________________________________

2
 ING BANK N.V. v. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 167679. July 22, 2015. Second Division. Leonen, J.

Qualified taxpayers with pending tax cases may still avail themselves of the tax amnesty program under
Republic Act No. 9480, otherwise known as the 2007 Tax Amnesty Act.

Facts:

ING Bank, the Philippine branch of Internationale Nederlanden Bank N.V., received a Final
Assessment Notice issued by the Enforcement Service of the Bureau of Internal Revenue stating therein
assessment of tax deficiency for taxable years 1996 and 1997. ING Bank made partial payment but protested
on other deficiency tax assessments.

While this case was pending before the SC, ING Bank filed a Manifestation and Motion stating that it
availed itself of the government’s tax amnesty program under Republic Act No. 9480 with respect to its
deficiency documentary stamp tax and deficiency onshore tax liabilities.

Issue:

Whether ING Bank is entitled to the tax amnesty.

Ruling:

YES. Taxpayers with pending tax cases may avail themselves of the tax amnesty program under
Republic Act No. 9480. The provision in BIR Revenue Memorandum Circular No. 19-2008 excepting "issues
and cases which were ruled by any court (even without finality) in favor of the BIR prior to amnesty
availment of the taxpayer" from the benefits of the law is illegal, invalid, and null and void.

Neither the law nor the implementing rules state that a court ruling that has not attained finality
would preclude the availment of the benefits of the Tax Amnesty Law. Both R.A. 9480 and DOF Order No. 29-
07 are quite precise in declaring that tax cases subject of final and executory judgment by the courts" are the
ones excepted from the benefits of the law. RA 9480 is specifically clear that the exceptions to the tax amnesty
program include "tax cases subject of final and executory judgment by the courts.Thus, petitioner ING Bank is
not disqualified from availing itself of the tax amnesty under the law during the pendency of its appeal before
this court.

Construction and Interpretation

Tax Exemption and Exclusion

MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY (MCIAA)v. CITY OF LAPU-LAPU AND ELENA T.

PACALDO
G.R. No. 181756, June 15, 2015, Leonardo-De Castro, J.

A tax exemption is strictly construed against the taxpayer claiming the exemption. However, when
Congress grants an exemption to a national government instrumentality from local taxation, such exemption is
construed liberally in favor of the national government instrumentality.

Facts:

The City of Lapu-Lapu subjected to real property taxes the Mactan-Cebu International Airport
Authority’s (MCIAA) airfield, runway, taxiway and the lots on which the runway and taxiway are situated.
MCIAA now contends that being an instrumentality of the government, the said real properties which were
used for public purpose cannot be subjected to local tax.

3
Issue:

Whether MCIAA is exempt from payment of local taxes pursuant to the Local Government Code.

Ruling:

YES. When local governments invoke the power to tax on national government instrumentalities,
such power is construed strictly against local governments. The rule is that a tax is never presumed and there
must be clear language in the law imposing the tax. Any doubt whether a person, article or activity is taxable
is resolved against taxation. This rule applies with greater force when local governments seek to tax national
government instrumentalities.

Scope and Limitation of Taxation

Constitutional Limitation

Exemption from Real Property Taxes

MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY (MCIAA)v. CITY OF LAPU-LAPU AND ELENA T.

PACALDO
G.R. No. 181756, June 15, 2015, Leonardo-De Castro, J.

To recall, in the 2006 MIAA case, we held that MIAA’s airport lands and buildings are exempt from real
estate tax imposed by local governments; that it is not a GOCC but an instrumentality of the national
government, with its real properties being owned by the Republic of the Philippines, and these are exempt from
real estate tax.

Facts:

The City of Lapu-Lapu subjected to real property taxes the Mactan-Cebu International Airport
Authority’s (MCIAA) airfield, runway, taxiway and the lots on which the runway and taxiway are situated.
MCIAA now contends that being an instrumentality of the government, the said real properties which were
used for public purpose cannot be subjected to local tax.

Issue:

Whether or not MCIAA is an instrumentality of the National Government and hence exempt from
payment of local taxes pursuant to the Local Government Code.

Ruling:

YES. The Court in the 2006 MIAA case went on to discuss the limitation on the taxing power of the
local governments as against the national government or its instrumentality.

A government instrumentality like MIAA falls under Section 133(o) of the Local Government Code,
which states:

SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless otherwise
provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not
extend to the levy of the following:

(o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and
local government units.

4
 Section 133(o) recognizes the basic principle that local governments cannot tax the national
government, which historically merely delegated to local governments the power to tax. While the 1987
Constitution now includes taxation as one of the powers of local governments, local governments may only
exercise such power “subject to such guidelines and limitations as the Congress may provide.”

NATIONAL INTERNAL REVENUE CODE (NIRC) OF 1997, AS AMENDED

Income Taxation

Dealings in Real Property situated in the Philippines

Republic of the Philippines, represented by the Department of Public Works and Highways v. Arlene
Soriano
G.R. No. 211666 February 25, 2015, Peralta, J.

Under Sections 24(D) and 56(A)(3) of the NIRC, capital gains tax due on the sale of real property is a
liability on the part of the seller.

Facts:

On October 20, 2010, Republic of the Philippines, represented by the Department of Public Works
and Highways (DPWH) filed a complaint for Expropriation against Arlene Soriano, the latter being the owner
of a parcel of land located in Valenzuela City to be used in the construction of North Luzon Expressway
(NLEX). The Expropriation is pursuant to Republic Act (RA) No. 8974, otherwise known as "An Act to
Facilitate the Acquisition of Right-Of-Way, Site or Location for National Government Infrastructure Projects
and for other Purposes." The RTC ordered DPWH to pay capital gains tax and documentary stamps tax. DPWH
opposed this saying that it is the seller’s obligation to pay.

Issue:

Whether DPWH is liable for capital gains tax.

Ruling:

NO. With respect to capital gains tax, Sections 24(D) and 56(A)(3) of the 1997 National Internal
Revenue Code (NIRC) state that capital gains tax due on the sale of real property is a liability on the part of
the seller. It has been held that since capital gains tax is a tax on passive income, it is the seller, not the buyer,
who generally would shoulder the tax.

