INPUT TAX

1. COMMISSIONER OF INTERNAL REVENUE VS. SONY PHILIPPINES, INC.- Value Added Tax, Final
Withholding Tax, Letter of Authority

FACTS: Sony Philippines was ordered examined for “the period 1997 and unverified prior years” as
indicated in the Letter of Authority. The audit yielded assessments against Sony Philippines for
deficiency VAT and FWT, viz: (1) late remittance of Final Withholding Tax on royalties for the period
January to March 1998 and (2) deficiency VAT on reimbursable received by Sony Philippines from its
offshore affiliate, Sony International Singapore (SIS).

ISSUE: Is Petitioner liable for deficiency Value Added Tax?

HELD: NO. Sony Philippines did in fact incur expenses supported by valid VAT invoices when it paid for
certain advertising costs. This is sufficient to accord it the benefit of input VAT credits and where the
money came from to satisfy said advertising billings is another matter but does not alter the VAT effect.
In the same way, Sony Philippines can not be deemed to have received the reimbursable as a fee for a
VAT-taxable activity. The reimbursable was couched as an aid for Sony Philippines by SIS in view of the
company’s “dire or adverse economic conditions”. More importantly, the absence of a sale, barter or
exchange of goods or properties supports the non-VAT nature of the reimbursement. This was
distinguished from the COMASERCO case where even if there was similarly a reimbursement-on-cost
arrangement between affiliates, there was in fact an underlying service. Here, the advertising services
were rendered in favor of Sony Philippines not SIS.

2. FORT BONIFACIO DEVELOPMENT CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE-

Transitional Input Value Added Tax

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

ISSUE: Is Petitioner entitled to claim the transitional input VAT on its sale of real properties given its
nature as a real estate dealer and if so (i) is the transitional input VAT applied only to the improvements
on the real property or is it applied on the value of the entire real property and (ii) should there have
been a previous tax payment for the transitional input VAT to be creditable?

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

The amendments to the VAT law do not show any intention to make those in the real estate business
subject to a different treatment from those engaged in the sale of other goods or properties or in any
other commercial trade or business. On the scope of the basis for determining the available transitional
input VAT, the CIR has no power to limit the meaning and coverage of the term "goods" in Section 105
of the Tax Code without statutory authority or basis. The transitional input tax credit operates to benefit
newly VAT-registered persons, whether or not they previously paid taxes in the acquisition of their
beginning inventory of goods, materials and supplies.

VAT REFUND

3. CONTEX VS CIR

Facts: Petitioner filed two applications for tax refund or tax credit of the VAT it paid. Mr. Edilberto
Carlos, revenue district officer of BIR RDO No. 19, denied the first application letter. Unfazed by the
denial, petitioner on May 4, 1999, filed another application for tax refund/credit, this time directly with
Atty. Alberto Pagabao, the regional director of BIR Revenue Region No. 4. The second letter sought a
refund or issuance of a tax credit certificate in the amount of P1,108,307.72, representing erroneously
paid input VAT for the period January 1, 1997 to November 30, 1998. No response to this matter.

Issue: WHETHER OR NOT THE EXEMPTION FROM ALL LOCAL AND NATIONAL INTERNAL REVENUE TAXES
PROVIDED IN REPUBLIC ACT NO. 7227 COVERS THE VALUE ADDED TAX PAID BY PETITIONER, A SUBIC
BAY FREEPORT ENTERPRISE ON ITS PURCHASES OF SUPPLIES AND MATERIALS.

HELD: Petitioner argues that the appellate court's restrictive interpretation of petitioner's VAT
exemption as limited to those covered by Section 107 of the Tax Code is erroneous and devoid of legal
basis. It contends that the provisions of Rep. Act No. 7227 clearly and unambiguously mandate that no
local and national taxes shall be imposed upon SBFZ-registered firms and hence, said law should govern
the case. Petitioner calls our attention to regulations issued by both the SBMA and BIR clearly and
categorically providing that the tax exemption provided for by Rep. Act No. 7227 includes exemption
from the imposition of VAT on purchases of supplies and materials.

4. ATLAS CONSOLIDATED MINING DEVT CORP vs. CIR

FACTS: Petitioner corporation, a VAT-registered taxpayer engaged in mining, production, and sale of
various mineral products, filed claims with the BIR for refund/credit of input VAT on its purchases of
capital goods and on its zero-rated sales in the taxable quarters of the years 1990 and 1992. BIR did not
immediately act on the matter prompting the petitioner to file a petition for review before the CTA. The

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latter denied the claims on the grounds that for zero-rating to apply, 70% of the company's sales must
consists of exports, that the same were not filed within the 2-year prescriptive period (the claim for
1992 quarterly returns were judicially filed only on April 20, 1994), and that petitioner failed to submit
substantial evidence to support its claim for refund/credit.

ISSUE: Did the petitioner corporation sufficiently establish the factual bases for its applications for
refund/credit of input VAT?

HELD: No. Although the Court agreed with the petitioner corporation that the two-year prescriptive
period for the filing of claims for refund/credit of input VAT must be counted from the date of filing of
the quarterly VAT return, and that sales to PASAR and PHILPOS inside the EPZA are taxed as exports
because these export processing zones are to be managed as a separate customs territory from the rest
of the Philippines, and thus, for tax purposes, are effectively considered as foreign territory, it still denies
the claims of petitioner corporation for refund of its input VAT on its purchases of capital goods and
effectively zero-rated sales during the period claimed for not being established and substantiated by
appropriate and sufficient evidence.

5. CIR VS SAN ROQUE POWER

Facts: On October 11, 1997, [San Roque] entered into a Power Purchase Agreement ("PPA") with the
National Power Corporation ("NPC") to develop hydro-potential of the Lower Agno River and generate
additional power and energy for the Luzon Power Grid, by building the San Roque.

On March 28, 2003, San Roque filed amended Quarterly VAT Returns for the year 2001 since it increased
its unutilized input VAT to the amount of P560,200,283.14. Consequently, San Roque filed with the BIR
on even date, separate amended claims for refund in the aggregate amount of P560,200,283.14.

ISSUE: The Court of Tax Appeals En Banc erred in holding that [San Roque's] claim for refund was not
prematurely filed.

HELD: San Roque failed to comply with the 120-day waiting period, the time expressly given by
law to the Commissioner to decide whether to grant or deny San Roque's application for tax refund
or credit. It is indisputable that compliance with the 120-day waiting period is... mandatory and
jurisdictional. The waiting period, originally fixed at 60 days only, was part of the provisions of the
first VAT law, Executive Order No. 273, which took effect on 1 January 1988. The waiting period was
extended to 120 days effective 1 January 1998 under RA 8424 or the Tax Reform Act of 1997. Thus,
the waiting period has been in our statute books for more than fifteen (15) years before San Roque
filed its judicial claim.
Failure to comply with the 120-day waiting period violates a mandatory provision of law. 

6. MICROSOFT PHILIPPINES INC. VS CIR

FACTS: Microsoft renders marketing services to two affiliated nonresident foreign corporations
with their services being paid for in foreign currency. Microsoft filed a claim for refund for
unutilized input VAT but the CTA denied the same on the basis that the official receipts issued

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 did not bear the imprinted word “zero-rated” on its face and are thus not valid evidence of
Microsoft’s sales.
ISSUE: Is Microsoft entitled to a refund?
HELD: NO. The regulations in effect when the sales were made by Microsoft clearly indicate in
the portion outlining the “Invoicing Requirements” that the word “zero-rated” must be
imprinted in the invoice. Without such, the invoice are not considered as VAT invoices and thus
could not give rise to any input tax. The Court added that the reason for enforcing this rule even
if only based on regulation is that it prevents buyers from falsely claiming input VAT from their
purchases when no VAT is actually paid.

7. COCA- COLA BOTTLERS PHILIPPINES VS CIR

FACTS: Petitioner Coca-Cola Bottlers Philippines, Inc., a Value-Added Tax (VAT)-registered, domestic
corporation engaged in the business of manufacturing and selling beverages, filed its Quarterly VAT
Return for the period of January 1, 2008 to March 31, 2008 and amended the same a few times
thereafter.[5] On May 27, 2009, the Bureau of Internal Revenue (BIR) issued a Letter of Authority to
examine petitioner's books of accounts for all internal revenue taxes for the period January 1, 2008 to
December 31, 2008. Subsequently, on April 20, 2010, petitioner filed with the BIR's Large Taxpayers
Service an administrative claim for refund or tax credit of its alleged over/erroneous payment of VAT for
the quarter ended March 31, 2008 in the total amount of P123,459,647.70. [6] 

ISSUE: Whether the petitioner's claim for its alleged understatement of overpayment of VAT due to
undeclared input taxes for the first quarter of 2008 be granted.

HELD: In this case, we emphasize that "the substantiated amount is not even enough to offset
petitioner's output tax liabilities for the same period leaving no balance that may be
refunded." Consequently, petitioner's claim for its alleged understatement of overpayment of VAT
(excess input taxes) due to undeclared input taxes for the first quarter of 2008 is denied.

REMEDIES UNDER THE NIRC

A. Letter of Authority / Audit Notice

8. CIR VS SONY PHILIPPINES INC.

Facts: The CIR issued Letter of Authority (LOA 19734) authorizing certain
revenue officers to examine Sony’s books of accounts and other accounting
records regarding revenue taxes for the period 1997 and unverified prior
years.

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 A preliminary assessment for 1997 deficiency taxes and penalties was
issued by the CIR which Sony protested. Thereafter, acting on the protest,
the CIR issued final assessment notices, the formal letter of demand and
the details of discrepancies. The CIR assessed a deficiency VAT -
P11,141,014.41

Issue: Whether The Letter of Authority is Valid

HELD: Based on Section 13 of the Tax Code, a Letter of Authority or LOA is
the authority given to the appropriate revenue officer assigned to perform
assessment functions. It empowers or enables said revenue officer to
examine the books of account and other accounting records of a taxpayer
for the purpose of collecting the correct amount of tax.
The LOA 19734 covered the period 1997 and unverified prior years. For said
reason, the CIR acting through its revenue officers went beyond the scope
of their authority because the deficiency VAT assessment they arrived at
was based on records from January to March 1998 or using the fiscal year
which ended in March 31, 1998.

9. CIR VS. DE LA SALLE

FACTS: Sometime in 2004, the Bureau of Internal Revenue (BIR) issued to DLSU
Letter of Authority (LOA) No. 2794 authorizing its revenue officers to examine
the latter's books of accounts and other accounting records for all internal
revenue taxes for the period Fiscal Year Ending 2003 and Unverified Prior Years.

On May 19, 2004, BIR issued a Preliminary Assessment Notice to DLSU.

Subsequently on August 18, 2004, the BIR through a Formal Letter of

Demand assessed DLSU the following deficiency taxes: (1) income tax on rental
earnings from restaurants/canteens and bookstores operating within the
campus; (2) value-added tax (VAT) on business income; and (3) documentary
stamp tax (DST) on loans and lease contracts. The BIR demanded the payment
of P17,303,001.12, inclusive of surcharge, interest and penalty for taxable
years 2001, 2002 and 2003.

ISSUE: Whether the entire assessment should be voided because of the defective LOA.
HELD: The Letter of Authority (LOA) issued to DLSU is not entirely void. The
assessment for taxable year 2003 is valid. DLSU objects to the CTA En Banc's
conclusion that the LOA is valid for taxable year 2003 and insists that the entire
LOA should be voided for being contrary to RMO No. 43-90, which provides that

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 if tax audit includes more than one taxable period, the other periods or years
shall be specifically indicated in the LOA.

10. MEDICARD PHILIPPINES INC VS CIR

FACTS: MEDICARD is a Health Maintenance Organization (HMO) that provides prepaid health
and medical insurance coverage to its clients.
Upon finding some discrepancies between MEDICARD’s Income Tax Returns (ITRs) and VAT
Returns, the CIR informed MEDICARD and issued a Letter Notice (LN).
MEDICARD received CIR’s FAN for alleged deficiency VAT for taxable year 2006 in the total
amount of P197M.
ISSUE: Whether the absence of Letter of Authority is fatal? 
HELD: Yes, the absence of a LOA violated MEDICARD’s right to due process.
A LOA is the authority given to the appropriate revenue officer assigned to perform assessment
functions. It empowers or enables said revenue officer to examine the books of account and
other accounting records of a taxpayer for the purpose of collecting the correct amount of tax. A
LOA is premised on the fact that the examination of a taxpayer who has already filed his tax
returns is a power that statutorily belongs only to the CIR himself or his duly authorized
representatives.

B. TAX ASSESSMEMENT

11. CIR VS PASCOR REALTY

FACTS: The BIR examined the books of account of Pascor Realty and Devt Corp for years 1986,
1987 and 1988, from which a tax liability of 10.5 Million Pesos was found. Based on the
recommendations of the examiners, the CIR filed an information with the DOJ for tax evasion
against the officers of Pascor. Upon receipt of the subpoena, the latter filed an urgent request
for reconsideration/reinvestigation with the CIR, which was immediately denied upon the
ground that no formal assessment has yet been issued by the Commisioner. Pascor elevated the
CIR's decision to the CTA on a petition for review. The CIR filed a Motion to Dismiss on the
ground of lack of jurisdiction of CTA as there was no formal assessment made against the
respondents. The CTA dismissed the motion, hence this petition.

ISSUE: Is a formal assessment necessary in the filing of a criminal complaint?

HELD: No. Section 222 of the NIRC states that an assessment is not necessary before a criminal
charge can be filed. This is the general rule. Private respondents failed to show that they are
entitled to an exception. Moreover, the criminal charge need only be supported by a prima facie
showing of failure to file a required return. This fact need not be proven by an assessment.

12. SMI-ED TECHNOLOGY CORPORATION, INC

FACTS: SMI-Ed Philippines is a PEZA-registered corporation authorized "to engage in the
business of manufacturing ultra high-density microprocessor unit package.

