SCHOOL OF LAW AND GOVERNANCE

Department of Law

CASE BRIEF
TAXATION 2

Submitted to:
Atty. Kim Aranas

Submitted by:
Block 408

2022
ESTATE TAX
Case Title Case Principle Summary of Facts Issue/s Ruling
1. Estate of the Notice must be sent to the administrator Philtrust manages the business affairs of Vda. De Whether or not the notice of No, the assessment is not binding on the Estate
Late Juliana Diez vda. of an estate when an estate is under Gabriel during her lifetime. Two days after her the assessment is binding on for lack of proper notice. When an estate is
De Gabriel v. CIR, G.R. administration, as representative of death, Philtrust filed her Income Tax Return for the Estate of Juliana Vda. De under administration, notice must be sent to the
No. 155541, January such, who has the legal obligation to pay 1978. BIR was not informed that she has died. A Gabriel administrator of the estate, since it is the said
27, 2004. and discharge all debts of the estate and petition for appointment as Special Administrator administrator, as representative of the estate,
to perform all orders of the court. was filed by Philtrust but RTC denied it. In the who has the legal obligation to pay and
meantime, the BIR found a deficiency income tax discharge all debts of the estate and to perform
for the year 1977. It sent by mail a demand letter all orders of the court. Philtrust was never
and Assessment Notice to the decedent through appointed as the administrator of the estate of
PhilTrust. No response was made by Philtrust. The the decedent. The relationship between the
BIR Commissioner issued warrants of distraint and decedent and Philtrust is one of agency which
levy to enforce collection of the deficient income tax was terminated upon the death of the
liability, served upon her heir, Francisco Gabriel. decedent. None of Philtrust’s acts or omissions
This was opposed by the heir on the ground that could bind the estate of the Taxpayer. In this
there was no proper service of the assessment. The case, the assessment was served not even on
BIR insists that the notice given to Philtrust served an heir of the Estate, but on a completely
as sufficient notice disinterested third party. This improper service
was clearly not binding on the petitioner.
2. CIR v. Pineda, G.R. Being an heir and a holder-transferee of Atanasio Pineda died and was survived by his wife Whether or not Pineda is liable Yes, Pineda is liable for the assessment as an
No. L-22734, the property belonging to the estate, an and 15 children who divided the estate among to pay the full amount of the heir and as a holder-transferee of property
September 15, 1967 heir is liable for the tax assessment to the them. Respondent Manuel Pineda’s share taxes assesse belonging to the estate. As an heir, he is
extent of the amount of the property in amounted to about P2,500.00. After the estate individually liable to the portion of the tax
his possession proceedings, the BIR investigated the income tax proportionate to his share from the inheritance.
liability of the estate for the period 1945 to 1948 and His liability cannot exceed the amount of his
found that income tax returns were not filed. The share. As a holder of property belonging to the
Commissioner held Pineda liable for the payment of estate, Pineda is liable for the tax up to the
all the taxes due from the estate in the amount of amount of the property in his possession. The
P760.28 and not for the taxes corresponding to his government has a lien on the P2,500.00 he
share in the estate received from the estate as his share in the
inheritance. By virtue of such lien, the
government has the right to subject the
property in Pineda's possession to satisfy the
unpaid income taxes for which said estate is
liable in the sum of P760.28 pursuant to the
Section 315 of the Tax Cod
3. CIR v. Prieto, G.R. Inheritance Tax should be based on the The Collector, in its examination to the estate of the Whether or not there was Yes, there was overpayment. The inheritance
No. L-11976, August value of the inheritance and should also deceased, yielded a higher assessment than what overpayment of the estate and consisted of several real properties which
29, 1961 consider the proper deductions made. the heirs had originally assessed and have paid. inheritance ta cannot be divided equally in accordance to the
The higher assessment onto the inheritance of the will of the testator. The 3 respondents remedied
respondent heirs resulted in a higher inheritance tax this by taking higher share then pay in cash the
liability. The heirs paid in protest and have difference to the other heirs in accordance with
 contested this findings of the Collector. The Court the project of partition among the heirs. The
of Tax Appeals sided with the heirs. collector cannot use the partition as basis for
assessing the inheritance tax (resulting in the
first 3 heirs paying higher tax for receiving
higher net inheritance) without regarding the
cash payments paid to equal the share
received among the heirs. What is controlling is
the receipt of shares in accordance with the
will’s sharing scheme. Further, in all reality,
despite the receipt of higher inheritance, the
receiving heirs paid cash in difference to equal
what they received. The deduction of the cash
payment to the other heirs should be called for.