TAXATION LAW 2

Value-Added Tax (VAT)

Period to file a claim for refund/apply for issuance of tax credit certificate

NORTHERN MINDANAO POWER CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 185115, February 18, 2015, SERENO, CJ

For a VAT-registered person whose sales are zero-rated or effectively zero-rated, Section 112(A)
specifically provides for a two-year prescriptive period after the close of the taxable quarter when the sales were
made within which such taxpayer may apply for the issuance of a tax credit certificate or refund of creditable
input tax.

Facts:

5
 Petitioner NMPC is engaged in the production and sale of electricity and allegedly incurred input VAT
on its domestic purchases of goods and services that were used in its production and sale of electricity to
NPC. Petitioner filed an administrative claim for a refund on June 20, 2000 for the 3rd and the 4th quarters of
taxable year 1999, and on July 25, 2001 for taxable year 2000.

Alleging inaction of respondent on these administrative claims, petitioner filed a petition with the
CTA 1st division which denied the petition and the Motion for Reconsideration ruling that the term "zero-
rated" was not imprinted on the receipts or invoices presented by petitioner in violation of Section 4.108-1 of
Revenue Regulations No. 7-95. The CTA En Banc denied the petition stating that the requirement of issuing
duly registered VAT official receipts with the term "zero-rated" imprinted is mandatory under the law and
cannot be substituted, especially for input VAT refund purposes.

Issue:

Whether or not the judicial claim for refund was filed on time.

Ruling:

NO. In this case, petitioner had until 30 September 2001 and 31 December 2001 for the claims
covering the 3rd and the 4th quarters of taxable year 1999; and 31 March, 30 June, 30 September and 31
December in 2002 for the claims covering all four quarters of taxable year 2000 −or the close of the taxable
quarter when the zero-rated sales were made −within which to file its administrative claim for a refund. On
this note, we find that petitioner had sufficiently complied with the two-year prescriptive period when it filed
its administrative claim for a refund on 20 June 2000 covering the 3rd and the 4th quarters of taxable year
1999 and on 25 July 2001 covering all the quarters of taxable year 2000.

Pursuant to Section 112(D) of the NIRC of 1997, respondent had one hundred twenty (120) days
from the date of submission of complete documents in support of the application within which to decide on
the administrative claim. As laid down in San Roque, judicial claims filed from 1 January 1998 until the
present should strictly adhere to the 120+30-day period referred to in Section 112 of the NIRC of 1997.
Petitioner’s claim for the 3rd and the 4th quarters of taxable year 1999 was filed 319 days after the expiration
of the 30-day period. It already lost its right to claim a refund or credit of its alleged excess input VAT
attributable to zero-rated or effectively zero-rated sales for the 3rd and the 4th quarters of taxable year 1999
by virtue of its own failure to observe the prescriptive periods.

For the year 2000, petitioner timely filed its administrative claim on 25 July 2001within the two-year
period from the close of the taxable quarter when the zero-rated sales were made. Pursuant to Section
112(D) of the NIRC of 1997, respondent had 120 days or until 22 November 2001 within which to act on
petitioner’s claim. It is only when respondent failed to act on the claim after the expiration of that period that
petitioner could elevate the matter to the tax court. Records show, however, that petitioner filed its Petition
with the CTA on 28 September 2001 without waiting for the expiration of the 120-day period. The Court in
San Roquehas already settled that failure of the petitioner to observe the mandatory 120-day period is fatal to
its judicial claim and renders the CTA devoid of jurisdiction over that claim. The judicial claim was thus
prematurely filed for failure of petitioner to observe the 120-day waiting period. The CTA therefore did not
acquire jurisdiction over the claim for a refund of input VAT for all the quarters of taxable year 2000.
______________________________________________________________________________________________________________________________

COMMISSIONER OF INTERNAL REVENUE v. TOLEDO POWER COMPANY

G.R. No. 196415, December 02, 2015, Del Castillo J.

The 120+30-day period must be strictly observed. Verily the compliance with the 120+3-day period is
mandatory and jurisdictional.

Facts:

6
 Toledo Power Corporation (TPC) herein respondent, is a general partnership engaged in the business
of power generation and sale of electricity to the NPC and other electricity service providers. On December
22, 2003, TPC filed with the BIR an administrative claim for refund or credit of its unutilized input VAT for the
taxable year 2002. On April 22, 2004, due to the inaction of the CIR, TPC filed with the CTA a Petition for
Review.

Issue:

Whether TPC's claim for tax refund/credit has already prescribed.

Ruling:

YES. Pursuant to Section 112 (A)42 and (D)43 of the NIRC, a taxpayer has two (2) years from the
close of the taxable quarter when the zero-rated sales were made within which to file with the CIR an
administrative claim for refund or credit of unutilized input VAT attributable to such sales. The CIR, on the
other hand, has 120 days from receipt of the complete documents within which to act on the administrative
claim. Upon receipt of the decision, a taxpayer has 30 days within which to appeal the decision to the CTA.
However, if the 120-day period expires without any decision from the CIR, the taxpayer may appeal the,
inaction to the CTA within 30 days from the expiration of the 120-day period.

In this case, TPC applied for a claim for refund or credit of its unutilized input VAT for the taxable
year 2002 on December 22, 2003. Since the CIR did not act on its application within the 120-day period, TPC
appealed the inaction on April 22, 2004. Clearly, both the administrative and the judicial claims were filed
within the prescribed period provided in Section 112 of the NIRC.

In view of the foregoing, we find that both the administrative and the judicial claims were timely and
validly filed.

Invoicing Requirement

NORTHERN MINDANAO POWER CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 185115, February 18, 2015, SERENO, CJ

This Court has consistently held as fatal the failure to print the word "zero-rated" on the VAT invoices or
official receipts in claims for a refund or credit of input VAT on zero-rated sales, even if the claims were made
prior to the effectivity of R.A. 9337.

Facts:

Petitioner NMPC is engaged in the production and sale of electricity and allegedly incurred input VAT
on its domestic purchases of goods and services that were used in its production and sale of electricity to
NPC. Petitioner filed an administrative claim for a refund on June 20, 2000 for the 3rd and the 4th quarters of
taxable year 1999, and on July 25, 2001 for taxable year 2000.