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 SMI-Ed Philippines constructed buildings and purchased machineries and equipment. As of
December 31, 1999, the total cost of the properties amounted to P3,150,925,917.00. SMI-Ed
Philippines "failed to commence operations." Its factory was temporarily closed, effective
October 15, 1999. It sold its buildings and some of its installed machineries and equipment to
Ibiden Philippines, Inc., another PEZA-registered enterprise, for Ñ2,100,000,000.00
(P893,550,000.00).
ISSUE: Whether The elevation of the refund claim with the Court of Tax Appeals IS a bar against
the BIR's exercise of its assessment powers.

HELD: The BIR had three years from the filing of petitioner's final tax return in 2000 to assess
petitioner's taxes. Nothing stopped the BIR from making the correct assessment. The elevation
of the refund claim with the Court of Tax Appeals was not a bar against the BIR's exercise of its
assessment powers.

The BIR, however, did not initiate any assessment for deficiency capital gains tax.[78] Since more
than a decade have lapsed from the filing of petitioner's return, the BIR can no longer assess
petitioner for deficiency capital gains taxes, if petitioner is later found to have capital gains tax
liabilities in excess of the amount claimed for refund.

13. CIR VS FITNESS BY DESIGN

FACTS: Fitness filed a protest to the Final Assessment Notice on June 25, 2004.
According to Fitness, the Commissioner's period to assess had already
prescribed. Further, the assessment was without basis since the company was
only incorporated on May 30, 1995. On February 2, 2005, the Commissioner
issued a Warrant of Distraint and/or Levy with Reference No. OCN WDL-95-05-
005 dated February 1, 2005 to Fitness.
ISSUE: Whether the Court of Tax Appeals erred in cancelling the Final Assessment Notice.
HELD: The Court of Tax Appeals did not err in cancelling the Final Assessment
Notice as well as the Audit Result/Assessment Notice issued by petitioner to
respondent for the year 1995 covering the "alleged deficiency income tax, value-
added tax and documentary stamp tax amounting to P10,647,529.69, inclusive
of surcharges and interest"144 for lack of due process. Thus, the Warrant of
Distraint and/or Levy is void since an invalid assessment bears no valid effect.

C. PRESCRIPTIVE PERIOD TO ASSESS AND COLLECT (False Return, Fraudulent Return,

Omission to File a Return/Extraordinary Prescription)
14. AZNAR VS CTA
Facts: Petitioner, as administrator of the estate of the deceased, Matias H. Aznar, seeks
a review and nullification of the decision of the Court of Tax Appeals ordering the
petitioner to pay the government the sum of P227,691.77 representing deficiency
income taxes for the years 1946 to 1951. An investigation by the Commissioner of
Internal Revenue (CIR) ascertained the assets and liabilities of the taxpayer and it was
discovered that from 1946 to 1951, his net worth had increased every year, which
increases in net worth was very much more than the income reported during said years.

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 Issue: Whether or not the deceased Aznar filed false or fraudulent income tax returns
and subsequently, whether the action has not prescribed.

Held: The petition is without merit.

The respondent CTA concluded that the very "substantial under declarations of income
for six consecutive years eloquently demonstrate the falsity or fraudulence of the
income tax returns with an intent to evade the payment of tax." The ordinary period of
prescription of 5 years within which to assess tax liabilities under Sec. 331 of the NIRC
should be applicable to normal circumstances, but whenever the government is placed
at a disadvantage so as to prevent its lawful agents from proper assessment of tax
liabilities due to false returns, fraudulent return intended to evade payment of tax, or
failure to file returns, the period of ten years from the time of the discovery of the
falsity, fraud or omission even seems to be inadequate.

15. CIR VS ASALUS CORPORATION

FACTS: On January 10, 2011, petitioner Commissioner of Internal Revenue issued the
Preliminary Assessment Notice finding Asalus liable for deficiency VAT for 2007 in the
aggregate amount of P413,378,058.11.
On August 26, 2011, Asalus received the Formal Assessment Notice stating that it was
liable for deficiency VAT for 2007 in the total amount of P95,681,988.64, inclusive of
surcharge and interest. Consequently, it filed its protest against the FAN, dated
September 6, 2011.

ISSUE: WHETHER the CTA erred in the decision and that the petition be granted in favor
of the petitioner.

HELD: The statement given by the CTA were correct in a way, and it was given due
respect for they found it partly correct but, after a review of the records and applicable
laws and jurisprudence, the Court finds that the CTA erred in concluding that the
assessment against Asalus had prescribed. Internal revenue taxes shall be assessed
within three years after the last day prescribed by law for the filing of the return, or
where the return is filed beyond the period, from the day the return was actually filed.
Section 222 of the NIRC, however, provides for exceptions to the general rule. It states
that in the case of a false or fraudulent return with intent to evade tax or of failure to
file a return, the assessment may be made within ten years from the discovery of the
falsity, fraud or omission.

16. CIR VS FITNESS BY DESIGN, INC.

FACTS: Fitness filed a protest to the Final Assessment Notice on June 25, 2004.
According to Fitness, the Commissioner's period to assess had already prescribed.

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 Further, the assessment was without basis since the company was only incorporated on
May 30, 1995.11
On February 2, 2005, the Commissioner issued a Warrant of Distraint and/or Levy with
Reference No. OCN WDL-95-05-005 dated February 1, 2005 to Fitness.
ISSUE: Whether the prescriptive period in making an assessment depends upon whether
a tax return was filed or whether the tax return filed was either false or fraudulent.
HELD: Yes, the prescriptive period in making an assessment depends upon whether a tax
return was filed or whether the tax return filed was either false or fraudulent. When a
tax return that is neither false nor fraudulent has been filed, the Bureau of Internal
Revenue may assess within three (3) years, reckoned from the date of actual filing or
from the last day prescribed by law for filing.110 However, in case of a false or fraudulent
return with intent to evade tax.

17. CIR VS UNITED SALVAGE AND TOWAGE (PHILS) INC.

FACTS: In the course of respondent’s operations, petitioner found respondent liable for
deficiency income tax, withholding tax, value-added tax (VAT) and documentary stamp tax
(DST) for taxable years 1992,1994, 1997 and 1998.4 Particularly, petitioner, through BIR
officials, issued demand letters with attached assessment notices for withholding tax on
compensation (WTC) and expanded withholding tax (EWT) for taxable years 1992, 1994 and
1998.
ISSUE: Whether or not petitioner’s right to collect the creditable withholding tax and
expanded withholding tax for taxable year 1992 has already prescribed.
HELD: petitioner avers that its right to collect the EWT for taxable year 1992 has not yet
prescribed. It argues that while the final assessment notice and demand letter on EWT for
taxable year 1992 were all issued on January 9, 1996, the five (5)-year prescriptive period to
collect was interrupted when respondent filed its request for reinvestigation on March 14,
1997 which was granted by petitioner on January 22, 2001 through the issuance of Tax
Verification Notice No. 00165498 on even date. Thus, the period for tax collection should
have begun to run from the date of the reconsidered or modified assessment.This argument
fails to persuade us.

18. BPI VS CIR

FACTS: Petitioner BPI is a commercial banking corporation organized and existing under
the laws of the Philippines. On two separate occasions, particularly on 06 June 1985 and
14 June 1985, it sold United States (US) $500,000.00 to the Central Bank of the
Philippines (Central Bank), for the total sales amount of US$1,000,000.00.

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 On 10 October 1989, the Bureau of Internal Revenue (BIR) issued Assessment No. FAS-5-
85-89-002054,3 finding petitioner BPI liable for deficiency DST on its afore-mentioned
sales of foreign bills of exchange to the Central Bank.
Petitioner BPI received the Assessment, together with the attached Assessment Notice,4
on 20 October 1989.

Petitioner BPI, through its counsel, protested the Assessment in a letter dated 16
November 1989, and filed with the BIR on 17 November 1989.

ISSUE: Whether the suspension of the statute of limitations on collection of the

assessed deficiency DST from petitioner BPI does not find support in jurisprudence.

HELD: It is the position of respondent BIR Commissioner, affirmed by the CTA and the
Court of Appeals, that the three-year prescriptive period for collecting on Assessment
No. FAS-5-85-89-002054 had not yet prescribed, because the said prescriptive period
was suspended, invoking the case of Commissioner of Internal Revenue v. Wyeth Suaco
Laboratories, Inc.42 It was in this case in which this Court ruled that the prescriptive
period provided by law to make a collection is interrupted once a taxpayer requests for
reinvestigation or reconsideration of the assessment.

19. CIR VS BASF COATING AN DINKS PHILS, INC

FACTS: Respondent was a corporation which was duly organized under and by virtue of
the laws of the Republic of the Philippines on August 1, 1990 with a term of existence of
fifty (50) years.  In a Formal Assessment Notice (FAN) dated January 17, 2003, petitioner
assessed respondent the aggregate amount of ₱18,671,343.14 representing deficiencies
in income tax, value added tax, withholding tax on compensation, expanded withholding
tax and documentary stamp tax, including increments, for the taxable year 1999.

On March 19, 2004, respondent filed a protest letter citing lack of due process and
prescription as grounds.8 On April 16, 2004, respondent filed a supplemental letter of
protest.

ISSUE: Was the running of the 3-year prescriptive period to assess suspended when BC
failed to notify the CIR of its change of address?

HELD: No, the 3-year prescriptive period to assess was not suspended in favor of the CIR
even if BC failed notify regarding its change of address. It is true that, under the Tax
Code, the running of the Statute of Limitations shall be suspended when the taxpayer
cannot be located in the address given in the return filed upon which a tax is being
assessed or collected. In addition, Section 11 of RR 12-85 states that, in case of change

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 of address, the taxpayer is required to give a written notice thereof to the RDO or the
district having jurisdiction over his former legal residence and/or place of business.
However, the Supreme Court ruled that the above-mentioned provisions on the
suspension of the 3-year period to assess apply only if the CIR is not aware of the
whereabouts of the taxpayer.

20. PHILIPPINE JOURNALISTS, INC VS. CIR (WAIVER OF THE STATUTE OF LIMITATIONS)
FACTS: The Revenue District Office of the Bureau of Internal Revenue (BIR) issued Letter
of Authority for Revenue Officer Federico de Vera, Jr. and Group Supervisor Vivencio
Gapasin to examine petitioner’s books of account and other accounting records for
internal revenue taxes. Revenue District Officer Jaime Concepcion invited petitioner to
send a representative to an informal conference for an opportunity to object and
present documentary evidence relative to the proposed assessment. Petitioner’s
Comptroller, LorenzaTolentino, executed a “Waiver of the Statute of Limitation Under
the National Internal Revenue Code (NIRC)”. Records show that, it did not bear the date
of acceptance, that petitioner was not furnished a copy of the waiver, and the waiver
was signed only by the Revenue District Officer. The tax liability exceeds One Million
Pesos (P1,000,000.00).

ISSUE: Whether the waiver is in accordance with RMO No. 20-90 to validly extend the
three-year prescriptive period under the NIRC.

HELD: NO. The waiver document is incomplete and defective and thus the three-year
prescriptive period was not tolled or extended and continued to run. Consequently, the
Assessment/Demand was invalid because it was issued beyond the three (3) year
period. In the same manner, Warrant of Distraint and/or Levy which petitioner received
thereafter is also null and void for having been issued pursuant to an invalid assessment.

21. CIR vs. KUDOS METAL CORPORATION

FACTS: CIR assessed Kudos Metal Corporation for taxable year 1998. A Waiver of the
Statute of Limitations was executed on December 2001. The CTA issued a Resolution
canceling the assessment notices issued against Petitioner for having been issued
beyond the prescriptive period as the waiver purportedly failed to (a) have the valid
officer execute the same (i.e., only the Assistant Commissioner signed it and not the
CIR); (b) the date of acceptance was not indicated; (c) the fact of receipt by the taxpayer
was not indicated in the original copy.
ISSUE: Has the CIR’s right to assess prescribed?
HELD: YES. The requirements for a valid waiver as laid down in RMO 20-90 and RDAO
No. 5-01 are mandatory to give effect to Section 222 of the Tax Code. Specifically, the
flaws in the waiver executed by Kudos Metal were as follows: (a) there was no notarized
written authority in favor of the signatory for the company; (b) there is no stated date of

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 acceptance by the Commissioner or his representative; and (c) the fact of the receipt of
the copy was not indicated in the original waivers.
Neither can it be said that by merely executing the waiver the taxpayer is already
estopped from disputing an action by the CIR beyond the statutory 3-year period since
the exception under the Suyoc case (i.e., when the delays were due to taxpayer’s acts)
does not apply.

22. RIZAL COMMERCIAL BANKING CORPORATION vs. CIR

FACTS: RCBC received the final assessment notice on July 5, 2001. It filed a protest on
July 20, 2001. As the protest was not acted upon, it filed a Petition for Review with the
Court of Tax Appeals (CTA) on April 30, 2002, or more than 30 days after the lapse of the
180-day period reckoned from the submission of complete documents. The CTA
dismissed the Petition for lack of jurisdiction since the appeal was filed out of time.

ISSUE: Has the action to protest the assessment judicially prescribed?

HELD: YES. The assessment has become final. The jurisdiction of the CTA has been
expanded to include not only decision but also inactions and both are jurisdictional such
that failure to observe either is fatal.

However, if there has been inaction, the taxpayer can choose between (1) file a Petition
with the CTA within 30 days from the lapse of the 180-day period OR (2) await the final
decision of the CIR and appeal such decision to the CTA within 30 days after receipt of
the decision. These options are mutually exclusive and resort to one bars the application
of the other. Thus, if petitioner belatedly filed an action based on inaction, it can not
subsequently file another petition once the decision comes out.

23. CIR VS. NEXT MOBILE, INC

FACTS: CTA First Division held that the Waivers executed by Sarmiento did not validly
extend the three-year prescriptive period to assess respondent for deficiency income
tax, FWT, EWT, for the Waivers were not properly executed according to the procedure
in Revenue Memorandum Order No. 20-90 (RMO 20-90) and Revenue Delegation
Authority Order No. 05-01 (RDAO 05-01).
ISSUE: whether or not the CIR’s right to assess respondent’s deficiency taxes had
already
prescribed.
HELD: The general rule is that when a waiver does not comply with the requisites for its
validity specified under RMO No. 20-90 and RDAO 01-05, it is invalid and ineffective to
extend the prescriptive period to assess taxes. However, due to its peculiar
circumstances, We shall treat this case as an exception to this rule.

