Vous êtes sur la page 1sur 28

2010 TAX CASES

CASE TITLE FACTS OF THE CASE ISSUE/S RULING


1. Fishwealth Canning Corporation Whether or not the filing of a motion for NO. A Motion for Reconsideration of the
Vs. Commissioner Of Internal reconsideration tolls the running of the denial of the administrative protest does
Revenue (G.R. No. 179343; 30-day period to appeal to the Court of not toll the 30-day period to appeal to the
January 21, 2010) Tax Appeals Court of Tax Appeals.

(Macanang, Domer)
2. Panasonic Communications Whether or not Panasonic qualifies for The petition is DENIED. NO.
Imaging Corporation Of The zero-rated sales and can refund its
PhilippinesVs.Commissioner of unutilized input VAT VAT is a tax on consumption, an indirect
Internal Revenue(G.R No. 178090 tax that the provider of goods or services
February 8, 2010) may pass on to his customers. Under the
VAT method of taxation, which is invoice-
(Guim, Amiel) based, an entity can subtract from the
VAT charged on its sales or outputs the
VAT it paid on its purchases, inputs and
imports. Under the 1997 NIRC, if at the
end of a taxable quarter the seller
charges output taxes equal to the input
taxes that his suppliers passed on to
him, no payment is required of him. It is
when his output taxes exceed his input
taxes that he has to pay the excess to
the BIR. If the input taxes exceed the
output taxes, however, the excess
payment shall be carried over to the
succeeding quarter or quarters. Should
the input taxes result from zero-rated or
effectively zero-rated transactions or
from the acquisition of capital goods, any
excess over the output taxes shall
instead be refunded to the taxpayer.
Under RMC 42-2003, failure to comply

1
2010 TAX CASES
with invoicing requirements will result in
the disallowance of his claim for refund.
Since Section 4.108-1 of RR 7-95 is
effective then, it should comply with word
zero-rated for zero-rated sales covered
by its receipts or invoices. It also became
part of 1997 NIRC on November 1, 2005
not diminishing the binding force of the
prior enactment. The requirement is
reasonable and in accord with efficient
collection of VAT preventing false claims
and helps
3. South African Airways Vs. Petitioner South African Airways is a Whether or not petitioner’s sourced In the instant case, the general rule is
Commissioner Of Internal Revenue foreign corporation organized and within the Philippines and is to be taxed that resident foreign corporations shall
G.R NO. 180356; existing under and by virtue of the laws at 32% of the Gross Billings be liable for a 32% income tax on their
FEBRUARY 16, 2010 of the Republic of South Africa. Its income from within the Philippines,
principal office is located at Airways except for resident foreign corporations
Park, Jones Road, Johannesburg that are international carriers that derive
(Balubal, Eden) International Airport, South Africa. In income from carriage of persons, excess
the Philippines, it is an internal air baggage, cargo and mail originating
carrier having no landing rights in the from the Philippines which shall be taxed
country. Petitioner has a general sales at 2 1/2% of their Gross Philippine
agent in the Philippines, Aerotel Billings. To reiterate, the correct
Limited Corporation (Aerotel). Aerotel interpretation of the provisions is that, if
sells passage documents for an international air carrier maintains
compensation or commission for flights to and from the Philippines, it shall
petitioners off-line flights for the be taxed at the rate of 2 1/2% of its Gross
carriage of passengers and cargo Philippine Billings, while international air
between ports or points outside the carriers that do not have flights to and
territorial jurisdiction of the Philippines. from the Philippines but nonetheless
Petitioner is not registered with the earn income from other activities in the
Securities and Exchange Commission country will be taxed at the rate of 32%
as a corporation, branch office, or of such income.
partnership. It is not licensed to do
business in the Philippines.
2
2010 TAX CASES
For the taxable year 2000, petitioner
filed separate quarterly and annual
income tax returns for its off-line flights
in the rate of 32% of it’s GPB. However,
he filed with the BIR for claim for refund
contending that it’s income should be
taxed at the rate of 2 ½ % of it’s GPB.
4. TFS Incorporated Vs. Commission Petitioner TFS, Incorporated is a duly Whether Or Not Petitioner Is Subject To The Court cited the case of First Planters
Of Internal Revenue organized domestic corporation The 10% VAT. Pawnshop Inc. v. CIR; “Since petitioner
GR. NO. 166829 APRIL 19, 2010 engaged in the pawnshop business. is a non-bank financial intermediary, it is
On January 15, 2002, petitioner subject to 10% VAT for the tax years
received a Preliminary Assessment 1996 to 2002; however, with the levy,
(Balubal, Eden) Notice (PAN) for deficiency value assessment and collection of VAT from
added tax (VAT), expanded withholding non-bank financial intermediaries being
tax (EWT) and compromise penalty for specifically deferred by law, then
the taxable year 1998. Insisting that petitioner is not liable for VAT during
there was no basis for the issuance of these tax years”.
PAN, petitioner through a letter
requested the Bureau of Internal Petitioner is not liable for VAT for the
Revenue (BIR) to withdraw and set year 1998. Consequently, the VAT
aside the assessments. Respondent deficiency assessment issued by the
Commissioner of Internal Revenue BIR against petitioner has no legal basis
(CIR) informed petitioner that a Final and must therefore be cancelled. In the
Assessment Notice (FAN) was issued same vein, the imposition of surcharge
on January 25, 2002, and that and interest must be deleted.
petitioner had until February 22, 2002
within which to file a protest letter. On
February 20, 2002, petitioner protested
the Final Assessment Notice (FAN).
There being no action taken by the
CIR, petitioner filed a Petition for
Review] with the CTA.

During trial, petitioner offered to


compromise and to settle the
3
2010 TAX CASES
assessment for deficiency EWT with
the BIR. Hence, on September 24,
2003, it filed a Manifestation and
Motion withdrawing its appeal on the
deficiency EWT, leaving only the issue
of VAT on pawnshops to be threshed
out. Since no opposition was made by
the CIR to the Motion, the same was
granted by the CTA.

