CONCEPCION VIDAL DE ROCES and her husband, MARCOS ROCES and

ELVIRA VIDAL DE RICHARDS, plaintiffs-appellants v. JUAN POSADAS, JR. a. It violates Sec 3 of Jones Law which provides that no law should embrace
CIR, defendant-appellee more than one subject
b. The Legislature has no authority to impose inheritance tax on donations inter
G.R. No. L-34937 March 13, 1933 vivos
c. A legal provision of this character contravenes the fundamental rule of
IMPERIAL, J. uniformity and taxation

NATURE OF THE CASE: Action to recover from Collector of Internal Revenue, 6. Posadas contention: the words “all gifts” refer clearly to donations inter vivos
certain sums of money paid by the plaintiffs under protest as inheritance tax.
Issue: Whether Sec 1540 includes donations inter vivos.
Facts:
Held: The gifts referred to in Sec 1540 of the Revised Administration Code are those
1. 1925 – Esperanza Tuazon, by means of public documents, donated certain parcels donations inter vivos that take effect immediately or during the lifetime of the donor
of land situated in Manila to Sps Roces who accepted them in the same public but are made in consideration or in contemplation of death.
documents which they recorded in the registry of deeds. So they took possession
of the said lands. 1. Gifts intervivos, the transmission of which is not made in contemplation of the
2. Esperanza died without leaving any forced heir and her will which was admitted donor’s death should not be understood as included within the said legal
to probate, she bequeathed to each of the donees the sum of 5k. After the estate provision for the reason that it would amount to imposing a direct tax on property
had been distributed, CIR Posadas ruled that Sps Roces (as donees and legatees) and not on the transmission thereof, which act does not come within the scope of
should pay as inheritance tax the sums of 16,673 and 13,951 respectively. the provisions contained in Article XI of Chapter 40 of the Administrative Code
3. At first, Sps Roces refused to pay the taxes but they agreed to pay them under which deals expressly with the tax on inheritances, legacies and other acquisitions
protest. mortis causa.
4. TC: granted Posadas demurrer as the Sps Roces did not really have a right of 2. Such interpretation is not in conflict with the Tuason and Tuason v. Posadas
action wherein it has been established therein that the expression “all gifts” refers to gifts
inter vivos inasmuch as the law considers them as advances on inheritance, in the
Sec. 1540 – Addition of gifts and advances. – After the aforementioned deductions sense that they are gifts inter vivos made in contemplation or in consideration of
have been made, there shall be added to the resulting amount the value of all gifts or death. In that case, it was not held that that kind of gifts consisted in those made
advances made by the predecessor to any those who, after his death, shall prove to be completely independent of death or without regard to it.
his heirs, devisees, legatees or donees mortis causa. 3. On the contention of Sps Roces with regard to power of the Legislature to impose
taxes on the transmission of real estate that takes effect immediately and during
5. Sps Roces contended that Sec 1540 does not include donations inter vivos and if it the lifetime of the donor and alleged that such tax partakes of the nature of the
does, it is unconstitutional because:
 land tax which the law has already created in another part of the Administrative
Code:

o SC ruled that the tax collected by Posadas on the properties donated in 1925
really constitutes an inheritance tax imposed on the transmission of said
properties in contemplation or in consideration of the donor’s death and under
the circumstance that the donees were later instituted as the former’s legatees.
o For this reason, the law considers such transmissions in the form of gifts inter
vivos as advances on inheritance and nothing therein violates any
constitutional provision.

4. On the issue of uniformity of taxation: Sec 1540 cannot be null and void because
it equally subjects to the same tax all of those donees who later become heirs,
legatees or donees mortis causa by the will of the donor. There would be a
repugnant and arbitrary exception if the provisions of the law were not applicable
to all donnes of the same kind.

o While a donee inter vivos who, after the predecessor’s death proved to be an
heir, a legatee or donee mortis causa, would have to pay the tax, another
donee inter vivos who did not prove be an heir, a legatee or a donee mortis
causa of the predecessor, would be exempt from such a tax. But as these are
two different cases, the principle of uniformity is inapplicable to them.

DISPOSITIVE: Wherefore, the demurrer interposed by the appellee was well-

founded because it appears that the complaint did not allege fact sufficient to
constitute a cause of action.

Justice Villareal’s dissenting opinion: Donations inter vivos made to persons who are
not forced heirs, but who are instituted legatees in the donor’s will, should be
presumed as not made mortis causa, unless the contrary is proven. In the case under
construction, the burden of proof rests with the person who contends that the donation
inter vivos has been made mortis causa.
Luis Dison Vs. Juan Posadas Issue: W/N Petitioner should be charge Inheritance tax as provided for Section 1540
of the Administrative Code?
Facts:
Ruling: Yes, Petitioner should be charge inheritance tax
 That before the death of Don Felix Dison (a widower), who was the father of
the petitioner (legitimate son), the former has made a gift inter vivos in favor  The law refers to gift inter vivos and not mortis causa. The language of the
of the plaintiff of all of his properties (22 tracts of land reserving the usufruct law refers to donations that took effect before the donor’s death and not mortis
of 3 tracts for his life); and that plaintiff did not receive any property upon the causa donations which can only be made with the formalities of a will and can
death of the former. only take effect after the donor’s death.
 The contention of the petitioner that he had received and holds the property by  Section 1540 of the Administrative Code presumes that such gifts have been
a consummated gift and that Section 1540 of Act No. 2601 or the made in anticipation of inheritance, devise, bequest or gift mortis causa for the
Administrative Code being the inheritance tax statute should not apply and purpose of evading taxes, and it is to prevent this that it provides that they
that he should not pay Inheritance Tax. shall be added to the resulting amount.
 In addition the petitioner argues that there is no evidence to support that the  Petition was denied, CFI judgment affirmed.
gift was simulated and that it was an artifice for evading the payment of
inheritance tax; and that he is not a heir of the deceased for his father in his
lifetime had given all his property and left no property to be inherited.
 There was also an attack on the constitutionality of section 1540 of the
Administrative Code (levies a tax inter vivos), for it violates section 3 of the
organic act of the Philippine Island, that no bill which may be enacted into
law shall embraced more than one subject and that the subject shall be
expressed in the title of the bill. That the title of the law does not make any
reference to a tax on gifts. That Section 1540 does not tax gifts per se but only
when those gifts are made to those who shall prove to be the heirs, devisees,
legatees or donees mortis causa of the donor.
 Petitioner filed a suit with the CFI alleging that the inheritance tax he has paid
under protest was illegal and must be recovered.
 CFI ruled in favor of the defendant
TITLE: THE BANK OF THE PHILIPPINE ISLANDS vs. JUAN POSADAS, 4. BPI, as administrator of the estate of deceased Adolphe Schuetze, appealed to
JR. CFI Manila absolving defendant, Collector of Internal Revenue, from the
complaint filed against him in recovering the inheritance tax amounting to
G.R. No. ; DATE: G.R. No. L-34583 October 22, 1931 P1209 paid by the plaintiff, Rosario Gelano Vda de Schuetze, under protest,
J. VILLA-REAL, J.: and sum of P20,150 representing the proceeds of the insurance policy of the
deceased.
5. Rosario and Adolphe were married in January 1914. The wife was actually
residing and living in Germany when Adolphe died in December 1927. The
NATURE OF THE CASE: The Bank of the Philippine Islands, as administrator of the
latter while in Germany, executed a will in March 1926, pursuant with its law
estate of the deceased Adolphe Oscar Schuetze, has appealed to this court from the
wherein plaintiff was named his universal heir. The deceased possessed not
judgment of the Court of First Instance of Manila absolving the defendant Juan
only real property situated in the Philippines but also personal property
Posadas, Jr., Collector of Internal Revenue, from the complaint filed against him by
consisting of shares of stocks in 19 domestic corporations. Included in the
said plaintiff bank, and dismissing the complaint with costs.
personal property is a life insurance policy issued at Manila on January 1913
FACTS for the sum of $10,000 by the Sun Life Assurance Company of Canada,
Manila Branch. In the insurance policy, the estate of the deceased was named
the beneficiary without any qualification.
6. Rosario is the sole and only heir of the deceased. BPI, as administrator of the
1. That the plaintiff, Rosario Gelano Vda. de Schuetze, widow of the late
decedent’s estate and attorney in fact of the plaintiff, having been demanded
Adolphe Oscar Schuetze, is of legal age, a native of Manila, Philippine
by Posadas to pay the inheritance tax, paid under protest. Notwithstanding
Islands, and is and was at all times hereinafter mentioned a resident of
various demands made by plaintiff, Posadas refused to refund such amount.
Germany, and at the time of the death of her husband, she was actually
residing and living in Germany;
2. That the Bank of the Philippine Islands, is and was at all times hereinafter
mentioned a banking institution duly organized and existing under and by ISSUE/S:
virtue of the laws of the Philippine Islands;
Whether or not the life insurance policy belongs to the conjugal partnership.
3. On August 23, 1928, plaintiff before notary public Salvador Zaragoza, drew a
general power appointing the above-mentioned Bank of the Philippine Islands HELD:
as her attorney-in-fact, and among the powers conferred to said attorney-in-
fact was the power to represent her in all legal actions instituted by or against The court ruled that
her;
(1) The proceeds of a life-insurance policy payable to the insured's estate, on which
the premiums were paid by the conjugal partnership, constitute community property,
and belong one-half to the husband and the other half to the wife, exclusively; and

(2) if the premiums were paid partly with paraphernal andpartly conjugal funds, the
proceeds are likewise in like proportion paraphernal in part and conjugal in part. That
the proceeds of a life-insurance policy payable to the insured's estate as the
beneficiary, if delivered to the testamentary administrator of the former as part of the
assets of said estate under probate administration, are subject to the inheritance tax
according to the law on the matter, if they belong to the assured exclusively, and it is
immaterial that the insured was domiciled in these Islands or outside.
Collector of Internal Revenue vs. Fisher

Ian Murray Statt, the appointed ancillary administrator of his estate filed an estate and
inheritance tax return. He made a preliminary return to secure the waiver of the CIR on
G.R. No. L-11622 January 28, 1961 1 SCRA 93 the inheritance tax due on the 210 shares of stock in the Mindanao Mother Lode Mines,
Inc. which the estate them desired to dispose in the US.

Barrera, J:
On September 27, 1952, the ancillary administrator filed in amended estate and
inheritance tax return in pursuance f his reservation made at the time of filing of the
NATURE OF THE CASE: This case relates to the determination and settlement of preliminary return and for the purpose of availing of the right granted by section 91 of
the hereditary estate left by the deceased Walter G. Stevenson, and the laws applicable the National Internal Revenue Code.
thereto.

In December 1952, Beatrice assigned all her rights and interests in the estate to the
FACTS: spouses Fisher.

Walter G. Stevenson was born in the Philippines of British parents, married in Manila Subsequently, the ancillary administrator filed a second amended estate and inheritance
to another British subject, Beatrice. He died on February 22, 1951 in San Francisco, tax return. This return declared the same assets of the estate except that it contained
California where he and his wife moved to. new claims for additional exemption and deduction to wit:

He instituted his wife Beatrice as his sole heiress to certain real and personal properties 1. Deduction in the amount of P4,000.00 from the gross estate of the decedent
acquired by the spouses while residing in the Philippines. as provided for in Section 861 of the US Federal Internal Revenue Code which the
ancillary administrator averred was allowable by way of the reciprocity granted by
Section 122 of the National Internal Revenue Code;
(TOTAL GROSS ASSETS= P130,792.85)
 2. Exemption from the imposition of estate and inheritance taxes on the 210,000 (4) The estate shall be entitled to a deduction of P2,000.00 for funeral expenses and
shares of stock in the Mindanao Mother Lode Mines, Inc. also pursuant to the judicial expenses of P8,604.39.
reciprocity proviso of Section 122 of the National Internal Revenue Code.

In this last return, the estate claimed that it was liable only for the amount of P525.34
for estate tax and P238.06 for inheritance tax and that, as a consequence, it had overpaid Both Parties Appealed
the government. The refund of the amount of P15,259.83, allegedly overpaid, was
accordingly requested by the estate. The Collector denied the claim. For this reason,
action was commenced in the Court of First Instance of Manila by respondents, as ISSUE: Whether or not, in determining the taxable net estate of the decedent, one-half
assignees of Beatrice Mauricia Stevenson, for the recovery of said amount. (½) of the net estate should be deducted therefrom as the share of tile surviving spouse
in accordance with our law on conjugal partnership and in relation to section 89 (c) of
the National Internal Revenue Code.
The Case was forwarded to CTA.

HELD: YES. The lower court correctly deducted the half of the conjugal property in
determining the hereditary estate left by the deceased.
CTA RULING:

(1) The one-half (½) share of the surviving spouse in the conjugal partnership property
as diminished by the obligations properly chargeable to such property should be RATIO: It must be noted, however, that what has just been said refers to mixed
deducted from the net estate of the deceased Walter G. Stevenson, pursuant to Section marriages between a Filipino citizen and a foreigner. In the instant case, both spouses
89-C of the National Internal Revenue Code. are foreigners who married in the Philippines.
(2) The intangible personal property belonging to the estate of said Stevenson is exempt
from inheritance tax, pursuant to the provision of section 122 of the National Internal
Revenue Code in relation to the California Inheritance Tax Law but decedent's estate If we adopt the view of Manresa, the law determinative of the property relation of the
is not entitled to an exemption of P4,000.00 in the computation of the estate tax. Stevensons, married in 1909, would be the English law even if the marriage was
celebrated in the Philippines, both of them being foreigners. But, as correctly observed
(3) For purposes of estate and inheritance taxation the Baguio real estate of the spouses by the Tax Court, the pertinent English law that allegedly vests in the decedent husband
should be valued at P52,200.00, and 210,000 shares of stock in the Mindanao Mother full ownership of the properties acquired during the marriage has not been proven by
Lode Mines, Inc. should be appraised at P0.38 per share. petitioner. Except for a mere allegation in his answer, which is not sufficient, the record
is bereft of any evidence as to what English law says on the matter. In the absence of
proof, the Court is justified, therefore, in indulging in what Wharton calls "processual
presumption," in presuming that the law of England on this matter is the same as our
law.

Nor do we believe petitioner can make use of Article 16 of the New Civil Code (art.
10, old Civil Code) to bolster his stand. A reading of Article 10 of the old Civil Code,
which incidentally is the one applicable, shows that it does not encompass or
contemplate to govern the question of property relation between spouses. Said article
distinctly speaks of amount of successional rights and this term, in speaks in our
opinion, properly refers to the extent or amount of property that each heir is legally
entitled to inherit from the estate available for distribution. It needs to be pointed out
that the property relation of spouses, as distinguished from their successional rights, is
governed differently by the specific and express provisions of Title VI, Chapter I of
our new Civil Code
CIR v. CA, CTA and Pajonar notarial fee for the Extrajudicial Settlement and the attorney's fees in the guardianship
Commissioner of Internal Revenue vs. Court of Appeals, CTA, and Pajonar proceedings are not deductible expenses.
G.R. No. 123206; 22 March 2000
Gonzaga-Reyes, J.
PROCEDURAL:

CTA- Upheld the validity of the deduction of the notarial fee and attorney's fee and ordered
NATURE OF THE CASE: Petition for Review on Certiorari of a decision of the Court the CIR to refund Josefina Pajonar the amount of P76,502.42 representing erroneously paid
of Appeals. tax for year 1988.
CA- Denied CIR's Petition: Affirmed CTA.
FACTS:
1. Pedro Pajonar, a member of the Philippine Scout during the Second World War, was a
part of the infamous Death March by reason of which he suffered shock and became insane.
His sister, Josefina Pajonar became the guardian over his person, while his property was
placed under the guardianship of the PNB by RTC-Dumaguete. ISSUE:
2. On 1998, the PNB filed an accounting of the decedent's property under guardianship WON the notarial fee paid for the extrajudicial settlement in the amount of P60,753 and
valued at P3,037,672.09. However, the PNB did not file an estate tax return, instead it the attorney's fees in the amount of P50,000 may be allowed as deductions from the gross
advised Pedro Pajonar's heirs to execute an extrajudicial settlement and to pay the taxes on estate of decedent in order to arrive at the value of the net estate.
his estate.
3. On April 1988, pursuant to the assessment by the BIR, the estate of Pedro Pajonar paid Case for Petitioner: Petitioner contends that the said amount are not expenses of the
taxes in the amount of P2,557. testamentary or intestate proceedings as the guardianship proceeding was instituted during
4. Pursuant to a second assessment by the BIR for deficiency estate tax, the estate of Pedro the lifetime of the decedent when there was yet no estate to be settled.
Pajonar paid estate tax in the amount of P1,527,790.98. Josefina Pajonar, in her capacity Case for Defendant: The notarial fee was incurred primarily to settle the estate of the
as administratrix and heir of Pedro Pajonar's estate, filed a protest with the BIR praying deceased Pedro Pajonar. Said amount should be considered as administration expenses
that the estate tax payment of P1,527,790.98 or at least some portion of it, be returned to necessarilly incurred in the collection of the assets of the estate, payment of debts and
the heirs. distribution of thr remainder. Hence, notarial fee incurred for Extrajudicial Settlement
5. On 1993, the CTA ordered the CIR to refund Pajonar's amount of P252,585.59, should be allowed as a deduction from the gross estate.
representing erroneously paid estate tax for the year 1988. Among the deductions from the
gross estate allowed by the CTA were the amounts representing the notarial fee for the
Extrajudicial Settlement and the amount of P50,000 as the attorney's fees in Special HELD/RATIO:
Proceedings for guardianship. YES.
6. The CIR filed a Motion for Reconsideration of the CTA's decision asserting that the
Section 79. Computation of Net Estate and Estate Tax- For the purpose of the tax imposed
in this Chapter, the value of the net estate shall be determined.
(a) In the case of a citizen or resident of the Phils., by deducting from the value of the gross
estate.-
(1) Expenses, losses, indebtedness, and taxes.- Such amounts-
(A) For funeral expenses in an amount equal to 5% of the gross estate but in no case to
exceed P50,000.00;
(B) For judicial expenses of the testamentary or intestate proceedings.
-Although the Tax Code specifies "judicial expenses of the testamentary or intestate
proceedings," there is no reason why expenses incurred in the administration and
settlement of an estate in extrajudicial proceedings should not be allowed. Deductible
attorney's fees are those incurred by the executor or administrator in the settlement of the
estate or in defending or prosecuting claims against or due the estate.

It is clear that the extrajudicial settlement was for the purpose of payment of taxes and thr
distribution of the estate to the heirs. The execution of the extrajudicial settlement
necessitated the notarization of the same. It follows that the notarial fee was incurred
primarily to settle the estate of deceased Pedro Pajonar. Said amount should then be
considered as an administration expenses actually and necessarily incurred in the collection
of the assets of the estate, payment of debts, and distribution of the remainder among those
entitled thereto.

Notarial fee of P60,753 incurred for Extrajudicial Settlement should be allowed as

deduction from gross estate. Attorney's fees essential to the settlement of the estate in the
amount of P50,000 should also be allowed as deduction from gross estate.

