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TABLE OF CONTENTS
Aala vs. Uy ................................................................................................................................................................................................. 5
Visayas Geothermal Power Company vs. Commissioner of Internal Revenue ........................................................................ 5
Commissioner of Internal Revenue vs. San Miguel Corporation ................................................................................................. 6
Commissioner of Internal Revenue and Commissioner of Customs vs. Philippine Airlines ................................................. 7
Commissioner of Internal Revenue vs. Apo Cement Corporation .............................................................................................. 8
COMMISSIONER OF INTERNAL REVENUE vs. ASALUS CORPORATION .................................................................................... 9
COMMISSIONER OF INTERNAL REVENUE vs. ST. LUKE’S MEDICAL CENTER, INC. ...............................................................10
SITEL PHILIPPINES CORPORATION (FORMERLY CLIENTLOGIC PHILS., INC.) vs. COMMISSIONER OF INTERNAL
REVENUE .................................................................................................................................................................................................11
NATIONAL POWER CORPORATION vs. PROVINCIAL GOVERNMENT OF BATAAN, SANGGUNIANG PANLALAWIGAN
OF BATAAN, PASTOR B. VICHUACO (IN HIS OFFICIAL CAPACITY AS PROVINCIAL TREASURER OF BATAAN) AND
THE REGISTER OF DEEDS OF THE PROVINCE OF BATAAN ........................................................................................................12
KIM S. JACINTO-HENARES vs. ST. PAUL COLLEGE OF MAKATI .................................................................................................13
Demetrio R. Alcantara v. Republic of the Philippines ..................................................................................................................14
Commissioner of Internal Revenue v. Philippine Daily Inquirer ................................................................................................15
Medicard Philippines, Inc., v. Commissioner of Internal Revenue ............................................................................................17
Secretary of Finance Cesar V. Purisima and Commissioner of Internal Revenue Kim S. Jacinto-Henares v. Philippine
Tobacco Institute, Inc. ..........................................................................................................................................................................18
Metropolitan Bank & Trust Company v. The Commissioner of Internal Revenue ................................................................19
Asia Trust Development Bank, Inc vs. Commissioner of Internal Revenue ............................................................................20
Mitsubishi Corporation - Manila Branch vs. Commissioner of Internal Revenue ..................................................................20
Marubeni Corporation vs. Commissioner of Internal Revenue .................................................................................................21
Republic of the Philippines vs. Spouses Senado Salvador and Josefina Salvador ................................................................22
Commissioner of Internal Revenue vs. United Cadiz Sugar Famers Association Multi-Purpose Cooperative ..............22
Pilipinas Shell Petroleum Corporation vs. Commissioner of Customs ....................................................................................23
Commissioner of Internal Revenue vs. Semirara Mining Corporation .....................................................................................25
Commissioner of Internal Revenue vs. Lancaster Philippines, Inc. ...........................................................................................26
CE Luzon Geothermal Power Company, Inc. vs. Commissioner of Internal Revenue ..........................................................27
Commissioner of Internal Revenue vs. Systems Technology Institute, Inc. ...........................................................................28
Procter & Gamble Asia PTE LTD. v. CIR ............................................................................................................................................30
Aichi Forging Company of Asia, Inc. v. CTA-En Banc and CIR .....................................................................................................31
Edison (Bataan) Cogeneration Corporation v. CIR; Republic of the Philippines represented by the CIR v. Edison
(Bataan) Cogeneration Corporation ................................................................................................................................................32
Lanao Del Norte Electric Cooperative, Inc. as represented by its General Manager Engr. Resnol C. Torres v.
Provincial Government of Lanao Del Norte by its Governor Hon. Mohamad Khalid Q. Dimaporo, et.al. .......................33
Power Sector Assets and Liabilities Management Corporation v. CIR ....................................................................................35
University Physicians Services Inc. - Management, Inc. vs. Commissioner of Internal Revenue .......................................36
City of Pasig and Crispina V. Salumbre, in her capacity as OIC-City Treasurer of Pasig City vs. Manila Electric
Company .................................................................................................................................................................................................37
Commissioner of Internal Revenue vs. Covanta Energy Philippines Holdings Inc. ...............................................................38
Philippine Airlines Inc. vs. Commissioner of Internal Revenue; Commissioner of Internal Revenue vs. Philippine
Airlines Inc...............................................................................................................................................................................................39
Nikken Philippines Inc. v. CIR..............................................................................................................................................................40
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Philippine International Air Terminals Co., Inc. v. CIR ..................................................................................................................41


CIR v. Lepanto Consolidated Mining Corporation ........................................................................................................................43
CIR V. DOHLE SHIPMANAGEMENT PHILS CORP. ..........................................................................................................................43
SAN MIGUEL HOLDINGS CORP., v. CIR ............................................................................................................................................44
People of the Philippines vs Maximo Hernandez y Maniego, Alias, Maximo H. Hernandez, Ponciano Hernandez y
Buco, Dominador Lalu y Pascual, Felipe Mangilit y Hernandez, Michael Manliclic y Vinuya, Danilo Santos y Sanguyo
and Johnrey Retobado y Paglinawan ...............................................................................................................................................45
National Food Authority,Represented by the Director of its Legal Affairs Department, Ma. Theresa S. Villafuerte
vs.City Government of Tagum, city assessor and city treasurer of Tagum, ...........................................................................46
Province of Davao Del Norte .............................................................................................................................................................46
Zuellig Pharma Asia Pacific Ltd. Phils. ROHQ vs. Commisioner of Internal Revenue ..........................................................47
Taganito Mining Corporation vs. Commisioner of Internal Revenue.......................................................................................48
IBEX Philippines Inc. vs.Commissioner of Internal Revenue ......................................................................................................50
Enjay Hotels v. CIR ................................................................................................................................................................................50
National Power Corporation v. Luzon Hydro Corporation (LHC), et. al. ..................................................................................52
CIR v. Air Philippines Corporation .....................................................................................................................................................53
Dedon Manufacturing, Inc. v. CIR ......................................................................................................................................................54
CIR v. Air Philippines Corporation .....................................................................................................................................................56
Commissioner of Internal Revenue vs. Goodyear Philippines, Inc. ...........................................................................................57
Bloomberry Resorts & Hotels vs. Bureau of Internal Revenue..................................................................................................57
Greenhills Properties, Inc. vs. Commissioner of Internal Revenue ...........................................................................................58
ASC Investors, Inc. vs. City of Davao and Hon. Rodrigo S. Riola, in his Capacity as City Treasurer of Davao .................58
Commissioner of Internal Revenue vs. Coral Bay Nickel Corporation .....................................................................................59
AGC FLAT GLASS PHILIPPINES, INC. VS. BUREAU OF CUSTOMS ..............................................................................................60
PHILIP MORRIS PHILIPPINES MANUFACTURING, INC. VS. COMMISSIONER 0F INTERNAL REVENUE ............................61
VESTAS SERVICES PHILIPPINES, INC. VS COMMISSIONER OF INTERNAL REVENUE .........................................................62
THE CITY GOVERNMENT OF MAKATI AND THE CITY TREASURER OF MAKATI VS SOUTH LUZON TOLLWAY
CORPORATION ......................................................................................................................................................................................63
FILMENERA RESOURCES CORPORATION VS COMMISSIONER OF INTERNAL REVENUE ..................................................64
COMMISSIONER OF INTERNAL REVENUE vs. PHILIPPINE NATIONAL BANK ........................................................................65
CLARK WATER CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE .....................................................................66
DUTY FREE PHILIPPINES CORPORATION vs. BUREAU OF INTERNAL REVENUE REPRESENTED BY KIM S. JACINTO-
HENARES, AND/OR NESTOR S. VALEROSO, OIC-ASSISTANT COMMISSIONER, LARGE TAXPAYERS SERVICE .............67
COMMISSIONER OF INTERNAL REVENUE vs. PREMIUM LEISURE CORP. ...............................................................................68
BONIFACIO LAND CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE ...............................................................69
Batino Realty Corporation vs. Commissioner of Internal Revenue ..........................................................................................70
Macintel, Inc. vs. Commissioner of Internal Revenue ..................................................................................................................71
Grandworth Resources Corporation vs. Commissioner of Internal Revenue ........................................................................72
Composite Materials, Inc. vs. Commissioner of Internal Revenue............................................................................................72
Republic of the Philippines vs. GMCC United Development Corporation, et al. ...................................................................73
AMADEUS MARKETING PHILIPPINES, INC. vs COMMISSIONER OF INTERNAL REVENUE ..................................................74
ALPHA 245 INC. vs COMMISSIONER OF INTERNAL REVENUE ..................................................................................................75
PHILIPPINE MINING DEVELOPMENT CORPORATION vs. THE COMMISSIONER OF INTERNAL REVENUE ....................76
PHILIPPINE AIRLINES, INC. vs COMMISSIONER OF INTERNAL REVENUE ..............................................................................77
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CITY OF DAVAO and BELLA LINDA N. TAJILI vs. SAN MIGUEL OFFICERS ...............................................................................78
People v. Ferdinand Mahusay ............................................................................................................................................................79
Univation Motor Philippines v. Commissioner of Internal Revenue ........................................................................................80
Commissioner of Internal Revenue v. Tyco Information Solutions Corp., ..............................................................................81
Commissioner of Internal Revenue v. T-Shuttle Services Inc. ....................................................................................................81
Commisioner of Internal Revenue vs. Philex Mining Corporation ............................................................................................82
Marubeni Philippines Corporation vs. Commissioner of Internal Revenue ............................................................................84
Commissioner of Internal Revenue vs. Univation Motor Phil., Inc. ...........................................................................................86
Jovelles Autoparts, Inc. vs. BIR ..........................................................................................................................................................87
Licel Calderon, et al. vs. Commissioner of Internal Revenue .....................................................................................................89
Oceanagold Inc. v. Commissioner of Internal Revenue ...............................................................................................................91
Philippine Geothermal Production Company Inc. v. Commissioner of Internal Revenue ...................................................92
The Aristocrat Franchise Corporation v. Commissioner of Internal Revenue .......................................................................93
Commissioner of Internal Revenue v. Mindanao Sanitarium and Hospital, Inc. ....................................................................93
Commissioner of Internal Revenue v. G & W Architects, Engineers and Project Consultants Co. ....................................94
CHEVRON HOLDINGS, INC. VS. COMMISSIONER OF INTERNAL REVENUE ...........................................................................95
PEOPLE OF THE PHILIPPINES VS. JUAN MIGUEL M. ARROYO ..................................................................................................96
LICEL CALDERON, ET AL. VS COMMISSIONER OF INTERNAL REVENUE ................................................................................97
GS MTE GRAINS CORPORATION VS. COMMISSIONER OR INTERNAL REVENUE .................................................................98
PANGASINAN III ELECTRIC COOPERATIVE, INC. VS. COMMISSIONER OF INTERNAL REVENUE ......................................99
Destiny Cable, Inc. v. The City of Makati ...................................................................................................................................... 100
Commissioner of Internal Revenue v. ABB, Inc. ......................................................................................................................... 102
Medtecs International Corporation Ltd. v. Commissioner of Internal Revenue ................................................................ 103
People v. KIngsam Express Incorporation and Samuel S. Santos ........................................................................................... 105
Bisazza Philippines, Inc. v. Commissioner of Internal Revenue .............................................................................................. 107
ROCA SECURITY INVESTIGATION AND AGENCY, INC. VS. COMMISSIONER OF INTERNAL REVENUE ........................ 108
COMMISSIONER OF INTERNAL REVENUE VS. INTERVET PHILS., INC. ................................................................................. 109
COMMISSIONER OF INTERNAL REVENUE VS. CO ..................................................................................................................... 110
COMMISIONER OF INTERNAL REVENUE v. LINDE PHILIPPINES, INC ................................................................................... 111
SOUTH PREMIERE TOWER CORP. VS. COMMISSIONER OF INTERNAL REVENUE ............................................................ 112
UNLIMITED EXCHANGE GLOBAL CORP. (UNEX) represented by Charles Tan, Petitioner, Members v.
COMMISSIONER OF CUSTOMS, CASTANEDA, JR., Chairperson CASANOVA, and MANAHAN, JJ. ............................... 113
COMMISSIONER OF INTERNAL REVENUE v. G&W ARCHITECTS, ENGINEERS AND PROJECT CONSULTANTS ......... 114
CITY OF DAVAO and BELLA CTA EB NO. 1591 LINDA N. TANJILI in her official capacity as The Officer-in Charge City
Treasurer's Office of Davao City v. RANDY ALLIED VENTURES, INC. ................................................................................... 115
COMMISSIONER OF INTERNAL REVENUE v. VICTORIAS FOODS CORPORATION ............................................................ 117
COMMISSIONER OF INTERNAL REVENUE v. SUTHERLAND GLOBAL SERVICES PHILIPPINES, INC., ............................ 118
PNOC DEVELOPMENT CORPORATION vs. COMMISSIONER ON INTERNAL REVENUE ................................................... 118
SABRE TRAVEL NETWORK (PHILIPPINES), INC (formerly ABACUS DISTRIBUTION SYSTEMS PHILS.INC.) vs.
COMMISSIONER ON INTERNAL REVENUE .................................................................................................................................. 119
DIGITEL MOBILE PHILIPPINES, INC. vs. THE CITY GOVERNMENT, THE CITY TREASURER AND CITY ASSESSOR OF
COTABATO CITY ................................................................................................................................................................................. 120
COMMISSIONER ON INTERNAL REVENUE vs. GIC PRIVATE LIMITED ................................................................................... 121
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COMMISSIONER OF INTERNAL REVENUE, vs. ASIAN TRANSMISSION CORPORATION .................................................. 123


Splash Corporation vs. Commissioner of Internal Revenue .................................................................................................... 124
Commissioner of Internal Revenue vs. China State Philippines Construction Corporation ............................................ 126
Commissioner of Internal Revenue vs. Toenec Philippines, Inc. ............................................................................................ 128
ARDCI NGO vs. Commissioner of Internal Revenue .................................................................................................................. 129
Allegro Microsystems Philippines, Inc. vs. The Undersecretary of the Department of Finance and Chairman of the
One-Stop-Shop Interagency Tax Credit and Duty Drawback Center, The Commissioner of Internal Revenue, and The
Commissioner of the Bureau of Customs .................................................................................................................................... 130
Convenience Corporation vs Commissioner of Internal Revenue ......................................................................................... 131
Nube Storage Systems, Inc. vs. Commissioner of Internal Revenue ..................................................................................... 132
Rio Tuba Nickel Mining Corporation vs Commissioner of Internal Revenue ...................................................................... 132
Mitsuba Philippines Technical Center Corp. v. Commissioner of Internal Revenue.......................................................... 133
Splash Corporation vs. Commissioner of Internal Revenue .................................................................................................... 134
Commissioner of Internal Rrevenue vs. Missouri Square, Inc. ............................................................................................... 134
Commissioner of Internal Revenue vs Phil. Gold Processing & Refining Corp. .................................................................. 135
Commissioner of Internal Revenue vs Tektite Insurance Brokers, Inc. ............................................................................... 136
Commissioner of Internal Revenue vs. Spouses Eduardo X. Genato And Lydia M. Genato and Condominium Pushers,
Inc. .......................................................................................................................................................................................................... 137
Deutsche Knowledge Services, PTE. LTD. Vs CIR ....................................................................................................................... 138
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Aala vs. Uy
G.R. No. 202781; January 10, 2017
Leonen, J.

FACTS:
In a Petition for original action for Certiorari, Prohibition, and Mandamus, petitioners Crisanto M. Aala, et
al. assail the validity of City Ordinance No. 558, S-2012 of the City of Tagum, Davao del Norte. Said City
Ordinance sought to adopt a new schedule of market values and assessment levels of real properties in
Tagum City. Petitioners contend that it imposes exorbitant real property taxes by classifying all real
properties in Tagum City into commercial or industrial properties only without regard to its actual use.

Citing Section 187 of the Local Government Code of 1991, respondents argue that petitioners should have
first exhausted administrative remedies, further arguing that in directly filing their Petition before this Court,
petitioner violated the doctrine on hierarchy of courts. In response, petitioners claim that under the cited
provision, the amount of real property tax assessed must first be paid before a protest may be entertained.
However, petitioners contend that the taxpayers of Tagum City would not be able to comply with this rule
due to lack of money. Petitioners justify immediate resort to this Court due to this impasse.

ISSUE:
Is a taxpayer required to pay the real property tax before his/her protest may be entertained?

RULING:
No, the taxpayer is not required to pay real property tax for a protest to be entertained.

In cases where the validity or legality of a tax ordinance is questioned, the rule that real property taxes must
first be paid before a protest is lodged does not apply. Taxpayers must first receive an assessment before
this rule is triggered. In Jardine Davies Insurance Brokers, Inc. v. Aliposa, this Court ruled that prior payment
under protest is not required when the taxpayer is questioning the very authority of the assessor to impose
taxes: “Hence, if a taxpayer disputes the reasonableness of an increase in a real estate tax assessment,
he is required to "first pay the tax" under protest. Otherwise, the city or municipal treasurer will not act on
his protest.

In the case at bench, however, the petitioners are questioning the very authority and power of the assessor,
acting solely and independently, to impose the assessment and of the treasurer to collect the tax. These
are not questions merely of amounts of the increase in the tax but attacks on the very validity of any
increase.”
Therefore, payment is not required. However, petitioners’ violation of the hierarchy of courts is not justified.
Petition is thereby dismissed.

Visayas Geothermal Power Company vs. Commissioner of Internal Revenue


G.R. No. 205279; April 26, 2017
Reyes, J.

FACTS:
In this petition for review on certiorari under Rule 45, petitioner Visayas Geothermal Power Company
assails the decision and resolution of CTA En Banc which held that the judicial claim filed before the
expiration of the 120-day period was premature.

Petitioner is a special purpose limited partnership registered with the BIR as a VAT taxpayer. On February
13, 2009, the petitioner filed with the BIR a claim for refund of its unutilized input VAT covering the taxable
year of 2007. On March 30, 2009, it proceeded to immediately file a petition for review with the CTA, as it
claimed that the BIR failed to act upon the claim for refund. The CTA First Division, however, ruled that the
petition was premature, being filed merely 45 days from the administrative claim with the BIR. The petitioner
moved to reconsider but the CTA En Banc affirmed in toto the ruling of the CTA First Division.
6

The petitioner insists that when it sought an immediate recourse to the CTA without waiting for the decision
of the CIR in the administrative claim, it merely relied on the guidelines that were set forth in BIR Ruling No.
DA-489-03, which provides that a taxpayer-claimant need not wait for the lapse of the 120-day period before
seeking judicial relief.

The CIR, on the other hand, maintains that the petition for review filed with the CTA was prematurely filed,
as the petitioner still had to wait for the lapse of the 120-day period allowed for the resolution of its
administrative claim.

ISSUE:
Was the judicial claim for refund via a petition for review filed by the petitioner before the expiration of 120-
day period prematurely filed?

RULING:
No, the judicial claim for refund via a petition for review filed by the petitioner before the expiration of the
120-day period was not prematurely filed.

The Court ruled in CIR v. San Roque Power Corporation (703 Phil. 310 [2013]) that "failure to comply with
the 120-day waiting period violates a mandatory provision of law." With the current rule that gives a taxpayer
30 days to file the judicial claim even if the CIR fails to act within the 120-day period, the remedy of a judicial
claim for refund or credit is always available to a taxpayer. This general rule, however, admits BIR Ruling
No. DA-489-03 as an exception, which provides that, "taxpayer-claimant need not wait for the lapse of the
120-day period before it could seek judicial relief with the CTA by way of Petition for Review," from the time
of its issuance on December 10, 2003 up to its reversal by the Court in CIR v. Aichi Forging Company of
Asia, Inc. (G.R. No. 183421, October 22, 2014) on October 6, 2010, where this Court held that the 120+30-
day periods are mandatory and jurisdictional.
Here, since both administrative and judicial claims were filed by the petitioner in 2009, the CTA En Banc's
reliance on the general rule enunciated by the Court in San Roque is misplaced.
Therefore, notwithstanding the fact that the petitioner failed to wait for the expiration of the 120-day
mandatory period, the CTA could still take cognizance of the petition for review.

Commissioner of Internal Revenue vs. San Miguel Corporation


G.R. No. 205045; January 25, 2017
Leonen, J.

FACTS:
In this petition for review on certiorari, the CIR assails the CTA En Banc’s decision granting San Miguel
Corporation’s (“SMC”) refund claim after changing “San Mig Light’s” classification from new brand to a
variant of an existing brand.

Respondent’s Former Assistant Vice President for Finance wrote the BIR Excise Tax Service Assistant
Commissioner to request the registration of and authority to manufacture “San Mig Light” to be taxed at
P12.15 per liter, which the latter granted. Large Tax Payer’s Assistance Division II (LTAD II) Acting Chief
confirmed that SMC was allowed to register, manufacture, and sell “San Mig Light” as a new brand.
However, the Assistant Commissioner issued a Notice of Discrepancy against respondent, stating that “San
Mig Light” was a variant of its existing beer products and must, therefore, be subjected to the higher excise
tax rate for variants. The Finance Manager of respondent’s Beer Division requested the withdrawal of such
notice. Preliminary Assessment Notice (“PAN”), Formal Letters of Demand as well as Final Assessment
Notice (“FAN”) were issued. Respondent filed a Protest/Request for Consideration against each FAN. To
prevent the issuance of additional excise tax assessments, respondent paid excise taxes at the rate of
P13.61 beginning February 1, 2004. Respondent then filed a refund claim.

Petitioner contends that “San Mig Light” was truly a variant of “San Miguel Pale Pilsen” and must be
subjected to the higher excise tax rate for variants.
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Respondent stated, among others, that “San Mig Light” was not a variant of any of its existing beer brands
because of the “distinctive shape, color scheme and general appearance; and different alcohol content and
innovative low calorie formulation.”

ISSUE:
May the respondent claim for a refund after the BIR changed San Mig Light’s classification from new brand
to variant of an existing brand?

RULING:
Yes, the respondent may claim for a refund even after the BIR changed San Mig Light’s classification from
new brand to variant of an existing brand.

Any reclassification of fermented liquor products should be by act of Congress. Section 143 of the Tax
Code, as amended by Rep. Act No. 9334, provides for this classification freeze referred to by the parties:
Provided, however, That brands of fermented liquors introduced in the domestic market between January
1, 1997 and December 31, 2003 shall remain the classification under which the BIR has determined them
to belong as of December 31, 2003. Such classification of new brands and brands shall not be revised
except by an act of Congress.

Petitioner’s letters and notice of discrepancy necessarily changes San Mig Light’s tax bracket. Based on
the legislative intent behind the classification freeze provision, petitioner has no power to do this. A
reclassification of a fermented liquor brand introduced between January 1, 1997 and December 31, 2003
such as “San Mig Light” must be by act of Congress. There was none in this case.
Hence, respondent may claim for a refund of erroneously collected excise taxes on San Mig Light.

Commissioner of Internal Revenue and Commissioner of Customs vs. Philippine Airlines


G.R. Nos. 215705-07; February 22, 2017
Peralta, J.

FACTS:
This is a petition for review on certiorari seeking the reversal and setting aside of the Decision and
Resolution of the CTA En Banc which grants the Philippine Airlines’ (PAL) claim for refund for being
exempted in the payment of excise taxes on its importation of alcoholic products, as provided by Sec. 13
of Presidential Decree No. 1590 (PD 1950).

Sec. 13 of PD 1590 grants tax exemption from excise tax to PAL for imported tobacco and alcohol products.
On January 1, 2005, Republic Act No. 9334 (RA 9334) took effect it increased the rates of excise tax
imposed on alcohol and tobacco products. It also removed the exemption from taxes, duties and charges,
including excise taxes, on importations of cigars, cigarettes, distilled spirits, wines and fermented liquor into
the Philippines. Thereafter, PAL’s importations of alcohol and tobacco products, which were intended for
use in its commissary supplies during international flights, were subjected to excise taxes. For said imported
articles, PAL was assessed with excise taxes to which it paid under protest and filed an administrative claim
for refund.

Petitioner argues that Sec. 131 of NIRC, as amended, revoked PAL’s tax privilege under Sec. 13 of PD
1590 with respect to excise tax on its alcohol and tobacco importation and assuming that it is still entitled,
PAL failed to adequately prove that the conditions under Sec. 13 of PD 1590 were met in the case.
Respondent, however, contends that it is entitled to tax privileges under Sec. 13 of PD 1590 which exempts
them from payment of excise taxes pertaining to its importation of alcoholic products.

ISSUE:
Did Sec. 131 of the NIRC of 1997, as amended by Sec. 6 of RA 9334 revoke the tax privilege of
PAL provided in Sec. 13 of PD 1590?
8

RULING:
No, Sec.131 of the NIRC of 1997, as amended by Sec. 6 of RA 9334 did not revoke the tax privilege
of PAL provided in Sec. 13 of PD 1590. A later law, general in terms and not expressly repealing or
amending a prior special law, will not ordinarily affect the special provisions of such earlier statute.

Noteworthy is the fact that PD 1590 is a special law, which governs the franchise of PAL. Between the
provisions under the NIRC of 1997, as amended by RA 9334, which is a general law, the former necessarily
prevails. Further, the matter as to PAL’s supposed noncompliance with the conditions set by Sec. 13 of PD
1590 for its imported supplies to be exempt from excise tax, are factual determinations that are best left to
the CTA, which found that PAL had, in fact, complied with the above conditions.

Hence, the franchise of PAL remains the governing law on its exemption from taxes.

Commissioner of Internal Revenue vs. Apo Cement Corporation


G.R. No. 193381; February 8, 2017
Leonen, J.

FACTS:
In this petition for review on certiorari, petitioner CIR assails the CTA En Banc’s decision affirming the CTA
Division’s decision in granting respondent Apo Cement Corporation’s (“Apo Cement”) motion to cancel tax
assessment.

Apo Cement protested the Final Assessment Notice (“FAN”) for deficiency taxes for the year 1999 sent by
the BIR but was denied. On January 25, 2008, Apo Cement availed of the tax amnesty under RA 9480
affecting the 1999 deficiency documentary stamp taxes. The CTA Division found Apo Cement fully
compliant with the requirements for tax amnesty, having filed a notice and Tax Amnesty Return,
accompanied by a Statement of Assets, Liabilities and Net worth (“SALN”). On April 17, 2009, the CIR filed
an opposition to the motion to cancel tax assessment.

The CIR avers that the Apo Cement’s SALN did not include the shares of stocks it acquired from its
subsidiary and underpaid its amnesty tax. Apo Cement contends that CIR is not the proper party to question
the correctness of the SALN. The CTA En Banc ruled in favor of Apo Cement and that the one-year
prescriptive period under Section 4 of RA 9480 already lapsed.

ISSUE:
Are the requirements to avail of the tax amnesty under RA 9480 duly complied by the respondent?

RULING:
Yes, the respondent duly complied with the requirements.

The documentary requirements and payment of the amnesty tax operate as a suspensive condition, such
that completion of these requirements entitles the taxpayer-applicant to immediately enjoy the immunities
and privileges under RA 9480. Under Section 4 of RA 9480, there is a presumption of correctness of the
SALN and only parties other than the Bureau of Internal Revenue or its agents may dispute the correctness
of the SALN. RA 9480 provides that the proceeding to challenge the SALN must be initiated within one (1)
year following the date of filing of the Tax Amnesty documents

In this case, the petitioner failed to overturn the presumption of correctness of respondent’s SALN. Even
assuming that petitioner has standing, petitioner’s challenge was already time-barred. However, Section 6
of the law contains a resolutory condition that the immunities and privileges will cease to apply to taxpayers
who, in their SALN, were proven to have understated their net worth by 30% or more.

Hence, the respondent properly availed of the tax amnesty under RA 9480.
9

COMMISSIONER OF INTERNAL REVENUE vs. ASALUS CORPORATION


G.R. No. 221590; February 22, 2017
MENDOZA, J.

FACTS:
Asalus Corporation was issued a Preliminary Assessment Notice (PAN) finding it liable for deficiency VAT
for 2007 in the aggregate amount of ₱413, 378, 058.11, inclusive of surcharge and interest, and
subsequently, the amount of ₱95,681,988.64. After protest, Asalus received the Final Decision on Disputed
Assessment8 (FDDA) showing VAT deficiency for 2007 in the aggregate amount of ₱106,761,025.17,
inclusive of surcharge and interest and ₱25,000.00 as compromise penalty. As a result, it filed a petition
for review before the CTA Division.

The petition was granted and the VAT assessment and its accompanying penalty cancelled and withdrawn
on the ground that the VAT assessment had prescribed and was consequently deemed invalid since the
ten (10)-year prescriptive period under Section 222 of the NIRC was inapplicable as neither the FAN nor
the FDDA indicated that Asalus had filed a false VAT return warranting the application of the ten (10)-year
prescriptive period. Hence, the assessment had prescribed because it was made beyond the three (3)-year
period as provided in Section 203 of the NIRC. The CTA En Banc sustained this ruling.

The CIR however claims that the finding of the CTA must be set aside since they were not supported with
substantial evidence or if there was a showing of gross error or abuse. It repeated that there was
presumption of falsity in light of the 30% underdeclaration of sales. It further insisted that Asalus was
sufficiently informed of its assessment based on the prescriptive period under Section 222 of the NIRC as
early as when the PAN was issued.

ISSUE:
Did the CTA err in ruling that the assessment against Asalus had prescribed?

RULING:
YES, the failure to report sales, receipts or income in an amount exceeding 30% what is declared in the
returns constitute prima facie evidence of substantial underdeclaration.

The Court ruled that when there is a showing that a taxpayer has substantially underdeclared its sales,
receipt or income, there is a presumption that it has filed a false return. As such, the CIR need not
immediately present evidence to support the falsity of the return, unless the taxpayer fails to overcome the
presumption against it. Applied in this case, the audit investigation revealed that there were undeclared VA
Table sales more than 30% of that declared in Asalus' VAT returns. Moreover, Asalus' lone witness testified
that not all membership fees, particularly those pertaining to medical practitioners and hospitals, were
reported in Asalus' VAT returns. The testimony of its witness, in trying to justify why not all of its sales were
included in the gross receipts reflected in the VAT returns, supported the presumption that the return filed
was indeed false precisely because not all the sales of Asalus were included in the VAT returns.

Thus, substantial compliance with the requirement as laid down under Section 228 of the NIRC suffices,
for what is important is that the taxpayer has been sufficiently informed of the factual and legal bases of the
assessment so that it may file an effective protest against the assessment. Considering the existing
circumstances, the assessment was timely made because the applicable prescriptive period was the ten
(10)-year prescriptive period under Section 222 of the NIRC.
10

COMMISSIONER OF INTERNAL REVENUE vs. ST. LUKE’S MEDICAL CENTER, INC.


G.R. No. 203514; February 13, 2017
DEL CASTILLO, J.

FACTS:
St. Luke’s Medical Center, Inc. (SLMC) filed an administrative protest after being assessed deficiency
income tax for taxable year 2005 in the amount of ₱78,617,434.54 and for taxable year 2006 in the amount
of ₱57,119,867.33, which was later increased to ₱82,419,522.21 and ₱60,259,885.94 respectively, on the
ground that as a non-stock, non-profit charitable and social welfare organization under Section 30(E) and
(G) of the NIRC, it is exempt from paying income tax.

The CTA Division ruled that SLMC not liable for deficiency income tax, which was affirmed by the CTA En
Banc. Hence, the CIR filed the instant Petition under Rule 45 of the Rules of Court contending that the CTA
erred in exempting SLMC from the payment of income tax.

Meanwhile, on September 26, 2012, the Court rendered a Decision in G.R. Nos. 195909 and 195960,
entitled Commissioner of Internal Revenue v. St. Luke's Medical Center, Inc.,18 finding SLMC not entitled
to the tax exemption under Section 30(E) and (G) of the NIRC of 1997 as it does not operate exclusively
for charitable or social welfare purposes insofar as its revenues from paying patients are concerned.

The CIR thus argues that under the doctrine of stare decisis SLMC is subject to 10% income tax under
Section 27(B) of the 1997 NIRC. It likewise asserts that SLMC is liable to pay compromise penalty pursuant
to Section 248(A) of the 1997 NIRC for failing to file its quarterly income tax returns. SLMC countered
claiming that earning a profit by a charitable, benevolent hospital or educational institution does not result
in the withdrawal of its tax exempt privilege. SLMC further claims that the income it derives from operating
a hospital is not income from "activities conducted for profit."

ISSUE:
Did the CTA err in exempting SLMC from the payment of income tax despite prior jurisprudence ruling the
contrary?

RULING:
YES, the doctrine of stare decisis dictates that "absent any powerful countervailing considerations, like
cases ought to be decided alike."

The issue of whether SLMC is liable for income tax under Section 27(B) of the 1997 NIRC insofar as its
revenues from paying patients are concerned has been settled in G.R. Nos. 195909 and 195960.

In these cases, it was discussed that there is no dispute that St. Luke's is organized as a non-stock and
non-profit charitable institution. However, this does not automatically exempt St. Luke's from paying taxes.
This only refers to the organization of St. Luke's. Even if St. Luke's meets the test of charity, a charitable
institution is not ipso facto tax exempt. To be exempt from real property taxes, Section 28(3), Article VI of
the Constitution requires that a charitable institution use the property 'actually, directly and exclusively' for
charitable purposes. To be exempt from income taxes, Section 30(E) of the NIRC requires that a charitable
institution must be 'organized and operated exclusively' for charitable purposes. Likewise, to be exempt
from income taxes, Section 30(G) of the NIRC requires that the institution be 'operated exclusively' for
social welfare.

Thus, even if the charitable institution must be 'organized and operated exclusively' for charitable purposes,
it is nevertheless allowed to engage in 'activities conducted for profit' without losing its tax exempt status
for its not-for-profit activities. The only consequence is that the 'income of whatever kind and character' of
a charitable institution 'from any of its activities conducted for profit, regardless of the disposition made of
such income, shall be subject to tax.'
11

SITEL PHILIPPINES CORPORATION (FORMERLY CLIENTLOGIC PHILS., INC.) vs. COMMISSIONER


OF INTERNAL REVENUE
G.R. No. 201326; February 08, 2017
CAGUIOA, J.

FACTS:
Sitel, is a corporation organized and extsting under the laws of the Philippines, is engaged in the business
of providing call center services from the Philippines to domestic and offshore businesseswhich is
registered with the 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.

It later 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 for the in the aggregate amount of P23,093,899.59. The CIR ordered to refund or issue a
tax credit certificate in the reduced amount of P11,155,276.59 representing unutilized input VAT. However,
the CTA Division denied Sitel's P7,170,276.02 claim for unutilized input VAT on the ground that it failed to
prove that the recipients of its services are doing business outside the Philippines, as required under
Section 108(B)(2) of the National Internal Revenue Code of 1997 (NIRC) and also disallowed the amount
of P2,668,852.55 representing input VAT paid on capital goods purchased for taxable year 2004 for failure
to comply with the invoicing requirements under Sections 113, 237, and 238 of the NIRC.

Upon review, the CTA En Banc reversed and set aside the ruling of the CTA Division, claiming that previous
jurisprudence ruled that the 120-day period for the CIR to act on the administrative claim for refund or tax
credit, under Section 112(D) of the NIRC of 1997, as amended, is mandatory and jurisdictional. Considering
that Sitel filed its judicial claim for VAT refund or credit without waiting for the lapse of the 120-day period
for the CIR to act on its administrative claim, the CTA did not acquire jurisdiction as there was no decision
or inaction to speak of.19 Thus, the CTA En Banc denied Sitel's entire refund claim on the ground of
prematurity.

Sitel filed a Motion for Reconsideration on the ground of the decision in CIR vs. San Roque which provides
for an exception to the mandatory and jurisdictional nature of the 120-day waiting period. Additionally, Sitel
contends that insofar as the denied portion of the claim is concerned, which the CTA En Banc failed to pass
upon with the dismissal of its appeal, speedy justice demands that the Court resolved the same on the
merits and Sitel be declared entitled to an additional refund in the amount of P9,839,128.57.

ISSUE:
Did the CTA En Banc err in reversing the ruling of the CTA Division due to lack of jurisdiction?

RULING:
The Court found the petition partly meritorious.

In previous jurisprudence, the Court ruled that the 120-day period granted to the CIR was mandatory and
jurisdictional, the non-observance of which was fatal to the filing of a judicial claim with the CTA. The Court
further explained that the two (2)-year prescriptive period under Section 112(A) of the NIRC pertained only
to the filing of the administrative claim with the BIR; while the judicial claim may be filed with the CTA within
thirty (30) days from the receipt of the decision of the CIR or the expiration of the 120-day period of the CIR
to act on the claim.

In this case, the administrative and the judicial claims were simultaneously filed on September 30, 2004.
Obviously, respondent did not wait for the decision of the CIR or the lapse of the 120-day period. For this
reason, we find the filing of the judicial claim with the CTA premature. Respondent's assertion that the non-
observance of the 120-day period is not fatal to the filing of a judicial claim as long as both the administrative
and the judicial claims are filed within the two-year prescriptive period has no legal basis.
12

In fine, the premature filing of respondent's claim for refund/credit of input VAT before the CTA warrants a
dismissal inasmuch as no jurisdiction was acquired by the CTA.

However, in San Roque, there is no dispute that the 120-day period is mandatory and jurisdictional, and
that the CTA does not acquire jurisdiction over a judicial claim that is filed before the expiration of the 120-
day period. There are, however, two exceptions to this rule. The first exception is if the Commissioner,
through a specific ruling, misleads a particular taxpayer to prematurely file a judicial claim with the CTA.
Such specific ruling is applicable only to such particular taxpayer. The second exception is where the
Commissioner, through a general interpretative rule issued under Section 4 of the Tax Code, misleads all
taxpayers into filing prematurely judicial claims with the CTA. In these cases, the Commissioner cannot be
allowed to later on question the CTA's assumption of jurisdiction over such claim since equitable estoppel
has set in as expressly authorized under Section 246 of the Tax Code.

Sitel failed to prove that the recipients of its call services are foreign corporations doing business outside
the Philippines. Sitel's claim for refund is anchored on Section 112(A)40 of the NIRC, which allows the
refund or credit of input VAT attributable to zero-rated or effectively zero-rated sales. Considering that the
subject invoice/official receipts are not imprinted with the taxpayer's TIN followed by the word VAT, these
would not be considered as VAT invoices/official receipts and would not give rise to any creditable input
VAT in favor of Sitel. At this juncture, it bears to emphasize that "[t]ax refunds or tax credits just like tax
exemptions are strictly construed against taxpayers, the latter having the burden to prove strict compliance
with the conditions for the grant of the tax refund or credit."Sitel failed to strictly comply with invoicing
requirements for VAT refund.

The Decision of the CTA En Banc was thus reversed and set aside. Accordingly, the Decision of the CTA
First Division was reinstated.

NATIONAL POWER CORPORATION vs. PROVINCIAL GOVERNMENT OF BATAAN,


SANGGUNIANG PANLALAWIGAN OF BATAAN, PASTOR B. VICHUACO (IN HIS OFFICIAL
CAPACITY AS PROVINCIAL TREASURER OF BATAAN) AND THE REGISTER OF DEEDS OF THE
PROVINCE OF BATAAN
G.R. No. 180654; March 6, 2017
LEONEN, J.

FACTS:
The National Power Corporation (NPC) received a notice of franchise tax delinquency from the respondent
Provincial Government of Bataan for P45.9 million. When NPC chose to reserve its right to contest the
computation pending the decision of the Supreme Court, the Province then sent notices of tax due to the
NPC. The NPC replied, however, that the Province has no right to further assess because NPC had ceased
to be liable for the payment of that tax after Congress enacted Republic Act (R.A.) 9136, also known as the
Electric Power Industry Reform Act (EPIRA).

Ignoring the NPC’s view, the Province issued a "Warrant of Levy" on 14 real properties that it used to own
in Limay, Bataan. In March 2004 the Province caused their sale at public auction with itself as the winning
bidder. On July 7, 2004 the NPC filed with the Regional Trial Court (RTC) of Mariveles, Bataan, a petition
for declaration of nullity of the foreclosure sale with prayer for preliminary mandatory injunction against the
Province, the provincial treasurer, and the Sangguniang Panlalawigan

On November 3, 2005 the RTC dismissed the NPC’s petition, stating that the franchise tax was not based
on ownership of property but on the NPC’s exercise of the privilege of doing business within Bataan. The
NPC appealed the RTC Decision to the Court of Appeals (CA) but the Province moved to dismiss the same
for lack of jurisdiction of that court over the subject matter of the case because it was essentially a local tax
case questioning the validity of the Province’s imposition of the local franchise tax, therefore, be lodged
with the Court of Tax Appeals (CTA). On November 27, 2007 the CA granted the Province’s motion and
dismissed the petition on the ground cited.
13

ISSUE:

1. Whether Napocor is the real party in interest; and

2. Whether the foreclosure sale on March 2, 2004 is valid.

RULING:

1. Yes. NPC is a real party interest, which stands to gain or lose from the judgment that the trial court may
render.

According to the Rules of Court, Rule 3, Sec. 2 “A real party in interest is the party who stands to be
benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit.” Napocor ‘s
complaint has sought two things: a.) the nullification of the foreclosure sale and also b.) a declaration from
the trial court that it is exempt from local franchise tax. Despite the claim for exemption by Napocor, the
respondents pursued its collection of the franchise tax delinquency by issuing the warrant of levy and
conducting the sale at public auction to enforce collection of the said delinquency against Napocor. Thus,
Napocor had to assail the correctness of the local franchise tax assessments made against it by instituting
the complaint with the Regional Trial Court, otherwise, the assessment would become conclusive and
unappealable.

2. No. The foreclosure sale on March 2, 2004 is null and void because it is quite apparent that at the time
of the levy and auction of the 14 properties sometime in January 2004 and March 2004, respectively, the
properties were by virtue of EPIRA already owned by TRANSCO. Thus, the foreclosure sale of properties
must be declared null and void.

As regards Napocor’s electric transmission function, under Section 8 of Republic Act No. 9136 or the
EPIRA, all transmission assets of Napocor were to be transferred to TRANSCO within six (6) months from
the effectivity of EPIRA, or by December 26, 2001. The EPIRA Implementing Rules and Regulations further
required Napocor, PSALM Corporation, and TRANSCO to “take such measures and execute such
documents to effect the transfer of the ownership and possession of the transmission and subtransmission
facilities of Napocor and all other assets related to transmission operations. Upon such transfer, the
nationwide franchise of Napocor for the operation of the transmission system and the Grid shall transfer
from Napocor to Transco.”

KIM S. JACINTO-HENARES vs. ST. PAUL COLLEGE OF MAKATI


GR No. 215383; March 08, 2017
CARPIO, J.:

FACTS:
On 29 November 2013, respondent St. Paul College of Makati (SPCM), a non-stock, non-profit educational
institution organized and existing under Philippine laws, filed a Civil Action to Declare Unconstitutional RMO
No. 20-2013 issued by Kim S. Jacinto-Henares, acting in her capacity as then Commissioner of Internal
Revenue with Prayer for Issuance of Temporary Restraining Order and Writ of Preliminary Injunction before
the RTC. SPCM alleged that "RMO No. 20-2013 imposes as a prerequisite to the enjoyment by non-stock,
non-profit educational institutions of the privilege of tax exemption under Sec. 4(3) of Article XIV of the
Constitution both a registration and approval requirement, i.e., that they submit an application for tax
exemption to the BIR subject to approval by CIR in the form of a Tax Exemption Ruling (TER) which is valid
for a period of [three] years and subject to renewal.

The RTC ruled in favor of SPCM and declared RMO No. 20-2013 unconstitutional for being violative of
Article XIV, Section 4, paragraph 3.
14

The CIR later issued RMO No. 34-2014, which clarified certain provisions of RMO No. 20-2013, as
amended by RMO No. 28-2013, thus the Motion for Reconsideration filed by the respondent was denied
for lack of merit. Meanwhile, this Court clarifies that the phrase "Revenue Memorandum Order" referred to
in the second sentence of its decision dated July 25, 2014 refers to "issuance/s" of the respondent which
tends to implement RMO 20-2013 for if it is otherwise, said decision would be useless and would be
rendered nugatory.

Hence, this present petition.

ISSUE:
Did the trial Court err in concluding that RMO [No.] 20-2013 imposes a prerequisite before a non-stock,
non-profit educational institution may avail of the tax exemption under section 4(3), Article XIV of the
Constitution.

RULING:
NO. The court denied the petition on the ground of mootness.

A moot and academic case is one that ceases to present a justiciable controversy by virtue of supervening
events, so that an adjudication of the case or a declaration on the issue would be of no practical value or
use. Courts generally decline jurisdiction over such case or dismiss it on the ground of mootness.

With the issuance of RMO No. 44-2016, a supervening event has transpired that rendered this petition moot
and academic, and subject to denial. The CIR, in her petition, assails the RTC Decision finding RMO No.
20-2013 unconstitutional because it violated the non-stock, non-profit educational institutions' tax
exemption privilege under the Constitution. However, subsequently, RMO No. 44-2016 clarified that non-
stock, non-profit educational institutions are excluded from the coverage of RMO No. 20-2013.
Consequently, the RTC Decision no longer stands, and there is no longer any practical value in resolving
the issues raised in this petition.

Demetrio R. Alcantara v. Republic of the Philippines


G.R. No. 192536; March 15, 2017
Bersamin, J.

FACTS:
Plaintiff-appellant Demetrio Alcantara (appellant) was the owner of a parcel of land in Davao City, covered
by a TCT. On April 15, 1983 and April 16, 1984, he filed his income tax returns for, respectively, 1982 and
1983. On December 14, 1987, Crispin Vallejo, Jr, Assistant Regional Director of the Revenue Region No.
11-B of the BIR, Davao City, wrote appellant informing him that there was still a deficiency due from him
representing deficiency income tax and fixed tax, surcharge, interest, and compromise penalty for late
payment, and inviting him to an informal conference to enable him to go over the findings and present any
objections. The letter was addressed to him, at Ecoland Subdivision, Matina, Davao City. Appellant made
no response. Later, on February 15, 1988, the BIR issued two demand letters to appellant at the same
address, to which appellant again made no response.

On August 12, 1991, the CIR issued a Warrant of Distraint and/or Levy against the properties of appellant,
again to the same address. A Notice of Seizure of Real Property was also issued to appellant, with an
indication that the same has been served to one Baldovino Lagbao, Mgr. of Panorama Home. As no bidder
appeared or the highest bid was insufficient, a Declaration of Forfeiture of Real Property was issued,
declaring the forfeiture of the property in favor of the government. A new title was thereafter issued in favor
of the Republic. Subsequently, the BIR issued a Notice of Sale informing the public of a resale, pursuant to
Sec. 217 of the NIRC, where Maximo Lagahit was proclaimed highest bidder.
15

Appellant instituted the action before the RTC of Davao City, alleging that he was about to pay the realty
taxes on his Buhangin Property when his payment was refused as the owner of the property was no longer
the appellant but one Maximo Lagahit. Appellant alleged that he has been fraudulently deprived of his
property when the BIR made it appear falsely in the Income Tax Assessment Notices that he was residing
at Ecoland Subdivision when in fact, he and his family left for the United States in 1985. In their Answer,
appellees countered that the cancellation of the appellant’s title was done with due process, with service of
the documents done at his last known residence, and that later, the Notice of Seizure was issued to one
Lagbao pursuant to Sec. 224 of the NIRC.

The RTC dismissed the complant, holding that respondents could not be faulted for appellant’s failure to
receive the assessment because the BIR was never informed of any change of address. Upon appeal, the
CA dismissed the same on account of lack of jurisdiction, as appellant was already seeking to challenge
the validity of the assessment made by the BIR. It ruled that the Tax Code mandated that the taxpayer
should administratively protest the assessment with the CIR before going to court.

ISSUE:
May the judicial courts acquire jurisdiction over appellant’s complaint?

RULING:
No, the judicial courts may not acquire jurisdiction over the present complaint.

The remedies available to a taxpayer were laid down by law. In particular, Sec. 229 of P.D. No. 1158, the
law in effect at the time of the disputed assessment, stated that prior resort to the administrative remedies
was necessary; otherwise, the assessment would attain finality. Sec. 230 allowed taxpayers to file their
claim for refund for the erroneously or illegally paid taxes. Such claim for refund was also a prerequisite
before any resort to the courts could be made to recover the erroneously or illegally paid taxes. In any case,
based on R.A. No. 1125, prior to its amendment by R.A. 9282, the CTA had exclusive appellate jurisdiction
over the appeal of the decisions of the CIR.
Based on a survey of the complaint, it is clear that despite assailing the supposedly illegal confiscation of
his property in order to satisfy his tax liabilities, Alcantara was really challenging the assessment and
collection of taxes made against him in violation of his right to due process. As such, the complaint
concerned the validity of the assessment and eventual collection of taxes by the BIR. The declaration of
the nullity of the sale and reconveyance was founded on the validity of the assessment and eventual
collection by the BIR. Despite availability of remedies as founded in law, appellant immediately invoked the
authority of the courts to protect his rights instead of first going to the CIR.
Thus, the complaint was dismissed for fatal prematurity.

Commissioner of Internal Revenue v. Philippine Daily Inquirer


G.R. No. 213943; March 22, 2017
Carpio, J.

FACTS:
Philippine Daily Inquirer (PDI), engaged in the business of newspaper publication, filed its Annual Income
Tax Return for the taxable year 2004 on April 25, 2005. On August 10, 2006, PDI received a letter dated
June 30, 2006 from Region 020 Large Taxpayers’ Service of BIR, in which BIR alleged that based on the
computerized matching it conducted, there was an underdeclaration of domestic purchases from PDI’s
suppliers, and invited PDI to reconcile the deficiencies with its Audit and Investigation Division (BIR-LTAID).
In response thereto, PDI submitted reconciliation reports. On March 21, 2007, PDI executed a Waiver of
the Statute of Limitation (First Waiver) consenting to assessment and/or collection of taxes for 2004 which
may be found due after the investigation, at any time before or after the lapse of the periods in Sec. 203
and 222 of the NIRC but not later than June 30, 2007. This was received on March 23, 2007 by Nestor
Valeroso, OIC-ACIR of the Large Taxpayer Service.
16

On June 5, 2007, PDI executed a Second Waiver, which Valeroso accepted on June 8, 2007. In a
Preliminary Assessment Notice dated October 15, 2007, PDI was assessed for alleged deficiency income
tax and VAT for taxable year 2004, which PDI received on December 4, 2007. In a letter dated December
12, 2007, PDI sought reconsideration of the PAN and addressed its willingness to execute another waiver
(Third Waiver), extending the BIR’s right to assess and/or collect from it until April 30, 2008. This was
accepted on December 20, 2007. On April 17, 2008, PDI received a Formal Letter of Demand dated March
11, 2008, demanding for payment of alleged deficiency VAT and income tax. PDI filed its protest on May
16, 2008. It then filed a Petition for Review on December 12, 2008 against the CIR, alleging that the 180-
day period within which the BIR should act on its protest had already elapsed.

The CTA First Division decided in favor of PDI, ruling that the period of limitation in the assessment and
collection of taxes is governed by Sec. 203 of the NIRC. In connection with the Waivers, the CTA First
Division found that while the First and Second Waivers were executed in three copies, the BIR failed to
provide the office accepting the waivers with their respective third copies, and in fact these third copies
were still attached to the docket of the case. There was also alleged failure to prove that the Third Waiver
was executed in three copies. Thus, due to the defects, the three-year period within which to assess PDI
was not extended. This decision was cited extensively by the CTA En Banc upon petition for review.
In this present petition, CIR alleges, inter alia, that PDI filed a false or fraudulent return, and as such, Sec.
222 of the NIRC should apply and thus, the applicable prescriptive period is 10 years from discovery of the
falsity of the return. As such, the assessment made through Formal Letter of Demand (March 11, 2008)
was within the 10 year period from issuance of the Letter Notice (August 10, 2006).

ISSUE:
Was the assessment made through the Formal Letter of Demand done within the prescriptive period?

RULING:
No, the assessment was not done within the prescriptive period.

Under Sec. 203 of the NIRC, the prescriptive period to assess is three years, unless Sec. 222 applies
exceptionally, as when a false or fraudulent return was issued with intent to evade tax, or failure to file a
return. In this regard, jurisprudence is replete with the ruling that fraud is never imputed. The Court will not
sustain findings of fraud upon circumstances which, at most, create only suspicion. Mere understatement
of tax is not itself proof of fraud for purpose of tax evasion. While the filing of a fraudulent return necessarily
implies that the act of the taxpayer was intentional and done with intent to evade the taxes due, the filing of
a false return can be intentional or due to honest mistake. The entry of a wrong information due to mistake,
carelessness, or ignorance, without intent to evade tax, does not constitute a false return.
In this case, the Court did not find enough evidence to prove fraud or intentional falsity on the part of PDI;
thus, Sec. 203 of the NIRC should apply. The Waivers executed were meant to extend the three-year
prescriptive period, and would have extended such period were it not for the defects found by the CTA.
Hence at the outset, the BIR did not find any ground that would make assessment fall under any of the
exceptions. The failure to provide the office accepting the waiver with the third copy violates RMO 20-90
and RDAO 05-01. The defects in such Waivers resulted to the non-extension of the period to assess or
collect taxes, and made the assessments issued by the BIR beyond the three-year prescriptive period void.
The BIR cannot shift the blame to the taxpayer for issuing defective waivers. A waiver of the statute of
limitations is a derogation of the taxpayer’s right to security against prolonged and unscrupulous
investigations and thus, it must be carefully and strictly construed.
Thus, the Formal letter of Demand and Assessment through Letter Notice for taxable year 2004 issued by
the BIR against PDI is cancelled because of the defective Waivers executed, which failed to extend the
prescriptive period for assessment.
17

Medicard Philippines, Inc., v. Commissioner of Internal Revenue


G.R. No. 222743; April 5, 2017
Reyes, J.

FACTS:
MEDICARD, a Health Maintenance Organization, filed its First, Second, and Third Quarterly VAT Returns
through Electronic Filing and Payment System (EFPS) on April 20, 2006, July 25, 2006, and October 20,
2006, respectively, and its Fourth Quarterly VAT Return on January 25, 2007. The CIR informed
MEDICARD of some discrepancies between MEDICARD’s Income Tax Returns and VAT Returns and
issued a Letter Notice dated September 20, 2007. The CIR subsequently issued a Preliminary Assessment
Notice (PAN) against MEDICARD for deficiency VAT, and a Memorandum dated December 10, 2007
recommending the issuance of a Formal Assessment Notice. This FAN was received by MEDICARD on
January 4, 2008.

As per the CIR, the taxable base of HMOs for VAT purposes is its gross receipts without any deduction
under Sec. 4.108.3(k) of RR No. 16-2005. Since MEDICARD does not actually provide medical and/or
hospital services, but merely arranges for the same, its services are not VAT exempt. In response thereto,
MEDICARD argued that the services it renders is not limited to arranging for the provision of medical and/or
hospital services by hospitals and/or clinics but include actual and direct rendition of medical and laboratory
services and that the processing fees and professional fess must be excluded from its gross receipts.

The CIR, in its Final Decision on Disputed Assessment dated May 15, 2009, denied MEDICARD’s protest,
prompting MEDICARD to file a petition for review before the CTA. The CTA Division however reiterated
the CIR ruling with modifications, holding that, inter alia, the amounts that MEDICARD earmarked, and
eventually paid to doctors, hospitals and clinics cannot be excluded from the computations of gross receipts
because the act of earmarking or allocation is by itself an act of ownership and management over the funds
by MEDICARD which is beyond the contemplation of RR No. 4-2007 and that MEDICARD’s earnings from
its clinics and laboratory facilities cannot be excluded as well because the operation of these clinics and
laboratory is merely an incident to MEDICARD’s main line of business as HMO and there is no evidence
that MEDICARD segregated the amounts pertaining to this at the time it received the premium from its
members. Upon elevation to the CTA En Banc, the CTA Division decision is modified as to the 10% VAT
rate for January 2006 but sustained in all other matters.

ISSUE:
May the amounts that MEDICARD earmarked and eventually paid to medical service providers form part
of gross receipts for VAT purposes?