5. Miguel J. Osorio Pension Petitioner is a non-stock and nonprofit Whether or not petitioner is entitled to The court ruled that, the tax-exempt
Foundation, Inc. vs. CA and corporation – it was organized for the claim a refund for the income tax paid character of petitioner’s Employees
CIR(GR 162175 June 28, 2010) purpose of holding title to and on the sale of its co-owned MBP lot in Trust Fund is not an issue in this case
administering the employees trust or its capacity as trustee of the because the tax-exempt character of the
( Abella, Khat) retirement funds (Employees Trust Employees Trust Fund. Employees Trust Fund has long been
Fund) established for the benefit of the settled. It is also settled that petitioner
employees of Victoria’s Milling exist for the purpose of holding title to
Company Inc. (VMC). Petitioner as and administering the tax exempt
trustee claims that the income earned Employees Trust Fund which was
by the employees Trust Fund is tax established for the benefit of VMC’s
exempt under Sec. 53(b) (now Sec. 60 employees. As such, petitioner has the
(b) of the NIRC. personality to claim tax refunds due to
the Employees Trust Fund.
Petitioner as trustee of the employees
fund invested part of said fund to As to the proof of co-ownership of the
purchase a lot in Madrigal Business MBP lot, the law expressly allows a co-
Park (MBP) located in Muntinlupa. owner (1st co-owner) of a parcel of land
Since petitioner needed funds to pay to register his proportionate share in the
the retirement and pension benefits of name of his co-owner (2nd co-owner) in
VMC employees and to reimburse whose name the entire land is
advances made by VMC, petitioner’s registered. The 2nd co-owner serves as
board of trustees authorized the sale of a legal trustee of the 1st co-owner
its share in the MBP lot. insofar as the proportionate share of the
VMC eventually sold the MBP lot to 1st co-owner is concerned. The 1st co-
Metrobank and as withholding agent; owner remains the owner of his
4
2010 TAX CASES
Metrobank paid the amount of PHP 6, proportionate share and not the 2nd co-
125, 625.00 as withholding tax on the owner in whose name the entire land is
sale of the real property. registered, as provided in Art. 1452 of
the NCC.
Petitioner claims that it is a co-owner of
the MBP lot as trustee of the The income from the trust fund
Employees Trust Fund. Further, it investments is therefore exempt from the
contends that the Employees Trust payment of income tax and
Fund is exempt from income tax. Since consequently from the payment of the
petitioner as trustee purchased creditable withholding tax on the sale of
49.59% of the MBP lot using funds of their real property. Thus, the Employees
the Trust Fund, it asserts that their Trust Fund owns 49.59% of the MBP lot.
49.59% share in the income tax
paid amounting to PHP 3, 037, 697.40 Since petitioner has proven that the
rounded off to PHP 3, 037, 500 should income from the sale of the MBP lot
be refunded. It maintained that the tax came from an investment by the
exemption of the Trust Fund rendered Employees Trust Fund, petitioner as
the payment of income tax as illegal or trustee is entitled to claim the tax refund
erroneous – which resulted in filing a of PHP 3, 037, 500.00 – which was
claim for tax refund. erroneously paid in the sale of the MBP
lot.
As action, the BIR stated that under
Sec 26 of the Tax Code, petitioner is
not exempt from tax on its income from
the sale of real property. The BIR
asked petitioner to submit documents
to prove its co-ownership of the MBP
lot and its exemption from tax.

Petitioner in reply said that the


applicable provision granting its claim
for tax exemption is not Sec. 26 but
Sec. 53 (b) of the Tax Code and that its
co-ownership of the MBP lot is
evidenced by Board Resolution #s 92-
5
2010 TAX CASES
34 and 96-46 and the MOA among
petitioner, VMC and its subsidiaries.

Since the BIR failed to act on


petitioner’s claim, it was elevated to
CIR - again no action was taken hence,
a petition for tax refund before the CTA
was filed.

The CTA ruled that Sec. 53 (b) of the


Tax Code talks about exemption from
income tax on the income or earnings
of the Employees trust Fund. Also, that
the petitioner is not the pension trust
itself but is a separate and distinct
entity whose function is to administer
the pension plan for some VMC
employees.

As to the co-ownership of the lot, the


CTA ruled that the evidences are self-
serving and cannot themselves prove
the co-ownership of the petitioner of
the MBP lot. Further, petitioner failed to
present any evidence to prove that the
money used to purchase the MBP lot
came from the Employees Trust Fund.
Thus, petitioner is estopped from
claiming a tax exemption.

When the claim was filed before the


CA, the CA agreed that the pieces of
documentary evidence submitted are
largely self-serving and can be
contrived easily and that the
6
2010 TAX CASES
documents failed to show that the
funds used to purchase the MBP lot
came from the Employees Trust Fund.
Hence this petition.
6. Lepanto Consolidated Mining Whether or not a mining corporation is The Court ruled in affirmative. Sand and
Company Vs Hon. Mauricio B. liable for taxes imposed by a province gravel taxes may be imposed even on
Ambanloc, in his capacity as the for the extraction of sand and gravel non-commercial extractions. Since
Provincial Treasurer of Benguet from areas covered by its mining lease Section 138 of the Local Government
(G.R. No. 180639 with the national government and used Code (Republic Act 7160) authorized
June 29, 2010) exclusively in its mining operations. provinces to impose a tax on the
extraction of sand and gravel from public
(Maramag, Jocelyn) lands, without distinguishing between
personal and commercial uses, then the
tax should be deemed to cover
extractions for both purposes.

The provincial revenue code provides


that the subject tax had to be paid prior
to the issuance of the permit to extract
sand and gravel. Its Article D, Section 2,
enumerates four kinds of permits:
commercial, industrial, special, and
gratuitous. Special permits covered only
personal use of the extracted materials
and did not allow the permitees to sell
materials coming from his concession.
Among applicants for permits, however,
only gratuitous permits were exempt
from the sand and gravel tax. It follows
that persons who applied for special
permits needed to pay the tax, even
though they did not extract materials for
commercial purposes. Thus, the tax
needed to be paid regardless of the
applicability of the administrative and
7
2010 TAX CASES
reportorial requirements of that revenue
code.