DISPOSITIVE:
The decision of CA is affirmed.
Dizon vs CTA and CIR deprive the BIR Commissioner of her authority to re-examine or re-assess the said
G.R. No. 140944; April 30, 2008 return filed on behalf of the Estate.
Nachura, J.:
Issue:
Nature of the Case: Whether the actual claims of creditors may be fully allowed as deductions
Petition for Review on Certiorari from the gross estate of Jose despite the fact that the said claims were reduced or
condoned through compromise agreements entered into by the Estate with its
Facts: creditors.
1. After the death of Jose Fernandez (Jose), a petition for the probate of his will
was filed with Branch 51 of the RTC of Manila. The probate court appointed
Atty. Rafael Arsenio P. Dizon (petitioner) as administrator of the estate. Held:
2. An estate tax return was filed later on which showed ZERO estate tax liability. Yes. Following the US Supreme Court’s ruling in Ithaca Trust Co. v. United
BIR thereafter issued a deficiency estate tax assessment, demanding payment States, the Court held that post-death developments are not material in determining
of Php 66.97 million as deficiency estate tax. This was subsequently reduced the amount of deduction. This is because estate tax is a tax imposed on the act of
by CTA to Php 37.42 million. The CA affirmed the CTA’s ruling, hence, the transferring property by will or intestacy and, because the act on which the tax is
instant petition. levied occurs at a discrete time, i.e., the instance of death, the net value of the
3. The petitioner claims that in as much as the valid claims of creditors against property transferred should be ascertained, as nearly as possible, as of the that time.
the Estate are in excess of the gross estate, no estate tax was due. On the other This is the date-of-death valuation rule.
hand, respondents argue that since the claims of the Estate’s creditors have
been condoned, such claims may no longer be deducted from the gross estate The Court, in adopting the date-of-death valuation principle, explained that:
of the decedent.
 First. There is no law, nor do we discern any legislative intent in our tax
Procedural (Court Decisions): laws, which disregards the date-of-death valuation principle and particularly
CTA: provides that post-death developments must be considered in determining the
The CTA did not fully adopt the assessment made by the BIR and it came up net value of the estate. It bears emphasis that tax burdens are not to be
with its own computation of the deficiency estate tax. Petitioner and/or the heirs of imposed, nor presumed to be imposed, beyond what the statute expressly and
Jose P. Fernandez were ordered to pay to respondent the amount of P37,419,493.71 clearly imports, tax statutes being construed strictissimi juris against the
plus 20% interest from the due date of its payment until full payment thereof as estate government.
tax liability of the estate of Jose P. Fernandez.  Second. Such construction finds relevance and consistency in our Rules on
Special Proceedings wherein the term "claims" required to be presented
Court of Appeals: against a decedent's estate is generally construed to mean debts or demands of
The CA affirmed the CTA's ruling. Adopting in full the CTA's findings, the a pecuniary nature which could have been enforced against the deceased in his
CA ruled that the petitioner's act of filing an estate tax return with the BIR did not lifetime, or liability contracted by the deceased before his death. Therefore,
the claims existing at the time of death are significant to, and should be made
the basis of, the determination of allowable deductions.
Estate of Reyes v. CIR be identified as having been received by the decedent
CTA Case No. 6747 [16 January 2006] from the donor by gift, or from such prior decedent by
Spouses Fidel and Teresita Reyes died on 1997 and 1998 respectively. Estate tax gift, bequest, devise or inheritance, or which can be
returns were then filed for the estates of Fidel and Teresita pursuant to the Voluntary identified as having been acquired in exchange for
Assessment Program of the BIR. property so received:

By virtue of a Letter of Authority, the BIR examined the books of accounts and One hundred percent (100%) of the value, if the prior
accounting records in ascertaining the tax liability of the estate of Teresita. After the decedent died within one (1) year prior to the death of
said assessment, both the estates of Fidel and Teresita were found accountable for the decedent, or if the property was transferred to him by
deficiency estate taxes and donor’s tax. The delinquency estate tax assessment for the gift within the same period prior to his death;
estate of Teresita was attributed to the inclusion of some conjugal properties which
actually belong to her spouse Fidel, and an overstatement of the vanishing deductions Eighty percent (80%) of the value, if the prior decedent
claimed. died more than one (1) year but not more than two (2)
years prior to the death of the decedent, or if the property
The petitioners protested these assessments before the BIR, but without waiting for the was transferred to him by gift within the same period
latter’s decision on the said matter, they filed a Petition for Review before the Supreme prior to his death;
Court, arguing among other things that the computation of vanishing deductions was
miscalculated in the estate return of Teresita. X X X
W/N THERE EXISTS AN OVERSTATEMENT OF VANISHING DEDUCTIONS
IN THE ESTATE OF TERESITA REYES? These deductions shall be allowed only where a donor's
Yes, there was an overstatement of vanishing deductions in the computation of tax or estate tax imposed under this Title was finally
Teresita’s estate. Vanishing deduction is a deduction allowed from the gross estate of determined and paid by or on behalf of such donor, or
citizens, resident aliens and non-resident estates for properties which were previously the estate of such prior decedent, as the case may be, and
subject to donor's or estate taxes. The deduction allowed diminishes for a period of only in the amount finally determined as the value of
five (5) years. Section 86(A)(2) of the 1997 NIRC provides for the computation of such property in determining the value of the gift, or the
property previously taxed, to wit: gross estate of such prior decedent, and only to the extent
that the value of such property is included in the
(2) Property Previously Taxed. - An amount equal to the decedent's gross estate, and only if in determining the
value specified below of any property forming a part of value of the estate of the prior decedent, no deduction
the gross estate situated in the Philippines of any person was allowable under paragraph (2) in respect of the
who died within five (5) years prior to the death of the property or properties given in exchange therefor. Where
decedent, or transferred to the decedent by gift within a deduction was allowed of any mortgage or other lien in
five (5) years prior to his death, where such property can determining the donor's tax, or the estate tax of the prior
 decedent, which was paid in whole or in part prior to the
decedent's death, then the deduction allowable under
said Subsection shall be reduced by the amount so paid.
Such deduction allowable shall be reduced by an amount
which bears the same ratio to the amounts allowed as
deductions under paragraphs (1) and (3) of this
Subsection as the amount otherwise deductible under
said paragraph (2) bears to the value of the decedent's
estate. Where the property referred to consists of two or
more items, the aggregate value of such items shall be
used for the purpose of computing the deduction.
Here, the initial basis (Php.1,145,985.08) used by the petitioners is 13/24 of the gross
estate of Fidel F. Reyes instead of only 1/24 (petitioners considered all the properties
of Fidel Reyes as conjugal), which is the inheritance share of Teresita. In other words,
such erroneous basis lead to the bloating of the vanishing deductions because being in
excess of Teresita’s inheritance share, the said properties (13/24) cannot be properly
identified as having been received by her from Fidel by gift, bequest, devise or
inheritance. In effect, the said properties cannot be made previously subject to donor’s
or estate taxes.

Thus, petitioner’s initial basis cannot be properly claimed as vanishing deductions since
it is contrary to what the NIRC provides. The correct initial basis (Php.882,071.14)
should only be Teresita’s inherited property from Fidel which was previously taxed.
Therefore, the BIR was correct in finding a delinquency estate tax assessment for the
estate of Teresita Reyes due to the overstatement of vanishing deductions.
Lorenzo v. Posadas

FACTS: Thomas Hanley died, leaving a will and a considerable amount of real and
personal properties. Proceedings for the probate of his will and the settlement and The appointment of Moore as trustee was made by the trial court in conformity with
distribution of his estate were begun in the CFI of Zamboanga. The will was admitted the wishes of the testator as expressed in his will. It is true that the word “trust” is not
to probate. mentioned or used in the will but the intention to create one is clear. No particular or
The CFI considered it proper for the best interests of the estate to appoint a trustee to technical words are required to create a testamentary trust. The words “trust” and
administer the real properties which, under the will, were to pass to nephew Matthew “trustee”, though apt for the purpose, are not necessary. In fact, the use of these two
ten years after the two executors named in the will was appointed trustee. Moore words is not conclusive on the question that a trust is created. ” To constitute a valid
acted as trustee until he resigned and the plaintiff Lorenzo herein was appointed in his testamentary trust there must be a concurrence of three circumstances:
stead.

During the incumbency of the plaintiff as trustee, the defendant Collector of Internal (1) Sufficient words to raise a trust;
Revenue (Posadas) assessed against the estate an inheritance tax, together with the
penalties for deliquency in payment. Lorenzo paid said amount under protest, (2) a definite subject;
notifying Posadas at the same time that unless the amount was promptly refunded suit
would be brought for its recovery. Posadas overruled Lorenzo’s protest and refused to
(3) a certain or ascertain object; statutes in some jurisdictions expressly or in effect so
refund the said amount. Plaintiff went to court. The CFI dismissed Lorenzo’s
providing.”
complaint and Posadas’ counterclaim. Both parties appealed to this court.

ISSUE:

(e) Has there been delinquency in the payment of the inheritance tax? There is no doubt that the testator intended to create a trust. He ordered in his will that
certain of his properties be kept together undisposed during a fixed period, for a
HELD: The judgment of the lower court is accordingly modified, with costs against stated purpose. The probate court certainly exercised sound judgment in
the plaintiff in both instances appointmening a trustee to carry into effect the provisions of the will
YES
The defendant maintains that it was the duty of the executor to pay the inheritance tax
before the delivery of the decedent’s property to the trustee. Stated otherwise, the
As the existence of the trust was already proven, it results that the estate which
defendant contends that delivery to the trustee was delivery to the cestui que trust, the
plaintiff represents has been delinquent in the payment of inheritance tax and,
beneficiary in this case, within the meaning of the first paragraph of subsection (b) of
therefore, liable for the payment of interest and surcharge provided by law in such
section 1544 of the Revised Administrative Code. This contention is well taken and is
cases.
sustained. A trustee is but an instrument or agent for the cestui que trust
The delinquency in payment occurred on March 10, 1924, the date when Moore (a) The merger of the usufruct in the owner of the naked title.
became trustee. On that date trust estate vested in him. The interest due should be (b) The transmission or delivery of the inheritance or legacy by the fiduciary heir or
computed from that date. legatee to the trustees.
(c) The transmission from the first heir, legatee, or donee in favor of another
beneficiary, in accordance with the desire of the predecessor. xx
NOTES: Other issues:
SEC. 1544. When tax to be paid. — The tax fixed in this article shall be paid:
(a) In the second and third cases of the next preceding section, before entrance into
possession of the property.
(a) When does the inheritance tax accrue and when must it be satisfied? (b) In other cases, within the six months subsequent to the death of the predecessor;
The accrual of the inheritance tax is distinct from the obligation to pay the same. but if judicial testamentary or intestate proceedings shall be instituted prior to the
expiration of said period, the payment shall be made by the executor or administrator
Acording to article 657 of the Civil Code, “the rights to the succession of a person are before delivering to each beneficiary his share.
transmitted from the moment of his death.” “In other words”, said Arellano, C. J., “. . The instant case does[not] fall under subsection (a), but under subsection (b), of
. the heirs succeed immediately to all of the property of the deceased ancestor. The section 1544 above-quoted, as there is here no fiduciary heirs, first heirs, legatee or
property belongs to the heirs at the moment of the death of the ancestor as completely donee. Under the subsection, the tax should have been paid before the delivery of the
as if the ancestor had executed and delivered to them a deed for the same before his properties in question to Moore as trustee.
death.” (b) Should the inheritance tax be computed on the basis of the value of the estate at
the time of the testator’s death, or on its value ten years later?

Whatever may be the time when actual transmission of the inheritance takes place,
succession takes place in any event at the moment of the decedent’s death. The time
when the heirs legally succeed to the inheritance may differ from the time when the If death is the generating source from which the power of the estate to impose
heirs actually receive such inheritance. ” Thomas Hanley having died on May 27, inheritance taxes takes its being and if, upon the death of the decedent, succession
1922, the inheritance tax accrued as of the date. takes place and the right of the estate to tax vests instantly, the tax should be
measured by the value of the estate as it stood at the time of the decedent’s death,
regardless of any subsequent contingency value of any subsequent increase or
From the fact, however, that Thomas Hanley died on May 27, 1922, it does not decrease in value
follow that the obligation to pay the tax arose as of the date. The time for the payment
on inheritance tax is clearly fixed by section 1544 of the Revised Administrative
Code as amended by Act No. 3031, in relation to section 1543 of the same Code. The
two sections follow:
(c) In determining the net value of the estate subject to tax, is it proper to deduct the
SEC. 1543. Exemption of certain acquisitions and transmissions. — The following compensation due to trustees?
shall not be taxed:
A trustee, no doubt, is entitled to receive a fair compensation for his services. But
from this it does not follow that the compensation due him may lawfully be deducted
in arriving at the net value of the estate subject to tax. There is no statute in the
Philippines which requires trustees’ commissions to be deducted in determining the
net value of the estate subject to inheritance tax

(d) What law governs the case at bar? Should the provisions of Act No. 3606
favorable to the tax-payer be given retroactive effect?

A statute should be considered as prospective in its operation, whether it enacts,

amends, or repeals an inheritance tax, unless the language of the statute clearly
demands or expresses that it shall have a retroactive effect, . . . .” Act No. 3606 itself
contains no provisions indicating legislative intent to give it retroactive effect. No
such effect can be given the statute by this court.
PABLO LORENZO v. JUAN POSADAS, JR., Collector of Internal Revenue trustee until February 29, 1932, when he resigned and the plaintiff herein was
G.R. No. L-43082 June 18, 1937 appointed in his stead.

 During the incumbency of the plaintiff as trustee, the defendant Collector of

LAUREL, J.:
Internal Revenue. assessed against the estate an inheritance tax in the amount

FACTS: of P1,434.24 which, together with the penalties for deliquency in payment
consisting of a 1 per cent monthly interest from July 1, 1931 to the date of
 Plaintiff Pablo Lorenzo, as trustee of the estate of Thomas Hanley, deceased, payment and a surcharge of 25 per cent on the tax, amounted to P2,052.74.
brought this action in the Court of First Instance of Zamboanga against the Plaintiff paid said amount under protest and eventually filed a complaint in the
defendant, Juan Posadas, Jr., then the Collector of Internal Revenue, for the CFI of Zamboanga.
refund of the amount of P2,052.74, paid by the plaintiff as inheritance tax on
the estate of the deceased Court of First Instance of Zamboanga: Dismissed both the plaintiff's complaint and
 On May 27, 1922, Thomas Hanley died in Zamboanga, Zamboanga, leaving a the defendant's counterclaim. Both parties appealed to SC.
will. The will was admitted to probate. Said will provides that all real estate
owned by Hanley at the time of his death be not sold or otherwise disposed of
ISSUE: WON the inheritance tax in question be based upon the value of the estate
for a period of ten (10) years after his death, and that the same be handled and
upon the death of the testator and not upon the value thereof at the expiration of the
managed by the executors, and proceeds thereof to be given to his nephew,
period of ten years.
Matthew Hanley of Rosecommon, Ireland.
 The Court of First Instance of Zamboanga considered it proper to appoint a
trustee to administer the real properties which, under the will, were to pass to Case for Petitioner: , Plaintiff contends that the lower court erred in holding that the
Matthew Hanley ten years after the two executors named in the will, was, on inheritance tax in question be based upon the value of the estate upon the death of the
March 8, 1924, appointed trustee. Moore took his oath of office and acted as testator, and not, as it should have been held, upon the value thereof at the expiration
of the period of ten years after which, according to the testator's will, the property could According to Article 657 of the Civil Code, "the rights to the succession of a person
be and was to be delivered to the instituted heir. are transmitted from the moment of his death." "In other words", said Arellano, C. J.,
". . . the heirs succeed immediately to all of the property of the deceased ancestor. The
property belongs to the heirs at the moment of the death of the ancestor as completely
Case for Defendant: The lower court erred in not ordering the plaintiff to pay to the
as if the ancestor had executed and delivered to them a deed for the same before his
defendant the sum of P1,191.27, representing part of the interest at the rate of 1 per
death."
cent per month from April 10, 1924, to June 30, 1931, which the plaintiff had failed to
pay on the inheritance tax assessed by the defendant against the estate of Thomas The provision of section 625 of the Code of Civil Procedure regarding the
Hanley. authentication and probate of a will as a necessary condition to effect transmission of
property does not affect the general rule laid down in article 657 of the Civil Code.

SC RULING with RATIO: From the fact, however, that Thomas Hanley died on May 27, 1922, it does not follow
that the obligation to pay the tax arose as of the date. The time for the payment on
YES, inheritance tax in question be based upon the value of the estate upon the death
inheritance tax is clearly fixed by section 1544 of the Revised Administrative Code
of the testator and not upon the value thereof at the expiration of the period of ten years.
as amended by Act No. 3031, in relation to section 1543 of the same Code.
The accrual of the inheritance tax is distinct from the obligation to pay the same.
Section 1536 as amended, of the Administrative Code, imposes the tax upon "every SEC. 1544. When tax to be paid. — The tax fixed in this article shall be paid:

transmission by virtue of inheritance, devise, bequest, gift mortis causa, or advance in (a) In the second and third cases of the next preceding section, before entrance
anticipation of inheritance, devise, or bequest." The tax therefore is upon transmission into possession of the property.
or the transfer or devolution of property of a decedent, made effective by his death. (61 (b) In other cases, within the six months subsequent to the death of the
C. J., p. 1592.) It is in reality an excise or privilege tax imposed on the right to succeed predecessor; but if judicial testamentary or intestate proceedings shall be
instituted prior to the expiration of said period, the payment shall be made
to, receive, or take property by or under a will or the intestacy law, or deed, grant, or
by the executor or administrator before delivering to each beneficiary his
gift to become operative at or after death share.
 The judgment of the lower court is accordingly modified, with costs against the plaintiff

The instant case does fall under subsection (a), but under subsection (b), of section in both instances.

1544 above-quoted, as there is here no fiduciary heirs, first heirs, legatee or donee.
Under the subsection, the tax should have been paid before the delivery of the
properties in question to P. J. M. Moore as trustee on March 10, 1924.

If death is the generating source from which the power of the estate to impose
inheritance taxes takes its being and if, upon the death of the decedent, succession takes
place and the right of the estate to tax vests instantly, the tax should be measured by
the value of the estate as it stood at the time of the decedent's death, regardless of any
subsequent contingency value of any subsequent increase or decrease in value.

Were we to hold that the payment of the tax could be postponed or delayed by the
creation of a trust of the type at hand, the result would be plainly disastrous. The
collection of the tax would then be left to the will of a private individual.

The delinquency in payment occurred on March 10, 1924, the date when Moore became
trustee. The interest due should be computed from that date and it is error on the part
of the defendant to compute it one month later. The provisions cases is mandatory
(see and cf. Lim Co Chui vs. Posadas, supra), and neither the Collector of Internal
Revenuen or this court may remit or decrease such interest, no matter how heavily it
may burden the taxpayer.
People vs. Santos, May 20, 2015 Arguments of the Prosecution: The prosecution alleges that both accused are guilty
of the crime charged, of failure to file a return and pay the tax under Section 255 of
BAUTISTA, J: the 1997 NIRC, for the following reasons: (1) that the accused, who are heirs, are the
persons required under Sections 90(B) and 91 of the 1997 NIRC or by rules and
THE CASE: regulations to file an Estate Tax Return and pay the tax due thereon; (2) that the Deed
of Transfer was executed by the accused in order to avoid the payment of Estate Tax
The accused, Luz A. Santos and Ricardo A. Santos, being legal within six (6) months from the death of the decedent; (3) that the accused presented
falsified Certificate Authorizing Registration ("CAR") and Tax Clearance Certificate
heirs and taxpayers, are charged for violation of Section 255 of the 1997
("TCC") to effect the transfer of the properties without payment of the required taxes;
National Internal Revenue Code, as amended ("NIRC",) for failure to and (4) that accused cannot claim the defense of tax amnesty as they failed to prove
their availment thereof.
file an Estate Tax Return and to pay the Estate Tax due thereon_ by use
Arguments of the Accused: The accused, on the other hand, claim that the
of a falsified Deed of Transfer of real property and other documents. prosecution failed to establish that they committed the offense under Section 255 of
the 1997 NIRC by failing to file a return and pay the tax due thereon since payment
FACTS: was made as shown by their availment of tax amnesty and / obtaining a TCC.