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 First, the parties in this case are in pari delicto or “in equal fault.”

24. ASIAN TRANSMISSION CORPORATION VS CIR

FACTS: ASIAN TRANSMISSION CORPORATION (ATC) is a corporation duly organized and
existing under Philippine Laws and with business address at Carmelray Industrial Park,
Canlubang, Calamba City, Laguna.
ATC filed its Annual Information Return of Income Taxes Withheld on Compensation and
Final Withholding Taxes and Annual Information Return of Creditable Income Taxed
Withheld (Expanded)/Income Payments Exempt from Withholding Tax, respectively.
ISSUE: Whether the principle of estoppel is applicable.
HELD: The principle of estoppel was applicable. The execution of the waivers was to the
advantage of ATC because the waivers would provide to ATC the sufficient time to
gather and produce voluminous records for the audit. It would really be unfair,
therefore, were ATC to be permitted to assail the waivers only after the final assessment
proved to be adverse.

PROCEDURE IN ISSUING AN ASSESSMENT / REQUISITE SOF A VALID ASSESSMENT /

DUE PROCESS

25. CIR VS. METRO STAR SUPERAMA, INC

FACT: Metro Star Superama was audited for taxable year 1999 and received a
Preliminary 15-day Letter on November 15, 2001. On April 11, 2002, it received a Formal
Letter of Demand dated April 3, 2002. Denying that it received a Pre-Assessment Notice
and thus not accorded due process, Metro Star Superama filed a Petition with the CTA.
ISSUE: Was the Petitioner accorded the required due process?
HELD: NO. Since the Petitioner denied receipt of the Pre-Assessment Notice, the burden
of proving the same shifts to the BIR. To raise the presumption of receipt, it must be shown that
(a) the letter was properly addressed with postage prepaid and (b) that it was mailed. If receipt
is denied, the BIR must then show actual receipt through presentation of the registry receipt or,
if the same cannot be located, at least a certification from the Bureau of Posts.
26. CIR VS. ASALUS CORPORATION
FACTS: On December 16, 2010, respondent Asalus Corporation (Asalus) received a Notice of
Informal Conference from Revenue District Office (RDO) No. 47 of the Bureau of Internal
Revenue (BIR).
Petitioner Commissioner of Internal Revenue (CIR) issued the Preliminary Assessment
Notice (PAN) finding Asalus liable for deficiency VAT for 2007 in the aggregate amount of

13
 ₱413, 378, 058.11, inclusive of surcharge and interest. Asalus filed its protest against the
PAN but it was denied by the CIR.
ISSUE: Whether Asalus was sufficiently informed with respect to its tax liability.
HELD: Substantial compliance with the requirement as laid down under Section 228 of the
NIRC suffices, for what is important is that the taxpayer has been sufficiently informed of
the factual and legal bases of the assessment so that it may file an effective protest against
the assessment. In the case at bench, Asalus was sufficiently informed that with respect to
its tax liability, the extraordinary period laid down in Section 222 of the NIRC would apply.
This was categorically stated in the PAN and all subsequent communications from the CIR
made reference to the PAN. Asalus was eventually able to file a protest addressing the issue
on prescription, although it was done only in its supplemental protest to the FAN.

27. CIR VS. FITNESS BY DESIGN, INC

FACTS: Fitness filed a protest to the Final Assessment Notice on June 25, 2004.
According to Fitness, the Commissioner's period to assess had already prescribed.
Further, the assessment was without basis since the company was only incorporated on
May 30, 1995.11
On February 2, 2005, the Commissioner issued a Warrant of Distraint and/or Levy with
Reference No. OCN WDL-95-05-005 dated February 1, 2005 to Fitness.
ISSUE: Whether the petition has merit
HELD: The Petition has no merit.

An assessment "refers to the determination of amounts due from a person obligated to

make payments."55 "In the context of national internal revenue collection, it refers to
the determination of the taxes due from a taxpayer under the National Internal Revenue
Code of 1997."56

The assessment process starts with the filing of tax return and payment of tax by the
taxpayer.57 The initial assessment evidenced by the tax return is a self-assessment of
the taxpayer.58 The tax is primarily computed and voluntarily paid by the taxpayer
without need of any demand from govemment.59 If tax obligations are properly paid,
the Bureau of Internal Revenue may dispense with its own assessment.

28. SAMAR-I ELECTRIC COOPERATIVE VS CIR

FACTS: Samar-I Electric Cooperative, Inc. (Petitioner) is an electric cooperative, with
principal office at Barangay Carayman, Calbayog City. It was issued a Certificate of
Registration by the National Electrification Administration (NEA) on February 27, 1974
pursuant to Presidential Decree (PD) 269.
On November 13, 2000, respondent issued a duly signed Letter of Authority (LOA).

14
 October 19, 2001, respondent sent a Notice for Informal Conference which was received
by petitioner in November 2001; indicating the allegedly income and withholding tax
liabilities of petitioner for 1997 to 1999. Attached to the letter is a summary of the
report, with an explanation of the findings of the investigators.

ISSUE: Whether Section 228 of the NIRC of 1997 was sufficiently complied with.
HELD: We find that the requirement of Section 228 was substantially complied with.
Respondent had fully informed petitioner in writing of the factual and legal bases of the
deficiency taxes assessment, which enabled the latter to file an "effective" protest,
much unlike the taxpayer's situation in Enron. Petitioner's right to due process was thus
not violated.

29. CIR VS. AVON PRODUCTS MANUFACTURING INC.

FACTS: Avon filed its Value Added Tax (VAT) Returns and Monthly Remittance Returns of
Income Tax Withheld for the taxable year 1999.

Avon signed two (2) Waivers of the Defense of Prescription dated October 14, 2002 and
December 27, 2002,9 which expired on January 14, 2003 and April 14, 2003,
respectively.10

On July 14, 2004, Avon was served a Collection Letter 11 dated July 9, 2004. It was
required to pay P80,246,459.15.

Preliminary assessment was done. On February 14, 2003, Avon filed a letter dated
February 13, 2003 protesting against the Preliminary Assessment Notice.

ISSUE: whether or not the assessments are void

HELD: The taxpayers shall be informed in writing of the law and the facts on which the
assessment is made; otherwise, the assessment shall be void.

Section 3.1.2 of Revenue Regulations No. 12-99 requires the Preliminary Assessment
Notice to show in detail the facts and law, rules and regulations, or jurisprudence on
which the proposed assessment is based.

PROTESTING AN ASSESSMENT
(REINVESIGATION AND RECONSIDERATION)
30. BPI VS CIR
FACTS: Petitioner BPI is a commercial banking corporation organized and existing under
the laws of the Philippines. The Bureau of Internal Revenue (BIR) issued Assessment No.
FAS-5-85-89-002054, [3] finding petitioner BPI liable for deficiency DST on its afore-

15
 mentioned sales of foreign bills of exchange to the Central Bank. Petitioner BPI received
the Assessment, together with the attached Assessment Notice, on 20 October 1989.
Petitioner BPI, through its counsel, protested the Assessment in a letter dated 16
November 1989, and filed with the BIR on 17 November 1989. Petitioner BPI did not
receive any immediate reply to its protest letter.
ISSUE: Whether the protest filed by petitioner BPI was a request for reconsideration.
HELD: The protest filed by petitioner BPI was a request for reconsideration, which
merely required a review of existing evidence and the legal basis for the assessment.
Respondent BIR Commissioner did not require, neither did petitioner BPI offer,
additional evidence on the matter. After petitioner BPI filed its request for
reconsideration, there was no other communication between it and respondent BIR
Commissioner or any of the authorized representatives of the latter. There was no
showing that petitioner BPI was informed or aware that its request for reconsideration
was granted or acted upon by the BIR.

SUBMISSION OF RELEVANT DOCUMENTS / 60-DAY PERIOD

31. CIR VS. FIRST EXPRESS PAWNSHOP

Facts:
In this case, respondent a pawnshop company received the tax assessment on 3 January
2002. On 1 February 2002, respondent submitted its protest and attached the GIS and
Balance Sheet as of 31 December 1998. Since petitioner did not act on the protest during
the 180-day period,respondent filed a petition before the CTA on 28 August 2002 and
contended that petitioner did not consider the supporting documents on the interest
expenses and donations which resulted in the deficiency income tax.
Issue: Whether the assessment has become final
HELD: NO. The assessment did not become final and unappealable. It cannot be said that
respondent failed to submit relevant supporting documents that would render the
assessment final because when respondent submitted its protest, respondent attached the
GIS and Balance Sheet. Further, petitioner cannot insist on the submission of proof of DST
payment because such document does not exist as respondent claims that it is not liable to
pay, and has not paid, the DST on the deposit on subscription. After respondent submitted
its letter-reply stating that it could not comply with the presentation of the proof of DST
payment, no reply was received from petitioner.

DECISION / INACTION ON THE PENDING PROTEST / APPEAL TO THE COURT OF TAX

APPEALS
16
 (FINAL DECISION ON A DISPUTED ASSESSMENT)
32. CIR VS. LIQUIGAZ PHILIPPINE CORPORATION
FACTS: Liquigaz Philippines Corporation (Liquigaz) is a corporation duly organized and
existing under Philippine laws. On July 11, 2006, it received a copy of Letter of Authority
(LOA) No. 00067824, dated July 4, 2006, issued by the Commissioner of Internal
Revenue (CIR), authorizing the investigation of all internal revenue taxes for taxable year
2005. On April 9, 2008, Liquigaz received an undated letter purporting to be a Notice of
Informal Conference (NIC), as well as the detailed computation of its supposed tax
liability.
ISSUE: Whether Liquigaz’s petition cancelling the EWT AND FBT assessment be granted.
HELD: The CTA Division partially granted Liquigaz's petition cancelling the EWT and FBT
assessments but affirmed with modification the WTC assessment. It ruled that the
portion of the FDDA relating to the EWT and the FBT assessment was void pursuant to
Section 228 of the National Internal Revenue Code (NIRC) of 1997, as implemented by
Revenue Regulations (RR) No. 12-99.

INACTION DURING THE 180-DAY PERIOD / APPEAL TO THE CTA

33. LASCONA LAND VS CIR
FACTS: On March 27, 1998, the CIR issued a formal assessment notice (FAN) to Lascona
Land Co., Inc. demanding the company to pay P753,266.56 income taxes. Lascona filed a
protest on April 20, 1998. CIR promulgated its decision on March 3, 1999. Lascona
received a copy of the decision on March 12, 1999. On April 12, 1999, Lascona appealed
the decision to the Court of Tax Appeals. The CIR moved for the dismissal of the appeal
on the ground that under a revenue regulation issued by the Bureau of Internal Revenue
(RR No. 12-99), if the CIR or its representative failed to act on a protest within the 180-
day period the taxpayer may appeal within 30 days from the lapse of the 180-day period
to the CTA otherwise, the decision shall become final and executor and that Lascona
having failed to appeal within the said period, CTA has no jurisdiction over the case.

ISSUE: Whether or not the contention of the CIR is correct.

HELD: No. The SC ruled that the revenue regulation to which the CIR anchored its
contention is invalid. Section 228 of the National Internal Revenue Code provides that a
taxpayer has two remedies if the CIR failed to act on his protest within the 180-day
period, to wit;
1) the taxpayer adversely affected by the decision may appeal to the CTA within 30 days
from receipt of the decision, or
2) may appeal to the CTA within 30 days from the lapse of the one hundred eighty (180)-
day period.

17
 From the above provision, the taxpayer was given two options in case CIR failed to act
on their claim. First is to appeal to the CTA within 30 days from the lapse of the 180 day
period; or second, wait for the CIR to issue the decision and then appeal, if adverse, to
the CTA within 30 days from the receipt of the decision by the taxpayer

34. RCBC VS CIR

FACTS: Petitioner reiterates its claim that its former counsel's failure to file petition for
review with the Court of Tax Appeals within the period set by Section 228 of the
National Internal Revenue Code of 1997 (NIRC) was excusable.
Petitioner's motion for reconsideration is denied for lack of merit.

Other than the issue of prescription, which is raised herein for the first time, the issues
presented are a mere rehash of petitioner's previous arguments, all of which have been
considered and found without merit in our Decision dated June 16, 2006.

ISSUE: Whether the Commissioner acted on the disputed assessment within 180 days
from submission of documents.
HELD: The Commissioner failed to act on the disputed assessment within 180 days from
date of submission of documents. Thus, petitioner opted to file a petition for review
before the Court of Tax Appeals. Unfortunately, the petition for review was filed out of
time, i.e., it was filed more than 30 days after the lapse of the 180-day period.
Consequently, it was dismissed by the Court of Tax Appeals for late filing. Petitioner did
not file a motion for reconsideration or make an appeal; hence, the disputed
assessment became final, demandable and executory.

35. PAGCOR VS BIR

FACTS: PAGCOR was created pursuant to Presidential Decree (P.D.) No. 1067-A on
January 1, 1977. Simultaneous to its creation, P.D. No. 1067-B (supplementing P.D. No.
1067-A) was issued exempting PAGCOR from the payment of any type of tax, except a
franchise tax of five percent (5%) of the gross revenue. Thereafter, on June 2, 1978, P.D.
No. 1399 was issued expanding the scope of PAGCOR's exemption. PAGCOR's tax
exemption was removed in June 1984 through P.D. No. 1931, but it was later restored
by Letter of Instruction No. 1430, which was issued in September 1984.
With the enactment of R.A. No. 9337 on May 24, 2005, certain sections of the National
Internal Revenue Code of 1997 were amended. The particular amendment that is at
issue in this case is Section 1 of R.A. No. 9337, which amended Section 27 (c) of the
National Internal Revenue Code of 1997 by excluding PAGCOR from the enumeration of
GOCCs that are exempt from payment of corporate income tax.

18
 ISSUE: Is Republic Act 9337 constitutional insofar as it excluded PAGCOR from the
enumeration of GOCCs exempt from the payment of corporate income tax?
HELD: YES. The original exemption of PAGCOR from corporate income tax was not made
pursuant to a valid classification based on substantial distinctions so that the law may
operate only on some and not on all. Instead, the same was merely granted due to the
acquiescence of the House Committee on Ways and Means to the request of PAGCOR..

