PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE COMPANY vs.

THE SECRETARY OF
FINANCE and THE COMMISSIONER OF INTERNAL REVENUE
G.R. No. 210987 (November 24, 2014)

I. FACTS:

Philamlife used to own Class A shares in PhilamCare, representing 49.89% of the

latter’s outstanding capital stock. In 2009, Philamlife offered and sold its shareholdings
through competitive bidding to STI Investments. After the sale, Philamlife filed an
application for tax clearance with BIR to facilitate transfer of shares. Months later, Philamlife
was informed that it needed to secure a BIR ruling in its application due to potential donor’s
tax liability.

Philamlife averred that the transaction cannot attract donor’s tax liability since there
was no donative intent; that shares were sold at actual fair market value and at arm’s length;
and that donor’s tax does not apply to sale of shares in open bidding process.

CIR denied Philamlife’s request, and ruled that the difference between the book
value and selling price is subject to 30% donor’s tax. SOF affirmed CIR’s ruling.

II. ISSUE: W/N the price difference is subject to donor’s tax.

III. RULING:

Yes. The absence of donative intent, if that be the case, does not exempt the sales of
stock transaction from donor’s tax since Sec. 100 of the NIRC categorically states that the
amount by which the fair market value of the property exceeded the value of the
consideration shall be deemed a gift. Thus, even if there is no actual donation, the difference
in price is considered a donation by fiction of law.

Moreover, Sec. 7(c.2.2) of RR 06-08 does not alter Sec. 100 of the NIRC but merely
sets the parameters for determining the “fair market value” of a sale of stocks. Such
issuance was made pursuant to the Commissioner’s power to interpret tax laws and to
promulgate rules and regulations for their implementation.

Lastly, petitioner is mistaken in stating that RMC 25-11, having been issued after the
sale, was being applied retroactively in contravention to Sec. 246 of the NIRC.26 Instead, it
merely called for the strict application of Sec. 100, which was already in force the moment
the NIRC was enacted.
FORT BONIFACIO DEVELOPMENT CORPORATION VS. COMMISSIONER OF INTERNAL
REVENUE and REVENUE DISTRICT OFFICER, REVENUE DISTRICT NO. 44, TAGUIG and
PATEROS, BUREAU OF INTERNAL REVENUE
G.R. No. 175707 (November 19, 2014)

I. FACTS:

Petitioner, FBDC, was a real estate developer that bought from the national
government a parcel of land that used to be the Fort Bonifacio military reservation. At the
time of the said sale there was as yet no VAT imposed so Petitioner did not pay any VAT on
its purchase. Subsequently, Petitioner sold two parcels of land to Metro Pacific Corp. In
reporting the said sale for VAT purposes (because the VAT had already been imposed in the
interim), Petitioner claimed transitional input VAT corresponding to its inventory of land. The
BIR disallowed the claim of presumptive input VAT and thereby assessed Petitioner for
deficiency VAT.

II. ISSUE: W/N FBDC is entitled to claim the transitional input VAT on its sale of real
properties given its nature as a real estate dealer.

III. RULING:

Yes, FBDC is entitled to claim transitional input VAT based on the value of not only the
improvements but on the value of the entire real property and regardless of whether there
was in fact actual payment on the purchase of the real property or not.

The amendments to the VAT law do not show any intention to make those in the real
estate business subject to a different treatment from those engaged in the sale of other
goods or properties or in any other commercial trade or business. On the scope of the basis
for determining the available transitional input VAT, the CIR has no power to limit the
meaning and coverage of the term "goods" in Section 105 of the Tax Code without statutory
authority or basis, to wit:

SEC. 105. Transitional Input Tax Credits. — A person who becomes liable to
value-added tax or any person who elects to be a VAT registered person shall,
subject to the filing of an inventory as prescribed by regulations, be allowed
input tax on his beginning inventory of goods, materials and supplies
equivalent to 8%of the value of such inventory or the actual value-added tax
paid on such goods, materials and supplies, whichever is higher, which shall
be creditable against the output tax.