On December 12, 2007, the prosecution filed an Information1 before the First
Division of the Court of Tax Appeals (" CTA") charging accused Felino A. Santos, ISSUE:
Luz A. Santos and Ricardo A. Santos:
WHETHER OR NOT ACCUSED LUZ A. SANTOS AND RICARDO A. SANTOS
'That on or about November 15, 2003, or on ARE GUILTY OF VIOLATING SECTION 255 OF THE 1997 NIRC FOR
es thereafter, in Makati City, and within the jurisdiction of this Honorable Court, FAILURE TO FILE AN ESTATE TAX RETURN AND TO PAY THE TAX DUE
theabove-named accused, being taxpayers and legal heirs of the estate of the late THEREON BY MEANS OF A FALSIFIED DEED OF TRANSFER OF REAL
Iluminada A. Santos, and with intent to deprive the government of the tax due it, did PROPERTY AND OTHER DOCUMENTS.
then and there, willfully, unlawfully and feloniously, conspired and confederated with
each other by failing to file estate tax return and pay the estate tax due with the
Bureau of Internal Revenue in accordance with the law, arising from the death of said RULING:
Iluminada A. Santos who died on the aforestated date, through the use of falsified
deed of transfer of real property and other documents, to the damage and prejudice of At the outset, it must be stated that this decision is limited to accused Ricardo A.
the Government in the amount of Twelve Million Seven Hundred Fifty Eight Santos. Considering that the Court did not acquire jurisdiction over the person of
Thousand Two Hundred Fifteen Pesos and Eighty Seven Centavos (Php accused Luz A. Santos, it cannot pass upon her guilt or innocence.37 In the
12,758,215.87), more or less, exclusive of other penalties,surcharges and interest.’ Information, accused Ricardo A. Santos was charged of violating Section 255 of the
1997 NIRC by conspiring with his coaccused in failing to file the Estate Tax Return (B) Time for Filing. - For the purpose of determining the estate tax provided for in
and to pay the Estate due on the estate left by Iluminada A. Santos, with the common Section 84 of this Code, the estate tax return required under the preceding Subsection
intent to deprive the Government of the proper tax due to it in the approximate (A) shall be filed within six (6) months from the decedent's death. XXX
amount of Phpl2,758,215.87, exclusive of other penalties, surcharges and interest,
through falsifying a Deed of Transfer of real and other documents. SECTION 91. Payment of Tax. -

Willful failure to pay tax and willful failure to make a return, are being attributed to (A) Time of Payment. - The estate tax imposed by Section 84 shall be paid at the time
accused Ricardo A. Santos. In accordance with the Section 255, the essential the return is filed by the executor, administrator or the heirs. xxx
elements of the said offense are:
(C) Liability for Payment. - The estate tax imposed by Section 84 shall be paid by the
1. The accused is a person required to make or file a return and/ or pay the tax; executor or administrator before delivery to any beneficiary of his distributive share
of the estate. Such beneficiary shall, to the extent of his distributive share of the
2. The accused failed to make or file the return and/ or pay the tax at the time estate, be subsidiarily liable for the payment of such portion of the estate tax as his
required by law; distributive share bears to the value of the total net estate. For the purpose of this
Chapter, the term 'executor' or 'administrator' means the executor or administrator of
and the decedent, or if there is no executor or administrator appointed, qualified, and
acting within the Philippines, any person in actual or constructive possession of any
3. Failure to make or file the return and/ or pay the tax, was willful.
property of the decedent."
As provided above, six (6) months after the death of the decedent, it is the duty of the
1.) Accused is the person required to make or file a return and/or pay the executor, the administrator, or the heir the decedent to file the Estate Tax Return. It is
tax. also the duty of the said executor, administrator, or heir/ s to pay the Estate Tax at the
time ~ the return is filed. In the present case, no one was appointed as executor or
The following provisions lifted from the 1997 NIRC relates to the person/ s legally administrator. Therefore, the responsibility lies upon the heirs to file the return and
obligated to file the Estate Tax Return and pay the Estate Tax. pay the tax. On November 15, 2003, Iluminada A. Santos died leaving as one of her
heirs herein said accused Ricardo A. Santos. Therefore as an heir, accused Ricardo
"SECTION 90. Estate Tax Returns. - (A) Requirements. - In all cases of transfers
A. Santos is duty bound to make or file a return and/ or pay the tax.
subject to the tax imposed herein, or where, though exempt from tax, the gross value
of the estate exceeds Two hundred thousand pesos (P200,000), or regardless of the
gross value of the estate, where the said estate consists of registered or registrable
property such as real property, motor vehicle, shares of stock or other similar property 2.) Accused failed to make or file the return and/or pay the tax at the time
for which a clearance from the Bureau of Internal Revenue is required /\ // as a required by law.
condition precedent for the transfer of ownership hereof in the name of the transferee,
To reiterate, it is the responsibility of accused Ricardo A. Santos to file the Estate Tax
the executor, or the administrator, or any of the legal heirs, as the case may be, shall
Return and pay the Estate Tax. However, records reveal that no Estate Tax Return
file a return under oath in duplicate, setting forth: XXX XXX XXX
was executed by the accused after the death of Iluminada A. Santos. Instead, what
was entered into was a Deed of Transfer40 dated June 7, 2004 and an undated Deed
of Donation41 with a Jurat dated June 5, 2003.
3.) That failure to make or file the return and/or pay the tax, was willful.
In order for the act of non-filing of return or non-payment of tax be deemed a
criminal act, the act must be "willful," a voluntary, intentional violation of a known
legal duty.44 Willfulness connotes the existence of 11 knowledge 11 and 11
voluntariness, 11 that is, the taxpayer is aware or knows its/his/her tax liability but
voluntarily and intentionally refuses to pay.
The prosecution, in proving that accused Ricardo A. Santos willfully failed to file an
Estate Tax Return and pay the Estate Tax, relied solely on the date of execution
provided on the face of the Deed of Transfer. Records reveal that the Deed of
Transfer was executed on June 7, 2004, approximately seven (7) months after the
death of Iluminada A. Santos, that it was entered into in Makati City, and that it was
acknowledged on the same date before a notary public, also in Makati City.
Willfulness involves the mental state of the offender. The fact that the accused paid
the Estate Tax in the amount of Php626,761.20 with the intent to avail of the tax
amnesty, albeit invalid, shows the lack of intent to avoid tax liability.
Considering the foregoing, as to the last element of the offense charged, the Court
finds insufficient proof. It may be impossible to imagine for someone, other than the
heirs of Iluminada A. Santos, including accused Ricardo A. Santos, to falsify the
Deed of Transfer and commit all the acts leading to the transfer of title over the
properties involved since it is the heirs who are benefitted thereby. However, the
mere fact that accused Ricardo A. Santos benefits from the forgery does not mean
that he is the author thereof.
DISPOSITIVE PORTION: Therefore, the Court is convinced that the
prosecution has failed to establish the guilt of accused Ricardo A. Santos beyond
reasonable doubt
SECOND DIVISION 1. The allegation he had made in various pleadings that he is an adopted son of
the couple
EUGENIA D. POLIDO, G.R. No. 170632 2. His Motion to Set Affirmative Defenses for Preliminary Hearing.
Petitioner,
Present:
And he moved to covert the case to an action for partition, at his instance, of the
QUISUMBING, *J., Chairperson, estate of his grandfather Narciso Polido, father of petitioner’s husband and Gasat’s
CARPIO,** mother, and to require petitioner to file income tax returns and pay the estate tax due.
- versus - CARPIO MORALES,
TINGA, and The trial court denied Gasat’s motion to convert the case to an action for partition and
VELASCO, JR., JJ. granted petitioner’s motion for judgement on the pleadings. The Court resolved to
grant the motion for judgement because the defense that he is an adopted child of the
Promulgated: plaintiff is withdrawn by the defendant himself. By withdrawing his defense, he is
HON. COURT OF APPEALS and July 10, 2007 deemed to have admitted the main allegation of the plaintiff that he is not an adopted
MARIANO P. GASAT, child. On the motion of the defendant that the instant action be converted into a
Respondents.
partition and that the plaintiff be ordered to file her real estate tax return, the same is
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x denied for lack of merit.
CARPIO MORALES, J.:
RTC : The RTC resolves to grant the motion for judgment on
the ground that the defense that he is an adopted child of the plaintiff is
Facts: withdrawn by the defendant himself. By withdrawing his defense, he is
deemed to have admitted the main allegation of the plaintiff that he is
After the death of her husband Jacinto Polido, Eugenia Duque Polido petitioner, tried not an adopted child. On the motion of the defendant that the instant
to withdraw the joint savings deposit they maintained at the PNB, but failed because action be converted into a partition and that the plaintiff be ordered to
Mariano Gasat, herein respondent who claimed to be the couple’s adopted child, file her real estate tax return, the same is denied for lack of merit.
objected thereto. Gasat argued that even assuming but without admitting that the
defendant’s adoption paper is ineffective, still he cannot be deprived of his CA : The Court of Appeals denied his motion and dismissed his
inheritance from the Estate of Jacinto Polido because said deceased and plaintiff are appeal.On Motion for Reconsideration, however, the Court of Appeals,
childless and all the properties subject of inheritance are exclusive proper of the late by Resolution dated July 19, 2005, admitted Gasats docket fee.
Jacinto Polido, the same being inherited from his late father, NARCISO POLIDO[,] Petitioner filed a Motion for Reconsideration, which the Court of
who died in Hawaii USA. Gasat subsequently filef an Omnibus Motion withdrawing : Appeals denied.
Issue : WON Gasat, who is a son of Polido’s sister Petra P. Gasat, could inherit Let the case be REMANDED to the trial court which is directed to continue
from Polido.
with dispatch its proceedings on and/or resolve the case in light of the foregoing
discussions.

Ruling :

Yes. Section 97 of the National Internal Revenue Code states: If a bank

has knowledge of the death of a person, who maintained a bank deposit account alone, Costs against petitioner.
or jointly with another, it shall not allow any withdrawal from the said deposit
account unless the Commissioner had certified that the taxes imposed thereon by this SO ORDERED.
Title have been paid; Provided, however, That the administrator of the estate or any one
(1) of the heirs of the decedent may, upon authorization by the Commissioner, withdraw
an amount not exceeding Twenty thousand pesos (P20,000) without the said
certification. For this purpose, all withdrawal slips shall contain a statement to the effect
that all of the joint depositors are still living at the time of withdrawal by any one of the
joint depositors and such statement shall be under oath by the said depositors. There
being no ground to merit petitioners Motion for Judgment on the Pleadings, the trial
court erred in granting the same.

WHEREFORE, the assailed petition is DENIED. The Court of Appeals

Resolution admitting respondents payment of docket fee is upheld.

The Order of the Regional Trial Court of Camiling, Tarlac, Branch 68

dated December 7, 2004 granting petitioners Motion for Judgment on the Pleadings
is REVERSED and SET ASIDE.
COMMISSIONER OF INTERNAL REVENUE, petitioner, Commissioner of Internal Revenue has proposed to hold Manuel B. Pineda liable for
vs. the payment of all the taxes found by the Tax Court to be due from the estate in the
MANUEL B. PINEDA, as one of the heirs of deceased ATANASIO PINEDA, respondent. total amount of P760.28 instead of only for the amount of taxes corresponding to his
share in the estate.
G.R. No. L-22734 September 15, 1967

BENGZON, J.P., J.:

Case for the respondent:

Respondent argues that he is liable to only that proportionate part or portion

Facts: pertaining to him as one of the heirs.
1. Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and 15
children, the eldest of whom is Atty. Manuel Pineda.
2. Estate proceedings were had in Court so that the estate was divided among Ruling/Ratio:
and awarded to the heirs.
3. Atty Pineda's share amounted to about P2,500.00. YES. The Government can require Atty. Pineda to pay the full amount of the taxes
4. After the estate proceedings were closed, the BIR investigated the income tax assessed. The reason is that the Government has a lien on the P2,500.00 received by
liability of the estate for the years 1945, 1946, 1947 and 1948 and it found that him from the estate as his share in the inheritance, for unpaid income taxes for which
the corresponding income tax returns were not filed. said estate is liable. By virtue of such lien, the Government has the right to subject the
5. Thereupon, the representative of the Collector of Internal Revenue filed said property in Pineda's possession to satisfy the income tax assessment. After such
returns for the estate issued an assessment and charged the full amount to the payment, Pineda will have a right of contribution from his co-heirs, to achieve an
inheritance due to Atty. Pineda who argued that he is liable only to extent of adjustment of the proper share of each heir in the distributable estate. All told, the
his proportional share in the inheritance. Government has two ways of collecting the tax in question. One, by going after all
the heirs and collecting from each one of them the amount of the tax proportionate to
the inheritance received; and second, is by subjecting said property of the estate
Issue: which is in the hands of an heir or transferee to the payment of the tax due. This
second remedy is the very avenue the Government took in this case to collect the tax.
Can BIR collect the full amount of estate taxes from an heir's inheritance?
The Bureau of Internal Revenue should be given, in instances like the case at bar, the
necessary discretion to avail itself of the most expeditious way to collect the tax as
may be envisioned in the particular provision of the Tax Code above quoted, because
Case for the petitioner:
taxes are the lifeblood of government and their prompt and certain availability is an
imperious need.
G.R. No. L-28821 December 19, 1980 Respondent Commissioner of Internal Revenue filed a Motion for Execution on August
1, 1967 before respondent Court of Tax Appeals. Petitioner filed an opposition on
LILIA YUSAY GONZALES, as Judicial Co-Administratrix of the Intestate August 11, 1967, contenting that it should be the Court of First Instance of Iloilo before
Estate of the late MATIAS YUSAY, petitioner, which Special Proceedings (Intestate Estate of the late Matias Yusay) was pending that
vs. should enforce the decision
THE COURT OF TAX APPEALS and THE COMMISSIONER OF INTERNAL
REVENUE, respondents. On September 11, 1967, respondent Court of Tax Appeals granted the writ of
execution.
Facts:
Issue:
On April 18, 1980, petitioner filed before the Court of Tax Appeals a petition for review
of the assessment of respondent Commissioner of Internal Revenue of the estate and whether or not respondent Court of Tax Appeals committed a grave abuse of discretion
inheritance taxes of the estate of the late Matias Yusay on the ground for prescription, tantamount to lack of jurisdiction when it ordered the execution of the decision

Respondent Court of Tax Appeals rendered judgement on January 11, 1962, holding Held:
that the assesment had prescribed
Respondent Court of Tax Appeals acquired jurisdiction to review the assessment of
Respondent Commissioner of Internal Revenue appealed to the Supreme Court. In a respondent Commissioner of Internal Revenue when petitioner, herself, initiated CTA
decision dated November 24, 1966, this Court upheld the Commissioner of Internal Case
Revenue and reversed the respondent Court of Tax Appeals
When the record of CTA Case No. 777 was returned to the respondent Court of Tax
Petitioner filed a motion for reconsideration dated December 27, 1966, praying that the Appeals, it must in a ministerial manner enforce the judgment as rendered by this Court
decision be amended so that the liability for the estate and inheritance taxes to be paid 'm G.R. No. L-19495. Under Section 8 of Rule 39 of the Rules of Court, the writ of
be alloted as 1/3 to petitioner and 2/3 to administratrix Florencia P. Vda. de Yusay. 5 execution must issue in the name of the Republic of the Philippines from the court in
which the judgment or order is entered.
This Court, on April 24, 1967, ruled that when petitioner represented her co-
administratrix and the whole estate of Matias Yusay, she risked being ordered to pay When this Court ordered "petitioner Lilia Yusay Gonzales to pay the estate and
the whole assessment, should the assessment be sustained. Petitioner was estopped inheritance taxes of the estate of Matias Yusay without prejudice to reimbursement
from denying liability for the whole tax. As administratrix, petitioner is liable for the from her administratrix Florencia P. Vda. de Yusay, for the latter's corresponding tax
entire inheritance tax although her liability would not exceed the amount of her share liability, it did so,realizing that the properties of the estate have already- been
in the estate. The entire inheritance tax which amounts to P39,178.12 excluding distributed to the heirs (1/3 to petitioner and 2/3 to Florencia P. Vda. de Yusay) as the
penalties is obviously much less than her distributive share. 6 amended project of partition in the intestate case was affirmed by this Court in G.R.
No. L-11378
To rule that the proper procedure would be for the decision of this Court to be filed in
Special Proceedings of the Court of First Instance of Iloilo as a money claim is not only
too late, but also impractical circuitous, and a cumbersome procedure that would lead
to further delay in the enforcement of the judgment in this case which is for tax liability.
We cannot ignore that there has been a delay of about 29 years in the payment of these
taxes.

Respondent Court of Tax Appeals did not commit an error, much less abuse of
discretion, in ordering the execution of the decision of this Court

Separate Opinions

AQUINO, J., concurring:

I concur because the Tax Court can enforce its judgment by execution (Ipekdjian vs.
Court of Tax Appeals, 118 Phil. 63).

If the intestate proceedings had really been closed, the closure was erroneous because
no judge can authorize the delivery of a distributive share without payment of the estate
tax. A document regarding( legacy and inheritance cannot be registered without proof
of payment of the estate and inheritance taxes (Secs. 103 and 104, Tax Code; Secs. 115,
116 and 119 [b] 1977 Tax Code).
PASTOR vs CTA PASTOR, JR. and his sister SOFIA filed their opposition to the petition for probate and
the order appointing QUEMADA as special administrator. PROBATE COURT issued
GR No. L-56340, June 30,1983 an order allowing the will to probate.

FACTS: On December 5, 1972, the PROBATE COURT issued an order allowing the will
to probate. Appealed to the Court of Appeals, the order was affirmed in a decision
dated May 9, 1977. On petition for review, the Supreme Court dismissed the
Pastor Sr. a Spanish subject died survived by his Spanish spouse Sofia Bossio (who petition in a minute resolution dated November 1, 1977 and remanded the same
also died in 1966), their two legitimate children, Pastor Jr. and Sofia, and an illegitimate to the PROBATE COURT after denying reconsideration on January 11, 1978.
(not natural) child by the name of Lewelyn Quemada.

For two years after remand of the case to the PROBATE COURT, QUEMADA filed
Quemada filed a petition for probate of allowance of an alleged holographic will of pleading after pleading asking for payment of his legacy and seizure of the properties
Pastor Sr. The will contained only one testamentary disposition: a legacy in favor of subject of said legacy. PASTOR, JR. and SOFIA opposed these pleadings on the
Quemada consisting of 30% of Pastor Sr’s 42% share in operation of Atlas Mining. In ground of pendency of the reconveyance suit with another branch of the Cebu Court of
Nov 1970, The Probate Court, appointed Quemada as special administrator of the entire First Instance. All pleadings remained unacted upon by the PROBATE COURT.
estate of Pastor Sr, whether or not covered or affected by holographic will.

The PROBATE COURT set the hearing on the intrinsic validity of the will for March
Quemada, as special administrator filed an action for reconveyance against Pastor Jr. 25, 1980, but upon objection of PASTOR, JR. and SOFIA on the ground of pendency
and his wife of the alleged properties of the estate, which included the properties subject of the reconveyance suit, no hearing was held on March 25. Instead, the PROBATE
of the legacy which were in the names of Pastor Jr and his Wife who claimed to be the COURT required the parties to submit their respective position papers as to how much
owners thereof in their own rights and not by inheritance. inheritance QUEMADA was entitled to receive.

While the reconveyance suit was still being litigated in Branch IX of the Court of First
Instance of Cebu, the PROBATE COURT issued the now assailed Order of Execution
and Garnishment, resolving the question of ownership of the royalties payable by Rule 75, Section 1; Rule 76, Section 9.) As a rule, the question of ownership is an
ATLAS and ruling in effect that the legacy to QUEMADA was not inofficious. extraneous matter which the Probate Court cannot resolve with finality. Thus, for the
purpose of determining whether a certain property should or should not be included in
the inventory of estate properties, the Probate Court may pass upon the title thereto, but
The order being "immediately executory", QUEMADA succeeded in obtaining a Writ such determination is provisional, not conclusive, and is subject to the final decision in
of Execution and Garnishment, the oppositors sought reconsideration thereof on the a separate action to resolve title.
same date primarily on the ground that the PROBATE COURT gravely abused its
discretion when it resolved the question of ownership of the royalties and ordered the
payment of QUEMADA's legacy after prematurely passing upon the intrinsic validity When PASTOR, SR. died in 1966, he was survived by his wife, aside from his two
of the will. legitimate children and one illegitimate son. There is therefore a need to liquidate the
conjugal partnership and set apart the share of PASTOR, SR.'s wife in the conjugal
partnership preparatory to the administration and liquidation of the estate of PASTOR,
SR. which will include, among others, the determination of the extent of the statutory
usufructuary right of his wife until her death. (When the disputed Probate order was
ISSUE: issued on December 5, 1972, there had been no liquidation of the community properties
of PASTOR, SR. and his wife.)

Whether the Probate Order resolved with finality the questions of ownership and
intrinsic validity of the will making the legacy made to Quamada proper? So, also, as of the same date, there had been no prior definitive determination of the
assets of the estate of PASTOR, SR. There was an inventory of his properties
presumably prepared by the special administrator, but it does not appear that it was ever
RULING: the subject of a hearing or that it was judicially approved. The reconveyance or
recovery of properties allegedly owned but not in the name of PASTOR, SR. was still
NO. being litigated in another court.

In a special proceeding for the probate of a will, the issue by and large is restricted to There was no appropriate determination, much less payment, of the debts of the
the extrinsic validity of the will, i.e., whether the testator, being of sound mind, freely decedent and his estate. Indeed, it was only in the Probate Order of December 5, 1972
executed the will in accordance with the formalities prescribed by law. (Rules of Court,
where the Probate Court ordered that- the estate of PASTOR, SR. in the face of conflicting claims made by heirs and a non-
heir (MA. ELENA ACHAVAL DE PASTOR) involving properties not in the name of
... a notice be issued and published pursuant to the provisions of Rule 86 of the Rules the decedent, and in the absence of a resolution on the intrinsic validity of the will here
of Court, requiring all persons having money claims against the decedent to file them in question, there was no basis for the Probate Court to hold in its Probate Order of
in the office of the Branch Clerk of this Court." 1972, which it did not, that private respondent is entitled to the payment of the
questioned legacy. Therefore, the Order of Execution of August 20, 1980 and the
subsequent implementing orders for the payment of QUEMADA's legacy, in alleged
Nor had the estate tax been determined and paid, or at least provided for, as of implementation of the dispositive part of the Probate Order of December 5, 1972, must
December 5, 1972. fall for lack of basis.

The net assets of the estate not having been determined, the legitime of the forced heirs The ordered payment of legacy would be violative of the rule requiring prior liquidation
in concrete figures could not be ascertained. of the estate of the deceased, i.e., the determination of the assets of the estate and
payment of all debts and expenses, before apportionment and distribution of the residue
among the heirs and legatees. (Bernardo vs. Court of Appeals, 7 SCRA 367.)
All the foregoing deficiencies considered, it was not possible to determine whether the
legacy of QUEMADA - a fixed share in a specific property rather than an aliquot part
of the entire net estate of the deceased - would produce an impairment of the legitime Neither has the estate tax been paid on the estate of PASTOR, SR. Payment therefore
of the compulsory heirs. of the legacy to QUEMADA would collide with the provision of the National Internal
Revenue Code requiring payment of estate tax before delivery to any beneficiary of his
distributive share of the estate (Section 107 [c])
Finally, there actually was no determination of the intrinsic validity of the will in other
respects. It was obviously for this reason that as late as March 5, 1980 - more than 7
years after the Probate Order was issued the Probate Court scheduled on March 25, WHEREFORE, the decision of the Court of Appeals in CA G.R. No. SP-11373-R is
1980 a hearing on the intrinsic validity of the will. reversed. This case is remanded to appropriate Regional Trial Court for proper
proceedings.

Without a final, authoritative adjudication of the issue as to what properties compose

Polido v. CA The trial court denied Gasat’s motion to convert the case. The court held that
G.R. No. 170632; July 10, 2007 by withdrawing his defense, he is deemed to have admitted the main allegation of the
Carpio-Morales, J.: plaintiff that he is not an adopted child.