Lepanto’s extraction and use of mineral


deposits bears the consent of the
national government, in line with the
principle that exploration of natural
resources can only be done under the
control and supervision of the State. The
contract makes no mention of any
exemption from securing government
permits.

An exemption from the requirements of


the provincial government should have a
clear basis, whether in law, ordinance, or
even from the contract itself.
Unfortunately for Lepanto, it failed to
show its entitlement to such exemption.
7. Commissioner Of Internal Eastern filed with the CIR a written Whether or not the rule in Section Yes. The question of the applicability of
Revenue, Petitioner, Vs. Eastern application for refund or credit of 104(A) of the Tax Code on the Section 104(A) of the Tax Code was
Telecommunications Philippines, unapplied input taxes it paid on the apportionment of tax credits can already raised but the tax court did not
Inc., Respondent.(G.R. No. 163835 imported equipment purchased during be applied in appreciating Eastern’s rule on it. This failure should not be taken
July 7, 2010) 1995 and 1996 amounting claim for tax refund, considering that against the CIR.
toP22,013,134.00. To toll the the matter was raised by the CIR only
(Ferrer, Elena Marie) running of the two-year prescriptive when he sought reconsideration of the The mere declaration of exempt sales in
period under the same provision, CTA ruling the VAT returns, whether based on
Eastern filed an appeal with the CTA. Section 103 of the Tax Code or some
The CTA found that Eastern has a valid other special law, should have prompted
claim for the refund/credit of the for the application of Section 104 (A) of
unapplied input taxes, declaring it the Tax Code to Eastern’s claim. The
entitled to a tax refund of general rule is that appeals can only
P16,229,100.00.The CIR filed a motion raise questions of law or fact that (a)
for reconsideration of the CTA’s were raised in the court below, and
decision. Subsequently, it filed a (b)are within the issues framed by the
8
2010 TAX CASES
supplemental motion for parties therein (People v. Echegaray,
reconsideration. The CTA denied the G.R. No. 117472). An issue which was
CIR’s motion for reconsideration. neither averred in the pleadings nor
raised during trial in the court below
The CIR then elevated the case to the cannot be raised for the first time on
CA, who affirmed the CTA ruling appeal.
and likewise denied the subsequent
motion for reconsideration. Hence, the The rule against raising new issues on
present petition. The CIR posits that, appeal is not without exceptions; it is a
applying Section 104(A) of the Tax procedural rule that the Court may relax
Code on apportionment of tax credits, when compelling reasons so warrant
Eastern is entitled to a tax refund of or when justice requires it. What
only a portion of the amount claimed. constitutes good and sufficient cause
Since the VAT returns clearly reflected that would merit suspension of the rules
income from exempt sales, the CIR is discretionary upon the courts (CIR v.
asserts that this constitutes as an Mirant Pagbilao Corporation, G.R.
admission on Eastern’s part that it No.159593). Another exception is when
engaged in transactions not subject to the question involves matters of public
VAT. importance. “Taxes are the lifeblood
of the government.” For this reason,
Hence, the proportionate allocation of the right of taxation cannot easily be
the tax credit to VAT and non-VAT surrendered; statutes granting tax
transactions provided in Section exemptions are considered as a
104(A)of the Tax Code should apply. derogation of the sovereign authority
Eastern objects to the arguments and are strictly construed against the
raised in the petition, alleging that person or entity claiming the
these have not been raised in the exemption. Claims for tax refunds, when
Answer filed by the CIR before the CTA based on statutes granting tax
and was only raised. In fact, theCIR exemption or tax refund, partake of the
only raised the applicability of Section nature of an exemption; thus, the rule of
104(A) of the Tax Code in his strict interpretation against the
supplemental motion for taxpayer-claimant similarly applies
reconsideration of the CTA’s ruling. (CIR v. Fortune Tobacco Corporation,
Eastern claims that for the CIR to raise G.R. Nos. 167274-75)
such an issue now would constitute a
9
2010 TAX CASES
violation of its right to due process; The taxpayer is charged with the heavy
following settled rules of procedure and burden of proving that he has complied
fair play, the CIR should not be allowed with and satisfied all the statutory and
at the appeal level to change his theory administrative requirements to be
of the case. Eastern further argues that entitled to the tax refund. This burden
there is no evidence on record that cannot be offset by the non-
would evidently show that respondent observance of procedural technicalities
is also engaged in other transactions by the government’s tax agents when
that are not subject to VAT. the non-observance of the remedial
measure addressing it does not in
any manner prejudice the taxpayer’s
due process rights. Lapses in the literal
observance of a rule of procedure
maybe overlooked when they have not
prejudiced the adverse party and
especially when they are more
consistent with upholding settled
principles in taxation.
8. CIR vs Smart Communications Respondent Smart Communication Whether or not the respondent has the Yes. Under Sec. 204 (c) and 229 of
Inc.(G.R. Nos. 179045-46; August Inc, is a corporation organized and right to file the claim for refund. NIRC. The person entitled to claim a tax
25, 2010) existing under Philippine Law. It is an is the taxpayer. However, in case the
enterprise duly registered with the taxpayer does not file a claim for refund,
(Taguinod, Jelyne) Board of Investments. On May 25, the withholding agent may file the claim.
2001, respondent entered into three In CIR vs Procter and Gamble
agreements for Programming and Philippines Manufacturing Corp., a
Consultancy Services with Prism withholding agent was considered a
Transactive, a non-resident proper party to file a claim for refund of
corporation duly organized and withheld taxes of its foreign parent
existing under the laws of Malaysia. company.
Under the agreements, Prism was to
provide programming and consultancy The petitioner submits that the ruling
services for installation and applies only when the withholding agent
implementation of Smart Money and and the taxpayer are related parties, the
Mobile Banking Service Sim court do not agree. Although such
Applications and private Text Platform. relationship between taxpayer and
10
2010 TAX CASES
withholding agent is a factor, there is