Hence, there was overpayment
4. CIR vs. Court of Expenses must be essential to the Pedro Pajonar, a soldier, was part of the Bataan Whether or not notarial fee Yes, notarial fee may be deducted from gross
Appeals, et al., G.R. proper settlement of the estate in order Death March which made him insane. His sis may be allowed as deductions estate. Judicial expenses are expenses of
No. 123206, March 22, to be deductible - expenses otherwise became the guardian over his person while PNB the from the gross estate of administration. Administration expenses shall
2000 incurred are not deductible guardian over his property (via guardianship deceden include all expenses “essential to the collection
proceedings wherein attorney’s fees were of the assets, payment of debts or the
incurred). He died. PNB instead of filing an estate distribution of the property to the persons
tax return, advised the heirs to execute an entitled to it. In other words, expenses must be
extrajudicial settlement (notarial fees incurred) and essential to the proper settlement of the estate.
to pay the taxes on his estate. BIR asserts that the Expenses for the sole benefit of the heirs,
notarial fees and attorney’s fees are not deductible devisees or legatees are not deductible. In the
from the gross estate. Only judicial expenses of the case at ar, notarial fees incurred in the
testamentary or intestate proceedings are allowed extrajudicial settlement is deductible since it
to be deducted resulted in a distribution of the estate to lawful
heirs
5. Pablo Lorenzo vs. Estate tax accrues upon transmission of Thomas Hanley died, leaving a will and a Whether or not there had The accrual of the inheritance tax (estate tax)
Juan Posadas, Jr., the property made effective by his death. considerable amount of real and personal been delinquency in the is distinct from the obligation to pay the same.
G.R. No. 43082, June properties. Proceedings for the probate of his will payment of inheritance tax Section 1536 of the Administrative Code,
18, 1937. and the settlement and distribution of his estate and Whether or not the imposes the tax upon "every transmission by
were begun in the CFI of Zamboanga. The will was inheritance tax be computed virtue of inheritance, devise, bequest, gift
admitted to probate. The CFI considered it proper based on the value of the mortis causa, or advance in anticipation of
for the best interests of the estate to appoint a estate at the time of the inheritance, devise, or bequest." The tax
trustee to administer the real properties which, testator's death therefore is upon transmission or transfer of
under the will, were to pass to his nephew ten years property of a decedent, made effective by his
after the two executors named in the will were death. It must be computed at the time of the
appointed trustees. Moore acted as trustee until he decedent's death. In this case, it was ruled that
resigned and the plaintiff Lorenzo was appointed in the mere fact that the estate of the deceased
his stead. Lorenzo, in his capacity as trustee of the was placed in trust did not remove it from the
estate of Thomas Hanley, brought an action against operation of our inheritance tax laws nor
the Collector of Internal Revenue Posadas for the exempt it from the punimayment of the
refund of P2,052.74 inheritance taxes. inheritance tax. The corresponding inheritance
tax should have been paid on or before March
10, 1924, to escape the penalties of the laws.
 (2) Yes, the inheritance tax should be
computed based on the value of the estate at
the time of the death of the testator. Succession
takes place and the right of the estate to tax
vests instantly, the tax should be measured by
the value of the estate as it stood at the time of
the decedent’s death, regardless of any
subsequent contingency value of any
subsequent increase or decrease in value of
the property transmitted at that time regardless
of its appreciation or depreciation.
6. Carlos Moran Sison Expenses incurred by an executor or by "Carlos Moran Sison was appointed, without "Whether a judicial "No. The Court ruled that the expense incurred
vs. Narcisa F. an administrator in order to produce a compensation, as a judicial administrator of the administrator, by an executor or administrator to produce a
Teodoro, G.R. No. L- bond is not a proper charge against the estate of Margarita David. He filed a bond of serving without compensation, bond is not a proper charge against the estate.
9271, March 29, 1957. estate. Further, the ability to give bond is P5,000, the premium of which as well as the is entitled to charge as an The Court further commented in that case that
in the nature of a qualification for office. renewal fee he charged as disbursement items in expense of administration the the ability to give bond is in the nature of
The execution and the approval of the his accounting. After entering into his duties as premiums paid on his bond. qualification for office. The execution and the
bond constitute a condition precedent to administrator, he filed an accounting of his " approval of the bond constitute a condition
acceptance of the responsibilities of the administration which included items as an expense precedent to acceptance of the responsibilities
trust. of administration the premiums he paid on his bond. of the trust.