Nature of the Case: Court of Appeals:

Special Civil Action in the Supreme Court. Certiorari and Prohibition Upon filing of a Notice of Appeal by Gasat and upon filing an Ex Parte Motion to
Admit Payment of Docket Fee, explaining that it took him some time to earn the
Facts: money…
4. After the death of her husband Jacinto Polido, Eugenia Duque Polido
(petitioner) tried to withdraw the joint savings deposit they maintained at The Court of Appeals denied his motion and dismissed his appeal. On Motion
PNB, but failed because one Mariano Gasat (respondent) who claimed to be for Reconsideration, however, the Court of Appeals admitted Gasat’s docket fee.
the couple’s adopted child, objected thereto
5. Eugenia filed a complaint before the RTC with Motion for the Issuance of a Issue:
Writ of Preliminary Injunction, against Gasat WON CA erred in relaxing in regard to the Rule on non-payment of appellate
a. Reliefs: docket fees
i. Issue a writ of preliminary injunction enjoining and restraining
defendant et al from preventing the officers/employees of PNB Held:
from releasing the money deposited No. The Court denied the assailed petition. The CA Resolution admitting
ii. Pay fees respondent’s payment of docket fee is upheld.
iii. Other reliefs
6. Gasat’s Answer: Eugenia and her husband adopted him and Eugenia cannot 1. The Court held that jurisprudent allows the relaxation of the Rule on non-
withdraw because she should follow legal procedures unless a competent payment of appellate docket fees.
court issues an order allowing her to withdraw a. Notwithstanding the mandatory nature of the requirement, it is
7. Later, Gasat filed an Omnibus Motion withdrawing the allegation he had recognized that its strict application is qualified by the following:
made as to the issue of being adopted and he moved to convert the case to an i. Failure to pay those fees within the reglementary period allows
action for partition only discretionary, not automatic, dismissal
8. Eugenia filed an Opposition and moved for Judgement on the Pleadings ii. Such power should be used by the court in conjunction with its
a. She argued that in withdrawing, he practically admitted her (Eugenia) exercise of sound discretion in accordance with the tenets of
material allegations that he is not an adopted child justice and fair play, as well as with a great deal of
circumspection in consideration of all attendant circumstances
Procedural (Court Decisions): 2. As to the process:
Trial Court: a. The Court provides that even assuming that the court will issue an
Order restraining defendant from claiming the bank account, the
 plaintiff still cannot withdraw any amount thereof, because it is a part
of the Estate of Jacinto Polido, and as provided for by laws before the
bank allows any withdrawal, the plaintiff has to follow certain
procedures required by other laws governing estate settlement, that is,
- (a) Payment of Estate Tax, if any; (b) BIR Tax Clearance; (c) Present
a duly published Extrajudicial Partition executed by the heirs
adjudicating said amount to such heir, unless a competent Court issues
an Order allowing the plaintiff to withdraw from said account.
b. Section 97 of the NIRC states: If a bank has knowledge of the death of
a person, who maintained a bank deposit account alone, or jointly with
another, it shall not allow any withdrawal from the said deposit
account unless the Commissioner had certified that the taxes imposed
thereon by this Title have been paid; Provided, however, That the
administrator of the estate or any one (1) of the heirs of the decedent
may, upon authorization by the Commissioner, withdraw an amount
not exceeding P20,000 with the said certification. For this purpose, all
withdrawal slips shall contain a statement to the effect that all of the
joint depositors are still living at the time of the withdrawal by any one
of the joint depositors and such statement shall be under oath by the
said depositors.
CIR v. B.F. Goodrich Phils., Inc. and CA
CTA decision:
CIR vs. B.F. Goodrich Phils., Inc., GR No. 104171 (1999)
- CTA ruled in favor of BIR; MODIFIED deficiency gift tax to P1.3M
J. Panganiban

CA decision:
Facts:
- REVERSED; that the case is not a first assessment nor based on the 5-year
- Private Respondent (PR) BF Goodrich was an American-owned and controlled
period in Sec. 331; it is a case of multiple assessment beyond the 5-year period –
corporation before July 3, 1974
assessment should be based on Sec. 337, which utilizes the very specific terms:
- Central Bank of the Philippines (CBP) required PR to develop a rubber plant to fraud, irregularity, and mistake
approve its manufacture of tires & other rubber products
- PR then purchased parcels of land in Tumajubong, Basilan from the Philippine
ISSUES:
Government in 1961, under the Public Land Act & Parity Amendment to the
1935 Constitution - WON CIR’s right to assess herein deficiency donors tax has prescribed
- On August 2, 1973, Justice Secretary rendered an opinion that upon the - WON herein deficiency donors tax assessment for 1974 is valid
expiration of the Parity on July 3, 1974, ownership rights of Americans over
agricultural lands will be lost
CIR case:
- Following the opinion, PR sold the land to Siltown Realty Philippines, Inc.,
- That CA erred because the ruling was based on factual findings that should have
(SRP) with the latter leasing to PR the land for a period of 25 years, renewable
been left undisturbed on appeal, in the absence of showing of grave abuse of
for another 25 years
discretion
- Based on BIRs Letter of Authority (LOA) No. 10115 dated April 14, 1975, BIR
o SC ruled that CTA’s application of the law is an altogether different
assessed PR for deficiency income tax of P6,005.35, which PR duly paid
matter as it involves a legal question
- Likewise, based on BIRs LOA Nos. 074420 RR and 074421 RR & Memorandum
- CIR insists on Sec. 332, which allows assessment based on false, fraudulent
Authority Reference No. 749157, BIR assessed SRP for deficiency in donors tax
intent to evade tax
of P1.02M in relation to the previous sale (BIR considered sale insufficient,
where difference between FMV and the actual purchase price is taxable donation) o SC ruled that CIR failed to prove fraud
- PR contested this assessment, received another assessment increasing the amount
to P1.09M for deficiency donors tax, surcharge, interest, compromise penalty SC decision:
- PR appealed to CTA
- Yes; applying Sec. 331 (5-year period), the October 17, 1980 & March 1981
assessments were issued beyond the 5-year statute of limitations
- No; BIR failed to show that PR’s 1974 return was filed fraudulently with intent
to evade the payment of correct tax
o Moreover, even though donor’s tax is different from capital gains tax, a
tax on the gain from the sale of the taxpayer’s property forming part of
the capital assets, the tax return filed by PR to reports its income for 1974
was sufficient compliance
o In other words, the fact that the sale transaction may have partly resulted
in a donation does not change the fact that PR already reported its income
for 1974 by filing an income tax return

DISPOSITIVE:
- WHEREFORE, the Petition for Review is DENIED and the assailed Decision of
the CA is AFFIRMED
Philippine American Life and General Insurance Company v. The Secretary of The transaction cannot attract donor’s tax liability since there was no donative intent
Finance and The Commissioner of Internal Revenue and, ergo, no taxable donation, citing BIR Ruling [DA-(DT-065) 715-09] dated
November 27, 2009; that the shares were sold at their actual fair market value and at
G.R. 210987 Nov 24, 2014 J. Velasco arm’s length; that as long as the transaction conducted is at arm’s length––such that a
NATURE OF THE CASE: Petition for Certiorari, Rule 45 bonafide business arrangement of the dealings is done in the ordinary course of
business––a sale for less than an adequate consideration is not subject to donor’s tax;
FACTS and that donor’s tax does not apply to sale of shares sold in an open bidding process.

Philamlife used to own 498,590 class A shares in PHILAMCARE, 49.89% of its RULING AND RATIO
outstanding capital stock. It offered to sell its shares in PHILAMCARE through
bidding. The shares were sold to STI Investments for 2,190,000 million USD. Yes. The price difference is subject to Donor’s tax.

Philamlife filed an application for a certificate authorizing registration/tax clearance The absence of donative intent does not exempt the sales of stock transaction from
with the BIR to facilitate the transfer of shares. However, it was informed that it donor's tax since Sec. 100 of the NIRC categorically states that the amount by which
needed to secure a BIR ruling for its application due to potential donor’s tax liability. the fair market value of the property exceeded the value of the consideration shall be
deemed a gift.1âwphi1 Thus, even if there is no actual donation, the difference in
Philamlife requested a ruling to confirm that the sale was not subject to donor’s tax.
price is considered a donation by fiction of law.
CIR Ruling:
Moreover, Sec. 7(c.2.2) of RR 06-08 does not alter Sec. 100 of the NIRC but merely
As determined by the Commissioner, the selling price of the shares thus sold was sets the parameters for determining the "fair market value" of a sale of stocks. Such
lower than their book value based on the financial statements of PhilamCare as of the issuance was made pursuant to the Commissioner's power to interpret tax laws and to
promulgate rules and regulations for their implementation.
end of 2008. The Commissioner held donor’s tax became imposable on the price
difference pursuant to Sec. 100 of the NIRC. 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
SECRETARY OF FINANCE: Upheld the CIR Ruling
NIRC.26 Instead, it merely called for the strict application of Sec. 100, which was
COURT OF APPEALS: Upheld Secretary of Finance already in force the moment the NIRC was enacted.

ISSUES: W/N the price difference in the sale of shares is subject to Donor’s tax DISPOSITIVE

PETITIONER: WHEREFORE, the petition is hereby DISMISSED.

TOLENTINO VS. SECRETARY OF FINANCE Case for the Petitioners: The statute is tantamount to claims of regressivity, denial of
due process, equal protection of law, and impairment of contracts.
G.R. No. 115455; October 30, 1995

SC RULING WITH RATIO: NO.

NATURE OF THE CASE: Certiorari and Prohibition.
1. The legislature is not required to adhere to a policy of “all or none” in
choosing the subject of taxation.
2. If the press is now required to pay a value-added tax on its transactions, it is
not because it is being singled out, much less targeted, for special treatment
but only because of the removal of the exemption previously granted by law.
MENDOZA, J:
The withdrawal of exemption is all that is involved in this case. Other
transactions, likewise previously granted exemption, have been delisted as
part of the scheme to expand the base and the scope of the VAT system.
FACTS: 3. The law would perhaps be open to the charge of discriminatory treatment if
the only privilege withdrawn had been that granted to the press. But that is not
1. RA 7716 seeks to widen the tax base of the existing VAT system and enhance the case.
its administration by amending the NIRC. 4. The Free Exercise of Religion Clause does not prohibit imposing a genrally
2. The contention of the petitioners is that in enacting RA 7716, or the Expanded applicable sales and use tax on the sale of religious materials by a religious
Value-Added Tax Law, Congress violated the Constitution because although organization.
House Bill No. 1197 had originated in the House of Representatives, it was 5. The inherent power of the State to tax, which is vested in the legislature,
not passed by the Senate but was simply consolidated with the Senate version includes the power to determine whom or what to tax, as well as how much to
in the Conference Committee to produce the bill which the President signed tax.
into law.
3. The effect of the amendment is to remove exemptions, as far as the VAT is
concerned. DISPOSITIVE:

The Court have endeavored to discuss, within limits, the validity of Republic Act No.
ISSUE: WON the withdrawal of exemption goes against constitutional policy. 7716 in its formal and substantive aspects as this has been raised in the various cases
before us. To sum up, the Court holds:
(1) That the procedural requirements of the Constitution have been complied with by
Congress in the enactment of the statute;
(2) That judicial inquiry whether the formal requirements for the enactment of
statutes—beyond those prescribed by the Constitution—have been observed is
precluded by the principle of separation of powers;
(3) That the law does not abridge freedom of speech, expression or the press, nor
interfere with the free exercise of religion, nor deny to any of the parties the right to
an education; and
(4) That, in view of the absence of a factual foundation of record, claims that the law
is regressive, oppressive and confiscatory and that it violates vested rights protected
under the Contract Clause are prematurely raised and do not justify the grant of
prospective relief by writ of prohibition.
WHEREFORE, the petitions in these cases are DISMISSED.
Abakada Guro Party List, et.al vs. Ermita

GR No. 168056, September 1, 2005 Issues:

Austria-Martinez, J. 1. WON Bicameral Committee should have acted on the no-pass on provision.
2. WON RA No. 9337 is violative of Sec. 24 of Article VI of the Constitution.
3. WON RA No. 9337 is a stand-by authority of the Executive.
4. WON the right to credit input VAT has become a vested right.
FACTS:

1. Motions for Reconsideration were filed by petitioners, ABAKADA Guro party Held:
List. They insisted that the bicameral conference committee should not have
acted on the no pass-on provisions since there is no disagreement between
House Bill Nos. 3705 and 3555 and Senate Bill No. 1950 with regard to the no
pass-on provision for the sale of service for power generation because both the 1. Yes. It is incorrect to conclude that there is no clash between two opposing forces
Senate and the House were in agreement that the VAT burden for the sale of with regard to the no pass-on provision for VAT on the sale of petroleum products
such service shall not be passed on to the end-consumer. merely because such provision exists in the House version while it is absent in the
As to the no pass-on provision for the sale of petroleum products, petitioners
Senate version. It is precisely the absence of such provision in the Senate bill and the
argue that the fact that the presence of such no pass-on provision in the House
presence thereof in the House bills that causes the conflict. The absence of the provision
version and the absence thereof in the Senate Bill means there is no conflict
in the Senate bill shows the Senate’s disagreement to the intention of the House of
because a House provision cannot be in conflict with something that does not
Representatives make the sellers of petroleum bear the burden of the VAT. Clearly,
exist.
such conflicts and differences between the no pass-on provisions in the Senate and
2. Escudero, et. al., also contend that Republic Act No. 9337 (VAT Reform Act) House bills had to be acted upon by the bicameral conference committee as mandated
grossly violates the constitutional imperative on exclusive origination of by the rules of both houses of Congress. The deletion of the no pass-on provision made
revenue bills under Section 24 of Article VI of the Constitution when the Senate the present VAT law more in consonance with the very nature of VAT which, as stated
introduced amendments not connected with VAT. in the Decision is a tax on spending or consumption, thus, the burden thereof is
3. Petitioners Escudero, et al., also reiterate that R.A. No. 9337 is a stand- by ultimately borne by the end-consumer.
authority to the Executive to increase the VAT rate, especially on account of
the recommendatory power granted to the Secretary of Finance, constitutes
undue delegation of legislative power.
4. Petitioners also contend that even if the right to credit the input VAT is merely 2. No. Article VI, Section 24 of the Constitution provides that “All appropriation,
a statutory privilege, it has already evolved into a vested right that the State revenue or tariff bills, bills authorizing increase of the public debt, bills of local
cannot remove.
application, and private bills shall originate exclusively in the House of
Representatives, but the Senate may propose or concur with amendments.” The Court
reiterates that in making this recommendation to the President on the existence of either 4. No. It is not a property or a property right, and a VAT-registered person’s entitlement
of the two conditions, the Secretary of Finance is not acting as the alter ego of the to the creditable input tax is a mere statutory privilege. The right to credit the input tax
President or even her subordinate. He is acting as the agent of the legislative is a mere creation of law. Prior to the enactment of multi-stage sales taxation, the sales
department, to determine and declare the event upon which its expressed will is to take taxes paid at every level of distribution are not recoverable from the taxes payable. The
effect. The Secretary of Finance becomes the means or tool by which legislative policy concept of "vested right" is a consequence of the constitutional guaranty of due process
is determined and implemented, considering that he possesses all the facilities to gather that expresses a present fixed interest which in right reason and natural justice is
data and information and has a much broader perspective to properly evaluate them. protected against arbitrary state action; it includes not only legal or equitable title to the
His function is to gather and collate statistical data and other pertinent information and enforcement of a demand but also exemptions from new obligations created after the
verify if any of the two conditions laid out by Congress is present. right has become vested. Rights are considered vested when the right to enjoyment is a
present interest, absolute, unconditional, and perfect or fixed and irrefutable.

3. No. The intent of the House of Representatives in initiating House Bill Nos. 3555
and 3705 was to solve the country’s serious financial problems. It was stated in the Motions for Reconsideration are hereby DENIED WITH FINALITY.
respective explanatory notes that there is a need for the government to make significant
expenditure savings and a credible package of revenue measures. These measures
include improvement of tax administration and control and leakages in revenues from
income taxes and value added tax. It is also stated that one opportunity that could be
beneficial to the overall status of our economy is to review existing tax rates, evaluating
the relevance given our present conditions. Thus, with these purposes in mind and to
accomplish these purposes for which the house bills were filed, i.e., to raise revenues
for the government, the Senate introduced amendments on income taxes, which as
admitted by Senator Ralph Recto, would yield about P10.5 billion a year.

Since the objective of these house bills is to raise revenues, the increase in corporate
income taxes would be a great help and would also soften the impact of VAT measure
on the consumers by distributing the burden across all sectors instead of putting it
entirely on the shoulders of the consumers.
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. MAGSAYSAY as the transaction did not fall under the enumeration of transactions deemed sale
LINES as listed either in Section 100(b) of the Tax Code, or Section 4 of R.R. No. 5-87.
Finally, the CTA ruled that any case of doubt should be resolved in favor of private
FACTS: respondents
since Section 99 of the Tax Code which implemented VAT is not an exemption
Pursuant to a government program of privatization, The NDC decided to sell in one provision,
lot its NMC shares and five (5) of its ships, which are 3,700 DWT Tween-Decker, but a classification provision which warranted the resolution of doubts in favor of
"Kloeckner" type vessels.1 The vessels were constructed for the NDC between the taxpayer.
1981 and 1984, then initially leased to Luzon Stevedoring Company, also its Hence CIR appealed the CTA Decision.
wholly-owned subsidiary. Subsequently, the vessels were transferred and leased,
on a bareboat basis, to the NMC.2 The NMC shares and the vessels were offered ISSUE:
for public bidding. Among the stipulated terms and conditions for the public
auction was that the winning bidder was to pay "a value added tax of 10% on the Whether the sale by the National Development Company (NDC) of five (5) of its
value of the vessels."3 On 3 June 1988, private respondent Magsaysay Lines, Inc. vessels to the private respondents
(Magsaysay Lines) offered to buy the shares and the vessels for P168,000,000.00. is subject to value-added tax (VAT) under the National Internal Revenue Code of
The bid was made by Magsaysay Lines, purportedly for a new company still to be 1986 (Tax Code)
formed composed of itself and was approved by the Committee on Privatization, then prevailing at the time of the sale. The facts are culled primarily from the
and a Notice of Award dated 1 July 1988 was issued to Magsaysay Lines who in ruling of the CTA.
turn was assessed of VAT through VAT Ruling No. 568-88 dated 14 December
1988 from the BIR, holding that the sale of the vessels was subject to the 10%
VAT. The ruling cited the fact that NDC was a VAT-registered enterprise, and HELD: NOT SUBJECT TO VAT.
thus its "transactions incident to its normal VAT registered activity of leasing out
personal property including sale of its own assets that are movable, tangible VAT is ultimately a tax on consumption,
objects which are appropriable or transferable are subject to the 10% [VAT]. even though it is assessed on many levels of transactions on the basis of a fixed
percentage.15
CTA ruled that – It is the end user of consumer goods or services which ultimately shoulders the tax,
the sale of a vessel was an "isolated transaction," not done in the ordinary course as the liability therefrom is passed on to the end users by the providers of these
of NDC’s business, goods or services16
and was thus not subject to VAT, which under Section 99 of the Tax Code, who in turn may credit their own VAT liability (or input VAT)
was applied only to sales in the course of trade or business. from the VAT payments they receive from the final consumer (or output VAT).17
The CTA further held that - the sale of the vessels could not be "deemed sale," and The final purchase by the end consumer represents the final link in a production chain
thus subject to VAT, that itself involves several transactions and several acts of consumption.
The VAT system assures fiscal adequacy through the collection of taxes on every
 level of consumption,18 the term "carrying on business" does not mean the performance of a single
yet assuages the manufacturers or providers of goods and services by enabling disconnected act,
them but means conducting, prosecuting and continuing business
to pass on their respective VAT liabilities to the next link of the chain by performing progressively all the acts normally incident thereof;
until finally the end consumer shoulders the entire tax liability. while "doing business" conveys the idea of business being done,
not from time to time, but all the time.
Yet VAT is not a singular-minded tax on every transactional level. "Course of business" is what is usually done in the management of trade or
Its assessment bears direct relevance to the taxpayer’s role or link in the business
production chain.
Hence, as affirmed by Section 99 of the Tax Code and its subsequent Court explained that
incarnations,19 "course of business" or "doing business" connotes regularity of activity.
the tax is levied only on the sale, barter or exchange of goods or services In the instant case, the sale was an isolated transaction.
by persons who engage in such activities, in the course of trade or business. The sale which was involuntary and made pursuant to the declared policy of
These transactions outside the course of trade or business - may invariably contribute Government for privatization
to the production chain, could no longer be repeated or carried on with regularity.
but they do so only as a matter of - accident or incident. It should be emphasized that - the normal VAT-registered activity of NDC is
As the sales of goods or services - do not occur within the course of trade or leasing personal property.21
business,
the providers of such goods or services - would hardly, if at all, have the This finding is confirmed by the Revised Charter22 of the NDC
opportunity which bears no indication that the NDC was created for the primary purpose of
to appropriately credit any VAT liability - as against their own accumulated VAT selling real property.
collections The conclusion that - the sale was not in the course of trade or business,
since the accumulation of output VAT - arises in the first place which the CIR does not dispute before this Court, should have definitively settled
only through the ordinary course of trade or business. the matter.