On June 25, 2001, Prism billed the nothing in the decision to suggest that
respondent in the amount of US $ such relationship is required or that lack
547,822.45. thinking that these of such relationship deprives the
payments constitute royalties, withholding agent of the right to file a
respondent withheld the amount of claim for refund.
US$136,955.61 representing the 25%
royalty tax under the RP-Malaysia Tax Rather, what is clear in the decision is
Treaty. On September 25, 2001, that a withholding agent has the legal
respondent filed its monthly remittance right to file a claim for refund: 2 reasons-
return of final income taxes withheld for (1) he is a taxpayer, as he is personally
the month of August 2001. liable for the withholding tax as well as
for deficiency assessments, surcharges
On September 24, 2003 or within the 2- and penalties should the amount of the
year period to claim a refund, withheld taxes be finally found to be less
respondent filed with the BIR, through than the amount that should have been
the International Tax Affairs Division an withheld under law;
Administrative claim for refund of the
amount P7,008,840.43. Due the failure (2) as an agent of the taxpayer, his
of the CIR to act on the claim for authority to file the necessary income tax
refund, respondent filed a petition for return and to remit the tax withheld to the
review with the CTA. Respondent government impliedly includes the
claimed that it is entitled to a refund authority to file a claim for refund and to
because the payments made to Prism bring an action for recovery of such
are not royalties but business profits, claim.
pursuant to the definition of royalties
under the RP-MalaysiaTax Treaty. It is however significant to add that while
Respondent further avered that since the withholding agent has the right to
under Art. 7 of the RP-Malayasia Tax recover the taxes erroneously or illegally
Treaty, business profits are taxable in collected, he nevertheless has the
Philippines only if attributable to a obligation to remit the same to the
permanent establishment in the principal taxpayer. As an agent of the
Philippines the payments made to taxpayer, it is his duty to return what he
Prism, a Malaysian company with no has recovered, otherwise, he would be
unjustly enriching himself at the expense
11
2010 TAX CASES
permanent establishment in the of the principal taxpayer from whom the
Philippines should not be taxed. taxes were withheld and from whom he
derives his legal right to file a claim for
On December 1, 2003, petitioner filed refund.
its answer arguing that respondent, as Whether or not the payments made to It is a Business Profit. Under the RP-
withholding agent, is not a party-in- Prism constitute business profits or Malaysia Tax Treaty, the term royalties is
interest to file the claim for refund, and royalties. defined as payment of any kind received
that assuming for the sake of argument as consideration for :
that it is the proper party, there is no (1) use of, or the right to use any patent,
showing that the payments made to trademark, design or model, plan, secret
Prism constitute profits. formula or process, any copyright of
literary, artistic or scientific work, or the
The CTA upheld the respondent’s right use of or the right to use, industrial,
to file the claim for refund. However, as commercial or scientific equipment or for
to the claim for refund, it found out that information concerning industrial,
respondent is entitled only to a partial commercial or scientific experience;
refund. Although it agreed that the (2) the use of or the right to use
payments for the CM and Sim cinematograph films, or tapes for radio
Application agreement are business or television broadcasting, these are
profits, and therefore not subject to tax taxed at the rate of 25% of the gross
under the RP-Malaysia Tax Treaty, the amount.
second division found the payments for
the SDM agreement a royalty subject The business profits of an enterprise of
to withholding tax. Both parties moved a contracting state is taxable only in that
for partial reconsideration which was state through a permanent
denied. Both parties appealed to CTA establishment. The term permanent
en Banc, the decision of the second establishment is defined as a fixed place
division was affirmed. of business, an enterprise of a
contracting state if it carries on
Petitioner sought for reconsideration, supervisory activities in that other state
denied. Hence this petition. It contends for more than 6 months in connection
that the cases relied upon by the CTA with a construction, installation or
in upholding the respondent’s right to assembly project which is being
claim the refund are inapplicable since undertaken in that other state. In the
the withholding agents therein are instant case, it was established that
12
2010 TAX CASES
wholly owned subsidiaries of the Prism does not have a permanent
principal taxpayer, unlike in the instant establishment in the Philippines, hence,
case, the withholding agent and business profits derived from Prisms
taxpayer are unrelated entities. dealings with respondent are not
taxable. The question whether the
It further claims that since respondent payments made to Prism are business
did not file the claim on behalf of Prism, profits and not royalties. It was clear in
it has no legal standing to claim the the provision in the agreement. Prism
refund assuming that respondent is the has intellectual property right over the
proper party, petitioner contends that it SDM program but not over the CM & Sim
is still not entitled to any refund application programs as the proprietary
because the payments made to prism rights of these program belong to
are taxable as royalties having been respondent. In other words, out of the
made in consideration for the use of payments made to Prism, only the
programs owned by Prism. payment for the SDM program is not a
Respondent on the other hand royalty subject to a 25% withholding tax.
maintains that it is the proper party to A refund of the erroneously withheld
file a claim for refund as it has the royalties taxes for the payments
statutory and primary responsibility pertaining to the CM and Sim application
and liability to withhold and remit the the government has no right to retain
taxes to the BIR. It points out that what does not belong to it.
under the withholding tax system, the
agent-payor becomes a payee by The petition is denied.
fiction of law because the law makes
the agent personally liable for the tax
arising from the breach of its duty to
withhold. Thus, the fact that
respondent is not in any way related to
Prism is immaterial. Moreover,
respondent asserts that the payments
made to Prism do not fall under the
definition of royalties since the
agreements are for programming and
consultancy services only.