RULING:
No, the amounts that MEDICARD earmarked and eventually paid to medical service providers do not form
part of gross receipts for VAT purposes.

Well-settled is the rule on the doctrine of strict interpretation in the imposition of taxes, which provides that
a statute will not be construed as imposing a tax unless it does so clearly, expressly, and unambiguously.
A tax cannot be imposed without clear and express words for that purpose. Accordingly, the general rule
of requiring adherence to the letter in construing statutes applies with peculiar strictness to tax laws and
the provisions of a taxing act are not to be extended by implication. In case of doubt, such statutes are to
be construed most strongly against the government and in favor of the citizens because burdens are not to
be imposed nor presumed to be imposed beyond what statutes expressly and clearly import.

As such, the definition of gross receipts under RR No. 16-2005 merely presumed that the amount received
by an HMO as membership fee is the HMO’s compensation for their services. As a mere presumption, an
HMO is thus, allowed to establish that a portion of the amount it received as membership fee does not
actually compensate it but some other person, which in this case are the medical service providers
themselves. The term as elsewhere mentioned as tax base under the NIRC does not contain any specific
definition, and thus is construed in its plain and ordinary meaning—that is, comprising the entire receipts
without any deduction.
18

It is significant to note in this regard that MEDICARD established that upon receipt of payment of
membership fee it actually issued two official receipts, one pertaining to the VATable portion, representing
compensation for its services, and the other represents the non-vatable portion pertaining to the amount
earmarked for medical utilization. Therefore, the absence of an actual and physical segregation of the
amounts pertaining to two different kinds of fees cannot arbitrarily disqualify MEDICARD from rebutting the
presumption under the law and from proving that indeed services were rendered by its healthcare providers
for which it paid the amount it sought to be excluded from its gross receipts.

Secretary of Finance Cesar V. Purisima and Commissioner of Internal Revenue Kim S. Jacinto-
Henares v. Philippine Tobacco Institute, Inc.
G.R. No. 210251; April 17, 2017
Carpio, J.

FACTS:
On December 20, 2012, President Benigno S. Aquino III signed RA 10351 (the Sin Tax Reform Law) which
restructured the excise tax on alcohol and tobacco products by amending pertinent provisions of RA 8424.
Sec. 5 of RA 10351, which amended Sec 145(C) of the NIRC, increased the excise tax rate of cigars and
cigarettes and allowed cigarettes packed by machine to be packed in other packaging combinations of not
more than 20. Later, the Secretary of Finance issued RR 17-2012, Sec. 11 of which imposes an excise tax
on individual cigarette pouches of 5’s and 10’s even if they are bundled or packed in packaging conditions
not exceeding 20 cigarettes. Pursuant thereto, the CIR issued RMC 90-2012, providing for the initial
classifications in tabular form, effective January 1, 2013, of locally manufactured cigarette brands packed
by machine according to the tax rates prescribed under RA 10351. PMFTC, Inc., a member of respondent,
paid the excise taxes in order to withdraw cigarettes from its manufacturing facilities, however, on January
16, 2012, it wrote to the CIR prior to the payment stating that such will be made under protest.

PTI thus filed a petition for declaratory relief with application for writ of preliminary injunction with the RTC,
seeking to declare null and void RR 17-2012 and RMC 90-2012 for violation of the Constitution and RA
10351. The same was granted by the RTC, which ruled that RA 10351 intends to tax the pack of 20’s as a
whole, regardless of whether they are further repacked by 10’s or 5’s, as long as they total 20 sticks in total,
and that the fact that the law allows packaging combinations, as long as they will not exceed a total of 20
sticks, is indicative of the lawmakers’ foresight that these combinations shall be sold at retail individually,
yet the lawmakers did not specify that the tax rate shall be impose on each packaging combination.

Hence the instant petition filed by petitioners through the Solicitor General, where petitioners assert that
the two regulations merely clarify the tax rates set out in RA 10351 but have neither amended nor added
any new taxes. PTI, on the other hand, contends that Sec. 11 of RR 17-2012 and Annex D-1 pertaining to
Cigarettes Packed by Machine of RMC 90-2012 disregarded the clear provision of RA 10351 and imposed
excise tax on each cigarette pouches of 5’s and 10’s regardless of whether they are packed together into
20 sticks per pack. They also assert that no publication or notices were made nor a hearing conducted on
the issuance of such regulations.

ISSUE: Were RR 17-2012 and RMC 90-2012 issued in violation of the Constitution and other existing laws?

RULING:
Yes, RR 17-2012 and RMC 90-2012 were issued in violation of the Constitution and other existing laws,
and are declared null and void and of no force and effect.
It is an elementary rule that administrative rules and regulations enacted by administrative bodies to
implement the law which they are entrusted to enforce have the force of law and are entitled to great weight
and respect. However, these implementations of the law must not override, supplant, or modify the law bt
must remain consistent with the law they intent to implement. It is only Congress which has the power to
repeal or amend the law.
19

In the present case, a reading of Sec. 11 of RR 17-2012 and Annex D-1 on Cigarettes Packed by Machines
of RMC 90-2012 reveals that they are not simply regulations to implement RA 10351 but are amendatory
provisions which require cigarette manufacturers to be liable to pay for more tax than the law, RA 10351,
allows. The BIR, in issuing these revenue regulations, created an additional tax liability for packaging
combinations smaller than 20 cigarette sticks. In so doing, the BIR amended the law, an act beyond the
power of the BIR to do.

Metropolitan Bank & Trust Company v. The Commissioner of Internal Revenue


G.R. No. 182582; April 17, 2017
Perlas-Bernabe, J.

FACTS:
This is a petition for review on certiorari of the CTA En Banc Decision which affirmed the CTA First Division
ruling, dismissing Metrobank’s claim for refund on the ground of prescription.
Solidbank Corporation (Solidbank) entered into an agreement with Luzon Hydro Corporation (LHC)
whereby the former extended to the latter a foreign currency denominated loan. Pursuant to the Agreement,
LHC is bound to shoulder all corresponding internal revenue taxes required by law to be deducted or
withheld on the said loan, as well as the filing of tax returns and remittance of taxes withheld by the BIR.
Metrobank subsequently acquired Solidbank, effectively acquiring the latter’s rights and obligations under
the Agreement. LHC then paid Metrobank and withheld, and later eventually paid to the BIR 10% final tax
on the interest portions of the aforesaid payments, on the same months that the respective payments were
made to petitioner.

According to Metrobank, it mistakenly remitted the amounts to the BIR as well when they were inadvertently
included in its own Monthly Remittance Returns of Final Income Taxes Withheld for March and October
2001. Thus, it filed a letter to the BIR requesting for a refund, and then filed a judicial claim for refund via
petition for review before the CTA on September 10, 2003. In defense, CTA averred that Metrobank must
prove double payment of tax sought to be refunded and the claim must be filed within the prescriptive period
laid down by law. The CTA Division denied Metrobank’s claims for refund for lack of merit, ruling that the
same was filed beyond the 2-year prescriptive period. Upon elevation of the matter to the CTA En Banc,
the CTA Division ruling was affirmed.

ISSUE:
Was Metrobank able to file its claim for refund within the prescriptive period?

RULING:
No, Metrobank was not able to file its claim for refund within the prescriptive period.

Under Sections 204 and 229 of the NIRC, a claimant for refund must first file an administrative claim for
refund with the CIR, prior to filing a judicial claim before the CTA. Notably, both the administrative and
judicial claims for refund should be filed within the 2-year prescriptive period indicated therein, and that the
claimant is allowed to file the latter even without waiting for the resolution of the former in order to prevent
the forfeiture of its claim through prescription. Case law states that "the primary purpose of filing an
administrative claim [is] to serve as a notice of warning to the CIR that court action would follow unless the
tax or penalty alleged to have been collected erroneously or illegally is refunded.

To clarify, Section 229 of the Tax Code - then Section 306 of the old Tax Code - however does not mean
that the taxpayer must await the final resolution of its administrative claim for refund, since doing so would
be tantamount to the taxpayer's forfeiture of its right to seek judicial recourse should the two (2)-year
prescriptive period expire without the appropriate judicial claim being filed."

The tax involved herein is 10% final withholding tax on Metrobank’s interest income on its foreign currency
denominated loan extended to LHC. Sec. 2.57 (A) of RR No. 02-98 explains the characterizations of taxes
of such nature, in that such are considered as full and final payment of the income tax due, and thus, are
20

not subject to any adjustments. Thus, the 2-year prescriptive period commences to run from the time the
refund is ascertained, i.e., the date such tax was paid, and not upon discovery by the taxpayer of the
erroneous or excessive payment of taxes. Metrobank’s final withholding tax liability in March 2001 was
remitted to the BIR on April 25, 2001, thus giving it only until April 25, 2003 to file its claims for refund.
However, Metrobank filed its administrative claim on December 27, 2002, and its judicial claim on
September 10, 2003.

Thus, Metrobank’s claim for refund had already prescribed and should be denied.

Asia Trust Development Bank, Inc vs. Commissioner of Internal Revenue


G.R. No. 201530; April 19, 2017
Del Castillo, J.

FACTS:
Asis Trust Development Bank, Inc. received from the Commission of Internal Revenue three Letters of
Demand with Assessment Notices for deficiency internal revenue taxes. Asiatrust timely protested the
assessment notices. Due to inaction of the CIR on the protest, Asiatrust filed before the CTA a Petition for
Review praying for the cancellation of the tax assessments for deficiency income tax, documentary stamp
tax - regular DST - industry issue, final withholding tax, expanded withholding tax, and fringe benefit tax
issued against it by the CIR.

Asiatrust manifested among others that it availed of the Tax Abatement Program for its deficiency final
withholding tax - trust assessments. Both the CTA and the CTA En Banc ruled that in the absence of a
termination letter, it cannot be established that Asiatrust vaildly availed of the Tax Abatement Program.

ISSUE:
Whether or not the CTA erred in ruling that Asiatrust failed to validly avail of the Tax Abatement Program

RULING:
No. Based on the guidelines laid out in an application for tax abatement under Section 204(B) of the 1997
National Internal Revenue Code, the last step in the tax abatement process is the issuance of the
termination letter. The presentation of the termination letter is essential as it proves that the taxpayer’s
application for tax abatement has been approved. Thus, without a termination letter, a tax assessment
cannot be considered closed and terminated.

In this case, Asiatrust failed to present a termination letter from the BIR. Instead, it presented a Certification
issued by the BIR to prove that it availed of the Tax Abatement Program and paid the basic tax. It also
attached copies of its BIR Tax Payment Deposit Slips and a Letter issued by RDO Nacar. These documents,
however, do not prove that Asiatrust’s application for tax abatement has been approved.

Mitsubishi Corporation - Manila Branch vs. Commissioner of Internal Revenue


G.R. No. 175772; June 5, 2017
Perlas-Bernabe, J.

FACTS:
The governments of Japan and the Philippines executed an Exchange Notes whereby the former agreed
to extend a loan amounting to Forty Billion Four Hundred Million Japanese Yen to the latter for the
implementation of the Calaca II Coal-Fired Thermal Power Plant Project. Meanwhile, the National Power
Corporation, as the executing government agency, entered into a contract with Mitsubishi Corporation for
the engineering, supply, construction, installation, testing, and commissioning of a steam generator,
auxiliaries, and associated civil works for the Project. In line with the Exchange Notes, the Contract
21

indicated NPC’s undertaking to pay any and all forms of taxes that are indirectly imposable under the
Contract.

Petitioner filed with the respondent Commissioner on Internal Revenue as administrative claim for refund
representing the erroneously paid amounts corresponding to the funded portion of the Project. The CTA
Division granted the petition but the same was reversed by the CTA En Banc.

ISSUE:
Whether or not petitioner is entitled to refund

RULING:
Yes. In this case, it is fairly apparent that the subject taxes was erroneously collected from petitioner,
considering that the obligation to pay the same had already been assumed by the Philippine Government
by virtue of its Exchange of Notes with the Japanese Government. Case law explains that an exchange of
notes is considered as an executive agreement, which is binding on the State even without Senate
concurrence. In line with the tax assumption provision under the Exhange of Notes, Article VII (B) (1) of the
Contract states that NPC shall pay any and all forms of taxes that are directly imposable under the contract.

Marubeni Corporation vs. Commissioner of Internal Revenue


G.R. No. 76573; September 14, 1989
Fernan, J.

FACTS:
Petitioner, through the accounting firm Sycip, Gorres, Velayo and Company, sought a ruling from the
Bureau of Internal Revenue on whether or not the dividencds petitioner received from Atlanta Gulf and
Pacific Co. of Manila are effectively connected with its conduct or business in the Philippines as to be
considered as branch profits subject to the 15% profit remittance tax imposed under Section 24 (b) (2) of
the National Internal Revenue Code as amended by the Presidential Decree Nos. 1705 and 1773.

Consequently, petitioner claimed for refund or issuance of a tax credit representing profit tax remittance
erroneously paid on the dividends remitted by AG&P to its head office in Tokyo, Japan.

ISSUE:
Whether or not the claim for refund should be granted

RULING:
Yes. Petitioner, being a non-resident foreign corporation with repect to the transaction in question, the
applicable provision of the Tax Code is Section 24 (b) (1) (iii) in conjuction with the Philippine-Japan treaty
of 1980. As a general rule, the corporation is taxed 35% of its gross income from all sources within the
Philippines.

However, a discounted rate of 15% is given to petitioner on dividends received from a domestic corporation
on the condition that its domicile state (Japan) extends in favor of petitioner, a tax credit of not less than
20% of the dividends received. This 20% represents the difference between the regular tax of 35% on non-
resident foreign corporations which petitioner would have ordinarily paid, and the 15% special rate on
dividends received from a domestic corporation.
22

Republic of the Philippines vs. Spouses Senado Salvador and Josefina Salvador
G.R. No. 205428; June 7, 2017
Del Castillo, J.

FACTS:
The Republic, represented by the DPWH, filed a verified Complaint before the RTC for the expropriation of
83 square meters of a parcel of land as well, as the improvements thereon, owned by Spouses Salvador,
for the construction of the C-5 Northern Link Road Project Phase 2 from the North Luzon Expressway to
Mc Arthur Highway. Respondents signified in open court that they recognized the purpose for which their
property is being expropriated and interposed no objection thereto. They also manifested that they have
already received the total sum from DPWH and therefore no longer intending to claim any just
compensation.

The RTC rendered judgment in favor of the Republic. It likewise directed the Republic to pay respondents
consequential damages equivalent to the value of the capital gains tax and other taxes necessary for the
transfer of the subject property in the Republic’s name.

ISSUE:
Whether capital gains tax on the transfer of property can be considered as consequential damages that
may be awarded to respondents

RULING:
No. It is settled that the transfer of property through expropriation proceedings is a sale or exchange within
the meaning of Sections 24 (D) and 56 (A) (3) of the NIRC, and profit from the transaction constitutes capital
gain. Since capital gains tax is a tax on passive income, it is the seller, or respondents in this case, who
are liable to shoulder the tax. Besides, consequential damages are only awarded if as a result of the
expropriation, the remaining property of the owner suffers from an impairment or decrease in value. In this
case, no evidence was submitted to prove any impairment or decrease in value of the property as a result
of the expropriation.

Commissioner of Internal Revenue vs. United Cadiz Sugar Famers Association Multi-Purpose
Cooperative
G.R. No. 209776
December 7, 2016
Brion, J.

FACTS:
The BIR issued BIR Ruling No. RR12-08-2004 otherwise known as the Certificate of Tax Exemption in
favor of respondent.

BIR Regional Director Rodita Galanto required respondent to pay in advance the value-added tax before
her office could issue the Authorization Allowing Release of Refined Sugar from the sugar refinery/mill. This
prompted the cooperative to confirm with the BIR whether it is exempt from the payment of VAT pursuant
to Section 109(1) of the NIRC. The BIR responded favorably to such query. The CIR ruled that the
cooperative is considered as the actual producer of the members’ sugar production, because it primarily
provided the various inputs, capital, technology transfer, and farm management. The CIR thus confirmed
that respondent’s sale of produce to members and non-members is exempt from payment of VAT.

Regional director again demanded payment of advance VAT. Unable to withdraw its refined sugar,
respondent was forced to pay advance VAT under protest.

ISSUE:
Whether or not the cooperative is exempted from VAT
23

RULING:
Yes. Although the sale of refined sugar is generally subject to such VAT, such transaction may nevertheless
qualify as a VAT-exempt transaction if the sale is made by a cooperative provided that the following
conditions concur: first, the seller must be an agricultural cooperative duly registered with the CDA. An
agricultural cooperative is duly registered when it has been issued a certificate of registration by the CDA.
Second, the cooperative must either sell exclusively to its members or to both members and non-members,
its produce, whether in its original state or processed form.

Respondent satisfies these requisites in the present case. A qualified cooperative also enjoys exemption
from the requirement of advance payment of VAT upon withdrawal from the refinery/mill. The agricultural
cooperative’s exemption from the requirement of advance payment is a logical consequence of the
exemption from VAT of its sales of refined sugar.

Pilipinas Shell Petroleum Corporation vs. Commissioner of Customs


G.R. No. 195876; June 19, 2017
Velasco, Jr., J.

FACTS:
The court resolves in this case an Omnibus Motion for Reconsideration and referral to the Court En Banc
filed by respondent Commissioner of Customs assailing the December 5, 2016 SC Decision.
The factual antecedents are as follows: On April 16, 1996, the Downstream Oil Industry Deregulation Act
of 1996 took effect providing for the reduction of the tariff duty on imported crude oil from 10% to 3%.
Petitioner's importation arrived on April 7, 1996 or nine days earlier than the effectivity of the liberalization
provision and was unloaded on April 10. Subsequently, petitioner filed the Import Entry and Internal
Revenue Declaration and paid the import duty of said shipment on May 23, 1996.

More than four years later, petitioner received a demand letter from the BOC assessing it to pay the
deficiency customs duties due from the crude oil importation, representing the difference between the
amount allegedly due (at the old rate often percent 10% or before the effectivity of R.A. No. 8180) and the
actual amount of duties paid by petitioner (on the rate of 3%)

Petitioner protested the assessment. However, petitioner received from respondent a demand letter for the
payment of the amount representing the dutiable value of its 1996 crude oil importation which had been
allegedly abandoned in favor of the government by operation of law. Respondent stated that Import Entry
No. 683-96 covering the subject importation had been irregularly filed and accepted beyond the thirty-day
(30) period prescribed by law.
The BOC then filed a civil case for collection of sum of money against petitioner. Consequently, petitioner
filed with the CTA a Petition for Review, upon consideration that the civil complaint filed in the RTC of Manila
was the final decision of the BOC on its protest. The Former 1st Division of the CA dismissed respondent's
petition. Petitioner appealed to the CTA Former En Banc which affirmed the CTA Division's ruling
Petitioner filed a petition for review before the SC. The SC granted the petition reversing and setting aside
the CTA Former En Banc decision.

Hence, this Omnibus Motion for Reconsideration and referral to the Court En Banc filed by respondent
before the SC anchored primarily on the applicability of Chevron Philippines, Inc. v. Commissioner of the
Bureau of Customs to the case at bar.

ISSUE:
Whether or not the Chevron Case is a precedent to the case at bar.

RULING:
No. Chevron is not a precedent to the case at bar.
24

The Court desisted from applying the doctrine laid down in Chevron considering that the facts and
circumstances therein are not in all fours with those obtaining in the instant case. As clearly explained in
the assailed December 5, 2016 Decision, the main difference between Chevron and the case at bar lies in
the attendance of fraud. In Chevron, evidence on record established that Chevron committed fraud in its
dealings. On the other hand, proof that petitioner Pilipinas Shell was just as guilty was clearly wanting.
Simply, there was no finding of fraud on the part of petitioner in the case at bar. Such circumstance is too
significant that it renders Chevron indubitably different from and cannot, therefore, serve as the
jurisprudential foundation of the case at bar.
As extensively discussed in the assailed Decision, whether or not petitioner Pilipinas Shell defrauded
becomes pivotal because of Section 1603 of the Tariff and Customs Code, which reads that “When articles
have been entered and passed free of duty or final adjustments of duties made, with subsequent delivery,
such entry and passage free of duty or settlements of duties will, after the expiration of one (1) year, from
the date of the final payment of duties, in the absence of fraud or protest or compliance audit pursuant to
the provisions of this Code, be final and conclusive upon all parties, unless the liquidation of the import
entry was merely tentative.” Pursuant to said provision, the attendance of fraud would remove the case
from the ambit of the statute of limitations, and would consequently allow the government to exercise its
power to assess and collect duties even beyond the one-year prescriptive period, rendering it virtually
imprescriptible.

In the case at bar, petitioner Pilipinas Shell filed its Import Entry and Internal Revenue Declaration (IEIRD)
and paid the import duty of its shipments on May 23, 1996. However, it only received a demand letter from
public respondent on July 27, 2000, or more than four (4) years later. By this time, the one-year prescriptive
period had already elapsed, and the government had already been barred from collecting the deficiency in
petitioner's import duties for the covered shipment of oil.
The absence of fraud not only allows the finality of the liquidations, it also calls for the strict observance of
the requirements for the doctrine of ipso facto abandonment. As expressly provided in Sec.1801(b) of the
TCC, the failure to file the IEIRD within 30 days from entry is not the only requirement for the doctrine of
ipso facto abandonment to apply. The law categorically requires that this be preceded by due notice
demanding compliance.

To recapitulate, the notice in this case was only served upon petitioner four (4) years after it has already
filed its IEIRD. Under this circumstance, the Court cannot rule that due notice was given, for when public
respondent served the notice demanding payment from petitioner, it no longer had the right to do so. By
that time, the prescriptive period for liquidation had already elapsed, and the assessment against
petitioner's shipment had already become final and conclusive. Consequently, Sec. 1801(b) failed to
operate in favor of the government for failure to demand payment for the discrepancy prior to the finality of
the liquidation. The government cannot deem the imported articles as abandoned without due notice.
Public respondent cannot harp on the Chevron ruling to excuse compliance from the due notice requirement
before the imported articles can be deemed abandoned, for to do so would only downplay the Court's
finding anent the non-attendance of fraud. To be clear, the element of fraud in Chevron was a key ingredient
on why notice was deemed unnecessary.

Hence, it does not suffice that petitioner is a multinational, large scale importer presumed to be familiar with
importation rules and procedures for the ipso facto abandonment doctrine to apply. Under the peculiar facts
and circumstances of Chevron, the existence of fraud was the primary element established to warrant the
application of the doctrine. Without this element, Chevron cannot be treated at par with the case at bar. The
statutorily required due notice should still have been timely served upon petitioner before the imported oil
shipments could have been deemed abandoned.

The notice requirement as mandated in CMO 15-94 cannot be excused unless fraud is established.
Resultantly, fraud being absent on the part of petitioner Pilipinas Shell, the ipso facto abandonment doctrine
cannot operate within the factual milieu of the instant case.
25

Commissioner of Internal Revenue vs. Semirara Mining Corporation


G.R. No. 202922; June 19, 2017
Caguioa, J.

FACTS:
Before the Court is a petition for review on certiorari under Rule 45 filed by petitioner CIR, assailing the
Decision CTA En Banc, which granted the claim of respondent Semirara Mining Corporation (SMC) for
refund or issuance of tax credit of final value-added tax it erroneously paid in connection with its sales of
coal for the period covering July 1, 2006 to December 31, 2006.

SMC is, registered as a non-VAT enterprise engaged in coal mining business. It conducts business by
virtue of PD No. 972 or the Coal Development Act of 1976. Semirara Coal Corporation executed a Coal
Operating Contract (COC) with the Ministry of Energy. In 2002, SCC changed its corporate name to SMC.
SMC has been selling coal to NPC for years without paying VAT pursuant to the exemption granted under
PD No. 972. However, after RA No. 9337, which amended certain provisions of the NIRC took effect, NPC
started to withhold a tax of 5% representing the final withholding VAT on SMC's coal billings pursuant to
Section 114C of the same law, on the belief that the sale of coal by SMC was no longer exempt from VAT.

SMC requested for a BIR pronouncement sustaining its position that its sale of coal to NPC was still exempt
from VAT notwithstanding RA No. 9337, which the BIR granted. Consequently, SMC filed with the BIR
letters with supporting documents requesting for a refund or issuance of a tax credit certificate representing
the final withholding VAT withheld by NPC on its coal billing for the period of July 1, 2006 to December 31,
2006.
Due to the CIR's inaction, SMC filed its petitions for review with the CTA Division. The CTA Division
rendered its Decision granting SMC's refund claim. CIR’s motion for reconsideration was denied.
The CIR then filed a Petition for Review with the CTA En Banc which dismissed the CIR's petition for lack
of merit. Hence, this petition for review on certiorari before the SC.

ISSUE:
Whether or not respondent SMC is still covered by the tax exemption, hence, entitled to tax refund.

RULING:
Yes. SMC is still covered by the tax exemption and is entitled to claim for a refund.

Contrary to the CIR's contention, SMC's claim for VAT exemption is anchored not on the paragraph deleted
by RA No. 9337 from the list of VAT exempt transactions under Section 109 of the NIRC but on the tax
incentives granted to operators of COCs executed pursuant to PD No. 972. As VAT is one of the national
internal revenue taxes, it falls within the tax exemptions provided under PD No. 972.
The Court agrees with the CTA that the tax exemption provided under Section 16 of PD No. 972 was not
revoked, withdrawn or repealed expressly or impliedly- by Congress with the enactment of RA No. 9337. It
is a fundamental rule in statutory construction that a special law cannot be repealed or modified by a
subsequently enacted general law in the absence of any express provision in the latter law to that effect.

The repealing clause of RA No. 9337, a general law, did not provide for the express repeal of PD No. 972,
a special law. Had Congress intended to withdraw or revoke the tax exemptions under PD No. 972, it would
have explicitly mentioned Section 16 of PD No. 972, in the same way that it specifically mentioned other
laws. The CTA also correctly ruled that RA No. 9337 could not have impliedly repealed PD No. 972.
Verily, as things stand, SMC is exempt from the payment of VAT on the sale of coal produced under its
COC, because Section 16(a) of PD No. 972, a special law, grants SMC exemption from all national taxes
except income tax. Accordingly, SMC is entitled to claim for a refund of the 5% final VAT erroneously
withheld on SMC's coal billings and remitted by NPC to the BIR.
26

Commissioner of Internal Revenue vs. Lancaster Philippines, Inc.


G.R. No. 183408; July 12, 2017
Marites, J.

FACTS:
This is a Petition for Review on Certiorari under Rule 45 of the ROC seeking to reverse and set aside the
decision of the CTA En Banc cancelling the assessment issued by petitioner CIR against respondent
Lancaster Philippines, Inc. and affirming the decision of the CTA Division.
In 1999, BIR issued a Letter of Authority (LOA) authorizing its revenue officers to examine Lancaster's
books of accounts and other accounting records for all internal revenue taxes due from taxable year 1998
to an unspecified date.
After the conduct of an examination pursuant to the LOA, the BIR issued a Preliminary Assessment Notice
(PAN) which cited Lancaster for: 1) overstatement of its purchases for the fiscal year April 1998 to March
1999; and 2) noncompliance with the generally accepted accounting principle of proper matching of cost
and revenue. More concretely, the BIR disallowed the purchases of tobacco from farmers covered by
Purchase Invoice Vouchers (PIVs) for the months of February and March 1998 as deductions against
income for the fiscal year April 1998 to March 1999.
Subsequently, Lancaster received from the BIR a final assessment notice (FAN) which assessed
Lancaster's deficiency income tax as a consequence of the disallowance of purchases claimed for the
taxable year ending March 1999.
Lancaster duly protested the FAN. There being no action taken by the Commissioner on its protest,
Lancaster filed a petition for review before the CTA Division. The CTA granted the petition.
Aggrieved, the CIR sought recourse from the CTA En Banc to seek a reversal of the decision and the
resolution of the CTA Division. However, the CTA En Banc found no reversible error in the CTA Division's
ruling, thus, it affirmed the cancellation of the assessment against Lancaster.
Hence, this petition for review on certiorari before the SC.

ISSUE:
Whether or not the BIR revenue officers had exceeded their authority when they issued the assessment
against Lancaster

RULING:
Yes. The BIR revenue officers had exceeded their authority when they issued the assessment against
Lancaster.

In the assailed decision of the CTA Division, the trial court observed that LOA authorized the BIR officers
to examine the books of account of Lancaster for the taxable year 1998 only or, since Lancaster adopted a
fiscal year, for the period 1 April 1997 to 31 March 1998 only. However, the deficiency income tax
assessment which the BIR eventually issued against Lancaster was based on the disallowance of expenses
reported in fiscal year 1999, or for the period 1 April 1998 to 31 March 1999. The CTA concluded that the
revenue examiners had exceeded their authority when they issued the assessment against Lancaster and,
consequently, declared such assessment to be without force and effect. The SC agrees.
The audit process normally commences with the issuance by the CIR of a Letter of Authority. The LOA
gives notice to the taxpayer that it is under investigation for possible deficiency tax assessment; at the same
time it authorizes or empowers a designated revenue officer to examine, verify, and scrutinize a taxpayer's
books and records, in relation to internal revenue tax liabilities for a particular period.

In this case, a perusal of LOA indeed shows that the period of examination is the taxable year 1998. Even
though the date after the words "taxable year 1998 to" is unstated, it is not at all difficult to discern that the
period of examination is the whole taxable year 1998. This means that the examination of Lancaster must
cover the FY period from 1 April 1997 to 31 March 1998. It could not have contemplated a longer period.
The examination for the full taxable year 1998 only is consistent with the guideline in Revenue
Memorandum Order (RMO) No. 43-90, that the LOA shall cover a taxable period not exceeding one taxable
year. In other words, absent any other valid cause, the LOA issued in this case is valid in all respects.
27

Nonetheless, a valid LOA does not necessarily clothe validity to an assessment issued on it, as when the
revenue officers designated in the LOA act in excess or outside of the authority granted them under said
LOA. In the present case, the LOA specified that the examination should be for the taxable year 1998 only
but the subsequent assessment issued against Lancaster involved disallowed expenses covering the next
fiscal year, or the period ending 31 March 1999.

The taxable year covered by the assessment being outside of the period specified in the LOA in this case,
the assessment issued against Lancaster is, therefore, void.

CE Luzon Geothermal Power Company, Inc. vs. Commissioner of Internal Revenue


G.R. No. 197526/ G.R. No. 199676-77; July 26, 2017
Leonen, J.

FACTS:
Before this Court are two consolidated Petitions for Review concerning the prescriptive period in filing
judicial claims for unutilized creditable input tax or input VAT. The 1st Petition was filed by CE Luzon
Geothermal Power Company, Inc. against CIR. The 2nd Petition was instituted by the BIR against CE
Luzon.

CE Luzon filed before the BIR an administrative claim for refund of its unutilized creditable input tax for the
first to fourth quarters of taxable year 2003. Without waiting for the CIR to act on its claim, or for the
expiration of 120 days, CE Luzon instituted before the CTA a judicial claim for refund of its first quarter
unutilized creditable input tax.

Meanwhile, CE Luzon received the CIR’s decision denying its claim for refund of creditable input tax for the
second quarter of 2003. Subsequently, CE Luzon again filed before the CTA a judicial claim for refund of
unutilized creditable input tax for the second to fourth quarters of taxable year 2003.
The CTA 2nd Division partially granted CE Luzon's claim for unutilized creditable input tax. It ruled that both
the administrative and judicial claims of CE Luzon were brought within the two (2)-year prescriptive period.
However, the CTA 2nd Division modified the amount of to be refunded.

CE Luzon and the CIR then filed their respective Petitions for Review before the CTA En Banc. The CTA
En Banc partially granted CE Luzon's petition. However, the CTA En Banc rendered an Amended Decision
setting aside its former decision ruling that CE Luzon failed to observe the 120-day period under Section
112(C) of the NIRC. Hence, it was barred from claiming a refund of its input VAT for taxable year 2003. The
CTA En Banc held that CE Luzon's judicial claims were prematurely filed. CE Luzon should have waited
either for the Commissioner of Internal Revenue to render a decision or for the 120-day period to expire
before instituting its judicial claim for refund.

CE Luzon moved for partial reconsideration. The CTA En Banc rendered a second Amended Decision,
partially granting CE Luzon's claim for unutilized creditable input tax but only for the second quarter of
taxable year 2003.
CE Luzon and the CIR filed before the SC their respective Petition for Review on Certiorari challenging the
second Amended Decision of the CTA En Banc. The CIR assails said decision insofar as it granted CE
Luzon's second quarter claim for refund

ISSUE:
Whether or not petitioner’s judicial claims for refund were timely filed

RULING:
Yes. The judicial claims of herein petitioner were timely filed.

Section 112(C) of the NIRC provides two (2) possible scenarios. The first is when the CIR denies the
administrative claim for refund within 120 days. The second is when the CIR fails to act within 120 days.
28

Taxpayers must await either for the decision of the CIR or for the lapse of 120 days before filing their judicial
claims with the CTA. Failure to observe the 120-day period renders the judicial claim premature. The Aichi
case directly tackled and interpreted Section 112(C) and the Aichi doctrine was reiterated by this Court in
San Roque, which held that the 120-day and 30-day periods in Section 112(C) of the NIRC are both
mandatory and jurisdictional.

In the present case, considering Sec 112(C) and the Aichi doctrine, only CE Luzon's second quarter claim
was filed on time. Its claims for refund of creditable input tax for the first, third, and fourth quarters of taxable
year 2003 were filed prematurely. It did not wait for the Commissioner of Internal Revenue to render a
decision or for the 120-day period to lapse before elevating its judicial claim with the Court of Tax Appeals.
However, despite its non-compliance with Section 112(C) of the NIRC, Luzon's judicial claims are shielded
from the vice of prematurity. It relied on the BIR Ruling DA-489-03, which expressly states that "a taxpayer-
claimant need not wait for the lapse of the 120-day period before it could seek judicial relief with the CTA
by way of a Petition for Review."

San Roque exempted taxpayers who had relied on the BIR Ruling DA-489-03 from the strict application of
Section 112(C) of the NIRC. Taxpayers who have relied on the BIR Ruling DA-489-03, from its issuance
on December 10, 2003 until its reversal on October 6, 2010 by this Court in Aichi, are, therefore, shielded
from the vice of prematurity.

Hence, CE Luzon may claim the benefit of the BIR Ruling DA-489-03. Its judicial claims for refund of
creditable input tax for the first, third, and fourth quarters of 2003 should also be considered as timely filed.

Commissioner of Internal Revenue vs. Systems Technology Institute, Inc.


G.R. No. 220835; July 26, 2017
Caguioa, J.

FACTS:
Before the Court is a petition for review on certiorari under Rule 45 of the ROC filed by petitioner CIR,
assailing the Decision of the CTA En Banc which affirmed the Decision CTA 2nd Division, granting the
petition for review filed by respondent Systems Technology Institute, Inc. (STI).

STI's Amiel Sangalang signed a Waiver of the Defense of Prescription under the Statute of Limitations of
the NIRC, with the proviso that the assessment and collection of taxes of fiscal year 2003 shall come "no
later than December 31, 2006." Another waiver was executed extending the period to assess and collect
the assessed taxes to March 31, 2007. Both waivers were signed by Sangalang and accepted by
Cembrano, Large Taxpayers District Officer. A third waiver was executed by the same signatories extending
further the period to June 30, 2007.

STI received a Formal Assessment Notice from the CIR, assessing STI for deficiency income tax, VAT and
EWT for fiscal year 2003. STI filed a request for reconsideration/reinvestigation. STI received from the CIR
the Final Decision on Disputed Assessment (FDDA) dated finding STI liable for deficiency income tax, VAT
and EWT but in a lesser amount.
STI appealed the FDDA by filing a petition for review with the CTA. The CTA 2nd Division promulgated its
decision denying the assessment on the ground of prescription. The CTA Division found the waivers
executed by STI defective for failing to strictly comply with the requirements provided by Revenue
Memorandum Order (RMO) No. 20-90 and Revenue Delegation Authority Order (RDAO) No. 05-01.
Consequently, the periods for the CIR to assess or collect internal revenue taxes were never extended; and
the subject assessment for deficiency income tax, VAT and EWT against STI, which the CIR issued beyond
the three-year prescriptive period provided by law, was already barred by prescription.

The CIR appealed to the CTA En Banc. The CTA En Banc denied the CIR's petition for lack of merit and
affirmed the Decision CTA Division. Hence, this petition for review on certiorari.
29

ISSUE:
Whether or not the right of the government to assess or collect the alleged deficiency taxes is already
barred by prescription.

RULING:
Yes. The right of the government to assess or collect the alleged deficiency taxes is already barred by
prescription. The Waivers of Statute of Limitations, being defective and invalid, did not extend the CIR's
period to issue the subject assessments.

Section 203 of the NIRC of 1997, as amended, limits the CIR's period to assess and collect internal revenue
taxes to three (3) years counted from the last day prescribed by law for the filing of the return or from the
day the return was filed, whichever comes later. Thus, assessments issued after the expiration of such
period are no longer valid and effective. Clearly, the final assessment notice dated June 16, 2007,
assessing STI for deficiency income tax, VAT and EWT for fiscal year 2003, which STI received on June
28, 2007, was issued beyond the three-year prescriptive period. However, the CIR maintains that
prescription had not set in because the parties validly executed a waiver of statute of limitations under
Section 222(b) of the NIRC.

To implement the said provision, the BIR issued RMO 20-90 and RDAO 05-01, outlining the procedures for
the proper execution of a valid waiver, viz.:
1. The waiver must be in the proper form prescribed by RMO 20- 90. The phrase "but not after __________
19 _",which indicates the expiry date of the period agreed upon to assess/collect the tax after the regular
three-year period of prescription, should be filled up.
2. The waiver must be signed by the taxpayer himself or his duly authorized representative. In the case of
a corporation, the waiver must be signed by any of its responsible officials. In case the authority is delegated
by the taxpayer to a representative, such delegation should be in writing and duly notarized.
3. The waiver should be duly notarized.
4. The CIR or the revenue official authorized by him must sign the waiver indicating that the BIR has
accepted and agreed to the waiver.The date of such acceptance by the BIR should be indicated. However,
before signing the waiver, the CIR or the revenue official authorized by him must make sure that the waiver
is in the prescribed form, duly notarized, and executed by the taxpayer or his duly authorized representative.
5. Both the date of execution by the taxpayer and date of acceptance by the Bureau should be before the
expiration of the period of prescription or before the lapse of the period agreed upon in case a subsequent
agreement is executed.
6. The waiver must be executed in three copies, the original copy to be attached to the docket of the case,
the second copy for the taxpayer and the third copy for the Office accepting the waiver. The fact of receipt
by the taxpayer of his/her file copy must be indicated in the original copy to show that the taxpayer was
notified of the acceptance of the BIR and the perfection of the agreement.

These requirements are mandatory and must strictly be followed. Tested against the requirements of RMO
20-90 and relevant jurisprudence, the Court cannot but agree with the CTA's finding that the waivers subject
of this case suffer from the following defects: (1) That at the time when the first waiver took effect, the period
for the CIR to assess STI for deficiency EWT and deficiency VAT for fiscal year ending March 31, 2003,
had already prescribed; (2) STI's signatory to the three waivers had no notarized written authority from the
corporation's board of directors; and (3) the waivers did not specify the kind of tax and the amount of tax
due.

Verily, considering the foregoing defects in the waivers executed by STI, the periods for the CIR to assess
or collect the alleged deficiency income tax, deficiency EWT and deficiency VAT were not extended. The
assessments subject of this case, which were issued by the BIR beyond the three-year prescriptive, are
therefore considered void and of no legal effect.
30

Procter & Gamble Asia PTE LTD. v. CIR


G.R. No. 205652; September 6, 2017
Caguiao, J.

FACTS:
This is a petition for review on certiorari filed by petitioner herein against CIR seeking the reversal of its
decision which denied the claim of petitioner for refund of unutilized input value-added tax attributable to its
zero-rated sales covering the 1st and 2nd quarters of calendar year 2005, for being prematurely filed.

P&G is a VAT registered taxpayer. On March 22, 2007 and May 2, 2007, it filed applications to BIR-RDO
requesting the refund or issuance of tax credit certificate of its input VAT attributable to its zero-rated sales
for the periods of January 2005 to March 2005, and April 2005 to June 2005. It filed a petition for review
with the CTA seeking a refund of 24 million attributable to such sales, on March 28, 2007. On June 8, 2007,
it filed in the CTA another judicial claim for refund in the amount of almost 20 million representing its
unutilized input VAT paid on goods and services attributable to its zero-rated sales for the second quarter
of taxable year 2005. The cases were consolidated. P&G produced evidence to prove that it is entitled to
refund. The CIR submitted the case for decision based on the pleadings, as the claim for refund was still
pending before the BIR-RDO No. 40. The CTA denied the claim of P&G for having been prematurely filed,
promulgating that the compliance with the 120-day period for the CIR to act on an administrative claim for
refund is mandatory and jurisdictional in filing an appeal to the CTA. The decision of the CTA was based
on the pronouncement on Aichi case decided on October 6, 2010, when herein case was pending.
Petitioner moved for reconsideration but it was denied.

P&G avers that its judicial claim was filed with the CTA on March 28, 2007 and June 8, 2007, after the
issuance of BIR Ruling No. DA-489-03, but before the adoption of the Aichi doctrine, annd pursuant to a
later case San Roque, its claim was timely filed. P&G also avers that CTA En Banc gravely erred in applying
the Aichi doctrine retroactively. Such application amounts to a denial of P&G’s constitutional right to due
process and unjust enrichment of the CIR. It further avers that the failure to observe the 120 day period
was not jurisdictional but violates only the rule on exhaustion of administrative remedies, which was deemed
waived by the CIR when it failed to file a motion to dismiss and opted to actively participate in the trial.

ISSUE:
Did the CTA En Banc err in dismissing the judicial claim for refund of petitioner P&G on the ground of
prematurity?

RULING:
Yes, the CTA En Banc’s decision was erroneous. The petition is meritorious.

Upon receipt of CIR's decision or ruling denying the said claim, or upon the expiration of the 120-day period
without action from the CIR, the taxpayer has 30 days within which to file a petition for review with the CTA.
In Aichi, the Court ruled that compliance with the 120+30-day periods is mandatory and jurisdictional and
is fatal to the filing of a judicial claim with the CTA. Subsequently, however, in San Roque, while the Court
reiterated the mandatory and jurisdictional nature of the 120+30-day periods, it recognized as an exception
BIR Ruling No. DA-489-03, issued prior to the promulgation of Aichi, where allowed the BIR expressly the
filing of judicial claims with the CTA even before the lapse of the 120-day period.

The Court held that BIR Ruling No. DA-489-03 furnishes a valid basis to hold the CIR in estoppel because
the CIR had misled taxpayers into filing judicial claims with the CTA even before the lapse of the 120-day
period. In this case, records show that P&G filed its judicial claims for refund on March 28, 2007 and June
8, 2007, respectively, or after the issuance of, BIR Ruling No. DA-489-03, but before the date when Aichi
was promulgated. Thus, even though P&G filed its judicial claim without waiting for the expiration of the
120-day mandatory period, the CTA may still take cognizance of the case because the claim was filed
within the excepted period stated in San Roque. In other words, P&G's judicial claims were deemed timely
filed and should not have by been dismissed the CTA.

Hence, the judicial claim for refund must be granted to P&G.


31

Aichi Forging Company of Asia, Inc. v. CTA-En Banc and CIR


G.R. No. 193625; August 20, 2017
Marites, J.

FACTS:
Before the Court is a certiorari under Rule 65, filed by petitioner Aichi Forging Company of Asia, Inc. (AICHI)
seeking the reversal and setting aside of the decision of the CTA En Banc, which affirmed the CTA Second
Division decision that partially granted the claim of AICHI for tax refund/credit of unutilized or unapplied
input VAT attributable to zero-rated sales.

AICHI is duly registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer and with the Board
of Investments (BOI) as an expanding producer of closed impression die steel forgings. AICHI filed with the
BIR District Office in San Pedro, Laguna, a written claim for refund and/or tax credit of its unutilized input
VAT credits for the third and fourth quarters of 2000 and the four taxable quarters of 2001. AICHI sought
the tax refund/credit of input VAT for the said taxable quarters in the total sum of P18, 030,547.776
representing VAT payments on importation of capital goods and domestic purchases of goods and services.
respondent CIR failed to act on the refund claim, and in order to toll the running of the prescriptive period
provided under Sections 229 and 112 (D) of the National Internal Revenue Code (Tax Code), AICHI filed
on 30 September 2002, a Petition for Review before the CTA Division. After finding that both the
administrative and judicial claims were filed within the statutory two-year prescriptive period, the CTA
Division partially granted the refund claim of AICHI.

The CIR questioned the partial grant of the refund claim in favor of AICHI. It claimed that the court did not
acquire jurisdiction over the refund claim in view of AICHI's failure to observe the 30-day period to claim
refund/tax credit as specified in Sec. 112 of the Tax Code, i.e., appeal to the CTA may be filed within 30
days from receipt of the decision denying the claim or after expiration of 120 days (denial by inaction). With
the filing of the administrative claim on 26 September 2002, the CIR had until 20 January 2003 to act on
the matter; and if it failed to do so, AICHI had the right to elevate the case before the CTA within 30 days
from 20 January 2003, or on or before 20 February 2003. However, AICHI filed its Petition for Review on
30 September 2002, or before the 30-day period of appeal had commenced.

AICHI claims that it has fifteen (15) days from receipt of the questioned decision of the CTA En Banc within
which to file a motion for reconsideration. Considering that it received the 18 February 2010 Decision of the
CTA En Banc on 25 February 2010, and that it filed the Motion for Reconsideration on 12 March 2010,
AICHI asserts that the filing of the said motion was made within the prescriptive period provided in the law.

ISSUE:
Whether or not the claim for tax refund is valid and the claim should be granted

RULING:
No, the claim for refund should not be granted and the petition is dismissed.

The CTA had no jurisdiction over the judicial claim. AICHI's judicial claim was filed prematurely and, thus,
without cause of action. The matter of jurisdiction cannot be waived because it is conferred by law and is
not dependent on the consent or objection or the acts or omissions of the parties or any one of them. In
addition, courts have the power to motu proprio dismiss an action over which it has no jurisdiction.

On the judicial claim for refund or tax credit of AICHI, the CTA did not validly acquire jurisdiction over such
judicial claim because the appeal before the court was made prematurely. When the CTA acts without
jurisdiction, its decision is void. In a long line of cases, the Court had interpreted the 120-day period as both
mandatory and jurisdictional such that the taxpayer is forced to await the expiration of the period before
initiating an appeal before the CTA. This must be so because prior to the expiration of the period, the CIR
still has the statutory authority to render a decision. If there is no decision and the period has not yet expired,
there is no reason to complain of in the meantime.
32

Otherwise stated, there is no cause of action yet as would justify a resort to the court. A premature
invocation of the court's jurisdiction is fatally defective and is susceptible to dismissal for want of jurisdiction.
Such is the very essence of the doctrine of exhaustion of administrative remedies under which the court
cannot take cognizance of a case unless all available remedies in the administrative level are first utilized.

Edison (Bataan) Cogeneration Corporation v. CIR; Republic of the Philippines represented by the
CIR v. Edison (Bataan) Cogeneration Corporation
GR. No. 201665/G.R. No. 201668; August 30, 2017
Del Castillo, J.

FACTS:
Petitioner received from CIR a final assessment notice on deficiency income tax, VAT, withholding tax on
compensation, EWT, and FWT for taxable year 2000, for a total of P85Million. On March 3, 2004, EBCC
filed with the CIR a letter-protest dated March 2, 2004 and furnished the CIR with the required documents.
Due to the inaction of the CIR, EBCC elevated the matter to the CTA via a Petition for Review raffled to
CTA second division. While the case was pending, EBCC availed itself of the Tax Amnesty Program under
Republic Act (RA) No. 9480.7 Thus, in a November 7, 2008 Resolution, the CTA Second Division deemed
the Petition partially withdrawn and the case closed and terminated with regard to EBCC's deficiency
income tax and VAT for the year 2000. The CTA Second Division partially granted the petition of EBCC. It
cancelled the deficiency on the EWT and WT on compensation, and on the loan interests. However it was
made liable as to the FWT to a reduced amount of P2.2Miliion. Both parties appealed to the CTA En Banc.
CTA En banc denied both appeals and affirmed the decision of CTA Second Division.

EBCC insists that it was not liable for any deficiency taxes for the year 2000 since it had already remitted
the amount of P2842630.20 as payment for its FWT for 2000, and that no proof of such payment was
necessary considering the CIR' s admission in her Memorandum that the original assessment of
Pl0,227,622.72 was reduced to P7,384,992.52. EBCC argued that it was not required to pay FWT at the
end of the taxable year 2000 as the interest payment became due on 2002. EBCC alleges that the
retroactive application of Revenue Regulation No. 12-01 is in clear violation of its constitutional right to due
process.

The CIR, however, denies that she made any judicial admission of payment and maintains that in the
absence of evidence of payment, EBCC is liable to pay the deficiency assessment as the party who alleges
payment have the burden of proving the same. CIR deems EBSS liable for payment of FWT.

ISSUE/S:
1. Whether or not EBCC is liable for deficiency FWT for the year 2000;
2. Whether or no RR. No. 12-01 should be applied in this case

RULING:
The SC ruled that the petition lacks merit.

1. No, EBCC is not liable for deficiency FWT for the year 2000. Considering that under RR No. 02-
98, the obligation of EBCC to deduct or withhold tax arises at the time an income is paid or payable,
whichever comes first, and considering further that under the said RR, the term "payable" refers to the date
the obligation becomes due, demandable or legally enforceable, SC finds no error on the part of the CTA
En Banc in ruling that EBCC had no obligation to withhold any taxes on the interest payment for the year
2000 as the obligation to withhold only commenced on June 1, 2002, and thus cancelling the assessment
for deficiency FWT on interest payments arising from EBCC's loan from Ogden.
2. Neither do we find any reason for the retroactive application of RR No. 12-01, which provides that
the withholding of final tax commences "at the time an income payment is paid or payable, or the income
payment is accrued or recorded as an expense or asset, whichever is applicable in the payor's book,
whichever comes first." To begin with, this issue was never raised before the CTA. Thus, we cannot rule
on this matter now. It is a settled rule that issues not raised below cannot be pleaded for the first time on
33

appeal because a party is not allowed to change his theory on appeal; to do so would be unfair to the other
party and offensive to rules of fair play, justice and due process.

In any case, even if the first payment was due on January 4, 2001 as claimed by the CIR, EBCC would still
not be liable, as the tax assessment pertained to taxable year 2000 and not 2001. All told, we find no reason
to reverse the January 30, 2012 Decision and the April 17, 2012 Resolution of the CTA in CTA EB Case
Nos. 766 and 769.

Lanao Del Norte Electric Cooperative, Inc. as represented by its General Manager Engr. Resnol C.
Torres v. Provincial Government of Lanao Del Norte by its Governor Hon. Mohamad Khalid Q.
Dimaporo, et.al.
G.R. No. 185420; August 29, 2017
Velasco, Jr., J.

FACTS:
This is a petition for prohibition and mandamus under Rule 65 of the ROC, with a prayer foe injunctive relief
to enjoin and prevent respondent Provincial Gov. of Lanao Del Norte (PGLN) from levying and auctioning
off all the assets, properties, and equipment of petitioner LANECO to satisfy its unpaid real property taxes.

Pursuant to Republic Act (R.A.) No. 6038, otherwise known as the National Electrification Administration
Act, LANECO was granted a franchise on January 8, 1972 to distribute electricity over the municipalities of
Lanao Del Norte. In order to finance its operations, LANECO contracted several loans from respondent
National Electrification Administration (NEA) from 1972 until 1991, secured by real estate mortgage
contracts over its properties. LANECO's total loans from the NEA amounted to P117, 645,358.00, a
substantial portion of which, however, had already been paid. Upon the enactment of R.A. No. 9136, or the
Electric Power Industry Reform Act of 2001, respondent Power Sector Assets and Liabilities Management
(PSALM) assumed LANECO's loan balance of P32, 507,813.70 to the NEA pursuant to Section 60 thereof.
Meanwhile, Congress enacted R.A. No. 7160, otherwise known as the Local Government Code of 1991
(LGC), which conferred power to local government units (LGUs) to impose taxes on real properties located
within their territories. Thus, on January 7, 1993, the Sangguniang Panlalawigan of the PGLN enacted
Provincial Tax Ordinance No. 1, Series of 1993, entitled "An Ordinance Adopting the Provincial Revenue
Code of the Province of Lanao del Norte pursuant to the Provisions of Republic Act No. 7160, otherwise
known as the Local Government Code of 1991".

On January 26, 2006, LANECO received a letter from respondent Provincial Treasurer of the PGLN,
demanding payment of P22, 841,842.60 representing real property taxes assessed against the cooperative
for the period of 1995 to 2005. The Provincial Treasurer sent additional billings to LANECO on July 28,
2006, this time for payment of its real property taxes for the other covered municipalities in the amount of
P8, 270,469.04. In a letter dated September 26, 2006, the Provincial Treasurer made a final demand for
the payment of the foretasted amounts.

While LANECO does not dispute its liability to pay real property taxes to the PGLN, it argues that the PGLN
will commit grave abuse of discretion amounting to lack or excess of jurisdiction if it resorts to administrative
action through levy to enforce the payment of unpaid real property taxes. Instead, the petition proposes that
the PGLN has another remedy of filing a collection case against LANECO under Section 60 of R.A. No.
9136. It also asserts that it is prohibited from disposing, transferring, and conveying its assets, properties,
and the management and control of electric cooperatives while under the rehabilitation and modernization
program.

LANECO further claims that the PGLN should be prohibited from auctioning off its assets, otherwise, it
would violate the constitutional rights of the national agencies to enter into a contract. It also avers that the
PGLN gravely abused its discretion in refusing to provide the original or a certified true copy of the Provincial
Revenue Code to allow LANECO to determine the correctness of its assessment and its demand letter.
34

Respondents NBA, DOE, and COA filed a consolidated Comment, alleging that LANECO is guilty of forum
shopping for filing several petitions before the R TC, aside from the present petition, which all raised similar
issues pertaining to the validity of the Provincial Revenue Code of the PGLN. They reject LANECO's
argument that the non-impairment clause of the Constitution was violated with the imposition of real
property taxes on it by the PGLN. They also assert that LANECO failed to exhaust available administrative
remedies when it directly resorted to filing the present petition before this Court instead of filing the correct
petition before the ERC. Nevertheless, they implore this Court to exercise caution so as not to defeat the
state policies under Presidential Decree No. (PD) 269, R.A. No. 9136, EO 119, and their respective
implementing rules and regulations.

ISSUE:
Whether or not the PGLN gravely abused its discretion when it levied on the real properties of LANECO to
enforce payment of unpaid real property taxes, in violation of Section 60 of R.A. No. 9136 and EO 119; and
the PGLN would commit grave abuse of discretion amounting to lack or excess of jurisdiction if it proceeds
to auction the delinquent real properties of LANECO.

RULING:
No, PGLN did not commit grave abuse of discretion in levying on the real properties of LANECO.

Contrary to LANECO's stand, the provisions of law cited do not prohibit local government units from
resorting to the administrative remedy of levy on real property. Nothing in the fore cited provisions withdrew
the remedy of tax collection by administrative action from the LGUs. Instead, these provisions merely
ascribe limitations on, and lay down the consequences of, any voluntary transfer and disposition of assets
by the electric cooperatives themselves. They do not limit the LGU s' remedies against electric cooperatives
to judicial actions in collecting real property taxes. To adopt LANECO's position would be reading into the
clear provisions of R.A. No. 9136 more than what it actually provides. The elementary rule in statutory
construction is that if a statute is clear, plain and free from ambiguity, it must be given its literal meaning
and applied without attempted interpretation.

Furthermore, LANECO failed to establish how the administrative remedy of levy on real properties will
impair the rights of NEA and PSALM. Instead, it merely reiterated its argument that R.A. No. 9136 prohibits
the disposition of its assets and properties during the period of rehabilitation and modernization program.
In fact, it failed to differentiate how exclusive resort to judicial action as opposed to the administrative
remedy of levy would be a better option to preserve the rights of NBA and PSALM. It is the option of the
LGU to choose which remedy to avail.