36. FISHWEALTH CANNING CORP VS CIR

FACTS: Petitioner was assessed for income tax, Value Added Tax and withholding tax.
After Court of Tax Appeals issued a Final Decision on Disputed Assessment, Petitioner
filed a Letter of Reconsideration with the CIR instead of appealing the same to the Court
of Tax Appeals within 30 days. The CIR then issued a Preliminary Collection Letter which
prompted the Petitioner to file its Petition with the Court of Tax Appeals. CIR argued
that the Petition with the Court of Tax Appeals was filed out of time.
ISSUE: Did the filing of a Reconsideration toll the running of the 30-day period to appeal
to the Court of Tax Appeals?

HELD: NO. A Motion for Reconsideration of the denial of the administrative protest does
not toll the 30-day period to appeal to the Court of Tax Appeals.

37. ALLIED BANKING CORPORATION VS CIR

FACTS: Allied Banking Corporation received a PAN from the BIR which it timely disputed.
In response, the BIR issued a Formal Letter of Demand with Assessment Notices. Instead
of protesting the FAN, the petitioner filed a Petition for Review with the CTA. The CTA
dismissed the Petition stating that it is neither the assessment nor the formal demand
letter itself that is appealable before it but instead it should be the decision of the CIR
on the disputed assessment
ISSUES: Can the Formal Letter of Demand be construed as the final decision of the CIR
appealable to the CTA under Republic Act 9282?
HELD: YES. This is considered an exception to the general rule on exhaustion of
administrative remedies since the CIR is considered estopped from claiming the same
principle applies in its case. The tenor of the demand letter is clear that the CIR had
already made a final decision and that the remedy of the Petitioner was to appeal the
same within 30 days of receipt. This can be gleaned from the use of the terms “final
decision” and “appeal” which were deemed unequivocal language pointing to the
finality of the decision. While the Court cited the rules relative to (a) protesting the FAN
and not the PAN and (b) counting the 30 day period to appeal to the CTA from receipt of

19
 the decision of the CIR and not issuance of the assessment, this particular case was
deemed a clear exception in view of the CIR’s own actions.

COLLECTION REMEDIES OF THE GOVERNMENT

(ADMINISTRATIVE REMEDIES / SUMMARY REMEDIES / JUDICIAL COLLECTION)
38. REPUBLIC VS. HIZON

FACTS: On July 18, 1986, the BIR issued to respondent Salud V. Hizon a deficiency
income tax assessment covering the fiscal year 1981-1982. Respondent not having
contested the assessment, petitioner BIR, on January 12, 1989, served warrants of
distraint and levy to collect the tax deficiency. However, for reasons not known, it did
not proceed to dispose of the attached properties.

ISSUE: Has the action for collection of the tax prescribed?

HELD: Yes. Sec. 229 of the NIRC mandates that a request for reconsideration must be
made within 30 days from the taxpayer's receipt of the tax deficiency assessment,
otherwise the assessment becomes final, unappealable and, therefore, demandable.
The notice of assessment for respondent's tax deficiency was issued by petitioner on
July 18, 1986. On the other hand, respondent made her request for reconsideration
thereof only on November 3, 1992, without stating when she received the notice of tax
assessment. Hence, her request for reconsideration did not suspend the running of the
prescriptive period provided under Sec. 223(c).

39. CIR VS. HAMBRECHT AND QUIST PHILIPPINE INC

FACTS: The assessment against Hambrecht & Quist had become final and unappelable
since there was a failure to protest the same within the 30-day period provided by law.
However, the CTA held that the BIR failed to collect within the prescribed time and thus
ordered the cancellation of the assessment notice. The CIR disputed the jurisdiction of
the CTA arguing that since the assessment had become final and unappealable, the
taxpayer can no longer dispute the correctness of the assessment even before the CTA.
ISSUE: Can the CTA still take cognizance of an assessment case which has become ‘final
and unappealable’ for failure of the taxpayer to protest within the 30-day protest
period?
HELD: YES. The appellate jurisdiction of the CTA is not limited to cases which involve
decisions of the CIR on matters relating to assessments or refunds. The CTA law clearly
bestows jurisdiction to the CTA even on “other matters arising under the National
Internal Revenue Code”. Thus, the issue of whether the right of the CIR to collect has
prescribed, collection being one of the duties of the BIR, is considered covered by the
term “other matters”. The fact that assessment has become final for failure to protest
only means that the validity or correctness of the assessment may no longer be

20
 questioned on appeal. However, this issue is entirely distinct from the issue of whether
the right to collect has in fact prescribed.

(NO INJUNCTION TO RESTRAIN COLLECTION OF TAXES)

4O. SPOUSES PACQUIAO VS. THE CTA
FACTS: On April 15, 2010, Pacquiao filed his 2009 income tax return, which although
reflecting his Philippines-sourced income, failed to include his income derived from his
earnings in the US. He also failed to file his Value Added Tax (VAT) returns for the years
2008 and 2009.
Finding the need to directly conduct the investigation and determine the tax liabilities of
the petitioners, respondent Commissioner on Internal Revenue (CIR) issued another
Letter of Authority, dated July 27, 2010 (July LA), authorizing the BIR's National
Investigation Division (NID) to examine the books of accounts and other accounting
records of both Pacquiao and Jinkee for the last 15 years, from 1995 to 2009.

ISSUE: Whether injunction to retrain collection of taxes is allowed.

HELD: It is clear that the authority of the courts to issue injunctive writs to restrain the
collection of tax and to dispense with the deposit of the amount claimed or the filing of
the required bond is not simply confined to cases where prescription has set in. As
explained by the Court in those cases, whenever it is determined by the courts that the
method employed by the Collector of Internal Revenue in the collection of tax is not
sanctioned by law, the bond requirement under Section 11 of R.A. No. 1125 should be
dispensed with. The purpose of the rule is not only to prevent jeopardizing the interest
of the taxpayer, but more importantly, to prevent the absurd situation wherein the
court would declare "that the collection by the summary methods of distraint and levy
was violative of law, and then, in the same breath require the petitioner to deposit or
file a bond as a prerequisite for the issuance of a writ of injunction."

40. TRIDHARMA MARKETING CORPORATION VS CTA

FACTS: BIR assessed TRIDHARMA MARKETING CORP (T) with various tax deficiencies
amounting to more than 4.640 billion pesos. Protest was filed. T paid 5.8 million pesos
for its assessment on WTC, DST and EWT and reiterated its interest to compromise
alleged IT and VAT deficiencies. FDDA was issued at 4.473 billion pesos.
T appealed the CIR's decision to the CTA 2D and moved for the suspension of tax
collection against it. However, the CTA 2D required T to post bond equivalent to 150%
of the assessment within 15 days from notice. Hence, T was ordered to post 6.701
billion pesos as bond.
ISSUES: Was the bond requirement properly issued considering T's allegation of illegal
collection?

21
 HELD: The bond requirement was not properly issued. Section 11 of R.A. 1125, as
amended, indicates that the requirement of the bond as a condition precedent to
suspension of the collection applies only in cases where the processes by which the
collection sought to be made by means thereof are carried out in consonance with the
law, not when the processes are in plain violation of the law that they have to be
suspended for jeopardizing the interests of the taxpayer.

CLAIMS FOR REFUND AND CREDIT OF TAXES

41. CIR VS SMART COMMUNICATION, INC
FACTS: Smart entered into an Agreement with Prism, a nonresident foreign corporation
domiciled in Malaysia, whereby Prism will provide programming and consultancy
services to Smart. Thinking that the payments to Prism were royalties, Smart withheld
25% under the RP-Malaysia Tax Treaty. Smart then filed a refund with the BIR alleging
that the payments were not subject to Philippine withholding taxes given that they
constituted business profits paid to an entity without a permanent establishment in the
Philippines.
ISSUE: Does Smart have the right to file the claim for refund?
HELD: YES. The Court reiterated the ruling in Procter & Gamble stating that a person
“liable for tax” has sufficient legal interest to bring a suit for refund of taxes he believes
were illegally collected from him. Since the withholding agent is an agent of the
beneficial owner of the payments (i.e., nonresident), the authority as agent is held to
include the filing of a claim for refund. The Silkair case was held inapplicable as it
involved excise taxes and not withholding taxes.

42. HONDA CARS PHILIPPINES, INC VS HONDA CARS TECHNICAL SPECIALIST AND
SUPERVISORS UNION
FACTS: Petitioner Honda Cars Philippines, Inc., (company) and respondent Honda Cars
Technical Specialists and Supervisory Union (union), the exclusive collective bargaining
representative of the company’s supervisors and technical specialists, entered into a
collective bargaining agreement (CBA) effective April 1, 2006 to March 31, 2011.
The disagreement between the company and the union on the matter resulted in a
grievance which they referred to the CBA grievance procedure for resolution. As it
remained unsettled there, they submitted the issue to a panel of voluntary arbitrators as
required by the CBA.
ISSUE: Whether the union has cause of action against the company.
HELD: We hold that the union has no cause of action against the company. The
company merely performed its statutory duty to withhold tax based on its
interpretation of the NIRC, albeit that interpretation may later be found to be
erroneous. The employer did not violate the employee’s right by the mere act of
withholding the tax that may be due the government.

22
 43. DIAGEO PHILIPPINES, INC VS CIR
FACTS: Petitioner Diageo Philippines, Inc. (Diageo) is engaged in the business of
importing, exporting, manufacturing, marketing, distributing, buying and selling, by
wholesale, all kinds of beverages and liquors. It purchased raw alcohol from its supplier
for use in the manufacture of its beverage and liquor products. The supplier imported
the raw alcohol and paid the related excise taxes thereon before they were sold to the
petitioner. The purchase price for the raw alcohol included the excise taxes paid by the
supplier. Diageo applied for tax refund/issuance of tax credit certificates corresponding
to the excise taxes which its supplier paid but passed on to it as part of the purchase
price of the subject raw alcohol. It filed a petition for review with the CTA for failure of
the CIR to act upon its claims for refund.

ISSUE: Who may claim the refund or tax credit of excise taxes paid by its supplier on the
raw alcohol it purchased and used in the manufacture of its exported goods?
HELD: The person entitled to claim a tax refund is the statutory taxpayer or the person
liable for or subject to tax.
Excise taxes partake of the nature of indirect taxes. The proper party to question, or
seek a refund of an indirect tax is the statutory taxpayer, the person on whom the tax is
imposed by law and who paid the same even if he shifts the burden thereof to another.
Indirect taxes are those wherein the liability for the payment of the tax falls on one
person but the burden thereof can be shifted to another person. When the seller passes
on the tax to his buyer, he, in effect, shifts the tax burden, not the liability to pay it, to
the purchaser as part of the price of goods sold or services rendered.

44. PAL VS. CIR

FACTS: PHILIPPINE AIRLINES, INC. had zero taxable income for 2000 but would have
been liable for Minimum Corporate Income Tax based on its gross income. However,
PHILIPPINE AIRLINES, INC. did not pay the Minimum Corporate Income Tax using as
basis its franchise which exempts it from “all other taxes” upon payment of whichever is
lower of either (a) the basic corporate income tax based on the net taxable income or
(b) a franchise tax of 2%.
ISSUE: Is PAL liable for Minimum Corporate Income Tax?
HELD: NO. PHILIPPINE AIRLINES, INC.’s franchise clearly refers to "basic corporate
income tax" which refers to the general rate of 35% (now 30%). In addition, there is an
apparent distinction under the Tax Code between taxable income, which is the basis for
basic corporate income tax under Sec. 27 (A) and gross income, which is the basis for
the Minimum Corporate Income Tax under Section 27 (E). The two terms have their
respective technical meanings and cannot be used interchangeably. Not being covered
by the Charter which makes PAL liable only for basic corporate income tax, then

23
 Minimum Corporate Income Tax is included in "all other taxes" from which PHILIPPINE
AIRLINES, INC. is exempted.

REQUISITES FOR A VALID CLAIM FOR REFUND / CREDITABLE WITHHOLDING TAX CASES
45. CIR VS MERALCO
FACTS: Manila Electric Company (Meralco) filed its tentative income tax reflecting a
refundable amount of P101,897,741. Only P77,931,812 was applied as tax credit. An
investigation was conducted showing that Meralco was liable for (1) deficiency income
tax in the amount of P2,340,902.52; and (2) deficiency franchise tax in the amount of
P2,838,335.84.” Later, Meralco filed an amended final corporate Income Tax Return
reflecting a refundable amount of P107,649,729 and thus filed a letter-claim for refund
or credit representing overpaid income taxes for the years 1987 and 1988.

ISSUE:Whether the appellate court failed to consider Meralco’s failure to substantiate

by positive evidence its entitlement to a tax refund or credit.

HELD: In case the corporation is entitled to a refund of the excess estimated quarterly
income taxes paid, the refundable amount shown on its final adjustment return may be
credited against the estimated quarterly income tax liabilities for the taxable quarters of
the succeeding taxable year. The issue of whether MERALCO adduced sufficient
evidence to prove its entitlement to a refund is a question of fact. It bears noting that
the tax court and the appellate court found MERALCO’s claim for tax refund or credit
meritorious on the basis of the testimonial and documentary evidence adduced by the
parties. It bears noting too that the Commissioner did not dispute the validity and
authenticity of MERALCO’s quarterly income tax returns as well as the final adjustment
returns for the years 1987 and 1988 and proofs of payment of its tax liabilities

46. CIR VS. FAR EAST BANK

FACTS: On April 10, 1995, respondent filed with the Bureau of Internal Revenue (BIR)
two Corporate Annual Income Tax Returns, one for its Corporate Banking Unit (CBU)4
and another for its Foreign Currency Deposit Unit (FCDU),5 for the taxable year ending
December 31, 1994. The return for the CBU consolidated the respondent’s overall
income tax liability for 1994, which reflected a refundable income tax of
₱12,682,864.00.
ISSUE: whether respondent has proven its entitlement to the refund.
HELD: We find that the respondent miserably failed to prove its entitlement to the
refund. Therefore, we grant the petition filed by the petitioner CIR for being
meritorious.