Alleging inaction of respondent on these administrative claims, petitioner filed a petition with the
CTA 1st division which denied the petition and the Motion for Reconsideration ruling that the term "zero-
rated" was not imprinted on the receipts or invoices presented by petitioner in violation of Section 4.108-1 of
Revenue Regulations No. 7-95. The CTA En Banc denied the petition stating that the requirement of issuing
duly registered VAT official receipts with the term "zero-rated" imprinted is mandatory under the law and
cannot be substituted, especially for input VAT refund purposes.

Issue:

7
 Whether or not Revenue Regulations No. 7-95 which expanded the statutory requirements for the
issuance of official receipts and invoices found in the 1997 Tax Code by providing for the additional
requirement of the imprinting of the terms "zero-rated" is unconstitutional.

Ruling:

NO. The issue of the requirement of imprinting the word "zero-rated" has already been settled by
this Court in a number of cases. In Panasonic Communications Imaging Corporation of the Philippines v. CIR,
we ruled that this provision is "reasonable and is in accord with the efficient collection of VAT from the
covered sales of goods and services." Moreover, we have held in Kepco Philippines Corporation v.
Commissioner of Internal Revenue that the subsequent incorporation of Section 4.108-1 of RR 7-95 in Section
113 (B) (2) (c) of R.A. 9337 actually confirmed the validity of the imprinting requirement on VAT invoices or
official receipts – a case falling under the principle of legislative approval of administrative interpretation by
reenactment.
______________________________________________________________________________________________________________________________

EASTERN TELECOMMUNICATIONS, PHILIPPINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 183531, March 25, 2015, Reyes, J.

The failure to indicate the words “zero-rated” on the invoices and receipts issued by a taxpayer would
result in the denial of the claim for refund or tax credit.

Facts:

ETPI filed its Quarterly VAT Returns for the year 1998 which were simultaneously amended to
correct its input VAT on domestic purchases of goods and services and on importation of goods and to reflect
its zero-rated and exempt sales for said year. ETPI filed with the BIR an administrative claim for refund of
input taxes resulting from its effectively zero-rated sales in 1998. Pending review by the BIR, ETPI filed a
Petition for Review before the CTA in order to toll the two-year reglementary period under Section 229 of the
NIRC. The BIR Commissioner opposed the petition.

The CTA denied the petition because the VAT official receipts presented by ETPI to support its claim
failed to imprint the word “zero-rated” on its face in violation of the invoicing requirements.

Issue:

Whether EPTI is entitled to a tax credit/refund.

Ruling:

NO. An applicant for a claim for tax refund or tax credit must not only prove entitlement to the claim
but also compliance with all the documentary and evidentiary requirements. A claim for the refund of
creditable input taxes must be evidenced by a VAT invoice or official receipt The invoicing requirements
provide that all VAT-registered taxpayers should observe, such as: (a) the BIR Permit to Print; (b) the Tax
Identification Number of the VAT-registered purchaser; and (c) the word “zero-rated” imprinted thereon.
Thus, the failure to indicate the words “zero-rated” on the invoices and receipts issued by a taxpayer would
result in the denial of the claim for refund or tax credit.

Tax refunds, being in the nature of tax exemptions, are construed in strictissimi juris against the
taxpayer and liberally in favor of the government. Accordingly, it is a claimant’s burden to prove the factual
basis of a claim for refund or tax credit. Considering that ETPI is engaged in mixed transactions that cover its
zero-rated sales, taxable and exempt sales, it is only appropriate and reasonable for it to present competent
evidence to validate all entries in its returns in order to properly determine which transactions are zero-rated
and which are taxable. Clearly, compliance with all the VAT invoicing requirements provided by tax laws and
regulations is mandatory.

8
 Tax Remedies under the NIRC

Assessment

COMMISSIONER OF INTERNAL REVENUE v. TRADERS ROYAL BANK

G.R. No. 167134, March 18, 2015, LEONARDO-DE CASTRO, J.

All presumptions are in favor of the correctness of tax assessments.

Facts:

The Bureau of Internal Revenue issued an Assessment Notice against Trader’s Royal Bank for
Deficiency Documentary Stamp Tax. TRB protested the assessment arguing that Trust Indenture Agreements
are not subject to documentary stamp tax.

The CIR denied the protest on the ground that the Trust Indenture Agreements were a form of
deposit, hence, subject to DST.

Issue:

Whether or not the Trust Indenture Agreements constitute deposits and hence subject to DST.

Ruling:

YES. At the crux of the instant controversy are the Trust Indenture Agreements of TRB. At issue is
whether the said Trust Indenture Agreements constituted deposits or trusts. The BIR posits that the
Agreements were deposits subject to DST, while TRB proffers that the Agreements were trusts exempt from
DST.

Surprisingly, not a single copy of a Trust Indenture Agreement and/or the Certificate of Participation
(issued to the client as evidence of the trust) could be found in the records of the case.

In contrast, records show that the BIR examiners conducted a thorough audit and investigation of the
books of account of TRB. Mr. Alexander D. Martinez, a BIR Revenue Officer, testified that it took the BIR team
of examiners more than one-year to conduct and complete the audit and examination of the documents of
TRB, which consisted of approximately 20,000 pages. The audit and investigation resulted in the issuance of
Assessment Notices against TRB for DST tax liabilities for 1996 and 1997, which were duly received by TRB.
The tax assessments against TRB are presumed valid. In Sy Po v. Court of Tax Appeals, the Court pronounced:

Tax assessments by tax examiners are presumed correct and made in good faith. The taxpayer has
the duty to prove otherwise. In the absence of proof of any irregularities in the performance of duties, an
assessment duly made by a Bureau of Internal Revenue examiner and approved by his superior officers will
not be disturbed.

When Assessment is made

COMMISSIONER OF INTERNAL REVENUE v. STANDARD CHARTERED BANK

G.R. No. 192173, July 29, 2015, PEREZ, J.

Petitioner only had three years, counted from the date of actual filing of the return or from the last date
prescribed by law for the filing of such return, whichever comes later, to assess a national internal revenue tax or
to begin a court proceeding for the collection thereof without an assessment.

9
Facts

On July 14, 2004, Standard Chartered Bank (SCB) received a Formal Letter from the CIR demanding
for the alleged deficiency income tax, final income tax – FCDU, EWT, and increments for taxable year 1998.
Aggrieved, SCB filed a letter-protest addressed to the BIR Deputy Commissioner for Large Taxpayers’ Service
however the same was not acted upon. This inaction prompted SCB to file a petition for the cancellation and
setting aside of the subject Formal Letter of Demand and Assessment Notices before CTA Division.