We likewise do not find merit in LANECO's argument that the levy caused by the PGLN upon its real
properties impairs the government contracts entered into by NBA and PSALM and violates the constitutional
right of national agencies to enter into a contract. It is ingrained in jurisprudence that the constitutional
prohibition on the impairment of the obligation of contracts does not prohibit every change in existing laws.
To fall within the prohibition, the change must not only impair the obligation of the existing contract, but the
impairment must be substantial. A law which changes the terms of a legal contract between parties, either
in the time or mode of performance, or imposes new conditions, or dispenses with those expressed, or
authorizes for its satisfaction something different from that provided in its terms, is law which impairs the
obligation of a contract and is therefore null and void. Moreover, to constitute impairment, the law must
affect a change in the rights of the parties with reference to each other and not with respect to non-parties.

It bears to stress that, regardless of whether the mortgages constituted on LANECO's properties constitute
as lien thereon, these cannot defeat the right of the PGLN to make those properties answerable for
delinquent real property taxes, since local government taxes serve as superior lien over the property subject
of the tax, as clearly laid out in Section 257 of the LGC:

SECTION 257. Local Governments Lien. - The basic real


property tax and any other tax levied under this Title constitutes
a lien on the property subject to tax, superior to all liens, charges
or encumbrances in favor of any person, irrespective of the
35

owner or possessor thereof, enforceable by administrative or


judicial action, and may only be extinguished upon payment of
the tax and the related interests and expenses.

Power Sector Assets and Liabilities Management Corporation v. CIR


G.R. No. 198146; August 8, 2017
Carpio, J.

FACTS:
This is a petition for review of the decision of the Court of Appeals, nullifying the decision of the Sec. of
Justice for lack of jurisdiction. Petitioner herein is Power Sector Assets and Liabilities Management
Corporation, herein PSALM, filed this case against respondent, Commissioner of Internal Revenue, herein
CIR.

PSALM is a GOCC created under R.A. 916, a.k.a. Electric Power Industry Reform Act or 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. On 28 August 2007, the NPC received a
letter5 dated 14 August 2007 from the Bureau of Internal Revenue (BIR) demanding immediate payment
of P3,813,080,472 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. The case was docketed as OSJ Case No. 2007-3. On 13 March 2008, the DOJ ruled in favor of
PSALM. The BIR moved for reconsideration, alleging that the DOJ had no jurisdiction since the dispute
involved tax laws administered by the BIR and therefore within the jurisdiction of the Court of Tax Appeals
(CTA). Furthermore, the BIR stated that the sale of the subject power plants by PSALM to private entities
is in the course of trade or business, as contemplated under Section 105 of the National Internal Revenue
Code (NIRC) of 1997, which covers incidental transactions. Thus, the sale is subject to VAT. On 14 January
2009, the DOJ denied BIR's Motion for Reconsideration.

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. In fact, PSALM's objective in filing the petition was to
recover the P3, 813,080,472 VAT which was allegedly assessed erroneously and which PSALM paid under
protest to the BIR. the Court of Appeals ruled that the CIR is the proper body to resolve cases involving
disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in
relation thereto, or other matters arising under the NIRC or other laws administered by the BIR. The Court
of Appeals stressed that jurisdiction is conferred by law or by the Constitution; the parties, such as in this
case, cannot agree or stipulate on it by conferring jurisdiction in a body that has none. Jurisdiction over the
person can be waived but not the jurisdiction over the subject matter which is neither subject to agreement
nor conferred by consent of the parties. The Court of Appeals held that the DOJ Secretary erred in ruling
that the CIR is estopped from assailing the jurisdiction of the DOJ after having agreed to submit to its
jurisdiction. As a general rule, estoppel does not confer jurisdiction over a cause of action to a tribunal one,
where by law, exists.

ISSUE:
Did the Sec. of Justice act in accordance with the law in assuming jurisdiction and settling the dispute by
and between the BIR and PSLAM, thereafter rendering a judgment that there should be no VAAT on the
privatization, sale or disposal of Generation Assets?

RULING:
36

The petition is meritorious.

SC agrees with the Court of Appeals that jurisdiction over the subject matter is vested by the Constitution
or by law, and not by the parties to an action. Jurisdiction cannot be conferred by consent or acquiescence
of the parties or by erroneous belief of the court, quasi-judicial office government that it exists. However,
SC finds that the DOJ is vested by law with jurisdiction over this case. This case involves a dispute between
PSALM and NPC, which are both wholly government-owned corporations, and the BIR, a government
office, over the imposition of VAT on the sale of the two power plants. There is no question that
original jurisdiction is with the CIR, who issues the preliminary and the final tax assessments. However, if
the government entity disputes the tax assessment, the dispute is already between the BIR (represented
by the CIR) and another government entity, in this case, the petitioner PSALM. Under Presidential Decree
No. 242(PD 242), all disputes and claims solely between government agencies and offices, including
government-owned or controlled· corporations, shall be administratively settled or adjudicated by the
Secretary of Justice, the Solicitor General, or the Government Corporate Counsel, depending on the issues
and government agencies involved.

As regards cases involving only questions of law, it is the Secretary of Justice who has jurisdiction. The use
of the word "shall" in a statute connotes a mandatory order or an imperative obligation. Its use rendered
the provisions mandatory and not merely permissive, and unless PD 242 is declared unconstitutional, its
provisions must be followed. The use of the word "shall" means that administrative settlement or
adjudication of disputes and claims between government agencies and offices, including government-
owned or controlled corporations, is not merely permissive but mandatory and imperative. Thus, under PD
242, it is mandatory that disputes and claims "solely" between government agencies and offices, including
government-owned or controlled corporations, involving only questions of law, be submitted to and settled
or adjudicated by the Secretary of Justice.

The law is clear and covers "all disputes, claims and controversies solely between or among the
departments, bureaus, offices, agencies and instrumentalities of the National Government, including
constitutional offices or agencies arising from the interpretation and application of statutes, contracts or
agreements." When the law says "all disputes, claims and controversies solely" among government
agencies, the law means all, without exception. Only those cases already pending in court at the time of
the effectivity of PD 242 are not covered by the law.

The purpose of PD 242 is to provide for a speedy and efficient administrative settlement or adjudication of
disputes between government offices or agencies under the Executive branch, as well as to filter cases to
lessen the clogged dockets of the courts.

University Physicians Services Inc. - Management, Inc. vs. Commissioner of Internal Revenue
G.R. No. 205955; March 7, 2018
Martires, J.

FACTS:
On April 16, 2007, petitioner filed its Annual Income Tax Return (ITR) for the year ended December 31,
2006. On November 14, 2007, petitioner filed an Annual ITR for the short period fiscal year ended March
31, 2007, reflecting the income tax overpayment of 5,159,341 from the previous period as "Prior Year’s
Excess Credit". On the same date, petitioner filed an amended Annual ITR for the short period fiscal year
ended March 31, 2007, reflecting the removal of the amount of the instant claim in the ''Prior Year's Excess
Credit". Thus, the amount thereof was changed from ₱5,159,341 to ₱2,231,507.

On October 10, 2008, petitioner filed with the respondent's office, a claim for refund and/or issuance of a
Tax Credit Certificate (TCC) in the amount of ₱2,927,834.00, representing the alleged excess and unutilized
creditable withholding taxes for 2006. In view of the fact that respondent has not acted upon the foregoing
claim for refund/tax credit, petitioner filed with a Petition for Review on April l4, 2009 before the Court in
Division. CTA Division denied the petition for review for lack of merit. It reasoned that UPSI-MI effectively
37

exercised the carry-over option under Section 76 of the National Internal Revenue Code (NIRC) of 1997.
On motion for reconsideration, UPSI-MI argued that the irrevocability rule under Section 76 of the NIRC is
not applicable for the reason that it did not carry over to the succeeding taxable period the 2006 excess
income tax credit. The CTA En Banc ruled that UPSI-MI is barred by Section 76 of the NIRC from claiming
a refund of its excess tax credits for the taxable year 2006.

ISSUE:
Whether or not Section 76 of NIRC applies to either of the options of refund or carry-over.

RULING:
NO. The reading of the law assumes the interpretation that the irrevocability is limited only to the option of
carry-over such that a taxpayer is still free to change its choice after electing a refund of its excess tax
credit. But once it opts to carry over such excess creditable tax, after electing refund or issuance of tax
credit certificate, the carry-over option becomes irrevocable. Accordingly, the previous choice of a claim for
refund, even if subsequently pursued, may no longer be granted.

SECTION 76. Final Adjustment Return. - Every corporation liable to tax under Section 27 shall file a final
adjustment return covering the total taxable income for the preceding calendar or fiscal year. If the sum of
the quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire
taxable income of that year, the corporation shall either:
(A) Pay the balance of tax still due; or
(B) Carry over the excess credit; or
(C) Be credited or refunded with the excess amount paid, as the case may be.

In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income taxes
paid, the excess amount shown on its final adjustment return may be carried over and credited against the
estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. Once the
option to carry-over and apply the excess quarterly income tax against income tax due for the taxable
quarters of the succeeding taxable years has been made, such option shall be considered irrevocable for
that taxable period and no application for cash refund or issuance of a tax credit certificate shall be allowed
therefor.

City of Pasig and Crispina V. Salumbre, in her capacity as OIC-City Treasurer of Pasig City vs.
Manila Electric Company
G.R. No. 181710; March 7, 2018
Martires, J.

FACTS:
On 26 December 1992, the Sangguniang Bayan of the Municipality of Pasig enacted Ordinance No. 25
which, under its Article 3, Section 32, imposed a franchise tax on all business venture operations carried
out through a franchise within the municipality the Municipality of Pasig was converted into a highly
urbanized city to be known as the City of Pasig. On 24 August 2001, the Treasurer’s Office of the City
Government of Pasig informed the Manila Electric Company (MERALCO), a grantee of a legislative
franchise, that it is liable to pay taxes for the period 1996 to 1999, pursuant to Municipal Ordinance No. 25.

On 8 February 2002, MERALCO protested the validity of the demand "claiming that the same be withdrawn
and cancelled for the following reasons: (1) Ordinance No. 25 was declared void ab initio by the Department
of Justice (DOJ) for being in contravention of law, which resolution was reiterated in another case that
questioned the validity of the franchise tax, etc.; (2) The Regional Trial Court of Pasig City (RTC) ordered
the Municipality of Pasig, now City of Pasig, to refund MERALCO the amount the latter paid as franchise
tax because the former lacked legal foundation in collecting the same, as municipalities are not empowered
by law to impose and collect franchise tax pursuant to Section 142 of the LGC; (3) The CA affirmed the
RTC decision; and (4) The petition for certiorari filed by the then Municipality of Pasig before the Supreme
38

Court, assailing the decision of the CA that sustained the RTC, was likewise dismissed and the motion for
reconsideration of the Municipality of Pasig was denied with finality.

In view of the inaction by the Treasurer's Office, MERALCO instituted an action before the RTC for the
annulment of the said demand with prayer for a temporary restraining order and a writ of preliminary
injunction. The RTC ruled in favor of the City of Pasig. CA affirmed

ISSUE:
Whether the City of Pasig was correct for its imposition of franchise tax for the period 1996 to 1999.

RULING:
NO. Under the Local Government Code (LGC) of 1991, a municipality is bereft of authority to levy and
impose franchise tax on franchise holders within its territorial jurisdiction. That authority belongs to
provinces and cities only. A franchise tax levied by a municipality is, thus, null and void. The nullity is not
cured by the subsequent conversion of the municipality into a city.
As held by the Court, unlike a city, a municipality is bereft of authority to levy franchise tax, thus, the
ordinance enacted for that purpose is void. The conversion of the municipality into a city does not lend
validity to the void ordinance. Neither does it authorize the collection of the tax under said ordinance. The
power to impose franchise tax belongs to the province by virtue of Section 137 of the LGC which states:
Section 137. Franchise Tax. - Notwithstanding any exemption granted by any law or other special law, the
province may impose a tax on businesses enjoying a franchise, at the rate not exceeding fifty percent (50%)
of one percent (1%) of the gross annual receipts for the preceding calendar year based on the incoming
receipt, or realized, within its territorial jurisdiction.

Commissioner of Internal Revenue vs. Covanta Energy Philippines Holdings Inc.


G.R. No. 203160; January 24, 2018
Reyes Jr., J.

FACTS:
On December 6, 2004, the CIR issued Formal Letters of Demand and Assessment Notices against the
respondent for deficiency value-added tax (VAT) and expended withholding tax (EWT) the taxable year
2001. CEPHI protested the assessments by filing two (2) separate Letters of Protest on January 19, 2005.
However, the CIR issued another Formal Letter of Demand and Assessment Notice dated January 11,
2005, assessing CEPHI for deficiency minimum corporate income tax (MCIT) in the amount of Php 467,
801.99, likewise for the taxable year 2001. This assessment lead to CEPHI filing a Letter of Protest on the
MCIT assessment on February 16, 2015.

The CIR avers that CEPHI is not entitled to the immunities and privileges under R.A. 9840 because its
documentary submissions failed to comply with the requirements under the tax amnesty law. The CIR
specifically points to CEPHI’s supposed omission of the information relating to the Reference and Basis for
Valuation columns in CEPHI’s original and amended SALNs. The protests remained unacted upon. Thus,
CEPHI filed separate petitions before CTA, seeking the cancellation and withdrawal of the deficiency
assessments. On December 6, 2005, the CIR filed an Answer.

The cases were eventually consolidated upon the CIR’s motion. After the parties’ respective submission of
their formal offer of evidence, CEPHI filed a Supplemental Petition. CEPHI afterwards submitted a
Supplemental Formal Offer of Evidence, together with the documents relevant to its tax amnesty. The CTA
then required the parties to submit their respective memoranda within 30 days. CTA granted. Unsatisfied
with the ruling, CIR elevated the matter to CTA en banc which affirmed the decision of CIR.

ISSUE:
Whether or not CTA Second Division erred in upholding the validity of the tax amnesty availed by CEPHI.

RULING:
39

NO. The Court ruled that CEPHI is entitled to the immunities and privileges of the tax amnesty program
upon full compliance with the requirements of R.A. No. 9480, which governs the tax amnesty program for
national internal revenue taxes for the taxable year 2005 and prior years. Subject to certain exceptions, a
taxpayer may avail of this program by complying with the documentary submissions to the Bureau of
Internal Revenue (BIR) and thereafter, paying the applicable amnesty tax. Upon the taxpayer’s full
compliance with these requirements, the taxpayer is immediately entitled to the enjoyment of the immunities
and privileges of the tax amnesty program. But when: (a) the taxpayer fails to file a SALN and the Tax
Amnesty Return; or the taxpayer in the SALN as of December 31, 2005 is proven to be understated to the
extent of 30% or more, the taxpayer shall cease to enjoy these immunities and privileges. It is evident from
CEPHI’s original and amended SALN that the information statutorily mandated in R.A. 9480 were all
reflected in its submission to the BIR. While the columns for Reference and Basis for Valuation were indeed
left blank, CEPHI attached schedules to its SALN (Schedules 1 to 7), both original and amended, which
provide the required information under R.A. No 9840 and its implementing rules and regulations.

Philippine Airlines Inc. vs. Commissioner of Internal Revenue; Commissioner of Internal Revenue
vs. Philippine Airlines Inc.
G.R. No. 206079-80/G.R. No. 206309; January 17, 2018
Leonen, J.

FACTS:
These consolidated cases stem from a refund by Philippines Airlines, Inc. (PAL) for final taxes withheld on
interest income from its peso and dollar deposits with China Banking Corporation (Chinabank), JP Morgan
Chase Bank (JPMorgan), Philippines Bank of Communications (PBCom), and (Standard Chartered)
(collectively, Agent Banks). G.r. Nos. 206079-80 involves the Petition filed by PAL questioning the denial
of its claim for refund of Php 510, 233.16 and US$ 65, 877.7, representing the final income tax withheld by
Chinabank, PBCom, and Standard Chartered. G.r. No. 206309 involves the Petition filed by the
Commissioner of Internal Revenue (Commisisioner) assailing the grant to PAL of the tax refund of Php
1,237, 646.43, representing the final income tax withheld and remitted by JPMorgan.

PAL asserts that it is entitled to a refund of the withheld taxes because it is exempted from paying the tax
on interest income under its franchise, Presidential Decree No. 1590. However, the Commissioner refused
to grant the claim, arguing that PAL failed to prove the remittance of the withheld taxes to the Bureau of
Internal Revenue.

Thus, the issue involves whether or not PAL is required to prove the remittance to the Bureau of Internal
Revenue of the final withholding tax on its interest from currency bank deposits to be entitled to tax refund.
CTA ordered the refund to PAL of Php 1,237,646.43 representing the final income tax withheld and remitted
by JPMorgan on PAL’s interest income. However, it denied the refund of Php 510,223.16 and US$
65,877.07, representing the final income tax withheld by Chinabank, PBCom, and Standard Chartered. The
Court of Tax Appeals En Banc affirmed the Decision of CTA. Sometime in 2002, PAL made US dollar and
Philippine peso deposits and placements in the mentioned banks. PAL earned interest income from these
deposits and the Agent Banks deducted final withholding taxes.

ISSUE:
Whether or not PAL is required to prove the remittance to the Bureau of Internal Revenue of the final
withholding tax on its interest from currency bank deposits to be entitled to tax refund.

RULING:
NO. While tax exemptions are strictly construed against the tax payer, the government should not misuse
technicalities to keep money it is not entitled to. Considering that PAL presented sufficient proof that: (i) it
is exempted from paying withholding taxes; (ii) amounts were withheld and deducted from its accounts; (iii)
and the Commissioner did not contest the withholding of these amounts and only raises that they were not
proven to be remitted, this Court finds that PAL sufficiently proved that it is entitled to its claim for refund.
The legislative policy would have been unreasonably reversed, which is iniquitous. It would have been near
40

impossible for the taxpayer to demand to see the records of the payor bank or the ledgers of the
government. Both the Commissioner and the CTA should have appreciated the unreasonable difficulty that
it would have put PAL to claim a statutory exemption granted to it. In requiring that it prove actual remittance,
the court a quo and the commissioner effectively put the burden on the payee to prove that both the
government and the banks complied with their legal obligation. It would have been near impossible for the
taxpayer to demand to see the records of the payor bank or the ledgers of the government. The legislative
policy was to provide incentives to the taxpayer by unburdening it of taxes.

Nikken Philippines Inc. v. CIR


CTA EB No. 1569; June 7, 2018
Bautista, J.

FACTS:
Nikken Philippines (Nikken) is engaged in the business of buying, selling, distributing and marketing
healthcare products and accessories. It filed an annual income tax return for the taxable year 2006 on
March 2007. It was informed that an investigation has been conducted with respect to its internal revenue
tax liabilities for taxable year 2006. Respondent CIR issued a Preliminary Assessment Notice (PAN) in
August 2010, and thereafter a Formal Letter of Demand (FLD) and Final Assessment Notice (FAN) in
September 2010. Petitioner protested the FLD; however, in the Final Decision on Disputed Assessment
(FDDA), respondent still found Nikken liable. Thus, the latter filed a petition for review before the Court of
Tax Appeals.

Respondent offered a Memorandum Referral addressed to Revenue Officer Lim ("RO Lim") and Group
Supervisor Lumagui, Jr., "for re-assignment and continuance of audit issued to Revenue Officer Delfin
Sunga." The Memorandum Referral was signed by the Revenue District Officer.

ISSUE:
1.) Whether or not CTA can resolve an issue not raised by the parties
2.) Whether or not the officer who conducted assessment on petitioner is duly authorized to do so

RULING:
1.) On whether CTA can resolve an issue which was not raised by the parties
YES. The authority to make an examination or assessment, being a matter provided for by the NIRC, is
well within the exclusive and appellate jurisdiction of the CTA. CTA is not bound by the issues specifically
raised by the parties but may also rule upon related issues necessary to achieve an orderly disposition of
the case. On the basis thereof, the CTA Division was, therefore, well within its authority to consider in its
decision the question on the scope of authority of the revenue officers who were named in the LOA even
though the parties had not raised the same in their pleadings or memoranda.

2.) On whether RO Lim is duly authorized to conduct the assessment against petitioner
The relevant laws are:

1997 NIRC: Sec. 13. Authority of a Revenue Officer. xxx Revenue Officer assigned to perform assessment
functions in any district may, pursuant to a Letter of Authority issued by the Revenue Regional Director,
examine taxpayers within the jurisdiction of the district in order to collect the correct amount of tax, or to
recommend the assessment of any deficiency tax due in the same manner that the said acts could have
been performed by the Revenue Regional Director himself.

Revenue Memorandum Order ("RMO") No. 43-9026: Any reassignment/ transfer of cases to another RO(s),
and revalidation of L/ As which have already expired, shall require the issuance of a new L/ A, with the
corresponding notation thereto xxx

The use of the word "shall" in RMO No. 43-90 can only mean that the issuance of a new LOA is mandatory
in cases of reassignment. Clearly, before an assessment can be conducted, the RO conducting the same
41

must first be authorized to do so, pursuant to an LOA issue by the Revenue Regional Director. In case of
re-assignment or transfer of cases to another RO, a new LOA with a corresponding notation thereto must
be issued.

Based on Section 13 of the Tax Code, a Letter of Authority or LOA is the authority given to the appropriate
revenue officer assigned to perform assessment functions. It empowers or enables said revenue officer to
examine the books of account and other accounting records of a taxpayer for the purpose of collecting the
correct amount of tax.

The LOA is the proof that the person/ s named therein is/are authorized to conduct the necessary
investigation/ audit, it is an express grant of authority. Thus, absent the necessary issuance of a new LOA
specifically naming the person to whom the case will be reassigned with the corresponding annotation per
RMO No. 43-90, there is no authority to conduct the investigation/ audit. Moreover, even if the Memorandum
of Referral will be taken into consideration, it will still not be valid since it was signed not by the Revenue
Regional Director but by the Revenue District Officer, in contravention of the provisions of the law. Thus,
RO Lim acted without authority when he conducted the audit of petitioner, hence, the assessment is null
and void. Accordingly, a void assessment bears no valid fruit.

Philippine International Air Terminals Co., Inc. v. CIR


CTA Case No. 9181; June 6, 2018
Manahan, J.

FACTS:
Respondent CIR sent Philippine International Air Terminals Co. (PIATCO) a Letter-Notice-RELIEF stating
that the latter had an alleged discrepancy in income tax returns for taxable year 2011, resulting in the
discovery of undeclared income. Respondent CIR sent PIATCO a Preliminary Assessment Notice (PAN)
to which petitioner filed its reply. The PAN stated that PIATCO was being assessed deficiency income tax
and VAT based on third -party matching conducted by respondent, where sales made to PIATCO by its
suppliers were compared with purchases declared by PIATCO in its income tax return. A Final Assessment
Notice was sent to PIATCO holding it liable for deficiency tax. PIATCO filed its protest to the FAN and
thereafter a petition for review with CTA.

PIATCO argues that the assessments for alleged deficiency income tax and VAT for taxable year 20 11
are arbitrary, oppressive and without legal basis. Meanwhile, respondent contends that the government is
allowed to resort to all evidence or resources available to determine a taxpayer's income and to use
methods to reconstruct his income, such as the expenditure method which has its basis on Sec. 6(B) of the
NIRC. And that PIATCO failed to satisfactorily explain, with documentary evidence, the alleged unreported
or undeclared income, thus, the deficiency tax assessments shall stand

ISSUE:
Whether or not the assessment of tax deficiency against PIATCO is void for having been undertaken without
a Letter of Authority

RULING:
YES. The Supreme Court has ruled that after an LN has been served on a taxpayer, an LOA is still required
for further examination and assessment. Further, an LOA cannot be dispensed with just because none of
the financial books or records kept by the taxpayers were examined. Thus, in Medicard Philippines, Inc. v.
CIR (Medicard case), SC ruled that:

An LOA is the authority given to the appropriate revenue officer assigned to perform assessment functions.
It empowers or enables said revenue officer to examine the books of account and other accounting records
of a taxpayer for the purpose of collecting the correct amount of tax. An LOA is premised on the fact that
the examination of a taxpayer who has already filed his tax returns is a power that statutorily belongs only
to the CIR himself or his duly authorized representatives.
42

Unless and authorized by the CIR himself or by his duly authorized representative, through an LOA, an
examination of a taxpayer cannot ordinarily be undertaken. The circumstances contemplated under Section
6 where the taxpayer may be assessed through best-evidence obtainable, inventory-taking, or surveillance
among others has nothing to do with the LOA. These are simply methods of examining the taxpayer in
order to arrive at the correct amount of taxes. Hence, unless undertaken by the CIR himself or his duly
authorized representatives, other tax agents may not validly conduct any of these kinds of examinations
without prior authority.

Under the “no-contact-audit-approach” viz. RELIEF system, even without conducting a detailed
examination of taxpayer's books and records, if the computerized/manual matching of sales and
purchases/expenses appears to reveal discrepancies, the same shall be communicated to the concerned
taxpayer through the issuance of LN. The LN shall serve as a discrepancy notice to taxpayer similar to a
Notice of Informal Conference to the concerned taxpayer. As provided in the RMO No. 42-2003, the LN is
merely similar to a Notice for Informal Conference. However, for a Notice of Informal Conference, which
generally precedes the issuance of an assessment notice to be valid, the same presupposes that the
revenue office who issued the same is properly authorized in the first place.

The Court cannot convert the LN into the LOA required under the law even if the same was issued by the
CIR himself. Under RR No. 12-2002, LN is issued to a person found to have underreported sales/receipts
per data generated under the RELIEF System.

LN and LOA are different. First, an LOA addressed to a revenue officer is specifically required under the
NIRC before an examination of a taxpayer may be had while an LN is not found in the NIRC and is only for
the purpose of notifying the taxpayer that a discrepancy is found based on the BIR's RELIEF System.
Second, an LOA is valid only for 30 days from date of issue while an LN has no such limitation. Third, an
LOA gives the revenue officer only a period of 120 days from receipt of LOA to conduct his examination of
the taxpayer whereas an LN does not contain such a limitation. Simply put, LN is entirely different and
serves a different purpose from an LOA. Due process demands, as recognized under RMO No. 32- 2005,
that after an LN has served its purpose, the revenue officer should properly secure an LOA before
proceeding with the further examination and assessment of petitioner. Unfortunately, this was not done in
this case

LOA cannot be dispensed with just because none of the financial books or records being physically kept by
MEDICARD was examined. To begin with, Section 6 of the NIRC requires an authority from the CIR or from
his duly authorized representatives before an examination "of a taxpayer" may be made. The requirement
of authorization is therefore not dependent on whether the taxpayer may be required to physically open his
books and financial records but only on whether a taxpayer is being subject to examination.

LOA is equally needed even under the BIR's RELIEF System because the rationale of requirement is the
same whether or not the CIR conducts a physical examination of the taxpayer's records: to prevent undue
harassment of a taxpayer and level the playing field between the government's vast resources for tax
assessment, collection and enforcement, on one hand, and the solitary taxpayer's dual need to prosecute
its business while at the same time respondent to the BIR exercise of its statutory powers. The balance
between these is achieved by ensuring that any examination of the taxpayer by the BIR's revenue officers
is properly authorized in the first place by those to whom the discretion to exercise the power of examination
is given by the statute.

Based on the foregoing, before an examination of the taxpayer may be validly done, it is a legal requirement
that there must first be an LOA issued to the concerned revenue examiners, unless the petitioner (the
Commissioner of Internal Revenue) himself or his duly authorized representative will conduct such an
examination; and an LN does not suffice, simply because an LN is entirely different and serves a different
purpose than an LOA. Without such an LOA, the resulting assessment or examination is a nullity.

Similar to the above-quoted case, the instant case arose from tax assessments for deficiency income tax
and VAT only on the basis of or pursuant to a mere LN, specifically the undated LN No. 051-RLF-11-00-
43

0015840, without a subsequent LOA having been issued. Thus, for lack of an LOA, the tax assessments
for deficiency income tax and VAT for taxable year 2011 are void.

CIR v. Lepanto Consolidated Mining Corporation


CTA EB No. 1584; June 4, 2018
Uy, J.

FACTS:
Respondent filed its Quarterly Value-Added Tax (VAT) Returns (BIR Form No. 2550-Q) for the first and
second quarters of taxable year 2012 on Respondent filed its Quarterly Value-Added Tax (VAT) Returns
(BIR Form No. 2550-Q) for the first and second quarters of taxable year 2012. In February 2014, respondent
filed before the BIR its administrative claim for tax credit covering the first and second quarters of taxable
year 2012. A month later, respondent submitted additional supporting documents. In June 2014, respondent
filed a petition for review before the CTA.

Petitioner contends that as part of taxpayers' duty to exhaust administrative remedies, the law requires the
submission of complete documents in support of the application filed with the BIR before the 120-day audit
period shall apply, and before the taxpayer could avail of judicial remedies as provided for in the law.
Petitioner invokes the necessity to comply with the rule on exhaustion of administrative remedies. Implicitly,
petitioner submits that respondent failed to observe the said rule because it did not submit complete
documents in support of its applications filed with the BIR. According to petitioner, the submission of
complete documents is required before the 120-day audit period shall apply, and before respondent could
avail of judicial remedies provided for by law.

ISSUE:
Whether or not respondent has exhausted administrative remedies before availing judicial remedies

RULING:
YES. It must be emphasized that the submission of complete supporting documents by the taxpayer-
claimant at the administrative level is presumed, pursuant to the ruling in the case of CBK Power Company
Limited vs. Commissioner of Internal Revenue, to wit:

"Bearing in mind that the burden to prove entitlement to a tax refund is on the taxpayer, it is presumed that
in order to discharge its burden, petitioner had attached complete supporting documents necessary to prove
its entitlement to a refund in its application, absent any evidence to the contrary."

Thus, petitioner is presumed to have attached complete supporting documents necessary to prove its
entitlement to a refund in its applications20 on February 27, 2014, absent any evidence to the contrary.

In addition, it is noteworthy that respondent submitted additional supporting documents on March 3, 2014.
If the same were still incomplete from petitioner's point of view, he could have easily required respondent
to submit the supposed lacking documents for the SIR's evaluation and verification, but apparently,
petitioner did not do so. Thus, respondent cannot be faulted, if in its point of view, it has submitted complete
documents in support of its refund claim.

CIR V. DOHLE SHIPMANAGEMENT PHILS CORP.


CTA EB No. 1582; June 1, 2018
Bautista, J.

FACTS:
In 2009, respondent and Dohle (10M) Ltd. ("DIOM") entered into a Service Agreement wherein the former
would act as the Philippine representative of DIOM. For CY 2011, respondent filed its Quarterly VAT
44

Returns. On March 22, 2013, respondent filed with the Department of Finance an administrative claim for
refund or for issuance of a TCC for the four quarters of CY 2011. In October of the same year, respondent
filed the Petition for Review before the Court in Division which partially granted the respondent’s claim for
refund. Hence this petition.

Petitioner then claims that under the Service Agreement, respondent does not directly render services to
its non-resident foreign clients, but directly to the crews being trained by it; and that, accordingly,
respondent's services cannot qualify for zero-rating as it failed to show that the direct recipient of its services
are non-resident foreign clients doing business outside the Philippines.

On the other hand, respondent counters that it complied with all the requisites for its sales to qualify for
VAT zero-rating, particularly the requirement that the recipient of the services should be doing business
outside the Philippines. Respondent continues that crew training services did not make the crew, the party
to whom the services were rendered, a party to the contract with DIOM- the obligee under the Service
Agreement; and that neither could the other services it rendered be considered as having been rendered
to the crew. Consequently, respondent posits that the recipient of its services under the Service Agreement
is DlOM, a non-resident foreign corporation engaged in business outside.

ISSUE:
Whether or not respondent is entitled to the administrative claim for refund for having rendered a zero-rated
sales of services to DIOM, a non-resident foreign corporation engaged in business outside Philippines

RULING:
YES. Respondent correctly argues that the parties to the contract involve the relevant non-resident foreign
corporation, and not the crew whom respondent trains pursuant to the provision of the applicable service
agreement. Respondent's service of training the crew member of the non-resident foreign corporation does
not make such crew member a party to the service agreement between respondent and the non-resident
foreign corporation. Consequently, respondent's service is not subject to VAT as the service is rendered in
favor of the non-resident foreign corporation, and not the crew member. The parties to the relevant service
agreement, the services under which is presumably zero-rated, remain to be respondent and either DIOM,
PDSK, or NSSPL. Having rendered the service of training the crew in favor of such non-resident foreign
corporation, respondent's services may be subject to VAT zero-rating provided it is able to properly
substantiate the same - which it did as found by the Court in Division.

SAN MIGUEL HOLDINGS CORP., v. CIR


CTA CASE No. 9401; June 5, 2018
Casanova, J.

FACTS:
This is a petition for review filed by San Miguel Holdings seeking the refund or issuance of tax credit
certificate (TCC) in the amount of (P109,943,523.84), allegedly representing deficiency documentary stamp
tax (DST) erroneously and illegally collected from it by the Bureau of Internal Revenue (BIR) for taxable
year 2011.

In 2011, the Supreme Court rendered a decision in CIR vs. Filinvest Development Corporation holding,
among others, that instructional letters and journal and cash vouchers evidencing the advances which
Filinvest extended to its affiliates qualified as loan agreements upon which DST may be imposed.

In July of 2014, 2014, petitioner received an undated Preliminary Assessment Notice (PAN) issued by the
BIR, assessing petitioner for the following deficiency taxes in connection with the examination of its internal
revenue tax liabilities for the taxable year 2011. Petitioner made a payment under protest to the BIR the
amount of P110,623,457. for the alleged deficiency DST per the PAN.
45

On June 28, 2016, petitioner filed with the BIR the Letter/Claim for Refund subject of this Petition for Review,
requesting the refund or issuance of a TCC in the amount of P109,943,523.84 allegedly representing DST
erroneously and/or illegally collected from it by the BIR for the taxable year 2011, pursuant to Section 229
in relation to Section 204(C) of the NIRC.

Petitioner argues that the Filinvest case promulgated on July 9, 2011 may not be applied on advances it
received/extended prior to July 19, 2011 without violating the principle on non-retroactivity of laws and
rulings. Petitioner claims that it relied on the rule prevailing prior to the July 19, 2011 decision in the Filinvest
case, that inter-company advances covered by inter-office memos are not loan agreements subject to DST.

ISSUE:
1.) Whether or not the decision in CIR v. Filinvest Development Corporation may be applied retroactively
2.) Whether or not the transaction not manifested by a debt instrument is subject to DST

RULING:
1.) On whether the decision in CIR v. Filinvest may be applied retroactively
YES. In the similar case of San Miguel Corporation vs. Commissioner of Internal Revenue, this Court ruled
that the interpretation of Section 180 of the Tax Code in the Filinvest case is deemed constituted as part of
the Tax Code as of the date of its enactment, viz: "It must be stressed that the interpretation placed upon
a law by the Supreme Court constitutes a part of the law as of the date it was originally passed since it
establishes the contemporaneous legislative intent of the law.

Considering that the interpretation of Section 180 of the NIRC (now Section 179 of the NIRC of 1997) in
the A/invest case was deemed constituted as part of the NIRC as of December 23, 1994 up to the present
time, the same may therefore be applied to this case without violating the principle on non-retroactivity of
laws and rulings. Moreover, it is worthy to note that prospective application of decisions applies only in
cases where an old doctrine of the Supreme Court is overruled by a subsequent decision which adopts a
new doctrine.

2.) On whether a transaction not manifested by a debt instrument is subject to DST


YES. DST is levied on the exercise by persons of certain privileges conferred by law for the creation,
revision, or termination of specific legal relationships through the execution of specific instruments. DST is
by nature, an excise tax since it is levied on the exercise by persons of privileges conferred by law. A DST
is a tax on documents, instruments, loan agreements, and papers evidencing the acceptance, assignment,
sale or transfer of an obligation, right or property incident thereto. The DST is actually an excise tax,
because it is imposed on the transaction rather than on the document. Thus, there is no basis for petitioner's
assertion that a DST is literally a tax on the document. In other words, DST may be imposed even in the
absence of a debt instrument, as long as the transactions are clearly established.

People of the Philippines vs Maximo Hernandez y Maniego, Alias, Maximo H. Hernandez,


Ponciano Hernandez y Buco, Dominador Lalu y Pascual, Felipe Mangilit y Hernandez, Michael
Manliclic y Vinuya, Danilo Santos y Sanguyo and Johnrey Retobado y Paglinawan

CTA CASE NO. O-379 ; May 23, 2018


Ponente: Ringpis - Liban, J.:

FACTS:
The defendants were all Board of Directors of Samahang Magsasakang Kapampangan at Katagalugan
Multi-Purpose Cooperative (SMKKMC). They were charged of Violation of Sections 101 and 3601 of the
Tariff and Customs Code of the Philippines (TCCP) which conspiringly fraudulently import or bring into the
Philippines, or assist in so doing contrary to law the merchandise, to wit: declared as eighteen (18) thousand
bags of "Vietnamese Long Grain White Rice" on board the vessel M/V "Minh Tuan 68" which arrived from
Ho Chi Minh City, Vietnam with estimated taxes and duties amounting to Php18, 779,528.12, thereby
exceeding its rice importation quota allocation balance of 700 M/T 14,000 bags under the Private Sector
46

Financed Program of National Food Authority (NFA) for the year 2012 and which were found to have been
imported without the requisite import permit/ authority from the National Food Authority (NFA).

Accused Maximo Hernande:v 56 years old, widow, a resident of Mapaniqui, Candaba, Pampanga testified
as follows: that he is familiar with the Samahan ng Magsasakang Kapampangan at Katagalugan Multi-
Purpose Cooperative because he is one the founding directors; the Articles of Coopera tion is the
proof that he is one of the founding directors of SMKKMC; the other founding directors of SMKKMC
are Ponciano Hernandez, Dominador Lalu, Felipe Mangilit, Michael Manliclic, Danilo Santos and Johnrey
Retobado. However, Ponciano Hernandez, Dominador Lalu, Felipe Mangilit, Michael Manliclic, Danilo
Santos are no longer members of the SMKKMC since 2011 pursuant to Article 10 of their Amended Articles
of Coope ration; 36 Johnrey Retobado is still a member of the cooperative; it is not true that he and his
co-accused conspired to import Vietnamese long grain white rice on board MV Minh Tuan 68; as far as
they know, they did not join any rice importation; he did not sign any document in connection with the
subject importation of rice.

ISSUE:
Whether or not the defendants secured an import permit and did not exceed its import quota balance
allocation.

RULING:
SMKKMC did not secure import permit from the NFA and it exceeded its import quota balance allocation.

By virtue of Presidential Decree No. 4, NFA is empowered to establish rules and regulations governing the
importation of rice and to license impose and collect fees and charges for the said importation. The plaintiff
offered in evidence marked as Exhibit "P-12" the "Certification" signed by Joseph Y. Dela Cruz, Assistant
Administrator for Marketing Operations, stating that no import permit was issued by the NFA in favor of
SMKKMC regarding the subject importation. On the other hand, to prove that SMKKMC exceeded its quota
allocation, the plaintiff presented the Memorandum for Fernandina A. Tuazon Director III- CIS signed by
Joel C. Pinawin, OIC-CIIS Southern Luzon, marked as Exhibit "P-10" stating that the balance allocation of
SMKKMC is 700 MT/ 14,000 bags.

Based on the foregoing, the failure on the part of SMKKMC to secure from the NFA the import for its rice
shipments clearly shows that the said importation is contrary to law. Hence, the plaintiff was able to prove
that there is unlawful importation of rice. The evidence of the prosecution satisfactorily proves the allegation
in the Information that accused did not possess the legal authority to import the 18,000 bags of rice.

National Food Authority,Represented by the Director of its Legal Affairs Department, Ma. Theresa
S. Villafuerte vs.City Government of Tagum, city assessor and city treasurer of Tagum,
Province of Davao Del Norte
CTA CASE NO. AC NO. 180; May 29, 2018
Ponente: Casanova, J.:

FACTS:
Petitioner National Food Authority (NFA) is created under Presidential Decree (PD) No. 45, as amended.
By virtue of PD No. 4, the National Grains Authority (NGA) was created to aide the development of the
country's rice and corn industry. Later on, through PD No. 17706, the NGA was reconstituted to the National
Food Authority (NFA) with the intention of expanding the functions and powers of the NGA to not only cover
the grains industry but other basic food commodities as well. Under Section 6 (d) of PD No. 4, as amended
by PD No. 14857, petitioner was given certain exemptions which includes payment of realty taxes.

However, on October 10, 1991, Republic Act (RA) No. 7160 entitled "An Act Providing for a Local
Government Code of 1991" was enacted8. The said Act meant to decentralize government powers,
authority, responsibilities and resources from the national government to the local government units. As
47

such, the Local Government Code (LGC) of 1991, as amended, withdrew and limited the exemption from
payment of real property tax, among others, to only few selected entities.

On August 2, 2016, petitioner received seven (7) Notices of Delinquency issued by respondent City
Treasurer demanding payment for real property taxes in the total amount of P2,643,816.53.

ISSUE:
Whether or not petitioner is liable for real property tax

RULING:

As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range, acknowledging
in its very nature no limits, so that security against its abuse is to be found only in the responsibility of the
legislature which imposes the tax on the constituency who are to pay it.24 But since taxes are what we pay
for civilized society, or are the lifeblood of the nation, the law frowns against exemptions from taxation and
statutes granting the exemptions are thus construed strictissimi juris against the taxpayer and liberally in
favor of the taxing authority. A claim of exemption from tax payment must be clearly shown and based on
language in the law too plain to be mistaken.

Under Section 200 of the LGC of 1991, as amended, provinces and cities, including the municipalities
within the Metropolitan Manila Area, shall be primarily responsible for the proper, effi cient and
effective administration of the real property tax. The law is clear on the matter. Respondents
have the power to impose and administer real property tax against petitioner.

Zuellig Pharma Asia Pacific Ltd. Phils. ROHQ vs. Commisioner of Internal Revenue
CTA CASE NO. 9025; May 23, 2018
Ponente: Castaneda, Jr.,J.:

FACTS:
Petitioner Zuellig Pharma Asia Pacific Ltd. Phils. ROHQ is the regional operating headquarters (ROHQ) of
Zuellig Pharma Asia Pacific Ltd., a foreign corporation duly organized and existing under the laws of Hong
Kong. It was licensed by the Securities and Exchange Commission (SEC) to do business as ROHQ in the
Philippines on December 4, 2001, particularly, to engage in the business of development, general
administration and planning, sourcing of IT components and services, marketing control, sales promotion,
training, technical support and maintenance. During the four quarters of CY 2011, petitioner rendered
services in the Philippines for its foreign affiliate, Zuellig Pharma Holdings Ltd. (ZPHL), a non-resident
foreign corporation engaged in business conducted outside the Philippines.

Based on petitioner's Quarterly VAT Returns for the four quarters of CY 2011, petitioner did not have any
local sales subject to twelve percent (12%) VAT during the said four quarters. Nevertheless, petitioner had
zero-rated sales in the total amount of P457,570,398.82. Petitioner accumulated input VAT credits on its
domestic purchases of goods and services for the four quarters of CY 2011 amounting to P59,809,336.82.
On January 16, 2013, petitioner filed with the BIR Revenue District Office (RDO) No. 49 an administrative
claim for refund of its alleged excess and unutilized input VAT for the four quarters of CY 2011 in the total
amount of P59,809,336.79.

In petitioner's letter dated November 10, 2014, stamped received by respondent on November 11, 2014,
petitioner manifested that it has already submitted the complete supporting documents for its administrative
claim for refund of excess and unutilized input VAT for the four quarters of CY 2011. In view of respondent's
inaction on petitioner's claim, petitioner filed a Petition for Review with this Court.

ISSUE:
48

Whether or not petitioner is entitled to its claim for refund of or issuance of TCC for its excess and unutilized
input VAT on purchases of goods and services attributable to zero-rated sales for the four (4) quarters of
CY 2011 in the total amount of P59,809,336.79.

RULING:
The rule is that from the date an administrative claim for excess unutilized VAT is filed, a taxpayer has thirty
(30) days within which to submit the documentary requirements sufficient to support his claim, unless given
further extension by the CIR. Then, upon filing by the taxpayer of his complete documents to support his
application, or expiration of the period given, the CIR has 120 days within which to decide the claim for tax
credit or refund. Should the taxpayer, on the date of his filing, manifest that he no longer wishes to submit
any other additional documents to complete his administrative claim, the 120- day period allowed to the
CIR begins to run from the date of filing. In all cases, whatever documents a taxpayer intends to file to
support his claim must be completed within the two-year period under Section 112(A) of the NIRC. The 30-
day period from denial of the claim or from the expiration of the 120-day period within which to appeal the
denial or inaction of the CIR to the CTA must also be respected.

It is the taxpayer who ultimately determines when complete documents have been submitted for the
purpose of commencing and continuing the running of the 120-day period. Nevertheless, the Supreme
Court also emphasized that the foregoing benefit given to taxpayer is not unbridled and, as such, is subject
to limitations.

In the case at bar, petitioner was required to submit all required documents, books, and records to the
assigned Revenue Officer on March 13, 2013. Although, petitioner submitted the required supporting
documents, petitioner submitted additional supporting documents after the said date. Hence, the 30-day
period pursuant to RMC No. 49-2003 had already expired, and there is no evidence of additional notice
from the BIR requesting petitioner to provide additional documents for the proper determination of whether
petitioner is entitled to the amount claimed.

Thus, the 120-day period shall be reckoned from March 20, 2013 and shall run until July 18, 2013.
Considering that respondent failed to act on the subject claim, petitioner had 30 days after the lapse of the
120-day period or until August 17, 2013 within which to file a judicial appeal before this Court. However,
the present Petition for Review was filed only on April 8, 2015. Clearly, petitioner's judicial claim was
belatedly filed.

Accordingly, petitioner's belated filing of its judicial claim or failure to observe the mandatory 120+30 day
periods is fatal to its claim and rendered the Court devoid of jurisdiction over petitioner's claim. Therefore,
the dismissal of the instant Petition for Review is in order.

It bears stressing that a claim for tax refund or credit, like a claim for tax exemption, is construed strictly
against the taxpayer. One of the conditions for a judicial claim of refund or credit under the VAT System is
compliance with the 120+30 day mandatory and jurisdictional periods. Thus, strict compliance with the
120+30 day periods is necessary for such a claim to prosper

Taganito Mining Corporation vs. Commisioner of Internal Revenue


CTA EB NO. 1404 and EB NO. 1511; June 11, 2018
Ponente: Ringis – Liban, J.:

FACTS:
Petitioner is duly registered with the Securities and Exchange Commission (SEC) and is primarily engaged
in the business of exploring, producing and exporting beneficiated nickel silicate ores and chromite ores. It
is a VAT-registered entity and also registered with the Board of Investments (BOI) with BOI Certificate of
Registration No. EP 88-306 dated April 14, 1988.
49

On December 27, 2013, petitioner filed its claim for refund of excess input VAT paid on its domestic
purchases and importation of taxable goods and services and importation of goods including capital goods
in accordance with Section 112 (A) and (B) in relation to Section 106 (A)(2)(a)(1) of the National Internal
Revenue Code of 1997, as amended (1997 NIRC) in the amount of P44,107,520.34 for purchases made
during the year 2012 and for re-filed claims for refund of the amortized portion of input VAT on its
capital goods purchased during the years 2008, 2010, 2011. Due to respondent's inaction on petitioner's
administrative claim, petitioner filed the instant Petition for Review.

In the Petition for Review before the Court in Division, Taganito prays for the refund of the amount of
P22,011,331.91 allegedly representing excess/unutilized input VAT paid on domestic purchases and
importation of capital goods with aggregate acquisition cost exceeding Pl million, which were amortized and
attributable to zero-rated sales in the years 2012 to 2013.

In the Answer, the CIR raised the following as his Special and Affirmative Defenses: that Taganito's
alleged claim for refund is subject to administrative routinary investigation or examination by ithe
Bureau; the petitioner's excess/unutilized VAT input taxes was not properly documented; that in an
action for refund, the burden of proof is on the taxpayer to establish its right to refund, and failure to
sustain the burden is fatal to the claim for refund; that there is no record that Taganito submitted the
complete documents for refund.

ISSUE:
Whether or not the Second Division of this Court erred in holding Taganito entitled to refund or
issuance of tax credit certificate in the reduced amount of P14,263,324.04

RULING:
Well-settled in this jurisdiction is the fact that actions for tax refund, as in this case, are in the nature of a
claim for exemption and the law is construed in strictissimi juns against the taxpayer. The pieces of
evidence presented entitling a taxpayer to an exemption are also strictissimi scrutinized and must be duly
proven. 48 In this case, Taganito was able to prove that it is entitled to a refund or issuance of a tax credit
certificate for its unutilized amortized input taxes on importation and domestic purchases of capital goods
with aggregate acquisition cost exceeding Pl Million incurred during taxable years 2010, 2011 and 2012
and are attributable to zero-rated sales in the taxable years 2012 and 2013 but in the reduced amount of P
l4,263,324.04.

Morever, as laid down by the Supreme Court in a number of cases, a taxpayer engaged in zero-
rated or effectively zero-rated transactions may claim a refund or tax credit certificate for input taxes
attributable to such sales upon compliance with the following requisites:

1. That the taxpayer must be VAT-registered;


2. That the claim for refund was filed within the two-year prescriptive period;
3. That there must be zero-rated or effectively zero-rated sales;
4. That input taxes were incurred or paid;
5. That such input VAT payments are directly attributable to zero-rated sales or effectively
zero-rated sales; and
6. That the input VAT payments were not applied against any output VAT liability.
50

IBEX Philippines Inc. vs.Commissioner of Internal Revenue


CTA CASE NO. 9002; January 5, 2018
Ponente: Bautista, J.:

FACTS:
On January 6, 2006, the Board of Investments ("BOI") issued Certificate of Registration No. 2006-0510
in favor of Ibex as a New IT Export Service Firm in the Field of Operation of a Call Center. On September
30, 2014, Ibex filed with the BIR an Application for Tax Credits/Refunds (BIR Form No. 1914)15 for the
third and fourth quarters of CY 2012 in the amount of Php2,485,892.92. Alleging the CIR's inaction on its
administrative claim for refund, Ibex filed the present Petition for Review on February 27, 2015. The CIR
filed his Answer alleging that it is imperative for Ibex to prove compliance with the relevant requisites in
order to validly claim a tax refund.

ISSUE:
Whether IBEX is entitled to a refund in the total amount of P 2, 485, 892. 92 representing unutilized and
excess input vat attributable to zero – rated sales for the third and fourth quarters of CY 2012

RULING:
In Luzon Hydro Corporation v. CIR36, the Supreme Court summarized the requisites for granting claims for
refund or tax credit for unutilized input VAT following Section 112(A) of the 1997 National Internal Revenue
Code, as amended ("1997 N IRC" ), as follows:

1. The taxpayer is VAT-registered;


2. The taxpayer is engaged in zero-rated or effectively zero- rated sales;
3. The input taxes are due or paid;
4. The input taxes are not transitional input taxes;
5. The input taxes have not been applied against output taxes during and in the succeeding
quarters;
6. The input taxes claimed are attributable to zero-rated or effectively zero-rated sales;

7. For zero-rated sales under Sections 106(A)(2)(1) and (2), 106(B), and lOB(B)(l) and (2),
the acceptable foreign currency exchange proceeds have been duly accounted for in accordance
with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
8. Where there are both zero-rated or effectively zero-rated sales and taxable or exempt
sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input
taxes shall be proportionately allocated on the basis of sales volume; and
9. The claim is filed within two (2) years after the close of the taxable quarter when such sales
were made.

All the requisites were present in the case at bar.

Enjay Hotels v. CIR


CTA EB 1498; May 28, 2018
Casanova, J.

FACTS
Enjay Hotels, Inc. ("EHI" for brevity) is primarily engaged in the general business of a hotel, resort,
apartment, and doing business under the name "InterContinental Manila". It is also a duly registered
taxpayer with the BIR as evidenced by its BIR Certificate of Registration with TIN No. 000-158-109-000.
EHI was given Income Tax Holiday (ITH) benefit for three (3) years pursuant to its being a BOI-registered
enterprise.

On September 7, 2011, the BIR issued a Notice of Informal Conference informing EHI that as per result of
their income tax audit for CY 2008, EHI's deficiency income amounts to P5,013,015.97. Then, a Preliminary
51

Assessment Notice (PAN) dated January 11, 2012, was issued by the BIR assessing EHI for deficiency
income tax in the total amount ofP7,797,650.22. EHI contested the said PAN. EHI, then received a Formal
Letter of Demand (FLD) On June 26, 2012, EHI filed a protest letter, impugning the validity of the deficiency
income tax assessment issued against it, but was later denied through a Final Decision on Disputed
Assessment (FDDA); also included in the FDDA is a computation amounting to P8,422,339.00 as deficiency
income tax.

A letter decision of the BOI determined that, in addition to its previously allowed registered activities, the
following were also considered part of EHI's ITH entitlement, viz. -broadband services; in-house video; and,
hotel guest's parking fees, including valet services. Due to this EHI requested for re-computation and partial
settlement thereof. CIR declined EHI's proposal since the matter is already pending with the CTA-Division.
EHI, nevertheless partially paid the tax due in the amount of P3,442,704.64.

CTA-Division promulgated its Decision, ordering EHI to pay P5,553,132.53 representing the amount still
due after [EHI]'s partial payment of its income tax liability, plus Deficiency interest and Delinquency Interest.
Both parties filed a motion for reconsideration but were both denied. Both parties elevated the matter to the
Court En Banc via the instant Petitions for Review.

ISSUES:
Whether this CTA-division has jurisdiction to entertain the present case; and
Whether EHI is liable for deficiency income tax for calendar year 2008

RULING:
The CTA has jurisdiction to entertain the present case.
Section 7(a)(1) of Republic Act (RA) No. 1125, as further amended by RA No. 9282 provides that:
"Sec. 7. Jurisdiction - The CTA shall exercise:
(a) Exclusive appellate jurisdiction to review by appeal, as
herein provided:
(1) Decisions of the Commissioner of Internal Revenue in
cases involving disputed assessments, xxx

While the BOI has the power to decide controversies, such, however, is limited to those concerning the
implementation of EO No.226 between registered enterprises or investors and government agencies. But
with regard to the assessment and collection of the axes, fees and charges, it is the BIR who was exclusively
vested with said directive. BOI recognizes the BIR's authority to conduct its own evaluation and audit of
EHI's income tax liability. Howbeit, on its part, the BIR gives special consideration on the findings made by
the BOI, such as the application of ITH, like the scenario here in the present consolidated appeals.

EHI is liable for deficiency income tax for calendar year 2008.
Over and over again, We, bear emphasis that cases filed in the CTA are litigated de novo. Mere allegation
is not proof. Petitioner should prove every minute aspect of its case by presenting, formally offering and
submitting its evidence to the CTA.

The BOI ruled and considered EHI's income from handling fee, broadband services and in-house video as
part of its ITH privilege. Considering that, as discussed earlier, the BIR gives paramount consideration in
the BOI's determination of what income falls under the ITH, the income from said activities shall enjoy ITH
benefit and will no longer be subject to corporate income tax.

Considering that no additional evidence, documentary or testimonial, were presented by EHI to warrant
modification of the income tax deficiency as computed by the CTA-Division, We shall uphold the
computation of the same. However, in view of the advent of Republic Act (RA) No. R.A. 1096353 or the
"TAX REFORM FOR ACCELERATION AND INCLUSION (TRAIN)"law, the interest rate of 20 percent
(20%) per annum under Section 249 of the NIRC were amended to "double the legal interest rate for loans
or forbearance of any money in the absence of an express stipulation as set by the Bangko Sentral ng
Pilipinas (BSP).
52

WHEREFORE, the Petitions for Review are hereby DENIED for lack of merit. Accordingly, the Decision
dated January 28, 2016 of the CTA-Division is hereby AFFIRMED WITH MODIFICATION, EHI is
ORDERED TO PAY [CIR] the amount of P5,553,132.53, representing the amount still due after [EHI]'s
partial payment of its income tax liability on August 1, 2013, including surcharges and interests imposed
under Section 248(A)(3) and Section 249(8) and (C), respectively, both of the NIRC of 1997.