Narcisa F. Teodoro, one of the heirs, objected to the It is also intimated therein that ""If an individual
approval of the above-quoted items on the grounds does not desire to assume the position of
that they are not necessary expenses of executor or administrator, he may refuse to do
administration and should not be charged against so,"" and it is far-fetched to conclude that the
the estate. giving of a bond by an administrator is an
necessary expense in the care, management
The court approved the report of the administrator and settlement of the estate within the meaning
but disallowed the items objected to on the ground of the law, because these expenses are
that they cannot be considered as expenses of incurred ""after the executor or administrator
administration. The administrator filed a motion for has met the requirement of the law and has
reconsideration and when the same was denied, he entered upon the performance of his duties.""
took the present appeal. Of course, a person may accept the position of
" executor or administrator with all the incident
appertaining thereto having in mind the
compensation which the law allows for the
purpose, but he may waive this compensation
in the same manner as he may refuse to serve
without it. Appellant having waived
compensation, he cannot now be heard to
complain of the expenses incident to his
qualification."
7. CIR vs. Court of All expenses incurred in relation to the "Pedro Pajonar, a member of the Philippine Scout, Whether the notarial fee paid "Yes.This Court adopts the view under
Appeals, et al., G.R. estate of the deceased will be deductible Bataan Contingent, during the second World War, for the extrajudicial settlement American jurisprudence that expenses incurred
No. 123206, March 22, for estate tax purposes provided these was a part of the infamous Death March by reason and the attorney's fees in the in the extrajudicial settlement of the estate
2000. are necessary and ordinary expenses for of which he suffered shock and became insane. guardianship proceedings should be allowed as a deduction from the
 administration of the settlement of the may be allowed as deductions gross estate. ""There is no requirement of
estate. His sister Josefina Pajonar became the guardian from the gross estate of formal administration. It is sufficient that the
over his person, while his property was placed decedent expense be a necessary contribution toward
However, deduction is limited to such under the guardianship of PNB. the settlement of the case.""
administration expenses as are actually
and necessarily incurred in the collection The decedent’s sister, Josefina Pajonar, filed a Judicial expenses are expenses of
of the assets of the estate, payment of petition with the Court of Tax Appeals (CTA) administration. Administration expenses, as an
the debts, and distribution of the praying for a refund of the erroneously paid estate allowable deduction from the gross estate of
remainder among those entitled thereto. tax. CTA ordered the CIR to refund the amount the decedent for purposes of arriving at the
Such expenses may include executor's representing the erroneously paid estate tax. value of the net estate, have been construed to
or administrator's fees, attorney's fees, include all expenses ""essential to the
court fees and charges, appraiser's fees, Among the deductions from the gross estate collection of the assets, payment of debts or the
clerk hire, costs of preserving and allowed by the CTA were attorney’s fees incurred in distribution of the property to the persons
distributing the estate and storing or the case of a special proceeding for guardianship entitled to it.""
maintaining it, brokerage fees or and a notarial fee for the extrajudicial settlement.
commissions for selling or disposing of The CIR questioned the CTA Order, assailing that Although the Tax Code specifies ""judicial
the estate, and the like. Deductible attorney’s fees and the notarial fee are not expenses of the testamentary or intestate
attorney's fees are those incurred by the deductible expenses, as said fees were not proceedings,"" there is no reason why
executor or administrator in the expenses of testamentary or intestate expenses incurred in the administration and
settlement of the estate or in defending proceedings." settlement of an estate in extrajudicial
or prosecuting claims against or due the proceedings should not be allowed. However,
estate. deduction is limited to such administration
expenses as are actually and necessarily
incurred in the collection of the assets of the
estate, payment of the debts, and distribution of
the remainder among those entitled thereto