13
2010 TAX CASES
9. United Airlines,Inc., Petitioner, Petitioner used to be an online carrier Whether or not the petitioner is entitled No. The petition has no merit.
Vs.Commissioner Of internal but ceased operating cargo flights from to a refund of the amount of
Revenue, Respondent.(G.R. No. the Philippines starting 2001. It is now ₱5,028,813.23 it paid as income tax on Under Section 72 of the NIRC, the CTA
178788. September 29, 2010) an offline international air carrier but its passenger revenues in 1999. can make a valid finding that petitioner
has a general sales agent in the made erroneous deductions on its gross
(Ferrer, Elena Marie) Philippines which sells passage cargo revenue; that because of the
documents for its off-line flights for erroneous deductions, petitioner
carriage of passengers and cargo. It reported a lower cargo revenue and paid
filed a claim for refund on the Gross a lower income tax thereon; and that
Philippine Billings (GPB) tax it paid. petitioner's underpayment of the income
The CTA ruled that Petitioner was not tax on cargo revenue is even higher than
liable for the GBP but was liable to pay the income tax it paid on passenger
32% tax on its net income derived from revenue subject of the claim for refund,
the sales of passage documents in the such that the refund cannot be granted.
Philippines. The grant of a refund is founded on the
Petitioner elevated the case to the CTA assumption that the tax return is valid,
En Banc which affirmed the decision of that is, the facts stated therein are true
the First Division. and correct. The deficiency assessment,
although not yet final, created a doubt as
to and constitutes a challenge against
the truth and accuracy of the facts stated
in said return which, by itself and without
unquestionable evidence, cannot be the
basis for the grant of the refund.

Moreover, to grant the refund without


determination of the proper assessment
and the tax due would inevitably result in
multiplicity of proceedings or suits. If the
deficiency assessment should
subsequently be upheld, the
Government will be forced to institute
anew a proceeding for the recovery of
erroneously refunded taxes which
recourse must be filed within the
14
2010 TAX CASES
prescriptive period of ten years after
discovery of the falsity, fraud or omission
in the false or fraudulent return involved.

This would necessarily require and entail


additional efforts and expenses on the
part of the Government, impose a
burden on and a drain of government
funds, and impede or delay the collection
of much-needed revenue for
governmental operations.
Here, the subject of claim for tax refund
is the tax paid on passenger revenue for
taxable year 1999 at the time when
petitioner was still operating cargo flights
originating from the Philippines although
it had ceased passenger flight
operations. The CTA found that
petitioner had underpaid its GPB tax for
1999 because petitioner had made
deductions from its gross cargo
revenues in the income tax return it filed
for the taxable year 1999, the amount of
underpayment even greater than the
refund sought for erroneously paid GPB
tax on passenger revenues for the same
taxable period. Hence, the CTA ruled
petitioner is not entitled to a tax refund.

We must emphasize that tax refunds,


like tax exemptions, are construed
strictly against the taxpayer and liberally
in favor of the taxing authority. In any
event, petitioner has not discharged its
burden of proof in establishing the
15
2010 TAX CASES
factual basis for its claim for a refund and
we find no reason to disturb the ruling of
the CTA. It has been a long-standing
policy and practice of the Court to
respect the conclusions of quasi-judicial
agencies such as the CTA, a highly
specialized body specifically created for
the purpose of reviewing tax cases.
10. Commissioner of Internal Revenue On September 30, 2004, Aichi Forging Whether or not the Petitioner’s NO. The right to claim the refund must
vs Aichi Forging Company of Asia, filed a claim for refund/credit of input administrative claim filed out of time be reckoned from the “close of the
Inc., (GR No. 184823, October 6, VAT attributable to its zero-rated sales taxable quarter when the sales were
2010) for the period July 1, 2002 to made” – in this case September 30,
September 30, 2002 with the CIR 2004. The Court added that the rules
(Azurin, Jastise) through the DOF One-Stop Shop. On under Sections 204 (C) and 229 as
the same day, Aichi Forging filed a cross-referred to Section 114 do not
Petition for Review with the CTA for the apply as they only cover erroneous
same action. The BIR disputed the payments or illegal collections of taxes
claim and alleged that the same was which is not the case for refund of
filed beyond the two-year period given unutilized input VAT. Thus, the claim
that 2004 was a leap year and thus the was filed on time even if 2004 was a leap
claim should have been filed on year since the sanctioned method of
September 29, 2004. The CIR also counting is the number of months.
raised issues related to the reckoning Whether or not the filing of the judicial YES. Section 112 mandates that the
of the 2-year period and the claim was premature taxpayer filing the refund must either
simultaneous filing of the wait for the decision of the CIR or the
administrative and judicial claims. lapse of the 120-day period provided
therein before filing its judicial claim.
Failure to observe this rule is fatal to a
claim. Thus, Section 112 (A) was
interpreted to refer only to claims filed
with the CIR and not appeals to the CTA
given that the word used is “application”.

Finally, the Court said that applying the


2-year period even to judicial claims
16
2010 TAX CASES
would render nugatory Section 112 (D)
which already provides for a specific
period to appeal to the CTA --- i.e., (a)
within 30 days after a decision within the
120-day period and (b) upon expiry of
the 120-day without a decision.
11. H. Tambunting Pawnshop, Inc vs. Petitioner, H.Tambunting Pawnshop, Whether or not a pawnshop operator is The court ruled petitioner’s main
CIR (GR No. 172394 October 13, Inc. (petitioner), a domestic corporation liable for VAT and the compromise argument that pawnshops are not within
2010) duly licensed to engage in the penalty. the concept of all services and similar
pawnshop business received an services as provided in Section 108(A) of
(Abella, Khat) assessment notice from BIR the NIRC and that the enumeration
demanding payment of deficiency VAT under Section 108(A) of the NIRC of
and compromise penalty for taxable services subject to VAT is exclusive has
year 2000 in the amounts of PHP 5, merit.Moreover, it is settled that for
212, 404.52 and PHP 25, 000.00, purposes of determining their tax liability,
respectively. Petitioner disclaiming its pawnshops are treated as non-bank
liability protested the assessment with financial intermediaries.
the respondent CIR, arguing that a
pawnshop business was not subject to Accordingly, the consecutive deferments
VAT and compromise penalty. of the effectivity date of the application of
VAT on non-bank financial
Due to the inaction of CIR to the intermediaries like pawnshops resulted
protest, petitioner elevated the case in their non-liability for VAT during the
with the CTA – the petition was partially affected taxable years. Thus, the VAT
granted by the deletion of the deficiency assessment and the
compromise penalty but petitioner was surcharge served on the petitioner by
ordered to pay the taxes due plus BIR lacked legal basis and must be
surcharge and delinquency interest. canceled and petitioner is entitled to
refund of any amount paid pursuant to
Aggrieved by the decision of the CTA, the settlement agreement corresponding
petitioner filed a motion for partial to taxable year 2000 only.
reconsideration with the CTA Second
Division, submitted a written
manifestation attaching a copy of BIR
tax payment deposit slip and the
17
2010 TAX CASES
corresponding schedule evidencing its
payment for the years from 2000 to
2002 pursuant to a settlement
agreement with BIR allowing petitioner
to pay 25% of its VAT due – but the
same was denied.