National Power Corporation v. Luzon Hydro Corporation (LHC), et. al.


CTA EB 1020; May 22, 2018
Mindaro- Grulla, J.

FACTS:
NPC entered into a BOT scheme with Luzon Hydro Corporation ("LHC") for the construction, operation and
maintenance of the Bakun AC Hydroelectric Plant (the "Power Plant"). This arrangement was defined in a
Power Purchase Agreement ("PPA") dated November 24, 1996. The Power Plant was built on land
constituting the boundaries of two municipalities. Hence, a portion of the Power Plant, particularly the Weir,
Desander and the Tunnel, are located in the Municipality of Bakun, Benguet while the rest of the Power
Plant is located in the Municipality of Alilem, Ilocos Sur.

Under the PPA and pursuant to the BOT Law, LHC undertook to construct, operate and maintain the Power
Plant for NPC and to deliver to NPC all electricity generated by the Power Plant. In every sense of the word,
NPC is the sole beneficiary of all electricity generated by the Power Plant. However, NPC acknowledged
and assumed responsibility for the payment of real property taxes and rates levied on the Power Plant and
its facilities.

The Municipal Assessor of Bakun, Benguet sent a Notice of Assessment of Real Property addressed to
LHC, assessing the machineries comprising the Power Plant as “industrial” and at 80% assessment level,
instead being classified as “special”, subject to 10% assessment level. LHC immediately referred the matter
to NPC and NPC's Vice President and Head of GENCO 2 wrote to the assessor stating that NPC is willing
to pay real property taxes at 10% assessment level as it was currently doing in Sual, Pangasinan pursuant
to an agreement with the Pangasinan Local Government Unit (LGU) to treat the generation facilities therein
as "Special Class".

The Municipal Assessor stand that (1) the real properties are owned and used by LHC, a private
corporation; (2) these properties cannot be classified as "Special" because NPC is not the owner and user
of the properties.
The matter remained unresolved due, in part, to the reorganization of the NPC in accordance with R.A. No.
9136 which caused the separation of key personnel from NPC; and, a directive from the Office of the
Solicitor General (OSG) to cease payment of real property taxes imposed by LGUs on machineries and
equipment as the same are exempt under Section 234(c) of the Local Government Code. However, the
Municipal Treasurer listed LHC as a delinquent taxpayer with a view to levying the subject properties.
NPC filed a petition before the Local Board of Assessment Appeals (LBAA), later the LBAA dismissed the
protest for lack of merit and upheld the assessment by respondent municipal officials and Municipality of
Bakun, Benguet. Aggrieved, both NPC and LHC filed their respective appeals before the CBAA which were
both dismissed for lack of merit. Both parties separately filed motions for reconsideration of the CBAA
Decision, but the CBAA denied both motions.

ISSUES:
Does NPC have sufficient legal interest or the legal standing to protest the real property tax assessment?
Whether or not NPC is exempted from paying real property taxes under Section 234 (c) of the LGC.

RULING:
NPC lacks the legal standing to institute the instant Petition for Review. Legal interest is defined as interest
in property or a claim cognizable at law, equivalent to that of a legal owner who has legal title to the property.
53

Section 226 of the Local Government Code limits the right to appeal the local assessor's action to the owner
or the person having legal interest in the property. Accordingly, Section 3(c) of Rule 8 of the Revised Rules
of Court of Tax Appeals an appeal by way of petition for review from a decision or ruling of a CBAA in the
exercise of its appellate jurisdiction, as in this case, may be filed with this Court by a "party adversely
affected" by the CBAA ruling or decision. Legal interest should be one that is actual and material, direct
and immediate, not simply contingent or expectant.

All notices of assessment were addressed to LHC, and NOT to NPC, and it was LHC who initially paid the
tax assessments under protest at the LBAA. Likewise, it was LHC, and NOT NPC who was ordered by the
LBAA to pay the realty taxes. Perforce, NPC is a "stranger" to the real property tax assessments, and in
fact, NOT a "party adversely affected" by such CBAA decision and resolution.

Even if the Court En Banc were to brush aside the issue of legal interest to protest, NPC could still not
successfully claim exemption under Section 234 (c) of the LGC because to be entitled to the exemption
under that provision, there must be actual, direct, and exclusive use of machineries. NPC failed to satisfy
these requirements. It is use, not ownership, that is of decisive import.
In view of the foregoing, we find no cogent reason to deviate from the rulings of the CBAA.

WHEREFORE, the petition is DENIED for lack of merit, additional to its respective jurisdictional defect. The
CBAA Decision dated July 13, 2012 and its Resolution dated March 22, 2013, are AFFIRMED. No
pronouncement as to costs.

CIR v. Air Philippines Corporation


CTA EB 1545; May 21, 2018
Mindaro- Grulla, J.

FACTS:
Petitioner Air Philippines Corporation (APC) is a domestic corporation duly organized and existing in
accordance with and by virtue of the laws of the Republic of the Philippines, engaged in the business of air
transportation of passengers and cargo to and from points within and outside the Philippines, pursuant to
its legislative franchise, Republic Act (RA) No. 8339, as amended by RA No. 9215.

Respondent Commissioner of Customs (COC) is the head of the Bureau of Customs (BOC) delegated and
authorized by respondent CIR, through an Authority to Release Imported Goods (ATRIG), to assess and
collect custom duties and all other lawful charges from imported articles, including the excise tax of P3.67
per liter on imported aviation turbo jet fuel imposed by Section 148(g) of the NIRC of 1997.

Petitioner was granted, through special law, exemption from excise tax importations of aviation turbo jet
fuel for use in its domestic flight operations. However, Letter of Instructions (LOI) No. 1483 withdrew PAL's
tax exemption privilege with respect to its purchase of domestic petroleum product for use in its domestic
operations, but those fuel imported and purchased abroad are still exempt from taxes. Consequently, the
BIR Commissioner issued BIR Ruling No. 001-2003, addressed to petitioner, to Philippine Airlines (PAL),
to Cebu Air, Inc. (CAl), and to Pacific Airways Corporation, stating that: “xxx our importations may not be
given the same treatment as before for as long as there is such available domestic supply of petroleum
products. On the basis of BIR Ruling No. 001-2003 respondent CIR, acting through respondent COC
assessed petitioner for specific taxes on the latter's importations of Jet A-1 aviation fuel used for it domestic
operations.

From March 2008 to October 2008, petitioner made importations and corresponding payments under
protest of the specific tax assessed by the Collector of Customs. Accordingly, petitioner filed with the District
Collector of Customs, Port of Batangas, Batangas City, formal written protests for the refund of the
respective specific taxes.
54

However, the Third Division promulgated the assailed Amended Decision, thereby granting APC's petition
for a refund citing several cases. CIR filed the instant petition for review.

ISSUE:
Whether or not Air Philippines Corporation complied with the requisite that articles, materials, or supplies
should not be locally available in reasonable quantity, quality or price, for it to be exempted from taxes.

RULING:

The APC 2016 Case regarding the very same issues and same parties ruled that imported products are
excluded from the determination of locally available supply of Jet A-1 fuel, citing therein the Supreme Court
PAL Case, ruling that "domestic" means locally manufactured or produced. No less than the Supreme Court
equated "domestic" with "local," therefore, the "locally available supply" of Jet A-1 fuel could never refer to
products which are imported. This Court cannot simply brush aside the testimony of no other than the
former Secretary of DOE, Mario V. Tiaoqui, who testified that "local supply" and "locally available supply"
is equivalent to and has always been deemed to be equivalent to local refinery production only.

The question here is not as to the practice of CAAP in including the imported Jet A-1 fuel in its list of locally
available supply, but as to the proper inclusion of such in the said category and based on testimony of an
expert witness and interpretation of the law, imported products should never be included in the term "locally
available" supply. As correctly observed in the alleged Decision, if locally available Jet A -1 fuel includes
both local production and imports, there will never be an instance when the Jet A-1 fuel available is
insufficient to meet the demands of the domestic market.

Even assuming arguendo that there is locally available supply of Jet A-1 fuel as to quantity, the government
would allow importation of Jet A-1 fuel if the local refiners would be unable to meet the requirements. In this
case, the said alleged available supply failed as to the reasonable price requirement. APC was able to
prove that the price of locally available supply in the Philippines is unreasonable. To require petitioner to
prove the absence of all three conditions locally available supply in reasonable quantity, quality and price -
- would result in an absurd situation wherein the airline would be constrained to purchase fuel locally while
sacrificing one or another standard it holds its suppliers up to.

WHEREFORE, premises considered, the instant Petition for Review is hereby DENIED. Accordingly, the
Amended Decision dated July 1, 2016 and the Resolution dated October 10, 2016 are hereby AFFIRMED.

Dedon Manufacturing, Inc. v. CIR


CTA Case. 8926; May 21, 2018
Ringpis- Liban, J.

FACTS:
Petitioner Dedon Manufacturing, Inc. is a corporation organized and existing under Philippine laws,
engaged in the business of manufacturing goods such as furniture made of aluminum frame and hularo
synthetic fiber and in trading the same on wholesale basis. Petitioner is registered with Bureau of Internal
Revenue (BIR) as a VAT taxpayer. Pursuant to its registration with the Board of Investments, petitioner's
sales are VAT zero-rated and entitled to income tax holiday incentive under special laws.

Petitioner filed its original Monthly and Quarterly VAT Returns for CY’s 2009, 2010, and 2011 through the
Electronic Filing and Payment System. Petitioner maintains that the input VAT paid on its purchases of
goods and services during CY s 2009, 2010, and 2011 are duly supported by VAT invoices and/ or official
receipts issued by its VAT -registered suppliers and that these transactions are zero rated and were not
applied against any output VAT.

Petitioner filed with the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the
Department of Finance ("DO F-OSS Center" for brevity) an Application for Tax Credits/Refund requesting
55

the refund of its alleged unutilized input VAT incurred in CY s 2009,2010, and 2011. According to petitioner,
since the BIR Commissioner failed to act on its refund claim within the prescribed 120-day period, the
inaction amounted to a denial; thus, prompting it to file the instant Petition for Review.

ISSUE:
Whether or not petitioner is entitled to Tax Refund/ Credit for the four quarters of the years 2009, 2010, and
2011, respectively.

RULING:
In order to be entitled to a tax credit or refund of excess input VAT attributable to zero-rated or effectively
zero-rated sales, the following requisites must be satisfied:

1. that the taxpayer is VAT -registered;


2. that there must be zero-rated or effectively zero-rated sales;
3. that input taxes were incurred or paid;
4. that such input taxes are attributable to zero-rated or effectively zero-rated sales;
5. that the input taxes were not applied against any output VAT liability; and
6. that the claim for refund was filed within the prescribed periods both in the administrative and
judicial levels.

In the case of Commissioner of Internal Revenue vs. Aichi Forging Company of Asia, Inc. the Supreme
Court exhaustively explained the significance of the period mentioned in Section 112 of the NIRC of 1997,
as amended, in relation to the validity of filing administrative and judicial claims for refund. Based on this
case, the two-year prescriptive period is reckoned from the close of the taxable quarter when the zero-rated
sales were made, regardless of when the input VAT was paid. Clearly, petitioner has timely flied its
administrative claims for refund for calendar years 2009, 2010, and 2011 as the records show.

For claims filed before June 11, 2014, or prior to the effectivity of Revenue Memorandum Circular (RMC)
No. 54-14, the rules provided under RMC No. 49-2003 in relation to Section 112 of the NIRC of 1997, as
amended, shall apply. Thus, petitioner had 30 days from the time of filing of its administrative claim for tax
credit or refund to submit all the required supporting documents. If in the course of the investigation,
additional documents are required, the BIR must inform petitioner of the need to submit additional
documents through a notice, and petitioner shall have 30 days to comply. Upon completion of all required
documents, the 120-day period shall commence; but in all cases, all filings and submissions, including the
judicial claim, must be completed within the two-year period under Section 112(A) of the NIRC of 1997, as
amended.

However, the Court notes that the notices received by petitioner, requiring the submission of certain
documents for the processing of the claim for refund for CYs 200941 and 2010, stated that the 120-day
period is suspended pending the submission of the required documents. Even though the date of receipt
was not indicated, the notices were dated beyond the 120- day period to decide. Thus, the request for
additional documents made by the revenue officers to petitioner and the subsequent compliance therewith
which were beyond the 120-day period did not toll the running of the said period.

Year Date of filing of Date of Notice for End of 120-day End of 30-day
Claim Submission of period period to file with
Documents the CA
2009 March 30, 2011 May 31, 2012 and July 28, 2011 August 27, 2011
October 8, 2012
2010 March 30, 2012 October 1, 2012 July 28, 2012 August 27, 2012
and 24, 2012
2011 March 30, 2013 - July 28, 2013 August 27, 2013
56

Evidently, the instant Petition for Review flied on November 10, 2014 was submitted out of time. The
reckoning period of the 120 days remains from the submission of complete document in support of the
administrative claim for refund, whether filed directly with the BIR Office or with the DOF-OSS Center.

WHEREFORE, premises considered, the instant Petition for Review is DISMISSED for lack of jurisdiction.

CIR v. Air Philippines Corporation


CTA EB 1537; May 21, 2018
Manahan, J.

FACTS:
Respondent Air Philippines Corporation (APC) is a corporation duly organized and existing in accordance
with and by virtue of the laws of the Republic of the Philippines. For the period March to November 2006,
respondent was assessed for specific taxes on its importations of Jet A-1 fuel used for its domestic
operations. Said assessments were paid under protest by respondent APC and became the subject of
seven (7) claims for refund filed before the Court of Tax Appeals (CTA) in division.

After trial, the Court in Division granted respondent APC's petitions and ordered the refund/issuance of tax
credit certificate (TCC) amounting to Php94,689,001.50

ISSUE:
Whether or not Air Philippines Corporation is entitled to exemption from all taxes due on importations of
aviation fuel.

RULING:
Respondent APC's franchise, Republic Act No. (RA) 8339, as amended by RA 9215, specifically Section
11 thereof, grants APC the same tax privileges and other favorable terms enjoyed by its competitors. The
tax privileges enjoyed by PAL - a competing corporation – as explained in Commissioner of Internal
Revenue v. Philippine Airlines, Inc. is provided in Sec. 13 of PD 1590 has not been revoked by Sec. 131 of
the NIRC of 1997, as amended by Sec. 6 of RA 9334.

Considering that PAL continues to enjoy the tax benefits under Sec. 13 of PD 1590, by virtue of the ipso
facto clause in Section 11 of RA 8339, as amended by RA 9215, APC shall also be entitled to the exemption
from all taxes due on importations of aviation fuel provided it meets the requirements therefor.

In determining APC's entitlement to the claimed refund, the Court in Division looked at whether APC
complied with the following requirements:
1. Payment has been made on its basic corporate income tax or franchise tax, whichever is lower;
2. The aviation fuel imported is for use in its transport and non-transport operations and other
activities incidental thereto; and
3. The aviation fuel is not locally available in reasonable
quantity, quality, or price.

As for the second requisite, The Court En Banc upholds the conclusion that respondent APC compliance
with this requisite. The Court in Division gave credence to the testimonies of APC's witnesses, Mr. Edwin
J. Segundo and Mr. Jhonathan Chiang, together with the ATRIGs on the importations for the period March
to November 2006. There is no question that ATRIGs provide prima facie proof that the imported Jet A-1
fuel are to be used for APC's transport and non-transport operations, and other activities incidental thereto.
Considering that petitioners presented no controverting evidence, APC's ATRIGs and testimonies of
witnesses have sufficiently proven the second requisite.

The third requisite was also complied with by APC. The Court in Division held that the law imposes an
alternative, not cumulative, qualification for the determination of whether there is locally available Jet A-1
fuel, i.e., in order for APC to satisfy the third condition, APC must prove that Jet A-1 fuel is not locally
57

available in reasonable quantity, quality, or price. Accordingly, it would suffice to prove even just one
qualification. The word "or" signifies that a preference can be made among the presented alternatives.
While initially confusing because the phrase is couched in the negative, simply put, as long as APC is able
to prove the absence of one condition (either reasonable quantity, quality, or price), the exemption applies.
APC is not required to prove the absence of all three conditions.

WHEREFORE, the instant Petitions for Review filed by the Commissioner of Internal Revenue and
Commissioner of Customs, docketed as CTA EB Nos. 1537 and 1550, respectively, are DISMISSED for
lack of merit.

Commissioner of Internal Revenue vs. Goodyear Philippines, Inc.


GR No. 216130 Aug. 3, 2016
Perlas-Bernabe, J.

FACTS:
Respondent filed an application for relief from double taxation with petitioner. On Oct. 21, 2010, it filed an
administrative claim before the BIR, for the refund or reissuance of tax credit certificate representing the
15% final withholding tax it paid. Thereafter, on Nov. 3, 2010, it filed a judicial claim, by way of petition for
review, before the CTA.

ISSUE:
Should respondent's claim be dismissed for non-exhaustion of administrative remedies?

RULING:
No, respondent's claim should not be dismissed.

Under Sec. 229 of the NIRC, judicial claims for refund must be filed within 2 years from the date of payment
of the tax or penalty. The primary purpose of filing an administrative claim was to serve as a warning to the
CIR that judicial action was to follow unless the penalty was illegally or erroneously collected.

Respondent cannot be faulted for filing a judicial claim just 13 days after it filed an administrative claim,
because the two year period for filing a judicial claim was about to expire.

Bloomberry Resorts & Hotels vs. Bureau of Internal Revenue


GR No. 212530 Aug. 10, 2016
Perez, J.

FACTS:
RA 9337 removed PAGCOR's tax exemption. In implementing the said law, respondent BIR issued RMC
No. 33-2013 declaring that PAGCOR's contractees and licensees being entities authorized by it to perform
gambling casinos, gaming clubs, and other similar recreation or amusement places, and gaming pools, are
likewise subject to income tax under the NIRC.

Petitioner argues that the CIR exercised grave abuse of discretion in issuing the administrative rule,
because the PAGCOR Charter expressly grants tax exemptions to its contractees.

ISSUE:
Did the BIR exercise grave abuse of discretion in issuing RMC No. 33-2013?

RULING:
Yes, the BIR exercised grave abuse of discretion.
58

There is no conflict between the PAGCOR Charter and the NIRC. The Charter laid down the taxes to be
paid by PAGCOR, while the previous NIRC provision merely exempted PAGCOR from paying such taxes.
Thus, when the exemptions were lifted, the law merely reverted to that of the PAGCOR Charter, which
grants such exemptions. Even assuming that there is an inconsistency, a special law prevails over a general
law.

Hence, contractees such as petitioner are exempt from paying the income tax.

Greenhills Properties, Inc. vs. Commissioner of Internal Revenue


CTA EB No. 1604 May 17, 2018
Mindaro-Gulla, J.

FACTS:
Respondent issued a Preliminary Assessment Notice with Details of Discrepancies to petitioner. Petitioner
filed its reply to the CIR. Later, the CIR issued a Formal Demand with Details of Discrepancies and
Assessment Notice. Petitioner later filed a Letter-Protest to the Final Assessment Notices. Respondent
granted the request for reinvestigation, but failed to act on the protest within the 180-day period. Petitioner
appealed to the CTA in Division who partially ruled in favor of petitioner. The CTA in Division later issued
an Amended Decision, which was appealed by petitioner before the CTA en banc.

ISSUE:
Is petitioner's failure to file a motion for reconsideration before appeal a ground for dismissal of the case?

RULING:
Yes, failure to file a motion for reconsideration before appeal is ground for dismissal.

According to Rule 8 of the RRCTA, a motion for reconsideration timely filed is required before the CTA en
banc may entertain an appeal. Under Rule 14, an amended decision is considered as a new decision, and
is thus the subject of a proper motion for reconsideration.

In this case, petitioner failed to file a timely motion for reconsideration after the CTA in Division issued an
Amended Decision. Thus, the CTA en banc denied the petition for being procedurally infirm.

ASC Investors, Inc. vs. City of Davao and Hon. Rodrigo S. Riola, in his Capacity as City Treasurer
of Davao
CTA EB No. 1568 May 17, 2018
Uy, J.

FACTS:
Respondent City, through the Treasurer, issued a Business Tax Order of Payment, assessing petitioner for
alleged 0.55% local business tax on the dividends derived from its shares of stock and interest on its money
market placements for the 3rd and 4th quarters of the taxable year 2011, in the amount of P4,943,223.40.

Petitioner filed a written administrative protest on the alleged erroneously and illegally assessed local
business tax. Respondent demanded the petitioner first make payment before the protest may be
entertained. Petitioner replied that the requirement of payment under protest is invalid and unconstitutional,
because under Sec. 252 in relation to Sec. 195 of RA 7160, it is only required for real property taxation.

Petitioner argues that the assessment is illegal because petitioner is not a taxable financial intermediary,
and is but a holding company. Petitioner avers that its income partakes the nature of public funds, and that
local governments cannot tax the national government.
59

Respondent argues that the nature of petitioner's business, which consists solely of stock investments and
money placements in San Miguel Corporation, is well within the purview of the definition of banks and other
financial institutions. Respondent also argues that even assuming petitioner's income is public in nature, it
is still taxable under Sec. 143(f) of the Local Government Code.

ISSUE:
Is petitioner a non-bank financial intermediary, and as such, taxable by the local government?

RULING:
No, petitioner is not a non-bank financial intermediary.

Taking the provisions of the NIRC and the General Banking Law into account, to be considered as a non-
bank financial intermediary, the following requirements have to be met: 1) the person or entity is authorized
by the Bangko Sentral ng Pilipinas to perform quasi-banking functions; 2) the principal functions of the entity
include “the lending, investing, or placement of funds or evidences of indebtedness or equity deposited to
them, acquired by them or otherwise coursed through them, either for their own account or for the account
of others”; 3) the person or entity must do the following on a regular and recurring basis: a) receive funds
from a group of persons, through traditional deposits, issuance of debt or equity securities, and make
available these securities to another person or entity; b) use principally the funds received for acquiring
various types of securities; c) borrow against, lend on, or or buy and sell debt or equity securities; d) hold
assests consisting principally of debtor equity securities such as promissory notes, bills of exchange, or
mortgages; e) realize regular income in the nature of, but not limited to, interest, discounts, capital gains,
principally from transactions in debt or equity securities, or by being an intermediary between suppliers and
users of funds.

In this case, there is no showing that petitioner was authorized by the BSP. Nothing on record also shows
that the petitioner is actually engaged in the functions of a financial intermediary as enumerated above.
Finally, there is no evidence that petitioner engaged in these activities in a regular and recurring, and not
isolated manner.

Thus, petitioner is not taxable by the local government.

Commissioner of Internal Revenue vs. Coral Bay Nickel Corporation


CTA EB No. 1418 May 17, 2018
Fabon-Victorino, J.

FACTS:
Coral Bay entered into an agreement with Sumitomo Metal Mining in which Coral Bay would export nickel
cobalt mixed sulfide to the latter. Later, it filed with the BIR its administrative claim for refund in the amount
of P28,032,089.95 representing its alleged unutilized input VAT for taxable year 2011. The CIR failed to act
on the claim, thus prompting petitioner to file a petition for review on the matter.

Petitioner argues that the court has no jurisdiction over the case because respondent did not exhaust its
administrative remedies, and that even assuming that it did so, it did not comply with the accounting and
invoicing requirements laid in Sec. 113, 114, and 236 of the NIRC.

Respondent argues that its failure to submit the documents finds no application in this case. It argues that
judicial claims are litigated de novo regardless of the documents submitted at the administrative level.

ISSUE:
Does respondent's failure to submit documents at the administrative level prevent the court from
adjudicating the judicial case?

RULING:
60

No, courts may try judicial claims regardless of the documents submitted at the administrative level.

According to jurisprudence, when a taxpayer files a judicial claim due to inaction by the CIR, the court is
essentially deciding the case in the first instance. There is no decision for the CTA to review on appeal per
se. The CTA may thus give credence to any evidence presented, including those that may not have been
submitted to the CIR.

In the instant case where the CIR failed to take any action on Coral Bay's administrative claim, the
documents submitted by the latter should be deemed complete, as there was no notification by the CIR
requiring the submission of other documents.

Thus, the courts may try the case.

AGC FLAT GLASS PHILIPPINES, INC. VS. BUREAU OF CUSTOMS


CTA Case No. 8752, MAY 09,2018
MANAHAN, J. :

FACTS:
Petitioner is primarily engaged in the export production of various industrial glass products such as float
glass, figure glass, and glass mirrors. It is a duly registered Ecozone Export Enterprise pursuant to Republic
Act (RA) No. 7916 otherwise known as "The Special Economic Zone Act of 1995" (PEZA Law) by the
Philippine Economic Zone Authority (PEZA) under Certificate of Registration No. 07-33. Petitioner entered
into a Supply Agreement with Pilipinas Shell Petroleum Corporation (PSPC).

Believing that it should have been exempted from paying the customs duties which were included in the
cost of said procured fuel, petitioner filed a letter dated October 19, 2010 the respondent's District Collector
of Batangas International Port requesting for the refund of the customs duties imposed on the procured
petroleum fuel covering the year 2008 in the amount of Php11,284,069.24. However, respondent informed
petitioner that January 1, 2008 to December 31, 2009 amounting to Php28,573,250.15 is denied citing that
under the Registration Agreement between PEZA and the petitioner dated March 13, 2007, the latter was
not entitled to PEZA incentives because "the area is ready fully developed ". Petitioner filed a letter request
for the reversal of said decision on November 14,2011. On December 25,2012, sent a letter reiterating its
prayer, however respondent made no decision was received. Thus, to avoid having its claim for refund
prescribed, petitioner filed the instant petition on December 27, 2013.Respondent filed its answer, and
petitioner was allowed to present evidence, but a substantial amount was not allowed.

Petitioner argues that the instant petition is filed pursuant to the principle of solutio indebiti as contained in
Article 2154 of the Civil Code. Respondent, on the other hand, argues that this Court has no jurisdiction
over the inaction of the Commissioner of Customs pursuant to Section 7 (2) of RA No. 1125 as amended
by Section 7(a)(4) of RA 9282 and that petitioner is not entitled to PEZA incentives, hence, the claim was
properly denied by the District Collector.

ISSUE:
Whether the petitioner or not the petitioner is entitled to the amount of customs duties claimed

RULING:
Petitioner is entitled to the claim for refund Petitioner maintains that being a PEZA-registered entity, it enjoys
a duty and tax-free importation privilege under the PEZA law and its implementing rules and regulations
(IRR). Relevant provisions of RA No. 7916, as amended. Rule XV - Incentives to Ecozone Export and Free
Trade Enterprises ,section 1 Exemption from Duties and Taxes on Merchandise Merchandise, raw
materials, supplies, articles, equipment, machineries, spare parts and wares of every description brought
into the ECOZONE Restricted Area by an ECOZONE Export or Free Trade Enterprise to be sold, stored,
broken up, repacked, assembled, installed, sorted, cleaned, grade or otherwise processed, manipulated,
61

manufacture, mixed with foreign or domestic merchandise whether directly or indirectly related in such
activity, shall not be subject to customs and internal revenue laws and regulations of the Philippines nor to
local tax ordinances. Likewise, the PEZA Registration Agreement of the petitioner provides such incentive.
Thus, any purchases made by a PEZA-registered EEE from a local supplier based outside the ECOZONE
are considered importations which should not be subjected to any customs duties or internal revenue taxes.

PHILIP MORRIS PHILIPPINES MANUFACTURING, INC. VS. COMMISSIONER 0F INTERNAL


REVENUE
CTA CASE NO. 8791, MAY 09, 2018
DEL ROSARIO, P.J.

FACTS:
On January 22, 2008J respondent issued RR 03-08 (Amending Certain Provisions of Existing Revenue
Regulations on the Granting of Outright Excise Tax Exemption on Removals of Excisable Articles Intended
for Export or Sale/Delivery to International Carriers or to Tax-Exempt Entities/Agencies and Prescribing the
Provisions for Availing Claims for Products Replenishment). On February 25, 2014 petitioner filed with the
Bureau of Internal Revenue (BIR) Large Taxpayers Excise Audit Division Il an administrative claim for
refund or issuance of a tax credit certificate in the total amount of P 101851 ,411.00, representing excise
tax advanced jn 2008 by petitioner on its exported tobacco, pursuant to RR 03-08.

Claiming inaction on its administrative claim, and that the six-year prescriptive period under Article 1145 (2)
of the Civil Code is about to expire, petitioner filed the present Petition for Review on March 28, 2014 based
on Section 130 (D) of the NIRC of 1997, as amended. On July 2, 2014, respondent filed his Answer, with
the following Special and Affirmative Defenses among others that the Petition for Review should not be
given due course and the claim for refund was filed out of time. Petitioner claims that the amounts it
advanced or deposited under RR 03-08 should be returned to petitioner pursuant to the principle of solutio
indebiti and Section 130(D) of the NIRC of 1997, as amended.

Petitioner avows that the CTA has jurisdiction to declare RR 0308 void. Petitioner further asserts that that
two-year prescriptive period under Section 204(C) and 229 of the NIRC of 1997, as amended, is not
applicable to this case since Section 130 (D) of the NIRC of 1997, as amended, does not prescribe a time
limit for filing a claim for it exported during the period beginning 3 April 2008 to 31 December 2008 has
already prescribed.

ISSUE:
Whether or not the claim has already prescribed

RULING:
Sections 204 and 229 of the NIRC of 1997, as amended, provide for the period within which to claim a
refund of internal revenue taxes which are erroneously, illegally and wrongfully collected. Sections 204 and
229 of the NIRC of 1997, as amended. Petitioner justifies the filing of its administrative and judicial claims
for refund of the aforesaid excise taxes beyond the two (2) year prescriptive period by arguing that Section
130(D) of the NIRC of 1997, as amended, does not prescribe a time limit for filing a claim for refund of
excise taxes paid in advance, and that the amounts paid under RR 03-08 are in the nature of advance or
deposited taxes and not erroneously paid taxes.

Petitioner in the present case paid the excise taxes in accordance with the provisions of the NIRC and its
implementing regulations. Petitioner's payment of excise taxes through advance deposit is specifically
provided under RR 03-08, which requires among others, all manufacturers of articles subject to excise tax
under Title VI of the NIRC of 1997, as amended, to pay the excise tax on every removal thereof from the
place of production even if intended for exportation or sale/delivery to international carriers or to tax-exempt
entities/agencies, subject to the subsequent filing of a claim for excise tax credit/refund or product
replenishment.
62

Analogously, the excise taxes paid in advance by petitioner were collected legally on the basis of Section
130(A) of the NIRC of 1997, as amended. While the aforequoted provision is silent on the period within
which a claim for refund may be filed, the Court finds as applicable Sections 204 and 229 of the NIRC of
1997, as amended, to refund of excise taxes that were paid in advance on locally manufactured products
which were eventually exported. These provisions of the NIRC confined, as they are to erroneously
collected taxes, necessarily include excise tax.

VESTAS SERVICES PHILIPPINES, INC. VS COMMISSIONER OF INTERNAL REVENUE


CTA CASE NO. 9382, MAY 09,2018
DEL ROSARIO, P.J.

FACTS:
Petitioner was incorporated on December 14, 2009. It is engaged in the business of installation and
construction services, including entering into subcontracting arrangements, and service of wind power
systems. It also acts as a business development and information technology center that provides services
to its affiliates in the Asia Pacific. It is registered with the BIR for VAT purposes. Petitioner filed with the BIR
its Amended Quarterly VAT Return for the 1 st quarter of CY 2014 on August 18, 2014. On March 31, 2016,
petitioner filed with the Revenue District Office (RDO) No. 50 its administrative claim for refund or issuance
of TCC representing its excess and/or unutilized input VAT for the 1 st quarter of CY 2014 in the amount of
P14,565, 140.54,this was denied.

In view of the denial of its administrative claim, petitioner filed the present Petition for Review before the
Court on July 7, 2016. Respondent in its Answer interposed among others the following special affirmative
defenses that petitioner failed to demonstrate that the tax, which is the subject of this case, was erroneously
or illegally collected, taxes are presumed to have been paid and collected in accordance with laws and
regulations, hence, not refundable and petitioner's claim for refund or issuance of TCC in the amount of
P14,565,140.54 representing alleged unutilized input VAT paid on purchases of goods and services
attributable to its zero-rated sales for the 1 st quarter of CY 2014 was not fully substantiated by proper
documents, such as sales invoices, official receipts and others.

ISSUE:
Whether petitioner’s claim for refund or to the issuance of a TCC representing its excess and/or unutilized
input VAT attributable to its zero-rated sales of goods or services, was timely fileD
RULING:
Petitioner cites Section 112(A), in relation to Section 112(C), of the NIRC of 1997, as amended, in claiming
a refund or issuance of a TCC of its input VAT which are allegedly attributable to its zero-rated sales. Anent
the petitioner's administrative claim, Section 112 (A) of the NIRC of 1997, as amended, specifically requires
that the taxpayer's application for refund or issuance of TCC of unutilized and/or excess input VAT arising
from its domestic purchases of services and importation of goods other than capital goods, which are
attributable to its zero-rated sales, must be made within two years after the close of the taxable quarter
when the sales were made. Since the present claim covers the 1 st quarter of CY 2014, petitioner had two
(2) years after the close of the taxable quarter on March 31, 2014 or until March 31, 2016 within which to
file its claim for refund.

Petitioner's administrative claim for refund or issuance of TCC for the 1st quarter of CY 2014 was filed on
March 31, 2016, thus, the same was timely filed. As to the appeal with respect to the “Denial Letter”, the
taxpayer can file the appeal in one of two ways: (1) file the judicial claim within thirty days after the
Commissioner denies the claim within the 120-day period, or (2) file the judicial claim within thirty days from
the expiration of the 120-day period if the Commissioner does not act within the 120-day period. Since
petitioner received the aforesaid Letter on June 7, 2016, petitioner had thirty (30) days from said date or
until July 7, 2016 within which to appeal to the CTA. The Petition for Review which was filed on July 7, 2016
was filed within the reglementary period to appeal. Thus, the Court has jurisdiction to take cognizance of
the Petition for Review.
63

THE CITY GOVERNMENT OF MAKATI AND THE CITY TREASURER OF MAKATI VS SOUTH LUZON
TOLLWAY CORPORATION
CTA AC No. 187, MAY 09,2018
DEL ROSARIO, P.J

FACTS:
Petitioner City of Makati is a duly created and existing local government unit empowered under the Local
Government Code to assess and collect local business taxes through Petitioner City Treasurer. On the
other hand, respondent South Luzon Tollway Corporation is a corporation duly organized and existing under
the laws of the Philippines. Respondent was organized for the purpose of engaging in the rehabilitation,
construction, and expansion, of the South Luzon Expressway ("SLEX").

Respondent's principal office was located in Makati City. On August 3, 2011, respondent transferred its
principal office to Calamba City, Laguna, and accordingly, applied for a Certificate of Business Retirement
with petitioners. In the process of its application, respondent was assessed local business tax for the period
January 1 to September 30, 201 1. On December 13, 2013, respondent sent a letter addressed to the City
of Makati, through then City Treasurer Nelia A. Barlis, requesting for a refund of the local business tax it
paid, claiming that it was registered as a pioneer enterprise with the Board of Investments ("BOI") on March
3, 2010 and is therefore exempt from local business tax for six (6) years or from March 3, 2010 to March 3,
2016.

No reply was made; thus, respondent filed a Petition with the Regional Trial Court of Calamba City, praying
that it be declared exempt from local business taxes for the period beginning March 3, 2010 until March 3,
2016 and seeking a refund of the local business tax previously collected by petitioner and said petition was
granted. Petitioners filed a Motion for Reconsideration which was denied. On September 11, 2017,
respondent filed its Comment/Opposition.

ISSUE:
Whether respondent or not entitled to a refund representing local business tax paid upon filing of its
application for business retirement

RULING:
Respondent is entitled to a cash refund. the Court finds that the Laguna-RTC did not err in holding that
respondent is entitled to the refund sought. The Court notes that, at the time of the filing of the claim for
refund on December 13, 2013, respondent submitted, among others, a copy of its BOI Certificate of
Registration which was issued by the BOI on March 3, 2010, in support of its claim that it is exempt from
local business tax for the period of six (6) years from March 3, 2010 to March 3, 2016. Petitioners failed,
however, to act on respondent's claim for refund, notwithstanding that based on the documents submitted
by respondent in support of its claim, it should not have been made to pay the local business tax for the
period January 1 to September 30, 2011.

Indeed, "tax refunds or tax credits — just like tax exemptions — are strictly construed against taxpayers,
the latter having the burden to prove strict compliance with the conditions for the grant of the tax refund or
credit. " Thus, a claimant must positively show compliance with pertinent provisions of the law in order to
be entitled thereto. But once the taxpayer is able to sufficiently prove its entitlement to the refund, as in the
case at bar, it thus behooves the government to refund what the taxpayer is entitled to. Section 196 of the
LGC explicitly gives the taxpayer the right to file a claim for refund or tax credit of erroneously or illegally
collected taxes. Section 196 of the LGC explicitly states: "Section 196. Claim for Refund or Tax Credit. - No
case or proceeding shall be maintained in any court for the recovery of any tax, fee, or charge erroneously
or illegally collected until a written claim for refund or credit has been filed with the local treasurer. No case
or proceeding shall be entertained in any court after the expiration of two (2) years from the date of the
payment of such tax, fee, or charge, or from the date the taxpayer is entitled to a refund or credit."
64

FILMENERA RESOURCES CORPORATION VS COMMISSIONER OF INTERNAL REVENUE


CTA Case No. 8666, MARCH 24 ,2017
RINGPIS-LIBAN, J.

FACTS:
Petitioner Film-inera Resources Corporation is a domestic Corporation incorporated under the laws of the
Republic of the Philippines engaged in the business of operating coal mines and prospecting explorations
and mining in all other kinds of ores, metals, and mineral resources. On July 5, 2007, petitioner entered
into an Ore Sales and Purchase Agreement with Phil. Gold Processing and Refining Corp, a duly registered
corporation with the Board of Investment. On April 25, 2011, petitioner, through the Electronic Filing and
Payment System, filed its Quarterly VAT Return for the third quarter of fiscal year ending June 30, 2011.

On January 29, 2013, petitioner filed an application for input tax credit for the third quarter of fiscal year
ending June 30, 2011 allegedly representing its unutilized or unapplied creditable input tax for the period
of January 1, 2011 to March 31, 2011. The Commissioner of Internal Revenue failed to act on the matter,
thus, a Petition for review was filed. CIR, in its answer, avers that the alleged claim of the petitioner was
not properly documented, and said failure to substantiate the refund is fatal to the claim of petitioner. On
August 3, 2015, the Court in Division denied the Petition for Review on the reason that it failed to prove that
the claimed input taxes were not applied against any output liability during and in the succeeding period of
claim.

Petitioner argues that it was able to sufficiently prove that it is engaged in zero-rated sales, being a VAT
registered supplier to PGPRC, a BOI registered purchaser whose products are 100% exported and thus,
to its claim for refund and/or issuance of tax credit certificate for the third quarter of fiscal year 2011. The
Petition for Review before the Court in Division was anchored on the petitioner's claim for tax refund
pursuant to Section 112 (A) of the NIRC of 1997, as amended.

ISSUE:
Whether the Court in Division erred in denying petitioner's claim for refund or issuance of a tax credit
certificate representing alleged unutilized creditable input tax

RULING:
Pursuant to Section 112(A) of the NIRC of 1997 provides ,and as laid down by the Supreme Court in a
number of cases , a taxpayer engaged in zero-rated or effectively zero-rated transactions may claim a
refund or tax credit certificate for input taxes attributable to such sales upon compliance with the following
requisites: 1) That the taxpayer must be VAT-registered; 2)That the claim for refund was filed within the
two-year prescriptive period; 3) That there must be zero-rated Of effectively zero-rated sales; 4)That input
taxes were incurred or paid; 4) That such input VAT payments are directly attributable to zero-rated sales
Of effectively zero-rated sales; and 5) That the input VAT payments were not applied against any output
VAT liability. As found in the records of the case, petitioner filed an administrative claim for refund before
the BIR on January 29, 2013. Thus, the 120-day period commenced to run from January 29, 2013 until May
29, 2013, the last day for the Commissioner of the BIR to decide the administrative claim. However,
respondent failed to act on the administrative claim. Hence, petitioner had thirty (30) days from the lapse
of the 120-day period or until June 28, 2013 within which to appeal the unacted claim to the Court of Tax
Appeals. Both filing fell within the prescriptive period.

Petitioner was able to sufficiently prove that it is engaged in zero-rated sales, being a VAT-registered
supplier to PGPRC, a BOI-registered purchaser whose products are 100% exported. However, an
examination of the sales invoices and official receipts submitted by petitioner shows that out of the reported
zero-rated sales of P695,704,567.61, the amount of P435,000.00, xxx, pertains to petitioner's lease of land
to PGPRC which cannot be considered as export sales contemplated under Section 106(A)of the NIRC of
1997, as amended. Without convincing evidence that the subject input taxes were not utilized or carried
over as credit to the subsequent quarters, this Court cannot grant petitioner's prayer. To grant petitioner's
claim for refund, without proof of deduction of the corresponding amount, would be dangerous and
tantamount to granting twice the refund herein sought to be refunded, to the prejudice of the Government.
65

COMMISSIONER OF INTERNAL REVENUE vs. PHILIPPINE NATIONAL BANK


CTA EB NO. 1615 (CTA Case No. 8636); April 25, 2018
Manahan, J.:

FACTS:
PNB seeks the refund of the amount of Php289,085,378.91, allegedly representing its excess creditable
withholding tax (CWT) for taxable year 2010. CIR primarily submits in its Petition for Review that PNB failed
to prove its entitlement to the tax refund by failing to offer in evidence substantial proof. It was alleged that
petitioner should have presented its quarterly income tax returns in order to ascertain whether it opted to
carry over its 2010 excess credits and to prove that the excess creditable withholding tax has not been
carried over to the succeeding taxable quarters. This is because tax refunds are in the
nature of tax exemptions and as such, they are regarded as in derogation of sovereign authority. Thus, tax
refunds are construed strictissimi juris against the person or entity claiming the same. PNB on its part,
maintains that the presentation of the quarterly ITRs for 20 11 is not necessary to prove that the
excess CWT of 2010 has not been carried over to the succeeding quarters as there were other evidence
presented to prove such fact. As to the presentation of the withholding agents to identify the withholding
tax certificates, petitioner submits that this not a requirement as the fact of withholding was sufficiently
established through the presentation of the CWT certificates for taxable year 2010.

ISSUE:
Whether the Court in Division committed reversible error in partially granting the claim for refund of PNB
representing alleged excess creditable withholding taxes for taxable year 2010.

RULING:
NO. The following basic requisites must be sufficiently established for a taxpayer be entitled to a refund or
issuance of tax credit certificate for its unutilized excess CWT:

1. The claim for refund must be filed within the two-year prescriptive period as provided under
Sections 204 (C) and 229 of the National Internal Revenue Code (NIRC) of 1997, as
amended;
2. The fact of withholding must be established by a copy of a statement duly issued by the
payor (withholding agent) to the payee showing the amount paid and the amount of tax
withheld therefrom; and
3. The income upon which the taxes were withheld must be declared as part of the gross
income of the recipient.

The first and the last requisites are of no relevance in the issue of this case. As to the second requisite, the
findings of the Court in Division are in accord with the basic evidentiary requirements to prove that the fact
of withholding as established by showing the amount paid and the amount of tax withheld therefrom.
Respondent PNB offered in evidence its Trial Balance for 20 10; its Audited Financial Statements; General
Ledgers and various Certificates of Creditable Tax Withheld at Source (BIR Form No. 2307) with
Transaction Tickets/Input Sheets and Deeds of Sale and the Independent Certified Public Accountant ICPA
Report. A review of the records shows that respondent's income upon which the taxes were withheld was
properly reported as forming part of its gross income as shown in the Annual ITR for taxable year 2010. All
the above requisites were substantially complied with but with some reductions in the amount claimed due
to the varied reasons aforestated in the Decision promulgated on October 3, 2016. The Court En Banc finds
no reason to reverse or modify such findings.
66

CLARK WATER CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE


CTA Case No. 9286; May 3, 2018
Casanova, J.

FACTS:
A Petition for Review was filed by Clark Water Corporation (CWC), on March 4, 2016, praying for the
cancellation and withdrawal of respondent's assessment for alleged deficiency value¬ added tax (VAT) for
calendar year (CY) 2011. CWC received a copy of the respondent's Preliminary Assessment Notice (PAN)
assessing the petitioner for deficiency VAT and final withholding tax (FWT) for CY 2011. A Formal Letter of
Demand and Final Assessment Notice was thereafter received by the same later on. CWC filed its protest
to the FLD/FAN wherein it requested for the cancellation and withdrawal of the deficiency VAT and FWT
assessments for CY 2011. Respondent cancelled his deficiency FWT assessment and demanded the
payment of deficiency VAT for CY 2011 as apparent in the copy of the Final Decision on Disputed
Assessment sent to and received by CWC. Petitioner insists that as a registered CSEZ enterprise, pursuant
to Section 15 of Republic Act No. 7227, Section 5 of Executive Order No. 80 and Proclamation No. 163, it
enjoys the preferential tax rate of 5% in lieu of all local and national taxes, unless it breaches the 30%
threshold on its sales within the customs territory. Accordingly, since its revenues from enterprises located
outside the CSEZ territory constituted only 7.12% of petitioner's total revenue for CY 2011, petitioner is of
the considered view that its sales within the customs territory should not be subject to VAT. Respondent,
on the other hand, insists that petitioner's sales transactions/services rendered to a customer from the
customs territory is subject to VAT pursuant to RMC No. 50-2007.

ISSUE:
Whether or not the alleged deficiency of VAT for CY 2011 arising from services rendered by petitioner to
customers from the customs territory should be subject to 12% VAT.

RULING:
NO. Pursuant to Section 3(Q9/A9) of RMC No. 50-2007, the sale of service shall be exempt from VAT if
the service is performed or rendered within the Freeport Zone. The lease of properties, on the other hand,
shall likewise be exempt from VAT if the property is located within the Freeport Zone. However, if the
properties (machineries and equipment) leased by the Freeport Zone-registered enterprise is located
outside of the Freeport Zone, payments to such enterprise will be considered as royalties and subject to
the final withholding VAT of 12%. The said provision discussed two things: sale of service and lease of
property by a PEZA-registered enterprise. With respect to the lease of property, the BIR distinguished the
tax implication of the lease of property, by a PEZA-registered enterprise, to its clients located inside and
outside of the Freeport Zone. Accordingly, it shall be exempt from VAT if the property being leased is
located within the Freeport Zone, but if the property being leased is located outside of the Freeport Zone,
the payment to such enterprise will be considered as royalties and will be subject to 12% final withholding
VAT.

As regards the sale of service, no such distinction was made. In fact, the BIR merely stated the tax
implication of the sale of service within the Freeport Zone, which, accordingly, is treated as a VAT exempt
transaction. It has to be noted that Freeport Zone-registered enterprises may generate income from sources
within the Customs Territory of up to thirty percent (30%) of its total income from all sources; provided, that
should a Freeport Zone¬ registered enterprise's income from sources within the Customs Territory exceed
thirty percent (30%) of its total income from all sources, then it shall be subject to the income tax laws of
the Customs Territory; provided further, that in any case, customs duties and taxes must be paid with
respect to transactions, receipts, income and sales of articles to the Customs Territory and in the Customs
Territory.
67

DUTY FREE PHILIPPINES CORPORATION vs. BUREAU OF INTERNAL REVENUE REPRESENTED


BY KIM S. JACINTO-HENARES, AND/OR NESTOR S. VALEROSO, OIC-ASSISTANT
COMMISSIONER, LARGE TAXPAYERS SERVICE
CTA Case No. 9355; May 8, 2018
Manahan, J.:

FACTS:
Petitioner Duty Free Philippines Corp. is a corporate body attached to the Department of Tourism (DOT),
created and organized by Republic Act (RA) No. 9593 otherwise known as the Tourism Act of 2009.
Respondent Bureau of Internal Revenue is a government bureau under the supervision of the Department
of Finance (DOF).In 2012, RA No. 10351 entitled "An Act Restructuring the Excise Tax on Alcohol and
Tobacco Products by Amending Sections 141, 142, 143, 144, 145, 8, 131 and 288 of Republic Act No.
8424, otherwise known as the National Internal Revenue Code of 1997, as amended by Republic Act No.
9334, and for other purposes" took effect which, among others restructured excise taxes on alcohol and
tobacco products. Thereafter, BIR assessed and collected value-added tax (VAT) on DFPC's importation
of alcohol and tobacco merchandise for sale in 2014. Petitioner filed its administrative claim for refund on
the alleged erroneously or illegally assessed and collected VAT for the period January 1 to December 31,
2014 on its importation of alcohol and tobacco merchandise. BIR denied said claim for refund citing Section
7 of RA No. 10351, amending Section 131(A) of the National Internal Revenue Code of 1997 (NIRC), as
amended, that DFPC's importation of tobacco and alcohol products for sale is exempt only as far as the
applicable duties are concerned but not from payment of VAT. Petitioner Duty Free filed instant petition to
set aside respondent BIR’s denial of its claim for refund and order said refund.

Respondent argues that this Court has jurisdiction over the instant petition citing the case of Power Sector
Assets and Liabilities Management Corporation v. Commissioner of Internal Revenue (PSALM case).
Respondent also argues that the petition was filed out of time and petitioner's exemption under RA No.
9593 was already repealed by RA No. 10351.

ISSUE:
Whether or not the Honorable Court has jurisdiction over the instant case.

RULING:
NO. In disputes and claims solely between government agencies and offices, including GOCCs, the
administrative procedure in Sections 2 and 3 of Presidential Decree (PD) No. 242 should be followed. Under
Presidential Decree No. 242 (PD 242), all disputes and claims solely between government agencies and
offices, including government-owned or controlled corporations, shall be administratively settled or
adjudicated by the Secretary of Justice, the Solicitor General, or the Government Corporate Counsel,
depending on the issues and government agencies involved.

The purpose of PD 242 is to provide for a speedy and efficient administrative settlement or adjudication of
disputes between government offices or agencies under the Executive branch, as well as to filter cases to
lessen the clogged dockets of the courts. Petitioner DFPC is an agency attached to DOT which is a national
government agency while respondent BIR is a bureau under the supervision of DOF, which is also a national
government agency. The opposing parties are both agencies of the government. Hence, the jurisdiction
belongs to the Secretary of Justice and the disputes should be resolved pursuant to PD 242.
68

COMMISSIONER OF INTERNAL REVENUE vs. PREMIUM LEISURE CORP.


CTA EB No.1702 (CTA Case No. 8940); April 25, 2018
Castañeda, Jr., J.:

FACTS:
Premium Leisure Corp. is the registered holder of a number of shares of the capital stock of BBC. The
Securities and Exchange Commission approved BBCC's Amended Articles of Incorporation, wherein Article
IV thereof was amended to shorten the term of BBCC's existence. BIR issued BIR Ruling DA-316-2007 in
May 1997 declaring that the transfer by BBCC of the reclaimed lots to its stockholders as liquidating
dividends is not subject to income tax, creditable withholding tax, and documentary stamp tax; and that the
receipt of reclaimed lots as liquidating dividends by the stockholder is a taxable income or a deductible loss,
as the case maybe. BBCC executed a Deed of Conveyance in favor of Premium Leisure Corp., transferring
a parcel of land.

The latter filed before the BIR its Withholding Tax Remittance Return and Documentary Stamp Tax
Declaration/Return without having remitted or paid any corresponding withholding tax or documentary
stamp tax. In its 2012 Annual Income Tax Return, Premium Leisure Corp. reported the fact of its receipt of
liquidating dividends from BBCC by recognizing a net liquidating gain as part of its 'Other Taxable Income
not Subjected to Final Tax,' thus, subjecting such to liquidating gains to the thirty percent (30%) regular
corporate income tax. Premium Leisure Corp. also filed its Capital Gains Tax Return with the Land Bank of
the Philippines (LBP), Baclaran Branch and paid under protest approximately 6M allegedly representing
capital gains tax arising from its receipt of real property by way of liquidating dividends from BBCC, to which
Premium Leisure Corp. later on filed an application for refund and/or issuance of TCC, recovering the CGT
tax previously remitted.

Premium Leisure Corp. as capital asset is the one obliged to pay the capital gains tax, based on its
obligation to transfer title over the property to the seller; that BBCC as seller is the one liable for the payment
of the corresponding capital gains tax; that BBCC should be the proper party who should file the claim for
refund in this case and not the buyer as herein petitioner.

ISSUE:
Whether or not the the surrender of shares of stockholders in exchange for assets distributed by corporation
is subject to Capital Gains Tax?

RULING:
NO. The Court En Bane is of the view that receipt by a stockholder, whether corporate or individual, of
liquidating dividends is not subject to CGT. The basis for this position is not because of the absence of
income from or the absence of sale, disposition or conveyance of real property, but because such
transaction is subject to ordinary income tax on the part of the individual stockholders, or corporate income
tax for corporate stockholders. Section 73(A) of the 1997 NIRC definitely provides that any gain derived, or
any loss sustained by a stockholder from its receipt of liquidating dividends shall be treated as taxable
income or deductible loss, as the case may be. The capital gain or loss derived therefrom shall be subject
to the regular income tax rates imposed under the Tax Code, as amended, on individual taxpayers or to
the corporate income tax rate, in case of corporations. It can be gleaned that the surrender of shares by
stockholders in exchange for assets distributed by the corporation upon dissolution thereof and liquidation
of its assets and liabilities is treated by the Supreme Court as sale by the stockholder of its shares to the
dissolved corporation and any gain derived by the stockholder from such transaction is subject to income
tax.
69

BONIFACIO LAND CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE


CT A Case No. 9068; April 19, 2018
Bautista, J.:

FACTS:
BCDA and the Consortium entered into a Joint Venture Contract, whereby the latter shall be entitled to and
shall purchase BCDA's outstanding shares of stock in FBDC, representing fifty-five percent (55%) of the
total issued and outstanding capital of FBDC. petitioner received Assessment Notice No. IT LA27497-08-
12-0164 and FAN28, both dated February 28, 2012, assessing petitioner for alleged deficiency IT in the
amount of Php17,830,362.67, inclusive of interest, for TY 2008.

The assessment pertained to the disallowance of the cost of investment in the redeemable preferred shares
("RPS") of FBDC which was allegedly unsubstantiated and supposedly in violation of Section 34(A)(l)(C) of
the 1997 National Internal Revenue Code, as amended ('1997 NIRC"), quoted by respondent in the Details
of Discrepancies attached to the FAN as "xxx [n] o deductions from gross income shall be allowed under
this Subsection (A) hereof, unless the taxpayer shall substantiate with sufficient evidence, such as official
receipts or adequate records: (i) the amount of expense being deducted... xxx."

Petitioner avers that the redeemed PS arose merely from there¬ classification of the same number of
convertible CS in FBDC with the same par value of Php1.00 per share; thus, the allocable cost of the
converted CS necessarily becomes the substituted cost of the PS thus converted. Petitioner stresses that,
citing BIR Ruling No. DA-030-05 dated January 24, 2005, the conversion of the same number of CS into
the same number of PS with the same par value per share pursuant to their conversion features merely
represent a change in form, and thus, no gain or loss is recognized therefrom. Since the redeemed
Preferred "C" and "D" Shares came from its CS that were converted to Preferred "C" and "D" Shares at the
ratio of 1 CS: 1 PS, with the same par value of Php1.00 per share, and that petitioner's total stockholdings
in FBDC remained at 11,447,520,334 total shares, petitioner submits that the disallowance made by
respondent and the consequent deficiency tax assessment is clearly without basis and should be cancelled.

Petitioner asserts that the FAN is null and void for failure to state the law and the facts on which the
assessment was made, as required under Section 228(e), 2nd paragraph of the 1997 NIRC. Petitioner adds
that the cited basis for the assessment, that is, Section 34(A)(l)(c) of the 1997 NIRC, is misleading because
said Section refers to disallowance of deductions constituting payments of bribes, kickbacks and other
similar payments, a matter that is not the subject of the present assessment, i.e., alleged unsupported
expenses. Lastly, petitioner avers that respondent's right to collect has already prescribed because more
than three (3) years has lapsed from the time respondent issued the FAN on February 28, 2012 up to the
time when the FDDA was issued on May 18, 2005.