24
 A taxpayer claiming for a tax credit or refund of creditable withholding tax must comply
with the following requisites:

1) The claim must be filed with the CIR within the two-year period from the date of
payment of the tax;

2) It must be shown on the return that the income received was declared as part of the
gross income; and

3) The fact of withholding must be established by a copy of a statement duly issued by

the payor to the payee showing the amount paid and the amount of the tax withheld.
47. METROBANK VS. CIR
Facts: On December 27, 2002, Metrobank filed a letter to the BIR requesting for the refund.
Thereafter and in view of the CIR inaction, Metrobank filed its judicial claim for refund via a
petition for review filed before the CTA on September 10, 2003.
In its defense, CTA averred that (a) the claim for refund is subject to administrative
investigation; (b) Metrobank must prove that there was double payment of the tax sought to be
refunded; (c) such claim must be filed within the prescriptive period laid down by law; (d) the
burden of proof to establish the right to a refund is on the taxpayer; and (e) claims for tax
refunds are in the nature of tax exemptions, and as such, should be construed strictissimi juris
against the taxpayer.
Issue: Whether Metrobank’s claim for refund has already prescribed.

Held: Yes, the right of Metrobank for refund has prescribed.

Section 229 of the NIRC provides for the proper procedure in order to claim for refunds, to wit:
Section 229. Recovery of Tax Erroneously or Illegally Collected. – No suit or proceeding shall be
maintained in any court for the recovery of any national internal revenue tax hereafter alleged
to have been erroneously or illegally assessed or collected, or of any penalty claimed to have
been collected without authority, or of any sum alleged to have been excessively or in any
manner wrongfully collected, until a claim for refund or credit has been duly filed with the
Commissioner; but such suit or proceeding may be maintained, whether or not such tax,
penalty, or sum has been paid under protest or duress.

REFUNDS OF CORPORATE TAXPAYERS / IRREVOCABILITY RULE

48. CIR VS. TMX SALES INC.

25
 FACTS: TMX Sales Inc. filed its quarterly income tax for the 1st quarter of 1981. It
declared P571,174.31 and paying an income tax of P247,019 on May 13, 1981.
However, during the subsequent quarters, TMX suffered losses. On April 15, 1982, when
TMX filed its Annual Income Tax Return for the year ended in December 31, 1981, it
declared a net loss of P6,156,525. On July 9, 1982, TMX filed with the Appellate Division
of BIR for refund in the amount of P247,010 representing overpaid income tax. His claim
was not acted upon by the Commissioner of Internal Revenue

ISSUE: Whether or not TMX Sales Inc. is entitled to a refund considering that two years
gas already elapsed since the payment of the tax

HELD: Yes. Petition of CIR is denied. Sec. 292, par. 2 of the National Internal Revenue
Code stated that “in any case, no such suit or proceeding shall be begun after the
expiration of two years from the date of the payment of the tax or penalty regardless of
any supervening cause that may arise after payment.” This should be interpreted in
relation to the other provisions of the Tax Code. The most reasonable and logical
application of the law would be to compute the 2-year prescriptive period at the time of
the filing of the Final Adjustment Return or the Annual Income Tax Return, where it can
finally be ascertained if the tax payer has still to pay additional income tax or if he is
entitled to a refund of overpaid income tax. Since TMX filed the suit on March 14, 1984,
it is within the 2-year prescriptive period starting from April 15, 1982 when they filed
their Annual Income Tax Return.

49. XYSTRA PHILS INC. VS. CIR

FACTS: On March 9, 2007, petitioner filed a petition for review on certiorari assailing
the January 18, 2007 decision1 of the Court of Tax Appeals (CTA) in CTA EB Case No.
135. The Court denied the petition in its March 28, 2007 resolution.
On July 5, 2007, petitioner’s motion for reconsideration was denied with finality as
there was no compelling reason to warrant a modification of the March 28, 2007
resolution.
ISSUE: Whether the petitioner could claim a refund.
HELD: Since petitioner elected to carry over its excess credits for the year 2000 in
the amount of ₱4,627,976 as tax credits for the following year, it could no longer
claim a refund. Again, at the risk of being repetitive, once the carry over option was
made, actually or constructively, it became forever irrevocable regardless of
whether the excess tax credits were actually or fully utilized. Nevertheless, as held in
Philam Asset Management, Inc., the amount will not be forfeited in favor of the
government but will remain in the taxpayer’s account. Petitioner may claim and
carry it over in the succeeding taxable years, creditable against future income tax
liabilities until fully utilized.

26
 50. WINEBRENNER AND INIGO INSURANCE BROKERS, INC
FACTS: On April 15, 2004, petitioner filed itsAnnual Income Tax Return for CY 2003.
About two years thereafter or on April 7, 2006, petitioner applied for the
administrative tax credit/refund claiming entitlement to the refund of its excess or
unutilized CWT for CY 2003, by filing BIR Form No. 1914 with the Revenue District
Office No. 50 of the Bureau of Internal Revenue (BIR).
There being no action taken on the said claim, a petition for review was filed by
petitioner before the CTA on April 11, 2006. The case was docketed as CTA Case No.
7440 and was raffled to the Special First Division (CTA Division).
On April 13, 2010, CTA Division partially granted petitioner’s claim for refund of
excess and unutilized CWT for CY 2003 in the reduced amount of ₱2,737,903.34 in
its April 13, 2010 Decision2 (original decision).

ISSUE: Whether the submission and presentation of the quarterly ITRs of the
succeeding quarters of a taxable year is indispensable in a claim for refund.

HELD: The Court however cannot agree.

Proving that no carry-over has been made does not absolutely require the
presentation of the quarterly ITRs.

In Philam, the petitioner therein sought for recognition of its right to the claimed
refund of unutilized CWT. The CIR opposed the claim, on the grounds similar to the
caseat hand, that no proof was provided showing the non-carry over of excess CWT
to the subsequent quarters of the subject year. In a categorical manner, the Court
ruled that the presentation of the quarterly ITRs was not necessary. Therein, it was
written.

Requiring that the ITR or the FAR of the succeeding year be presented to the BIR in
requesting a tax refund has no basis in law and jurisprudence.

51. UNIVERSITY PHYSICIANS SERVICES INC. MANAGEMENT VS. CIR

FACTS: UPSI-MI had, as of 31 December 2005, an outstanding amount of ₱2,331,
102.00 in excess and unutilized creditable withholding taxes.

For the subsequent taxable year ending 31 December 2006, the total sum of
creditable taxes withheld on the management fees of UPSI-MI was ₱2,927,834.00.
Per its 2006 Annual Income Tax Return (ITR), UPSI-MI's income tax due amounted to
₱99,105.00. UPSI-MI applied its "Prior Year's Excess Credits" of ₱2,331, 102.00 as tax
credit against such 2006 Income Tax due, leaving a balance of ₱2,231,507.00 of still
unutilized excess creditable tax.

27
 ISSUE: May UPSI-MI still be entitled to the refund of its 2006 excess tax credits in the
amount of ₱2,927,834.00 when it thereafter filed its income tax return (for the short
period ending 31 March 2007) indicating the option of carry-over.

HELD: Under Philippine tax laws, there are two options available to a corporation
whenever it overpays its income tax for the taxable year: (1) to carry over and apply
the overpayment as tax credit against the estimated quarterly income tax liabilities
of the succeeding taxable years (also known as automatic tax credit) until fully
utilized (meaning, there is no prescriptive period); and (2) to apply for a cash refund
or issuance of a tax credit certificate within the prescribed period. Such
overpayment of income tax is usually occasioned by the over-withholding of taxes
on the income payments to the corporate taxpayer.

52. RHOMBUS ENERGY, INC VS. CIR

FACTS: On April 17, 2006, respondent filed its Annual Income Tax Return (“ITR”) for
taxable year 2005. Said Annual ITR indicated, among others, the excess creditable
withholding tax (“CWT”) for the year 2005 in the amount P1,500,653.00 was “To be
refunded” to it by the CIR. Rhombus reiterated this excess credit from the previous
year in its Tax Returns for the first, second and third quarter of 2006. On December
29, 2006, respondent filed with the Revenue Region No. 8 an administrative claim
for refund of its alleged excess/unutilized CWT for the year 2005 in the amount of
P1,500,653.00.
ISSUE: Whether or not Rhombus has proven its entitlement to the refund.

HELD: Yes, The appeal is meritorious.

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

In case the corporation is entitled to a tax credit or refund of the excess estimated
quarterly income taxes paid, the excess amount shown on its final adjustment return
may be carried over and credited against the estimated quarterly income tax
liabilities for the taxable quarters of the succeeding taxable years.

28
THE COURT OF TAX APPEALS
53. CIR VS. CTA AND PETRON CORPORATION
FACTS: Petron, which is engaged in the manufacture and marketing of petroleum
products, imports alkylate as a raw material or blending component for the
manufacture of ethanol-blended motor gasoline.[4] For the period January 2009 to
August 2011, as well as for the month of April 2012, Petron transacted an aggregate
of 22 separate importations for which petitioner the Commissioner of Internal
Revenue (CIR) issued Authorities to Release Imported Goods (ATRIGs), categorically
stating that Petron's importation of alkylate is exempt from the payment of the
excise tax because it was not among those articles enumerated as subject to excise
tax under Title VI of Republic Act No. (RA) 8424,[5] as amended, or the 1997
National Internal Revenue Code (NIRC).
ISSUE: Whether the CTA properly assumed jurisdiction over the petition assailing the
imposition of excise tax on Petron's importation of alkylate based on Section 148 (e)
of the NIRC.
HELD: The petition is meritorious. The CIR asserts that the interpretation of the
subject tax provision, i.e., Section 148 (e) of the NIRC, embodied in CMC No. 164-
2012, is an exercise of her quasi-legislative function which is reviewable by the
Secretary of Finance, whose decision, in turn, is appealable to the Office of the
President and, ultimately, to the regular courts, and that only her quasi judicial
functions or the authority to decide disputed assessments, refunds, penalties and
the like are subject to the exclusive appellate jurisdiction of the CTA.[20] She
likewise contends that the petition suffers from prematurity due to Petron's failure
to exhaust all available remedies within the administrative level in accordance with
the Tariff and Customs Code (TCC).

54. BANCO DE ORO VS. REPUBLIC

FACTS: The Bureau of Treasury (BTr) in a notice announced the auction of 10- year
Zero-Coupon Bonds denominated as the Poverty Eradication and Alleviation
Certificates or the PEACE Bonds on October 16, 2001, which the BTr states shall not
be subject to 20% final withholding tax since the issue is limited to 19
buyers/lenders.

At the auction, Rizal Commercial Banking Corporation (RCBC) participated on behalf

of Caucus of Development NGO Networks (CODE-NGO) and won the bid.
ISSUES: Does CTA have jurisdiction to determine the constitutionality or validity of
tax laws, rules and regulations, and other administrative issuances of CIR?

29
 HELD: YES. CTA has jurisdiction and may take cognizance of cases directly
challenging constitutionality or validity of a tax law, regulation or administrative
issuance such as revenue order, revenue memorandum circular, and ruling.
RA 9282: appeals from the decisions of quasi-judicial agencies on tax-related
problems must be brought exclusively to the CTA.
55. CITY OF MANILA VS GRECIA-CUERDO
FACTS: Petitioner City of Manila, through its treasurer, petitioner Liberty Toledo,
assessed taxes for the taxable period from January to December 2002 against the
private respondents. In addition to the taxes purportedly due from private
respondents pursuant to Section 14, 15, 16, 17 of the Revised Revenue Code of
Manila (RRCM), said assessment covered the local business taxes. private
respondents were constrained to pay the P 19,316,458.77 assessment under protes.

ISSUE: Whether or not the CTA has jurisdiction over a special civil action for
certiorari assailing an interlocutory order issued by the RTC in a local tax case.

HELD: The CTA has jurisdiction over a special civil action for certiorari assailing an
interlocutory order issued by the RTC in a local tax case. In order for any appellate
court to effectively exercise its appellate jurisdiction, it must have the authority to
issue, among others, a writ of certiorari. In transferring exclusive jurisdiction over
appealed tax cases to the CTA, it can reasonably be assumed that the law intended
to transfer also such power as is deemed necessary, if not indispensable, in aid of
such appellate jurisdiction. There is no perceivable reason why the transfer should
only be considered as partial, not total.

56.ASIATRUST DEVELOPMENT BANK, INC VS. CIR

Facts: Asiatrust Development Bank, Inc. (Asiatrust), on separate dates in February
2000, received from the Commissioner of Internal Revenue (CIR) three Formal
Letters of Demand (FLD) with Assessment Notices for deficiency internal revenue
taxes in the amounts of P131,909,161.85, P83,012,265.78, and ₱l44,012,918.42 for
fiscal years ending June 30, 1996, 1997, and 1998, respectively.
Asiatrust timely protested the assessment notices.

ISSUE: Whether the CTA en banc erred in finding that Asiatrust is liable for
deficiency final withholding tax for fiscal year ending June 30, 1998.

HELD: The Petitions lack merit. G.R. No. 201530 An application for tax abatement is
considered approved only upon the issuance of a termination letter. Section 204(B)
of the 1997 National lnten1al Revenue Code (NIRC) empowers the CIR to abate or
cancel a tax liability. The BIR issued RR No. 15-06 prescribing the guidelines on the

30
 implementation of the one-time administrative abatement of all
penalties/surcharges and interest on delinquent accounts and assessments
(preliminary or final, disputed or not).

56. POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT CORPORATION VS. CIR
FACTS: Petitioner Power Sector Assets and Liabilities Management Corporation
(PSALM) is a government-owned and controlled corporation created under Republic
Act No. 9136 (RA 9136), also known as the Electric Power Industry Reform Act of
2001 (EPIRA). Section 50 of RA 9136 states that the principal purpose of PSALM is to
manage the orderly sale, disposition, and privatization of the National Power
Corporation (NPC) generation assets, real estate and other disposable assets, and
Independent Power Producer (IPP) contracts with the objective of liquidating all NPC
financial obligations and stranded contract costs in an optimal manner.
ISSUE: Whether the sale of the power plants is subject to VAT?