That the sale of the vessels was not in the ordinary course of trade or business of Any sale, barter or exchange of goods or services not in the course of trade or
NDC business is not subject to VAT.
was appreciated by both the CTA and the Court of Appeals, the latter doing so Accordingly, the Court rules that - given the undisputed finding that
even in its first decision which it eventually reconsidered.20 the transaction in question was not made in the course of trade or business of the
seller, NDC that is,
We cite with approval the CTA’s explanation on this point: the sale is not subject to VAT pursuant to Section 99 of the Tax Code,
In Imperial v. Collector of Internal Revenue, G.R. No. L-7924, September 30,
no matter how the said sale may hew to those transactions deemed sale
1955 (97 Phil. 992),
as defined under Section 100. Petition Denied.
MINDANAO II GEOTHERMAL PARTNERSHIP, Petitioner, 6. CTA First Division’s Ruling: Mindanao II satisfied the twin requirements for
vs. VAT zero rating under EPIRA --- (a) it is a generation company and (b) it derived
COMMISSIONER OF INTERNAL REVENUE, Respondent. sales from power generation;

GR NO. 194367; March 11, 2013 *With respect to the fifth requirement, it has been established that Mindanao II
has timely filed its series of VAT returns in accordance with Atlas.
Carpio, J.
*CTA First Division also held that Mindanao II is entitled to a refund in the
Nature of the case: Petition for review modified amount of 7,703,957.79 pesos. It disallowed 522,059.91 pesos from
input VAT and deducted 18,181.82 from Mindanao II’s sale of a fully depreciated
Facts: 200,000 Nissan Patrol.

Mindanao II v. CIR (GR 193301) o From CTA First Division’s ruling, Mindanao II filed a motion for partial
reconsideration. Mindanao II stated that the sale of the fully depreciated
1. Mindanao II allegedly entered into a Built Operate Transfer (BOT) contract with Nissan Patrol is a one time transaction and is not incidental to its VAT zero
the PNOC for finance, engineering, supply, installation, testing, commissioning, rated operations. Moreover, the disallowed taxes substantially complied with
operation and maintenance of a 48.25 megawatt geothermal power plant, provided the requirements for refund/tax credit.
that PNOC shall apply and deliver the steam to Mindanao II at no cost.
2. Mindanao II alleges that its sale of generated power and delivery of electric o CIR also filed a motion for partial reconsideration. Argument: The judicial
capacity and energy of Mindanao II to NPC is its only revenue-generating activity claims for the first and second quarters of 2003 were filed beyond the period
which is in the ambit of VAT zero-rated sales under EPIRA Law. So, Mindanao allowed by law, as stated in Sec 112 A of the 1997 Tax Code.
believes that the amendment of NIRC of 1997 modified the VAT rate applicable
to sales of generated power by generation companies from 10 to zero percent. 7. CTA Ruling En Banc: denied Mindanao II’s petition and ruled the following:
3. Thus, Mindanao II adopted the VAT zero rating of the EPIRA in computing for
its VAT payable when it filed its quarterly VAT returns. o Sec 112 (A) provides that the reckoning of the two year prescriptive period for
4. In this regard, Mindanao II filed an application for refund and issuance of tax filing the application for refund of input VAT attributable to zero rated sales
credit certificate with the BIR’s Revenue District Office of Kidapawan for the shall be counted from the close of the taxable quarter when the sales were
four quarters of 2003. made
5. As of September 22, 2008, the application for refund by Mindanao II remains o The sale of the fully depreciated Nissan Patrol is incidental to Mindanao II’s
unacted upon by the CIR. Three petitions were filed about the tax refund but they VAT zer rated transactions pursuant to Sec 105
were consolidated in 2006 as they involve the same parties and same subject o Mindanao II failed to comply with the substantiation requirements provided
matter. The only difference lies with the taxable periods involved in each petition. under Section 113 (A) in rel to Sec 237 of 1997 Tax Code
 o The doctrine of strictissisimi juris on tax exemptions cannot be relaxed in the agreed with the CIR’s claim that Sec 229 of NIRC of 1997 is inapplicable in light
present case of this Court’s ruling in Mirant

Mindanao I v. CIR (GR 194637) o CTA Case 7228 – Claim for the first quarter of 2003 had already prescribed
for having been filed beyond the two year prescriptive period
1. Mindanao I entered into a contract of BOT with the PNOC for finance, design, o CTA Case 7286 – Claim for the second quarter of 2003 should be dismissed
construction, testing, commissioning, operation, maintenance and repair of 47 for Mindanao I’s failure to comply with a condition precedent when it failed
megawatt geothermal powerplant. to exhaust administrative remedies by filing its Petition for Review even
2. Under the said BOT contract, PNOC shall supply and deliver steam to Mindanao I before the lapse of 120 day period for the CIR to decide the administrative
at no cost. In turn, Mindanao I will convert the steam into electric capacity and claim
energy for PNOC and shall supply and deliver the same to NPC, for and in behalf o CTA Case 7318 – Petition for review was filed beyond the 30 day prescribed
of PNOC period to appeal to the CTA
3. June 26, 2001 – RA 9136 (EPIRA Law) took effect, and relevant provisions of
NIRC of 1997 were deemed modified. EPIRA was enacted by Congress to ordain *CIR’s MR is Granted, Mindanao I’s partial reconsideration is denied.
reforms in the electric power industry. Under the provisions of EPIRA, the
delivery and supply of electric energy by generation companies became VAT zero Issue: Whether CTA erred in holding that the claim of Mindanao II for the first and
rated, which previously were subject to 10% VAT second quarters of year 2003 has already prescribed pursuant to Mirant case and
4. BIR denied Mindanao I’s application for tax credit/refund. whether administrative claim of Mindanao I were timely filed.
5. CTA Second Division’s Ruling:
Held:
o Pursuant to Sec 112 (A), Mindanao I can only claim 90.27% of the amount of
substantiated excess input VAT because a portion was not reported in its 1. Determination of prescriptive period
quarterly VAT returns
o Out of the 14 million plus excess input VAT applied for refund, only o The pertinent sections of the 1997 Tax Code, the law applicable at the time of
11,657,447.14 can be considered substantiated excess input VAT due to Mindanao II’s and I’s administrative and judicial claims provide:
disallowances by the Independent CPA
o Mindanao I’s administrative claims were filed within the two year prescriptive SEC. 112. Refunds or Tax Credits of Input Tax. -(A) Zero-rated or Effectively
period reckoned from the respective dates of filing of the quarterly VAT Zero-rated Sales. - Any VAT-registered person, whose sales are zero-rated
returns or effectively zero-rated may, within two (2) years after the close of the
taxable quarter when the sales were made, apply for the issuance of a tax
6. CTA Ruling En Banc: denied the petitions filed by the CIR and Mindanao I; credit certificate or refund of creditable input tax due or paid
Subsequently, an amended decision was promulgated and the CTA En Banc attributable to such sales, except transitional input tax, to the extent that
such input tax has not been applied against output tax: Provided, however,
 That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (B) “In case of full or partial denial of the claim for tax refund or tax credit, or the
and Section 108 (B)(1) and (2), the acceptable foreign currency exchange failure on the part of the Commissioner to act on the application within the
proceeds thereof had been duly accounted for in accordance with the rules and period prescribed above, the taxpayer affected may, within thirty (30) days
regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That from the receipt of the decision denying the claim or after the expiration of the
where the taxpayer is engaged in zero-rated or effectively zero-rated sale and one hundred twenty day-period, appeal the decision or the unacted claim with
also in taxable or exempt sale of goods or properties or services, and the the Court of Tax Appeals."
amount of creditable input tax due or paid cannot be directly and entirely
attributed to any one of the transactions, it shall be allocated proportionately o Sec 112 (c) expressly grants the Commissioner 120 days within which to
on the basis of the volume of sales. decide the taxpayer’s claim. Taxpayer cannot simply file a petition with CTA
without waiting for the Commissioner’s decision within the 120 day
o When Mindanao I and II filed their respective admin and judicial claims in mandatory and jurisdictional period.
2005, neither Atlas nor Mirant has been promulgated. Atlas was promulgated o Sec 112 (c) also expressly grants the taxpayer a 30 day period to appeal to
on 8 June 2007 while Mirant was promulgated on 12 September 2008. CTA the decision or inaction of the Commissioner.
o Section 112(A) and (C) must be interpreted according to its clear, plain, and
 So, it is misleading to state that Atlas was controlling doctrine at the time unequivocal language. The taxpayer can file his administrative claim for
of filing of the claims. Hence, the 1997 Tax Code was the applicable law refund or credit at anytime within the two-year prescriptive period. If he files
at the time of filing of the claims in issue. his claim on the last day of the two-year prescriptive period, his claim is still
filed on time. The Commissioner will have 120 days from such filing to
o The burden is on the taxpayer to show that he has strictly complied with the decide the claim. If the Commissioner decides the claim on the 120th day, or
conditions for the grant of the tax refund or credit. does not decide it on that day, the taxpayer still has 30 days to file his judicial
claim with the CTA. This is not only the plain meaning but also the only
Prescriptive period for the filing of administrative claims logical interpretation of Section 112(A) and (C).

o To determine whether the administrative claims of Mindanao I and II for 2003 o Ruling of the Court in Mindanao I and II’s prescriptive judicial claims:
have prescribed, there is no need to rely on either Atlas or Mirant. Section 112
(A) of the 1997 Tax Code is clear.  Mindanao II’s judicial claim for the second quarter of 2003 was
prematurely filed. But it qualifies under the exception to the strict
Prescriptive period for the filing of judicial claims application of the 120+30 day periods
 Mindanao II’s judicial claim for the third quarter of 2003 – filed on time
o In determining whether the claims for 2nd, 3rd and 4th quarters of 2003 have  Mindnao II’s judicial claim for the fourth quarter of 2003 – filed on time
been properly appealed, there is no need to refer to Atlas/Mirant, or even to  Mindnao I’s judicial claim for the second quarter of 2003 – qualifies under
Sec 229 of the Tax Code. Second par of Sec 112 (C) of the Tax Code is clear: the exception to the strict application of the 120+30 day periods
  Mindanao I’s judicial claim for the third quarter of 2003 – filed after the any decision from CIR, then admin claim may be considered to be denied by
prescriptive period inaction.
 Mindanao I filed its judicial claim for the fourth quarter of 2003 – filed o A judicial claim must be filed with the CTA within 30 days from the receipt
after the prescriptive period of the CIR’s decision denying the admin claim or from the expiration of the
120 day period without any action from CIR.
BIR Ruling No. DA-489-03 o All taxpayers can rely on BIR Ruling no DA-489-03 from the time of its
issuance on 10 December 2003 up to its reversal by this Court in Aichi on 6
o States that the taxpayer claimant need not wait for the lapse of the 120 day October 2010, as an exception to the mandatory and jurisdictional 120 + 30
period before it could seek judicial relief with the CTA by way of Petition for day periods.
Review.
o Court said that taxpayers should not be prejudiced by an erroneous “Incidental Transactions”
interpretation by the Commissioner. The reckoning of the prescriptive periods
for input VAT tax refund or credit is a difficult question of law. o Mindanao II’s sale of the Nissan Patrol is said to be an isolated
o Another issue: Whether BIR Ruling No. DA-489-03 is a general interpretative transaction.1âwphi1 However, it does not follow that an isolated transaction
rule applicable to all taxpayers or a specific ruling applicable only to a cannot be an incidental transaction for purposes of VAT liability. Indeed, a
particular taxpayer? reading of Section 105 of the 1997 Tax Code would show that a transaction
"in the course of trade or business" includes "transactions incidental thereto."
 It is a general interpretative rule as it was a response to a query made, not
by a particular taxpayer, but by a government agency tasked with DISPOSITIVE: Wherefore, we partially grant the petitions. The Decision of CTA En
processing tax refunds and credits. Banc are affirmed with modification.

Summary of the rules on the determination of the prescriptive period for filing a
tax refund/credit of unutilized input VAT as provided in Sec 112 of the 1997 Tax
Code:

o An administrative claim must be filed with the CIR within two years after the
close of the taxable quarter when the zero rated/effectively zero rated sales
were made.
o CIR has 120 days from the date of submission of complete documents in
support of the administrative claim within which to decide whether to grant a
refund/issue a tax credit certificate. The 120 day period may extend beyond
the two year period from the filing of administrative claim if the claim is filed
in the later part of the two year period. If the 120 day period expires without
COMMISSIONER OF INTERNAL REVENUE vs. COURT OF APPEALS and CIR avers that to "engage in business" and to "engage in the sale of services" are two different
COMMONWEALTH MANAGEMENT AND SERVICES CORPORATION things. Petitioner maintains that the services rendered by COMASERCO to Philamlife and its
affiliates, for a fee or consideration, are subject to VAT. VAT is a tax on the value added by
G.R. No. 125355. March 30, 2000 the performance of the service. It is immaterial whether profit is derived from rendering the
service.
Nature:
petition for review on certiorari of the decision of the Court of Appeals, reversing that of the The CTA rules in favour of CIR. The CA reversed.
Court of Tax Appeals, which affirmed with modification the decision of the Commissioner of
Internal Revenue ruling that Commonwealth Management and Services Corporation, is liable Issue:
for value added tax for services to clients during taxable year 1988.
Whether or not COMASERCO was engaged in the sale of services and must be liable to pay
Facts: for VAT.

Commonwealth Management and Services Corporation (COMASERCO) is a corporation duly Held:

organized and existing under the laws of the Philippines. It is an affiliate of Philippine
American Life Insurance Co. (Philamlife), organized by the letter to perform collection, VAT is a tax on transactions, imposed at every stage of the distribution process on the sale,
consultative and other technical services, including functioning as an internal auditor, of barter, exchange of goods or property, and on the performance of services, even in the absence
Philamlife and its other affiliates. of profit attributable thereto. The term "in the course of trade or business" requires the regular
conduct or pursuit of a commercial or an economic activity regardless of whether or not the
BIR issued an assessment to COMASERCO for deficiency VAT amounting to P351,851.01 entity is profit-oriented.
for taxable year 1988. COMASERCO’s annual corporate income tax return ending December
31, 1988 indicated a net loss in its operations in the amount of P6,077. The Commissioner of Internal Revenue issued BIR Ruling No. 010-98 emphasizing that a
domestic corporation that provided technical, research, management and technical assistance
COMASERCO asserted that the services it rendered to Philamlife and its affiliates, relating to to its affiliated companies and received payments on a reimbursement-of-cost basis, without
collections, consultative and other technical assistance, including functioning as an internal any intention of realizing profit, was subject to VAT on services rendered. In fact, even if such
auditor, were on a "no-profit, reimbursement-of-cost-only" basis. It averred that it was not corporation was organized without any intention realizing profit, any income or profit
engaged in the business of providing services to Philamlife and its affiliates. It was established generated by the entity in the conduct of its activities was subject to income tax.
to ensure operational orderliness and administrative efficiency of Philamlife and its affiliates,
and not in the sale of services. It was not profit-motivated, thus not engaged in business. In Hence, it is immaterial whether the primary purpose of a corporation indicates that it receives
fact, it did not generate profit but suffered a net loss in taxable year 1988. COMASERCO payments for services rendered to its affiliates on a reimbursement-on-cost basis only, without
averred that since it was not engaged in business, it was not liable to pay VAT. realizing profit, for purposes of determining liability for VAT on services rendered. As long as
the entity provides service for a fee, remuneration or consideration, then the service rendered
is subject to VAT.

At any rate, since taxes are the lifeblood of the nation, statutes that allow exemptions are
construed against the grantee and liberally in favour of the government. Any exemption from
the payment of a tax must be clearly stated in the language of the law; it cannot be merely
implied therefrom. In the case of VAT, Section 109, Republic Act 8424 clearly enumerates the
transactions exempted from VAT. The services rendered by COMASERCO do not fall within
the exemptions.

The Court GRANTS the petition and REVERSES the decision of the Court of Appeals in CA-
G. R. SP No. 37930. The Court hereby REINSTATES the decision of the Court of Tax Appeals
in C. T. A. Case No. 4853.
CIR vs. SM Prime Holdings, Inc.

February 26, 2010 CTA Case No. 7111

On April 16, 2004, the BIR sent a PAN to First Asia for VAT deficiency on cinema
DEL CASTILLO, J.:
ticket sales for taxable year 2000 in the amount of P35,840,895.78. First Asia protested the
PAN through a letter dated April 22, 2004.
On October 5, 2004, the BIR denied the protest and ordered First Asia to pay the VAT
FACTS:
deficiency in the amount of P35,840,895.78 for taxable year 2000.
SM Prime Holdings, Inc. (SM Prime) and First Asia Realty Development Corporation (First
Asia) are domestic corporations duly organized and existing under the laws of the Republic CTA Case No. 7272
of the Philippines. Both are engaged in the business of operating cinema houses, among Re: Assessment Notice No. 008-02
others.
A PAN for VAT deficiency on cinema ticket sales for the taxable year 2002 in the total
CTA Case No. 7079 amount of P32,802,912.21 was issued against First Asia by the BIR.
On September 26, 2003, the Bureau of Internal Revenue (BIR) sent SM Prime a Re: Assessment Notice No. 003-03
Preliminary Assessment Notice (PAN) for value added tax (VAT) deficiency on cinema ticket A PAN for VAT deficiency on cinema ticket sales in the total amount
sales in the amount of P119,276,047.40 for taxable year 2000. In response, SM Prime filed a of P28,196,376.46 for the taxable year 2003 was issued by the BIR against First Asia. On May
letter-protest dated December 15, 2003 11, 2005, the BIR rendered a Decision denying the protests.
On September 6, 2004, the BIR denied the protest filed by SM Prime and ordered it to SM Prime filed a Motion to Consolidate CTA Case Nos. 7085, 7111 and 7272 with
pay the VAT deficiency for taxable year 2000 in the amount of P124,035,874.12. CTA Case No. 7079 on the grounds that the issues raised therein are identical and that SM
Prime is a majority shareholder of First Asia
CTA Case No. 7085
On May 15, 2002, the BIR sent First Asia a PAN for VAT deficiency on Ruling of the CTA First Division
Cinema ticket sales for taxable year 1999 in the total amount Resorting to the language used and the legislative history of the law, it ruled that the
of P35,823,680.93. First Asia protested the PAN in a letter dated July 9, 2002. activity of showing cinematographic films is not a service covered by VAT under the National
On September 6, 2004, the BIR rendered a Decision denying the protest and ordering Internal Revenue Code (NIRC) of 1997, as amended, but an activity subject to amusement tax
First Asia to pay the amount of P35,823,680.93 for VAT deficiency for taxable year 1999. under RA 7160, otherwise known as the Local Government Code (LGC) of 1991. Citing
House Joint Resolution No. 13, entitled Joint Resolution Expressing the True Intent of
Congress with Respect to the Prevailing Tax Regime in the Theater and Local Film Industry ISSUE: Are the gross receipts derived by operators or proprietors of cinema/theater
Consistent with the States Policy to Have a Viable, Sustainable and Competitive Theater and houses from admission tickets subject to VAT?
Film Industry as One of its Partners in National Development, the CTA First Division held
that the House of Representatives resolved that there should only be one business tax applicable
HELD:
to theaters and movie houses, which is the 30% amusement tax imposed by cities and provinces
NO. While (1) the enumeration under Section 108 on the VAT-taxable services is not
under the LGC of 1991. Further, it held that consistent with the States policy to have a viable, exhaustive and (2) the said list includes “the lease of motion picture films, films,
sustainable and competitive theater and film industry, the national government should be tapes and discs”, the said activity however is not the same as showing or exhibition of
precluded from imposing its own business tax in addition to that already imposed and collected motion pictures or films. Thus, since the showing or exhibition of motion pictures or
films is not in the enumeration, the CIR must show that it falls under the phrase
by local government units. The CTA First Division likewise found that Revenue Memorandum
“similar services”.
Circular (RMC) No. 28-2001, which imposes VAT on gross receipts from admission to cinema
houses, cannot be given force and effect because it failed to comply with the procedural due
process for tax issuances under RMC No. 20-86. The enumeration of services subject to VAT
under Section 108 of the NIRC is not
exhaustive
Ruling of the CTA En Banc Section 108 of the NIRC of the 1997 reads:
The CTA En Banc held that Section 108 of the NIRC actually sets forth an exhaustive
enumeration of what services are intended to be subject to VAT. And since the showing or SEC. 108. Value-added Tax on Sale of Services and Use or Lease of
Properties.
exhibition of motion pictures, films or movies by cinema operators or proprietors is not among
the enumerated activities contemplated in the phrase sale or exchange of services, then gross (A) Rate and Base of Tax. There shall be levied, assessed and collected, a
receipts derived by cinema/ theater operators or proprietors from admission tickets in showing value-added tax equivalent to ten percent (10%) of gross receipts derived from
the sale or exchange of services, including the use or lease of properties.
motion pictures, film or movie are not subject to VAT. It reiterated that the exhibition or
The phrase sale or exchange of services means the performance of all kinds
showing of motion pictures, films, or movies is instead subject to amusement tax under the of services in the Philippines for others for a fee, remuneration or
LGC of 1991. As regards the validity of RMC No. 28-2001, the CTA En Banc agreed with its consideration, including those performed or rendered by construction and
First Division that the same cannot be given force and effect for failure to comply with service contractors; stock, real estate, commercial, customs and immigration
brokers; lessors of property, whether personal or real; warehousing
RMC No. 20-86. services; lessors or distributors of cinematographic films; persons engaged
in milling, processing, manufacturing or repacking goods for others;
proprietors, operators or keepers of hotels, motels, rest houses, pension houses,
 inns, resorts; proprietors or operators of restaurants, refreshment parlors, cafes Exhibition in Blacks Law Dictionary is defined as To show or display. x x x
and other eating places, including clubs and caterers; dealers in securities; To produce anything in public so that it may be taken into possession (6th ed.,
lending investors; transportation contractors on their transport of goods or p. 573). While the word lease is defined as a contract by which one owning
cargoes, including persons who transport goods or cargoes for hire and other such property grants to another the right to possess, use and enjoy it on
domestic common carriers by land, air and water relative to their transport of specified period of time in exchange for periodic payment of a stipulated price,
goods or cargoes; services of franchise grantees of telephone and telegraph, referred to as rent (Blacks Law Dictionary, 6th ed., p. 889). x x x
radio and television broadcasting and all other franchise grantees except those Since the activity of showing motion pictures, films or movies by cinema/ theater
under Section 119 of this Code; services of banks, non-bank financial
intermediaries and finance companies; and non-life insurance companies operators or proprietors is not included in the enumeration, it is incumbent upon the court to
(except their crop insurances), including surety, fidelity, indemnity and the determine whether such activity falls under the phrase similar services. The intent of the
bonding companies; and similar services regardless of whether or not the legislature must therefore be ascertained.
performance thereof calls for the exercise or use of the physical or mental
The repeal of the Local Tax Code by the LGC of 1991 is not a legal basis for
faculties. The phrase sale or exchange of services shall likewise include:
the imposition of VAT on the gross receipts of cinema/theater operators or proprietors
(1) The lease or the use of or the right or privilege to use any copyright, patent, derived from admission tickets. The removal of the prohibition (on the national
design or model, plan, secret formula or process, goodwill, trademark, trade
government to tax certain activities) under the Local Tax Code did not grant nor restore
brand or other like property or right;
to the national government the power to impose amusement tax on cinema/theater
xxxx operators or proprietors. Neither did it expand the coverage of VAT.