Petitioner continues that respondent has no legal or physical constraint to prevent him from proceeding
with the collection, since its protest merely requested for the withdrawal and cancellation of the assessment
on the basis of the legal and factual arguments contained therein, and did not request for reinvestigation.
Neither did respondent, according to petitioner, granted any such request for reinvestigation nor
communicated such fact to the knowledge of petitioner. Respondent counters that petitioner has not
provided any supporting document or evidence to support its claimed cost of investment in the RPS of
FBDC amounting to Php559,690,622.00, in violation of Section 34(A)(l)(b) of the 1997 NIRC; that his right
to collect has not yet prescribed; and that assessments are prima facie presumed correct and made in good
faith, and the duty to prove otherwise is upon the taxpayer. Respondent emphasizes that taxes are the
lifeblood of the government and must be collected without unnecessary hindrance.

ISSUE:
Whether or not there was a valid assessment.

RULING:
NO. The taxpayer has thirty (30) days from receipt of the FAN to protest the assessment. Thereafter, within
thirty (30) days from receipt of the decision denying the protest, or from the lapse of the one hundred and
eighty (180)-day period for the Commissioner of Internal Revenue (" CIR") to act on the protest, the taxpayer
70

may appeal to the CTA. Respondent however, failed to act on the protest within one hundred eighty (180)
days from the filing thereof on March 29, 2012, or until September 25, 2012. It was only on May 18, 2015
that petitioner received the FDDA, with assessment for deficiency IT of Php25,035,070.41, inclusive of
interest computed from April 16, 2009 to June 19, 2015.As borne out by the records, instead of filing an
appeal to the CTA within thirty (30) days after the lapse of the one hundred and eighty (180)-day period
within which respondent will decide on the protest, petitioner opted to wait for respondent's decision in the
form of an FDDA received on May 18, 2015. Within thirty (30) days from receipt thereof, or on June 16,
2015, petitioner filed the instant Petition for Review. Clearly, the Court has jurisdiction to settle the present
controversy.

It cannot be emphasized that the authority of ROs to conduct audit investigation goes into the validity of an
assessment; thus, any assessment arising from the conduct of audit examination of a taxpayer's books of
accounts by an RO who is not duly authorized to do so is a complete nullity. A void assessment bears no
valid fruit. The Court ought to reiterate the Supreme Court's teachings that "in balancing the scales between
the power of the State to tax and its inherent right to prosecute perceived transgressors of the law on one
side, and the constitutional rights of a citizen to due process of law and the equal protection of the laws on
the other, the scales must tilt in favor of the individual, for a citizen's right is amply protected by the Bill of
Rights under the Constitution."

Thus, while taxes are the lifeblood of the government, the power to tax has its limits, in spite of all its
plenitude. And even if the Court will concede the inevitability and indispensability of taxation, it is a
requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed
procedure. The question on whether respondent's right to collect the alleged deficiency IT has prescribed
is of no moment, considering that the assessment is void. The Supreme Court has consistently ruled that
tax collection should be premised on a valid assessment; and the issuance of a valid formal assessment is
a substantive pre-requisite for collection of taxes.

Batino Realty Corporation vs. Commissioner of Internal Revenue


CTA Case No. 9542; April 18, 2018
Castaneda, JR., J.

FACTS:
Petitioner Batino Realty Corporation alleges that it is a domestic corporation duly organized and existing
under Philippine laws. Petitioner allegedly entered into an agreement with Samsung Electro-Mechanics
Phils. Corp. (SEMPHIL) on March 27, 2013 whereby the latter extended a loan to petitioner in the amount
of Two Hundred Fourteen Million Eighty Thousand Pesos (P214, 080,000.00), with 6.5°/o interest per
annum. Petitioner also allegedly subjected to VAT its interest payments for its loan obligation to SEMPHIL.
Petitioner allegedly filed its Amended Quarterly VAT Returns for the 3rd and 4th quarters of calendar year
2014 on September 27, 2016. Petitioner likewise alleges that its unutilized input VAT for the 3rd and 4th
quarters of calendar year 2014 amounting to P416,216.18 and P419,283.07, respectively, arose from the
payment of its loan with interest on installments to SEMPHIL, which is rooted from a single isolated
transaction. On September 30, 2016, petitioner allegedly filed an administrative claim for refund before the
BIR.

ISSUE:
Whether or not Petitioner's request for VAT refund can be legally allowed.

RULING:
No, At the outset, it bears stressing that tax refunds are in derogation of State's taxing power. Such being
the case, tax refunds, like tax exemptions, are strictly construed against the taxpayer and liberally in favor
of the State. Consequently, the taxpayer is charged with the heavy burden of proving clearly the factual
basis of its claim. The taxpayer must show that it has strictly complied with all the statutory and
administrative requirements for the grant of the tax refund. Failure to present sufficient evidence to justify
the claim for refund is fatal. Any doubt as to whether a tax exemption exists is resolved against the taxpayer.
71

Note also that petitioner explicitly based its judicial claim on Section 112 of the 1997 NIRC, which refers to
refund of creditable input tax attributable to zero-rated or effectively zero-rated sales. On the other hand,
the particular transaction alleged by petitioner in its Petition for Review and upon which petitioner based its
claim, is a transaction that is not subject to zero-rated VAT. Considering that the transaction involved is
alleged to be not subject to VAT and the petitioner seeks the refund of erroneously paid VAT, the Petition
for Review should have been based on Section 229 of the 1997 NIRC. Therefore, the present Petition for
Review lacks legal basis.

Macintel, Inc. vs. Commissioner of Internal Revenue


CTA Case No. 9252; April 17, 2018
Castaneda, Jr., J.

FACTS:
On September 15, 2010, Electronic Letter of Authority No.eLA201000005304 authorizing Revenue Officer
Michelle DelaCruz and Group Supervisor Elizabeth Arias to examine petitioner's books of account and
other accounting records for all internal revenue taxes for taxable year 2009. Pursuant to Letter Notice (LN)
No. 047-TRS-09-00-00061 dated May 20, 2011, petitioner was subjected to a tax audit or investigation for
alleged deficiency internal revenue taxes for the taxable year 2009. Petitioner received the FAN, assessing
and demanding from petitioner the payment for the alleged deficiency income tax in the amount of Php
47,046,011.65 and deficiency VAT in the amount of Php 19, 241, 465.61 for the taxable year 2009.

ISSUE/S:
(1) Whether or not the Assessment Notices are arbitrary, illegal and null and void for failure to
comply with the requirements under Revenue Memorandum Order (RMO) No. 46-2004 dated
September 2, 2004.
(2) Whether or not the Petitioner is liable for 50°/o surcharge on the alleged basic deficiency income
tax and value[-]added tax.
Whether or not Petitioner is liable to pay the assessed deficiency income tax and value[-]added tax
in the total amount of Php77,419,559.76 (inclusive of surcharges and interest), for taxable year
2009.

RULING:
(1) No, a careful perusal of the aforesaid revenue issuance revealed that the particular provisions of RMO
No. 46-04 invoked by petitioner do not apply to its case for two reasons. First, a careful examination of the
documentary evidence showed that LN No. 047- TRS-09-00061 dated May 20, 2011 was issued against
petitioner in accordance with the TRS System. In contrast, RMO NO. 46-04 provides for guidelines in
handling Letter Notices with discrepancies arising from data matching processes as defined in RMO Nos.
34-2004 and 30-2003, i.e., the BOC Data Program and the RELIEF System. Evidently, RMO No. 46-04
does not cover the TRS System as the same was implemented only later by RMO No. 28-07 in 2007.
Second, the provisions of RMO No. 46-04 invoked by petitioner contemplate a situation wherein the
taxpayer duly protested the issuance of the LN and submitted the necessary schedules and supporting
documents for the reconciliation of the discrepancy findings indicated in the LN. In the present case,
however, petitioner failed to submit its protest to the LN. As borne by the evidence on record, petitioner
merely filed letters50 requesting for extension of time within which to respond to the LN but failed to actually
file any protest to the LN.

(2) Yes, Petitioner's argument does not induce assent. In other words, when there is a showing that a
taxpayer has substantially underdeclared its sales, receipt or income, there is a presumption that it has filed
a false return. As such, the CIR need not (k-67 G.R. No. 221590, February 22, 2017 ("Asalus'). immediately
present evidence to support the falsity of the return, unless the taxpayer fails to overcome the presumption
against it." As indicated in the FAN and the Details of Discrepancies attached to it, the audit investigation
revealed that there were undeclared sales, receipts and income in the total amount exceeding 30°/o of that
declared in petitioner's tax returns. Accordingly, the same raises the presumption that petitioner has filed a
false return. In such case, petitioner has the burden to present sufficient evidence to overcome this
72

presumption and to prove that it has filed accurate returns. This, however, petitioner failed to do. On the
other hand, respondent need not present further evidence as the presumption of falsity was not overcome.

Grandworth Resources Corporation vs. Commissioner of Internal Revenue


CTA Case No. 8765; April 17, 2018
Castaneda, Jr., J.

FACTS:
On January 10, 2012, petitioner received a Preliminary Assessment Notice (PAN) with attached Details of
Discrepancies dated December 21, 2011. On April 2, 2012, petitioner received the FLD under Demand No.
43A-B294-08, with attached Details of Discrepancies and the corresponding Assessment Notices, all dated
January 13, 2012.19 In the Final Assessment Notice (FAN), respondent found petitioner liable for deficiency
income tax, VAT, and EWT, inclusive of interest, in the aggregate amount of Php7,628,784.47 for taxable
year 2008. On August 14, 2013, petitioner filed via registered mail an administrative appeal before the CIR.
On January 9, 2014, the aggregate amount of Php7,628,784.47 representing petitioner's garnished bank
deposit with Metropolitan Bank & Trust Company - Ortigas Emerald Branch (Metrobank) was credited to
the BIR's account.

ISSUE:
Whether petitioner is liable for deficiency income tax, VAT, and EWT in the total amount of
Php7,628,784.47, inclusive of interests due to failure to file petition for review on time.

RULING:
Yes, Curiously enough, petitioner was apparently aware of the foregoing rule yet it failed to abide by the
same. Guided by the foregoing considerations, this Court holds that the present Petition for Review was
filed out of time. Counting thirty (30) days from November 14, 2012, the date when petitioner received the
Preliminary Collection Letter, petitioner had until December 14, 2012 within which to either file an appeal
before this Court or to file a request for reconsideration before the Commissioner himself. Petitioner,
however, filed its administrative appeal before the Commissioner only on August 14, 2013. Clearly, such
an appeal was already time-barred. By then, the deficiency tax assessment against petitioner already
became final, executory and demandable. Consequently, this Court is precluded from acquiring jurisdiction
over the present case. Given that this Court has no jurisdiction to take cognizance of the present case, it
has no other option but to dismiss the same.

Composite Materials, Inc. vs. Commissioner of Internal Revenue


CTA EB No. 1539; April 11, 2018
Bautista, J.

FACTS:
On January 19, 2010, petitioner received a Formal Letter of Demand ("FLD") dated January 15, 2010 with
attached Details of Discrepancies and Assessment Notices. In the FLD, petitioner was assessed for alleged
deficiency income tax, VAT, expanded withholding tax ("EWT"), and final withholding tax ("FWT") for CY
2006 in the aggregate amount of Php5,416,501.70, inclusive of interest. On January 29, 2010, petitioner
filed its protest letter dated January 27, 2010 against the assessment issued by respondent, and requested
the cancellation thereof. On September 30, 2011, petitioner received a copy of respondent's letter dated
September 26, 2011 embodying respondent's final decision on petitioner's protest. Thereafter, on
November 2, 2011, petitioner filed a Petition for Review14 with the Court in Division.

ISSUE:
Whether respondent’s deficiency tax assessments for CY 2006 violated petitioner’s right to due process.

RULING:
73

No, In the present case, the Court En Bane holds that by virtue of petitioner's failure to file a motion for
reconsideration or new trial of the Assailed Amended Decision, the Petition for Review should be denied
as the Assailed Amended Decision has already become final and may no longer be reviewed or modified.
Thus, in order for the CT A En Bane to take cognizance of an appeal via a petition for review, a timely
motion for reconsideration or new trial must first be filed with the CTA Division that issued the assailed
decision or resolution. Failure to do so is a ground for the dismissal of the appeal as the word "must"
indicates that the filing of a prior motion is mandatory, and not merely directory. The same is true in the
case of an amended decision. In the present case, the records bear that petitioner immediately filed the
Petition for Review before the Court En Bane upon receipt of the Assailed Amended Decision. Petitioner
failed to file a motion for reconsideration or new trial of the Assailed Amended Decision prior to the filing of
the instant Petition for Review. Thus, following the pronouncements of the Supreme Court in the Asiatrust
case, the Court En Bane is constrained to deny the instant Petition for Review due to the aforementioned
procedural infirmity. Having ruled that the present Petition for Review was filed contrary to the prevailing
rules of procedure, the Court En Bane finds no reason to discuss the arguments raised by the parties.

Republic of the Philippines vs. GMCC United Development Corporation, et al.


G.R. No. 191856; December 07, 2016
Leonen, J.

FACTS:
On April 3, 2003 GMCC was served a copy of said Letter of Authority and was requested to present its
books of accounts and other accounting records. GMCC failed to respond to the Letter of Authority as well
as the subsequent letters requesting that its records and documents be produced. In light of the discovered
tax deficiencies, the Bureau of Internal Revenue, on October 7, 2005, filed with the Department of Justice
a criminal complaint for violation of Sections 254, 255, and 267, of the National Internal Revenue Code
against GMCC, its president, Jose C. Go, and its treasurer, Xu Xian Chun. On May 26, 2006, the
Department of Justice, through the Chief State Prosecutor, issued a Resolution dismissing the criminal
complaint against the GMCC officers. The State Prosecutor ruled that there was no proof that GMCC
defrauded the government. The Bureau went beyond its authority when it assessed and issued the Letter
of Authority knowing that the period to assess had already lapsed.

ISSUE:
(1) Whether the Court of Appeals erred in declaring that the Secretary of Justice did not commit
grave abuse of discretion when he found no probable cause and dismissed the tax evasion case
against the respondent officers of GMCC.
(2) Whether the applicable prescriptive period for the tax assessment is the ten-year period or the
three-year period.

RULING:
(1) No, We are convinced that the Court of Appeals committed no reversible error in affirming the ruling of
the Secretary of Justice that there was no probable cause to file a tax evasion case against the respondent
officers. Since the assessment for the tax had In ruling that there was no probable cause to indict the
respondent officers for the acts charged, the Court of Appeals said there was no clear showing that there
was deliberate intent on the part of the respondents to evade payment of the taxes. Both the State
Prosecutor and the Court of Appeals emphasized that if respondents really intended to evade payment,
they would have omitted the assailed transactions completely in all their financial statements. already
prescribed, no proceeding in court on the basis of such return can be filed.

(2) As to the issue on the applicable prescriptive period, it is the three--year prescriptive period that applies
in this case. In arguing for the application of the 10-year prescriptive period, petitioner claims that the tax
return in this case is fraudulent and thus, the three-year prescriptive period is not applicable. Petitioner fails
to convince that respondents filed a fraudulent tax return. The respondents may have erred in reporting
their tax liability when they recorded the assailed transactions in the wrong year, but such error stemmed
from the wrong application of the law and is not an indication of their intent to evade payment. If there were
74

really an intent to evade payment, respondents would not have reported and subsequently paid the income
tax, albeit in the wrong year.

AMADEUS MARKETING PHILIPPINES, INC. vs COMMISSIONER OF INTERNAL REVENUE


CTA EB No. 1532; April 5, 2018

FACTS:
Amadeus Marketing Philippines is a domestic corporation and VAT-registered entity. According to the
corporation’s articles of incorporation, its primary purpose is to market an automated computerized
reservations systems for seat and bookings in different transport services. According to the petitioner, it
entered into several transactions during the 2nd, 3rd and 4th quarters of 2010 and incurred input taxes
which they reported in its VAT returns. In response, the domestic corporation filed with the BIR RDO in
Makati an Application for Tax Refund supporting the aforementioned input taxes on June 29, 2012.

Subsequently, it filed a Petition for Review due to inaction of the BIR on the administrative claim for refund.
In his answer, respondent alleged that it is the petitioner’s burden to substantiate its claim for refund. It must
prove with sufficient evidence that it has complied with ALL the legal requisites for its alleged entitlement.
Failure to discharge said burden would be fatal to the claimant pursuant to the lifeblood doctrine and
strictissimi juris construction of statutes granting tax exemptions.

On June 21, 2016, the Petition for Review was denied due to lack of merit. It was found that the domestic
corporation failed to satisfy the second requisite for the refund sought. It was discovered that Amadeus IT
Group S.A. , the petitioner’s recipient of services, is doing business in the Philippines pursuant to Section
105 of the National Internal Revenue Code (NIRC) and Sections 4.105-1 and 4.105-3 of RR No. 16-2005.
Consequently, petitioner corporation filed a Motion for Reconsideration/ New Trial on July 12, 2016.
However, the court still denied said action due to lack of merit.
After filing for a Motion for Extension of Time to File Petition for Review, petitioner filed a Petition for Review
assailing the previously issued order. Respondent failed to file a comment. Thus, the Court decided to
require the parties to submit a Memoranda

ISSUE:
Whether or not petitioner domestic corporation is entitled to refund

RULING:
NO. The Court finds no merit in the instant petition.

The Court found that Amadeus IT Group S.A. is doing business in the Philippines. Therefore, the sales
made by the petitioner to said company cannot be treated as subject to the zero (0%) percent VAT.
Based on the provisions of Sec 108 (B) (1) and (2) of the NIRC, in order for a sale of service transaction to
be treated as subject to the zero (0%) percent VAT rate, it is required that the services were ‘"rendered to
a person engaged in business outside the Philippines or to a nonresident person not engaged in business
who is outside the Philippines when the services are performed".

The Court ruled that it not sufficient to prove that the recipient corporation is a foreign corporation, it must
be proven that it is a ‘nonresident foreign corporation.’ In addition, the court also ruled in a separate case
that the service recipient must also NOT be doing business in the Philippines. If not, the service transaction
shall be subject to the corresponding VAT rate. During the course of the trial, it was proven that Amadeus
IT Group S.A. was engaged in business outside the Philippines as evidenced by Authenticated Certification/
Articles of Association, and 2010 Auditor’s Annual Report of the said company.

Furthermore, Section 105 shall not be used in determining whether a foreign corporation is not "doing
business" in the Philippines, for purposes of Section 108(8)(2) of the NIRC of 1997. Essentially, as also
provided by the Foreign Investment Act of 1991, a foreign corporation may be considered engaged in trade
75

or business, if there is continuity. In the case at bar, it is evident that Amadeus IT Group S.A. intended to
establish a continuous business in the Philippines.

Also, the Distribution Agreement also further proves the aforementioned finding that Amadeus IT Group
S.A. is doing business in the Philippines. The royalties received by Amadeus IT Group S.A. cannot be
considered as merely passive income. As proven due to previous agreements, petitioner is an agent of the
Amadeus IT Group S.A.. Furthermore, the petitioner grants licenses on behalf of the foreign corporation.
Thereby, proving that the latter is doing business in the country.

ALPHA 245 INC. vs COMMISSIONER OF INTERNAL REVENUE


CTA CASE 9225; April 6, 2018
Castañeda Jr., J.

FACTS:
Petitioner alleges that the BIR Commissioner issued Letter of Authority authorizing Revenue Officer Alwino
R. Daga to examine their book of accounts and other accounting records for 2009. Petitioner received a
Notice of Informal Conference on October 2, 2012 and a Preliminary Notice of Assessment (PAN) on
December 10, 2012. The Formal Assessment Notice with attached Details of Discrepancies was issued
January 8, 2013. As a response, a Protest Letter dated January 22, 2013 was filed by the corporation’s
Finance Controller. The BIR sent a reply through its Regional Director Valeroso, requiring it to submit
necessary supporting documents.

The BIR sent another letter requesting for the petitioner to submit supporting documents but in its reply, it
merely reiterated the issues stated in its protest letter and requested for the availability of BIR personnel to
examine their books. The Final Decision on Disputed Assessment (FDDA) was issued by RD Valeroso on
September 30, 2013. The FDDA found that the petitioner failed to submit relevant supporting documents
to its protest. Petitioner filed a request for reconsideration afterwards submitting 2009 and 2010 Audited
Financial Statements (AFS) and Annual Income Tax Return.

After receiving a copy of the assailed decision on the FDDA, the petitioner filed this instant petition before
the Court on December 8, 2015. Subsequently, petitioner filed a supplement on February 26, 2016.
In a resolution, the Court required both parties to submit a memorandum. On August 4, 2017, the case was
deemed submitted for decision.

ISSUE:
(1)Whether or not the petitioner’s protest is valid
(2)Whether or not the subject assessment already became final and executory

RULING:
(1)YES, the petitioner’s protest is valid because it is in the nature of a petition for reinvestigation under
Revenue Regulation No. 99. It does not matter that the letter was not written in legalese manner, what is
important that it raised the factual errors the BIR may have committed in the assessment.

(2)NO, the assessment is not yet final and executory.


In a relevant case, the Court held that, ‘The term 'relevant supporting documents' should be understood as
those documents necessary to support the legal basis in disputing a tax assessment as determined by the
taxpayer. The BIR can only inform the taxpayer to submit additional documents. The BIR cannot demand
what type of supporting documents should be submitted. Otherwise, a taxpayer will be at the mercy of the
BIR, which may require the production of documents that a taxpayer cannot submit."

It cannot be said that the petitioner failed to submit relevant supporting documents because such were
already in the possession of the BIR.
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PHILIPPINE MINING DEVELOPMENT CORPORATION vs. THE COMMISSIONER OF INTERNAL


REVENUE
CTA CASE No. 9292; April 6, 2018

FACTS:
Formerly known as Natural Resources Mining Development Corporation, PMDC was incorporated on July
4, 2003.
April 23, 2008: In a letter, CIR Hefti was informed that PMDC was a large taxpayer and was under the
jurisdiction of RDO 121.
September 26, 2008: Subsequently, PMDC filed its application for Registration Information Update.
September 18, 2009: PMDC received a Preliminary Assessment Notice (PAN) with regard to VAT and
income tax deficiencies for 2006. Such PAN was addressed to the old office of the PMDC.
January 22, 2010: The BIR issued the Final Assessment Notice (FAN. The basic deficiency VAT amounted
to Php 1,356,588.37, while the basic deficiency income tax amounted to Php3,956,716.07 which, when
totaled with the surcharge and interests amounted to Php 11 ,048,658.60. Said FAN was also addressed
to PMDC's old address. MDC requested that it be provided with a copy of the BIR’s matching/reconciliation
data sheet to verify the claim for VAT deficiency.

November 22, 2010: PMDC received the Preliminary Collection Letter from RDO 50 for the alleged tax
deficiency. PMDC, in a letter addressed to RD Santiago of Region 8, reiterated the change of address and
that the details of the assessment have not yet been provided.
May 26, 2011: PMDC received the PCL issued by the Large Taxpayer- Collection and Enforcement Division
demanding payment of the alleged tax deficiencies amounting to Php 11, 048, 658.60.
June 2, 2011: PMDC replied through a letter alleging that:
(1)PMDC incurred a net loss as evidenced by its Annual Audit Report
(2)It is requesting for a reinvestigation of the BIR findings on the alleged INCOME tax deficiency
(3)It is willing to pay the VAT deficiency of Php2,193,151.20 with an additional request to waive the
surcharge amounting to Php678,294.0Q.

June 13, 2011: PMDC paid the VAT deficiency and the surcharge subsequently on October 9, 2014.
June 10, 2011: PMDC received the Final Notice Before Seizure dated May 24, 2011. PMDC replied through
a letter on July 7, 2011seeking the removal of the deficiency income tax assessment considering the fact
that it has no unreported revenues for 2006.

August 27, 2011: BIR issued a warrant of distraint and levy (WDL).
March 22, 2012: BIR denied PMDC’s request for suspension of the implementation of the WDL stating that
PMDC failed to file a protest and the assessment has become final and executory.
April 30, 2012: PMDC paid 40% of the basic assessed tax amounting to Php 1, 582, 686.43.
May 3, 2012: PMDC filed its Application for Compromise on the ground of doubtful validity of the
assessment. The National Evaluation Board disapproved of its application for compromise.
Hence, the instant petition.

ISSUE:
Whether or not the Court has jurisdiction

RULING:
NO, the petition should be dismissed due to lack of jurisdiction.
“The Supreme Court En Bane in Power Sector Assets and Liabilities Management Corporation v.
Commissioner of Internal Revenue (PSALM case)5B ruled that in disputes and claims solely between
government agencies and offices, including GOCCs, the administrative procedure in Sections 2 and 3 of
Presidential Decree (PD) No. 242 should be followed. Under Presidential Decree No. 242 (PD 242), all
disputes and claims solely between government agencies and offices, including government-owned or
controlled corporations, shall be administratively settled or adjudicated by the Secretary of Justice, the
Solicitor General, or the Government Corporate Counsel, depending on the issues and government
agencies involved. Thus, even if the 1997 NIRC, a general statute, is a later act, PD 242, which is a special
77

law, will still prevail and is treated as an exception to the terms of the 1997 NIRC with regard solely to
intragovernmental disputes.”

Following the ruling in the PSALM case, the Court has no jurisdiction with Philippine Mining Development
Corporation as a GOCC and the BIR as a government agency.

PHILIPPINE AIRLINES, INC. vs COMMISSIONER OF INTERNAL REVENUE


CTA EB No. 1484; April 10, 2018

FACTS:
Philippine Airlines (PAL) was granted franchise to operate air transport services domestically and
internationally under PD 1590.
January 1, 2005: RA 9334, otherwise known as ‘An Act Increasing the Excise Tax Rates Imposed on
Alcohol and Tobacco Products’, took effect.
February 4, 2005: COC George Jereos issued a Memorandum to the BOC Officers and personnel to effect
RA 9334 and collect excise taxes due on imported alcohol and tobacco products even if destined to DFP
and Freeport Zones.
2007 -2009: PAL’s importations of assorted cigarettes, liquors and wines arrived in Manila through the
Ninoy Aquino International Airport and South Harbor.
October 26, 2009: Petitioner paid, under protest, the amounts of P2,514,774.48 and P896,280.00 to the
BOC, representing the excise taxes on the above importations, as evidenced by BOC Official Receipt Nos.
16854694457 and 16854696.
November 6, 2009: petitioner filed with the District Collector of Customs of NAIA a written protest against
the assessment and collection of P2,514,774.4861 and P896,280.0062 , representing the excise taxes on
the above importations.
January 28, 2010: petltloner filed an administrative claim with respondent CIR for the refund of
P2,514,774.4863 and P896,280.0064 , representing the excise taxes paid for the said importation
October 26, 2011: Petitioner filed a Petition for Review due to inaction of the Commissioner.

ISSUE:
Whether or not the Court erred in denying its claim for refund

RULING:
The following requisites must first be complied with for PAL to be entitled to a refund:
1. PAL paid its corporate income tax and VAT liabilities for the subject
period of importation;
2. The imported articles, supplies or materials are intended to be used
in PAL's transport and non-transport operations and other activities
incidental thereto; and
3. The imported articles, supplies or materials are not locally available
in reasonable quantity, quality or price.

As held in the Assailed Decision, the first and second conditions have been sufficiently established. The
third condition has also been sufficiently established as proven by a more recent case of Commissioner of
Internal Revenue and Commissioner of Customs vs. PAL. In said case, ‘PAL made a prima facie case that
the cost of importing the alcohol products were reasonably cheaper than purchasing them locally through
the following evidence: (a) testimony of Mr. Victor Santos, PAL's Assistant Vice President in charge of the
Catering and In-flight Materials Purchasing; (b) Table of Comparison Between Cost of Importing and Cost
of Locally Purchasing Commissary and Catering Supplies; (c) Philippine Wine Merchant's January 11, 2007
Price List; and, (d) Monthly PDS rates for the year 2007-2008, 2008-2009, and 2009-2010.’
78

CITY OF DAVAO and BELLA LINDA N. TAJILI vs. SAN MIGUEL OFFICERS
CTA EB No. 1628; April 10, 2018

FACTS:
San Miguel Officers Corps, Inc. (SMOCI) has been registered owner of 53, 863, 035 preferred shares of
stock in San Miguel Corporation after the Supreme Court approved the conversion of SMOCI’s 53, 863,
035 SMC common shares of stock into SMC preferred shares. Petitioners issued a Business Tax Order of
Payment assessing SMOCI Php 1, 124, 064.00 for local business tax for the first and second quarters of
2011 on the dividends received from the SMC preferred shares. This was pursuant to Sec 143 of Local
Government Code of 1991and Sections 5(b)(3) and 69(£) of Ordinance No. 158-05, Series of2005, in
relation to Section 131(e) of R.A. No. 7160. Petitioners classified SMOCI as a ‘bank’ or ‘other financial
institution’ on which local business tax may be imposed.

SMOCI paid the assessment. However, they filed for administrative claim for refund or credit for erroneously
and illegally collected business tax on September 13, 2012. The claim was not acted upon by Riola after
four months of filing. Due to inaction of Riola on SMOCI’s claim, SMOCI filed a Petition for Review. The
RTC denied the Petition for Review on June 22, 2015 on the ground that SMOCI falls within the category
of ‘non-bank financial intermediary’ and is therefore subject to local business tax on its dividends and
interest income.

The RTC also denied the Motion for Reconsideration filed by the SMOCI. SMOCI appealed by way of
Petition for Review with the Court of Tax Appeals. The First Division of CTA ruled that the SMOCI cannot
be categorized as a non-bank financial intermediary. Thus, this petition for review.

ISSUE:
Whether or not the SMOCI is a non-bank financial intermediary falling under the category of ‘bank and other
financial institutions’, so as to be a subject of local business tax.

RULING:
Petition is DENIED.

SMOCI is NOT a non-bank financial intermediary on which local business taxes may be imposed.
The power to tax of provinces, cities and municipalities is limited by the law that granted it – the Local
Government Code of 1991. The Davao City does not have the power to extend to levy of income tax, except
when levied on banks and other financial institutions under Sec. 143 of the Local Government Code.
Sec. 131 of the LGC defines banks and other financial institutions as:
"'Banks and other financial institutions' include non-bank financial intermediaries,
lending investors, finance and investment companies, pawnshops, money shops,
insurance companies, stock markets, stock brokers and dealers in securities and
foreign exchange, as defined under applicable laws, or rules and regulations
thereunder.''

On the other hand, the LGC does NOT define non-financial intermediaries. Hence, the resort to other
applicable laws. The NIRC of 1997 defines such as ‘a financial intermediary, as defined in Section 2(D)(c)
of Republic Act No. 337, as amended, otherwise known as the General Banking Act, authorized by the
Bangko Sentra! ng Pi!ipinas (BSP) to perform quasibanking activities.’

The following are the requirements in order for an entity to be considered as a non-bank financial
intermediary:
1) The person or entity is authorized by the Bangko Sentral ng Pilipinas (BSP) to perform
quasi-banking activities;
2) The principal functions of the said person or entity include the lending, investing or
placement of funds or evidences of indebtedness or equity deposited to them. acquired by
them. or otherwise coursed through them, either for their own account or for the account of
others;
79

3) The person or entity must perform any of the following functions on a regular and recurring.
not on an isolated basis, to wit:
a. Receive funds from one (1) group of persons, irrespective of number,
through traditional deposits, or issuance of debt or equity securities; and
make available/lend these funds to another person or entity, and in the
process acquire debt or equity securities;
b. Use principally the funds received for acquiring various types of debt
or equity securities;
c. Borrow against, or lend on, or buy or sell debt or equity securities;
d. Hold assets consisting principally of debt or equity securities such as
promissory notes, bills of exchange, mortgages, stocks, bonds, and
commercial papers; and
e. Realize regular income in the nature of, but need not be limited to,
interest, discounts, capital gains, underwriting fees, guarantees, fees,
commissions, and service fees, principally from transactions in debt or
equity securities or by being an intermediary between suppliers and users
of funds.

The SMOCI does not fulfill any of the aforementioned requirements. It should also be noted that Davao
City’s assessment is an ultra vires act. The ruling in COCOFED placed the subject San Miguel shares and
its dividends, and any income therefrom, beyond the scope of the taxing power of Davao City. Since the
subject shares are owned by the government, it follows that the dividends and any income therefrom are
also owned by the government. Thus, the same is not within the power of the Davao City to tax. Any
earnings of the San Miguel shares belong to the government. Any local tax imposed on SMOCI, is imposed
on the national government. This is clearly in contravention of Section 133(o) of the 1991 LGC.

People v. Ferdinand Mahusay


CTA Criminal Case No. O-424; April 4, 2018

FACTS:
Mahusay is charged before the CTA with violations of Sections 254 and 255 of the NIRC of 1997, as
amended, under two (2) separate informations. It was averred that he is a taxpayer earning income as a
member of the Board of Trustees of the Regular and Corporate Offices of MWSS and as such, required by
law, rules, and regulations to file his annual income tax return. However, Mahusay did not declare his
income earned from MWSS for taxable year 2009 which resulted to a basic deficiency income tax. He then
entered a plea of not guilty.

It was in the Preliminary Conference wherein the CTA noted that the Informations filed for both cases have
the statement “more or less” after the amount stated. Meanwhile, the accused filed his Motion for Leave to
file Demurrer to Evidence. The subsequent Demurrer to Evidence was however denied.

ISSUE:
Did Mahusay violated the Tax Code for failure to declare his income in the MWSS

RULING:
No. The Supreme Court held that a crime is complete when the violator has knowingly and wilfully filed a
fraudulent return, with intent to evade and defeat the tax.

Under Section 254 of the NIRC of 1997, as amended, in order to sustain a conviction for attempt to evade
or defeat tax the following elements must be established:
1 .An attempt in any manner to evade or defeat any tax imposed under the NIRC of the payment
thereof; and
2. Such attempt to evade or defeat tax or the payment thereof is willful.
80

The crime of failure to pay tax under Section 255 is defined by the element of “wilfulness” of not paying the
tax which in turn, requires the showing of “knowledge” and “voluntariness”. Simply stated, the offender is
aware or knows the existence of and obligation to pay a tax liability but voluntarily and intentionally failed
to pay it.

The above circumstances merely show that the accused’s negligence is caused by merely relying on the
assertion that the withholding taxes, as per BIR Form No. 2307, serve as his taxes to the government.
Thus, the element of “wilfulness” is lacking to find the accused guilty of the offense charged.

REQUISITES FOR TAX REFUND


Colt Commercial Inc., v. Commissioner of Internal Revenue
CTA Case No. 9270; April 3, 2018

FACTS: Colt Commercial, a VAT registered taxpayer, filed its quarterly VAT returns for the first, second,
and third quarters of taxable year 2013 on April 24, on July 25, and on October 25, respectively, and
amended all of the said returns on April 30, 2014. Likewise, petitioner filed its amended quarterly VAT
returns for the fourth quarter of taxable year 2013 on January 25, 2014 and on April 30, 2014.

On September 29, 2015, petitioner filed its administrative claim for refund covering the third quarter of
taxable year 2013 in the amount of P2, 194, 583.72.Respondent then denied petitioner’s claim for refund.

ISSUE: Was Colt Commercial Inc., entitled to a tax refund?

RULING:
Yes. In order to be entitled to refund or tax credit of input tax due or paid attributable to zero-rated or
effectively zero-rated sales, the following requisites must be satisfied:
1. That the claimant must be VAT registered;
2. That there must be zero-rated or effectively zero-rated sales;
3. That the creditable input tax due or paid must be attributable to such zero-rated sales;
4. That the input taxes were not applied against any output VAT liability; and
5. That the administrative and judicial claims for refund were timely filed.

Nevertheless, a portion of the P1,700,263.79 shall be applied against the reported output VAT liability of
P1,054,219,86. Consequently, only the remaining input VAT of P646,043.93 can be attributed to the entire
zero-rated sales amounting to P27,483,753.38 and only the input VAT of P583,863.63 is attributable to the
valid zero-rated sales of P24,838,502.93.

Univation Motor Philippines v. Commissioner of Internal Revenue


CTA Case No. 9335; April 3, 2018

FACTS:
Univation Motor filed with the BIR LTEAD II an administrative claim for refund or issuance of tax credit
certificate (TCC) for the alleged excess and unutilized CWT for taxable year 2013. Due to CIR’s failure to
act on the said administrative claim for refund, petitioner filed the instant petition for review. CIR then filed
its answer.

ISSUE:
If Univation Motor is entitled to tax refund

RULING:
Yes. [Section 76 of the NIRC of 1997] prescribes to options to a taxable corporation whose total quarterly
income tax payment in a given taxable year exceeds its total income tax due. The taxpayer may either file
a tax refund (either in the form of tax credit certificate) or carry over the excess credit. However, once the
carry-over option is taken actually or constructively, it becomes irrevocable for that tax period.
81

Petitioner clearly indicated its intention to be issued a TCC by marking the box corresponding to the said
choice in its Annual ITR for CY 2013 and only the prior year’s excess tax credits were carried over in its
Annual ITR for the succeeding year 2014.

The following requirements for entitlement of a corporate taxpayer to a refund or issuance of tax credit
certificate involving excess withholding taxes:
1. That the claim for refund was filed within the two-year reglementary period pursuant to Section
229 of the NIRC;
2. When it is shown on the ITR that the income payment received is being declared part of the
taxpayer’s gross income; and
3. When the fact of withholding is established by a copy of the withholding tax statement, duly
issued by the payor to the payee, showing the amount paid and income tax withheld from that
amount.

[T]he reckoning of the two-year prescriptive period x x x should commence from the date of filing of the
Final Adjustment Return.

Commissioner of Internal Revenue v. Tyco Information Solutions Corp.,


CTA EB No. 1426; April 3, 2018

FACTS:
Tyco Corp. received a LOA authorizing the examination of its books of account and other accounting
records covering the taxable year 2006. It also received a request for presentation of records and
subsequently another request for presentation of records and a final notice. A notice of Informal Conference
was later issued indicating that petitioner is liable for deficiency income tax and VAT. A PAN was then
issued assessing the tax liability of Tyco. Tyco then received a FAN reiterating its tax liability. Tyco then
sent a protest letter, however, the CIR sent another letter reiterating the said tax liabilities.

The filing of the instant case was triggered by respondent’s denial of petitioner’s protest against its Formal
Assessments. Petitioner was assessed deficiency taxes due to the disallowance of purchases the
supporting invoices of which failed to comply with the NIRC requirements.

ISSUE:
Was the disallowance of tax deductions and input VAT valid?

RULING:
Yes. To begin with, while it may be true that the said sales invoices were issued without Tyco Corp.’s
participation and control, it is the look out of the latter to require its suppliers of goods and services to issue
pertinent VAT invoice which bear all the information required by the Tax Code and Revenue Regulations.

In the absence of proof of any irregularities in the performance of duties, as assessment duly made by the
BIR examiner and approved by his superior officers will not be disturbed. All presumptions are in favor of
the correctness of tax assessments.

Commissioner of Internal Revenue v. T-Shuttle Services Inc.


CTA EB No. 1565; April 3, 2018

FACTS:
It is a Petition for Review assailing the decision of the court in division which granted the Petition for review
of respondents T-Shuttle Services and ordering the cancellation and setting aside of the Final Assessment
Notice and the Warrant of Distraint and Levy issued against respondent.
82

The CIR denied the protest filed by T-Shuttle against the Final Notice before Seizure. It was averred that
the CIR issued a Letter Notice informing the respondent of the discrepancy found after comparing the
RELIEF and TRS with the tax returns filed by the respondent for the year 2007. A follow up letter was then
sent. In the absence of any action from the respondent, a LOA for examination of respondent’s books of
accounts were sent. The CIR then issued a PAN with attached details of discrepancies.

ISSUE:
Was there a proper issuance of notices as against the respondent?

RULING:
No. The presentation of the Registry Return Receipts is not sufficient to prove that respondent actually
received the PAN and FAN. It must be signed by the addressee or the recipient and must be authenticated
to establish that the person who signed the Registry Return Receipts was the duly authorized representative
of respondent.

Section 228 of the NIRC of 1997, as amended, specifically states that a taxpayer shall be informed in writing
of the law and the facts on which the assessment is made, otherwise, the assessment shall be void. x x x
To implement Section 228 of the NIRC of 1997, as amended, Revenue Regulations (RR) No. 12-99 was
issued echoing the requirement that taxpayers must be informed in writing of the law and the facts on which
their tax liability was based.

It is settled in our jurisprudence that if the assessment notice is served by registered mail, and the original
was not returned to the BIR, the presumption is that the taxpayer received the said assessment notice in
the regular course of mail. x x x The facts to be proved to raise this presumption are (a) that the letter was
properly addressed with the postage prepaid, and (b) that it was mailed.

Commisioner of Internal Revenue vs. Philex Mining Corporation


CTA EB1525; April 2, 2018

FACTS:
The instant Petition for Review was filed on October 21, 2016 by the Commissioner of Internal Revenue,
praying for the reversal of the Decision dated May 19, 2016 and Resolution dated September 13, 2016,
rendered by the Third Division of this Court (Court in Division) in CTA Case No. 8808, entitled "Philex Mining
Corporation, Petitioner, vs. Commissioner of Internal Revenue, Respondent.”

The dispositive portion of Decision dated May 19, 2016 read: "WHEREFORE, premises considered, the
instant EB Docket, pp. 5 to 15. DECISION CTA EB No. 1525 (CTA Case No 8808). Petition for Review is
hereby PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO REFUND in favor of petitioner
the amount of P25,811 ,450.88, representing petitioner's unutilized excess input VAT attributable to its zero-
rated sales for the first quarter of taxable year 2012xxx”

The Resolution dated September 13, 2016, on the other hand, denied respondent's Motion for
Reconsideration (Of the Decision dated May 19, 2016) for lack of merit.

ISSUE:
Whether or not, respondent is entitled to a refund in the reduced amount of P25,811,450.88, representing
respondent's unutilized excess input VAT attributable to its zero-rated sales for the first quarter of taxable
year 2012, as ruled by the Court in Division.

RULING:

Yes, respondent is entitled to a refund in the reduced amount of P25,811,450.88. The instant Petition for
Review lacks merit.
83

The Atlas case is not applicable to VAT refund cases which are no longer governed by Revenue
Regulations (RR) Nos. 5-87 and 3-88.

The specific documentary requirements laid down under Section 16 of RR No. 5-87, as amended by RR
No. 3-88, vis-a-vis the Atlas case in connection with the claims for refund of input VAT, are no longer
binding, upon the effectivity of RR No. 14-2005, i.e., on July 1, 2005. In this case, since the subject claim
for refund pertains to the 1st quarter of 2012, respondent must already comply with the provisions of RR
No. 16-2005, as amended, in addition to the legal requirements of the pertinent provisions of the NIRC of
1997, as amended by RA No. 9337, and pertinent jurisprudence, but no longer in accordance with Section
16 of RR No. 5-87, as amended by RR No. 3-88, as enunciated in the Atlas case. Thus, it is of no moment
that respondent failed to produce or submit: (1) evidence or proof of actual receipt of the goods, and (2) the
801 statement showing the amount and description of the goods delivered to the foreign buyer, which are
required under Section 16 of RR No. 5-87, as amended by RR No. 3-88, vis-a-vis the Atlas case.

The Court in Division did not err in considering as valid, final invoices bearing dates later than the dates of
sale of respondent's products.

As correctly found by the Court in Division, it was established that the shipment date in the Bills of Lading
and Provisional Invoices is the date of sale. The Final Invoices bearing dates later than the dates of
shipment does not remove the fact that the sales and actual shipment of goods from the Philippines to a
foreign country, as contemplated under Section 106 (A)(2)(a)(1) of the National Internal Revenue Code
(NIRC) of 1997, as amended, had actually transpired during the period of claim. The final invoices are
merely additional evidence to support respondent's claimed zero-rated sales, having been issued by
respondent in reference to sales transactions consummated during the period of claim.

As stated in the assailed Decision, aside from the provisional invoice issued by respondent upon shipment,
a final invoice was issued after the contracting parties reached an agreement regarding the final settlement
of weighs, assays and quotations or final value of the shipment which is done after arrival of the shipment
at the port of loading. Thus, the Final Invoices dated outside the period of claim do not cover separate sales
transactions for different taxable periods, but actually relates to the sales transactions of respondent during
the period of claim as indicated in the provisional invoices, bills of lading and export declarations.

Respondent's failure to submit the Subsidiary Sales Journal and the Subsidiary Purchase Journal is not
fatal to its claim for refund.

Section 113(C) of the NIRC of 1997, as amended, and Section 4.113.3 of RR No. 16-2005 require that a
Subsidiary Sales Journal and a Subsidiary Purchase Journal are required to be maintained by all persons
subject to VAT.

A careful reading of the foregoing provisions reveals that the same only require that the said subsidiary
journals must be maintained by a VAT taxpayer. Nowhere in the said provisions does it state that the
presentation of the subsidiary sales journal and subsidiary purchase journal is a condition sine qua non to
entitle the taxpayer to its claim for refund or tax credit for input tax attributable to zero-rated sales. As a
corollary, the absence of the same subsidiary journals does not denigrate the finding that there were zero-
rated sales made, and purchases with passed-on input VAT incurred, by respondent, as these are already
supported by sufficient evidence as presented and offered in the proceedings a quo.

Petitioner failed to rebut the factual findings of the Court in Division.

It is a basic rule that he who alleges must prove what is alleged. 20 In this case, the CIR failed to discharge
its burden of disproving the findings of facts made by the Court in Division.

The mere general averment of petitioner that the respondent failed to fully substantiate its claim for refund
failed to convince the Court En Banc that a reversible error was committed by the Court in Division as the
84

same is unsubstantiated, too vague, highly speculative, and uncertain. As between the above-stated
findings of the Court in Division and the general averment of petitioner, the former must perforce prevail.

Thus, the ruling of the Court in Division, that respondent was able to substantiate its claim for VAT refund
or issuance of tax credit certificate, albeit in the reduced amount of P 25,811 ,450.88, must be sustained.

WHEREFORE, in light of the foregoing considerations, the Petition for Review is hereby DENIED for lack
of merit. The assailed Decision dated May 19, 2016 and the assailed Resolution dated September 13, 2016
are AFFIRMED.

Marubeni Philippines Corporation vs. Commissioner of Internal Revenue


CTA EB 1548; April 2, 2018

FACTS:
Before the CTA En Banc are the Petitions for Review filed by petitioner Marubeni Philippines Corporation
on November 21, 2016 docketed as CTA EB No. 1548 and filed by petitioner Commissioner of Internal
Revenue on November 21, 2016 docketed as CTA EB No. 1554. Both petitions assail the Amended
Decision 1 dated April 21, 2016 and Resolution 2 dated October 19, 2016 promulgated by the Special First
Division of this Court in CTA Case No. 7223, entitled "Marubeni Philippines Corporation v. Commissioner
of Internal Revenue, " which partially granted Marubeni' s claim for tax refund/tax credit in the reduced
amount of P 134,662.95 representing its excess and unutilized input taxes attributable to zero-rated sales
for the four taxable quarters of 2003. The assailed Amended Decision and Resolution, which affirmed the
CTA Special First Division's Decision dated December 15, 2009, were the result of the granting of Marubeni'
s Petition for Review in CTA EB Case No. 799 then remanding of the case to the Court in Division for further
proceedings to determine Marubeni' s entitlement to the relief sought.

ISSUES:
Whether the Special First Division erred in partially denying a substantial portion of its claim for input VAT
Refund for the fourth quarters of CY 2003

Whether or not the Special First Division of this Honorable Court erred in holding that respondent is partially
entitled to its claim for tax refund/ tax credit in the amount of P 134,662.95, representing its unutilized and
excess input taxes attributable to its zero-rated sales for the four taxable quarters of 2003

RULING:
1. No. A careful review of the issues and arguments raised by Marubeni and CIR reveal that these are mere
reiterations of what have been considered and passed upon by the Court in Division in the assailed
Amended Decision dated April 21, 2016, and Resolution dated October 19, 2016.

The taxable year involved in this case is 2003, which is prior to the effectivity of Republic Act (RA) 9337.
Pertinent to this case are Sections ll0 (B) and 112 of the 1997 National Internal Revenue Code (NIRC).
Based on Section 112 (A) of the 1997 NIRC, the following requisites must be complied with by the taxpayer
in order to be entitled to a refund/tax credit of unutilized excess input VAT attributable to zero-rated or
effectively zero rated sales:

1. there must be zero-rated or effectively zero-rated sales;

2. that input taxes were incurred or paid;

3. that such input taxes are attributable to zero-rated or effectively zero-rated sales;

4. that the input taxes were not applied against any output VAT liability; and

5. that the claim for refund was filed within the two-year prescriptive period.
85

Requisites (4) and (5), are complied with by Marubeni as discussed in the December 15, 2009 Decision in
this case. Moreover, the Supreme Court has already ruled with finality on the timeliness of the filing of the
judicial claim with the CTA in its Resolution dated July 23, 2004 in G.R. No. 210326 (Commissioner of
Internal Revenue v. Marubeni Philippines Corporation). Marubeni's judicial claim filed on April 21, 2005 with
the CTA, or only one day after it filed its administrative claim with the CIR on April 20, 2005 is exempted
from the strict application of the 120-day mandatory period under Section 112 of the 1997 National Internal
Revenue Code (NIRC) because the filing of the petition for review is within the window period created in
the case Commissioner of Internal Revenue v. San Roque Power Corporation (San Roque case).

As regards requisites 1 to 3, as found by the Court in Division, Marubeni' s total substantiated zero-rated
sales amounts only to P1,827,105.36, 18 out of the total of P 166,957,052.16. Also, the Court in Division
found that the substantiated input VAT claim is P134,662.95 20 out of the total input VAT claim
ofP11,139,650.20 21 which is attributable to petitioner's substantiated zero-rated sales and capital goods
purchased for taxable year 2003 is refundable. In this case, the Court in Division found the amount of
P69,954.55 representing unutilized excess input VAT on capital goods purchased for the year 2003 to be
valid pursuant to Section 112 (B) of the 1997 NIRC.

It is a "well-established rule that tax refunds, which are in the nature of tax exemptions, are construed strictly
against the taxpayer and liberally in favor of the government. This is because taxes are the lifeblood of the
nation. Thus, the burden of proof is upon the claimant of the tax refund to prove the factual basis of his
claim."

In this case, CIR waived its right to present evidence. However, it does not follow that the taxpayer is already
entitled to its claim. The burden is on the taxpayer to prove its entitlement to the refund. Pertinent to this is
the case Commissioner of Internal Revenue v. Far East Bank & Trust Company, wherein the Supreme
Court emphasized that the failure of the CIR to present any evidence or to refute the evidence presented
by the taxpayer does not ipso facto entitle the taxpayer to a tax refund. The burden is on the taxpayer to
prove its entitlement to the refund.

In order for export sales to qualify for VAT zero-rating, the Special First Division ruled that based on "Section
106(A)(2)(a)(l) of the Tax Code, 27 in relation to Section 113 (A) of the 1997 NIRC and Section 4.108-1 of
Revenue Regulations No. 7-95, any person claiming VAT zero-rated direct export sales must present at
least three (3) types of documents, to wit: a) the sales invoice as proof of sale of goods; b) the export
declaration and bill of lading or airway bill as proof of actual shipment of goods from the Philippines to a
foreign country; and c) bank credit advice, certificate of bank remittance or any other document proving
payment for the goods in acceptable foreign currency or its equivalent in goods and services." In this case,
Marubeni complied with (a) and (b) documents, but failed to satisfy the last requirement. Hence, the Court
in Division did not err in disallowing the amount ofP101,939,439.49 reported as direct export sales to
Marubeni Tokyo provisions of RMC No. 42-2003.

2. No. This Court disagrees with petitioner simply because petitioner misunderstood provision "a" under A-
8 of RMC No. 42-2003. The phrase "import documents which created liability accounts in favor of the foreign
parent or affiliated company" means that the liability should be in favor or to the benefit of the foreign parent
company or its affiliates, and therefore, at the expense or liability of petitioner. From the foregoing, it can
be gleaned that the main purpose of provision "A-8.a" of RMC No. 42-2003 is to prove that the offsetting
arrangement is actually in place, by proving that petitioner has payables to the foreign parent or its affiliates
against which petitioner's receivables (i.e., from its sale of goods and services to Marubeni-Tokyo) were
offset. Hence, the sales invoices issued by petitioner to Marubeni-Tokyo are not the proper documents to
prove the existence of its payables to Marubeni-Tokyo.

Moreover, a VAT invoice is the seller's best proof of the sale of goods or services to the buyer, while a VAT
receipt is the buyer's best evidence of the payment of goods or services received from the seller. A VAT
invoice and a VAT receipt should not be confused and made to refer to one and the same thing. Certainly,
neither does the law intend the two to be used alternatively. As aptly held by the First Division of this Court
in its December 15, 2009 Decision, without VAT official receipts, petitioner's reported collected
86

commissions from non-residents in the amount of P 39,475,267.97 and commissions from PEZA entities in
the amount of P687 ,626.92 cannot qualify for VAT zero-rating.

Based on the foregoing discussions, the Court En Banc finds no reversible error to disturb the assailed
Amended Decision and Resolution of the CTA Special First Division.

Commissioner of Internal Revenue vs. Univation Motor Phil., Inc.


CTA EB 1553; April 2, 2018

FACTS:
Petitioner is the duly appointed Commissioner of Internal Revenue, vested with authority to carry out all the
functions, duties, and responsibilities of said office, including, inter alia, the power to act upon, decide, and
approve claims for refund and/or tax credits overpaid or erroneously paid or collected internal revenue
taxes.

Respondent Univation Motor Philippines, Inc., incorporated for the primary purpose of carrying out the
business of buying, acquiring, manufacturing, assembling, producing, importing, holding, selling, disposing,
distributing, dealing in motor trucks, cars, engines and other kinds of automobiles and mechanically
propelled vehicles, means of transportation and industrial machinery, their bodies, spare parts, accessories;
and to repair, maintain, service, condition and/or recondition said products, is a registered taxpayer of the
BIR, Large Taxpayers Service, with Taxpayer Identification No. 000389-353-000.

For calendar year (CY) 2011, respondent manually filed with the BIR its Annual Income Tax Return (ITR)
on April 26, 2012, and electronically filed the same with the BIR through the electronic Filing and Payment
System (eFPS) on July 25, 2012, marked as belatedly filed. Under its 2011 Annual ITR, respondent was
liable for Minimum Corporate Income Tax (MCIT) in the amount of P1 ,344,538.02, considering that the
MCIT was higher than the normal income tax due of P0.00. Nevertheless, respondent had an overpayment
of P25,055,787.65. Accordingly, respondent indicated on the face of its 2011 Annual ITR its option to be
issued a tax credit certificate (TCC) for its excess and unutilized creditable withholding tax (CWT) for CY
2011.

Thereafter, on December 21, 2012, respondent filed with the Large Taxpayers Excise Audit Division II of
the BIR, an administrative claim for refund or issuance of TCC for its excess and unutilized CWT for CY
2011 in the amount of P 13,165,171.00. On April 10, 2014, respondent filed a Petition for Review, following
Sections 58(D), 76, 204(C), and 229 of the National Internal Revenue Code (NIRC) of 1997. The case was
docketed as CTA Case No. 8797 and was assigned to the Third Division of this Court.

In a Decision dated July 21, 2016, the Commissioner of Internal Revenue is ordered to issue Tax Credit
Certificate in favor of petitioner Univation Motor Philippines, Inc. in the reduced amount of twelve million
nine hundred thirty-eight thousand six hundred and 20/100 pesos (Php12,938,601.20) representing
petitioner's excess and unutilized creditable withholding tax for calendar year 2011.