HELD: To resolve the issue of whether the sale of the Pantabangan-Masiway and
Magat Power Plants by petitioner PSALM to private entities is subject to VAT, the
Court must determine whether the sale is "in the course of trade or business" as
contemplated under Section 105 of the NIRC, which reads:
SEC 105. Persons Liable. - Any person who, in the course of trade or business, sells,
barters, exchanges, leases goods or properties, renders services, and any person
who imports goods shall be subject to the value-added tax (VAT) imposed in Sections
106 to 108 of this Code.

LOCAL AND REAL PROPERTY TAXATION

(LOCAL GOVERNMENT UNITS POWER TO TAX)
57. FILM DEVELOPMENT COUNCIL OF THE PHILIPPINES VS. COLON HERITAGE REALTY
FACTS: Sometime in 1993, respondent City of Cebu, in its exercise of its power to
impose amusement taxes under Section 140 of the Local Government Code2 (LGC)
anchored on the constitutional policy on local autonomy,3 passed City Ordinance
No. LXIX otherwise known as the "Revised Omnibus Tax Ordinance of the City of
Cebu (tax ordinance)." Central to the case at bar are Sections 42 and 43, Chapter XI
thereof which require proprietors, lessees or operators of theatres, cinemas, concert
halls, circuses, boxing stadia, and other places of amusement, to pay an amusement
tax equivalent to thirty percent (30%) of the gross receipts of admission fees to the
Office of the City Treasurer of Cebu City.

ISSUE: Whether there is a reason to disturb the assailed rulings.

HELD: Local fiscal autonomy and the constitutionally-delegated power to tax

31
 The power of taxation, being an essential and inherent attribute of sovereignty,
belongs, as a matter of right, to every independent government, and needs no
express conferment by the people before it can be exercised. It is purely legislative
and, thus, cannot be delegated to the executive and judicial branches of government
without running afoul to the theory of separation of powers. It, however, can be
delegated to municipal corporations, consistent with the principle that legislative
powers may be delegated to local governments in respect of matters of local
concern.

(REPEAL OF TAX EXEMPTIONS)

58. PLDT VS. CITY OF DAVAO
Facts: PLDT paid a franchise tax equal to three percent (3%) of its gross receipts. The
franchise tax was paid “in lieu of all taxes on this franchise or earnings thereof”
pursuant to RA 7082. The exemption from “all taxes on this franchise or earnings
thereof” was subsequently withdrawn by RA 7160 (LGC), which at the same time
gave local government units the power to tax businesses enjoying a franchise on the
basis of income received or earned by them within their territorial jurisdiction. The
LGC took effect on January 1, 1992.

Issue: Whether or not by virtue of RA 7925, Sec. 23, PLDT is again entitled to the
exemption from payment of the local franchise tax in view of the grant of tax
exemption to Globe and Smart.

Held: Petitioner contends that because their existing franchises contain “in lieu of all
taxes” clauses, the same grant of tax exemption must be deemed to have become
ipso facto part of its previously granted telecommunications franchise. But the rule
is that tax exemptions should be granted only by a clear and unequivocal provision
of law “expressed in a language too plain to be mistaken” and assuming for the
nonce that the charters of Globe and of Smart grant tax exemptions, then this
runabout way of granting tax exemption to PLDT is not a direct, “clear and
unequivocal” way of communicating the legislative intent.

COMMON LIMITATIONS ON LOCAL GOVERNMENT UNITS’ POWER TO TAX

59. PETRON CORP VS. TIANGCO
FACTS: Petron maintains a depot or bulk plant at the Navotas Fishport Complex in
Navotas. Through that depot, it has engaged in the selling of diesel fuels to vessels
used in commercial fishing in and around Manila Bay.

32
 The Assessment: In 2002, Petron received a letter from the office of Navotas Mayor,
respondent Toby Tiangco, wherein the corporation was assessed taxes “relative to
the figures covering sale of diesel declared by your Navotas Terminal from 1997 to
2001.” The stated total amount due was P6,259,087.62, a figure derived from the
gross sales of the depot during the years in question.
Protest Letter,. Petron duly filed with Navotas a letter-protest arguing that it was
exempt from local business taxes.
ISSUE: Whether a local government unit is empowered under the Local Government
Code to impose business taxes on persons or entities engaged in the sale of
petroleum products. (NO)
HELD: Article 232 of the IRR: Defines with more particularity the capacity of a
municipality to impose taxes on businesses. The enumeration that follows is
generally a positive list of businesses which may be subjected to business taxes, and
paragraph (h) of Article 232 does allow the imposition of local business taxes “on
any business not otherwise specified in the preceding paragraphs which the
sanggunian concerned may deem proper to tax,” but subject to this important
qualification:

“x x x provided further, that in line with existing national policy, any business
engaged in the production, manufacture, refining, distribution or sale of oil, gasoline
and other petroleum products shall not be subject to any local tax imposed on this
article.”

60. BATANGAS CITY VS. PILIPINAS SHELL PETROLEUM CORPORATION

Facts: on February 20, 2001, petitioner Batangas City, through its City Legal Officer,
sent a notice of assessment to respondent... demanding the payment of
P92,373,720.50 and P312,656,253.04 as business taxes for its manufacture and
distribution of petroleum products.
In response, respondent filed a protest on April 17, 2002 contending among others
that it is not liable for the payment of the local business tax either as a manufacturer
or distributor of petroleum products. It further argued that the Mayor's Permit Fees
are exorbitant, confiscatory, arbitrary, unreasonable and not commensurable with
the cost of issuing a license.
Issue: whether a LGU is empowered under the LGC to impose business taxes on
persons or entities engaged in the business of manufacturing and distribution of
petroleum products.

HELD: Among the common limitations on the taxing powers of LGUs under Section
133 of the LGC is paragraph (h) which states:

33
 SECTION 133. Common Limitations on the Taxing Powers of Local Government Units.
- Unless otherwise provided herein the exercise of taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of the following:

(h) Excise taxes on articles enumerated under the National Internal Revenue Code,
as amended, and taxes, fees or charges on petroleum products.;[13]

From the foregoing, Section 133(h) clearly specifies the two kinds of taxes which
cannot be imposed by LGUs: (1) excise taxes on articles enumerated under the NIRC,
as amended; and (2) taxes, fees or charges on petroleum products

61. CITY OF MANILA vs COLET

FACTS: The case involves 10 consolidated petitions involving several corporations

operating as “transportation contractors, persons who transport passenger or
freight for hire, and common carriers by land, air or water” with principal offices in
Metro Manila, and City of Manila’s Ordinance No. 7807 which amended Sec. 21 (B)
of the Manila Revenue Code. Sec.21 (B) imposed business tax on “transportation
contractors, persons who transport passenger or freight for hire, and common
carriers by land, air or water”; while the subject ordinance amended such by
lowering the tax rate from 3% per annum to .5% per annum. The City of Manila,
through its City Treasurer, began imposing and collecting the business tax under
Section 21(B) of the Manila Revenue Code, as amended, beginning January 1994.

ISSUE: Is Sec. 21 (B) of the Manila Revenue Code, as amended, unconstitutional?

HELD: Yes. The power to tax is not inherent in LGUs to whom the power must be
delegated by Congress and must be exercised within the guidelines and limitations
that Congress may provide.

Sec. 5 of Article X of the Constitution granted LGUs the “power to create its own
sources of revenues and to levy taxes, fees, and charges subject to such guidelines
and limitations as the Congress may provide”.
In conformity with said constitutional provision, the Local Gov’t Code was enacted
by Congress.

62. PROVINCIAL ASSESSOR OF AGUSAN DEL SUR VS. PILIPINAS PALM OIL
FACTS: Filipinas Palm Oil Plantation Inc. (Filipinas) is a private organization engaged
in palm oil plantation[5] with a total land area of more than 7,000 hectares of
National Development Company (NDC) lands in Agusan del Sur.

34
 The Provincial-Assessor of Agusan del Sur (Provincial Assessor) is a government
agency in charge with the assessment of lands under the public domain.[12] It
assessed Filipinas' properties found within the plantation area,[13] which Filipinas
assailed before the Local Board of Assessment Appeals (LBAA).
ISSUE: Whether the exemption privilege of NGPI-NGEI from payment of real
property tax extends to respondent Filipinas Palm Oil Plantation Inc. as lessee of the
parcel of land owned by cooperatives.
HELD: NGPI-NGEI, as the owner of the land being leased by respondent, falls within
the purview of the law. Section 234 of the Local Government Code exempts all real
property owned by cooperatives without distinction. Nothing in the law suggests
that the real property tax exemption only applies when the property is used by the
cooperative itself. Similarly, the instance that the real property is leased to either an
individual or corporation is not a ground for withdrawal of tax exemption.

63. MIAA VS. CA

Facts: Petitioner Manila International Airport Authority (MIAA) operates the Ninoy
Aquino International Airport (NAIA).
The OGCC opined that the Local Government Code of 1991 withdrew the exemption
from real estate tax granted to MIAA under Section 21 of the MIAA Charter. Thus,
MIAA negotiated with respondent City of Parañaque to pay the real estate tax
imposed by the City. MIAA then paid some of the real estate tax already due.
MIAA received Final Notices of Real Estate Tax Delinquency from the City of
Parañaque.

ISSUE: whether the Airport Lands and Buildings of MIAA are exempt from real estate
tax under existing laws.

HELD: We rule that MIAA's Airport Lands and Buildings are exempt from real estate
tax imposed by local governments.
First, MIAA is not a government-owned or controlled corporation but an
instrumentality of the National Government and thus exempt from local taxation.
Second, the real properties of MIAA are owned by the Republic of the Philippines
and thus exempt from real estate tax.
There is no dispute that a government-owned or controlled corporation is not
exempt from real estate tax. However, MIAA is not a government-owned or
controlled corporation.
Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as
a government-owned or controlled corporation.

SPECIFIC TAXES
(FRANCHISE TAX)

35
 64. SMART COMMUNICATIONS VS. CITY OF DAVAO
Facts: On February 18, 2002, Smart filed a special civil action for declaratory relief,
for the ascertainment of its rights and obligations under the Tax Code of the City of
Davao. Smart contends that its telecenter in Davao City is exempt from payment of
franchise tax to the City because the power of the City of Davao to impose a
franchise tax is subject to statutory limitations such as the “in lieu of all taxes” clause
found in Section 9 of R.A. No. 7294 (Smart’s franchise). Respondents contested the
tax exemption claimed by Smart. They invoked the power granted by the

Issue: Whether or not Smart is liable to pay the franchise tax imposed by the City of
Davao.

Held: Yes. The SC find that there is no violation of Article III, Section 10 of the 1987
Philippine Constitution. Tax exemptions are never presumed and are strictly
construed against the taxpayer and liberally in favor of the taxing authority. They
can only be given force when the grant is clear and categorical. Moreover, Smarts
franchise was granted with the express condition that it is subject to amendment,
alteration, or repeal. In this case since there is doubt it must be resolved in favor of
the City of Davao. The “in lieu” of all taxes clause applies only to national internal
revenue taxes and not to local taxes.

65. CITY OF IRIGA VS CAMARINES SUR III ELECTRIC COOPERATIVE, INC.

FACTS: On January 7, 2004, petitioner made a final demand on CASURECO III to pay
the franchise taxes due for the period 1998-2003 and real property taxes due for the
period 1995-2003.8ςrνll CASURECO III, however, refused to pay said taxes on the
ground that it is an electric cooperative provisionally registered with the Cooperative
Development Authority (CDA),9ςrνll and therefore exempt from the payment of
local taxes.
ISSUE: Whether CASURECO III is liable for franchise tax on gross receipts within Iriga
City and Rinconada area,
HELD: It should be stressed that what the petitioner seeks to collect from CASURECO
III is a franchise tax, which as defined, is a tax on the exercise of a privilege. As
Section 13735ςrνll of the LGC provides, franchise tax shall be based on gross
receipts precisely because it is a tax on business, rather than on persons or
property.36ςrνll Since it partakes of the nature of an excise tax/37ςrνll the situs of
taxation is the place where the privilege is exercised, in this case in the City of Iriga,
where CASURECO III has its principal office and from where it operates, regardless of
the place where its services or products are delivered. Hence, franchise tax covers all
gross receipts from Iriga City and the Rinconada area.

AMUSEMENT TAX

36
 66. PELIZLOY REALTY CORP VS PROVINCE OF BENGUET
FACTS: Petitioner Pelizloy Realty Corporation owns Palm Grove Resort in Tuba,
Benguet, which has facilities like swimming pools, a spa and function halls.
In 2005, the Provincial Board of Benguet approved its Revenue Code of 2005.
Section 59, the tax ordinance levied a 10% amusement tax on gross receipts from
admissions to "resorts, swimming pools, bath houses, hot springs and tourist spots."
Pelizloy's posits that amusement tax is an ultra vires act. Thus, it filed an
appeal/petition before the Secretary of Justice. Upon the Secretary’s failure to
decide on the appeal within sixty days, Pelizloy filed a Petition for Declaratory Relief
and Injunction before the RTC.

ISSUE: Whether provinces are authorized to impose amusement taxes on admission

fees to resorts, swimming pools, bath houses, hot springs, and tourist spots for
being "amusement places" under the LGC.

HELD: NO. Amusement taxes are percentage taxes. However, provinces are not
barred from levying amusement taxes even if amusement taxes are a form of
percentage taxes. The levying of percentage taxes is prohibited "except as otherwise
provided" by the LGC. Section 140 provides such exception.

Section 140 expressly allows for the imposition by provinces of amusement taxes on
"the proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses,
boxing stadia, and other places of amusement."

67. ALTA VISTA GOLF AND COUNTRY CLUB VS THE CITY OF CEBU
Facts: A golf course has been operated in the city of Cebu for 5 years already. The
local government has promulgated a law for imposing tax on amusement places in
their jurisdiction.

Issue: WHETHER golf course is to be considered an amusement place

Held: Golf course cannot be considered as an amusement place and is therefore not
subject to amusement tax. According to Section 140 of the Local Government Code
on amusement tax, the province may levy an amusement tax to be collected from
the proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses,
boxing stadia, and other places of amusement.