The CTA in Division granted the petition and cancelled the formal letter issued by the BIR. The CTA in
Division ruled that the petitioner’s right to assess respondent for the deficiency income tax, final income tax –
FCDU, and EWT was already barred by prescription. It further ruled that even though the parties executed a
Waivers of Statute of Limitations which would justify the extension of period to assess respondent, the
subject waivers failed to strictly comply and conform with the provisions of Revenue Memorandum Order
(RMO) No. 20-90. It therefore concluded that since the waivers were invalid, it necessarily follows that the
subsequent waivers did not in any way cure the defects. Neither did it extend the prescriptive period to
assess.

Issue:

Whether petitioner’s right to assess respondent has already prescribed.

Ruling:

YES. The period for petitioner to assess and collect an internal revenue tax is limited only to three
years by Section 203 of the NIRC of 1997, as amended. This mandate governs the question of prescription of
the government’s right to assess internal revenue taxes primarily to safeguard the interests of taxpayers from
unreasonable investigation by not indefinitely extending the period of assessment and depriving the taxpayer
of the assurance that it will no longer be subjected to further investigation for taxes after the expiration of
reasonable period of time. Thus, in the present case, petitioner only had three years, counted from the date of
actual filing of the return or from the last date prescribed by law for the filing of such return, whichever
comes later, to assess a national internal revenue tax or to begin a court proceeding for the collection thereof
without an assessment

Suspension of the running of Statute of Limitation

COMMISSIONER OF INTERNAL REVENUE v. STANDARD CHARTERED BANK

G.R. No. 192173, July 29, 2015, PEREZ, J.

Failure to comply with any of the requisites renders a waiver defective and ineffectual. Thus, the waivers
in question were defective and did not validly extend the original three-year prescriptive period.

Facts

On July 14, 2004, Standard Chartered Bank (SCB) received a Formal Letter from the CIR demanding
for the alleged deficiency income tax, final income tax – FCDU, EWT, and increments for taxable year 1998.
Aggrieved, SCB filed a letter-protest addressed to the BIR Deputy Commissioner for Large Taxpayers’ Service
however the same was not acted upon. This inaction prompted SCB to file a petition for the cancellation and
setting aside of the subject Formal Letter of Demand and Assessment Notices before CTA Division.

The CTA in Division granted the petition and cancelled the formal letter issued by the BIR. The CTA in
Division ruled that the petitioner’s right to assess respondent for the deficiency income tax, final income tax –
FCDU, and EWT was already barred by prescription. It further ruled that even though the parties executed a
Waivers of Statute of Limitations which would justify the extension of period to assess respondent, the
subject waivers failed to strictly comply and conform with the provisions of Revenue Memorandum Order
(RMO) No. 20-90. It therefore concluded that since the waivers were invalid, it necessarily follows that the

10
subsequent waivers did not in any way cure the defects. Neither did it extend the prescriptive period to
assess.

Issue:

Whether or not the Waiver of Statute of Limitation executed by the parties was valid.

Ruling:

NO. Revenue orders namely; RMO No. 20-90 and Revenue Delegation Authority Order (RDAO) No.
05-01, outline the procedure for the proper execution of a waiver. The provisions of the RMO and RDAO
explicitly show their mandatory nature, requiring strict compliance. The subject waivers of the Statute of
Limitations were in clear violation of RMO No. 20-90.

Taking into consideration the defects in the First and Second Waivers presented and admitted in
evidence before the court a quo, the period to assess the tax liabilities of respondent for taxable year 1998
was never extended. Consequently, when the succeeding waivers of Statute of Limitations were subsequently
executed covering the same tax liabilities of respondent, and there being no assessment having been issued as
of that time, prescription has already set in. The subject waivers did not extend the period to assess the
subject deficiency tax liabilities of respondent for taxable year 1998. The aforesaid waivers cannot be
considered as "subsequent written agreement(s) made before the expiration of the period previously agreed
upon" referred to in the second sentence of the earlier quoted Section 222(b) of the NIRC of 1997, as
amended, since there is no "period previously agreed upon" to speak of.
______________________________________________________________________________________________________________________________

Commisioner Of Internal Revenue v. Next Mobile Inc

GR No. 212825, December 7, 2015, J. Velasco JR.

The general rule is that when a waiver does not comply with the requisites for its validity, it is invalid
and ineffective to extend the prescriptive period to assess taxes. However as an exception the BIR's right to assess
and collect taxes should not be jeopardized merely because of the mistakes and lapses of its officers, especially in
cases like this where the taxpayer is obviously in bad faith.

Facts:

Sarmiento, Next Mobile Inc. Director of Finance, executed several waivers of the statute of limitations
to extend the prescriptive period of assessment for taxes due. Then BIR issued an assessment beyond the
three year prescriptive period to assess. It was contested by Sarmiento and contended that the waivers
executed by her were void thus the assessment was void for it was made out of time. CTA found that these
waivers were invalid because of the following flaws: (1) they were executed without a notarized board
authority; (2) the dates of acceptance by the BIR were not indicated therein; and (3) the fact of receipt by
Next Mobile Inc of its copy of the Second Waiver was not indicated on the face of the original Second Waiver.

Issue:

Whether the CIR’s right to assess Next Mobile's deficiency taxes had already prescribed.

Ruling:

NO. Section 2033 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 three-year prescriptive period is
not valid and effective. Exceptions to this rule are provided under Section 222 of the NIRC. Section 222(b) of
the NIRC provides that the period to assess and collect taxes may only be extended upon a written agreement

11
between the CIR and the taxpayer executed before the expiration of the three-year period provided it comply
with the requisites for its validity specified under RMO No. 20-90 and RDAO 01-05.

Here, it did not comply with the procedure for a valid agreement for the waiver of the statute of
limitations. However, the Court cannot tolerate this highly suspicious situation. In this case, the taxpayer, on
the one hand, after voluntarily executing waivers, insisted on their invalidity by raising the very same defects
it caused. On the other hand, the BIR miserably failed to exact from Next Mobile compliance with its rules. The
BIR’s negligence in the performance of its duties was so gross that it amounted to malice and bad faith.
Moreover, the BIR was so lax such that it seemed that it consented to the mistakes in the Waivers. Such a
situation is dangerous and open to abuse by unscrupulous taxpayers who intend to escape their
responsibility to pay taxes by mere expedient of hiding behind technicalities.