ISSUES:
Whether or not respondent failed to substantiate its claim for refund before the administrative body
Whether or not respondent is not entitled to claim refund in the amount of P 13,165,171.67

RULING:
No. Upon a cursory reading of RMO No. 53-98, the Court En Banc finds that nothing in the said issuance
which mandates that the list of documents therein stated should be submitted in connection with an
administrative claim for refund. Furthermore, said RMO is explicit, as to its subject and objective, that it
provides a checklist of documents to be submitted "upon Audit", and that it was issued to "(i)dentify the
documents to be required from a taxpayer during audit", respectively.
87

One of the two-tiered reasons for the issuance of RR No. 2-2006 is "to help promote a better business
environment by limiting BIR audits of returns with corresponding tax withheld at source to those without
substantiation".

In this case, however, it was never established that an audit was ever conducted by the BIR in connection
with respondent's administrative claim. In fact, petitioner never presented any evidence in the case a quo.
Thus, petitioner cannot validly invoke RMO No. 53-98 and RR No. 2-2006 to show that respondent failed
to present complete documents at the administrative level.

As a corollary, the submission of complete supporting documents by the taxpayer-claimant is presumed, in


the absence of contrary evidence. This is in accordance with the Supreme Court's pronouncement in CBK
Power Company Limited vs. Commissioner of Internal Revenue, wherein it was held that: "Bearing in mind
that the burden to prove entitlement to a tax refund is on the taxpayer, it is presumed that in order to
discharge its burden, petitioner had attached complete supporting documents necessary to prove its
entitlement to a refund in its application, absent any evidence to the contrary."

In view of this presumption and there being no evidence to the contrary, the documents attached to
respondent's administrative claim for refund filed on December 21, 2012 22 are deemed complete
documents.

2. No. A taxpayer-claimant need not wait for the decision of petitioner before filing a judicial claim with this
Court, when the 2-year prescriptive period is about to expire.

When the two-year prescriptive period is about to end, a taxpayer-claimant need not wait for the decision
of petitioner before filing a case with this Court.

Moreover, in no wise does Section 229 of the NIRC of 1997 imply that petitioner first act upon the taxpayer's
claim, and that the taxpayer shall not go to court before such taxpayer is notified of petitioner's action. 29 It
must be emphasized that the claim with petitioner was intended primarily as a notice of warning that unless
the tax or penalty alleged to have been collected erroneously or illegally is refunded, court action will follow.
30

In this case, there is no showing that petitioner ever acted on the administrative claim for refund of
respondent from the time it was filed on December 21, 2012 31 up to the filing of its judicial claim on April
10, 2014, 32 when the two-year prescriptive period is about to end. Thus, it was correct on the part of
respondent to have elevated its judicial claims before the expiration of the said two-year prescriptive period
under Section 229 of the NIRC of 1997.

Jovelles Autoparts, Inc. vs. BIR


CTA EB 1594; April 2, 2018

FACTS:
On November 10, 2014, petitioner received a copy of the Preliminary Assessment Notice (PAN) dated
November 8, 2014, to which it filed a protest on November 23, 2014. On November 27, 2014, petitioner
received a Formal Letter of Demand (FLO) dated November 26, 2014, finding it liable for deficiency Income
Tax (IT) and Value-Added Tax (VAT) in the total amount of P1,019,457.60, inclusive of interest and
surcharge. On December 16, 2014, petitioner protested the FLO. On March 25, 2015, petitioner received a
letter dated March 3, 2015 from OIC-Regional Director Marina C. De Guzman, reiterating the assessment
and demand for payment of its 2010 tax liabilities. On April 1, 2015, petitioner filed a Legal Petition Notice
dated March 28, 2015, inquiring if respondent's letter dated March 3, 2015 was his final decision on the
disputed assessments.

On June 30, 2015, petitioner received a letter dated June 29, 2015 from respondent's Revenue District
Officer (ROO) Salvador V.R. Lasala, informing it that the assessment was already for collection. Petitioner
88

questioned the propriety of the collection in its Legal Petition Notice filed on July 6, 2015. On July 23, 2015,
petitioner received a Warrant of Distraint and/or Levy (WDL) No. 15-17-003, which it also questioned in its
Legal Petition Notice filed on July 24, 2015. On August 4, 2015, petitioner received a letter dated July 24,
2015 from OIC Regional Director Marina C. De Guzman, stating that her letter dated March 3, 2015 was
the Final Decision on the Disputed Assessment (FDDA). On August 12, 2015, petitioner filed a Legal
Petition Notice/Motion for Reconsideration dated August 10, 2015 assailing the letter dated July 24, 2015.
This incident according to petitioner is still pending. On August 25, 2015, OIC-Regional Director Marina C.
De Guzman issued a letter to petitioner affirming the validity of the WDL No. 15-17-003.

On February 16, 2016, respondent's OIC - Asst. Regional Director Jose Eric C. Furia, issued a Warrant of
Garnishment against petitioner's account in the Bank of the Philippine Islands (BPI). Petitioner moved to lift
the cited Warrant of Garnishment but the same was denied in a letter11 dated March 10, 2016, issued by
Regional Director Arne/ SO. Guballa. On March 28, 2016, petitioner asked for a reconsideration of the letter
dated March 10, 2016. It is yet to receive a reply to its plea for reconsideration.

Hence, the instant Petition for Review with Application for Temporary Restraining Order and/or Writ of
Preliminary Injunction filed on Apri/15, 2016, xxx.

On September 26, 2016, the Court in Division dismissed petitioner's petition on jurisdictional ground.
Subsequently, on January 11, 2017 the Court in Division denied petitioner's Motion for Reconsideration of
the Resolution dated September 26, 2016. Hence, the present petition was filed.

ISSUES:
Whether or not the petition for review dated 14 April 2016 was filed beyond the reglementary period
Whether or not the warrants of garnishment and/or levy and garnishment issued by respondent is invalid
or premature

RULING:
Yes. An action to declare warrant of distraint and /or levy as void is neither imprescriptible nor akin to action
for declaration of contract's nullity; reconveyance of property on void contracts, and void judgments.

The power and authority of this Court to act on petitions for the annulment of distraint orders by the CIR
may not be denied and an appeal to this Court may be exercised only in the manner and in accordance
with the provisions of the law. The alleged premature issuance of warrants is of no moment; it is not
imprescriptible. Appeal must be made within the period fixed by law. The thirty (30) day period to appeal
before this Court in Division is reckoned from petitioner's receipt of the WDL No. 15-17-003 on July 23,
2015. Hence, petitioner had until August 22, 2015. The petition before the Court in Division was filed on
April 15, 2016. Thus, petitioner failed to comply with the prescriptive period. Evidently, the Court in Division
no longer has jurisdiction to act on the Petition for Review filed on April 15, 2016 as it was filed out of time.

2. WDL is valid. On the issuance of the Warrant of Garnishment against petitioner's BPI account on
February 16, 2016, the same is but a follow-up directed towards full implementation of the collection of tax
liabilities based on a final and executory assessment. Significantly, both the WDL No. 15-17-003 and the
Warrant of Garnishment stem from the same FDDA dated November 26, 2014, finding petitioner liable for
deficiency income tax and value-added tax in the total amount of P1,019,457.60. Thus, when petitioner
received the WDL No. 15-17-003 on July 23, 2015, its right to appeal before the Court commenced to run
and not from receipt of the Warrant of Garnishment on February 16, 2016. In sum, there is no compelling
reason to disturb the findings and conclusion of the Court in Division as it is supported by the evidence on
record.
89

Licel Calderon, et al. vs. Commissioner of Internal Revenue


CTA 9090; March 27, 2018

FACTS:
This is a Petition for Review 1 filed on July 13, 2015 by several Filipino employees of the Asian Development
Bank (ADB), praying for the refund of their alleged erroneously and illegally paid income tax in the aggregate
amount of Forty-Five Million Seven Hundred SeventyTwo Thousand Six Hundred Sixty Pesos and 30/100
(P45,772,660.30) for taxable years 2012 and 2013.

On April 12, 2013, respondent issued Revenue Memorandum Circular (RMC) No. 31-2013 entitled
"Guidelines on the Taxation of Compensation Income of Philippine Nationals and Alien Individuals
Employed by Foreign Governments/Embassies/Diplomatic Missions and International Organizations
Situated in the Philippines." It provides, among others, that officers and staff of the ADB who are not
Philippine nationals shall be exempt from Philippine income tax.

Since the said RMC was given retroactive effect, Filipino employees of the ADB were ordered to declare
and pay income taxes for 2012 onwards. Petitioners paid the following amounts as their income taxes for
taxable years 2012 and 2013.

On February 14, 2014, Mr. Erwin Salaveria and Ms. Portia Gonzales, Filipino employees of the ADB, filed
a Petition to Nullify Section 2(d)(1) of RMC No. 31-2013, with the Regional Trial Court (RTC), which
promulgated a decision in Civil Case No. MC14-8775 declaring Section 2(d)(1) of RMC No. 31-2013 as
void for being issued without legal basis, in excess of authority and/or without due process of law due to
absence of legislation and/or regulation to the contrary. A Motion for Reconsideration was filed by
respondent but was denied on January 9, 2015.

Respondent appealed the lower court decision to the Court of Appeals, which dismissed it via Resolution
dated July 3, 2015. The Court of Appeals ruled that the proper appeal would have been to file a petition
with the Supreme Court via Rule 45 of the Rules of Court. Respondent filed a Motion for Reconsideration,
but it was also denied by the Court of Appeals. Respondent then elevated the case before the Supreme
Court by filing a Petition for Review on Certiorari. The case is still awaiting resolution by the High Tribunal,
when petitioners, armed with a favorable RTC ruling, filed their respective administrative claims for refund
of income tax with the BIR on June 11, 2015 and on June 22, 2015. Due to the inaction of respondent on
the refund claims, petitioner was prompted to file the present Petition for Review before this Court on July
13, 2015.

ISSUES:
Whether or not the claim for refund and the Petition for Review were filed within the two-year prescriptive
period provided under Section 229 of the NIRC; and
Whether or not petitioners are entitled to their claim for refund of income taxes paid in taxable years 2012
and 2013 alleged to be erroneously and/or illegally paid.

RULING:
Yes. The claim for refund must be filed with the Commissioner of Internal Revenue and the Court of Tax
Appeals within the two-year prescriptive period from the date of payment of tax. Applying the provisions of
law and the table detailing the significant dates relative to petitioners' respective income tax payments, this
Court finds that petitioners have established that they were able to file both their administrative and judicial
claims for refund for 2012 and 2013 within the two-year period.

Yes for 2012; No for 2013. Accordingly, amount of Php30,543,307.80 to be individually allocated based on
the tabular summary provided earlier, representing the illegally collected income taxes for taxable year
2012. As regards the 2013 claim for tax refund/tax credit certificate in the amount of Php15,229,352.50, the
same is hereby DENIED for lack of legal basis.

The Court cannot take cognizance of the declarations made by the RTC in its decision in the case entitled
''Erwin Salaveria and Portia Gonzales vs. Commissioner of Internal Revenue'; which declared void the
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provisions of RMC No. 31-2013 issued on April 12, 2013 for being issued without legal basis. Decisions of
lower courts are not binding precedents as succinctly enunciated by the Supreme Court in the case of
Visayas Geothermal Power Company vs. Commissioner of Internal Revenue 191 , viz: "Only decisions of
this Court constitute binding precedents, forming part of the Philippine legal system".

The Court find the clarifications provided by RMC 31-2013 as to the taxability of the compensation received
by the petitioners, in accord with the ADB Charter and the subsequent ratification made by the President
of the Philippines. The contention of the petitioners that the exclusion of Filipino employees from the tax-
exempt provisions of the ADB Charter would entail an enactment of an enabling law to put this into effect
is bereft of merit as it is clear that the Philippines had already enacted its own Tax Code at the time of the
ratification of the ADB Charter imposing the types and rates of tax of citizens of the Philippines. The word
"reservation" in the aforequoted ratification therefore is to be construed as an excepting clause to the tax
exemptions found in the treaty establishing the ADB. There should be no question then that the tax
exemption on the compensation income of the Filipino employees of the ADB are subject to tax and that
respondent Commissioner of Internal Revenue did not abuse his discretion in issuing the controverted RMC
No. 31-2013.

However, this Court finds that the clarificatory nature of the provisions of RMC 31-2013 issued on April 12,
2013, should apply prospectively and should not affect the tax exempt privilege availed of by the Filipino
ADB employees in 2012 (prior to the issuance of RMC 31-2013).

Section 7 of RMC 31-2013 clearly provides that the provisions thereof "shall take effect immediately" which
means that it should take effect starting May 2, 2013 the date when a copy was officially submitted to the
Office of the National Administrative Register of the UP Law Center pursuant to the requirement of the
Administrative Code, Section 3, Chapter 2, Book VII. Pursuant to the abovementioned provision, the
Supreme Court emphasized in National Association of Electricity Consumers for Reforms v. Energy
Regulatory Commission, G.R. No. 163935, February 2, 2006 that both the requirements of publication and
filing of administrative issuances are mandatory for their effectivity. The ADB as employer as well as the
concerned employees should not be faulted on the apparently confirmatory but inconsistent opinions of
senior officials of the BIR. It was only by the issuance of RMC 312013 that then Commissioner Kim Henares
categorically clarified that they are subject to tax.

More than the lifeblood doctrine, we find that the principles of fundamental fairness and equity behoove us
to apply the non-retroactive rule under Section 246 of the Tax Code and we quote:

"SEC. 246. Non- Retroactivity of Rulings. - 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”


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Oceanagold Inc. v. Commissioner of Internal Revenue


CTA Case No. 8995
Bautista, J.

FACTS:
These are consolidated Petitions for Review seeking the Court to render a judgement declaring
OceanaGold (Philippines), Inc. (OGPI) entitled to a refund of or to the issuance of a tax credit certificate
representing alleged erroneously paid and illegally and wrongfully collected excise taxes for the period from
February to March 2013.

The Republic of the Philippines and Arimco Mining Corporation (AMC) entered into a Financial or Technical
Assistance Agreement (FTAA). A portion of the contract area under the structure covers the Dipidio Gold-
Copper Project. AMC then transferred to OGPI all its rights and obligations under the FTAA. Consequently,
petitioner submitted a request to CIR confirming its exemption from the payment of excise tax on minerals
during the recovery period in which the CIR approved. After sometime, revenue officers seized on several
occasions mineral ores and copper concentrates for failure of prepayment of removal of copper
concentrates. The CIR also revoked OGPI’s exemption from excise tax during the recovery period. OGPI
paid under protest the excise taxes. OGPI also prepaid excise taxes for its next scheduled removals of
copper concentrates and doré bars.

Then, OGPI sought for the recovery of the excise taxes paid on OGPI’s removal of copper concentrates
and doré bars. Without the decision of the CIR on its claim for refund or the issuance of the TCC, OGPI
filed two separate Petitions for Review. OGPI also avers that both administrative and judicial claims for
refund or issuance of a TCC of excise tax erroneously paid on the removal of copper concentrates were
filed within the two-year period under the NIRC.

ISSUE:
Whether or not OGPI timely filed it administrative and judicial claims?

RULING: Yes.

A taxpayer has two (2) years from the date of payment of the tax (alleged to have been erroneously or
illegally collected) within which to file a claim for refund or for the issuance of a TCC before the CIR and
with the Court; and that a prior filing of an administrative claim is a condition precedent before a judicial
claim can be filed.

OGPI filed its administrative claim before the Excise LT Audit Division I on February 20, 2015, seeking for
the refund of excise taxes paid for the period from February to March 2013 and from April to June 2013, in
the amounts of Php25,843,462.41 and Php42,785,549.13, respectively. Subsequently, on February 24,
2015135, without waiting for the decision of the BIR on its administrative claim, OGPI filed a Petition for
Review before the CT A seeking for the recovery of the Php25,843,462.41 amount. Another Petition for
Review was filed on April 28, 2015, this time for the recovery of Php42,785,549.13 excise taxes paid for
the period from April to June 2013.

Thus, OGPI timely filed its administrative and judicial claims for refund or for the issuance of a TCC of
excise taxes alleged to be erroneously or illegally collected which were filed within the two-year prescriptive
period. However, the Court denied the Petitions for Review for the claim of refund or issuance of a TCC as
OGPI failed to submit sufficient evidence to support its claim for refund or issuance of TCC.
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Philippine Geothermal Production Company Inc. v. Commissioner of Internal Revenue


CTA Case No. 9048
Castañeda, Jr. J

FACTS:
Petitioner Philippine Geothermal Production Company Inc seeks to assail the adverse decision of the CIR
on its claim for refund or tax credit in the amount of P14,145,000.00 allegedly representing its unutilized
input VAT for the fourth quarter of taxable year 2012.

During the fourth quarter of taxable year 2012, petitioner had zero-rated sales in the amount of P355,
077,241.24. It also ade royalty payments to its non-resident suppliers in December 2012 amounting to
P117, 875,000.00 which was subjected to 12% VAT amounting to P14,145,000.00. Petitioner filed its claim
for refund or tax credit tax credit in the total amount of P14,145,000.00 pursuant to Sections 112(A) and
108(B)(7) of the National Internal Revenue Code of 1997. However, the BIR denied petitioner’s claim for
refund or tax credit.

Respondent averred that the law requires the submission of complete documents in support of the
application filed with the BIR before 120-day audit period shall apply, and before the taxpayer could avail
of judicial remedies as provided for in the law, petitioner’s failure to comply with the duly mandated legal
requirements in such claims for refund/tax credit warranted by the denial by inaction of the administrative
claim. Also, petitioner failed to substantiate its claim for refund/issuance of tax credit certificate in the
amount of P14,145,000.00 representing alleged erroneously paid input taxes for tax year 2012.

ISSUE:
Whether or not petitioner is entitled to a claim for refund of its unutilized input taxes for the 4th
Quarter of 2012 in the total amount of P14, 145,000.00?

RULING: No.
Based on Section 112(A) and (C) of the NIRC of 1997, as amended, in order to be entitled to a refund or
tax credit of unutilized input VAT attributable to zero-rated or effectively zero-rated sales, the following
requisites must be satisfied:
1. the claimant must be a VAT-registered person;
2. there must be zero-rated or effectively zero-rated sales;
3. input taxes were incurred or paid;
4. such input taxes are attributable to zero-rated or effectively zero-rated sales;
5. said input taxes were not applied against any output VAT liability; and
6. the administrative and judicial claims for refund were filed within the prescribed period.

In this case, petitioner is primarily engaged in the exploration, development, and exploitation of geothermal
energy and similar resources. Pursuant to Republic Act (RA) No. 9513 or the Renewable Energy Act of
2008, renewable energy (RE) developers are entitled to VAT zero-rating treatment of their sale of fuel or
power generated from renewable sources of energy. Accordingly, the sale of power or fuel generated
through geothermal energy is subject to zero-rated value-added tax. However, evidence showed that
petitioner’s sales of power generated through geothermal energy for the fourth quarter of 2012 do not qualify
for VAT zero-rating. During the fourth quarter of 2012, petitioner is not yet DOE-certified as RE developer.
Hence, it is not entitled at that time to any of the incentives under RA 9513, particularly the VAT zero-rating
treatment of sale of power generated through geothermal energy.

Thus, considering that it has no zero-rated sales for the fourth quarter of 2012, petitioner cannot claim the
input taxes withheld on the royalty payment made to tis non-resident suppliers.
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The Aristocrat Franchise Corporation v. Commissioner of Internal Revenue


CTA EB No. 1575
Bautista, J.

FACTS:
Petitioner filed its Annual Income Tax Return. A Revenue Officer conducted an audit investigation and
issued a Preliminary Assessment Notice for deficiency. Petitioner, then, protested the PAN. Thereafter, a
Final Assessment Notice was issued against petitioner demanding payment of P11,016,535.09 including
increments. Petitioner filed several offer of compromise which were all denied.

Petitioner filed a petition for Review asserting that its offer of compromise based on doubtful validity of
assessment is valid because the disputed assessment is a jeopardy assessment and is lacking in legal and
factual basis. Petitioner avers that the assessment was made without the benefit of a complete or partial
audit when the FAN was issued or a day after its protest to the PAN was received by the BIR. Respondent
counters that the grounds relied upon by petitioner are mere rehashes or reiterations of the previous issues
and arguments already squarely and intelligently passes upon by the Court in Division. Respondent avers
that petitioner was not deprived of due process since it was able to receive the PAN and the FAN and it
was able to contest by filing a protest. He adds that tax assessments are presumed correct and made in
good faith and the taxpayer has the duty to prove otherwise. Respondent asserts that petitioner failed to
overcome this presumption.

ISSUE:
Whether or not petitioner was deprived of due process when the revenue officer has no authority to conduct
an audit investigation?

RULING: Yes.
In all tax assessments, the audit investigation must be conducted by a duly designated RO tasked to
perform audit and examination of taxpayers' books, pursuant to an LOA issued by the Regional Director. In
case of re-assignment or transfer of cases to another RO, a new LOA with a corresponding notation thereto
must be issued.

In this case, records reveal that Revenue Officer Quintos, the RO who conducted the audit investigation of
petitioner’s books of accounts and other accounting records, was not named in LOA No. 00061306. RO
Quintos’ authority can be traced only from a Letter issued by Mr. Isidro T. Casals, Jr. wherein he wrote that
the authority to examine was re-assigned to RO Quintos. In Medicard Philippines Inc v. Commissioner of
Internal Revenue, the Supreme Court emphasized that the absence of an LOA violated a taxpayer’s right
to due process.

Thus, absent a new LOA designating RO Quintos to conduct the audit and examination of petitioner’s books
of accounts and accounting records for TY 2006, RO Quintos acted without authority when he conducted
the audit investigation of petitioner’s books. Therefore, the assessment arising therefrom is void.

Commissioner of Internal Revenue v. Mindanao Sanitarium and Hospital, Inc.


CTA EB No. 1610
Bautista, J.

FACTS:
This is a petition for Review praying for the recall of the Court En Banc’s Amended Decision and Resolution
by the second division of the CTA and for the issuance of a new decision denying the Petition for Review
filed by respondent before the Court in Division.

Petitioner issued a Preliminary Assessment Notice against respondent. However, respondent denies due
receipt thereof. Consequently, petitioner sent to respondent a Formal Letter of Demand and Final
Assessment Notices. Petitioner issued to respondent a Warrant of Distraint and /or Levy so respondent
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filed a Petition for Review which was denied. Then, respondent filed a Motion for Reconsideration which
was partially granted.

ISSUE:
Whether or not respondent timely filed the Petition for Review?

RULING: Yes. Respondent timely filed the Petition for Review.

Section 228 of the NIRC provides that If the protest is denied in whole or in part, or is not acted upon within
one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the
decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of said
decision, or from the lapse of the one hundred eighty (180)-day period; otherwise, the decision shall become
final, executory and demandable.

Based on the special circumstances surrounding the case at bar, the WDL can be considered as the Final
Decision on Disputed Assessments, since it is the only admissible evidence which respondent can refer to
in order to determine whether its Protest was denied or granted. The Court En Banc wishes to point out
that respondent filed its Protest on November 29, 2012 and received no other response from petitioner,
save for the WDL received on July 25, 2013; that the WDL was received two hundred and thirty-eight (238)
days after filing the Protest; and that the CIR is only given one hundred and eighty (180) days to act on a
Protest. Therefore, the only logical inference respondent can gather from the circumstances is that the WDL
is in response to its Protest, which was denied in view of the commencement of collection proceedings.

Considering that the WDL was served upon respondent on July 25, 2013, it had until August 24, 2013 to
file a Petition for Review. Accordingly, the Petition for Review filed with the Court in Division on August 22,
2013 was filed on time. Thus, while the Court in Division may have erred in declaring that respondent opted
to appeal the inaction of the CIR and in finding that the WDL cannot be deemed as the FDDA, the overall
outcome of the case is still the same – the petition for Review filed with the Court in Division was timely
made.

Commissioner of Internal Revenue v. G & W Architects, Engineers and Project Consultants Co.
CTA EB No. 1449
Casanova, J.

FACTS:
This is an appeal by way of Petition for Review seeking the reversal and setting aside of the Decision and
Resolution both rendered by the CTA-First Division.

The Assailed Decision granted the Petitions for Review and, accordingly, cancelled the assessments for
deficiency expanded withholding tax and documentary stamp tax for the periods 2004, July 10, 2004 and
June 2004, in the amounts of P277,458,117.19, P132,852,679.05 and P149,414,228.66, respectively, or in
the total amount ofP559,725,024.90. The assailed decision found and ruled that in the instant case, there
is nothing in the Contracts to Manage and Execute the Construction of several condominium projects
between petitioner (respondent now) and its clients which would show that there would be a transfer of
ownership of the condominium units from petitioner to its clients for the transaction to be considered as a
sale of the condominium units.

ISSUE:
Whether or not petitioner (respondent now) is liable for deficiency expanded withholding tax (EWT) and
documentary stamp tax (DST) since respondent is not merely the Project Manager of the condominium
project but the owner thereof?

RULING: Yes.
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Respondent is liable for deficiency EWT and DST since respondent is not merely the Project Manager of
the condominium project but the owner thereof.

With regard to respondent's liability for deficiency expanded withholding tax (EWT) and documentary stamp
tax (DST), since it is this Court's observation that respondent is not merely the Project Manager of the
condominium Projects but the owner thereof, the Court concurs in the following conclusion of Presiding
Justice Roman G. Del Rosario in his Dissenting Opinion, viz.: "Anent the EWT assessment issued against
petitioner, I am aware that the duty to withhold in a sale of real property is the responsibility of the
withholding agent, i.e. condominium unit owners. Considering however that it was petitioner who
misrepresented to the unsuspecting buyers that the transaction is not a sale, it must bear the EWT as a
consequence. To allow petitioner to escape liability from the consequence of its mischievous tax scheme
would in esse permit a wrong-doer to benefit from its own wrong doing. "Commodum Ex Injuria Sua Nemo
Habere Debet" (A wrong doer should not be enabled by law to take any advantage from his actions)."

Thus, a review of the contracts executed between respondent and its clients reveal that respondent’s
assertion that it is merely the Project Manager and not the owner of the condominium units is belief by
petitioner’s own pieces of evidence. G & W has the authority to terminate the contract if it deems that it is
not feasible to proceed with the project. Also, it shall have the right to acquire or identify a substitute client
to acquire all the rights and interests of the clinet in the project and assume the corresponding remaining
obligation. Therefore, respondent is ordered to pay the assessed deficiency EWT and DST plus accrued
25% surcharge for late payment 20% interest per annum until fully paid.

CHEVRON HOLDINGS, INC. VS. COMMISSIONER OF INTERNAL REVENUE


CTA EB NO. 1508 AND 1509; March 21, 2018
Ringpis-Liban, J.

FACTS:
Petitioner, Chevron, is a SEC registered regional operating headquarters (ROHQ) in the Philippines. It is
registered with the BIR as a VAT taxpayer. On October 23, 2012, Chevron filed its administrative claim for
refund and/or the issuance of Tax Credit Certificate (TCC) of unutilized input VAT for the four quarters of
CY 2011. In view of the inaction of the Commissioner Internal Revenue, petitioner filed the instant Petition
for Review. On April 5, 2016, the Second Division partially granted the petition and ordered the CIR to
refund issue a Tax Credit Certificate (TCC) in favor of Chevron in the reduced amount of Php 9,188,216.85
representing its unutilized excess input VAT for the four quarters of taxable year 2011 which is attributable
to its valid zero-rated receipts for the same period.

ISSUES:
Whether or not the CTA-Division gravely erred in holding that out of its declared zero-rated receipts of Php
2,472,585,065.00, only the amount of Php 578, 576,738.40 represent valid zero-rated receipts.

Whether or not the Honorable Court’s Second Division erred in partially granting Chevron’s claim for refund
in the amount of Php9,188,216.85 allegedly representing unutilized excess input VAT attributable to zero-
rated sales for taxable year 2011.

RULING:
EB NO. 1508

The Court denied the instant petition and agreed with the Second Division when it ruled that only the amount
of Php578,576,738.40 represent Chevron’s valid zero-rated receipts for CY 2011. Section 108 (B)(2) of the
1997 NIRC provides that in order for a sale of service transaction to be subject to 0% VAT rate, it is required,
inter alia, that the services were “rendered to a person engaged in business conducted outside the
Philippines or to a nonresident person not engaged in business who is outside the Philippines when the
services are performed" and the consideration therefor was "paid for in acceptable foreign currency and
accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP)".
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There can be no merit in Chevron's insistence that its service agreements and printed screenshot or
corporate profile, are sufficient to establish that its service recipients are non-resident foreign corporations
doing business outside the Philippines. The former document only shows the names of Chevron's
customers to whom it rendered services, but do not, in any way, establish that the service recipients are
engaged in business outside the Philippines; while the latter document is self-serving, and lack credibility,
which can be easily manipulated to favor Chevron in view of its affinity with the entity that maintains or
keeps the said database.

EB NO. 1509

The Court is one with the Second Division that Chevron has sufficiently established that it is entitled to a
refund or issuance of a TCC corresponding to its unutilized and excess input VAT for the four quarters of
CY 2011 attributable to its zero-rated receipts, but in the reduced amount of Php9,188,216.85. Moreover,
the Court disagreed with the argument of CIR that there is no showing that Chevron submitted complete
documents to substantiate its administrative claim for refund and that being the case its application for
refund should be deemed not filed. As held in the case of Pilipinas Total Gas Inc. vs CIR, non-submission
of complete documents at the administrative level is not fatal to a claim for refund in the judicial level. The
same will not bar the Court from receiving, evaluating, and appreciating evidence submitted before it.
Hence, the instant petition was denied for lack of merit.

PEOPLE OF THE PHILIPPINES VS. JUAN MIGUEL M. ARROYO


CTA CRIM. CASE NO. O-247, O-248 and O-249; March 21, 2018
Del Rosario, P.J.

FACTS:
Accused herein is charged before the Court of Tax Appeals for failure to supply correct and accurate
information under Sections 24 (Income Tax on Individuals), 51 (A)(1 )(a)1 in relation to Section 2552 of the
National Internal Revenue Code (NIRC) of 1997, as amended in CTA Crim. Case Nos. 0-247, and 0-248,
and for failure to file an income tax return under the same provisions of the NIRC in CTA Crim. Case No.
0-249. Complainants in this case aver that based on information and documents gathered during
investigation, it was disclosed that Mr. & Mrs. Arroyo were able to acquire real, personal and other
properties for the years 2004 to 2009, which are worth several millions; that among those properties are
residential houses in Lubao, Pampanga & La Vista Subdivision in Quezon City, motor vehicles, shares of
stock, jewelries, clothes and other personal effects as enumerated in the Statement of Assets, Liabilities &
Net Worth (SALNs) of Mr. Arroyo as of December 31 of the years 2002 to 2009; and that despite the receipt
of substantial amounts of income as shown by their acquisition of numerous properties, Mr. and Mrs. Arroyo
had repeatedly failed to file any Annual ITR and pay the corresponding taxes; and for the years that they
filed their ITRs, they understated their income.

ISSUES:

Whether or not accused willfully, unlawfully and substantially failed to supply correct and accurate
information with respect to his true and correct income for taxable years 2004, 2006 and 2007.
Whether or not accused is required by law, rules and regulations to file his Annual Income Tax Return for
income earned for taxable year 2007;
Whether or not a prior assessment of the tax liability of accused is required prior to the criminal prosecution
for tax evasion

RULING:
The prosecution failed to establish the likely source and the nature of the alleged undeclared income, that
is, whether it is an ordinary income that should have been reported in the ITRs or that said undeclared
income was not sourced from bank deposits, investments in shares, donations or inheritance. If the
undeclared income is a passive income, accused is not required to declare the same in his ITRs as said
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income is subject to final tax. Thus, the prosecution has failed to prove beyond reasonable doubt the second
element of the crime, which is the alleged failure of accused to supply correct and accurate information in
the return, as charged.

Accused cannot be convicted of the crime of failure to file ITR under Section 255 of the NIRC of 1997, as
amended, as he was not required to file a separate ITR for the year 2007. His employer's Annual Information
Return on Income Tax Withheld on Compensation (BIR Form 1604CF) is considered as his "substitute" ITR
pursuant to Section 2.83.4 of RR No. 02-98, as amended by RR No. 03-02.

To sustain a conviction for the offenses, as charged under Section 255 of the NIRC of 1997, as amended,
the following elements must be established by the prosecution beyond reasonable doubt: (1) Accused is
required under the NIRC or its rules and regulations to pay any tax or make a return, or to supply correct
and accurate information in the return; (2) Accused failed to pay the required tax, or make a return, or
supply correct and accurate information at the time required by law or rules and regulations; and (3)
Accused's failure to pay the required tax or to make a return, or to supply correct and accurate information
at the time required by law or rules and regulations is willful. Furthermore, to prove the first element of the
offense under Section 255 of the NIRC of 1997, as amended, the prosecution is burdened to establish two
(2) essential components, namely: (1) that accused is a resident of the Philippines as alleged in the
Information; and (2) the source of income of the accused in taxable years 2004, 2006 and 2007 including
the taxable income derived therefrom, which income was not declared in the corresponding Income Tax
Returns (ITRs). In the case at bar, accused was found to be a resident Filipino citizen in 2004, 2006 and
2007.

In Commissioner of Internal Revenue v. Court of Appeals, the Court clarified that although a deficiency
assessment is not necessary, the fact that a tax is due must first be proved before one can be prosecuted
for tax evasion. In Ungab v. Judge Cusi, Jr., the Court ruled that tax evasion is deemed complete when the
violator has knowingly and willfully filed a fraudulent return with intent to evade and defeat a part or all of
the tax. Corollary, an assessment of the tax deficiency is not required in a criminal prosecution for tax
evasion.

WHEREFORE, in view of the foregoing, accused Juan Miguel M. Arroyo is hereby ACQUITTED of the
offenses charged in CTA Crim. Case Nos. 0-247, 0-248 and 0-249 for failure of the prosecution to prove
his guilt beyond reasonable doubt.

LICEL CALDERON, ET AL. VS COMMISSIONER OF INTERNAL REVENUE


CTA CASE NO. 9090 ; March 20, 2018
Castaneda, Jr.

FACTS:
On April 12, 2013, respondent issued Revenue Memorandum Circular (RMC) No. 31-2013 entitled
"Guidelines on the Taxation of Compensation Income of Philippine Nationals and Alien Individuals
Employed by Foreign Governments/Embassies/Diplomatic Missions and International Organizations
Situated in the Philippines." It provides, among others, that officers and staff of the ADB who are not
Philippine nationals shall be exempt from Philippine income tax. Since the said RMC was given retroactive
effect, Filipino employees of the ADB were ordered to declare and pay income taxes for 2012 onwards.
Petitioners paid the following amounts as their income taxes for taxable years 2012 and 2013.
Consequently, this Petition for Review was filed on July 13, 2015 by several Filipino employees of the Asian
Development Bank (ADB), praying for the refund of their alleged erroneously and illegally paid income tax
in the aggregate amount of Forty-Five Million Seven Hundred Seventy Two Thousand Six Hundred Sixty
Pesos and 30/100 (P45,772,660.30) for taxable years 2012 and 2013.

ISSUE:
Whether or not the claim for refund and the Petition for Review were filed within the two-year prescriptive
period provided under Section 229 of the NIRC;
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Whether or not petitioners are entitled to claim refund for income taxes paid in taxable years 2012 and 2013
alleged to be erroneously and/or illegally paid.

RULING:
Section 229 of the NIRC OF 1997, as amended, provides that the claim for a refund must be filed with the
Commissioner of Internal Revenue and the Court of Tax Appeals within the two-year prescriptive period
from the date of payment of tax. Based on the record of income tax payments of petitioners, the latter timely
filed their administrative and judicial claims for refund within the two-year period from their respective dates
of payment.

Contrary to the allegations of tax-exemption of petitioners, Filipino officers and employees of the ADB are
subject to income tax on salaries and emoluments they receive from the ADB as pertinent treaties and
legislations clearly indicate the intention of Congress to subject to tax the salaries and emoluments being
received by Filipinos from the ADB. In fact, on March 16, 1966, in Senate Resolution No. 6, the Philippine
Government ratified and confirmed the ADB Charter but categorically included a reservation of the
Philippine's right to tax the Filipino employees of ADB. Consequently, petitioners' income tax payments for
salaries and emoluments they received from the ADB for taxable years 2012 and 2013 were not erroneously
and/or illegally collected by the BIR. Hence, such income tax payments cannot be refunded.

GS MTE GRAINS CORPORATION VS. COMMISSIONER OR INTERNAL REVENUE


CTA CASE NO. 8837; MARCH 19, 2018
MINDARO-GRULLA, J.

FACTS:
Petitioner, a domestic corporation duly organized and existing under the laws of the Philippines, seeks to
set aside the Decision dated February 3, 2014 issued by respondent CIR and to nullify the Formal Letter of
Demand (FLD) dated December 1, 2009, assessing the former for alleged deficiency income tax, expanded
withholding tax (EWT), and compromise penalties in the total amount of P12,970,415.01 for calendar year
(CY) 2006, pursuant to the denial of its protest dated October 27, 2010 by respondent CIR. In its answer,
the latter averred that the Court of Tax Appeals (CTA) did not acquire jurisdiction over the instant case, as
the assessment has become final, executory and demandable because of the failure of petitioner to submit
relevant supporting documents within the time prescribed by law and to timely appeal the denial of its
protest within the period provided in Section 228 of the Tax Code, specifically within 30 days from receipt
of the decision or the lapse of 180-day period from submission of documents.

ISSUES:
Whether the Court acquired jurisdiction over the instant case;
Whether petitioner is liable to pay the assessed amount of P12,970,415.01 representing its deficiency
income tax, EWT and compromise penalty for taxable year 2006.

RULING:
Under pertinent provisions of the law, the jurisdiction of the CTA is not limited only to cases which involve
decisions or inactions of the CIR on matters relating to assessments or refunds but also includes other
cases arising from the NIRC or related laws administered by the BIR. Thus, for instance, the Court had
once held that the question of whether or not to impose a deficiency tax assessment comes within the
purview of 'other matters arising under the National Internal Revenue Code. In the case at bar, petitioner
received a copy of respondent's Decision dated February 3, 2014, demanding the payment of deficiency
income tax, EWT, and compromise penalties in the total amount of P12,970,415.01 for CY 2006, on March
7, 2014. Counting thirty days from March 7, 2014, petitioner had until April 7, 2014 within which to file its
Petition for Review with the Court. Hence, the Petition for Review was clearly filed by petitioner on April 7,
2014, within the thirty day prescriptive period.

No. The Petition for Review was granted. There must be a grant of authority before any RO can conduct
an examination or assessment. Equally important is that the RO so authorized must not go beyond the
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authority given. In the absence of such an authority, the assessment or examination is a nullity. In this case,
the non-compliance of the concerned RO with the required procedure would inevitably render the LOA
invalid. By continuing with the audit beyond the prescribed 120-day period, without submission of a
Progress Report and without the surrender of the LOA for revalidation, RO Sophia D. Dipatuan had
therefore acted without authority. In the absence of competent proof that RO Sophia D. Dipatuan was duly
authorized pursuant to a valid LOA, the deficiency tax assessments issued against petitioner, arising from
the audit she conducted, is void ab initio.

It is an elementary rule enshrined in the 1987 Constitution that no person shall be deprived of property
without due process of law. In balancing the scales between the power of the State to tax and its inherent
right to prosecute perceived transgressors of the law on one side, and the constitutional rights of a citizen
to due process of law and the equal protection of the laws on the other, the scales must tilt in favor of the
individual, for a citizen's right is amply protected by the Bill of Rights under the Constitution. Thus, while
"taxes are the lifeblood of the government," the power to tax has its limits, in spite of all its plenitude. Even
as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes
that it be exercised reasonably and in accordance with the prescribed procedure.

PANGASINAN III ELECTRIC COOPERATIVE, INC. VS. COMMISSIONER OF INTERNAL REVENUE


CTA CASE NO. 8915; MARCH 19, 2018
Mindaro-Grulla, J.

FACTS:
Petitioner, an electric cooperative registered with the Cooperative Development Authority, seeks to annul,
reverse and set aside the (a) Final Assessment Notices/Formal Letter of Demand (FAN/FLO) dated
December 12, 2013 issued by respondent Commissioner of Internal Revenue (CIR), demanding from
petitioner Pangasinan III Electric Cooperative, Inc. the payment of P153,623,068.02 representing alleged
deficiency value-added tax (VAT), expanded withholding tax (EWT), final withholding tax (FWT) on fringe
benefits, and documentary stamp tax (DST), and compromise penalty for taxable year 2009; and (b)
FAN/FLO dated February 19, 2014 issued by respondent, demanding from petitioner the payment of
P245,682,949.94 representing alleged deficiency VAT, EWT, FWT on fringe benefits, and compromise
penalty for taxable year 2010.
In its answer, filed on January 21, 2015, respondent interposed the following Special and Affirmative
Defenses: (a) the Court has no jurisdiction over the instant petition; the assessment had already become
final, executory and demandable; (b) respondent's right to assess for the two taxable years did not
prescribe; and (c) the Letter of Authority, Notice of Informal Conference, Preliminary Assessment Notice,
Formal Letter of Demand, and Final Assessment Notice were issued in accordance with law, rules and
jurisprudence.

ISSUES:
Whether the Court has jurisdiction over the instant petition;
Whether petitioner is liable to pay the total amount of P153,623,068.02 for deficiency VAT, EWT, FWT,
DST and Compromise Penalty for taxable year 2009 and 2010.

RULING:
The CTA En Banc in a case held that it can be concluded that once there is a finding of a void assessment,
the absence or presence of a protest ceases to be relevant. Thus, the Court has jurisdiction over the instant
case as the same falls under "other matters arising under the National Internal Revenue Code or other laws
administered by the Bureau of Internal Revenue".

The word "shall" in Section 228 of the National Internal Revenue Code and Revenue Regulations No. 1299
means the act of informing the taxpayer of both the legal and factual bases of the assessment is mandatory.
The law requires that the bases be reflected in the formal letter of demand and assessment notice. This
cannot be presumed. Otherwise, the express mandate of Section 228 and Revenue Regulations No. 12-
99 would be nugatory. The requirement enables the taxpayer to make an effective protest or appeal of the
100

assessment or decision. A formal letter of demand and an assessment notice, stating the facts,
jurisprudence, and law on which the assessment was based, shall be issued by the CIR or his duly
authorized representative. The use of the word "shall" indicates the mandatory nature of the said
requirement. Since it was not proven that petitioner received the FLD, then, it was not informed of the legal
and factual bases of the assessment.

Hence, the assessment notices issued by respondent to petitioner for deficiency VAT, EWT, FWT and DST
for taxable year 2009 never became final and demandable. A determination that there was a violation of
due process because no FLD was sent renders the assessment void; and a void assessment bears no
valid fruit. Accordingly, the Formal Letter of Demand and Assessment Notices dated December 12, 2013
issued by respondent against petitioner for deficiency VAT, EWT, FBT, and DST and compromise penalty
for taxable year 2009 are cancelled while the Formal Letter of Demand and Assessment Notices dated
February 19, 2014 issued by respondent against petitioner for deficiency VAT and EWT, and compromise
penalty for taxable year 2010 are likewise cancelled.

Destiny Cable, Inc. v. The City of Makati


CTA AC No. 182; March 14, 2018
Castaneda, Jr.

FACTS:
Plaintiff is a domestic corporation engaged in the business of providing cable/community antennae
television (CATV) systems and networks and multi-media training systems and other related services in the
Philippines and other countries. On May 12, 2012, plaintiff and Sky Cable Corporation (Sky Cable) executed
two Deeds of Sale and Assignment. Under the first Deed of Assignment, plaintiff assigned, transferred and
conveyed to Sky Cable all its rights, obligations, title and interests to all the assets, permits, licenses and
intellectual property used in connection with or pertaining to the plaintiff's cable television business. In the
second Deed of Assignment plaintiff assigned, transferred and conveyed to Sky Cable all its rights,
obligations, title and interest under all the subscription contracts and various other contracts relating to its
cable television business to Sky Cable.

On April 1, 2014, Sky Cable handed to plaintiff a copy of defendant City Treasurer's Final Notice of
Assessment dated March 20, 2014, which demanded payment of plaintiff's deficiency taxes, fees and
charges in the amount of Php25,069,245.92 within five days from receipt of the said Final Notice. The Final
Notice states that plaintiff failed to file a protest against the defendants' Notice of Assessment dated August
15, 2013 which was allegedly received by the plaintiff on August 22, 2013.

On April 24, 2014, plaintiff wrote to defendant City Treasurer requesting for the withdrawal and cancellation
of the Final Notice on the ground that the assessment for deficiency taxes, fees and charges in the amount
of Php25,069,245.92 is null and void, because plaintiff was not served the Assessment Notice referred to
in the Final Notice.

On May 8, 2014, plaintiff received a copy of defendant City Treasurer's letter dated April 30, 2014 which
denied plaintiff's request for withdrawal and cancellation of the assessment for deficiency taxes, fees and
charges, hence this Complaint.

The RTC held that the LOA and other notices, including the August 15, 2013 Notice of Assessment, have
been validly served upon petitioner through Mr. Renario Garfin. Since there is nothing on record to show
that petitioner filed a written protest before the Office of the City Treasurer within sixty (60) days from receipt
of the assessment, the RTC dismissed petitioner's Complaint.

ISSUE:
Whether or not the RTC erred in ruling that the deficiency LBT assessment against petitioner for 2009,
2010, and 2011 in the total amount of PHP25,069,245.92, as embodied in the respondents' Notice of
Assessment dated August 15, 2013, is valid.
101

RULING:
No, the assessment against the petitioner is void for being in violation of the petitioner’s right to due process.

In this case, respondents are insisting that the Notice of Assessment was served upon petitioner through
Mr. Gartin, who was allegedly clothed with apparent authority to receive the document on behalf of
petitioner. It is undisputed that Mr. Garfin was formerly employed as Branch Manager of petitioner's Bangkal
branch, and that his employment was terminated in August 2012 by virtue of petitioner's sale of all its assets
to Sky Cable. Hence, when the notices were served by Mr. Flores, Mr. Garfin was no longer an employee
of petitioner.

It may not be amiss to point out that Mr. Garfin and the security guard whom Mr. Flores spoke with during
his service of the Final Notice of Compliance have already disabused Mr. Flores of the notion that they are
authorized by petitioner to receive the notice. When Mr. Flores served the Notice of Assessment, he was
informed that they are no longer Destiny Cable, Inc. Moreover, the Global Tower office where he had
previously delivered the LOA and Final Notice of Compliance was already vacant. Hence, he had to go to
the office at Evangelista cor. Dallas Street to serve the same.

Mr. Flores was repeatedly informed that they were not authorized to receive the Notice of Assessment, and
yet, he still insisted to let them receive it. In fact, Mr. Flores' testimony is in line with Mr. Garfin's testimony.
Upon cross-examination by respondents' counsel on his refusal to accept the documents, Mr. Garfin said
that he informed the messenger of the City of Makati of the wrong address, but the messenger insisted that
the notice be received by Mr. Garfin

From the foregoing testimonies, it is perplexing how respondents could argue that Mr. Garfin is clothed with
apparent authority to receive the notices when Mr. Garfin and the security guards with whom Mr. Flores
spoke with, all deny that they have authority to do so. Hence, the Court finds that respondents' evidence
falls short of proving that Mr. Garfin has been clothed with apparent authority to receive the notices on
petitioner's behalf.

It is incumbent upon respondents to ensure that critical notices, such as the Notice of Assessment in the
present case, be actually served upon the taxpayer. An assessment not only contains a computation of tax
liabilities, but also a demand for payment within a prescribed period. It also signals the time when penalties
and interests begin to accrue against the taxpayer.

To enable the taxpayer to determine his remedies thereon, due process requires that it must be served on
and received by the taxpayer. This Court has consistently ruled that in balancing the scales between (1)
the State's power to tax and the right to prosecute perceived transgressors of the law, and (2) the
constitutional rights of a citizen to due process of law and the equal protection of the laws, the scales must
tilt in favor of the latter, for a citizen's right is amply protected by the Bill of Rights. Thus, while taxes are the
lifeblood of the government, it has its limits, in spite of all its plenitude and must be exercised reasonably
and in accordance with the prescribed procedure.

A careful evaluation of the records shows respondents' failure to exercise ordinary care and prudence in
serving the Notice of Assessment. As a result, respondents were not able to properly serve the Notice of
Assessment, which deprived petitioner of the opportunity to contest the deficiency LBT assessment against
it. Hence, the same is void for being in violation of petitioner's right to due process.
102

Commissioner of Internal Revenue v. ABB, Inc.


CTA EB No. 1501; March 13, 2018
Uy, J

FACTS:

Respondent ABB Inc. is a corporation duly organized and existing under and by virtue of the laws
of the Philippines engaged in the business of providing automation and power products, systems, and
services.

Respondent entered into a Contract with NGCP for the Wright-Calbayog 138 kV Substation Project
(Wright-Calbayog Project) after winning the bid therefor. The Joint Venture of respondent, and AER
Construction & Development Co., Inc. entered into a Contract with NGCP for the New Naga 138 kV
Substation Project (New Naga Project). Both contracts are on a turnkey basis, which is defined as a job or
contract in which the contractor agrees to complete the work of building and installation to the point of
readiness for operation or occupancy.

To fulfill its obligations under the contracts, respondent subcontracted specific segments of the
Wright-Calbayog and New Naga Projects to both offshore and onshore subcontractors. The offshore portion
of the contracts consists of the complete design, manufacture, testing, supply and delivery, storage,
construction, erection, installation, field testing and commissioning of substation, telecommunication,
protection and substation control equipment and materials, which were sourced from foreign subcontractors
coming from various countries, including Taiwan, Sweden, Italy, Thailand, India, Korea, Malaysia, France,
Finland, Switzerland, Vietnam, USA, Singapore, New Zealand, Japan, Canada, Indonesia, China and
Germany.

On the other hand, the onshore portion of the Contracts consist of the construction and installation
of the materials, machinery and equipment and the performance of related civil works for the two projects
and were subcontracted to various local subcontractors.

Respondent filed its Monthly VAT Declaration (BIR Form No. 2550-M) from July 2010 to February
2012, as well as its Quarterly VAT Return (BIR Form No. 2550-Q) for the 3rd and 4th Quarters of taxable
year (TY) 201 0; 1st, 3rd and 4th Quarters of TY 2011; and 1st Quarter of TY 2012.

Respondent applied for the following claims for tax refund of 12% output VAT on gross receipts for
services rendered outside the Philippines that was erroneously paid and remitted to the BIR : (a) for July
and September 2010 amounting to P2,781,796.54 and (b) for 4th quarter of 2010, 1st, 4rd and 4th quarters
of 2011, and 1st quarter of 2012, amounting to P52,493, 162.17. Respondent also filed a petition for review
for claim for refund of erroneously paid output taxes on VAT -exempt sale/supply of equipment for the
taxable periods 3rd Quarter (July) 2011, 4th Quarter (October) 2011 I and 1st Quarter (March) 2012. These
cases are now consolidated.

In the assailed Decision, 3 the Court in Division partially granted the consolidated Petitions for
Review, and ordered petitioner to refund or issue a tax credit certificate in favor of respondent in the reduced
amount of P21 ,530,960.05.

ISSUE
A. Whether or not the respondent failed to substantiate its claim for refund before the BIR.
B. Whether or not respondent is not entitled to a claim for refund.

RULING
A. No, the respondent is able to substantiate its claim for refund before the BIR.
It must be emphasized that the submission of complete supporting documents by the taxpayer-claimant is
presumed. This is in accordance with the Supreme Court's pronouncement in CBK Power Company Limited
vs. Commissioner of Internal Revenue, wherein it was held that: "Bearing in mind that the burden to prove
entitlement to a tax refund is on the taxpayer, it is presumed that in order to discharge its burden, petitioner
103

had attached complete supporting documents necessary to prove its entitlement to a refund in its
application, absent any evidence to the contrary."

But even granting that We can validly ignore the said presumption and find that respondent indeed did not
present or attach the "complete supporting documents" in its administrative claims, petitioner can always
immediately decide a refund claim, in view of the recognized principle that petitioner ought to know the tax
records of all taxpayers. Thus, there can be no merit in the contention of petitioner that his office could not
have properly acted upon the administrative claim because of respondent's failure to submit the document
evidence appurtenant thereto.

Petitioner cannot validly complain that he was not given sufficient time to evaluate respondent's
administrative claim for refund. Section 229 of the National Internal Revenue Code (NIRC) of 1997 provides
that “in any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date
of payment of the tax or penalty regardless of any supervening cause that may arise after payment.

If, however, the Collector takes time in deciding the claim, and the period of two years is about to end, the
suit or proceeding must be started in the Court of Tax Appeals before the end of the two-year period without
awaiting the decision of the Collector. This is so because of the positive requirement of Section 229 and
the doctrine that delay of the Collector in rendering decision does not extend the peremptory period fixed
by the statute.

B. Yes, the respondent is entitled to a claim for refund in the amount of P21,530,960.05.
Petitioner proceeds from the wrong notion that the amounts which may be refunded by a taxpayer-claimant
are only those that arise from tax-exempt transactions, and thus, such taxpayer-claimant must prove its
tax-exempt status under the law to be able to claim a tax refund. Contrary to petitioner's stance, a
refundable amount of tax may arise not only from tax-exempt entities or transactions, but also from those
not covered by provisions of law imposing taxes.

It must be remembered that pursuant to the aforequoted Section 229 of the NIRC of 1997, the law allows
the recovery from the BIR of the following:

1. Any national internal revenue taxes alleged to have been erroneously or illegally assessed or
collected,
2. Any penalty claimed to have been collected without authority, and
3. Any sum alleged to have been excessively or in any manner wrongfully collected.

In this case, what was sought to be refunded belongs to the first category, which is otherwise known as
erroneous or illegal taxes. Relative thereto, an "erroneous or illegal tax" is defined as one levied without
statutory authority, or upon property not subject to taxation or by some officer having no authority to levy
the tax, or one which is some other similar respect is illegal. Simply put, a tax assessed or collected without
legal basis may be refunded.

Correspondingly, since respondent was able to establish before the Court a quo the illegality of the subject
taxes collected by the government, the same is sufficient to justify the grant of the subject tax refund.

Medtecs International Corporation Ltd. v. Commissioner of Internal Revenue


CTA EB No. 1560 ; March 13, 2018
Uy, J

FACTS:
Medtecs International Corporation Limited (Medtecs) is the Philippine branch of Medtecs International
Corporation Limited (Bermuda). A Letter of Authority (LOA) No. LOA 200100074246 was issued authorizing
Revenue Officer (RO) Roel Vergel Narag to examine Medtec's books of accounts and other accounting
104

records for all internal revenue taxes covering the period of January 1, 2006 to December 31, 2006. The
CIR thus asked Medtecs to present the latter's records for the subject period.

The CIR issued the PAN dated August 18, 2011 with Details of Discrepancies, assessing Medtecs for
deficiency income tax, value-added tax (VAT), expanded withholding tax (EWT), withholding tax on
compensation (WTC), and documentary stamp tax (DST) for taxable year 2006 in the aggregate amount
of P1 0,050,587.02. Medtecs filed its protest. Subsequently, the CIR issued the Formal Letter of Demand
(FLO) and Audit Results/Assessment Notices, for which Medtecs filed a protest. The CIR denied the same.
Thus, the appeal to the CTA.

Court in Division rendered the assailed decision which partially granted Medtecs' Petition for Review, and
ordered Medtecs to pay P5,397,588.23, representing deficiency income tax, VAT, WTC, and DST for
taxable year 2006, inclusive of the twenty-five percent (25%) surcharge and twenty percent (20%)
deficiency interest, plus the twenty percent (20%) delinquency interest. Hence, the present case before the
CTA En Banc.

Medtecs argues that The CIR's deficiency tax assessments against Medtecs for CY 2006 are null and void
because the records of the case show that the Revenue Officer (RO) who conducted the examination of
Medtecs' books of accounts and accounting records, and who recommended the issuance of the deficiency
tax assessments for CY 2006, had no authority to do so under Letter of Authority (LOA).

ISSUE
Whether or not respondent is liable for the entirety of the assessed deficiency documentary stamp tax on
stock option for taxable year 2006.

RULING
No, Medtecs is not liable.