The transitional input tax credit operates to benefit newly VAT-registered persons,
whether or not they previously paid taxes in the acquisition of their beginning inventory of
goods, materials and supplies.
AT&T COMMUNICATIONS SERVICES PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL
REVENUE
G.R. No. 185969 (November 19, 2014)

I. FACTS:

AT&T Communications Services Philippines, Inc. (AT&T-CSP), a domestic corporation

principally engaged in the business of rendering information, promotional, supportive and
liaison service, entered into a Service Agreement with AT&T Communications Services
International, Inc. (AT&T-CSI), a non-resident foreign corporation, whereby compensation
for such services is paid in US Dollars. AT&T-CSP has an Assignment Agreement with AT&T
Solutions, Inc. (AT&T-SI) where the latter assigned to AT&T-CSP the performance of services
AT&T-SI was supposed to provide Mastercard International, Inc. (a non-resident foreign
corporation) under a Virtual Private Network Service Agreement. Likewise, the
compensation for such services is paid in US Dollars to be inwardly remitted to the
Philippines by AT&T-SI, which acts as the collecting agent of petitioner.

Thereafter, a second Assignment Agreement was executed and entered into by

petitioner with AT&T-SI for the purpose of performing the latter’s obligation to Lexmark
International, Inc. (non-resident foreign corporation) by providing services to its affiliates in
the Philippines, namely: Lexmark Research and Development Corporation and Lexmark
International (Philippines), Inc. (both PEZA-registered enterprises). Payment of AT&T-CSP’s
aforesaid services is as well paid in US Dollars through telegraphic transfer.

On 5 February 2004, AT&T-CSP filed its first Amended Quarterly VAT Return for the
Fourth Quarter of taxable year 2003; while on 26 April 2004, AT&T-CSP filed its Amended
Quarterly VAT Returns for the First to Fourth Quarters of the taxable year 2003. It then filed
on 13 April 2005 with the BIR an application for refund and/or tax credit of its unutilized VAT
input taxes for the aforesaid taxable period amounting to ₱3,003,265.14. However, there
being no action on said administrative claim, petitioner filed a Petition for Review before the
CTA in Division on 20 April 2005.

CTA Division dismissed AT&T-CSP’s claim for the refund or issuance of a TCC. It ruled
that in order to be entitled to its refund claim, petitioner must show proof of compliance
with the substantiation requirements as mandated by law and regulations. Therefore,
considering that the subject revenues pertain to gross receipts from services rendered by
petitioner, valid official receipts and not mere sales invoices should have been presented and
submitted in evidence in support thereof. Without proper VAT official receipts, the foreign
currency payment received by petitioner from services rendered for the four (4) quarters of
taxable year 2003 cannot qualify for zero-rating for VAT purposes. CTA En Banc affirmed
Division’s ruling.
II. ISSUE: W/N AT&T-CSP is entitled to a refund or issuance of a TCC in its favor amounting to
₱3,003,265.14 allegedly representing unutilized input VAT attributable to petitioner’s zero-
rated sales for the period of 1 January 2003 to 31 December 2003.

III. RULING:

No. VAT invoice is the seller's best proof of the sale of the goods or services to the
buyer while the VAT receipt is the buyer's best evidence of the payment of goods or services
received from the seller. Thus, the High Court concluded that VAT invoice and VAT receipt
should not be confused as referring to one and the same thing. Certainly, neither does the
law intend the two to be used interchangeably. Accordingly, we agree with the ruling of the
CTA in Division, as well as that of the CTA En Banc, insofar as to its discussion on the
relevancy of the aforesaid substantiation requirements.
TAGANITO MINING CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 198076 (November 19, 2014)

I. FACTS:

On December 30, 2003, Taganito, a VAT-registrered entity, filed with CIR an

application for refund of its excess input VAT paid on its domestic purchases of taxable
goods and services and importation of goods amounting to Php 4,447,651.32 for the period
January 1, 2002 to December 3, 2002. On February 19, 2004 or 51 days after, Taganito filed
with CTA a petition for review. The CIR answered that the claim for refund was still subject
to investigation.