(7) The lease of motion picture films, films, tapes and discs; and

(8) The lease or the use of or the right to use radio, television, satellite
transmission and cable television time.

A cursory reading of the foregoing provision clearly shows that the enumeration of the
sale or exchange of services subject to VAT is not exhaustive. The words, including, similar
services, and shall likewise include, indicate that the enumeration is by way of example only.
Among those included in the enumeration is the lease of motion picture films, films,
tapes and discs. This, however, is not the same as the showing or exhibition of motion pictures
or films. As pointed out by the CTA En Banc:
Diaz and Timbol v. Sec. of Finance Petitioners also contend that the public nature of the services rendered by tollway
operators excludes such services from the term sale of services under Sec. 108 of the
Petitioners filed a petition for declaratory relief assailing the validity of the impending NIRC. However, in specifically including services such as electric utilities, telephone,
imposition of VAT by the BIR on the collections of tollway operators. They claim telegraph, and broadcasting companies in the list of its VAT covered businesses, Sec.
when Congress enacted the NIRC, it did not intend to include toll fees within the 108 opens other companies rendering public service for a fee to the imposition of VAT.
meaning of services that are subject to VAT. Thus, the Supreme Court issued a TRO
enjoining the implementation of the VAT, and required the Government to comment
on the said petition.

In its Comment, the Government avers that the NIRC imposes VAT on all kinds of
services of franchise grantees, including tollway operations, except where the law
provides otherwise. In their reply to the said Comment, the petitioners point out that
tollway operators cannot be regarded as franchise grantees under the NIRC since they
do not hold legislative franchises.

W/N THE GOVERNMENT IS UNLAWFULLY EXPANDING THE VAT

COVERAGE BY INCLUDING TOLLWAY OPERATIONS IN THE TERMS
FRANCHISE GRANTEES AND SALE OF SERVICES UNDER SEC. 108 OF THE
NIRC?

No, because under Sec. 108 of the NIRC, the law imposes VAT on all kinds of services
rendered in the Philippines for a fee, including those specified in the list. When a
tollway operator takes a toll fee from a motorist, the fee is in effect for the latter’s use
of the tollway facilities over which the operator enjoys private proprietary rights.
Moreover, for services to be subject to VAT, it need not fall under the traditional kinds
of personal and professional services that use human knowledge and skills.
Furthermore, not only do tollway operators come under the broad term “all kinds of
services”, but they also come under the specific class described in Section 108 as all
other franchise grantees who are subject to VAT. Tollway operators are franchise
grantees and they do not belong to exceptions that the NIRC spares from the payment
of VAT.
G.R. No. 164365 June 8, 2007 CTA: Ordered the refund. Services of PTDSL Phils to PTDSL constituted a zero-
rated transaction under the Tax Code. But the CTA found that only the resulting input
COMMISSIONER OF INTERNAL REVENUE, petitioner, VAT of P17,178,373.12 could be refunded the respondent.12
vs.
PLACER DOME TECHNICAL SERVICES (PHILS.), INC., respondent. CA: Affirmed the CTA

Mine tailings started to escape from the San Antonio Mines owned by Marcopper, ISSUE: W/N the services of respondent should have zero vat
causing the cessation of the mining and milling operations and the potential
environmental damage to the rivers and the immediate area. Placer Dome INC (PDI) PETITIONER:
undertook to perform the cleanup and rehabilitation of the rivers.
Following Section 4.102-2(b)(2) of Revenue Regulation No. 5-96, there are only two
PDI engaged PDTSL, a non-resident foreign corporation to carry out the project. categories of services that are subject to zero percent VAT
PDTSL engaged PDTSL Philippines, the respondent, a domestic corporation and
VAT registered entity, to implement the project. They entered into an Implementation 1. services other than processing, manufacturing or repacking for other persons
Agreement for the purpose, and PDTSL Philippines agreed to immediately implement doing business outside the Philippines for goods which are subsequently
the project. exported;
2. and services by a resident to a non-resident foreign client, such as project
The Agreement stipulated that PDTSL was to pay respondent "an amount of money, studies, information services, engineering and architectural designs and other
in U.S. funds, equal to all Costs incurred for Implementation Services performed similar services.21
under the Agreement,"5 as well as "a fee agreed to one percent (1%) of such Costs."
Respondent’s services not being part of the abovementioned, then they are not zero
PTDSL Phils amended its quarterly VAT returns for the last two quarters of 1996, rated.
and for the four quarters of 1997. In the amended returns, respondent declared a total
input VAT payment of P43,015,461.98 for the said quarters, and P42,837,933.60 as HELD: YES
its total excess input VAT for the same period. The respondent filed an administrative
claim for the refund of its reported total input VAT payments in relation to the project The law is very clear. Under the last paragraph [of Section
it had contracted from PDTSL, amounting to P43,015,461.98. Respondent argued that 102(b)],services performed by VAT-registered persons in the Philippines
the revenues it derived from services rendered to PDTSL, pursuant to the Agreement, (other than the processing, manufacturing or repacking of goods for
qualified as zero-rated sales under Section 102(b)(2) of the then Tax Code, since it persons doing business outside the Philippines), when paid in acceptable foreign
was paid in foreign currency inwardly remitted to the Philippines. currency and accounted for in accordance with the rules and regulations of the BSP,
are zero-rated.
The CIR did not act on the claim, so the respondent filed a petition for review with
the CTA, praying for the refund of the excess vat.
Petitioner presently invokes the "destination principle," citing that income is realized. The law neither makes a qualification nor adds a condition in
[r]espondent’s services, while rendered to a non-resident foreign corporation, determining the tax situs of a zero-rated service. Under this criterion, the place where
are not destined to be consumed abroad. Hence, the onus of taxation of the revenue the service is rendered determines the jurisdiction to impose the VAT.
arising therefrom, for VAT purposes, is also within the Philippines. Performed in the Philippines, such service is necessarily subject to its
jurisdiction, for the State necessarily has to have "a substantial connection" to it, in
Confusion in zero rating arises because petitioner equates the performance order to enforce a zero rate. The place of payment is immaterial; much less is the
of a particular type of service with the consumption of its output abroad. place where the output of the service will be further or ultimately used.
The consumption contemplated by law, contrary to petitioner's
administrative interpretation, does not imply that the service be done abroad in PETITION DENIED
order to be zero-rated. Applied to services, the consumption means the
performance or "successful completion of a contractual duty, usually
resulting in the performer's release from any past or future liability
x x x" Its services, having been performed in the Philippines, are therefore
also consumed in the Philippines. Unlike goods, services cannot be physically
used in or bound for a specific place when their destination is determined. Instead,
there can only be a "predetermined end of a course" when determining the service
"location or position x x x for legal purposes."

However, the law clearly provides for an exception to the destination

principle; that is, for a zero percent VAT rate for services that are
performed in the Philippines, "paid for in acceptable foreign currency and accounted
for in accordance with the rules and regulations of the [BSP]." Again, contrary to
petitioner's stand, for the cost of respondent's service to be zero-rated, it need not
be tacked in as part of the cost of goods exported. The law neither
imposes such requirement nor associates services with exported goods.

It simply states that the services performed by VAT-registered persons in the

Philippines — services other than the processing, manufacturing or repacking of
goods for persons doing business outside this country — if paid in acceptable
foreign currency and accounted for in accordance with the rules and regulations of the
BSP, are zero-rated. The service rendered by respondent is clearly different from the
product that arises from the rendition of such service. The activity that creates the
income must not be confused with the main business in the course of which that
Accenture Inc. v. CIR 9. Accenture then filed a Petition for Review with the 1st Division of the CTA
G.R. No. 190102 ; July 11, 2012 (Division), praying for the issuance of a TCC
Sereno, J. 10. CIR argued:
a. Sale by Accenture of goods and services to its clients are not zero-
NATURE OF THE CASE: Petition for review on certiorari of the decision and rated transactions
resolution of the CTA b. Claims for refund are construed strictly against the claimant and
Accenture has failed to prove that it is entitled to a refund, because its
FACTS claim has not been fully substantiated or documented
1. On August 9, 2002, Accenture filed its Monthly VAT Return for July 2002 to 11. Division – denied the Petition of Accenture
August 31, 2002 a. Failure to prove that sale of services to foreign clients qualified for
2. Its quarterly VAT Return for the fourth quarter of 2002 was filed on zero percent VAT
September 17, 2002; and an Amended Quarterly VAT Return on June 21, 12. CTA – Accenture failed to discharge the burden of proving the latter’s
2004 (and same for the months of September 2002 and October 2002) allegation that its clients were foreign-based (affirmed Division)
3. The monthly and quarterly VAT returns of Accenture, notwithstanding its
application of the input VAT credits earned from its zero-rated transactions
against its output VAT liabilities, it still had excess or unutilized input VAT ISSUE/S:
credits (for a total of P37M) WON Accenture is entitled to the VAT refund
4. Out of the P37M, only P35M pertained to the allocated input VAT on
Accenture’s domestic purchases of taxable goods which cannot be directly SC RULING with RATIO:
attributed to its zero-rated sale of services
No. The Supreme Court denied the petition and affirms the resolution of the
5. The excess input VAT was not applied to any output VAT that Accenture was CTA En Banc.
liable for in the same quarter when the amount was earned – or to any of the
succeeding quarters
6. Instead, it was carried forward to Accenture’s 2nd Quarterly VAT Return for DISPOSITIVE:
2003 1. The Court held that the recipient of the service must be doing business outside
7. Thus, Accenture filed with the Department of Finance (DoF) an the Philippines for the transaction to qualify for zero-rating under Section
administrative claim for the refund or the issuance of a Tax Credit Certificate 108(B) of the Tax Code. The Court upholds the position of the CTA en banc
(TCC) that, because Sec. 108(B) of the 1997 Tax Code is a verbatim copy Section
102(b) of the 1977 Tax Code, any interpretation of the latter holds true for the
8. DoF did not act on the claim former
2. It was also held that a taxpayer claiming a tax credit or refund has the burden
of proof to establish the factual basis of that claim. Tax refunds, like tax
exemptions, are construed strictly against the taxpayer. Accenture failed to
discharge this burden. It alleged and presented evidence to prove only that its
clients were foreign entities. However, as found by both the CTA Division
and the CTA En Banc, no evidence was presented by Accenture to prove the
fact that the foreign clients to whom petitioner rendered its services were
clients doing business outside the Philippines
a. Only submitted the Securities and Exchange Commission (SEC)
certifications showing that their clients have not established any
branch offices in the Philippines and billing statements issued to the
said clients
ATLAS CONSOLIDATED MINING & DEVELOPMENT CORPORATION v. of Investments) registration were by themselves not enough for zero-rating to
COMMISSIONER OF INTERNAL REVENUE apply.
G.R. No. 134467. November 17, 1999

Court of Tax Appeals: Petitioner is not VAT-registered for the 1st quarter of
Petition for Review on Certiorari under Rule 45 challenging the decision of the
1990
CA
Court of Appeals: Petitioner is not VAT-registered for the 1st quarter of
PANGANIBAN, J.: 1990; that the “zero-percent rating” of BOI-registered enterprises shall be set in
proportion to the amount of its actual exports; and that EPZA and BOI registration were
FACTS: by themselves not enough for zero-rating to apply.

 Petitioner is engaged in the business of mining, production and sale of various

ISSUE: WON the totality of sales to EPZA-registered enterprises should be zero-rated,
mineral products, consisting principally of copper concentrates and gold.
not merely the proportion which such sales have to the actual exports of the enterprise.
 Respondent [BIR] duly approved petitioner’s application for VAT zero-rating
of the following sales: 1. Gold to the Central Bank (CB); 2. Copper
concentrates to the Philippines Smelting and Refining Corp. (PASAR); and 3.
Case for Petitioner: Petitioner criticizes the respondent commissioner, as its sales to
Pyrite [concentrated] to Philippine Phosphates, Inc. (Philphos).
PASAR and Philphos -- both registered with the BOI (Board of Investments) and EPZA
 Petitioner filed a VAT return with the BIR for the first quarter of 1990 whereby
(Export Processing Zone Authority) as export-oriented entities -- were zero-rated only
it declared its sales described in par. 3 hereof, i.e., to the CB, PASAR and
in proportion to the actual exports made by the two, and not to the entirety of petitioner's
Philphos, as zero-rated sales and therefore not subject to any output VAT.
sales to them.
 Petitioner filed a claim with respondent for refund/credit of VAT input taxes on
its purchase of goods and services for the first quarter of 1990. The respondent
partially allowed the claim of Php 2,518,122.32 for VAT refund/credit while Case for Defendant: Respondent, on the other hand, maintains that before zero-rating
disallowing Php 33,003,934.26. can be applied, petitioner must first show that the entities to which the raw materials
 In upholding the CTA decision, the CA held that Petitioner is not VAT- have been sold are export-oriented, and that their export sales exceed 70 percent of
registered for the 1st quarter of 1990; that the “zero-percent rating” of BOI- their total annual production. Should these conditions be met, zero-rating would apply,
registered enterprises shall be set in proportion to the amount of its actual but only in proportion to the exports actually made.
exports; and that EPZA (Export Processing Zone Authority) and BOI (Board
SC RULING with RATIO: of such sales to the actual exports of the said enterprises. Other than the above
YES, the totality of sales to EPZA-registered enterprises should be zero-rated, modifications, the challenged Decision is AFFIRMED.
not merely the proportion which such sales have to the actual exports of the enterprise.
The Joint Stipulation of Facts expressly states that petitioner’s sales of raw
materials have been approved for zero-rating. Verily, the commissioner has already
conceded that PASAR and Philphos qualify as export-oriented enterprises whose
export sales exceed 70 percent of their total annual production, and that petitioners sales
to them thus qualify for zero-rating.

Finding that the respondent commissioner had indeed already approved the
zero-rating of petitioners past sales to PASAR and Philphos, the CA ruled that indeed,
the BIR has already recognized and admitted that said transactions are zero-rated
(paragraph 3, pages 1-2 of the Joint Stipulation of Facts; page 40-41 of the CTA
Records).

Finally, an examination of Section 4.100.2 of Revenue Regulation 7-95[14] in

relation to Section 102 (b) of the Tax Code shows that sales to an export-oriented
enterprise whose export sales exceed 70 percent of its annual production are to be
zero-rated, provided the seller complies with other requirements, like registration
with the BOI and the EPZA. The said Regulation does not even hint, much less
expressly mention, that only a percentage of the sales would be zero-rated. The
internal revenue commissioner cannot, by administrative fiat, amend the law by
making compliance therewith more burdensome.

WHEREFORE, the Petition is hereby partially GRANTED and the assailed

Decision is MODIFIED as follows: (1) petitioner is deemed VAT-registered for the
first quarter of 1990 and beyond; and (2) it is the totality of petitioner's sales to
Philphos and PASAR that must be taken into account, not merely the proportion
CIR vs Cebu Toyo Corporation
[G.R. No. 149073. February 16, 2005] Issue:
Facts: Whether the CA erred in affirming the CTA granting a refund representing unutilized
Cebu Toyo Corp. (Cebu) is a domestic subsidiary of Toyo Lens Corporation Japan, input VAT on goods
engaged in the and services.
manufacture of lenses and various optical components used in TV set, cameras, CDs,
etc. Its principal office is located at the Mactan Export Processing Zone (MEPZ) as a Ruling:
zone export enterprise registered with the PEZA. It is also registered with the BIR as The petition is denied. Cebu is entitled to the P2.1M tax refund/credit. Petitioner’s
a VAT taxpayer. Cebu sells 80% of its products to its mother corporation, pursuant to contention that respondent is not entitled to refund for being exempt form VAT is
an Agreement of Offsetting. The rest are sold to various enterprises doing business in untenable. This argument turns a blind eye to the fiscal incentives given to PEZA
the MEPZ. registered enterprises under RA 7916. Under this statute, Cebu has to options with
As an export enterprise, respondent sells 80% of its products to its mother respect to its tax burden. It could avail of an income tax holiday pursuant to EO 226,
corporation, the Japan-based Toyo Lens Corporation, pursuant to an Agreement of thus exempting it from income taxes for a number of years (in this case, 4 years) but
Offsetting. The rest are sold to various enterprises doing business in the MEPZ. not from other internal revenue taxes such as VAT; or it could avail of the tax
Inasmuch as both sales are considered export sales subject to Value-Added Tax exemption on all taxes, including VAT under PD 66 and pay only the preferential rate
(VAT) at 0% rate under Section 106(A)(2)(a) of the National Internal Revenue Code, of 5% under RA 7916. Thus, availing of the first option, respondent is not exempt
as amended, respondent filed its quarterly VAT returns from April 1, 1996 to from VAT and it correctly registered itself as a VAT taxpayer. In fine, it is engaged in
December 31, 1997 showing a total input VAT of P4,462,412.63. a taxable rather than exempt transactions. In taxable transactions, the seller (Cebu)
On March 30, 1998, it filed an application for tax credit/refund of VAT paid for the shall be entitled to tax credit for the VAT paid on purchases and leases of goods
period April 1996 to December 1997 amounting to about P4.4 million representing properties or services. Under the VAT system, a zero-rate sale by a VAT-registered
excess VAT input payments. Cebu argues that as a VAT-registered exporter of goods, person, which is a taxable transaction for VAT purposes, shall not result in any output
it is subject to VAT at the rate of 0% on its export sales that do not result in any tax. However, input tax on his purchase of goods, properties or services related to
output tax. Hence, the unutilized VAT input taxes on its purchases of goods and such zero-related sale shall be available as a tax credit or refund. While a zero rating
services related to such zero-rated activities are available as tax credits or refund. The and exemption are computationally the same, they actually differ in several aspects,
BIR opposed this on the following grounds: It failed to show that the tax was to wit:
erroneously or illegally collected; the taxes paid and collected are presumed to have
been made in accordance with law; and that claims for refund are strictly construed A) A zero-rated sale is a taxable transaction but does not result in an output tax while
against the claimant. an exempted
The CTA ruled that not the entire amount claimed for refund by Toyo were actually transaction is not subject to the output tax;
offset against its related accounts. It determined that the refund/credit amounted only B) The input VAt on the purchases of VAT-registered person with zero-rated sales
to P2.1M. The same was affirmed by the CA. may be allowed as tax credits or refunded while the seller in an exempt transaction is
not entitled to any output tax on his purchases despite the issuance of a VAT invoice
or receipt;
C) Persons engaged in transactions which are zero-rated, being subject to VAt, are
required to register while registration is optional for VAt-exempt persons.