It is true that BIR was also at fault here because it was careless. Nevertheless, BIR's negligence may be
addressed by enforcing the provisions imposing administrative liabilities upon the officers responsible for
these errors. The BIR's right to assess and collect taxes should not be jeopardized merely because of the
mistakes and lapses of its officers, especially in cases like this where the taxpayer is obviously in bad faith.

LOCAL GOVERNMENT CODE OF 1991, AS AMENDED

Real Property Taxation

Issuance of Notice of Delinquency for Real Property Tax Payments

OFELIA GAMILLAv.BURGUNDY REALTY CORPORATION

G.R. No. 212246 June 22, 2015 MENDOZA, J.

It is incumbent upon the City Treasurer to convey the notice of delinquency to the taxpayer.

Facts:

City Treasurer of Quezon City sent BRC a Statement of Delinquency informing it that the real estate
tax on the subject property, covered by CCT No. 5708, had not been paid and requiring it to pay. Later, Final
Notice of Delinquency was sent but BRC still failed to comply. Thereafter, Warrant of Levywas
issued.Following the requirements of law, the public auction was conducted and Ofelia Gamilla was declared
the highest bidder. A year after, City Treasurer executed the Final Bill of Sale in favor of Gamilla, who caused
its annotation on CCT No. 5708 with the RD. Gamilla filed a petition for the cancellation of CCT No. 5708 with
the RTC praying for the issuance of a new CCT but BRC opposed the same.RTC rendered a decision in favor of
Gamilla. However, CA reversed and set aside the RTC decision.

Issue:

Whether or not the auction sale of the subject property should be annulled in view of the failure of
the City Treasurer to send a notice of delinquency to BRC.

Ruling:

NO. The strict adherence to the notice requirement in tax sales is imperative not only for the
protection of the taxpayers, but also to allay any possible suspicion of collusion between the buyer and the
public officials called upon to enforce such laws. In the present case, a perusal of the records would show that
BRC was properly notified of its tax delinquency and of the proceedings relative to the auction sale; hence, its
right as a taxpayer and the owner of the subject property was adequately protected.

Though the statement of delinquency was not captioned as "Notice of Delinquency," its contents
nonetheless sufficiently informed BRC of its deficiency in real property taxes and the penalty with a reminder
to settle its tax obligation immediately in order to avoid legal inconvenience. Furthermore, aside from this

12
statement of delinquency, the City Treasurer sent to BRC, through personal service, the Final Notice of
Delinquency, dated July 28, 2005. In the said notice, BRC was again reminded of its unpaid realty taxes and
penalties and was informed that the subject property was included in the list of delinquent real properties
and was scheduled for auction on September 15, 2005. This final notice was followed by the Warrant of Levy,
both of which were received by Tayag.

Resale of Real Estate taken for Taxes, Fees or Charges

OFELIA GAMILLAv.BURGUNDY REALTY CORPORATION

G.R. No. 212246 June 22, 2015 MENDOZA, J.

Section 267 of R.A. No. 7160 is a jurisdictional requirement, the nonpayment of which warrants the
dismissal of the action.

Facts:

City Treasurer of Quezon City sent BRC a Statement of Delinquency informing it that the real estate
tax on the subject property, covered by CCT No. 5708, had not been paid and requiring it to pay. Later, Final
Notice of Delinquency was sent but BRC still failed to comply. Thereafter, Warrant of Levywas
issued.Following the requirements of law, the public auction was conducted and Ofelia Gamilla was declared
the highest bidder. A year after, City Treasurer executed the Final Bill of Sale in favor of Gamilla, who caused
its annotation on CCT No. 5708 with the RD. Gamilla filed a petition for the cancellation of CCT No. 5708 with
the RTC praying for the issuance of a new CCT but BRC opposed the same.RTC rendered a decision in favor of
Gamilla. However, CA reversed and set aside the RTC decision.

Issue:

Whether or not the CA was correct in taking cognizant of the case despite failure of BRC to comply
with Section 267 of R.A. No. 7160.

Ruling:

NO. The CA erred in taking cognizance of the case. Section 267 of R.A. No. 7160 explicitly provides that
a court shall not entertain any action assailing the validity or sale at public auction of real property unless the
taxpayer deposits with the court the amount for which the real property was sold, together with interest of
two percent (2%) per month from the date of sale to the time of the institution of the action. This condition is
a jurisdictional requirement, the nonpayment of which warrants the dismissal of the action. Considering that
BRC did not make such deposit, the RTC should not have acted on the opposition of BRC.

TARIFF AND CUSTOMS CODE OF 1978, AS AMENDED

Smuggling

M/V "DON MARTIN" V. HON. SECRETARY OF FINANCE, ET. AL

G.R. No. 160206, July 15, 2015, BERSAMIN, J.

In order that a shipment be liable to forfeiture, it must be proved that fraud has been committed by the
consignee/importer to evade the payment of the duties due.

Facts:

Based on an intelligence report to the effect that the cargo of rice being unloaded from the M/V Don
Martin had been smuggled, such vessel was apprehended and seized and its entire rice cargo. The District
Collector of Customs rendered a ruling that in the absence of a showing of lawful entry into the country, the
6,500 sacks of rice were of foreign origin and thus subject to seizure and forfeiture.

13
Issue:

Whether the rice shipment constituted smuggling or unlawful importation therefore warrants its
forfeiture.

Ruling:

NO. The respondents should establish probable cause prior to forfeiture by proving: (1) that the
importation or exportation of the 6,500 sacks of rice was effected or attempted contrary to law, or that the
shipment of the 6,500 sacks of rice constituted prohibited importation or exportation; and (2) that the vessel
was used unlawfully in the importation or exportation of the rice, or in conveying or transporting the rice, if
considered as contraband or smuggled articles in commercial quantities, into or from any Philippine port or
place. A review of the records discloses that no probable cause existed to justify the forfeiture of the rice
cargo and the vessel.

Other fraudulent practices

ALVIN MERCADO v. PEOPLE OF THE PHILIPPINES

G.R. No. 167510, July 08, 2015, Bersamin, J.