BUSINESS TAX
68. NURSERY CARE CORPORATION VS ACEVEDO
FACTS: The City of Manila assessed and collected taxes from the individual
petitioners pursuant to Section 15 (Tax on Wholesalers, Distributors, or Dealers) and

37
 Section 17 (Tax on Retailers) of the Revenue Code of Manila.3 At the same time, the
City of Manila imposed additional taxes upon the petitioners pursuant to Section 21
ofthe Revenue Code of Manila,4 as amended, as a condition for the renewal of their
respective business licenses for the year 1999.
ISSUE: Whether the taxes were all in the nature of local business taxes.
HELD: We note that although Coca-Cola Bottlers Philippines, Inc. and Swedish Match
Philippines, Inc. involved Section 21 vis-à-vis Section 14 (Tax on Manufacturers,
Assemblers and Other Processors)39 of the Revenue Code of Manila, the legal
principles enunciated therein should similarly apply because Section 15 (Tax on
Wholesalers, Distributors, or Dealers)and Section 17 (Tax on Retailers) of the
Revenue Code of Manila imposed the same nature of tax as that imposed under
Section 14, i.e., local business tax, albeit on a different subject matter or group of
taxpayers.

REMEDIES ON LOCAL TAXATION

(CONSTITUTIONALITY OF TAX ORDINANCE)
69. SMART COMMUNICATIONS, INC. VS MUNICIPALITY OF MALVAR
FACTS: Petitioner Smart Communications, Inc. (Smart) is a domestic corporation
engaged in the business of providing telecommunications services to the general
public while respondent Municipality of Malvar, Batangas (Municipality) is a local
government unit created by law.

In the course of its business, Smart constructed a telecommunications tower within

the territorial jurisdiction of the Municipality. The construction of the tower was for
the purpose of receiving and transmitting cellular communications within the
covered area.
ISSUE: Whether the Court finds that the fees imposed under Ordinance No. 18 are
taxes.
HELD: The Court finds that the fees imposed under Ordinance No. 18 are not taxes.
Section 5, Article X of the 1987 Constitution provides that "each local government
unit shall have the power to create its own sources of revenues and to levy taxes,
fees, and charges subject to such guidelines and limitations as the Congress may
provide, consistent with the basic policy of local autonomy. Such taxes, fees, and
charges shall accrue exclusively to the local government."

(PROTEST)
70. SAN JUAN VS. CASTRO
FACTS: Petitioner, registered owners of real properties in Marikina City, with
consent of his wife, conveyed by deed of assignment, the properties to the Saints
and Angels Realty Corp. (SARC), by virtue of incorporations, in exchange for shares
of stock therein with a par value of P2,000,000.0, placed in San Juan’s name and the

38
 remaining par value in the name of his wife. Respondents’ representatives went to
the City Treasurer’s Office of Marikina to pay the transfer tax based on the
consideration stated in the deed of assignment. City Treasurer Castro informed him
however that the tax due is based on the fair market value of the property.
ISSUE: When can a protest of assessment be availed of?
HELD: That petitioner protested in writing against the assessment of tax due and the
basis thereof is on record as in fact it was on that account that respondent sent him
the above-quoted July 15, 2005 letter which operated as a denial of petitioner’s
written protest.

Petitioner should thus have, following the earlier above-quoted Section 195 of the
Local Government Code, either appealed the assessment before the court of
competent jurisdiction or paid the tax and then sought a refund.

IS INJUNCTION AVAILABLE?
71. ANGELES CITY VS ANGELES ELECTRIC COOPERATIVE
FACTS: On June 18, 1964, AEC was granted a legislative franchise under Republic Act
No. (RA) 40792 to construct, maintain and operate an electric light, heat, and power
system for the purpose of generating and distributing electric light, heat and power
for sale in Angeles City, Pampanga. Pursuant to Section 3-A thereof,3 AEC’s payment
of franchise tax for gross earnings from electric current sold was in lieu of all taxes,
fees and assessments.
ISSUE: Can an injunction be issued to enjoin the collection of local taxes?
HELD: YES. The Local Government Code does not specifically prohibit an injunction
enjoining the collection of taxes. This is different in the case of national taxes where
the Tax Code expressly provides that no court shall have the authority to grant an
injunction to restrain the collection on national internal revenue tax, fee or charge
with the sole exception of when the CTA finds that the collection thereof may
jeopardize the interest of the government and/or the taxpayer. Nevertheless, there
must still be proof of the existence of the requirements for injunction to be issued
under the Rules of Court (i.e., clear right to be protected and urgent necessity to
prevent serious damage).

GENERAL PRINCIPLES ON REAL PROPERTY TAXATION

(MACHINERIES AND IMPROVEMENT)
72. MANILA ELECTRIC COMPANY VS. THE CITY OF ASSESSOR AND CITY TREASURER OF
LUCENA
Facts: MERALCO is a private corporation organized and existing under Philippine
laws to operate as a public utility engaged in electric distribution.

39
 MERALCO received from the City Assessor of Lucena a copy of Tax Declaration No.
019-6500[13] covering the following electric facilities, classified as capital
investment, of the company: (a) transformer and electric post; (b)... transmission
line; (c) insulator; and (d) electric meter, located in Quezon Ave. Ext., Brgy. Gulang-
Gulang, Lucena City. Under Tax Declaration No. 019-6500, these electric facilities
had a market value of P81,811,000.00 and an assessed value of P65,448,800.00, and
were subjected to real property tax as of 1985.

Issues: Whether or not the poles, wires, insulators, transformers, and electric
meters of MERALCO were real properties

HELD: LBAA cited the 1964 case of Board of Assessment Appeals v. Manila Electric
Company[16] (1964 MERALCO case) in which the Court held that: (1) the steel towers
fell within the term "poles" expressly exempted from taxes under the franchise of
MERALCO; and (2) the steel towers were personal properties under the provisions... of
the Civil Code and, hence, not subject to real property tax. The LBAA lastly ordered that
Tax Declaration No. 019-6500 would remain and the poles, wires, insulators,
transformers, and electric meters of MERALCO would be continuously assessed, but the
City Assessor would stamp on the said Tax Declaration the word "exempt.
73. PROVINCIAL ASSESSOR OF AGUSAN DEL SUR VS. PILIPINAS PALM OIL
FACTS: Filipinas Palm Oil Plantation Inc. (Filipinas) is a private organization engaged in
palm oil plantation with a total land area of more than 7,000 hectares of National
Development Company (NDC) lands in Agusan del Sur.
The Provincial-Assessor of Agusan del Sur (Provincial Assessor) is a government agency
in charge with the assessment of lands under the public domain.[12] It assessed
Filipinas' properties found within the plantation area,[13] which Filipinas assailed before
the Local Board of Assessment Appeals (LBAA).
ISSUE: Whether the road equipment and mini haulers shall be considered as real
property, subject to real property tax.
HELD: Yes. The road equipment and mini haulers shall be considered as real property,
subject to real property tax.
Section 199(o) of the Local Government Code defines "machinery" as real property
subject to real property tax,85 thus:
SECTION 199. Definition of Terms. — When used in this Title, the term:
(o) "Machinery" embraces machines, equipment, mechanical contrivances, instruments,
appliances or apparatus which may or may not be attached, permanently or

40
 temporarily, to the real property. It includes the physical facilities for production, the
installations and appurtenant service facilities, those which are mobile, self-powered or
self-propelled, and those not permanently attached to the real property which are
actually, directly, and exclusively used to meet the needs of the particular industry,
business or activity and which by their very nature and purpose are designed for, or
necessary to its manufacturing, mining, logging, commercial, industrial or agricultural
purposes.

74. CAPITOL WIRELESS, INC VS. PROVINCIAL TREASURER OF BATANGAS

Facts: Petitioner Capitol Wireless Inc. (Capwire) is a Philippine corporation in the
business of providing international telecommunications services.[3] As such
provider, Capwire has signed agreements with other local and foreign
telecommunications companies covering an international network of submarine
cable systems such as the Asia Pacific Cable Network System (APCN) (which connects
Australia, Thailand, Malaysia, Singapore, Hong Kong, Taiwan, Korea, Japan,
Indonesia and the Philippines); the Brunei-Malaysia-Philippines Cable Network
System (BMP-CNS), the Philippines-Italy (SEA-ME-WE-3 CNS), and the Guam
Philippines (GP-CNS) systems. The agreements provide for co-ownership and other
rights among the parties over the network.
ISSUE: May submarine communications cables be classified as taxable real property
by the local governments?
HELD: Submarine or undersea communications cables are akin to electric
transmission lines which this Court has recently declared in Manila Electric Company
v. City Assessor and City Treasurer of Lucena City,[37] as "no longer exempted from
real property tax" and may qualify as "machinery" subject to real property tax under
the Local Government Code. To the extent that the equipment's location is
determinable to be within the taxing authority's jurisdiction, the Court sees no
reason to distinguish between submarine cables used for communications and aerial
or underground wires or lines used for electric transmission, so that both pieces of
property do not merit a different treatment in the aspect of real property taxation.

NOTIFICATION OF NEW OR REVISED ASSESSMENT

75. MANILA ELECTRIC COMPANY VS. THE CITY OF ASSESSOR AND CITY TREASURER OF
LUCENA

Facts: MERALCO is a private corporation organized and existing under Philippine

laws to operate as a public utility engaged in electric distribution.
MERALCO received from the City Assessor of Lucena a copy of Tax Declaration No.
019-6500[13] covering the following electric facilities, classified as capital
investment, of the company: (a) transformer and electric post; (b)... transmission

41
 line; (c) insulator; and (d) electric meter, located in Quezon Ave. Ext., Brgy. Gulang-
Gulang, Lucena City. Under Tax Declaration No. 019-6500, these electric facilities
had a market value of P81,811,000.00 and an assessed value of P65,448,800.00, and
were subjected... to real property tax as of 1985.

Issue: whether the poles, wires, insulators, transformers, and electric meters of
MERALCO were real properties

HELD: LBAA cited the 1964 case of Board of Assessment Appeals v. Manila Electric
Company[16] (1964 MERALCO case) in which the Court held that: (1) the steel
towers fell within the term "poles" expressly exempted from taxes under the
franchise of MERALCO; and (2) the steel towers were personal properties under the
provisions... of the Civil Code and, hence, not subject to real property tax. The LBAA
lastly ordered that Tax Declaration No. 019-6500 would remain and the poles, wires,
insulators, transformers, and electric meters of MERALCO would be continuously
assessed, but the City Assessor would stamp... on the said Tax Declaration the word
"exempt.
Board overrules the claim of the [City Assessor of Lucena] and sustain the claim of
[MERALCO].

EXEMPTION FROM REAL PROPERTY TAXATION

76. MIAA VS CA
Facts: Petitioner Manila International Airport Authority (MIAA) operates the Ninoy
Aquino International Airport (NAIA).
As operator of the international airport, MIAA administers the land, improvements
and equipment within the NAIA Complex. The MIAA Charter transferred to MIAA
approximately 600 hectares of land,... The MIAA Charter further provides that no
portion of the land transferred to MIAA shall be disposed of through sale or any
other mode unless specifically approved by the President of the Philippines.
The OGCC opined that the Local Government Code of 1991 withdrew the exemption
from real estate tax granted to MIAA under Section 21 of the MIAA Charter.

ISSUE: whether the Airport Lands and Buildings of MIAA are exempt from real estate
tax under existing laws.

HELD: We rule that MIAA's Airport Lands and Buildings are exempt from real estate
tax imposed by local governments.
First, MIAA is not a government-owned or controlled corporation but an
instrumentality of the National Government and thus exempt from local taxation.
Second, the real properties of MIAA are owned by the Republic of the Philippines
and thus exempt from real estate tax.

42
 There is no dispute that a government-owned or controlled corporation is not
exempt from real estate tax. However, MIAA is not a government-owned or
controlled corporation.
Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as
a government-owned or controlled corporation.

77. GSIS VS CITY TREASURER AND ASSESSOR OF MANILA

FACTS: The controversy started when the City Treasurer of Manila addressed a
letter4 dated September 13, 2002 to GSIS President and General Manager Winston
F. Garcia informing him of the unpaid real property taxes due on the
aforementioned properties for years 1992 to 2002, broken down as follows: (a) PhP
54,826,599.37 for the Katigbak property; and (b) PhP 48,498,917.01 for the
Concepcion-Arroceros property. The letter warned of the inclusion of the subject
properties in the scheduled October 30, 2002 public auction of all delinquent
properties in Manila should the unpaid taxes remain unsettled before that date.
ISSUE: Whether the GSIS is Exempt from Real Property Tax.
HELD: While recognizing the exempt status of GSIS owing to the reenactment of the
full tax exemption clause under Sec. 39 of RA 8291 in 1997, the ponencia in City of
Davao appeared to have failed to take stock of and fully appreciate the all-
embracing condoning proviso in the very same Sec. 39 which, for all intents and
purposes, considered as paid "any assessment against the GSIS as of the approval of
this Act." If only to stress the point, we hereby reproduce the pertinent portion of
said Sec. 39:

SEC. 39. Exemption from Tax, Legal Process and Lien. – x x x Taxes imposed on the
GSIS tend to impair the actuarial solvency of its funds and increase the contribution
rate necessary to sustain the benefits of this Act.

78. CITY OF PASIG VS REPUBLIC

FACTS: On 30 September 2002, the Pasig City Assessor's Office sent MPLDC two
notices of tax delinquency for its failure to pay real property tax on the properties
for the period 1979 to 2001 totaling P256,858,555.86. In a letter dated 29 October
2002, Independent Realty Corporation (IRC) President Ernesto R. Jalandoni
(Jalandoni) and Treasurer Rosario Razon informed the Pasig City Treasurer that the
tax for the period 1979 to 1986 had been paid, and that the properties were exempt
from tax beginning 1987.
ISSUE: Pasig City raises as issues that the lower courts erred in granting PCGG's
petition for certiorari, prohibition and mandamus and in ordering Pasig City to assess
and collect real property tax from the lessees of the properties.