An LOA is the authority given to the appropriate revenue officer assigned to perform assessment functions.
It empowers or enables said revenue officer to examine the books of account and other accounting records
of a taxpayer for the purpose of collecting the correct amount of tax. An LOA is premised on the fact that
the examination of a taxpayer who has already filed his tax returns is a power that statutorily belongs only
to the CIR himself or his duly authorized representatives. Section 6 of the NIRC clearly provides as follows:

SEC. 6. Power of the Commissioner to Make Assessments and Prescribe Additional Requirements
for Tax Administration and Enforcement. –
(A) Examination of Return and Determination of Tax Due. -After a return has been filed as
required under the provisions of this Code, the Commissioner or his duly authorized
representative may authorize the examination of any taxpayer and the assessment of the correct
amount of tax: Provided, however, That failure to file a return shall not prevent the Commissioner
from authorizing the examination of any taxpayer.
Xxxx

Based on the afore-quoted provision, it is clear that unless authorized by the CIR himself or by his
duly authorized representative, through an LOA, an examination of the taxpayer cannot ordinarily be
undertaken. The circumstances contemplated under Section 6 where the taxpayer may be assessed
through best-evidence obtainable, inventory-taking, or surveillance among others has nothing to do with
the LOA. These are simply methods of examining the taxpayer in order to arrive at the correct amount of
taxes. Hence, unless undertaken by the CIR himself or his duly authorized representatives, other tax agents
may not validly conduct any of these kinds of examinations without prior authority.

Clearly, there must be a grant of authority before any revenue officer can conduct an examination or
assessment. Equally important is that the revenue officer so authorized must not go beyond the authority
given. In the absence of such an authority, the assessment or examination is a nullity.
105

In addition, the law even requires that an LOA must have been issued in favor of an RO, in order for such
an RO to examine taxpayers and to perform tax assessment and collection functions. Section 13 of the
NIRC of 1997 provides as follows:

SEC. 13. Authority of a Revenue Officer. - Subject to the rules and regulations to be prescribed by
the Secretary of Finance, upon recommendation of the Commissioner, a Revenue Officer assigned
to perform assessment functions in any district may, pursuant to a Letter of Authority issued by the
Revenue Regional Director, examine taxpayers within the jurisdiction of the district in order to
collect the correct amount of tax, or to recommend the assessment of any deficiency tax due in the
same manner that the said acts could have been performed by the Revenue Regional Director
himself.

In this case, records show that it was RO Reel Verge! Narag who was authorized to examine Medtec's
books of accounts and other accounting records for taxable year 2006 under LOA No. 2001 00074246
dated December 3, 2007. It was only through an undated Re-Assignment Notice where RO Mary Ann
Canare was "authorized" to continue the examination of the Medtecs' books and accounting records.
Thereafter, invoking the very same LOA, RO Canare recommended the issuance of a PAN against
Medtecs. Thus, RO Canare cannot be considered as validly authorized to examine Medtecs' books of
accounts and other accounting records for taxable year 2006. This must be so because her authority to
examine did not spring from, or was not made pursuant to, an LOA, as required by law and jurisprudence.

For being void, the FLO and Audit Results/Assessment Notices dated February 28, 2012, with Details of
Discrepancies, assessing Medtecs of deficiency income tax, VAT, EWT, WTC, and DST for taxable year
2006, are CANCELLED and SET ASIDE.

People v. KIngsam Express Incorporation and Samuel S. Santos


CTA Crim. Case no. O-522 ; March 12, 2018
Manahan, J

FACTS:
These are consolidated cases for alleged violations of the National Internal Revenue Code (NIRC) of 1997,
as amended, for tax evasion and failure to supply correct and accurate information for taxable years 2008
and 2009 through the filing of the Income Ta Return on 2009 and 2010, respectively. In CTA Crim. Case
No. O-522, it was alleged that accused substantially under declare the corporation's income for taxable
year 2008, in order to conceal its true and correct taxable income, thus, resulting to a deficiency income tax
in the estimated amount ofPhp4,095,000.00.

In CTA Crim. Case No. O-523, it was alleged that accused concealed the corporation's true and correct
income for taxable year 2009, to the damage and prejudice of the government in the amount of Php
10,800,000.00. In CTA Crim. Case No. O-524, it was alleged that accused concealed corporation's true
and correct income for taxable year 2008, to the damage and prejudice of the government in the amount
of Ph4,095,000.00. In CTA Crim. Case No. O-525, it was alleged that accused substantially under declare
the corporation's income for taxable year 2009, in order to conceal its true and correct taxable income, thus,
resulting to a deficiency income tax in the estimated amount of Php 10,800,000.00

ISSUE:
Whether or not accused is guilty of violating Sections 254 (tax evasion) and 255 (failure to supply correct
and accurate information) of the National Internal Revenue Code (NIRC) of 1997, as amended.

RULING:
Yes, defendants are guilty of the crimes charged.
Accused Kingsam is a corporate entity and a juridical person while accused Santos is the President of said
corporation. In the instant case, said accused were charged under Section 254 of the 1997 NIRC as
amended, of tax evasion for taxable year 2008, the provision of which is quoted below:
106

SEC. 254. Attempt to Evade or Defeat Tax. -Any person who willfully attempts in any manner to
evade or defeat any tax imposed under this Code or the payment thereof shall, in addition to other
penalties provided by law, upon conviction thereof, be punished by a fine not less than Thirty
thousand (P30,000) but not more than One hundred thousand pesos (PlOO,OOO) and suffer
imprisonment of not less than two (2) years but not more than four (4) years: Provided, That the
conviction or acquittal obtained under this Section shall not be a bar to the filing of a civil suit for
the collection of taxes.

Further, Sections 52(A) and 253(d) of the 1997 NIRC, as amended, indicate the persons who should be
responsible to file and pay the required internal revenue taxes, and the persons who shall be liable for the
failure to file and pay said internal revenue taxes, respectively, to wit:

SEC. 52. Corporation Returns. -


(A) Requirements. -Every corporation subject to the tax herein imposed, except foreign
corporations not engaged in trade or business in the Philippines, shall render, in duplicate, a true
and accurate quarterly income tax return and final or adjustment return in accordance with the
provisions of Chapter XII of this Title. The return shall be filed by the president, vice-president or
other principal officer, and shall be sworn to by such officer and by the treasurer or assistant
treasurer.

SEC. 253. General Provisions. -


(a) XXX XXX
(b) XXX XXX
(c) XXX XXX
(d) In the case of associations, partnerships or corporations, the penalty shall be imposed on the
partner, president, general manager, branch manager, treasurer, officer-in-charge, and the
employees responsible for the violation.

Thus, the elements of such offense are the following:


1. Offender is required to pay the tax imposed under NIRC;
2. Offender attempts in any manner to evade or defeat any tax imposed, or the payment thereof;
3. The attempt to evade or defeat any tax imposed, or the payment thereof was willful; and
4. In case the offender is a corporate taxpayer, the accused is its responsible officer.

Based on the evidence adduced, all the abovementioned elements are present in the instant case.

On the first element, it was established by the records of the case that accused Kingsam is a domestic
corporation, duly organized and incorporated, which is required under the law, rules and regulations to file
the ITR indicating therein the true and accurate information as to its receipts or income, expenses and other
relevant information for the purpose of payment of proper taxes to the government and accordingly, the
payment of said internal revenue taxes.

As to the second element, the facts of the case, based on the evidence, evince that accused Kingsam
through the action of accused Santos hid the actual transactions from the government authorities
particularly as to the down payment made to PIBI in 2008 acquisition amounting to Php7 ,520,000.00.

The ITR for taxable year 2008 showed only the amount of Php 1,212,772.89 as its total sales/revenue or
receipts which is more or less 620% understated compared with the down payment of Php7,520,000.00
made for the 7 Kinglong buses in the said year. Thus, the income tax paid was not commensurate to the
actual income earned by the accused since the Php7,520,000.00 down payment which is deemed as
unreported income is not included in its total income earned for the said taxable year. This is a clear case
of substantial under-declaration
107

As to the third and fourth elements, the knowledge and action of accused Santos as President of Kingsam
on said actual transactions indicate willfulness and deliberate attempt to evade payment of income tax on
said down payments.

Accused Santos' admission of falsifying the Deeds of Sale for 2008 acquisition of buses which were
submitted to LTO, the deliberate non-recognition of said acquisition in accused Kingsam's FS as well as in
its books of accounts, and the intentional hiding and non-reporting of the actual transactions to the proper
authorities such as LTO and BIR are all indicia of unlawful acts which were resorted to in order to evade
the payment of a higher income tax. Hence, defendants are guilty of the crimes charged.

Bisazza Philippines, Inc. v. Commissioner of Internal Revenue


CTA Case No. 9372 ; March 7, 2018
Manahan, J

FACTS:
On December 17, 2008, petitioner received a Letter of Authority (LOA) from Revenue District Office No.
(RDO) 54-Trece Martirez City, Cavite authorizing Revenue Officer Lloyd B. Patinglag and Group Supervisor
Nena Joyce W. Geston to examine the books of account and other accounting records for all internal
revenue taxes for the period from January 1 to December 31, 2007.

On December 28, 2010, petitioner received a copy of the Preliminary Assessment Notice (PAN) dated
December 15, 2010 assessing a total deficiency tax of Php14,936,256.76.13 On January 10, 2011,
petitioner filed its Reply to the PAN dated January 5, 2011. On January 18, 2011, petitioner received the
Assessment Notices/Formal Letter of Demand (FAN/FLD) dated January 7, 2011. On January 18, 2011,
petitioner received the Assessment Notices/Formal Letter of Demand (FAN/FLD) dated January 7, 2011.

ISSUE:
Whether or not the CIR’s right to collect on the deficiency assessments for the taxable year 2007 has
prescribed.

RULING:
Yes, the CIR’s right to collect on the deficiency assessments for the taxable year 2007 has prescribed.

Even if the Court considers the assessments for taxable year 2007 as valid, the same can no longer be
collected due to the prescription of respondent's right to collect. The NIRC has the following provisions on
the period to collect:

Sec. 203. Period of Limitation Upon Assessment and Collection. -Except as provided in Section
222, internal revenue taxes shall be assessed within three (3) years after the last day prescribed
by law for the filing of the return, and no proceeding in court without assessment for the collection
of such taxes shall be begun after the expiration of such period: Provided, That in a case where a
return is filed beyond the period prescribed by law, the three (3)-year period shall be counted from
the day the return was filed. For purposes of this Section, a return filed before the last day
prescribed by law for the filing thereof shall be considered as filed on such last day.

Sec. 222. 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 for the collection of such tax may be filed without
assessment, at any time within ten (10) 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 the collection thereof.

XXX
108

(c) Any internal revenue tax which has been assessed within the period of limitation as prescribed
in paragraph (a) hereof may be collected by distraint or levy or by a proceeding in court within five
(5) years following the assessment of the tax.
From the foregoing provisions, Section 203 is silent as to collection of assessments made within the three-
year period. On the other hand, Section 222(c), specifically provides a five (5)-year period to collect for
assessments made pursuant to Section 222(a).

In the instant case, the FAN j FLD dated January 7, 2011, was sent through registered mail on January 10,
2011, and received by petitioner on January 18, 2011. Counting five years from January 10, 2011,
respondent had until January 10, 2016 within which to collect on the assessment through distraint, levy, or
court proceeding. Clearly, the PCL dated May 4, 20 16 was issued beyond the five (5)-year prescriptive
period and therefore null. Accordingly, the Assessment Notices for deficiency income tax, VAT, EWT, FBT
and compromise penalty for taxable year 2007, and the Preliminary Collection Letter dated May 4, 2016
are cancelled and withdrawn.

ROCA SECURITY INVESTIGATION AND AGENCY, INC. VS. COMMISSIONER OF INTERNAL


REVENUE
CTA EB NO. 1523; March 7, 2018
Fa bon-Victorino, J.:

FACTS:
The case is a Petition for Review of the CTA Division Decision and Resolution which affirmed respondent
CIR’s assessment of petitioner Roca Security and Investigation Agency, Inc., a domestic corporation, for
deficiency income tax (IT and improperly accumulated earnings tax (IAET).

On April 15, 2010, petitioner filed its annual income tax return (ITR) for the year 2009. On September 2010,
petitioner received a letter of authority with requesting for presentation of records. On March 25, 2013,
respondent was issued a preliminary notice of assessment (PAN) for alleged deficiency IT and IAET. On
April 12, 2013, a formal letter of demand was issued and on April 18, 2013 petitioner filed a letter of protest
against the PAN, Respondent affirmed the assessed tax deficiencies on the on the ground that petitioner
failed to submit relevant documents in support of its protest. The same letter informed petitioner that the
said letter shall constitute as the Final Decision on the Disputed Assessment (FDDA).

Petitioner contends that the subject assessment should be invalidated for being in the nature of a "jeopardy
assessment," or an assessment issued without basis in any full or partial audit. The issuance of the FLD at
a rapid pace of barely 16 days from the issuance of the PAN clearly indicates that the final assessment is
without basis, hence, void for having been issued in violation of petitioner's right to due process. It further
contend that its failure to failure to present supporting documents to substantiate the said operating
expenses was because its accounting records and books of account for 2009 were destroyed during
inundation caused by typhoon Ondoy on September 26, 2009.

ISSUE:
Whether or not the petitioner was deprived of due process

RULING:
YES. Pursuant to Sec. 228 of the NIRC, a taxpayer must be informed in writing of the legal and factual
bases of the tax assessment made against him. Its purpose is to aid the taxpayer in making a reasonable
protest, if necessary. Note, that requirement is substantive, not merely formal. Thus, violation thereof
renders the assessment void. Thus, a taxpayer has fifteen (15) days from receipt of the PAN to respond or
file a protest thereto. It is only upon the lapse of this 15-day period, with or without a response/protest from
the taxpayer, that the CIR or his legally authorized representative may issue the FLD or final assessment
notice.
109

In this case, the PAN was issued on March 25, 2013 and received by petitioner on April 3, 2013. Hence,
petitioner had 15 days or until April 18, 2013, to file its protest to the PAN. Record however reveals that
respondent issued the FLD with assessment notices 6 days before the 15-day period to file protest expired,
or on April 12, 2013. Evidently, the FLD was prematurely issued in violation of petitioner's right to due
process.

COMMISSIONER OF INTERNAL REVENUE VS. INTERVET PHILS., INC.


CTA EB NO. 1507, March 1, 2018
Uy, J.

FACTS:
The case is a Petition for Review by herein petitioner Commissioner of Internal Revenue against
Philippines. Inc. praying for that the decision of the CTA 2nd Division cancelling the assessments for income
tax, VAT, EWT, compromise penalty in the amount of the P 49, 139, 464.50 for 2006, to be set aside.

On September 7, 2007 BIR RDO of Pasig City issued a Letter of Authority (LOA) authorizing the
examination of all internal revenue taxes of respondent for taxable year 2008. The LOA indicated the
address at of the respondent’s office to be in Pasig City. The LOA was unserved because the taxpayer
vacated the place to move to Quezon City. Subsequently, on July 23, 2008, a Certificate of Registration
(COR) was issued by BIR ROO No. 40 - Quezon City, reflecting the address of the Quezon City office as
the respondent’s address. On September 9, 2008, RDO-Quezon City issued a LOA and also a Final Notice
requesting respondent to present its accounting records. Both the LOA and Final Notice indicated that
petitioner's address is at its Quezon City office. In 2008, the respondent’s Board issued a resolution
transferring respondent’s business address from its Quezon City Office to Manadaluyong. Meanwhile,
respondent was acquired by Merck Sharp & Oehme, a subsidiary of Merck Sharp & Co., Inc., thereby
prompting respondent to transfer its principal office in Makati.

The petitioner alleges that the deficiency tax assessments for taxable year 2006 became final, executory
and demandable based on the alleged failure of respondent to file a timely protest. Respondent alleged
that there was no valid assessment notice and that petitioner's right to assess respondent has already
prescribed. Respondent further argued that it properly notified petitioner of its change in address.
Respondent denies the receipt of PAN and the FLD/FAN, and stresses that petitioner should have sent the
said notices to their Mandaluyong office, and not to the old and invalid address of their former Pasig office.

ISSUE:
Whether or not the petitioner failed to prove that the PAN and the FLD/FAN were actually received by the
respondent

RULING:
YES. Section 228 of the NIRC of 1997 provides that if there exists sufficient basis to assess the taxpayer,
the Cl R or his authorized representative is mandated to issue a PAN. Thereafter, a formal letter of demand
and an assessment notice shall be issued by the CIR or his duly authorized representative. The use of the
word "shall" in these legal provisions indicates the mandatory nature of the requirements laid down therein.
Thus, it is essential for petitioner to establish and prove that the requisite assessment notices were duly
served to the taxpayer within the prescriptive period.

In instances that the taxpayer denies having received the assessment notices, it is incumbent upon
petitioner to prove by competent evidence that the assessment notices were indeed received by the
taxpayer. In this case, however, petitioner failed to establish that the PAN, FLO with Assessment Notices
were actually received by respondent.
110

COMMISSIONER OF INTERNAL REVENUE VS. CO


CTA EB NO. 1522, February 28, 2018
Castaneda, Jr., J.

FACTS:
The case is a Petition for Review filed by herein petitioner seeking the reversal of the order of the CTA 3rd
Division which directed the CIR to refund in favor of respondents herein amounts representing erroneously
paid capital gains tax (CGT).

The respondents are majority stockholders of Kareila Management Corporation (Kareila). In March 27,
2012, the Board of Directors of Puregold approved the issuance of common shares to respondents in
exchange for the transfer to Puregold of shares in Kareila. On May 11, 2012, the respondents entered into
a Deed of Exchange with Puregold. On June 2012, the respondents collectively paid CGT including
interests and/or compromise penalty on the said transfer pursuant to Sec. 24(c) of the NIRC.

Respondents-taxpayers, however, contend that their payments of CGT were erroneous because, under
Section 40(C)(2) of the NIRC, their transfer of shares through the Deed of Exchange was a tax-exempt
transaction. Thus, on May 21, 2014, the respondents filed their administrative claims for the refund of the
CGT.

The CIR contends that in order to avail of the non-recognition of gain under Section 40(C)(2) and Revenue
Regulations No. 18-2001 and for the share swap transaction to qualify as a tax-free exchange, a prior
application for a BIR certification or ruling must have been secured. In this case, however, no such prior
request from the BIR was made. Accordingly, the CIR contended that, since refund claims are construed
strictly against the taxpayer-claimant, the refund sought by the respondents should be denied.

ISSUE:
Whether or not the swap-transaction between respondent and Puregold does not qualify as a tax-free
exchange under Section 40(C)(2) and 6(c) of the NIRC because the respondents failed to file a confirmatory
ruling pursuant to Section 58(E) of the NIRC, and RR No. 18-2001

RULING:
NO, the transaction qualifies as a tax-free exchange. The CGT refund of the Cos is anchored on Section
229 in relation to Sections 40(C)(2) and 40(C)(6)(c) of the NIRC, as amended, which covers tax-free
exchanges:

“No gain or loss shall also be recognized if property is transferred to a corporation by a person in exchange
for stock or unit of participation in such a corporation of which as a result of such exchange said person,
alone or together with others, not exceeding four (4) persons, gains control of said corporation: Provided,
That stocks issued for services shall not be considered as issued in return for property.”

The share swap transaction entered by the respondents, for which they paid the CGT subject of this claim,
involved the disposition of their Kareila shares, or shares in a domestic corporation, paid for by Puregold,
another domestic corporation, with Puregold shares. The exchange resulted in further control of Puregold
when the Cos increased their ownership from 66.57% to 75.83%. In 2015, the CTA En Bane in
Commissioner of Internal Revenue v. Dakudao & Sons, Incorporated affirmed the refund claim of Dakudao,
a domestic corporation, for the VAT paid on its assignment of two parcels of land MSDPC, a domestic
corporation, in exchange for MSDPC shares. In the case, it was stated that as a result of the exchange,
Dakudao gained 75% control of the MSDPC. This Court then held that a prior confirmatory ruling from the
BIR under RR 18- 2001 is not a condition sine qua non for the tax exemption of the property-for -share
transaction
111

COMMISIONER OF INTERNAL REVENUE v. LINDE PHILIPPINES, INC


CTA EB No. 1515; March 7, 2018
Fabon-Victorino, J.

FACTS:
On June 21, 2011, respondent received a Letter-Notice from petitioner about alleged discrepancies
discovered in its income/ VAT/ percentage/ withholding tax returns. On December 27, 2012, respondent
received an undated formal assessment notice (FAN) with attached detail of discrepancies for deficiency
IT and VAT for CY 2009. On January 2, 2013, respondent received from petitioner a preliminary
assessment notice (PAN) giving it a period of fifteen (15) days from receipt to present its defense in writing.

On January 25, 2013, respondent protested the undated FAN. On October 2, 2013, respondent received
the Final Decision on Disputed Assessment (FDDA), finding it liable for IT and VAT for CY 2009. On
November 4, 2013, respondent filed a Petition for Review before the Court in Division, for the cancellation
of the questioned assessment.

While the case was pending decision, respondent paid the aggregate amount for the alleged deficiency IT
and VAT for CY 2009, inclusive of compromise penalties and interests. On January 21, 2015, respondent
filed an administrative claim for refund, on the ground that the amount of P18,567,731.69 was erroneously
and illegally collected by petitioner as the assessment was void.

Petitioner argues that respondent radically changed its cause of action from invalidation of the assailed
assessment to an action for refund which is proscribed under Section 3, Rule 10 of the Rules of Court and
existing jurisprudence. Also, it contends that he has not transgressed the right of respondent to due process
since the 21-day period from the service of the PAN to the receipt of FAN constitutes the 15-day period
within which respondent should have refuted the preliminary findings in PAN.

ISSUE:
1.) Whether or not the change in the cause of action by respondent (from a prayer to declare the
assessment void into a claim for refund) is violative of the rules of court
2.) Whether or not respondent has been denied of due process for having failed to refute the
preliminary findings in PAN because of the premature service of the FAN

RULING:
1.) NO. Section 3, Rule 108 of the Rules of Court and case law explicitly allow substantial amendment to a
pleading provided that leave of court is obtained and intent to delay is absent on the part of the movant. It
appears from respondent's original Petition for Review that it prayed for the cancellation of the disputed
assessment, which relief is inextricably interwoven with its prayer for refund in its Amended Petition for
Review. Both pleadings impugn the assessment issued by petitioner on the ground of non-observance of
the due process requirement. Irrefragably, the controversy laid down in the two pleadings germinated from
the same facts, issues and parties, necessitating presentation of the same pieces of evidence to
substantiate the complaint. Thus, the determination of the case which sprung from the same cause of
action, 10 will not only hasten the resolution of the controversy but will also prevent multiplicity of suits

2.) YES. For the FAN to be compliant with the due process requirement, the taxpayer must be granted
fifteen (15) days from receipt of the PAN to file its response thereon. Only after the lapse of the fifteen (15)-
day period without any action on the part of the taxpayer would petitioner be legally allowed to issue a FAN.
Simply stated, petitioner's right to issue a FAN begins when the period to respond on the PAN ends. A
summa contrario with petitioner's posture, the fifteen (15)-day period to take action on the PAN starts to run
not from its issuance by petitioner, but from the taxpayer's receipt thereof. While there is no denying that
petitioner issued the PAN on December 6, 2012,14 respondent received it only on January 2, 2013. 15
Counting fifteen (15) days from the receipt of the PAN, respondent had until January 17, 2013 to refute
petitioner's findings as contained in the PAN. However, petitioner prematurely issued the undated FAN on
December 27, 2012, or six (6) days before respondent received the PAN resulting in the denial of sufficient
opportunity for respondent to present its position or defense against the assessment indicated in the PAN.
112

Petitioner's failure to pass the benchmark of due process on assessment enunciated in Section 228 of the
NIRC, as amended, as implemented by RR No. 12-99 renders the FAN invalid and without any legal
consequences. Petitioner is therefore divested of any authority to retain the tax he collected from
respondent for a void assessment bears no valid fruit.

SOUTH PREMIERE TOWER CORP. VS. COMMISSIONER OF INTERNAL REVENUE


CTA CASE NO. 9337, February 27, 2018
Castañeda, J.

FACTS:
The case is a Petition for Review filed by herein petitioner against the respondent, seeking the refund or
the issuance of tax credit certificate (TCC) allegedly representing erroneous and/or illegal collection of
documentary stamp tax (DST) for taxable year 2010.

Petitioner South Premiere Tower Corp. is a domestic corporation. On April 16, 2012, petitioner received a
Letter of Authority dated April 12, 2012 from the BIR, authorizing revenue officers to examine petitioner's
books of accounts and other accounting records for all internal revenue taxes for the period covering
January 1, 2010 to December 31, 2010. Thereafter, on April 21, 2014, petitioner received from respondent
a Preliminary Assessment Notice (PAN) dated April 15, 2014 assessing petitioner for alleged deficiency
income tax (IT), value-added tax (VAT), expanded withholding tax (EWT), and DST. The deficiency DST
assessment in the amount of P2,741,511.48 was imposed under Section 179 of the National Internal
Revenue Code (NIRC) of 1997, as amended, in relation to Revenue Regulations (RR) No. 13-2004 and the
decision of the Supreme Court in the Commissioner of Internal Revenue vs. Filinvest Development
Corporation (Filinvest case) which held among others that instructional letters and journal and cash
vouchers evidencing the advances which Filinvest Development Corporation extended to its affiliates
qualified as loan agreements upon which documentary stamp taxes may be imposed. Petitioner paid under
protest the alleged deficiency DST for taxable year 2010 on April 30, 2014.
On February 2, 2016, petitioner filed with respondent its Letter/Claim for Refund allegedly representing
erroneously and/or illegally collected DST for taxable year 2010, pursuant to Section 229 and Section
204(C) of the NIRC of 1997, as amended. Due to respondent's inaction on petitioner's administrative claim
for refund, petitioner filed the present Petition for Review before this Court on April 27, 2016.

The respondent argues that the taxes paid were not erroneously collected and therefore may not be the
subject of an action for refund because the amount requested to be refunded is not an erroneously and/or
illegally collected tax for taxable year 2010 because the period to contest if the same is erroneous or illegal
has already lapsed.

ISSUE:.
1) Whether or not the time for filing the action for refund have already lapsed and the petitioner may no
longer collect;
2) Whether or not the Filinvest Ruling may be given retroactive effect thereby making petitioner herein liable
for DST

RULING:
1) NO. Pursuant to Sections 204(C) and 229 of the NIRC which provides for claiming a refund of erroneously
paid tax, the following requisites must be complied with: (1) that the tax has been erroneously or illegally
collected, or the penalty has been collected without authority, and/or any sum has been excessively or in
any manner wrongfully collected; and (2) that the claim for refund or credit has been filed within two (2)
years from the date of payment of tax, or penalty, regardless of any supervening cause that may arise after
payment. Furthermore, in the case of Commissioner of Internal Revenue vs. Goodyear

Philippines, Inc., the Supreme Court held that both the claim for refund with the BIR and the subsequent
appeal to the Court of Tax Appeals must be filed within the two-year period from the date of payment of the
tax. Based on the records, petitioner paid under protest the alleged deficiency DST in the amount of
113

P2,741,511.48 for taxable year 2010 on April 30, 2014. This means that petitioner had until April 30, 2016
within which to file both the administrative and judicial claims for refund. Petitioner filed its administrative
claim for refund on February 2, 201634; while the present Petition for Review was filed on April 27, 2016.
Clearly, petitioner's administrative and judicial claims were filed within the two-year prescriptive period
provided by the law.

2) YES. The Filinvest case and RMC No. 48-2011 may be applied retroactively because prospective effect
applies only to decisions issued by the Supreme Court enunciating new doctrines. Considering that the
interpretation of Section 180 of the NIRC (now Section 179 of the NIRC of 1997) in the Filinvest case was
deemed constituted as part of the NIRC as of December 23, 1994 up to the present time, the same may
therefore be applied to this case without violating the principle of non-retroactivity of laws and rulings.
Moreover, it is only when a prior ruling of the Supreme Court finds itself later overruled, and a different view
is adopted, that the new doctrine may have to be applied prospectively in favor of parties who have relied
on the old doctrine and have acted in good faith in accordance therewith under the familiar rule of lex
prospicit, non respicit. In this case, however, there is no prior ruling that is overruled by the doctrine in the
Filinvest case.

UNLIMITED EXCHANGE GLOBAL CORP. (UNEX) represented by Charles Tan, Petitioner, Members
v. COMMISSIONER OF CUSTOMS, CASTANEDA, JR., Chairperson CASANOVA, and MANAHAN, JJ.
CTA Case No. 9488; February 27, 2018
MANAHAN,J.:

FACTS:
Petitioner UNEX is a corporation duly organized and e){isting under the laws of the Philippines and with
principal office address at 310 Baesa Road, Caloocan City. Respondent Commissioner of Customs is the
head of the Bureau of Customs (BOC), the government agency officially responsible for the assessment
and collection of all duties and t~es related to importation of goods.

On 01 September 2015, a shipment of250 bags of Soya Milk Powder consigned to petitioner herein arrived
at the Manila International Container Port (MICP) from China on board the vessel "LORRAINE V. 15002s".
Due to FDA's advice, petitioner's customs broker did not submit the required CPR but because of the threat
of penalty, petitioner was forced to submit the CPR for the product "POWDERED SOYA MILK DRINK"
which was secured by petitioner for the soya milk product which it intended to repack/ distribute in sachet
packs under the brand name "VEGTAN ORGANIC SOYA GOLD MILK". Subsequently, a Memorandum
was issued stating that subject cargo does not have a CPR and referred the subject matter to the MICP
Collector. Warrant was issued for consignee's purported violation of Sec. 2530 in relation to Sec. 10 1 (k)
of the Tariff and Customs Code.

ISSUE:
Whether or not petitioner violated Sec. 2530 in relation to Sec. 10 1 (k) of the Tariff and Customs Code of
the Philippines, as amended, by R.A. 7651

RULING:
Under Section 2530(f), the following are subject to forfeiture: (f) Any article the importation or exportation
of which is effected or attempted contrary to law, or any article of prohibited importation or exportation, and
all other articles which, in the opinion of the Collector, have been used, are or were entered to be used as
instruments in the importation or exportation of the former;

In relation thereto, Section 101 of the TCCP provides for the prohibited importations: Sec. 101. Prohibited
Importations XXX XXX XXX (k) All other articles and parts thereof, the importation of which is prohibited by
law or rules and regulations issued by competent authority. (As amended by Presidential Decree No. 34)
The BOC can withhold release and initiate seizure proceedings with respect to importations that fail to
comply with the requisites contained in FDA MC No. 2013-032.
114

Since the importation of the soya milk product was not covered by a valid CPR, the BOC was able to
establish probable cause to seize the subject importation. The Court finds that petitioner failed to discharge
its burden to present substantial proof that the subject importation of soya milk powder was wrongfully
seized and forfeited.

COMMISSIONER OF INTERNAL REVENUE v. G&W ARCHITECTS, ENGINEERS AND PROJECT


CONSULTANTS
CTA EB NO. 1572; February 23, 2018
RINGPIS-LIBAN,J.:

FACTS:
Respondent is a partnership whose purpose is to engage in the general practice of Architecture and
Construction and to purchase, own, hold, manage, lease, and operate any and all kinds of properties. On
the other hand, Petitioner is the Commissioner of the Bureau of Internal Revenue (BIR), vested by law with
authority to decide, approve, and reverse assessments of internal revenue taxes. [He] holds office at the
BIR National Office Building, Agham Road, Dillman, Quezon City.

Petitioner then issued the assailed Formal Assessment Notice (FAN) dated February 15,2012, finding
Respondent liable to pay deficiency income tax and deficiency VAT due to the discrepancy that resulted
from the Reconciliation of Listing for Enforcement (RELIEF) and Third-Party Matching-SOC Data Program
as declared in the tax returns. Respondent flied its protest against the FAN on May 2, 2012 and submitted
its supporting documents on June 29, 2012. Respondent filed a petition for review which was granted.
Petitioner filed for a motion for reconsideration but it was denied by the Second Division ruling that
Petitioner's assessment was based on unverified information and presumptions.

This is a Petition for Review seeking the nullification of the Decision1 dated August 16, 2016 ("Assailed
Decision") and Resolution2 dated December 02,2016 ("Assailed Resolution") of the Court of Tax Appeals
Second Division ("Second Division"), cancelling the assessments Petitioner issued against Respondent for
deficiency income tax and value-added tax ("VAT") amounting to Php518,268,999.15 and
Php181,317,267.09.

ISSUES:
(1) Whether or not the Honorable Court in Division correctly ruled that the tax deficiency
assessment is null and void because it was not based on actual facts and was issued beyond the
three (3) year period to assess; and
(2) Whether or not Respondent is liable for [Php518,268,999.15 and Php181,317,267.09],
representing the deficiency income tax and [VAT] respectively for taxable year 2007.

RULING:
(1)No, Petitioner's assessment has no factual and legal basis. As found by the Second Division, Petitioner's
witness admitted that the said undeclared purchases which allegedly resulted from third-party matching
were all unverified. The assessment being based on unverified information, this Court could not just
recklessly take it hook, line and sinker, absent any substantiation. Petitioner likewise failed to show that he
complied with the guidelines set forth in RMO No. 46-04, which requires the execution and presentation of
sworn statements from third-party informants to attest to veracity of the schedules and data on which the
assessment is based. There being no verification, the reliability of such information is questionable. Even
granting that there was under-declaration of purchase on the part of Respondent, the same is of no
consequence. As we have held in the case of Commissioner of Internal Revenue v. Agrinurture, Inc.,18 a
finding of under declaration of purchase does not itself result in the imposition of income tax and VAT.

Indeed, there are three (3) elements for the imposition of income tax. First, there must be gain or profit.
Second, the gain or profit is realized or received, actually or constructively. And third, it is not exempted by
law or treaty from income tax. Income tax is assessed on income received from any property, activity or
service. 19 Such being the case, in the imposition or assessment of income tax, it is not when there is an
115

undeclared purchase, but only when there was an income, and such income was received or realized by
the taxpayer.

(2)Petitioner failed to establish that Respondent has undeclared purchases amounting to


Php332,961,715.85. Consequently, Respondent's tax returns cannot be construed as false or fraudulent.

The law requires that the VAT Return must be filed quarterly within twenty-five (25) days following the close
of each taxable quarter prescribed for each taxpayer. Records reveal that [Respondent] filed its Quarterly
VAT Returns covering the four quarters of taxable year 2007 on April 24, 2007, on July 23, 2007, on October
25, 2007, and on January 22, 2008, respectively. Hence, [Petitioner] had until April 25, 2010, July 25,2010,
October 25,2010, and January 25,2011 within which to assess petitioner for deficiency VAT for the four
quarters of taxable year 2007. The FAN was issued on February 15, 2012. As a result, the assessment
was issued beyond the 3-year prescriptive period provided by law."

CITY OF DAVAO and BELLA CTA EB NO. 1591 LINDA N. TANJILI in her official capacity as The
Officer-in Charge City Treasurer's Office of Davao City v. RANDY ALLIED VENTURES, INC.

CTA EB NO. 1591, February 20, 2018


MANAHAN, J .:

FACTS:
Petitioner City of Davao, represented by the City Mayor, is a local government unit established and
operating under the existing laws of the Republic of the Philippines, with its official address at City Hall, City
Hall Drive, Davao City. While co-petitioner, City Treasurer of Davao City is represented by Ms. Bella Tanjili,
the newly designated Officer-in -Charge of the City Treasurer's Office. Respondent Randy Allied Ventures,
Inc. (RAVI) is an entity duly organized and existing under Philippine laws with principal office address at
Legaspi Oil Compound Km. 9.5, Sasa, Davao City.

[RAVI] filed a petition docketed as Civil Case No. 34,853-2013 before the [Regional Trial Court] claiming
refund or credit of local business taxes erroneously and illegally collected by [petitioners] for the taxable
year 20 10. [RA VI] claims [petitioners] erroneously and illegally collected business tax in the amount of
P503,346.00 from [RA VI] 's dividends from San Miguel Corporation (SMC) preferred shares and interest
on its money market placement on the ground that it is not a bank or financial institutions.

Respondent argues that it is entitled to a refund or credit of the 0.55o/o LBT collected for the 1st and 2nd
quarters of taxable year 2011 based on the dividend and interest income for the year 2010. Respondent
states that pursuant to Section 133(a) of the Local Government Code of 1991 (LGC), it is illegal for
petitioners to collect LBT on dividends and interest income of respondent because it is not a bank or a
financial institution; that being a holding company, respondent's dividend and interest income are not
subject to LBT; and, that respondent, including its SMC shares and income therefrom, are national
government property exempt from LBT.

ISSUE:
Whether or not Randy Allied Ventures, Inc. is a "non-bank financial intermediary", falling under the category
of "bank and other financial institutions", so as to be subject to local business tax (LBT) imposition, as
provided under Section 143(f) of RA 7160, otherwise known as the "Local Government Code of 1991".

RULING:
Randy Allied Ventures, Inc. is a holding company. The term "banks and other financial institutions" 1s
defined under Section 131 (e) of the LGC, as follows: Section 131. Definition of Terms. -When used in this
Title, the term: XXX XXX XXX (e) "Banks and other financial institutions" include non-bank financial
intermediaries, lending investors, finance and investment companies, pawnshops, money shops, insurance
companies, stock markets, stock brokers and dealers in securities and foreign exchange, as defined under
applicable laws, or rules and regulations thereunder;”
116

The term "non-bank financial intermediaries" is defined in Section 22(W) of the 1997 National Internal
Revenue Code, as amended (NIRC), as follows: Sec. 22. Definitions. -When used in this Title: XXX XXX
XXX (W) The term 'non-bank financial intermediary' means a financial intermediary, as defined in Section
2(D)(c) of Republic Act No. 337, as amended, otherwise known as the General Banking Act, authorized by
the Bangko Sentral ng Pilipinas (BSP) to perform quasibanking activities.”

An NBFI must meet the following requirements:


1) The person or entity is authorized by the BSP to perform quasi-banking functions;
2) The principal functions of said person or entity include the lending, investing or placement
of funds or evidences of indebtedness or equity deposited to them, acquired by them, or
otherwise coursed through them, either for their own account or for the account of others; and
3) The person or entity must perform any of the following functions on a regular and recurring,
not on an isolated basis, to wit:
a. Receive funds from one (1) group of persons, irrespective of number,
through traditional deposits, or issuance of debt or equity securities; and make
available I lend these funds to another person or entity, and in the process
acquire debt or equity securities;
b. Use principally the funds received for acqu1nng various types of debt or
equity securities;
c. Borrow against, or lend on, or buy or sell debt or equity securities;
d. Hold assets consisting principally of debt or equity securities such as
promissory notes, bills of exchange, mortgages, stocks, bonds, and
commercial papers; and
e. Realize regular income in the nature of, but need not be limited to, interest,
discounts, capital gains, underwriting fees, guarantees, fees, commissions,
and service fees, principally from transactions in debt or equity securities or by
being an intermediary between suppliers and users of funds.

In the instant case, petitioners failed to present any credible and convincing proof that respondent RA VI is
an NBFI or has engaged in the activities of a financial institution or intermediary. First, there is no indication
that respondent was authorized by the BSP to perform quasi-banking activities as a non-bank financial
intermediary. Second, there is no indication that respondent is a financial intermediary or that it has actually
engaged in the activities enumerated in the BSP Manual. Neither was it shown that respondent has held
itself out nor advertised itself as an NBFI or as a lending, investing, or financing company. Third, while
respondent's primary purpose, as stated in its Amended AOI, may involve one of the activities enumerated
in the BSP Manual, there was no proof that respondent performed these activities as its principal function
and on a regular and recurring basis. Fourth, an examination of respondent's primary purpose in its
Amended AOI shows that respondent fits the definition of a holding company, rather than an NBFI.

Respondent's primary purpose reflects its function as a "holding company", in consonance with the
definition by the Securities and Exchange Commission (SEC), as follows: A holding company has been
defined by the Commission in several opinions. A holding company has been aptly defined as "a corporation
organized to hold the stock of another or other corporations." Its essential feature is that it holds stock. The
term "holding company" is equivalent to a parent corporation, having such an interest in another
corporation, or power of control, that it may elect its directors and influence management. A parent or
holding company is one that controls another as a subsidiary or affiliate by the power to elect its
management. Affiliates are those concerns that are subject to common control and operated as part of a
system.

As such, respondent cannot be made liable for local business tax imposed on "banks and other financial
institutions" under Section 143(f) of the 1991 LGC. Thus, the local business tax assessment for the 1st and
2nd quarters of taxable year 20 11 should be cancelled, and respondent's claim for refund of the LBT paid
under protest should be granted.
117

COMMISSIONER OF INTERNAL REVENUE v. VICTORIAS FOODS CORPORATION


CTA EB NO. 1542; February 19, 2018
BAUTISTA, J.

FACTS:
Respondent is a domestic corporation organized in accordance with the laws of the Republic of the
Philippines, principally engaged in the business of acquiring or owning factories and other manufacturing
facilities by lease, purchase, or otherwise, and to operate the same for the processing, preservation, and
packaging of food products, and to sell the same at wholesale.

Petitioner's examiners stated that as of that date, respondent failed to submit the required documents,
despite written notices to comply on or before May 31, 2012. Accordingly, the Memorandum addressed to
the Regional Director Perfecto L. Aranas ("RD Aranas") recommended that the case be forwarded to the
Assessment Division for issuance of a Final Assessment Notice ("FAN") and Demand Letter. In a transmittal
letter dated June 13,2012, respondent submitted original documents consisting of Check Vouchers, Journal
Vouchers, and other documents to comply with the May 29, 2012 letter of petitioner.

In a letter dated July 4, 2012, which was mailed on July 6, 2012, RD Aranas upheld the assessment against
respondent, and demanded payment for the amount of Php10,131,843.31 as deficiency income tax, VAT,
and EWT. Said letter enclosed the FANs, the Formal Letter of Demand ("FLD"), Details of Discrepancy,
and Computation of Tax Liabilities.

After filing a petition for review, respondent was ordered to pay basic deficiency income and [VAT] for the
fiscal year ending August 31, 2009 in the amount of One Million ThirtyNine Thousand Five Hundred Fifty
Eight and 37/100 Pesos ([Php]1,039,558.37), inclusive of 25% surcharge plus deficiency interests.
Petitioner filed the present Petition for Review. Petitioner avers that the deficiency tax assessments were
assessed within the three (3)-year period prescribed by law. As to income tax, petitioner insists that the
Court in Division erred in deleting or reducing the items of overstatement of net operating loss carry-over
("NOLCO") for 2008, disallowed purchases, disallowed expenses due to non-withholding, overstatement of
salaries and wages, and unreported purchases of food ingredients.

ISSUE:
Whether respondent is liable to pay the total amount of php10,131,843.31 representing deficiency income
tax, VAT, and EWT for the fy ending august 31, 2009.

RULING:
The Court in Division did not err in holding that the period to assess income tax has not yet prescribed; but
VAT for the first to third quarters, and EWT from September 2008 to May 2009 have prescribed.

Section 203 of the 1997 NIRC mandates that the BIR issue an assessment for deficiency taxes within three
(3) years from the last day prescribed by law to file the tax return or the actual date of filing of such return,
whichever comes later; and any assessment notice issued beyond this prescriptive period shall not be valid.
The Court En Banc notes that the request for reinvestigation petitioner is referring to was made in response
to the PAN. What Section 223 has in mind is an actual assessment, a FAN. Looking into respondent's
protest« to the FAN, it is entitled "Motion for Reconsideration." Further, a reading of the body shows that
respondent does not seek for a re-evaluation of the assessment due to newly-discovered or additional
evidence, and it only insisted that the decision on its request for reinvestigation relating to the PAN is not
in accord with law, and reiterated its grounds for RD Aranas to reconsider his decision. Neither did the RD
Aranas grant respondent's request in its letter45 dated October 1, 2012, as required by Section 223 of the
1997 NIRC. In fact, he advised respondent to request for another reinvestigation, which respondent never
did, opting to file another request for reconsideration with the CIR instead.
118

COMMISSIONER OF INTERNAL REVENUE v. SUTHERLAND GLOBAL SERVICES PHILIPPINES,


INC.,
CTA EB N0. 1596; February 19, 2018
CASTANEDA, JR., J.:

FACTS:
Petitioner [now respondent] Sutherland Global Services Philippines, Inc. is a non-pioneer Information
Technology (IT) locator enterprise registered by virtue of the Philippine Economic Zone Authority (PEZA)
Certificates of Registration. Prior to the proclamation of the Clark Economic Zone (CEZ) as a PEZA Special
Economic Zone, petitioner was registered with the Clark Development Corporation (CDC). On December
20, 2006, petitioner and PEZA executed a Registration Agreement dated November 22, 2006, entitling
petitioner, as registrant, to conduct and operate its business inside the CSEZ. Among the provisions of the
Registration Agreement was the grant to petitioner of tax incentives under Republic Act (RA) No. 7916
which states that it shall pay 5% tax on gross income, in lieu of all national and local taxes, subject to PEZA
and BIR rules and regulations.

On October 15, 2012, petitioner filed an administrative claim for refund, arguing that it erroneously paid the
5% GIT during the fiscal year ending June 30,2010. Respondent filed a Motion to Dismiss on January 18,
2013, praying that after due hearing, the Petition for Review should be dismissed for lack of jurisdiction and
for being barred by prescription.

ISSUE:
Whether the CTA has jurisdiction over this case;

RULING:
The CTA has jurisdiction over the instant case. Section 229 of the NIRC of 1997, as amended, categorically
states that the two (2)-year period shall be counted from the date of payment of the tax or penalty. Had it
been the purpose of the law to count the two (2)-year period from the last day for filing of the tax return, i.e.,
income tax return, then it could have plainly set forth the same.

However, in refund cases, Section 229 of the NIRC of 1997, as amended, plainly and clearly states that the
two (2)-year period shall be counted from the date of payment of the tax or penalty. In other words, while
penalties may be imposed against an erring taxpayer, Section 229 of the NIRC of 1997, as amended, does
not deny or reduce a taxpayer's right to refund. What is essential under Section 229 is that the taxpayer
complied with or observed the mandatory and prescriptive periods, aside from the taxpayer's duty to
exhaust available administrative remedies. Considering the foregoing, the Court En Bane rules that the CT
A has jurisdiction over the instant case.

PNOC DEVELOPMENT CORPORATION vs. COMMISSIONER ON INTERNAL REVENUE


CTA E.B. 1486, February 19, 2018
Ringpis-Liban, J:

FACTS:
In this case, PNOC, a government-owned and controlled corporation (GOCC), assailed the 2012 decision
of the CTA’s First Division which partially granted the petition to cancel and withdraw the Formal
Assessment Notice (FAN) issued by respondent Commissioner Internal Revenue (CIR), held PDMC liable
for alleged deficiency income tax, value-added tax , expanded withholding tax, withholding tax on
compensation and final withholding VAT.

The Commissioner on Internal Revenue issue a FAN which imposed a twenty percent (20%) interest
pursuant to Section 249 of the NIRC of 1997, as amended. fifty percent (50%) surcharge on deficiency VAT
pursuant to Section 248(8) of the NIRC of 1997, as amended, for substantial under-declaration of sale of
more than thirty percent (30%) of the actual sales declared per return. The PDMC filed protest against each
of the assessed deficiency taxes. Due to CIR’s failure to act on PDMC’s protest, complainant filed a Petition
119

for Review with the CTA. In its Answer, the CIR asserted that the disallowances on claimed expenses and
deduction from gross income was primarily due to petitioner’s failure to substantiate these claims with
sufficient and appropriate documents and hence the assessment.

In its petition, PDMC asked the Court En Banc to delete the imposition of deficiency interest and
delinquency interest on the basic deficiency income tax. The Assailed Decision held that deficiency interest
under Section 249(B) should be applied only whenever there is a deficiency income tax, a deficiency estate
tax, and a deficiency donor's tax. Accordingly, the deficiency interest imposed on the deficiency EWT, WTC,
VAT, and Final Withholding VAT assessed against petitioner was cancelled.

ISSUE:
Was the CTA En Banc correct in holding that deficiency interest should be applied only when there is a
deficiency income tax, a deficiency estate tax, and a deficiency donor's tax?

RULING:
No, the Court en Banc in holding that deficiency interest should be applied only when there is a deficiency
income tax, a deficiency estate tax, and a deficiency donor's tax and subsequently cancelling the deficiency
interest imposed on the deficiency EWT, WTC, VAT, and Final Withholding VAT assessed against petitioner
The text of Section 247(a) is clear. It states that the additions under Chapter I, Title X are applicable to all
taxes imposed under the code, i.e. the 1997 NIRC, regardless of the title under which they are classified.

Therefore, the law does not limit these additions to only the three (3) types of internal revenue taxes,
namely, income (Title II), estate (Title III) and donor's tax (Title III). Their imposition applies with equal force
and effect to the other taxes under the 1997 NIRC such as the value-added tax (Title IV), other percentage
taxes (Title V), excise tax (Title VI) and documentary stamp tax (Title VII). Accordingly, the additions to the
tax or deficiency tax such as, among others, Civil Penalties or Surcharges under Section 248, Deficiency
Interest under Section 249(B), Delinquency Interest under Section 249(C), and Installment on Extended
Payment under Section 249(D) are also applicable to PDMC's deficiency EWT, WTC, VAT, and Final
Withholding VAT.

Therefore, the Court denied the Petition for Review for lack of merit. The Assailed Decision was modified
by ordering PDMC to pay basic deficiency EWT, WTC, income tax, VAT, and final withholding VAT,
inclusive of the twenty-five percent (25%) surcharge imposed under Section 248(A)(3) of the NIRC of 1997
as well as the Deficiency interest at the rate of twenty percent (20°/o) per annum on the basic deficiency
income tax, EWT, WTC, VAT, and Final Withholding VAT computed from April 15, 2008 until full payment
thereof and the Delinquency interest at the rate of 20% per annum on the total, and on the 20% deficiency
interest computed from October 1, 2012 until full payment.

SABRE TRAVEL NETWORK (PHILIPPINES), INC (formerly ABACUS DISTRIBUTION SYSTEMS


PHILS.INC.) vs. COMMISSIONER ON INTERNAL REVENUE
CTA Case No. 8678, February 15, 2018
Castaneda, Jr., J:

FACTS:
This case involves the assailed decision of the CTA where it cancelled the assessment of Commissioner
on Internal Revenue covering WTC and partially upheld the assessment for deficiency EWT, FWVAT,
FWT, income tax, VAT and DST and imposed a 25% surcharge pursuant to Section 248 (a) (3) of the NIRC
as amended. In addition, a 20% deficiency interest per annum was impose on the basic deficiency EWT,
FWVAT, FWT, Income Tax, VAT and DST pursuant to Section 249(8) of the NIRC of 1997, as amended.

While Sabre Travel Network (Philippines) Inc. appreciated the cancellation of the assessment on WTC, it
questioned, among others, the imposition of deficiency interest as well as delinquency interest on deficiency
EWT, FWVAT, FWT, income tax, VAT and DST .Petitioner claims that the deficiency interest under Section
249 of the NIRC of 1997 applies only to three (3) types of internal revenue taxes, namely: income tax,
120

estate tax and donor's tax, pursuant to Sections 56, 93 and 104 of the NIRC of 1997. Further, it claims that
the imposition of deficiency interest on its EWT, FWVAT, FWT, VAT and DST liabilities must be cancelled.
Moreover, petitioner asserts that the imposition of delinquency interest on the deficiency interest which
have accrued in relation to the basic EWT, FWVAT, FWT, VAT and DST assessments must likewise be
cancelled as it consist double imposition of interests.

ISSUE/S:
# 1: Does the deficiency interest apply exclusively to income tax, estate tax and donor’s tax?
#2: Is the imposition of delinquency interest on deficiency interest valid?

RULING:
1. No, deficiency interest does not exclusively apply to income tax, estate tax and donor’s tax. In the
consolidated cases of Liquigaz Philippines Corporation v. Commissioner of Internal Revenue and
Commissioner of Internal Revenue v. Liquigaz Philippines Corporation, 10 the Court En Bane ruled that the
deficiency interest is imposable on all internal revenue taxes/ Section 247(a) of the NIRC of 1997, as
amended], very clearly embraces failure to pay all taxes imposed in the Tax Code, without any regard to
the Title of the Code where provisions imposing particular taxes are textually located. Thus, deficiency
interest must be imposed not just on deficiency income tax but also on deficiency VAT, EWT and WTC.

2. Yes, the imposition of delinquency interest on deficiency interest is valid. Section 249 of the NIRC
provides that an interest of at least 20% per annum shall be assessed and collected on any unpaid amount
of tax. A careful perusal of Section 248 reveals that there is no double imposition of interests as the law
clearly differentiates deficiency interest from delinquency interest. Deficiency is defined as the amount still
due and collectible from a taxpayer upon audit or investigation; whereas delinquency is defined as the
failure of the taxpayer to pay the tax due on the date fixed by law or indicated in the assessment notice or
letter of demand.

Consequently, deficiency interest is imposed upon any tax that is still due and unpaid to the government.
Such interest is imposed by the fact that a portion of the tax imposed by law, which is the "deficiency tax",
is still withheld by the taxpayer. Otherwise stated, it is imposed on the amount short of the full tax due and
should be paid to the government, which is the deficiency tax.
Delinquency interest, on the other hand, is the interest imposed on the failure to pay (i) the amount of tax
due on any return required to be filed, (ii) the amount of tax due for which no return is required, or (iii)
deficiency tax, or any surcharge or interest on the due date appearing in the notice and demand of the
Commissioner. It is the interest upon the delay in the payment of the amount of tax due whether return is
required to be filed or not, or delay in the payment of deficiency tax, surcharges and interests thereon.

Hence, having different nature for their existence, petitioner cannot assail double imposition of interests as
the law itself allows the simultaneous imposition of these two kinds of interests.

DIGITEL MOBILE PHILIPPINES, INC. vs. THE CITY GOVERNMENT, THE CITY TREASURER AND
CITY ASSESSOR OF COTABATO CITY
CTA AC No. 164, December 27, 2017
Mindaro-Grulla, J:

FACTS:
This is a Petition for Review filed by Digitel Mobile Philippines, Inc. after the Regional Trial Court of Cotabato
City which ordered petitioner to pay the assessed real property taxes after lifting the TRO against the city
government with regard to any acts which may cause the cessation of operation of petitioner.

Petitioner is the grantee of a legislative franchise under Republic Act (RA) No. 9180, authorizing it to
construct, install, establish, operate and maintain telecommunications systems throughout the Philippines.
It is the registered owner of real properties, consisting of several machineries, equipment and buildings
located in Cotabato City which are used for its telecommunication system business.
121

The City Treasurer demanded the payment of over 2 million pesos in real property taxes covering the years
2004-2009. However, petitioner refused to pay said amount as it asserted an earlier pronouncement by the
court in Digitel Telecommunications Philippines, Inc. v Pangasinan which declared that it is not liable to pay
real property taxes on its real properties which are actually, directly and exclusively used in its operations.
Through a Petition for Prohibition and Mandamus (With Urgent Prayer for the Issuance of a Temporary
Restraining Order and Writ of Preliminary Mandatory Injunction), t was able to secure a 20-day TRO against
the City Government. After which the RTC ordered the petitioner to pay the assessed real property taxes.
Its MR was denied, Hence it filed a Petition for Review before the CTA.

While petitioner asserts violation of the RTC of due process, among other, the Court found it important to
determine its jurisdiction in accommodating the petition before ruling on the issues raised by the petitioner.

ISSUE:
Does the CTA have jurisdiction to entertain the Petition for Review filed by petitioner Digitel?

RULING:
No, the CTA does not have jurisdiction over the Petition for Review filed by Digitel.
Under the doctrine of primacy of administrative remedies, an error in the assessment must be
administratively pursued to the exclusion of ordinary courts whose decisions would be void for lack of
jurisdiction. But an appeal shall not suspend the collection of the tax assessed without prejudice to a later
adjustment pending the outcome of the appeal. Republic Act 7160 or the Local Government Code of 1991
(LGC) clearly sets for the administrative remedies available to a taxpayer or real property owner who is not
satisfied with the assessment of reasonableness of the real property tax sought to be collected. Section
252 of the LGC directs that the taxpayer should first pay the tax due before his protest could be entertained.