Since Cebu did not have any output tax against which said input tax may be
offset, it had the option to file a claim for tax refund/credit of its unutilized input
taxes

WHEREFORE, the petition is DENIED for lack of merit. The assailed Decision
dated July 6, 2001 of the Court of Appeals, in CA-G.R. SP No. 60304 is AFFIRMED
with very slight modification. Petitioner is hereby ORDERED to REFUND or, in the
alternative, to ISSUE a TAX CREDIT CERTIFICATE in favor of respondent in the
amount of P2,158,714.52 representing unutilized input tax payments. No
pronouncement as to costs.
TOSHIBA INFORMATION EQUIPMENT (PHILS.), INC., Petitioner, v. 4. Toshiba filed Department of Finance two separate applications for tax
COMMISSIONER OF INTERNAL REVENUE, Respondent. credit/refund of its unutilized input VAT payments for the first half of 1997 in
the total amount of P3,685,446.73.
G.R. No. 157594 5. The CIR, on the other hand, argued in his Motion for Reconsideration that
March 9, 2010 Toshiba was not entitled to the credit/refund of its input VAT payments
because as a PEZA-registered ECOZONE export enterprise, Toshiba was not
LEONARDO-DE CASTRO, J.: subject to VAT.
6. The CIR contended that under Section 24 of Republic Act No. 7916, a special
Facts:
law, all businesses and establishments within the ECOZONE were to remit to
1. In this Petition for Review on Certiorari under Rule 45, petitioner Toshiba the government five percent (5%) of their gross income earned within the
seeks the reversal and setting aside of the Decision Court of Appeals, which zone, in lieu of all taxes, including VAT. This placed Toshiba within the
found that Toshiba was not entitled to the credit/refund of its unutilized input ambit of Section 103(q) of the Tax Code of 1977, as amended, which
Value-Added Tax (VAT) payments attributable to its export sales, because it exempted from VAT the transactions that were exempted under special laws.
was a tax-exempt entity and its export sales were VAT-exempt transactions. Following Section 4.103-1(A) of Revenue Regulations No. 7-95, the VAT-
2. Toshiba is a domestic corporation principally engaged in the business of exemption of Toshiba meant that its sale of goods was not subject to output
manufacturing and exporting of electric machinery, equipment systems, VAT and Toshiba as seller was not allowed any tax credit on the input VAT it
accessories, parts, components, materials and goods of all kinds, including had previously paid.
those relating to office automation and information technology and all types Issue:
of computer hardware and software, such as but not limited to HDD-CD-
ROM and personal computer printed circuit board. It is registered with the Whether Toshiba is VAT exempt
Philippine Economic Zone Authority (PEZA).
Held:
3. In its VAT returns for the first and second quarters of 1997, filed on April 14,
1997 and July 21, 1997, respectively, Toshiba declared input VAT payments No. In the instant case, among the facts expressly admitted by the CIR and Toshiba in
on its domestic purchases of taxable goods and services in the aggregate sum their CTA-approved Joint Stipulation are that Toshiba “is a duly registered value-
of P3,875,139.65, with no zero-rated sales. Toshiba subsequently submitted added tax entity in accordance with Section 107 of the Tax Code, as amended[,]” that
to the BIR on July 23, 1997 its amended VAT returns for the first and second “is subject to zero percent (0%) value-added tax on its export sales in accordance with
quarters of 1997, reporting the same amount of input VAT payments but, this then Section 100(a)(2)(A) of the Tax Code, as amended.” The CIR was bound by
time, with zero-rated sales totaling P7,494,677,000.00. these admissions, which he could not eventually contradict in his Motion for
Reconsideration of the CTA Decision dated October 16, 2000, by arguing that
Toshiba was actually a VAT-exempt entity and its export sales were VAT-exempt
transactions. Obviously, Toshiba could not have been subject to VAT and exempt
from VAT at the same time. Similarly, the export sales of Toshiba could not have
been subject to zero percent (0%) VAT and exempt from VAT as well.

Toshiba is entitled to refund/credit of unutilized input VAT payments attributable to

its zero-rated sales in the amounts of P1,158,016.82 and P227,265.26, for the first and
second quarters of 1997, respectively, or in the total amount of P1,385,282.08.
FORT BONIFACIO DEVELOPMENT CORPORATION v. COMMISSIONER OF a. VAT was imposed for the first time
INTERNAL REVENUE b. Amended Section 100 of the NIRC to include real properties among the goods
or properties which is made subject to VAT
G.R. No. 158885 and 170680; 02 April 2009; Justice Tinga c. However, provisions of Sec. 105 (transitional input tax) had remained intact
despite the enactment of RA 7716 (105 was renumbered to 111(A).
3. REPUBLIC ACT 8424 introduced the concept of presumptive input tax credit (Sec
111b)
Important notes: a. Sec 111 (B) Presumptive Input Tax Credits. – (1) Persons or firms engaged in
the processing of sardines, mackerel and milk, and in manufacturing refined
1. VAT was first introduced by the enactment of EXECUTIVE ORDER NO. 273 which sugar and cooking oil, shall be allowed a presumptive input tax, creditable
amended several provisions of the Old National Internal Revenue Code of 1986 against the output tax, equivalent to 1 ½% of the gross value in money of their
a. Accommodated the potential burdens of the shift to the VAT system by purchases of primary agricultural products which are used as inputs to their
allowing newly liable VAT-registered persons to avail of a transitional input production. xxx (2) Public works contractors shall be allowed a presumptive
tax credit. input tax equivalent to 1 ½% of the contract price with respect to government
b. Measures that ease the shift to the VAT system: contracts only in lieu of actual input taxes therefrom.
i. Sec 105 (as amended by EO 273). Transitional input tax credits. A
person who becomes liable to VAT or any person who elects to be a
VAT-registered person shall, subject to the filing of an inventory as FACTS:
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 VAT paid on such goods,
materials and supplies, whichever is higher, which shall be creditable 1. Fort Bonifacio Development Corporation (FDBC) is engaged in the development and
against the output tax. sale of real property.
ii. Sec 25. Transitory provisions. (A) All VAT-registered persons shall be 2. In February 8 1995, prior to the enactment of RA 7716, FBDC acquired by way of sale
allowed transitional input taxes which can be credited against output from the national government the land formerly known as the Fort Bonifacio military
tax in the same manner as provided in Sec. 104 of the NIRC as follows: reservation. FBDC did not pay for VAT since real properties were not subject to VAT.
(1) The balance of the deferred sales tax credit account as of 3. From October 1996 onwards, FBDC has been selling lots in Global City to interested
December 31, 1987 which are accounted for in accordance with buyers. Since the effectivity of RA 7716, FBDC’s transactions were made subject to
regulations prescribed therefor; (2) A presumptive input tax VAT.
equivalent to 8% of the value of the inventory as of December 31, 1987 4. FBDC invoked its right to avail of the transitional input tax credit and accordingly
of materials and supplies which are not for sale, the tax on which was submitted an inventory list of real properties it owned, with a total book value of
not taken up or claimed as deferred sales tax credit; and (3) A P71,227,503,200.00.
presumptive input tax equivalent to 8% of the value of the inventory 5. FBDC sold 2 parcels of land to Metro Pacific Corporation in consideration of the
as of December 31, 1987 as goods for sale, the tax on which was not purchase prices at P1,526,298,949.00 and P785,009,018.00.
taken up or claimed as deferred sales tax credit 6. G.R. No. 15885
2. REPUBLIC ACT NO. 7716 amended the Old NIRC by reconstructing the VAT
system
 a. For the 4th quarter of 1996, FBDC earned a total of P3,498,888,713.60 from credit is computed. At the time when transactions on real properties were finally made
the sale of its lots. Output VAT payable to the BIR was P318,080,792.14. subject to VAT (RA 7716), no corresponding amendment was adopted as regards Sec.
FBDC paid a total of P269,340,469.45 and utilized: 105 to provide a differentiated treatment in the application of the transitional input tax
i. P28,413,783.00 representing a portion of its then total credit with respect to real properties or real estate dealers.
transitiona;/presumptive input tax credit of P5,698,200,256.00  RA 7716 clarifies that it is the real properties held primarily for sale to customers or
ii. Regular input tax credit of P20,326,539.69 on the purchase of goods held for lease in the ordinary course of trade or business that are subject to the VAT,
and services and not when the real estate transactions are engaged in by persons who do not sell or
b. FBDC sent 2 letters to the BIR requesting appropriate action on whether its lease properties in the ordinary course of trade or business.
use of its presumptive input VAT on its land inventory in partial payment of  Amendments introduced by RA 7716 to Sec. 100, coupled with the fact that the said
its output VAT for the 4th quarter of 1996. BIR disallowed the use of law left Sec 105 intact, reveal the lack of any legislative intention to make persons or
presumptive input tax credit entities in the real estate business subject to a VAT treatment different from those
i. REASON: REVENUE REGULATION 7-95 (Sec. 4.105-1) and engaged in the sale of other goods or properties or in any other commercial trade or
REVENUE MEMORANDUM CIRCULAR 3-96 business.
7. G.R. No. 170680  CTA’s contention: It would be improper to allow FBDC, which had acquired its
a. For the 3rd quarter of 1997, FBDC made cash payments totaling to properties through a tax-free purchase, to claim the transitional input tax credit.
P347,741,695.74 and utilized its regular input tax credit of P19,743,656.73 on o While it is true, Sec. 25 addressed that inequity. The provision authorized
purchases of goods and services. VAT-registered persons to invoke a presumptive input tax equivalent to 8% of
b. On May 1999, FBDC filed a claim for refund before the BIR for the amount it the value of the inventory as of Dec. 31, 1987 of materials and supplies which
had paid as VAT for the 3rd quarter of 1997 but no action was taken by BIR are not for sale, the tax on which was not taken up or claimed as deferred sales
tax credit, and a similar presumptive input tax equivalent to 8% of the value of
the inventory as of Dec. 31, 1987 of goods for sale, the tax on which was not
ISSUE: taken up or claimed as deferred sales tax credit.
o Purpose behind the transitional input tax credit is not confined to the transition
from sales tax to VAT.
o This interpretation would exclude goods and properties which are acquired
1. Whether Section 105 of the Old NIRC may be interpreted in such a way as to restrict through sale not in the ordinary course of trade or business, donation or
its application in the case of real estate dealers only to the improvements on the real through succession, from the beginning inventory on which the transitional
property belinging to their beginning inventory, and not the entire real property iteself input tax credit is based.
 Sec. 105 states that the transitional input tax credits become available either to (1) a
person who becomes liable to VAT; or (2) any person who elects to be VAT-registered.
HELD: SC ruled in favor of FBDC.
The clear language of the law entitles new trades or business to avail of the tax credit
once they become VAT-registerd.

 On its face, there is nothin in Section 105 of the Old NIRC that prohibits the inclusion
of real properties, together with the improvements thereon, in the beginning inventory
of goods, materials and supplies, based on which inventoory the transitional input tax
EASTERN TELECOMMUNICATIONS PHILIPPINES vs. CIR CTA: Denied the petition for lack of merit.
G.R. No. 168856 August 29, 2012 CTA En Banc: Affirms
MENDOZA, J
ISSUE: Whether ETPI’s failure to imprint the word "zero-rated" on its invoices or
FACTS: Petitioner Eastern Telecommunications Philippines, Inc. (ETPI) is a duly receipts is fatal to its claim for tax refund or tax credit for excess input VAT.
authorized corporation engaged in telecommunications services by virtue of a
legislative franchise. It has entered into various international service agreements with RULING: The petition is bereft of merit.
international non-resident telecommunications companies and it handles incoming
telecommunications services for non-resident foreign telecommunication companies Imprinting of the word "zero-rated" on the invoices or receipts is required.
and the relay of said international calls within the Philippines. In addition, to broaden ETPI argues that the National Internal Revenue Code of 1997 (NIRC) allows VAT-
the coverage of its distribution of telecommunications services, it executed several registered taxpayers to file a claim for refund of input taxes directly attributable to, or
interconnection agreements with local carriers for the receipt of foreign calls relayed otherwise allocable to, zero-rated transactions subject to compliance with certain
by it and the distribution of such calls to the intended local end-receiver. conditions.

From these services to non-resident foreign telecommunications companies, ETPI Nowhere in the NIRC does it appear that the invoices or receipts must have been
generates foreign currency revenues which are inwardly remitted in accordance with printed with the word "zero-rated" on its face or that failure to do so would result in
the rules and regulations of the Bangko Sentral ng Pilipinas to its US dollar accounts the denial of the claim. Such a requirement only appears in Revenue Regulations No.
in banks such as the Hong Kong and Shanghai Banking Corporation, Metrobank and 7-95 which, ETPI insists, cannot prevail over a taxpayer’s substantive right to claim a
Citibank. The manner and mode of payments follow the international standard as set refund or tax credit for input taxes attributable to its zero-rated transactions.
forth in the Blue Book or Manual prepared by the Consultative Commission of Moreover, the lack of the word "zero-rated" on ETPI’s invoices and receipts does not
International Telegraph and Telephony. justify the outright denial of its claim for refund, considering that the zero-rated
nature of the transactions has been sufficiently established by other equally relevant
ETPI seasonable filed its quarterly Value Added Tax Returns. Both ETPI and CIR and competent evidence. Finally, ETPI points out that the danger to be avoided by the
confirmed the veracity of the entries under excess input VAT. questioned requirement, as mentioned by the CTA-En Banc, is more theoretical than
real. This is because ETPI’s clients for its zero-rated transactions are non-resident
Believing that it is entitled to a refund for the utilized input VAT attributable to its foreign corporations which are not covered by the Philippine VAT system. Thus,
zero-rated sales, ETPI filed with the BIR an administrative claim for refund and/or there is no possibility that they will be able to unduly take advantage of ETPI’s
tax credit in the amount of P23,070,911.75 representing the excess input VAT omission to print the word "zero-rated" on its invoices and receipts.
derived from its zero-rated sales for the period from January 1999 to December 1999.
ETPI is mistaken.
Without waiting for the decision of the BIR, ETPI filed a petition for review before
the CTA division.
In this regard, the Court has consistently held that the absence of the word "zero-
rated" on the invoices and receipts of a taxpayer will result in the denial of the claim
for tax refund.
CIR VS AICHI FORGING COMPANY OF ASIA, INC. the two-year period, which expired on Sep 29, 2004, and grounded the
GR No. 184823, Oct. 6, 2010 counting of days on Art. 13, CC
J. del Castillo
CTA en banc decision:
Petition for review on certiorari under Rule 45 of the rules of court seeks to set aside
the July 30, 2008 Decision and October 6, 2008 Resolution of CTA En Banc - Affirmed 2nd division
- That the reckoning of the two-year period provided under Sec. 229 should
Facts: start from the payment of tax subject claim for refund; thus, the claim filed on
Sep 30 2004 was filed on time because Aichi had until Oct 20 2004 within
- Respondent Aichi is a corporation duly organized and existing under the laws which to file its claim for refund
of the RP and engaged in the manufacturing, producing, and processing of
steel and its by products Issue: WON the claim was filed within the two-year prescriptive period provided
o It is registered with BIR as a VAT entity and its products, “close under Sec 112(A) and 229 of NIRC
impression die steel forgings” and “tool and dies” are registered with
the Board of Investments as a pioneer status Case for petitioner:
- Aichi filed on Sep 30 2004 a claim for refund/credit of input VAT for July 1
2002 – Sep 30 2002 for P3.8M with petitioner CIR - Pursuant to Art 13 of CC, since 2004 was a leap year, the filing of claim for
o Same date, it filed a petition for review with CTA for the refund/credit tax refund on Sep 30 2004 was beyond the two-year period, which expired on
of the same input VAT Sep 29, 2004
- Aichi alleged that for the given period, it generated and recorded zero-rated
sales for P131.79M, paid pursuant to Sec. 106(A)(2)(a), (2), and (3) of NIRC Case for respondent:
o That for the said period, it incurred input VAT amounting to P3.9M
from purchases and importation attributable to its zero-rated sales - That it is entitled to a refund/credit as a matter of right because it has
o That with its application with DOF, it only claimed P3.89M substantially complied with all the requirements provided by law
- CIR answered, among others, that petitioner must prove that claim was filed
within a two year period prescribed in Sec. 229 of the Tax Code SC Ruling:

2nd division of the CTA decision: - Petition has merit

- Sec 112(A): unutilized input VAT payments not otherwise used for any
- Partially granted Aichi’s claim grounded on Sec. 112 (A) of NIRC internal revenue tax due to the taxpayer must be claimed within two years
- CIR filed a motion for partial reconsideration insisting that 2004 was a leap reckoned from the close of the taxable quarter when the relevant sales were
year, the filing of the claim for tax refund/credit on Sep 30 2004 was beyond made pertaining to the input VAT regardless of whether said tax was paid or
not
 - As for the computation of date, it was held in CIR vs Primetown Property
Group, Inc. that between the CC which provides that a year is equivalent to
365 days and the Admin Code of 1987 which states that a year is composed of
12 calendar month, the Admin code must prevail
- Claim was timely filed

WHEREFORE, the petition is hereby granted.

G.R. No. 187485 February 12, 2013 completion date of the power station, NPC will take and pay for all electricity available from
the power station. On the construction and development of the San Roque Multi- Purpose
COMMISSIONER OF INTERNAL REVENUE, Petitioner, Project which comprises of the dam, spillway and power plant, San Roque allegedly incurred,
vs. excess input VAT. The CIR’s inaction on the subject claim led to the filling by San Roque of
SAN ROQUE POWER CORPORATION, Respondent. the Petition for Review with the CTA. In denying San Roque’s claim, the CTA 2nd division
held that the lack of recorded zero-rated or effectively zero-rated sales; failure to submit
X----------------------------X documents specifically identifying the purchased goods/services related to the claimed input
VAT which were included in its Property, Plant and Equipment account; and failure to prove
G.R. No. 196113 that the related construction costs were capitalized in its books of account and subjected to
depreciation. The CTA 2nd division required San Roque to show that it complied with the
TAGANITO MINING CORPORATION, Petitioner, following requirements of Section 112(B) of the NIRC. The CTA EB dismissed the CIR’s
vs.
petition for review and affirmed the challenged decision and resolution.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
ISSUE :
x----------------------------x
Whether or not San Roque’s failure to comply with the 120 day mandatory period renders its
G.R. No. 197156 petition for review with the CTA void.

PHILEX MINING CORPORATION, Petitioner, Ruling:

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent. YES. The mere fact that a taxpayer has undisputed excess input VAT, or that the tax was
admittedly illegally, erroneously or excessively collected from him, does not entitle him as a
Carpio, J. matter of right to a tax refund or credit. Strict compliance with the mandatory and
jurisdictional conditions prescribed by law to claim such tax refund or credit is essential and
Facts: necessary for such claim to prosper. Well-settled is the rule that tax refunds or credits,
San Roque entered into a Power Purchase Agreement “PPA” with the National Power just like tax exemptions, are strictly construed against the taxpayer.51 The burden is on
Corporation “NPC” to develop hydro-potential of the Lower Agno River and generate the taxpayer to show that he has strictly complied with the conditions for the grant of the tax
additional power and energy for the Luzon Power Grid, by building the San Roque Multi refund or credit. The SC cannot disregard mandatory and jurisdictional conditions mandated
Purpose Project located in San Manuel, Pangasinan. The PPA provides, among others, that by law simply because the Commissioner chose not to contest the numerical correctness of
San Roque shall be responsible for the design, construction, installation, completion, testing the claim for tax refund or credit of the taxpayer. Non-compliance with mandatory periods,
and commissioning of the Power Station and shall operate and maintain the same, subject to non-observance of prescriptive periods, and non-adherence to exhaustion of administrative
NPC instructions. During the cooperation period of 25 years commencing from the remedies bar a taxpayer’s claim for tax refund or credit, whether or not the Commissioner
questions the numerical correctness of the claim of the taxpayer. This Court should not
establish the precedent that non-compliance with mandatory and jurisdictional conditions can
be excused if the claim is otherwise meritorious, particularly in claims for tax refunds or
credit. Such precedent will render meaningless compliance with mandatory and jurisdictional
requirements, for then every tax refund case will have to be decided on the numerical
correctness of the amounts claimed, regardless of non-compliance with mandatory and
jurisdictional conditions. Section 112(D) of the 1997 Tax Code is clear, unequivocal, and
categorical that the Commissioner has 120 days to act on an administrative claim. The
taxpayer can file the judicial claim (1) only within thirty days after the Commissioner
partially or fully denies the claim within the 120- day period, or (2) only within thirty days
from the expiration of the 120- day period if the Commissioner does not act within the 120-
day period. There can be no dispute that upon effectivity of the 1997 Tax Code on 1 January
1998, or more than five years before San Roque filed its administrative claim on 28
March 2003, the law has been clear: the 120- day period is mandatory and jurisdictional. San
Roque’s claim, having been filed administratively on 28 March 2003, is governed by the
1997 Tax Code, not the 1977 Tax Code. Since San Roque filed its judicial claim before the
expiration of the 120-day mandatory and jurisdictional period, San Roque’s claim cannot
prosper.

WHEREFORE, the Court hereby (1) GRANTS the petition of the Commissioner of Internal
Revenue in G.R. No. 187485 to DENY the P483,797,599.65 tax refund or credit claim of San
Roque Power Corporation; (2) GRANTS the petition of Taganito Mining Corporation in
G.R. No. 196113 for a tax refund or credit of P8,365,664.38; and (3) DENIES the petition of
Philex Mining Corporation in G.R. No. 197156 for a tax refund or credit of P23,956,732.44.