An appeal to the CTA en Banc was filed


thereafter but still, the same was
denied. Hence, this petition.
12. Commissioner Of Internal Revenue Whether LMCEC and its corporate The court grant the petition. There is no
Vs. Hon. Raul M. Gonzalez, officers may be prosecuted for violation dispute that prior to the filing of the
Secretary Of Justice, L. M. Camus of Sections 254 (Attempt to Evade or complaint with the DOJ, the report on the
Engineering Corporation Defeat Tax) and 255 (Willful Failure to tax fraud investigation conducted on
(Represented By Luis M. Camus Supply Correct and Accurate LMCEC disclosed that it made
And Lino D. Mendoza) (G.R. No. Information and Pay Tax) substantial under declarations in its
177279 October 13, 2010) income tax returns for 1997, 1998 and
1999. Pursuant to RR No. 12-99, a PAN
was sent to and received by LMCEC on
(Balubal, Eden) February 22, 2001 wherein it was
notified of the proposed assessment of
deficiency taxes amounting to
P430,958,005.90 (income tax -
P318,606,380.19 and VAT -
P112,351,625.71) covering taxable
years 1997, 1998 and 1999. In response
to said PAN, LMCEC sent a letter-protest
to the TFD, which denied the same on
April 12, 2001 for lack of legal and
factual basis and also for having been
filed beyond the 15-day reglementary
period.

As mentioned in the PAN, the revenue


officers were not given the opportunity to
18
2010 TAX CASES
examine LMCECs books of accounts
and other accounting records because
its officers failed to comply with the
subpoena duces tecum earlier issued, to
verify its alleged under declarations of
income reported by the Bureaus
informant under Section 282 of the
NIRC.

Respondent Secretary concurred with


the Chief State Prosecutors conclusion
that there is insufficient evidence to
establish probable cause to charge
private respondents under the above
provisions, based on the following
findings: (
1) the tax deficiencies of LMCEC for
taxable years 1997, 1998 and 1999 have
all been settled or terminated, as in fact
LMCEC was issued a Certificate of
Immunity and Letter of Termination, and
availed of the ERAP and VAP programs;
(2) there was no prior determination of
the existence of fraud;
(3) the assessment notices are
unnumbered, hence irregular and
suspect;
(4) the books of accounts and other
accounting records may be subject to
audit examination only once in a given
taxable year and there is no proof that
the case falls under the exceptions
provided in Section 235 of the NIRC; and
(5) petitioner committed forum shopping
when it filed the instant case even as the
19
2010 TAX CASES
earlier criminal complaint (I.S. No. 00-
956) dismissed.
13. Commission of Internal Whether the existing Revised Zonal The Revised Zonal Values of Real
RevenueVs.Aquafresh Seafoods, Values of Real Properties in the City of Properties in the City of Roxas must be
Inc.,(G.R. No. 170389 October 20, Roxas or The fair market value as followed for purposes of computing the
2010) determined by BIR will be used as CGT and DST. It is undisputed that at the
basis for the capital gains tax and time of the sale of the subject properties
(Guim, Amiel) Documentary tax found in Barrio Banica, Roxas City, the
same were classified as “RR,” or
residential, based on the 1995 Revised
Zonal Value of Real Properties. CIR,
thus, cannot unilaterally change the
zonal valuation of such properties to
“commercial” without first conducting a
re-evaluation of the zonal values as
mandated under Section 6(E) of the
NIRC.