On October 27, 2009, CTA Division partially granted Taganito’s petition and ordered
the CIR to refund the amount of ₱3,636,854.07. CIR moved for reconsideration, arguing that
the petition for review was prematurely filed because Taganito did not wait for the lapse of
120 days mandated by Section 112(d) of the NIRC. The said motion was denied. CTA En Banc
reversed and ordered the case dismissed for being prematurely filed.

II. ISSUE: W/N Taganito’s judicial claim for refund/credit was prematurely filed.

III. RULING:

No. Under Section 112(A), the taxpayer may, within 2 years after the close of the
taxable quarter when the sales were made, via an administrative claim with the CIR, apply
for the issuance of a tax credit certificate or refund of creditable input tax due or paid
attributable to such sales. Under Section 112(D), the CIR must then act on the claim within
120 days from the submission of the taxpayer’s complete documents. In case of a full or
partial denial by CIR of the claim, or CIR’s failure to act on the claim within 120 days, the
taxpayer may file a judicial claim via an appeal with CTA within 30 days from receipt of the
decision; or after the expiration of the 120-day period. The 120+30 day period is mandatory
and jurisdictional.

There is, however, an exception to the mandatory and jurisdictional nature of the
120+30 day period. The Court in San Roque case noted that BIR Ruling No. DA-489-03, dated
December 10, 2003, expressly stated that the "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." Judicial claims filed between December 10, 2003 up to October 6, 2010 or the
reversal of the ruling in Aichi, need not wait for the lapse of the 120+30 day period in
consonance with the principle of equitable estoppel.

Here, Taganito filed its judicial claim on February 19, 2004, clearly within the period of
exception of December 10, 2003 to October 6, 2010. Its judicial claim was, therefore, not
prematurely filed and should not have been dismissed by the CTA En Banc.
SMI-ED TECHNOLOGY VS. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 175410 (November 12, 2014)

I. FACTS:

SMI-Ed registered with PEZA on June 29, 1998. Thereafter, it constructed buildings
and purchased machineries and equipment. However, SMI-Ed failed to commence
operations. Its factory was temporarily closed, later sold its buildings and some machineries
to Ibiden Phils. Eventually, SMI-Ed was dissolved. In its quarterly income tax return for 2000,
SMI-Ed subjected the entire gross sales of its properties to 5% final tax on PEZA registered
corporations, and paid taxes amounting to P44,677,500. On February 2, 2001, after
requesting the cancellation of its PEZA registration, SMI-Ed filed an administrative claim for
the refund with BIR, alleging that the amount was erroneously paid. BIR did not act on claim.
Hence, SMI-Ed filed a petition for review before CTA.

CTA Division denied SMI-ED’s claim for refund ruling that fiscal incentives given to
PEZA-registered enterprises may be availed only by PEZA-registered enterprises that had
already commenced operations. Since SMI-Ed had not commenced operations, it was not
entitled to the incentives of either the income tax holiday or the 5% preferential tax rate. CTA
en banc affirmed.

II. ISSUE: W/N SMI-ED is entitled to the benefits given to PEZA-registered enterprises
including the 5% preferential tax rate.

III. RULING:

No. Petitioner never started its operations since its registration because of the Asian
financial crisis. Essentially, the purpose of RA 7916 is to promote development and
encourage investments and business activities that will generate employment. Giving fiscal
incentives to businesses is one of the means devised to achieve this purpose. It comes with
the expectation that persons who will avail these incentives will contribute to the purpose’s
achievement. Hence, to avail the fiscal incentives, the law did not say that mere PEZA
registration is sufficient. The fiscal incentives and the 5% preferential tax rate are available
only to businesses operating within the Ecozone. A business is considered in operation when
it starts entering into commercial transactions that are not merely incidental to but are
related to the purposes of the business.