The elements to be established in order to convict a person of the crime of making an entry by means of
false and fraudulent invoice and declaration are: (1) there must be an entry of imported or exported articles; (2)
the entry was made by means of any false or fraudulent invoice, declaration, affidavit, letter, or paper; and (3)
there must be intent to avoid payment of taxes.

Facts:

A shipment containing assorted men's and ladies' wearing apparel, textile and accessories from
Bangkok, Thailand had arrived at the Manila International Container Port (MICP) on board the vessel Sumire.
The shipment was consigned to Al-Mer Cargo Management, an entity owned and managed by the petitioner
Alvin Mercado. An Alert Order was issued directing the Customs Special Agent to witness the 100%
examination of the shipment by the assigned customs examiner. Meanwhile, Al-Mer Cargo Management filed
an Informal Import Declaration and Entry (IIDE) and Permit to Deliver through its broker, Consular Cargo
Services, describing the items in the shipment as "personal effects, assorted men’s and ladies’ wearing
apparels, (sic) textile and accessories." Upon examination of the shipment, the Customs Examiner found the
shipment to contain general merchandise in commercial quantities instead of personal effects of no
commercial value. Thereafter, the shipment was seized and the petitioner was charged in the RTC with the
violation of Section 3602, in relation to Section 2503, of the Tariff and Customs Code of the Philippines. The
RTC convicted him of the crime charged, which the CA affirmed.

Issue:

Whether or not petitioner may be held liable for violation of Section 3602, in relation to Section
2503, of the Tariff and Customs Code of the Philippines.

Ruling:

NO. The act thereby imputed against the petitioner - making an entry by means of false and fraudulent
invoice and declaration - fell under the first form of fraudulent practice punished under Section 3602 of the
TCCP. The elements to be established in order to convict him of the crime charged are, specifically: (1) there
must be an entry of imported or exported articles; (2) the entry was made by means of any false or fraudulent
invoice, declaration, affidavit, letter, or paper; and (3) there must be intent to avoid payment of taxes.

14
 The Court holds that the petitioner deserved an acquittal because the Prosecution did not prove his
guilt beyond reasonable doubt. It is undisputed that the customs documents (like the IIDE and Permit to
Deliver) were filed with and the imported goods passed through the customs authorities, thereby satisfying
the first element of entry of imported articles. However, the second and third elements were not established
beyond reasonable doubt. Although there was a discrepancy between the declaration made and the actual
contents of the shipment, the petitioner firmly disavowed his participation in securing the clearance for the
shipment as well as in preparing and filing the import documents. He insisted that being only the consignee
of the shipment, he did not file the informal entry in the Bureau of Customs; that based on the documents, the
filer was Consular Cargo; that he had no knowledge about the entry; that it was the broker who prepared the
import entry declaration; that the papers were submitted by Viray; and that only Rolando Saganay
(petitioner’s agent-broker) signed the IIDE.

The importer or consignee should not be held criminally liable for any underdeclaration or
misdeclaration made by the broker unless either a conspiracy between them had been alleged and proved, or
the Prosecution sufficiently established that the importer had knowledge of and actively participated in the
underdeclaration or misdeclaration.

JUDICIAL REMEDIES (R.A. NO. 1125, AS AMENDED, AND THE REVISED RULES OF THE COURT OF TAX
APPEALS)

Jurisdiction of the Court of Tax Appeals

CE CASECNAN WATER AND ENERGY COMPANY, INC., Petitioner, v. THE PROVINCE OF NUEVA ECIJA et al
G.R. No. 196278, June 17, 2015, Del Castillo J.

It is the CTA which has the power to rule on a Petition for Certiorari assailing an interlocutory order of
the RTC relating to a local tax case.

Facts:

CeCasecnan Water and Energy Company Inc (Casecnan) herein petitioner, entered into a build-
operate-transfer (BOT) contract with the National Irrigation Administration (NIA) whereby the latter shall
undertake the construction and development of the Casecnan Multi-purpose Irrigation and Power Project in
Nueva Ecija and Nueva Vizcaya. The BOT contract contained a provision which provides that NIA must
reimburse Casecnan for Real Property Taxes (RPT) provided the same was paid upon NIA’s directive and
with the concurrence of the Department of Finance. Thereafter Notice of Assessments were sent to Casecnan
for payment of RPT. Casecnan questions the aforementioned assessments arguing that NIA is party which is
liable to pay the aforementioned RPT. Hence, Casecnan filed with the RTC a complaint for injunction praying
to restrain the collection of the RPT by the local government concerned. It argued that it was not the one
which should pay the taxes but NIA.

The RTC dismissed the complaint of Casecnan. This prompted Casecnan to file a petitioner for
Certiorari under Rule 65 with the CA. The CA dismissed the petition of Casecnan. It held that it had no
jurisdiction over the matter since the subject matter of the controversy involves a tax case. Hence this
petition.

Issue:

Whether the CA has jurisdiction to hear and decided the case instituted by Casecnan involving an
assessment of RPT by the local government

Ruling:

15
 NO. Jurisdiction over the subject matter is required for a court to act on any controversy. It is
conferred by law and not by the consent or waiver upon a court. As such, if a court lacks jurisdiction over an
action, it cannot decide the case on the merits and must dismiss it.

With respect to the CTA, its jurisdiction was expanded and its rank elevated to that of a collegiate
court with special jurisdiction by virtue of Republic Act No. 9282. This expanded jurisdiction of the CTA
includes its exclusive appellate jurisdiction to review by appeal the decisions, orders or resolutions of the
RTC in local tax cases originally decided or resolved by the RTC in the exercise of its original or appellate
jurisdiction.

In a string of cases, the Supreme Court ruled that the CTA likewise has the jurisdiction to issue writs
of certiorari or to determine whether there has been grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the RTC in issuing an interlocutory order in cases falling within the CTA's exclusive
appellate jurisdiction
______________________________________________________________________________________________________________________________

COMMISSIONER OF INTERNAL REVENUE v. COURT OF TAX APPEALS AND PETRON CORPORATION, GR

NO. 207843, JULY 15, 2015, J. PERLAS-BERNABE

The CTA is a court of special jurisdiction, with power to review by appeal decisions involving tax
disputes rendered by either the CIR or the COC. Conversely, it has no jurisdiction to determine the validity of a
ruling issued by the CIR or the COC in the exercise of their quasi-legislative powers to interpret tax laws.