Zonal value is determined for the


purpose of establishing a more realistic
basis for real property valuation. Since
internal revenue taxes, such as CGT and
DST, are assessed on the basis of
valuation, the zonal valuation existing at
the time of the sale should be taken into
account.
14. Commissioner Of Internal Revenue In a letter dated February 15, 1993, Whether or not the Court of Tax The jurisdiction of the CTA is governed
Vs. Hambrecht & Quist Philippines, respondent informed the BIR of its Appeals has jurisdiction to rule that the by section 7 of Republic Act No. 1125, as
Inc.- (GR NO. 169225, November change of business address. governments right to collect the tax has amended, and the term other matters
17, 2010) prescribed. referred to by the CIR in its argument
On November 4, 1993, respondent can be found in number (1) of the
(Taguinod, Jelyn) received a tracer-letter or follow up aforementioned provision, to wit:
letter dated October 11, 1993
demanding for payment of alleged Section 7. Jurisdiction. - The Court of Tax
deficiency income and expanded Appeals shall exercise exclusive
20
2010 TAX CASES
withholding taxes for taxable year appellate jurisdiction to review by
1989. On December 3, 1993, appeal, as herein provided:
respondent filed its protest letter 1. Decisions of the Commissioner of
against the alleged deficiency tax Internal Revenue in cases involving
assessments for 1989. disputed assessments, refunds of
internal revenue taxes, fees or other
On November 7, 2001, nearly eight (8) charges, penalties imposed in relation
years later, respondents external thereto, or other matters arising under
auditors received a letter from herein the National Internal Revenue Code or
petitioner Commissioner of Internal other law as part of law administered by
Revenue dated October 20, 2001' the the Bureau of Internal Revenue.
letter advised the respondent that
petitioner had rendered a final decision The appellate jurisdiction of the CTA is
denying its protest on the ground that not limited to cases which involve
the protest against the disputed tax decisions of the CIR on matters relating
assessment has allegedly filed beyond to assessments or refunds. The CTA law
the 30 day reglementary period clearly bestows jurisdiction to the CTA
prescribed in then section 229 of the even on “other matters arising under the
National Internal Revenue Code National Internal Revenue Code”. Thus,
the issue of whether the right of the CIR
Respondent filed petition for review to collect has prescribed, collection
before the Court of Tax Appeals to being one of the duties of the BIR, is
appeal the final decision of the considered covered by the term “other
Commissioner of Internal Revenue matters”. The fact that assessment has
denying its protest against the become final for failure to protest only
deficiency income and withholding tax means that the validity or correctness of
assessments issued for taxable year the assessment may no longer be
1989. The original division held that the questioned on appeal. However, this
subject assessment notice sent by issue is entirely distinct from the issue of
registered mail on January 8, 1993 to whether the right to collect has in fact
respondents former place of business prescribed.
was valid and binding since
respondent only gave formal notice of In connection therewith, the NIRC also
its change of address on February 18, states that the collection of taxes is one
1993 thus, the assessment had of the duties of the BIR. Thus, from the
21
2010 TAX CASES
become final and unappealable for foregoing, the issue of prescription of the
failure of respondent to file a protest BIR’s right to collect taxes may be
within the 30 day period provided by considered as covered by the term
law However, the CTA held that the CIR “other matters” over which the CTA has
failed to collect the assessed taxes appellate jurisdiction.
within the prescriptive period' Whether or not the period to collect the Yes, it already prescribed.
assessment has prescribed.
The assessment against Hambrecht & Section 224 of the 1986 NIRC provides
Quist had become final and that: Suspension of running of statute.
unappelable since there was a failure The running of the statute of limitations
to protest the same within the 30-day provided in Sections 203 and 223 on the
period provided by law. However, the making of assessment and the
CTA held that the BIR failed to collect beginning of distraint or levy or a
within the prescribed time and thus proceeding in court for collection, in
ordered the cancellation of the respect of any deficiency, shall be
assessment notice. The CIR disputed suspended for the period during which
the jurisdiction of the CTA arguing that the Commissioner is prohibited from
since the assessment had become making the assessment or beginning
final and unappealable, the taxpayer distraint or levy or a proceeding in court
can no longer dispute the correctness and for sixty days thereafter; when the
of the assessment even before the taxpayer requests for a re-investigation
CTA. which is granted by the Commissioner;
when the taxpayer cannot be located in
the address given by him in the return
filed upon which a tax is being assessed
or collected:

Provided, That, if the taxpayer informs


the Commissioner of any change in
address, the statute will not be
suspended; when the warrant of distraint
and levy is duly served upon the
taxpayer, his authorized representative,
or a member of his household with
sufficient discretion, and no property
22
2010 TAX CASES
could be located; and when the taxpayer
is out of the Philippines. (Emphasis
supplied.)

The plain and unambiguous wording of


the said provision dictates that two
requisites must concur before the period
to enforce collection may be suspended:
(a) that the taxpayer requests for
reinvestigation, and (b) that petitioner
grants such request

Consequently, the mere filing of a protest


letter which is not granted does not
operate to suspend the running of the
period to collect taxes. In the case at bar,
the records show that respondent filed a
request for reinvestigation on December
3, 1993, however, there is no indication
that petitioner acted upon respondents
protest.

As the CTA Original Division in C.T.A.


Case No. 6362 succinctly pointed out in
its Decision, to wit:

It is evident that the respondent did not


conduct a reinvestigation, the protest
having been dismissed on the ground
that the assessment has become final
and executory. There is nothing in the
record that would show what action was
taken in connection with the protest of
the petitioner. In fact, petitioner did not
hear anything from the respondent nor
23
2010 TAX CASES
received any communication from the
respondent relative to its protest, not
until eight years later when the final
decision of the Commissioner was
issued (TSN, March 7, 2002, p. 24). In
other words, the request for
reinvestigation was not granted. x x
x.[10] (Emphasis supplied.)