43
 HELD: In the present case, the parcels of land are not properties of public dominion
because they are not "intended for public use, such as roads, canals, rivers, torrents,
ports and bridges constructed by the State, banks, shores, roadsteads."
In sum, only those portions of the properties leased to taxable entities are subject to
real estate tax for the period of such leases. Pasig City must, therefore, issue to
respondent new real property tax assessments covering the portions of the
properties leased to taxable entities. If the Republic of the Philippines fails to pay the
real property tax on the portions of the properties leased to taxable entities, then
such portions may be sold at public auction to satisfy the tax delinquency.

79. LUNG CENTER OF THE PHILIPPINES VS QUEZON CITY

FACTS: The petitioner Lung Center of the Philippines is a non-stock and non-profit
entity established on January 16, 1981 by virtue of Presidential Decree No. 1823.
The petitioner accepts paying and non-paying patients. It also renders medical
services to out-patients, both paying and non-paying. Aside from its income from
paying patients, the petitioner receives annual subsidies from the government.

On June 7, 1993, both the land and the hospital building of the petitioner were
assessed for real property taxes in the amount of ₱4,554,860 by the City Assessor of
Quezon City.
The petitioner’s request was denied.

ISSUE: whether the real properties of the petitioner are exempt from real property
taxes.
HELD: As a general principle, a charitable institution does not lose its character as
such and its exemption from taxes simply because it derives income from paying
patients, whether out-patient, or confined in the hospital, or receives subsidies from
the government, so long as the money received is devoted or used altogether to the
charitable object which it is intended to achieve; and no money inures to the private
benefit of the persons managing or operating the institution.18 In Congregational
Sunday School, etc. v. Board of Review,19 the State Supreme Court of Illinois held,
thus: “An institution does not lose its charitable character, and consequent
exemption from taxation, by reason of the fact that those recipients of its benefits
who are able to pay are required to do so, where no profit is made by the institution
and the amounts so received are applied in furthering its charitable purposes, and
those benefits are refused to none on account of inability to pay therefor. The
fundamental ground upon which all exemptions in favor of charitable institutions
are based is the benefit conferred upon the public by them, and a consequent relief,
to some extent, of the burden upon the state to care for and advance the interests
of its citizens.”

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 80. NPC VS. PROVINCE OF QUEZON
FACTS: NPC is a GOCC that entered into an Energy Conversion Agreement (ECA)
under a build-operate-transfer (BOT) arrangement with Mirant Pagbilao Corp. Under
the agreement, Mirant will build and finance a thermal power plant in Quezon, and
operate and maintain the same for 25 years, after which, Mirant will transfer the
power plant to the Respondent without compensation. NPC also undertook to pay
all taxes that the government may impose on Mirant. Quezon then assessed Mirant
real property taxes on the power plant and its machineries.

ISSUE: Can Petitioner claim exemption from the RPT given the BOT arrangement
with Mirant?
HELD: NO. To successfully claim exemption under Section 234 (c) of the LGC, the
claimant must prove two elements: a) the machineries and equipment are actually,
directly, and exclusively used by local water districts and government-owned or
controlled corporations; and b) the local water districts and government-owned and
controlled corporations claiming exemption must be engaged in the supply and
distribution of water and/or the generation and transmission of electric power.
Since neither the Petitioner nor Mirant satisfies both requirements, the claim for
exemption must fall.

81. NPC VS. PROVINCE OF QUEZON

(RESOLUTION)
To successfully claim exemption under Section 234 (c) of the LGC, the claimant must
prove two elements: a) the machineries and equipment are actually, directly, and
exclusively used by local water districts and government-owned or controlled
corporations; and b) the local water districts and government-owned and controlled
corporations claiming exemption must be engaged in the supply and distribution of
water and/or the generation and transmission of electric power. Since neither the
Petitioner nor Mirant satisfies both requirements, the claim for exemption must fall.

82. PROVINCIAL ASSESSOR OF AGUSAN DEL SUR VS. FILIPINAS PALM OIL
FACTS: The Provincial-Assessor of Agusan del Sur (Provincial Assessor) is a
government agency in charge with the assessment of lands under the public domain.
It assessed Filipinas' properties found within the plantation area,13 which Filipinas
assailed before the Local Board of Assessment Appeals (LBAA).
ISSUE: Whether the NGPI-NGEI is liable for real property taxes.
HELD: Therefore, NGPI-NGEI, as owner of the roads that permanently became part
of the land being leased by respondent, shall be liable for real property taxes, if any.
However, by express provision of the Local Government Code, NGPI-NGEI is
exempted from payment of real property tax.

45
 REMEDIES ON REAL PROPERTY TAXATION
83. MANILA ELECTRIC COMPANY VS. THE CITY ASSESSOR AND CITY TREASURER OF
LUCENA CITY
FACTS: MERALCO is a private corporation organized and existing under Philippine
laws to operate as a public utility engaged in electric distribution. MERALCO has
been successively granted franchises to operate in Lucena City beginning 1922 until
present time, particularly, by: (1) Resolution No. 36 dated May 15, 1922 of the
Municipal Council of Lucena; (2) Resolution No. 108 dated July 1, 1957 of the
Municipal Council of Lucena; (3) Resolution No. 2679 dated June 13, 1972 of the
Municipal Board of Lucena City; (4) Certificate of Franchise dated October 28, 1993
issued by the National Electrification Commission; and (5) Republic Act No. 9209
approved on June 9, 2003 by Congress.
ISSUE: .WHETHER MERALCO PROPERLY POSTED A BOND.
HELD: YES. Section 252 of the Local Government Code mandates that “[n]o protest
shall be entertained unless the taxpayer first pays the tax.” It is settled that the
requirement of “payment under protest” is a condition sine qua non before an
appeal may be entertained. Section 231 of the same Code also dictates that
“[a]ppeal on assessments of real property . . . shall, in no case, suspend the
collection of the corresponding realty taxes on the property involved as assessed by
the provincial or city assessor, without prejudice to subsequent adjustment
depending upon the final outcome of the appeal.” Clearly, under the Local
Government Code, even when the assessment of the real property is appealed, the
real property tax due on the basis thereof should be paid to and/or collected by the
local government unit concerned.

84. NPC VS. PROVINCE OF QUEZON

FACTS: NPC is a GOCC that entered into an Energy Conversion Agreement (ECA)
under a build-operate-transfer (BOT) arrangement with Mirant Pagbilao Corp. Under
the agreement, Mirant will build and finance a thermal power plant in Quezon, and
operate and maintain the same for 25 years, after which, Mirant will transfer the
power plant to the Respondent without compensation. NPC also undertook to pay
all taxes that the government may impose on Mirant. Quezon then assessed Mirant
real property taxes on the power plant and its machineries.
ISSUE: Is payment under protest required before an appeal to the LBAA is made?
HELD: YES. If a taxpayer disputes the reasonableness of an increase in a real
property tax assessment, he is required to "first pay the tax" under protest. The case
of Ty does not apply as it involved a situation where the taxpayer was questioning
the very authority and power of the assessor, acting solely and independently, to
impose the assessment and of the treasurer to collect the tax. A claim for tax

46
 exemption, whether full or partial, does not question the authority of local assessors
to assess real property tax.
85. NPC VS. PROVINCE OF QUEZON
(RESOLUTION)
The petitioner National Power Corporation (Napocor) filed the present motion for
reconsideration1 of the Court’s Decision of July 15, 2009, in which we denied
Napocor’s claimed real property tax exemptions. For the resolution of the motion,
we deem it proper to provide first a background of the case.

86. CAMP JOHN HAY DEVELOPMENT CORP VS. CBAA

FACTS: On 23 May 2002, petitioner filed with the Board of Tax Assessment Appeals
(BTAA) of Baguio City an appeal under Section 2262 of the LGC of 1991 challenging
the validity and propriety of the issuances of the City Assessor. The appeal was
docketed as Tax Appeal Case No. 2002-003. Petitioner claimed that there was no
legal basis for the issuance of the assessments because it was allegedly exempted
from paying taxes, national and local, including real property taxes, pursuant to RA
No. 7227, otherwise known as the Bases Conversion and Development Act of 1992.

ISSUE: Whether respondent CTA En Banc erred in dismissing for lack of merit the
petition in C.T.A. EB No. 48, and accordingly affirmed the order of the CBAA to
remand the case to the LBAA of Baguio City for further proceedings subject to a full
and up-to-date payment of realty taxes, either in cash or in bond, on the subject
properties assessed by the City Assessor of Baguio City.
HELD: The Court finds the petition unmeritorious and therefore rules against
petitioner.
Section 252 of RA No. 7160, also known as the LGC of 199114, categorically
provides:
SEC. 252. Payment Under Protest. – (a) No protest shall be entertained unless the
taxpayer first pays the tax. There shall be annotated on the tax receipts the words
"paid under protest." The protest in writing must be filed within thirty (30) days
from payment of the tax to the provincial, city treasurer or municipal treasurer, in
the case of a municipality within Metropolitan Manila Area, who shall decide the
protest within sixty (60) days from receipt.

87. NPC VS. MUNICIPAL GOVERNMENT OF NAVOTAS

FACTS : Petitioner National Power Corporation (NPC) is a government owned and
controlled corporation. Respondent Municipal Government of Navotas, is a local
government unit, hosting petitioner’s Navotas Power Stations I and II located in the
Municipality of Navotas. On the respective dates of November 16, 1988 and June 29,

47
 1992, petitioner entered into a Build-Operate-and-Transfer Project Agreements
(BOTs) with Mirant Navotas I Corporation and Mirant Navotas II Corporation.
petitioner has the obligation to pay for all taxes, except business taxes, relative to
the implementation of the agreements.
ISSUE: The issue is whether or not the CTA Second Division has jurisdiction to review
the decision of the RTC which concerns a petition for declaratory relief involving real
property taxes.

HELD: Indeed, the CTA, sitting as Division, has jurisdiction to review by appeal the
decisions, rulings and resolutions of the RTC over local tax cases, which includes real
property taxes. This is evident from a perusal of the Local Government Code (LGC)
which includes the matter of Real Property Taxation under one of its main chapters.

88. CITY OF LAPU-LAPU VS. PEZA

Facts: In 1995, the PEZA was created by virtue of Republic Act No. 7916 or “the
Special Economic Zone Act of 1995” to operate, administer, manage, and develop
economic zones in the country. The PEZA was granted the power to register,
regulate, and supervise the enterprises located in the economic zones. By virtue of
the law, the export processing zone in Mariveles, Bataan became the Bataan
Economic Zone and the Mactan Export Processing Zone the Mactan Economic Zone.
The City contends that due to the enactment of the LGC, specifically withdrawing all
tax exemptions and with the PEZA law of 1995 which did not have any provisions on
tax exemptions, it maintains that PEZA is liable for real property tax.
Issue: Whether or not PEZA should be exempted from real property taxation.

Held: Yes. Under Section 234(a) of the Local Government Code, real properties
owned by the Republic of the Philippines are exempt from real property taxes.
Properties owned by the state are either property of public dominion or patrimonial
property as per Art. 420.

Citing Manila International Airport Authority: Properties of public dominion, being

for public use, are not subject to levy, encumbrance or disposition through public or
private sale. Any encumbrance, levy on execution or auction sale of any property of
public dominion is void for being contrary to public policy. Essential public services
will stop if properties of public dominion are subject to encumbrances, foreclosures
and auction sale.

89. CE CASECNAN WATER AND ENERGY COMPANY INC. VS. THE PROVINCE OF NUEVA
ECIJA
FACTS: On September 29, 2003, petitioner and NIA executed a Supplemental
Agreement amending Article II of the Casecnan Contract which pertains to payment

48
 of taxes. Article 2.2 thereof states that NIA must reimburse petitioner for real
property taxes (RPT) provided the same was paid upon NIA's directive and with the
concurrence of the Department of Finance.

On September 6, 2005, petitioner received from the Office of the Provincial Assessor
a Notice of Assessment of Real Property dated August 2, 2005, which indicates that
for the years 2002 to 2005, its RPT due was P248,676,349.60.
ISSUE: Whether the petition is meritorious
HELD: There is no merit in the Petition. It is the CTA which has the power to rule on a
Petition for Certiorari assailing an interlocutory order of the RTC relating to a local
tax case. Jurisdiction over the subject matter is required for a court to act on any
controversy. It is conferred by law and not by the consent or waiver upon a court. As
such, if a court lacks jurisdiction over an action, it cannot decide the case on the
merits and must dismiss it.

90. NPC VS. PROVINCIAL TREASURER OF BENGUET

FACTS: Respondents Provincial Treasurer, Provincial Assessor, Municipal Treasurer
and Municipal Assessor of Itogon are representatives of the province of Benguet, a
local government unit. Respondents issued the subject assessment in their official
capacities.
Sometime in May 2000, the Municipal Assessor of Itogon, Benguet assessed NPC the
amount of P62,645,668.80 real property tax for the following properties located
within the Binga Hydro-Electric Power Plant.
ISSUE: Whether the petition is meritorious.
HELD: This Court finds the instant petition without merit
At the outset, settled is the rule that should the taxpayer/real property owner
question the excessiveness or reasonableness of the assessment, Section 252 of the
LGC of 1991 directs that the taxpayer should first pay the tax due before his protest
can be entertained.

91. CAPITOL WIRELESS, INC VS. PROVINCIAL TREASURER OF BATANGAS

Facts: Petitioner Capitol Wireless Inc. (Capwire) is a Philippine corporation in the
business of providing international telecommunications services.
Petitioner Capwire claims that it is co-owner only of the so-called "Wet Segment" of
the APCN, while the landing stations or terminals and Segment E of APCN located in
Nasugbu, Batangas are allegedly owned by the Philippine Long Distance Telephone
Corporation (PLDT).[6] Moreover, it alleges that the Wet Segment is laid in
international, and not Philippine, waters.
ISSUE: Whether the petition be denied.
HELD: Petition denied. Court of Appeals judgment affirmed.

49
 It is not in dispute that the submarine cable system's landing station in Nasugbu,
Batangas, is owned by PLDT and not by Capwire. Obviously, Capwire is not liable for
real property tax on this landing station. Nonetheless, Capwire admits that it co-
owns the submarine cable system that is the subject of the tax assessed and being
collected by the respondents.

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