Facts:

An excise tax was imposed by the collector of customs on Petron’s alkylate importation. The
imposition of the excise tax was premised on Customs Memorandum Circular (CMC) No. 164-2012 dated July
18, 2012, implementing the Letter dated June 29, 2012 issued by the CIR. In view of the CIR’s assessment,
Petron filed before the CTA a petition for review, docketed as CTA Case No. 8544, raising the issue of whether
its importation of alkylate as a blending component is subject to excise tax as contemplated under Section
148 (e) of the NIRC, which states that:

The CIR filed a motion to dismiss on the grounds of lack of jurisdiction and prematurity.

CTA gave due course to Petron’s petition, finding that: (a) the controversy was not essentially for the
determination of the constitutionality, legality or validity of a law, rule or regulation but a question on the
propriety or soundness of the CIR’s interpretation of Section 148 (e) of the NIRC which falls within the
exclusive jurisdiction of the CTA under Section 4 thereof, particularly under the phrase “other matters arising
under the NIRC” and (b) there are attending circumstances that exempt the case from the rule on non-
exhaustion of administrative remedies, such as the great irreparable damage that may be suffered by Petron
from the CIR’s final assessment of excise tax on its importation

Issue:

Whether or not the CTA properly assumed jurisdiction?

Ruling:

NO. In this case, Petron’s tax liability was premised on the COC’s issuance of CMC No. 164-2012,
which gave effect to the CIR’s June 29, 2012 Letter interpreting Section 148 (e) of the NIRC as to include
alkylate among the articles subject to customs duties, hence, Petron’s petition before the CTA ultimately
challenging the legality and constitutionality of the CIR’s aforesaid interpretation of a tax provision. In line
with the foregoing discussion, however, the CIR correctly argues that the CTA had no jurisdiction to take
cognizance of the petition as its resolution would necessarily involve a declaration of the validity or
constitutionality of the CIR’s interpretation of Section 148 (e) of the NIRC, which is subject to the exclusive

16
review by the Secretary of Finance and ultimately by the regular courts. In British American Tobacco v.
Camacho, the Court ruled that theCTA’s jurisdiction to resolve tax disputes excludes the power to rule on the
constitutionality or validity of a law, rule or regulation, to wit:

While the above statute confers on the CTA jurisdiction to resolve tax disputes in general, this does
not include cases where the constitutionality of a law or rule is challenged. Where what is assailed is the
validity or constitutionality of a law, or a rule or regulation issued by the administrative agency in the
performance of its quasi-legislative function, the regular courts have jurisdiction to pass upon the same.
______________________________________________________________________________________________________________________________

COMMISSIONER OF INTERNAL REVENUE v. NIPPON EXPRESS (PHILS.) CORPORATION

G.R. No. 212920 September 16, 2015, Perlas-Bernabe, J.

Sec. 3, Rule 50 of the Rules of Court applies since the Revised Rules of the Court of Tax Appeals is silent as
to the procedure for withdrawal of pending appeals before the CTA. While withdrawal may be allowed in the
discretion of the CTA, it must also be borne in mind that jurisdiction, once acquired, is not lost upon the instance
of the parties, or by the unilateral withdrawal by one party, but continues until the case is terminated.

Facts:

Nippon Express (Phils.) filed an administrative claim for refund of its excess Input VAT before the
BIR. A day later, it filed a judicial claim for tax refund before the CTA. After a full blown hearing, the BIR
issued a tax credit certificate in favor of Nippon Express.

The CTA Division eventually ruled granting Nippon Express’s refund to the extent of only around P2
Million. It found that Nippon Express’s sales do not fall under “zero rated sales” for failing to prove that the
recipients of its services were non-residents “doing business outside the Philippines”. But before receiving
the Decision of the CTA Division, Nippon Express filed a motion to withdraw. The CTA Division and the CTA
en banc ruled for Nippon Express and considered the case as closed.

Issue:

Whether the CTA Division and CTA en banc erred in granting the motion to withdraw of Nippon
Express.

Ruling:

YES. Sec. 3, Rule 50 of the Rules of Court applies since the Revised Rules of the Court of Tax Appeals
is silent as to the procedure for withdrawal of pending appeals before the CTA. Sec. 3, Rule 50 provides that

“Section 3. Withdrawal of appeal. — An appeal may be withdrawn as of right at any time before the
filing of the appellee's brief. Thereafter, the withdrawal may be allowed in the discretion of the court.”

While it is true that the CTA Division has the prerogative to grant or deny, the circumstances of the
case should have incited it to act otherwise. Jurisdiction, once acquired, is not lost upon the instance of the
parties, but continues until the case is terminated. When Nippon Express filed its judicial claim, jurisdiction
vested in the CTA and, in fact, the CTA exercised such jurisdiction when it acted on the claim. Such jurisdiction
cannot be lost by the unilateral withdrawal of the claim by Nippon Express.

Equally important is the finding of the CTA Division itself after a full-blown hearing that Nippon's
purported sales therefrom could not qualify as zero-rated sales.

17
 DOCUMENTARY STAMP TAX

Republic of the Philippines, represented by the Department of Public Works and Highways v. Arlene
Soriano
G.R. No. 211666 February 25, 2015, Peralta, J.

With regard to documentary stamps tax, the NIRC does not explicitly impute the obligation to pay on
the seller. Thus, any of the parties to a transaction shall be liable, unless they agree among themselves on who
shall be liable

Facts:

On October 20, 2010, Republic of the Philippines, represented by the Department of Public Works
and Highways (DPWH) filed a complaint for Expropriation against Arlene Soriano, the latter being the owner
of a parcel of land located in Valenzuela City to be used in the construction of North Luzon Expressway
(NLEX). The Expropriation is pursuant to Republic Act (RA) No. 8974, otherwise known as "An Act to
Facilitate the Acquisition of Right-Of-Way, Site or Location for National Government Infrastructure Projects
and for other Purposes." The RTC ordered DPWH to pay transfer taxes in the nature of capital gains tax and
documentary stamps tax. DPWH opposed this saying that it is the seller’s obligation to pay.

Issue:

Whether DPWH is liable for documentary stamps tax.