Since the CIR failed to disprove the


aforementioned findings of fact of the
CTA which are borne by substantial
evidence on record, this Court is
constrained to uphold them as binding
and true. The Court ruled that the right to
collect has indeed prescribed since there
was no proof that the request for
reinvestigation was in fact granted/acted
upon by the CIR. Thus, the period to
collect was never suspended.
15. Philippines Fisheries Development Lucena Fishing Port Complex is one of Whether or not PFDA is liable for the No.In a case of PFDA vs. CA, a 2007
Authority(PFDA)VS.Central Board the fishery infrastructure projects real property tax assessed on the case, the court resolved that PFDA is an
of Assessment Appeals, Local undertaken by the National Lucena Fishing Port Complex instrumentality of the government and is
Board of Assessment Appeals of Government under the Nationwide thus exempt from the payment of real
Lucena City, City of Lucena, Fishing Port Package. It is located at property tax.
Lucena City Assessor and Lucena Lucena City, was constructed on a
City Treasurer reclaimed land. The PFDA was created The Authority is not a GOCC but an
(G.R. No. 178030; December 15, by virtue of P.D. 977 as amended by instrumentality of the government. The
2010) TO 772, with functions and powers to Authority has a capital stock but it is not
manage, operate and develop the divided into shares of stocks. Also, it has
Navotas Fishing Port Complex and no Stockholders or voting shares.
(Taguinod, Jelyn) such other fishing port complexes that Hence, it is not a stock corporation.
may be established by the authority. Neither is it a non-stock corporation
Pursuant thereto, Petitioner-Appellant because it has no members. The
PFDA took over the management and Authority is actually a national
24
2010 TAX CASES
operation of LFPC in February government instrumentality which is
1992.On October 26, 1999, in a letter defined as an agency of the national
addressed to PFDA, the City government, not integrated within the
Government of Lucena demanded department framework, vested with
payment of realty taxes on the LFPC special functions or jurisdiction by law,
property for the period from 1993 to endowed with some if not all corporate
1999 which was received by PFDA on powers administering special funds, and
November 24, 1999. bOn October 17, enjoying operational autonomy usually
2000, another demand letter was sent through a charter. When the law vests in
this time covering the period 1993 to a government instrumentality corporate
2000. powers, the instrumentality is organized
as a stock or non-stock corporation, it
On December 18, 2000 Petitioner- remains a government instrumentality
Appellant filed its appeal before the exercising not only governmental but
local Board of Assessment Appeals of also corporate powers.
Lucena City, which was dismissed for
lack of merit. MR was filed which was Confirmed in a subsequent PFDA case-
denied. PFDA appealed to the Central Navotas Fishing Port Complex
Board of Assessment Appeals, the
same was dismissed for lack of merit. Similarly the court holds that PFDA is a
The CBAA ruled that: ownership of government instrumentality, the PFDA is
LFPC has been handed over to the exempt from real property tax imposed
pFDA, as provided for under Sec. 11 of on the LFPC, except those portions
PD 977 as amended and declared which are leased to private persons or
under the MC 199 case (Mactan Cebu entities.
International Airport Authority V.
Marcos) PD 977 provided for the The exercise of the taxing power of LGU
exemption from income tax under par. is subject to the limitations enumerated
2 Sec 10 thereof “the Authority shall be in Section 133 of the LGC: LGU has no
exempted from the payment of income power to tax instrumentalities of the
tax. Nothing was said however about National Government like the PFDA.
its exemption from payment of real Thus, PFDA is not liable to pay real
property tax: PFDA has no basis in property tax assessed by the office of the
claiming real property exemption on its City Treasurer of Lucena City on the
Fishing Port Complexes. Reading Sec.
25
2010 TAX CASES
40 of PD 464 and Sec. 234 of RA 7160 LFPC, except those portions which are
however, provided such ground: LFPC leased to private persons or entities.
is owned by the RP, PFDA is only
tasked to manage, operate and Besides LFPC is a property of public
develop the same. Hence, LFPC is dominion intended for public use and is
exempted from payment of realty tax. therefore exempt from real property tax
The ownership of LFPC as passed by under Section 234 (a) of the LGC.
the RP to PFDA is bourne by Direct
evidence PD 977 as amended.
Therefore Petitioner-Appellant’s claim
is untenable

PFDA moved for reconsideration,


denied. Appealed to CTA, denied. CTA
Ruling: PFDA is a GOCC and is
therefore subject to the real property
tax imposed by the local government.
Pursuant to Sec. 232 in relation to Sec.
193 and 234 of the CGC. Furthermore,
the CTA ruled that PFDA failed to prove
that sit is exempt from real property tax
pursuant to Sec. 234 of LGC. Hence
this petition for review.

16. Asiaworld Properties Phil. Corp. Petitioner is a domestic Corp. engaged Whether the exercise of the option to Section 76 of the NIRC of 1997 it states
vs. CIR, G.R. No. 171766; July 29 in the business of real estate carry-over the excess income tax that once the option to carry over and
development. For CY ending Dec. 31, credit, which shall be applied against apply the excess quarterly income tax
2001 it filed its annual Income Tax the tax due in the succeeding taxable against income tax due for the taxable
(Tayawa, Ma. Esperanza) Return on April 5, 2002 and declared a year, prohibits a claim for refund in the quarters of the succeeding taxable years
corporate income taxod 1.2M but with subsequent taxable years for the has been made, such option shall be
refundable amount of 6.4M . In its 2001 unused portion of the excess tax considered irrevocable for that taxable
ITR it states that the amount of 7.4M credits carried over. period and no application for cash refund
representing prior years excess credits
26
2010 TAX CASES
was net of year 1999 excess creditable or issuance of a tax credit certificate shall
withholding tax to be refunded in the be allowed.
amount of 18M. Petitioner also
indicated in its ITR its option to carry
over as tax credit next year the
overpayment. Hence they filed with
RDO request to refund the amount of
18.4M allegedly representing partial
excess creditable tax withheld for the
year 2001, therefore they are entitled to
refund and maintained their claim that
the option to carry over and apply the
excess quarterly income taxable in the
succeeding years is irrevocable only
for the next taxable period when the
excess payment was carried over.
Before the RDO could act on
petitioners claim, they filed a Petition
for Review with CTA to toll the running
of the prescriptive period. The CTA
denied the petition for lack of merit.
Filed a Motion for Reconsideration but
it was denied. Appealed to CA but CA
affirmed the decision
17. Chevron Phils. Inc. vs Bases Yes, it is within the limits of the police
Conversion Development Whether or not the act of CDC in power if the State when it imposed
G.R. No. 173863 Sept. 15,2010 imposing royalty fees be considered as royalty fees. In distinguishing tax and
valid exercise of the police power regulation as a form of police power, the
(Ma. Esperanza Tayawa) determining factor is the purpose of the
implemented measure. It the purpose is
primarily to raise revenue then it will be
deemed a tax even though the measure
results in some form of regulation. On
the other hand, police power of the State
even though incidentally, revenue is
27
2010 TAX CASES
generated. In this case it held that the
subject royalty fees form part of the
regulatory framework to ensure free flow
or movement of petroleum fuel to and
from the CSEZ. The fact that the
respondents have the exclusive right to
distribute and market petroleum
products within CSEZ pursuant to its
joint venture agreement with SBMA and
CSBTI does not diminish the regulatory
purpose of the royalty fee for the fuel
products supplied by petitioner to its
client at the CSEZ. Respondent submit
that the increased administrative costs
were triggered by the security risks that
have recently emerged, such as terrorist
strikes. The need for regulation is more
evident in the light of the 9/11 tragedy
considering that what is being moved
from one location to another are highly
combustible fuel products that cause
loss of lives and damage to properties.

28