SO ORDERED.
Nippon Express Corporation VS. Commission Of Internal Revenue ISSUE:

G.R. No. 196907 March 13, 2013  Whether or not the Court Of Tax Appeals has no jurisdiction to entertain the instant
case?
Facts:

 Petitioner Nippon Express (Philippines) Corporation (petitioner) is a corporation duly HELD: YES.
organized and registered with the SEC. It is also a VAT-registered entity with the
BIR.  A simple reading of Section 112(D) of the NIRC reveals that the taxpayer may
 Petitioner filed and administrative claim for refund, representing excess input tax appeal the denial or the inaction of the CIR only within thirty (30) days from receipt
attributable to its effective zero-rated sales in 2001. of the decision denying the claim or the expiration of the 120-day period given to the
 Pending review by the BIR, petitioner filed a petition for review with the CTA First CIR to decide the claim. Because the law is categorical in its language, there is no
Division. need for further interpretation by the courts and non-compliance with the provision
 There were flip flops of decision of the CTA first division but eventually sided with cannot be justified.
the petitioner and ordered the CIR to issue a tax credit certificate in favor of  The 120+30-day period is indeed mandatory and jurisdictional. Failure to
petitioner. observe the said period before filing a judicial claim with the CTA would not
 The CTA First Division took judicial notice of the records of C.T.A. Case No. 6967, only make such petition premature, but would also result in the non-acquisition
also involving petitioner, to show that the claim of input tax had not been applied by the CTA of jurisdiction to hear the said case.
against any output tax in the succeeding quarters. As to the timeliness of the filing of  Pursuant to the ruling of the Court in San Roque, the 120+30-day period is
petitioner's administrative and judicial claims, the CTA First Division ruled that mandatory and jurisdictional from the time of the effectivity of Republic Act (R.A.)
while the administrative application for refund was made within the two-year No. 8424 or the Tax Reform Act of 1997.
prescriptive period, petitioner's immediate recourse to the court was a premature  The Court, however, took into consideration the issuance by the BIR of Ruling No.
invocation of the court's jurisdiction due to the non-observance of the procedure in DA-489-03, which expressly stated that the taxpayer need not wait for the lapse of
Section 112(D) of the NIRC providing that an appeal may be made with the CTA the 120-day period before seeking judicial relief. Because taxpayers cannot be faulted
within 30 days from the receipt of the decision of the CIR denying the claim or after for relying on this declaration by the BIR, the Court deemed it reasonable to allow
the expiration of the 120-day period without action on the part of the CIR. taxpayers to file its judicial claim even before the expiration of the 120-day period.
Considering, however, that the CIR did not register his objection when he filed his This exception is to be observed from the issuance of the said ruling on December
Answer, he is deemed to have waived his objection thereto. 10, 2003 up until its reversal by Aichi on October 6, 2010. In the landmark case of
 The Case was elevated to the CTA En Banc which eventually made a flip flop on its Aichi, this Court made a definitive statement that the failure of a taxpayer to wait for
decision but eventually sided with the respondent and reversed the decision of the the decision of the CIR or the lapse of the 120-day period will render the tiling of the
CTA First division, it held that the 120-day period under Section 112(D) of the judicial claim with the CTA premature. As a consequence, its promulgation once
NIRC, which granted the CIR the opportunity to act on the claim for refund, was again made it clear to the taxpayers that the 120+ 30-day period must be observed.
jurisdictional in nature such that petitioner's failure to observe the said period before  Petition Denied.
resorting to judicial action warranted the dismissal of its petition for review for
having been prematurely filed.
COMMISSIONER OF INTERNAL REVENUE the five requirements to be entitled to a refund orissuance of tax credit certificate on
vs. its input VAT, to wit:
TEAM SUAL CORPORATION (formerly MIRANT SUAL CORPORATION)
1. That there must be zero-rated or effectively zero-rated sales;
G.R. No. 205055 July 18, 2014
2. That input taxes were incurred or paid;
FACTS:
3. That such input taxes are attributable to zero-rated sales or
TSC is a value-added tax (VAT) payer duly registered with the Bureau of Internal Revenue effectively zero-rated sales;
(BIR). It is principally engaged in the business of electric power generation and the sale of
electric power to National Power Corporation (NPC) under a Build-Operate-Transfer (BOT) 4. That the input taxes were not applied against any output VAT
Scheme. liability; and

On 19 December 2003, TSC applied for the VAT zero-rating of its sale of electric power to 5. That the claim for refund was filed within the two-year prescriptive
NPC for the taxable year 2004. TSC’s application was subsequently approved by the BIR. period.

On 26 April 2004, 26 July 2004, 25 October 2004 and 25 January 2005, TSC filed its The CTA Special First Division found that TSC is entitled to a refund or issuance of tax
quarterly VAT returns for the four quarters of 2004 with the BIR, through the Electronic credit certificate in the amount of P78,009,891.56 input VAT. The CTA Special First
Filing and Payment Scheme (EFPS). On 26 July 2004 and on 3 August 2005, TSC filed its Division likewise ruled that both the administrative and the judicial claims of TSC were filed
amended quarterly VAT returns for the first and fourth quarters of 2004, respectively. within the two-year prescriptive period.

On 21 December 2005, TSC filed an administrative claim for refund of its input VAT, which
it incurredfor the four quarters of 2004.
ISSUE:
On 24 April 2006, due to the BIR’s inaction, TSC filed a petition for review with the Court of
Tax Appeals (CTA). TSC prayed for the refund or issuance of tax credit certificate for its THE [CTA EB] GRAVELY ERRED IN DENYING DUE COURSE TO [CIR]’S PETITION
alleged unutilized input VAT for year 2004. FOR REVIEW AND IN AFFIRMING THE DECISION OF ITS SPECIAL FIRST
DIVISION THAT [TSC] IS ENTITLED TO A REFUND OR TAX CREDIT CERTIFICATE
CTA: IN THE AMOUNT OF P96,846,234.31 BECAUSE IT WAS ABLE TO SUBMIT THE
LEGALLY REQUIRED DOCUMENTS IN ITS APPLICATION FOR REFUND.
CTA Special First Division ruled that TSC’s sale of electric power toNPC was
effectively zero-rated. The CTA Special First Division found that TSC complied with
HELD: 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 petition lacks merit.
Under Section 112(C) of the NIRC,the CIR has 120 days to decide the taxpayer’s claim from
The relevant portions of Section 112 of the National Internal Revenue Code (NIRC), which the date of submission of complete documents in support of the application filed in
provide the requirements to enable the taxpayer to claim a refund or credit ofits input tax, accordance with Section 112(A) of the NIRC. In Intel Technology v. Commissioner of
state: Internal Revenue,15 we ruled that once the taxpayer has established by sufficient evidence that
it is entitled to a refund or issuance of a tax credit certificate, in accordance with the
Sec. 112. Refunds or Tax Credits of Input Tax.— requirements of Section 112(A) of the NIRC, its claim should be granted.

(A) Zero-rated or Effectively Zero-rated Sales—Any VAT-registered person, whose sales are In Atlas Consolidated Mining v. Commissioner of Internal Revenue, we held that
zero-rated oreffectively zero-rated may, within two (2) years after the close of the taxable applications for refund o rcredit of input tax with the BIR must comply with the appropriate
quarter when the sales were made, apply for the issuance of a tax credit certificate or refund revenue regulations. Thus, applications must be in accordance with Section 2 of Revenue
of creditable input tax due or paid attributable to such sales, except transitional input tax, to Regulations No. 3-88 (RR 3-88), amending Section 16 of Revenue Regulations No. 5-87, to
the extent that such input tax has not been applied against output tax: Provided, however,That wit:
in the case of zerorated sales under Section 106(A)(2)(a)(1), (2) and (B) and Section
108(B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly SECTION 2. Section 16 of Revenue Regulations 5-87 is hereby amended to read as follows:
accounted for in accordance with the rules and regulations of the Bangko Sentral ng SECTION 16. Refunds or tax credits of input tax.
Pilipinas(BSP): Provided, further, That where the taxpayer is engaged in zero-rated or
effectively zero-rated sale and also in taxable or exempt sale of goods or properties or (c) Claims for tax credits/refunds. – Application for Tax Credit/Refund of Value-Added Tax
services, and the amount of creditable input tax due or paid cannot be directly and entirely Paid (BIR Form No. 2552) shall be filed with the Revenue District Officeof the city or
attributed to any one of the transactions, it shall be allocated proportionately on the basis of municipality where the principal place of business of the applicant is located or directly with
the volume of sales the Commissioner, Attention: VAT Division.

(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. — In proper A photocopy of the purchase invoice or receipt evidencing the value added tax paid shall be
cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable submitted together with the application. The original copy of the said invoice/receipt,
input taxes within one hundred twenty (120) days from the date of submission of complete however, shall be presented for cancellation prior to the issuance of the Tax Credit Certificate
documents in support of the application filed in accordance with Subsection (A) hereof. or refund. In addition, the following documents shall be attached whenever applicable:

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the 3. Effectively zero-rated sale of goods and services.
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 i) photocopy of approved application for zero-rate if filing for the first time.
 ii) sales invoice or receipt showing name of the person or entity to whom the x x x x.
sale of goods or services were delivered, date of delivery, amount of
consideration, and description of goods or services delivered. In the present case, the CTA Special First Division found that TSC complied with the
requirements of Section 112(A) of the NIRC and granted its claim for refund or credit of
iii) evidence of actual receipt of goods or services. P78,009,891.56 input VAT. Upon a partial new trial, the CTA Special First Division
increased the amount to P96,846,234.31. Upon appeal, the CTA EB concluded that TSC
5. In applicable cases, where the applicant’s zero-rated transactions are regulated by certain submitted the relevant documents to substantiate its claim for refund or credit of input tax, to
government agencies, a statement therefrom showing the amount and description of sale of wit:
goods and services, name of persons or entities (except in case of exports) to whom the goods
or services were sold, and date of transaction shall also be submitted. 1. BIR Certificate of Registration

In all cases, the amount of refund or tax credit that may be granted shall be limited to the 2. Quarterly VAT returns for the first,second, third and fourth quarters of
amount of the value-added tax (VAT) paid directly and entirely attributable to the zero-rated 2004
transaction during the period covered by the application for credit or refund.
3. Summary of Input Tax Payments for the first, second, third and fourth
Where the applicant is engaged in zero-rated and other taxable and exempt sales of goods and quarters of 2004 showing details of purchases of goods and service as well as
services, and the VAT paid (inputs) on purchases of goods and services cannot be directly the corresponding input tax paid
attributed to any of the aforementioned transactions, the following formula shall be used to
determine the creditable or refundable input tax for zero-rated sale: 4. VAT official receipts and invoicesfor the first, second, third and fourth
quarters of
Amount of Zero-rated Sale
5. Approved Certificate for Zero-Rate; and

6. Application for Tax Credit/Refund

Total Sales

Total Amount of Input Taxes The CIR’s reliance on RMO 53-98 is misplaced. There is nothing in Section 112 of
the NIRC, RR 3-88 or RMO 53-98 itself that requires submission of the complete
= documents enumerated in RMO 53-98 for a grant of a refund or credit of input VAT.
The subject of RMO 53-98 states that it is a "Checklist of Documents to be Submitted
Amount Creditable/Refundable
by a Taxpayer upon Auditof his Tax Liabilities x x x." In this case, TSC was applying
for a grant of refund or credit of its input tax. There was no allegation of an audit
being conducted by the CIR. Even assuming that RMO 53-98 applies, it specifically
states that some documents are required to be submitted by the taxpayer "if
applicable."22

Moreover, if TSC indeed failed to submit the complete documents in support of its
application, the CIR could have informed TSC of its failure, consistent with Revenue
Memorandum Circular No. (RMC) 42-03.23 However, the CIR did not inform TSC of
the document it failed to submit, even up to the present petition. The CIR likewise
raised the issue of TSC’s alleged failure to submit the complete documents only in its
motion for reconsideration of the CTA Special First Division’s 4 March 2010
Decision. Accordingly, we affirm the CTA EB’s finding that TSC filed its
administrative claim on 21 December 2005, and submitted the complete documents in
support of its application for refund or credit of its input tax at the same time.

Under Section 112(C) of the NIRC, incase of failure on the part of the CIR to act on
the application, the taxpayer affected may, within 30 days after the expiration of the
120-day period, appeal the unacted claim with the CTA. The charter of the CTA24
also expressly provides that if the Commissioner fails to decide within "a specific
period" required by law, such "inaction shall be deemed a denial" of the application
for tax refund or credit. In Commissioner of Internal Revenue v. San Roque Power
Corporation,25 we emphasized that compliance with the 120-day waiting period is
mandatory and jurisdictional. In this case, when TSC filed its administrative claim on
21 December 2005, the CIR had a period of 120 days, or until 20 April 2006, to act
on the claim. However, the CIR failed to act on TSC's claim within this 120-day
period. Thus, TSC filed its petition for review with the CTA on 24 April 2006 or
within 30 days after the expiration of the 120-day period. Accordingly, we do not find
merit in the CIR' s argument that the judicial claim was prematurely filed.

WHEREFORE, we DENY the petition for lack of merit. The Decision and Resolution
of the Court of Tax Appeals, dated 27 July 2012 and 6 December 2012, respectively,
are AFFIRMED.
PANASONIC COMMUNICATIONS IMAGING CORP vs. CIR

ABAD, J
Held:
FACTS:
The VAT is a tax on consumption, an indirect tax that the provider of goods or services
Petitioner Panasonic Communications Imaging Corporation of may pass on to his customers. Under the VAT method of taxation, which is invoice-based, an
the Philippines (Panasonic) produces and exports plain paper copiers and their sub-assemblies, entity can subtract from the VAT charged on its sales or outputs the VAT it paid on its
parts, and components. It is registered with the Board of Investments as a preferred pioneer purchases, inputs and imports. For example, when a seller charges VAT on its sale, it issues
enterprise under the Omnibus Investments Code of 1987. It is also a registered value-added tax an invoice to the buyer, indicating the amount of VAT he charged. For his part, if the buyer is
(VAT) enterprise. also a seller subjected to the payment of VAT on his sales, he can use the invoice issued to him
by his supplier to get a reduction of his own VAT liability. The difference in tax shown on
From April 1 to September 30, 1998 and from October 1, 1998 to March 31, 1999, invoices passed and invoices received is the tax paid to the government. In case the tax on
petitioner Panasonic generated export sales amounting to US$12,819,475.15 and invoices received exceeds that on invoices passed, a tax refund may be claimed.
US$11,859,489.78, respectively, for a total of US$24,678,964.93. Believing that these export
sales were zero-rated for VAT under Section 106(A)(2)(a)(1) of the 1997 National Internal
Revenue Code as amended by Republic Act (R.A.) 8424 (1997 NIRC), Panasonic paid input
Under the 1997 NIRC, if at the end of a taxable quarter the seller charges output taxes
VAT of P4,980,254.26 and P4,388,228.14 for the two periods or a total of P9,368,482.40
equal to the input taxes that his suppliers passed on to him, no payment is required of him. It is
attributable to its zero-rated sales.
when his output taxes exceed his input taxes that he has to pay the excess to the BIR. If the
Claiming that the input VAT it paid remained unutilized or unapplied, on March 12, input taxes exceed the output taxes, however, the excess payment shall be carried over to the
1999 and July 20, 1999 petitioner Panasonic filed with the Bureau of Internal Revenue (BIR) succeeding quarter or quarters. Should the input taxes result from zero-rated or effectively zero-
two separate applications for refund or tax credit of what it paid. When the BIR did not act on rated transactions or from the acquisition of capital goods, any excess over the output taxes
the same, Panasonic filed on December 16, 1999 a petition for review with the CTA, averring shall instead be refunded to the taxpayer.
the inaction of the respondent Commissioner of Internal Revenue (CIR) on its applications.

ISSUE: whether or not the CTA en banc correctly denied petitioner Panasonics claim for
Zero-rated transactions generally refer to the export sale of goods and services. The tax
refund of the VAT it paid as a zero-rated taxpayer on the ground that its sales invoices did not
rate in this case is set at zero. When applied to the tax base or the selling price of the goods or
state on their faces that its sales were zero-rated.
services sold, such zero rate results in no tax chargeable against the foreign buyer or asset account subject to depreciation, whichever is applicable. Moreover,
the case shall be referred by the processing office to the concerned BIR
customer. But, although the seller in such transactions charges no output tax, he can claim a
office for verification of other tax liabilities of the taxpayer.
refund of the VAT that his suppliers charged him. The seller thus enjoys automatic zero rating,
which allows him to recover the input taxes he paid relating to the export sales, making him
internationally competitive.
Petitioner Panasonic points out, however, that in requiring the printing on its sales
invoices of the word zero-rated, the Secretary of Finance unduly expanded, amended, and
modified by a mere regulation (Section 4.108-1 of RR 7-95) the letter and spirit of Sections
For the effective zero rating of such transactions, however, the taxpayer has to be VAT-
113 and 237 of the 1997 NIRC, prior to their amendment by R.A. 9337. Panasonic argues that
registered and must comply with invoicing requirements. Interpreting these requirements,
the 1997 NIRC, which applied to its payments specifically Sections 113 and 237required the
respondent CIR ruled that under Revenue Memorandum Circular (RMC) 42-2003, the
VAT-registered taxpayers receipts or invoices to indicate only the following information:
taxpayer’s failure to comply with invoicing requirements will result in the disallowance of his
claim for refund. RMC 42-2003 provides:

(1) A statement that the seller is a VAT-registered person,

followed by his taxpayer's identification number (TIN);
A-13. Failure by the supplier to comply with the invoicing
requirements on the documents supporting the sale of goods and services
will result to the disallowance of the claim for input tax by the purchaser-
(2) The total amount which the purchaser pays or is obligated to
claimant.
pay to the seller with the indication that such amount includes the value-
added tax;

If the claim for refund/TCC is based on the existence of zero-rated

sales by the taxpayer but it fails to comply with the invoicing requirements
(3) The date of transaction, quantity, unit cost and description of
in the issuance of sales invoices (e.g., failure to indicate the TIN), its claim
the goods or properties or nature of the service; and
for tax credit/refund of VAT on its purchases shall be denied considering
that the invoice it is issuing to its customers does not depict its being a
VAT-registered taxpayer whose sales are classified as zero-rated
sales. Nonetheless, this treatment is without prejudice to the right of the (4) The name, business style, if any, address and taxpayers
taxpayer to charge the input taxes to the appropriate expense account or identification number (TIN) of the purchaser, customer or client.
 successful claim for input VAT is made, the government would be refunding money it did not
collect.
Petitioner Panasonic points out that Sections 113 and 237 did not require the inclusion
of the word zero-rated for zero-rated sales covered by its receipts or invoices. The BIR
incorporated this requirement only after the enactment of R.A. 9337 on November 1, 2005, a
Further, the printing of the word zero-rated on the invoice helps segregate sales that are
law that did not yet exist at the time it issued its invoices.
subject to 10% (now 12%) VAT from those sales that are zero-rated. Unable to submit the
proper invoices, petitioner Panasonic has been unable to substantiate its claim for refund.

But when petitioner Panasonic made the export sales subject of this case, i.e., from
April 1998 to March 1999, the rule that applied was Section 4.108-1 of RR 7-95, otherwise
Petitioner Panasonics citation of Intel Technology Philippines, Inc. v. Commissioner of
known as the Consolidated Value-Added Tax Regulations, which the Secretary of Finance
Internal Revenue is misplaced. Quite the contrary, it strengthens the position taken by
issued on December 9, 1995 and took effect on January 1, 1996. It already required the printing
respondent CIR. In that case, the CIR denied the claim for tax refund on the ground of the
of the word zero-rated on the invoices covering zero-rated sales. When R.A. 9337 amended the
taxpayers failure to indicate on its invoices the BIR authority to print. But Sec. 4.108-1 required
1997 NIRC on November 1, 2005, it made this particular revenue regulation a part of the tax
only the following to be reflected on the invoice:
code. This conversion from regulation to law did not diminish the binding force of such
regulation with respect to acts committed prior to the enactment of that law.

1. The name, taxpayers identification number (TIN) and address of

seller;
Section 4.108-1 of RR 7-95 proceeds from the rule-making authority granted to the
2. Date of transaction;
Secretary of Finance under Section 245 of the 1977 NIRC (Presidential Decree 1158) for the
efficient enforcement of the tax code and of course its amendments. The requirement is 3. Quantity, unit cost and description of merchandise or nature of
service;
reasonable and is in accord with the efficient collection of VAT from the covered sales of goods
and services. As aptly explained by the CTAs First Division, the appearance of the word zero- 4. The name, TIN, business style, if any, and address of the VAT-
rated on the face of invoices covering zero-rated sales prevents buyers from falsely claiming registered purchaser, customer or client;

input VAT from their purchases when no VAT was actually paid. If, absent such word, a 5. The word zero-rated imprinted on the invoice covering zero-rated
sales; and
 6. The invoice value or consideration.

This Court held that, since the BIR authority to print is not one of the items required
to be indicated on the invoices or receipts, the BIR erred in denying the claim for refund. Here,
however, the ground for denial of petitioner Panasonics claim for tax refund the absence of
the word zero-rated on its invoices is one which is specifically and precisely included in the
above enumeration. Consequently, the BIR correctly denied Panasonics claim for tax refund.