It is only after the taxpayer has paid the tax due that he may file a protest in writing within 30 days from the
payment of the tax to the provincial, city or municipal treasurer. If the local treasurer denies the protest or
fails to act upon it within a 60-day period as provided for in Section 252, the taxpayer or real property owner
has 60 days from the denial of the protest or inaction within which to appeal to the Local Board of
Assessment Appeals (LBAA) which shall, in turn, decide the appeal within 120 days from the date of receipt
of such appeal as provided in Section 266 of the LGC. If the taxpayer is not satisfied with the decision of
the LBAA, he may elevate the same within 30 days after receipt of the decision of the LBAA to the CBAA.
To be clear, Section 252 of the LGC mandates that “no protest shall be entertained unless the taxpayer
first pays the tax”. It is settled that the requirement of “payment under protest is a condition sine qua non
before an appeal may be entertained.

In this case, it is evident that petitioner questioned the correctness of the assessment issued against by
respondent City Treasurer when it filed its petition against respondents before claiming exemption from
payment of real property tax allegedly provided under its franchise. Therefore, petitioner should have first
complied with Section 252 of the LGC by paying under protest before the provincial, city or municipal
treasurer. If the local treasurer denies the protest or fails to act upon it within the 60-day period, petitioner
may then appeal to the LBAA and if not satisfied, he may elevate the same to the CBAA.
Petitioner, having failed to exhaust the administrative remedies available to it and comply with the
procedural requirements laid down under the LGC, the assessment thus attained finality and collection
would be in order. Consequently, the Court has no jurisdiction to entertain the present case.

COMMISSIONER ON INTERNAL REVENUE vs. GIC PRIVATE LIMITED


CTA EB No. 1477 (CTA Case No. 8749), December 12, 2017
Fabon-Victorino, .J.:

FACTS:
This is a Petition for Review filed by the Commissioner on Internal Revenue (CIR) assailing the Decision
and Resolution, both rendered by the Court in Division, granting respondent GIC Private Limited's claim for
refund or issuance of tax credit certificate (TCC) of erroneously withheld final tax .
122

Respondent GIC Private Limited (Formerly, Government of Singapore Investment Corporation Private
Limited) ,a non-resident foreign corporation wholly-owned and controlled by the Government of Singapore,
and Citibank, acting through its Singapore branch, executed a Global Custodial Services Schedule (GCS)
as a supplement to the Direct Custodial Services Agreement (DCSA). Per GCSS, respondent endowed
Citibank to open subcustody accounts with other Citibank subsidiaries and affiliates as foreign sub-
custodians for holding the securities issued by foreign governments or foreign companies whose principal
trading market is located outside of Singapore by virtue of the GCSS, Citibank Singapore opened a sub-
custody account with Citibank Philippine Branch. Respondent through Citibank invested in T-bonds with a
maturity period of one year and consequently derived interest income of over 1 Billion pesos from said
investment derived interest income from its investments in T-Bonds mounting to P1,084,596,432.68. The
said interest income as subjected to Final Withholding Tax (FWT) at the rate of twenty percent (20°/o),
which the Bureau of Treasury (BTr) withheld and remitted to the BIR.

Respondent filed with the BIR an administrative claim for refund/TCC to the alleged erroneously withheld
and remitted FWT. Due to BIR’s inaction, it elevated the matter to the CTA which in turn granted the claim
for refund. After the denial of its MR, petitioner filed this petition raising, among others, that respondent
should present the Monthly Remittance Return of Final Incomes Taxes Withheld (BIR Form 1602) as proof
of actual remittance of the final tax

ISSUE:
Is the petitioner’s assertation that the presentation of BIR form 1602 is required as proof of actual remittance
of the final tax withheld by BTr?

RULING:
No. Contrary to petitioner's claim, respondent is not required under the law to present the Monthly
Remittance Return of Final Income Taxes Withheld (BIR Form 1602) for the onus of demonstration actual
remittance of the final tax lies with BTr as payor -withholding agent pursuant to Sections 57 and 58 of the
1997 National Internal Revenue Code, as amended. As to what document constitutes sufficient proof that
the taxes were indeed withheld by the payor-withholding agent, Section 58(8) of the NIRC, as amended,
provides that every withholding agent required to deduct and withhold taxes under Section 57 shall furnish
each

Clearly, respondent's presentation of the Certificate of Final Tax Withheld at Source (BIR Form No. 2306)
issued by the withholding agent BTr in favor of Citibank covering FWT in the Certification, confirming the
amount of final taxes withheld from the c0upons or interest income derived by the Philippine T-Bond
recorded under Citibank N.A. 's Custodian Account, the Statements of Interest Payment of Coupon/Maturity
due by government securities holders of Citibank and the journaI entry vouchers (JEVs) covering the
withholding of final tax on coupons and remittance of FWTs to the BIR, satisfy the requirement of the law.
The foregoing pieces of evidence show that for the periods December 1, 2011 to December 31, 2012, the
amount of P242,816,565.56 pertaining to final taxes on interest income from Philippine T -Bonds, to which
respondent's claim is hinged, were indeed withheld and remitted by the BTr to the BIR.

All said, respondent as complied with all the requisites to justify the grant of its claim for refund in the
aggregate amount of P216,919,2 6.53, representing erroneously collected final taxes.

Hence, the Court denied the Petition for Review.


123

COMMISSIONER OF INTERNAL REVENUE, vs. ASIAN TRANSMISSION CORPORATION


CTA EB N0.1519, December 1, 2019
Ringpis- Liban, J:

FACTS:
This is a Petition for Review filed by the Commissioner of Internal Revenue (CIR) assailing the CTA decision
ordering the payment of a lower amount of tax and at lower tax rated to the assessed amounts, specifically
holding ATC liable to pay only the amount of P3,999,957.67, representing basic deficiency withholding tax
on compensation and the 25% surcharge imposed under Section 248(3)

The CIR contends that ATC is liable to pay its deficiency withholding tax on compensation in accordance
with Sections 79 and 80 of the NIRC; that since ATC failed to present the complete list of its employees,
the maximum tax rate of 32% must be applied; and that ATC, as withholding agent, must be held liable, in
addition of other penalties, to a penalty equal to the total amount of tax not withheld or not accounted for
and remitted in accordance with Section 251 of the NIRC of 1997.

On the other hand, ATC argues that the CIR failed to advance any argument to dispute the findings of the
Court in Division that P7 ,870,532.35 of the alleged discrepancy found by the CIR actually pertains to ATC's
contribution to its employees' Hospitalization, SSS, Pag-Ibig, Medicare, Employees Compensation and
Rice Allowance, all of which are not taxable under the law; that the findings of the Court in Division are fully
supported by documentary evidence on record; that the effective rate of 19.98% was logically arrived at
through valid estimation "based on the total withholding tax on compensation paid divided by the total
amount of taxable gross compensation reported during taxable year 2001; and that the additional penalty
provided by law applies only in a criminal case for violation of Section 251 of the NIRC, as amended.

ISSUE:
Did the Court in Division err in partially granting the Petition for Review and holding ATC liable to pay only
the amount of P3,999,957.67, representing basic deficiency withholding tax on compensation and the 25%
surcharge imposed under Section 248(3) of the NIRC of 1997, and delinquency interest at the rate of twenty
percent (20%) per annum, on the said total amount,?

RULING:
The Court En Banc agrees with the findings of the Court in Division that ATC is liable to pay withholding
tax on compensation but only in the amount of P3,199,966.14. However, it does not totally agree with all
the findings.

Considering that SSS, Medicare, Pag-Ibig Contributions and Empioyee Compensation Insurance are
income payments specifically exempted by the above-quoted Section 2.78.1 (B)(12) of RR No. 2-98, the
Courts finds that the same should not be subjected to withholding tax on compensation anent the other
contributions, i.e., Hospitalization Company Contribution, Group Insurance, and Retirement Plan
Contribution, since the same are not specifically exempted from withholding tax on compensation, it must
have been shown by petitioner that such contributions are not subject to the requirement of withholding tax
on compensation. Petitioner failed to establish by clear and convincing evidence that said contributions
were not realized or received, actually or constructively, by its employees, and thus, the withholding tax
assessment thereon must be sustained.

As for the Rice Allowance, petitioner's documents substantiating the sufficiently established the fact of
purchase of rice and the corresponding list of employees which were entitled for such benefit. Accordingly,
the rice allowance given to each of petitioner's employees amounted to either P890 or P900 per month
during 2001, well within the threshold set forth in Section 2.78.1 (A)(3)(c) of RR No. 02-98 as de minimis
benefits. Thus, the Rice Allowance in the verified amount of P2,962,900.00 is exempt form withholding tax
on compensation.

However, this Court cannot extend the same ruling on Employee Uniforms, since the documents presented
by petitioner failed to prove the number/listing of employees which were given with uniforms, hence, the
Court cannot verify whether said allowance was within the threshold per employee as set forth in the earlier
124

quoted Section 2.78.1(A)(3)(d) of RR No. 2-98. Hence, the assessment on the deficiency withholding tax
on compensation arising from the alleged Employee Uniforms must be upheld.
With regard to the Canteen Allowance, the same should likewise be subjected to withholding tax on
compensation because petitioner failed to prove that the meals" were furnished ]or the convenience if the
employer as required by the above-quoted Section 78.1 (A) (2) of RR No. 2-98, for the value thereof to be
not included as part of compensation income. Moreover, there is no showing that the said amount
represents daily meal allowance for overtime work" considered as de minimis benefits under Section 2.
78.1 (A) (3) (j) of RR No. 2-98.

As regards the Maintenance and Tool Expenses y, petitioner neither presented any supporting documents,
nor explained the nature of these expenses. Hence, the assessments thereto must no longer be disturbed.
The unaccounted compensation of P16,096,409.13 should be subjected to withholding tax on
compensation based the appropriate tax rate to be used should be the effective rate computed based on
the total withholding tax on compensation paid divided by the total amount of taxable gross compensation
reported during the taxable year 2001 and not on the 32% rate applied by the BIR.

Lastly, the compromise penalty imposed by respondent for the deficiency withholding tax on compensation
must be cancelled. Pursuant to RMO No. 01-90, compromise penalties are only amounts suggested in
settlement of criminal liability, and may not be imposed or exacted on the taxpayer in the event that a
taxpayer refuses to pay the same. The Court has no jurisdiction to compel a taxpayer to pay the compromise
penalty because by its very nature, it implies a mutual agreement between the parties in respect to the thing
or subject matter that is so compromised, and the choice of paying or not paying it distinctly belongs to the
taxpayer. Absent a showing that herein petitioner consented to the compromise penalty, its imposition
should be deleted. The imposition of the same without the conformity of the taxpayer is illegal and
unauthorized.

Therefore, the Court partially granted the Petition for Review while upholding the earlier CTA Decision with
modification.

Splash Corporation vs. Commissioner of Internal Revenue


CTA Case No. 8904; February 2, 2018
Casanova, J.

FACTS:
On February 26, 2014, petitioner received a Preliminary Assessment Notice (PAN) with details of
discrepancy and computation of deficiency income tax dated February 17, 2014, assessing petitioner of
deficiency income taxes arising from "Disallowed Income Tax Exemption on Net Income in the amount of
P159,490,000.00. Petitioner filed its response dated March 12, 2014, contending that it is entitled to the
exemption granted under Section 6 of Republic Act (RA) No. 7459. Thereafter, on March 19, 2014,
petitioner received from the BIR a Formal Letter of Demand (FLD) dated March 15, 2014, with attached
Details of Discrepancies and Audit Result/ Assessment Notice dated March 18, 2014. The BIR issued a
Letter dated March 25, 2014, withdrawing/cancelling the FLD and Final Assessment Notice received by
petitioner on March 19, 2014. On April 7, 2014, another FLD was later received by the petitioner dated April
4, 2014, from the BIR with the Attached Details of Discrepancies and Audit Result/ Assessment Notice
dated March 28, 2014, finding that petitioner has deficiency income tax liability for the CY 2010 in the total
amount of P76,580,200.00, inclusive of interest and penalties. Petitioner thereafter filed on May 7, 2014 a
Letter of Protest dated May 7, 2014, requesting for reinvestigation of the deficiency income tax assessment.
Subsequently, on September 8, 2014, petitioner received from the BIR a Final Decision on Disputed
Assessment (FDDA) dated August 20, 2014, with attached Memorandum dated August 20, 2014, stating
that, as per their reinvestigation, petitioner is liable for deficiency income tax and increments in the
aggregate amount of P80,984,745. 75. In view thereof, petitioner filed the instant Petition for Review on
October 8, 2014.

ISSUE:
125

Whether Petitioner is liable for deficiency income tax for taxable year 2010 in the aggregate amount of
Php80,984,745.75.

RULING:
No, Petitioner is not liable for deficiency income tax for taxable year 2010.

One of the allegations made by Petitioner was that the issuance and subsequent withdrawal of the
FLD/FAN, and the issuance of a new one is not outlined by the laws and rules regarding assessments.
Thus, respondent failed to comply with the cardinal principles of administrative due process. The Court
ruled, however, that the issuance of the two FLDs/FAN against petitioner is of no moment considering that
a letter was already sent to petitioner withdrawing the 1st FLD and that the 2nd FLD/FAN dated April 4,
2014 contained a statement cancelling the 1st FLD/FAN dated March 15, 2014. Also, the 2nd FLD/FAN
was issued before the lapse of the 3-year prescriptive period provided by law for the issuance of an
assessment. In effect, the 2nd FLD/FAN validly superseded the 1st FLD/FAN. Thus, its right to due process
was not violated by Respondent.

Another argument presented by Petitioner was that the PAN and FLDs issued against it allegedly failed to
state the facts and the law upon which they are based, hence, the assessment is void. The Court finds
pertinent Section 228 under the NIRC of 1997, as amended which provides:
"SEC. 228. Protesting of Assessment. – When the Commissioner or his duly authorized representative
finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings: Provided,
however, That a pre-assessment notice shall not be required in the following cases: xxx xxx xxx The
taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise,
the assessment shall be void. xxx xxx xxx."

The law requires that the taxpayers should be informed of the legal and factual bases of the assessment.
However, the assessment notices need not be a full narration of the facts and laws on which the assessment
is based. Thus, so long as the parties are notified and were given the opportunity to explain their side, the
requirements of due process are satisfactorily complied with.

Now, the Court shall only determine the correctness of respondent's finding that petitioner, being merely
the manufacture and seller of the qualified product, and not the inventor, is not exempt from income tax
under Section 6 of RA No. 7459 on its commercial sale of the qualified invented products.

In resolving the said issue, the Court finds instructive Section 6 of RA No. 745937 which reads:
"SECTION 6. Tax Exemption. - To promote, encourage, develop and accelerate commercialization of
technologies developed by local researchers or adapted locally from foreign sources including inventions,
any income derived from these technologies shall be exempted from all kinds of taxes during the first ten
(10) years from the date of the first sale, subject to the rules and regulations of the Department of Finance:
Provided, that this tax exemption privilege pertaining to invention shall be extended to the legal heir or
assignee upon the death of the inventor. The technologies, their manufacture or sale, shall also be exempt
from payment of license, permit fees, customs duties and charges on imports."

As clearly provided by Section 6 of RA No. 7459, "any income" derived from the sale of the patented
products shall be exempt from the payment of income taxes for a period of ten (10) years from the date of
the product's first sale on a commercial scale, subject to the rules and regulations of the Department of
Finance.

Notably, in the CTA Case No. 8530 dated May 19, 2016 and CTA EB Case No. 330 dated May 5, 2008,
both entitled Commissioner of Internal Revenue vs. Splash Corporation this Court already held that
petitioner, who is the manufacturer and seller of the inventions made by Dr. Hortaleza, is entitled to tax
incentives under RA No. 7459 for a period of 10 years from the date of first sale of the inventions involved.

Therefore, following the previous pronouncements of this Court, and applying Section 6 of RA No. 7459,
the income of petitioner for CY 2010 in the total amount of P159,490,000.00 pertaining to the commercial
sale of qualified invented products is exempt from income tax pursuant to RA No. 7459. Thus, the
126

assessment issued by respondent against petitioner arising from the disallowed exempt sales in the instant
case must be cancelled.

Commissioner of Internal Revenue vs. China State Philippines Construction Corporation


CTA EB No. 1558; February 8, 2018
Bautista, J.

FACTS:
China State Construction Engineering Corporation "CSCEC" is a foreign state-owned corporation
organized and established under the laws of the People's Republic of China. CHINA STATE PHILS.
CONSTRUCTION ENGINEERING CORPORATION “CSPCC” was incorporated as a domestic subsidiary
of CSCEC and registered with the SEC on August 14, 1989. At the time of its incorporation, CSCEC owned
99% of CSPCC. CSPCC assumed the responsibility of completing the projects awarded to CSCEC from
August 14, 1989 to January 2006, since CSCEC was a non-resident foreign corporation without any branch
in the Philippines. On January 12, 2006, CSCEC was granted a license to transact business in the
Philippines. CSPCC was only able to independently obtain and was awarded contracts under its own name
beginning July 2006.

On November 16, 2007, CSPCC received a copy of the Letter of Authority "LOA" No. 21730 authorizing
certain Revenue Officers to investigate and ascertain the internal revenue taxes of CSPCC for TY 2006
and unverified prior years. On May 25, 2011, CSPCC received an undated Preliminary Assessment Notice,
assessing it for deficiency IT, VAT and EWT for TYs 2003 to 2006. On October 3, 2011, CSPCC received
the Formal Letter of Demand "FLO" with attached Details of Discrepancies and Formal Assessment Notices
"FAN" dated June 28, 2009 which sought to assess CSPCC for TYs 2003 to 2006 the aggregate amount
of Php781,498,514.53.

On November 2, 2011, CSPCC filed an administrative protest against the FAN by submitting to the CIR a
Protest Letter dated November 2, 2011. In view of the CIR's inaction on CSPCC's administrative protest,
CSPCC filed the Petition for Review on July 30, 2012. Trial ensued and, thereafter, the case was submitted
for decision on July 20, 2015. The dispositive portion of the Decision reads as follows:

“WHEREFORE, premises considered, the instant Petition for Review is GRANTED. Considering that the
CIR had no valid authority to assess CSPCC for TYs 2003, 2004, and 2005 and his right to assess CSPCC
for TY 2006 has already prescribed, the assessment against CSPCC dated June 28, 2009 for deficiency
IT, VAT and EWT in the aggregate amount of Seven Hundred Eighty-One Million Four Hundred Ninety
Eight Thousand Five Hundred Fourteen and 53/100 (Php781,498,514.53) for TYs 2003 to 2006 is
CANCELLED and deemed WITHDRAWN. SO ORDERED.”

Not satisfied with the Decision, the CIR filed his Motion for Reconsideration but the same was denied for
lack of merit. After being granted an extension, the CIR raised the instant case to the Court En Banc when
he filed a Petition for Review on December 15, 2016. On February 28, 2017 the Court En Banc gave due
course to the Petition for Review. On April 6, 2017, CSPCC filed its Memorandum; while the CIR failed to
file his memorandum per Records Verification Report issued by the Judicial Records Division on April 26,
2017. On May 22, 2017, the Court En Banc promulgated a Resolution submitting the case for decision;
hence, this Decision.

ISSUE:
Whether the Court in Division erred in granting CSPCC’s Petition for Review, and cancelling and
withdrawing the CIR’s Assessment for Deficiency IT, VAT, and EWT in the aggregate amount of
Php781,498,514.53 for TYs 2003 to 2006.

RULING:
No, the Court En Banc agrees with the ruling made by the Court in Division. The reinforce such ruling, the
following are the issues raised before the Court in Division.
127

In the assailed Decision and Resolution, the Court in Division ruled that LOA No. 21730 is void, in so far as
it authorizes the conduct of audit investigation of CSPCC' s books of accounts and accounting records for
TYs 2003, 2004, and 2005 for having been issued in violation of Section C(3) of RMO No. 43-1990, the
pertinent portion of which reads:
A Letter of Authority [LOA] should cover a taxable period not exceeding one taxable year. The practice of
issuing [LOAs] covering audit of unverified prior years is hereby prohibited. If the audit of a taxpayer shall
include more than one taxable period, the other periods or years shall be specifically indicated in the [LOA].

What this provision clearly prohibits is the practice of issuing LOAs covering audit of unverified prior years.
RMO 43-90 does not say that a LOA which contains unverified prior years is void. It merely prescribes that
if the audit includes more than one taxable period, the other periods or years must be specified.

In the present case, LOA No. 2173035 authorizes the audit investigation of CSPCC's books not only of TY
2006 but of "unverified prior years," a clear violation of Section C(3) of RMO No. 43-1990. Accordingly, the
assessment resulting therefrom is likewise void.

While LOA No. 21730 was issued in accordance with Section C(3) of RMO No. 43-1990 in so far as TY
2006 is concerned, the Court in Division ruled that the assessment which resulted therefrom is still void
because the LOA was served to CSPCC beyond the three (3) year period prescribed under Section 203 of
the 1997 NIRC, which reads:
SEC. 203. Period of Limitation Upon Assessment and Collection. - Except as provided in Section 222,
internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the
filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be
begun after the expiration of such period: Provided, That in case where a return is filed beyond the period
prescribed by law, the three (3)-year period shall be counted from the day the return was filed. For purposes
of this Section, a return filed before the last day prescribed by law for the filing thereof shall be considered
as filed on such last day.

Thus, the CIR had only until April 15, 2010 to issue an assessment for deficiency IT, until March 20, 2010
at the latest for VAT, and until January 15, 2010 at the latest for EWT. On the other hand, the FLD/FAN
dated June 28, 2009 was personally served to CSPCC on October 3, 2011. Clearly, when the FLD/FAN
was issued to CSPCC on October 3, 2011, the three (3)-year prescriptive period for all the foregoing taxes
already lapsed. Consequently, the CIR' s right to assess CSPCC for deficiency IT, VAT, and EWT for TY
2006 has prescribed.

The CIR insists that the ten (10)-year prescriptive period under Section 222(a) of the 1997 NIRC should be
applied because the returns filed by CSPCC are fraudulent returns. Nevertheless, as aptly found by the
Court in Division, the CIR failed to substantiate said claim by presenting clear and convincing evidence.
The CIR failed to show proof that there was intent on the part of CSPCC to evade tax when it used the
CWT certificates of CSCEC; or that the returns filed by CSPCC are indeed fraudulent. It must be
remembered that fraud cannot be presumed nor justified by mere speculation; it must be proven by
competent evidence.

In the present case, the CIR consistently claimed in his Answers filed before the Court in Division that
CSPCC's case involves fraud, in which case, the ten (10)-year period prescribed under Section 222(a) of
the 1997 NIRC is applicable. It is only when the Court in Division ruled against the allegation of fraud that
the CIR raised the issue on false returns.

To the mind of this Court, this shift in new theory is nothing but a mere afterthought and a last ditch effort
in the hope of a favorable result, which has consistently been rejected. Needless to say, to entertain the
CIR's new theory is not only unfair to CSPCC, who would have no opportunity to present evidence to refute
the new theory which it could have been aware of at the time of the hearing before the Court in Division,
but more so, is offensive to the rudimentary rules of fair play, justice and due process. Besides, if the CIR
sincerely believes that the returns filed by CSPCC are false returns, he could have raised the same at the
earliest opportunity when he filed his Answer before the Court in Division. The CIR did not do so.
128

Moreover, it has been a long standing rule that a party cannot change his theory of the case on appeal.
Accordingly, the Court En Banc holds that the Court in Division committed no error in not applying the ten
(10)-year prescriptive period under Section 222(a) of the 1997 NIRC on the ground that the returns filed by
CSPCC are false returns.

All told, the Court En Banc holds that the cancellation of the assessment against CSPCC for deficiency
taxes for TYs 2003, 2004, 2005, and 2006 is therefore warranted.

Commissioner of Internal Revenue vs. Toenec Philippines, Inc.


CTA EB No. 1520; October 23, 2017
Manahan, J.

FACTS:
On May 24, 2010, Toenec PH and Toenec Japan executed a Capital Infusion Agreement, wherein Toenec
Japan contributed Php30,000,000.00 as additional paid-in capital (APIC) to Toenec PH purportedly to
sustain the viability of its operations and to protect its original capital investment therein. Thereafter, as a
requirement for Toenec PH's application for license, Toenec PH submitted with the Philippine Contractor's
Accreditation Board (PCAB) its audited financial statement as of June 30, 2010. In a letter dated February
21, 2011, the BIR informed Toenec PH that the infusion of additional capital is subject to donor's tax.

As a result of the BIR's investigation, Toenec PH received on November 24, 2011 a Preliminary Assessment
Notice (PAN) dated November 23, 2011, with attached annex described as "Details of Discrepancies"
issued by the CIR. On June 25, 2012, Toenec PH received the FAN dated June 22, 2012 with the attached
Assessment Notice assessing and demanding from Toenec PH the payment of deficiency donor's tax
relative to the Capital Infusion Agreement. On July 24, 2012, Toenec PH filed its protest against said FAN.
On April 12, 2013, Toenec PH received the FDDA dated April 11, 2013 finding Toenec PH liable for
deficiency donor's tax and compromise penalty.

The case proceeded to trial, after which the Court in Division rendered the assailed Decision which disposed
of the case as follows:

“WHEREFORE, premises considered, the instant Petition for Review is hereby GRANTED.
The Final Decision on Disputed Assessment dated April 11, 2013 is hereby SET ASIDE.
Accordingly, the Final Assessment Notice dated June 22, 2012 and the attached
Assessment Notice Nos. MC-ONETT001-10-12-0578 and DN-ONETT001-10-12-0578
assessing and demanding from Toenec PH the payment of deficiency donor's tax in the
total amount of Php13,217,671.23 for taxable year 2010 are hereby CANCELLED and
WITHDRAWN.”

The CIR's Motion for Reconsideration was denied in the Court in Division's Resolution dated September 2,
2016. On October 12, 2016, the Court received the subject Petition for Review filed through registered mail
on October 5, 2016. After notice and within the extended period granted, Toenec filed its Comment (to
Petitioner's Petition for Review dated October 3, 2016) on February 1, 2017. On February 23, 2017, the
Court En Banc required the submission of memoranda. The CIR failed to file his memorandum per Records
Verification dated May 9, 20 17. On the other hand, Toenec filed its Memorandum on May 8, 2017. Thus,
on May 23, 2017, the instant case was deemed submitted for decision.

ISSUE:
Whether or not the Court in Division erred in cancelling and setting aside the BIR Final Assessment Notice
(FAN) dated June 22, 2013 and Final Decision on Disputed Assessment (FDDA) dated April 11, 2013,
bearing the deficiency donor's tax assessment of respondent for taxable year 2010 for alleged want of legal
moorings.
129

RULING:
No, there is no compelling reason to reverse or modify the Court in Division's Decision and Resolution.

The Court En Banc agrees with the Court in Division that the liability for donor's tax falls upon the donor
and not the donee. Relying on Sections 98, 99, and 103 of the 1997 National Internal Revenue Code, as
amended (NIRC), it is clear that the person or entity liable to pay donor's tax is the donor, or the person or
entity transferring the property to another. Moreover, if the donor is a non-resident, there is no mention that
the donor's return and tax shall be filed and paid by the donee. Instead, it is provided that the return must
be filed with the Philippine Embassy or Consulate in the country where the donor is domiciled at the time
of transfer, or directly with the Office of the Commissioner.

The liability to pay donor's tax is not transferable. The burden to pay donor's tax is imposed upon the donor
and not upon the donee. While the imposition of tax is a matter of law, mere exigency and convenience
may not be used as an excuse to collect donor's tax from a donee simply because the latter is located in
the Philippines. Basic is the rule that laws imposing tax are strictly construed against the taxing authority
and in favor of the taxpayer.

As to the question of whether the Php30,000,000.00 APIC is a donation, suffice it to say that any
determination thereon is irrelevant. Even if the Court determines that it is a donation, Toenec PH, the donee
in the transaction, is not liable to pay donor's tax pursuant to Section 98 of the NIRC of 1997, as amended.
In passing upon the issue, this Court declared in its assailed Decision that it is the donor and not the donee
who is liable for Donor's tax.

ARDCI NGO vs. Commissioner of Internal Revenue


CTA Case No. 9056; February 5, 2018
Castañeda, Jr., J.

FACTS:
Petitioner ARDCI NGO Group, Inc. is a nonstock, non-profit corporation duly organized and existing under
Philippine laws. On May 9, 2013, petitioner received a Notice of Informal Conference dated May 8, 2013
wherein petitioner was informed that after verification, it was found that petitioner still has deficiency taxes
in the amount of P39,599,718.18. Thus, through its letter dated May 14, 2013, petitioner protested the
findings indicated in the Notice of Informal Conference.

On August 4, 2014, petitioner received a Preliminary Assessment Notice (PAN) dated July 24, 2014 issued
by BIR Revenue Region No. 10- Legazpi City. The PAN indicated that petitioner is liable to pay deficiency
taxes in the amount of P40,663,851.61, inclusive of increments. In a letter dated August 18, 2014, petitioner
protested the findings in the PAN. Petitioner received a Formal Letter of Demand dated September 17,
2014 with attached Details of Discrepancies and Audit Results/Assessment Notice with Assessment No.
069-10-402-793- 85911 (FLD/FAN) which demanded from petitioner the payment of deficiency taxes for
taxable year 2010 in the total amount of P41,460,662.31, inclusive of increments.

Through a letter dated October 3, 2014/2 petitioner re-sent to BIR Revenue Region No. 10- Legazpi City
its protest letter to the PAN dated August 18, 2014. In a letter dated October 16, 2014,13 BIR Revenue
Region No. 10- Legazpi City acknowledged receipt of petitioner's protest letter to the PAN dated August
18, 2014 and informed petitioner that an FLD/FAN was already issued on September 17, 2014.

Petitioner filed a protest letter dated October 24, 2014 to the FLD/FAN via a private courier service and
which was received by BIR Revenue Region No. 10- Legazpi City on October 29, 2014. In a letter dated
February 27, 2015, BIR Revenue Region No. 10 - Legazpi City denied petitioner's protest on the PAN and
maintained their position that petitioner is liable to pay the amounts of P16,864,904.40, P23,957,144.84,
and P638,613.07 representing deficiency income tax, VAT and EWT liabilities, respectively. On May 25,
2015, petitioner filed the present Petition for Review.
130

ISSUE:
Whether or not the Petition for Review should be granted.

RULING:
No, the Petition for Review shall be dismissed for lack of jurisdiction. The Court of Tax Appeals (CTA) is a
court of special and limited jurisdiction. As such, the CTA can only take cognizance of matters which are
clearly within its jurisdiction.

Section 3 of RR No. 12-99, as amended, implements Section 228 of the 1997 NIRC as it lays down a more
detailed procedure relative to the issuance and protest of deficiency tax assessments. Sections 3.1.3 and
3.1.4 of RR No. 12-99, as amended, in part, provides as follows:
3.1.3 Formal Letter of Demand and Final Assessment Notice {FLD/FAN}. - The Formal Letter of Demand
and Final Assessment Notice (FLD/FAN) shall be issued by the Commissioner or his duly authorized
representative. The FLD/FAN calling for payment of the taxpayer's deficiency tax or taxes shall state the
facts, the law, rules and regulations, or jurisprudence on which the assessment is based; otherwise, the
assessment shall be void.
3.1.4 Disputed Assessment - The taxpayer or its authorized representative or tax agent may protest
administratively against the aforesaid FLD I FAN within thirty (30) days from date of receipt thereof.
xxx xxx xxx
If the taxpayer fails to file a valid protest against the FLD/FAN within thirty (30) days from date of receipt
thereof, the assessment shall become final, executory and demandable. No request for reconsideration or
reinvestigation shall be granted on tax assessments that have already become final, executory and
demandable.

Pursuant to the above provision, the rule is that an administrative protest against FLD/FAN, whether it be
a request for reconsideration or a request for re-investigation, shall be filed within thirty (30) days from the
date of receipt of the FLD/FAN. Otherwise, the tax assessment becomes final, executory and demandable.
As such, it can no longer be contested.

In the present case, respondent argues, among others, that petitioner failed to timely file a protest against
the FLD/FAN. According to respondent, the FLD/FAN dated September 17, 2014 was received by petitioner
on September 24, 2014. Counting thirty (30) days from said date, petitioner only has until October 24, 2014
within which to file its protest to the FLD/FAN.60 Thus, petitioner's protest was filed out of time when it was
filed only on October 29, 2014, or five (5) days beyond the reglementary period.

Petitioner, on the other hand, claims that it received the FLD/FAN on September 26, 2014. It further claims
that it filed its protest to the FLD/FAN on October 27, 2014 via a private courier and the same was received
by BIR Revenue Region No. 10- Legazpi City on October 29, 2014.

After careful evaluation of the allegations vis-a-vis the evidence presented by the parties, this Court finds
that petitioner's protest to the FLD/FAN was filed out of time. By reason of petitioner's failure to timely file a
valid protest, FLD/FAN already became final, executory and demandable. Accordingly, the said
assessment did not become a "disputed assessment" subject to this Court's review under the law.

Allegro Microsystems Philippines, Inc. vs. The Undersecretary of the Department of Finance and
Chairman of the One-Stop-Shop Interagency Tax Credit and Duty Drawback Center, The
Commissioner of Internal Revenue, and The Commissioner of the Bureau of Customs
CTA EB No. 1327; January 30, 2017
Bautista, J.

FACTS:
On 26 September 2013, AMPI filed its administrative claim for the issuance of a Tax Credit Certificate in
the aggregate amount of Php129,770,030.10 with One-Stop-Shop, representing its unutilized excess Input
VAT for FY 2013. On 29 August 2014, AMPI filed a Petition for Review to annul, reverse and set aside the
131

alleged Decision of respondent CIR denying AMPI' s claim for a tax refund or issuance of a TCC for its
unutilized Input [VAT] arising from importations attributable to its zero-rated export sales for the
FY 1 April 2012 to 31 March 2013 in the aggregate amount of Php129,770,030.10. Petitioner also alleges
that its administrative claim was verbally denied on July 30, 2014; and that the reason given for the denial
was the issuance of RMC 54-149.

The Court in Division found that it had no jurisdiction to decide the case since petitioner filed its appeal
beyond the one hundred and twenty (120) + thirty (30)-day period provided in Section 112(C) of the 1997
NIRC. Thus, it granted respondents' Motion to Dismiss.

Consequently, petitioner filed the present Petition for Review before the Court En Banc on June 25, 2015.
The Court En Banc gave due course to the petition and ordered the parties to submit their respective
memoranda. On March 17, 2016, the Court En Banc deemed the case submitted for decision; hence, this
Decision.

ISSUE:
Whether the Court in Division correctly dismissed the Petition for Review.

RULING:
The main issue revolves around the timeliness of petitioner's judicial claim. For reference, Section 112(C)
of the 1997 NIRC is quoted hereunder:
(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the
Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one
hundred twenty (120) days from the date of submission of complete documents in support of the application
filed in accordance with Subsection (A) hereof. In case of full or partial denial of the 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, 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 claim with
the Court of Tax Appeals.

The one hundred twenty (120) + thirty (30)-day period provided above is mandatory and jurisdictional, such
that failure to comply with the same deprives the CTA of jurisdiction.

In the instant case, petitioner filed its administrative claim with the One-Stop-Shop on September 26, 2013,
together with its supporting documents. Counting one hundred and twenty (120) days therefrom,
respondents had until January 24, 2014 within which to deny or grant the same. Upon the period's lapse
on January 24, 2014, petitioner had thirty (30) days, or until February 24, 2014 within which to file its appeal
to the CTA. Records reveal that petitioner filed its appeal with the Court in Division on August 29, 2014,
clearly beyond the thirty (30)-day period for filing an appeal.

Convenience Corporation vs Commissioner of Internal Revenue


CTA Case No. 8853; February 2, 2018
Mindaro-Grulla, J.:

FACTS:
Petitioner was assessed for deficiency income tax and VAT for the taxable year 2009. The BIR Regional
Director eventually issued a Final Decision on Disputed Assessment, from which the Petitioner filed a
motion for reconsideration. Thereafter, BIR Revenue Region No. 6 issued a Preliminary Collection Letter
(PCL) against Petitioner. Petitioner argues that it was constrained to treat the PCL as a denial of its protest.
Thus, within 30 days after it received the PCL, Petitioner filed with the CTA the instant Petition. However,
Respondent argues that the Petition was filed out of time and that the CTA did not have jurisdiction.

ISSUE:
Does the Court of Tax Appeals have jurisdiction over the present case?
132

RULING:
YES. Section 7(a)(1) of R.A. No. 1125 provides:

"SEC. 7. Jurisdiction.- The CTA shall exercise:


(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other
matters arising under the National Internal Revenue or other laws administered by the Bureau of
Internal Revenue; xxx"
Apparently, the PCL dated June 30, 2014, which would enforce the collection of petitioner's taxes
deficiency, is the one being appealed before this Court. Considering that such PCL involves the
interpretation and application of the provisions of the NIRC of 1997, as amended, it falls within the
phrase "other matters arising under the NIRC", pursuant to Section 7(a)(1) of R.A. No. 1125.

Nube Storage Systems, Inc. vs. Commissioner of Internal Revenue


CTA Case No. 9189, February 1, 2018
Fabon-Victorino, J.:

FACTS:
Petitioner Nube Storage Systems, Inc., a domestic corporation, was incorporated with an authorized capital
stock of P5,000,000.00 divided into 50,000 fully subscribed shares with par value of P100.00 per share.
Petitioner paid the corresponding Documentary Stamp Tax on the said subscription of shares of stock in
the amount of P2,500,000.00. Subsequently, petitioner filed with respondent a claim for refund in the
amount of P2,475,000.00 which it allegedly overpaid for DST. Due to the inaction of respondent, petitioner
filed, through registered mail, the instant Petition for Review.

In his Answer, respondent contends that the burden of proof to establish its firth to refund lies on petitioner
who must as well substantiate its claim in accordance with the pertinent laws and established jurisprudence
on the matter. Moreover, collection and payment of taxes are presumed made in accordance with law,
hence, not refundable.

ISSUE:
Is the petitioner entitled to the P2,475,000.00 refund for the overpaid DST on the original issuance of
petitioner's shares of stock?

RULING:
YES. Petitioner erroneously computed and paid DST, in the amount of P2,500,000.00, on the subscription
of its shares of stock by its incorporators. Per Section 174 of the NIRC, a DST of P1.00, for every P200.00
or fractional part thereof, shall be imposed on every original issuance of shares of stock with par value
based on the par value of such shares. Applying the provision of Section 174 of the NIRC, the DST due
thereon should be P25,000.00.
Since the administrative claim and judicial claim for refund/credit were filed on time, the CTA Division
granted the Petition.

Rio Tuba Nickel Mining Corporation vs Commissioner of Internal Revenue


CTA Case No. 9127; January 30, 2018
Casanova, J.:

FACTS:
Petitioner Rio Tuba Nickel Mining Corporation is a corporation duly organized under Philippines laws. On
April 1, 2015, petitioner filed its administrative claim for refund of excess VAT input taxes paid on its
133

domestic purchases and importation of taxable goods and services and importation of goods including
capital goods, together with supporting documents. On July 29, 2015, respondent issued a decision on
petitioner's claim for refund, granting only the amount of P1,617,120.37 out of its P26,331,332.84 claim for
refund/tax credit. Thus, petitioner filed its Petition for Review on August 26, 2015.

ISSUE:
Was the petition for review seasonably filed?

RULING:
Section 112 (C) of the NIRC of 1997, as amended, states the time requirements for filing a judicial claim
for refund or issuance of a tax credit of input VAT. The legal provision speaks of two periods: the period of
120 days, which serves as a waiting period to give time for the CIR to act on the administrative claim for a
refund or credit; and the period of thirty (30) days, which refers to the period for filing a judicial claim with
the CTA. It is to be noted that the 120-day period begins to run from the date of submission of complete
documents supporting the administrative claim. If there is no evidence showing that the taxpayer was
required to submit or actually submitted - additional documents after the filing of the administrative claim, it
is presumed that the complete documents accompanied the claim when it was filed.

Accordingly, counting from the filing of petitioner's administrative claim with the supporting documents on
April 1, 2015, respondent had 120 days or until July 30, 2015 to act on the claim. In this case, respondent
rendered a decision on petitioner's claim on July 29, 2015, which was allegedly received by petitioner on
August 11, 2015. Petitioner had thirty (30) days from the receipt of the denial on August 11, 2015, or until
September 10, 2015 within which to file an appeal before this Court. Clearly, petitioner's judicial appeal, by
way of the instant Petition for Review, filed before this Court, was also timely filed on August 26, 2015. It
must be noted that even if the thirty (30)-day period is to be counted from the issuance of respondent's
decision on July 29, 2015, petitioner still had until August 28, 2015 within which to file an appeal before the
Court. Moreover, even without respondent's decision on petitioner's claim for refund, the Petition for Review
was still filed on time. In such case, the thirty (30)-day period to appeal before the Court shall be counted
from the lapse of the 120-day period on July 30, 2015 or until August 31, 201528, within which to appeal
its claim for refund before this Court. Thus, the instant Petition for Review was timely filed on August 26,
2015.

Mitsuba Philippines Technical Center Corp. v. Commissioner of Internal Revenue


CTA Case No. 9032; January 24, 2018
Manahan, J.:

FACTS:
This is a Petition for Review filed by Mitsuba for the issuance of a TCC or a refund in the amount of
P4,000,000.00 representing its excess and unapplied input valued-added tax (VAT) payments attributable
to its zero-rated sales for taxable year 2010. CIR filed a Motion to Dismiss, raising lack of jurisdiction, as
Mitsuba waited for the denial during the 120+30-day period. The CTA agreed with the contention of the
CIR. The 120-day period begins to run from the date of submission of complete documents in support of
the administrative claim. The records show that on April 27, 2012, petitioner received a Letter of Authority
(LOA) together with a Checklist of Requirements. The said checklist enumerated the additional documents
requested by the BIR from petitioner for the complete determination of its claim for refund. However, there
is no evidence on record which shows that petitioner complied with the above request for supporting
documents in the Checklist.

ISSUE:
When should 120-day period be counted from?

RULING:
The CTA ruled that the 120-day period should be counted from May 27, 2012, which 30 days from April 27,
2012. Pursuant to the ruling laid down in the Pilipinas Total Gas, Inc. vs. Commissioner of Internal Revenue
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in relation to RMC No. 49-2003, the taxpayer has 30 days from notice within which to submit the additional
documents requested by the BIR that are necessary for the investigation and processing of the claims.
There is no evidence on record which shows that petitioner complied with the above request for supporting
documents contained in the Checklist of Requirements which was received by the petitioner on April 27,
2012. It was only on July 11, 2014 that petitioner submitted additional documents in response to the request
of respondent. Hence, the 120-day period should be counted from the lapse of the thirty-day period or on
May 27, 2012.

Splash Corporation vs. Commissioner of Internal Revenue


CTA Case No. 8904; February 2, 2018
Casanova, J.:

FACTS:
The petitioner, Splash Corporation, is a domestic corporation engaged in the manufacturing and selling of
personal care, pharmaceuticals, food, health, home, household care products. For calendar year 2010, the
Bureau of Internal Revenue (BIR) assessed Splash Corporation, for income tax deficiency. Splash
Corporation protested on the ground that it was tax exempt pursuant to Section 6 of RA 7459, which
exempts sales made by inventor and/or patent holders from the payment of income tax, since the patent
holder, Dr. Hortaleza is a part-owner of the corporation. However, according to the BIR, Petitioner and its
inventor Dr. Hortaleza and distinct personalities, and that the term “inventor” under the said law does not
include business conduit selling the technologies and inventions.

ISSUE:
Is Splash Corporation exempt from the payment of tax?

RULING:
YES. Notably, in the CTA Case No. 8530 dated May 19, 2016 and CTA EB Case No. 330 dated May 5,
2008, both entitled Commissioner of Internal Revenue vs. Splash Corporation this Court already held that
petitioner, who is the manufacturer and seller of the inventions made by Dr. Hortaleza, is entitled to tax
incentives under RA No. 7459 for a period of 10 years from the date of first sale of the inventions involved.
Therefore, following the previous pronouncements of this Court, and applying Section 6 of RA No. 7459,
the income of petitioner for CY 2010 pertaining to the commercial sale of qualified invented products is
exempt from income tax pursuant to RA No. 7459. Thus, the assessment issued by respondent against
petitioner arising from the disallowed exempt sales in the instant case must be cancelled.

Commissioner of Internal Rrevenue vs. Missouri Square, Inc.


CTA EB NO 1521, January 24, 2018
Mindaro-Grulla, J.

FACTS:
Respondent received a Preliminary Assessment Notice {PAN) from petitioner, finding respondent liable for
deficiency income tax. Thereafter, respondent received a Final Assessment Notice {FAN) and Formal Letter
of Demand (FLD), with attached Details of Discrepancies from Respondent. Respondent wrote to petitioner,
indicating that the letter should be considered as its protest letter regarding the result of the audit and
examination of its books for the year 2009 based on the PAN.

Respondent received petitioner’s Preliminary Collection Letter, demanding for the payment of petitioner's
alleged deficiency income tax and VAT for taxable year 2009. Then, petitioner received the Final Notice
before Issuance of Warrant of Distraint and Levy.

Accordingly, respondent filed a Petition for Review to the CTA in Division. In response, petitioner argued
that following the periods provided for in Section 228 of the National Internal Revenue Code (NIRC) of
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1997, as amended, from January 23, 2013 (the date of petitioner's filing of protest), it had until March 24,
2013 to submit relevant documents and from March 24, 2013, the Commissioner had until September 20,
2013 to issue her decision. As admitted by respondent, the protest remained unacted by the Commissioner
of Internal Revenue. Therefore, it had until October 20, 2013 within which to elevate the case to this court.
Moreover, respondent filed a protest against the PAN, not the FAN, contrary to Revenue Regulations (RR)
No. 12-99. As provided in Section 228, the failure of a taxpayer to appeal from an assessment on time
rendered the assessment final, executory and demandable. Consequently, petitioner is precluded from
disputing the correctness of the assessment.

Consequently, petitioner filed this instant petition, instead of a Motion for Reconsideration.

ISSUE:
Whether or not petitioner’s petitioner for review should be granted.

RULING:
NO. It should not be granted. Petitioner’s non-filing of a motion for reconsideration of the Amended Decision
dated September 8 2016 is fatal to the petition for review at hand. Section 1, Rule 8 of the 2005 RRCTA,
as amended, clearly provides that cases falling under the exclusive appellate jurisdiction of the Court en
banc must be preceded by the filing of a timely motion for reconsideration. Evidently, before an appeal may
be filed with the Court en banc by an aggrieved party, the appeal must be preceded by the filing of a timely
motion for reconsideration or new trial with the Division that rendered the questioned decision. Corollary,
an amended decision which modifies or reverses a decision, is a new and different decision, thus, is a
proper subject of a motion for reconsideration.

Concomitantly, a petition for review before the Court En Banc of the decision of the Court in Division without
the filing of a timely motion for reconsideration thereof is a ground for the dismissal of the petition.

Commissioner of Internal Revenue vs Phil. Gold Processing & Refining Corp.


CTA EB No 1536, January 17, 2018
Mindaro-Grulla, J.

FACTS:
PGPRC filed its Quarterly VAT Return or BIR Form No. 2550-Q. Thereafter, PGPRC filed its Application for
Tax Credits/Refunds or BIR Form No. 1914 based on Section 112 of the 1997 National Internal Revenue
Code, as amended ("1997 NIRC") and Section 4.112 of Revenue Regulations ("RR") No. 16-05.

The BIR issued Letter of Authority, authorizing Revenue Officers ("RO") Jennifer Agamata and Jovelyn
Borromeo and Group Supervisor ("GS") Angelita Martinez of Revenue Region No. 040- VAT Credit Audit
Division to examine PGPRC's books of account and other accounting records pursuant to Mandatory Audit-
Claim for VAT TCC; the same was received by PGPRC on even date.

BIR Deputy Commissioner Nelson M. Aspe wrote a letter to PGPRC denying the claim for TCC for the
reason that it cannot be ascertained whether such foreign currency remittances actually pertain to PGPRC's
export sales for the subject period of claim.

Unsatisfied with the denial of its claim, PGPRC filed a Petition for Review to which the Court held that
Philippine Gold Processing and Refining Corporation (PGPRC) is entitled to a refund in the reduced amount
of P35,883,549.98 allegedly representing unutilized excess input VAT attributable to its zero-rated sales for
the first quarter of taxable year (TV) ending June 30, 2013.

The CIR filed a Motion for Partial Reconsideration, but it was denied. Hence, this Petition for Review was
filed by the CIR, arguing that PGPRC's claim for refund of unutilized input VAT should be denied for failure
to comply with the requirements provided under the law, and thus the claim for refund or tax credit must
necessarily fail.
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ISSUE: Whether or not PGPRC is entitled to a refund.

RULING:
Yes. PGPRC is entitled to a refund.

Notably, the non-submission of complete supporting documents in the administrative level is not fatal to the
taxpayer's judicial claim. It has already been stressed in the assailed Decision that the Court is not barred
from receiving, evaluating and appreciating evidence submitted before it. Once the claim for refund has
been elevated to the Court, the admissibility, materiality, relevance, probative value and weight of evidence
presented therein become subject to the relevant provisions of the Rules of Court. The question of whether
or not the evidence submitted by a party is sufficient to warrant the grant of a claim for refund lies within the
sound discretion and judgment of the Court.

Commissioner of Internal Revenue vs Tektite Insurance Brokers, Inc.


CTA EB No 1544, January 17, 2018
Fabon-Victorino, J.

FACTS:
Respondent filed its Annual Income Tax Return for taxable year 2008 reporting revenue from its sale of.
Subsequently, Letter of Authority was issued by petitioner to respondent, authorizing the audit and
examination of its books of account and other accounting records for 2008. Respondent executed a Waiver
of Statute of Limitations under the NIRC, as amended, which petitioner received and accepted extending
the period to assess. Respondent received from petitioner a Preliminary Assessment Notice (PAN).
Respondent contested the said assessment.

Respondent received a Formal Letter of Demand with Assessment Notices, reiterating the assessment for
deficiency and compromise penalties in an increased amount. Respondent filed with the BIR a Protest
against the FLD and submitted supporting documents thereto.

Respondent elevated the matter to the Court in Division citing petitioner's inaction on its protest. The Court
in Division granted respondent's Petition for Review in its Decision. The same Court denied for lack of merit
petitioner's plea for reconsideration of the assailed Decision.

Hence, this appeal through a Petition for Review before the Court En Banc. Petitioner insists that contrary
to the finding of the / Court in Division, the subject assessment for alleged deficiency taxes was timely
issued since respondent executed a waiver of the defense of prescription under Section 222(b) of the NIRC,
as amended, which extended his three-year period to assess.

ISSUE:
Whether or not the subject assessment for alleged deficiency taxes was timely issued since respondent
executed a waiver of the defense of prescription

RULING:
NO. The subject assessment for alleged deficiency taxes was not timely issued despite the waiver.
It has been ruled that a Waiver is not a unilateral act of the taxpayer; hence, the BIR must act on it, either
by conforming to or by disagreeing with the extension. A waiver of the statute of limitations, whether on
assessment or collection, should not be construed as a waiver of the right to invoke the defense of
prescription but, rather, an agreement between the taxpayer and the BIR to extend the period to a date
certain, within which the latter could still assess or collect taxes due. The waiver does not imply that the
taxpayer relinquishes the right to invoke prescription unequivocally.

It has also been ruled that the law must not only be valid, it must also be just. Given that the waiver results
to a derogation of some of the rights of the taxpayer, the same must be executed in accordance with pre-
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set guidelines and procedural requirements. Otherwise, it does not serve its purpose, and the taxpayer has
all the right to invoke its nullity. x x x Without such a legal defense, taxpayers would furthermore be under
obligation to always keep their books and keep them open for inspection subject to harassment by
unscrupulous tax agents. The law on prescription being a remedial measure should be interpreted in a way
conducive to bringing about the beneficent purpose of affording protection to the taxpayer within the
contemplation of the Commission which recommends the approval of the law. Even assuming that all the
formal requisites for the execution of a valid waiver have been satisfied, the subject assessment must still
be declared void since there was violation of respondent's right to due process.

Commissioner of Internal Revenue vs. Spouses Eduardo X. Genato And Lydia M. Genato and
Condominium Pushers, Inc.
CTA EB No. 1695, January 12, 2018
Uy, J.

FACTS:
Respondents Spouses Genato are stockholders of CPI and LPI. The Securities and Exchange Commission
approved the separate applications of CPI and LPI for the increase in their respective capital stock from
5,000,000.00 to 25,000,000.00. Respondents also conveyed several properties in favor of the said two
companies.

Thereafter, respondents filed their Capital Gains Tax Return. However, CPI and LPI filed with the SEC
Petitions for Cancellation20 of the increase in capital stock. The SEC granted the cancellation in the Orders
both dated April 4, 2014.Consequently, the authorized capital stocks of CPI and LPI were reverted to the
original amount of P5, 000,000.00. The Deeds of Conveyance and the Supplemental Deeds of Conveyance
have also been rescinded. This prompted the Spouses to file written claims for the issuance of tax credit
certificate. The CIR did not act upon the claim.

The Court in Division rendered the assailed Decision granting respondents' Petitions for Review. The Court
in Division ordered petitioner to issue tax credit certificate in favor of respondent Spouses Genato
representing the capital gains taxes. Aggrieved, petitioner filed a Motion for Reconsideration on which the
Court in Division denied in the assailed Resolution. Petitioner filed the present Petition for Review via
registered mail. The Court En Banc gave due course to the present Petition for Review.

ISSUE:
Whether or not the rescission of the Deeds of Conveyance and the Supplemental Deeds of Conveyance
has the effect of withdrawing the capital gains tax returns.

RULING:
No. the Court En Banc cannot give credence to petitioner's claim that the rescission has the effect of
withdrawing the capital gains tax returns filed before the BIR and thus, prohibited under Section 6 of the
National Internal Revenue Code of 1997, as amended. As the Court in Division correctly observed, there is
no indication in the present case that Spouses Genato are requesting or praying for this Court to order the
withdrawal of the capital gains tax returns filed before the BIR regarding the subject transactions. The Court
in Division likewise correctly held that the filing of the present claim for refund does not amount to a request
for the withdrawal of the said returns considering that a claim for refund of taxes paid and a request for the
withdrawal of tax returns are two different and distinct matters.
138

Deutsche Knowledge Services, PTE. LTD. Vs CIR


CTA Case No. 9079, Jan. 8, 2018
Casanova, J.

FACTS:
Petitioner is licensed to do business as a regional operating headquarters (ROHQ) in the Philippines by the
Securities and Exchange Commission (SEC). It is engaged in general administration and planning;
business planning and coordination; sourcing/procurement of raw materials and components; corporate
finance advisory services; marketing control and sales promotion; training and personnel management;
logistic services; and development services and product development; technical support and maintenance;
data processing and communication and business development.

Petitioner filed with the BIR-Large Taxpayers Regular Audit Division 3, an application for tax credit/refund
of its excess and unutilized input VAT for the second quarter of CY 2013. There being no action taken by
respondent on petitioner's administrative claim for refund or issuance of TCC, petitioner filed the present
Petition for Review before the Court. Respondent filed his Answer containing numerous affirmative and
special defenses.

ISSUE:
Whether or not petitioner is entitled to the claim for refund of or issuance of TCC for its alleged excess or
unutilized input VAT.

RULING:
YES. Petitioner is entitled to the claim for refund of or issuance of TCC for its alleged excess or unutilized
input VAT.

In order to be entitled to a refund or tax credit of input VAT attributable to zero-rated or effectively zero-
rated sales, the following requisites must be complied with:

1. That the taxpayer is VAT-registered;


2. That the claim for refund was filed within the prescriptive periods;
3. There must be zero-rated or effectively zero-rated sales;
4. That input taxes were incurred or paid;
5. That such input taxes are attributable to zero-rated or effectively zero-rated sales; and
6. that the input taxes were not applied against any output VAT liability.

The petitioner was able to fulfil the aforementioned requirements. Thus, the Court decided that a tax refund
or a Tax Credit Certificate be issued in favor of petitioner, representing its unutilized and excess input VAT
attributable to zero-rated sales.