Ruling:

YES. With regard to documentary stamps tax, DPWH is liable because as a general rule, any of the
parties to a transaction shall be liable for the full amount of the documentary stamp tax due, unless they agree
among themselves on who shall be liable for the same. In this case, there is no agreement as to the party liable
for the documentary stamp tax due on the sale of the land to be expropriated. While DPWH rejects liability for
the same, the court took note of its Citizen’s Charter, which functions as a guide for the procedure to be taken
by the DPWH in acquiring real property through expropriation under RA 8974. The Citizen’s Charter, issued
by petitioner DPWH itself, explicitly provides that the documentary stamp tax, and registration fee due on the
transfer of the title of land in the name of the Republic shall be shouldered by the implementing agency of the
DPWH, while the capital gains tax shall be paid by the affected property owner.
______________________________________________________________________________________________________________________________

COMMISSIONER OF INTERNAL REVENUE v. LA TONDENA DISTILLERS, INC. [NOW GINEBRA SAN

MIGUEL], GR NO. 175188, JULY 15, 2015, J. J. DEL CASTILLO

The transfer of real property to a surviving corporation pursuant to a merger is not subject to
Documentary Stamp Tax (DST).

Facts:

The CIR denied claims for documentary tax exemption of the real property transfer resulting from
the merger of respondent La Tondena with other corporations in which the latter as the surviving
corporation. CIR posits that DST is levied on the exercise of the privilege to convey real property regardless
of the manner of conveyance. Thus, it is imposed on all conveyances of realty, including realty transfer during
a corporate merger. As to the subsequent enactment of RA 9243, CIR claims that La Tondena cannot benefit
from it as laws apply prospectively.

Respondent La Tondena Distiller Inc, on the other hand, contends that DST is imposed only on
conveyances, deeds, instruments, or writing, where realty sold shall be conveyed to a purchaser or buyer. In

18
this case, there is no purchaser or buyer as a merger is neither a sale nor a liquidation of corporate property
but a consolidation of properties, powers, and facilities of the constituent companies.

Issue:

Whether transfer of real property to a surviving corporation pursuant to a merger is subject to

Documentary Stamp Tax.

Ruling:

NO. We do not find merit in petitioner CIR’s contention that Section 196 covers all transfers and
conveyances of real property for a valuable consideration. A perusal of the subject provision would clearly
show it pertains only to sale transactions where real property is conveyed to a purchaser for a consideration.
The phrase “granted, assigned, transferred or otherwise conveyed” is qualified by the word “sold” which
means that documentary stamp tax under Section 196 is imposed on the transfer of realty by way of sale and
does not apply to all conveyances of real property. Indeed, as correctly noted by the respondent, the fact that
Section 196 refers to words “sold”, “purchaser” and “consideration” undoubtedly leads to the conclusion that
only sales of real property are contemplated therein.Thus, petitioner obviously erred when it relied on the
phrase “granted, assigned, transferred or otherwise conveyed” in claiming that all conveyances of real
property regardless of the manner of transfer are subject to documentary stamp tax under Section 196.

In a merger, the real properties are not deemed “sold” to the surviving corporation and the latter
could not be considered as “purchaser” of realty since the real properties subject of the merger were merely
absorbed by the surviving corporation by operation of law and these properties are deemed automatically
transferred to and vested in the surviving corporation without further act or deed. Therefore, the transfer of
real properties to the surviving corporation in pursuance of a merger is not subject to documentary stamp
tax. As stated at the outset, documentary stamp tax is imposed only on all conveyances, deeds, instruments or
writing where realty sold shall be conveyed to a purchaser or purchasers.

EXCISE TAX

CHEVRON PHILIPPINES INC. v. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 210836, September 1, 2105, BERSAMIN, J.

Excise tax on petroleum products is essentially a tax on property, the direct liability for which pertains
to the statutory taxpayer (i.e., manufacturer, producer or importer). Any excise tax paid by the statutory
taxpayer on petroleum products sold to any of the entities or agencies named in Section 135 of the National
Internal Revenue Code (NIRC) exempt from excise tax is deemed illegal or erroneous, and should be credited or
refunded to the payor pursuant to Section 204 of the NIRC. This is because the exemption granted under Section
135 of the NIRC must be construed in favor of the property itself, that is, the petroleum products.

Facts:

Chevron sold and delivered petroleum products to Clark Development Corporation (CDC). Chevron
did not pass on to CDC the excise taxes paid on the importation of the petroleum products sold to CDC, hence,
it filed an administrative claim for tax refund or issuance of tax credit certificate.

Issue:

Whether or not Chevron was entitled to the refund or credit of the excise taxes it paid on petroleum
products sold to CDC, a tax-exempt entity, under Section 135(c) of the NIRC.

Ruling:

19
 YES. Under Section 129 of the NIRC, as amended, excise taxes are imposed on two kinds of goods,
namely: (a) goods manufactured or produced in the Philippines for domestic sales or consumption or for any
other disposition; and (b) things imported. Undoubtedly, the excise tax imposed under Section 129 of the
NIRC is a tax on property.

With respect to imported things, Section 131 of the NIRC declares that excise taxes on imported
things shall be paid by the owner or importer to the Customs officers, conformably with the regulations of the
Department of Finance and before the release of such articles from the customs house, unless the imported
things are exempt from excise taxes and the person found to be in possession of the same is other than those
legally entitled to such tax exemption.

For this purpose, the statutory taxpayer is the importer of the things subject to excise tax. Chevron,
being the statutory taxpayer, paid the excise taxes on its importation of the petroleum products.

Pursuant to Section 135(c), petroleum products sold to entities that are by law exempt from direct
and indirect taxes are exempt from excise tax. The phrase which are by law exempt from direct and indirect
taxes describes the entities to whom the petroleum products must be sold in order to render the exemption
operative. Section 135(c) should thus be construed as an exemption in favor of the petroleum products on
which the excise tax was levied in the first place. The exemption cannot be granted to the buyers – that is, the
entities that are by law exempt from direct and indirect taxes – because they are not under any legal duty to
pay the excise tax.

In cases involving excise tax exemptions on petroleum products under Section 135 of the NIRC, the
Court has consistently held that it is the statutory taxpayer, not the party who only bears the economic
burden, who is entitled to claim the tax refund or tax credit. But the Court has also made clear that this rule
does not apply where the law grants the party to whom the economic burden of the tax is shifted by virtue of
an exemption from both direct and indirect taxes. In which case, such party must be allowed to claim the tax
refund or tax credit even if it is not considered as the statutory taxpayer under the law.

20