In the case at bar, the notarial fee paid for the

extrajudicial settlement is clearly a deductible
expense since such settlement effected a
distribution of Pedro Pajonar's estate to his
lawful heirs. Similarly, the attorney's fees paid
to PNB for acting as the guardian of Pedro
Pajonar's property during his lifetime should
also be considered as a deductible
administration expense. PNB provided a
detailed accounting of decedent's property and
gave advice as to the proper settlement of the
latter's estate, acts which contributed towards
the collection of decedent's assets and the
subsequent settlement of the estate."
8. Ferdinand R. The nature of the process of estate tax Following the death of former President Marcos in Whether the properties can be Yes. The court recognized the liberal treatment
Marcos II vs. Court of collection has been described as follows: 1989, a Special Tax Audit Team was created on levied despite the pendency of of claims for taxes charged against the estate
Appeals, et al., G.R. "Strictly speaking, the assessment of a June 27, 1990 to conduct investigations and proceedings on probate of a of the decedent. Such taxes, we said, were
No. 120880, June 5, inheritance tax does not directly involve examinations of tax liabilities of the late president, will. exempted from the application of the statute of
1997 the administration of a decedent's estate, his family, associates and cronies. The nonclaims, and this is justified by the necessity
 although it may be viewed as an incident investigation said that the family failed to file a of government funding, immortalized in the
to the complete settlement of an estate, written notice of his death. maxim that taxes are the lifeblood of the
and, under some statutes, it is made the government. Vectigalia nervi sunt rei publicae
duty of the probate court to make the The CIR then caused the filing of the Estate Tax — taxes are the sinews of the state.
amount of the inheritance tax a part of return of the late president. The deficiency estate
the final decree of distribution of the tax amounted to 23,293,607,638. Such liberal treatment of internal revenue taxes
estate. It is not against the property of in the probate proceedings extends so far, even
decedent, nor is it a claim against the The deficiency tax assessments were not protested to allowing the enforcement of tax obligations
estate as such, but it is against the administratively, by Imelda Marcos and the other against the heirs of the decedent, even after
interest or property right which the heir heirs of the late president, within 30 days distribution of the estate's properties.
legatee, devisee, etc., has in the from service of said assessments.
property formerly held by decedent. From the foregoing, it is discernible that the
Further, under some statutes, it has Further, there was levying on the property already, approval of the court, sitting in probate, or as a
been held that it is not a suit or but his son contested such levying by saying that settlement tribunal over the deceased is not a
controversy the subject properties are under the pendency of mandatory requirement in the collection of
between the parties, nor it is an proceedings on probate of a will, estate taxes. It cannot therefore be argued that
adversary proceeding between the state making it under custodia legis. the Tax Bureau erred in proceeding with the
and the person who owes the tax on the levying and sale of the properties allegedly
inheritance. However, under other Petitioner filed a petition for certiorari and owned by the late President, on the ground that
statutes it has been held that the hearing prohibition with an application for TRO before the it was required to
and determination of the cash value of CA to annul and set aside the notices of levy as well seek first the probate court's sanction. There is
the assets and the determination of the as the notice of sale and to enjoin the BIR from nothing in the Tax Code, and in the pertinent
tax are adversary proceedings. The proceeding with the auction. The CA dismissed the remedial laws that implies the necessity of the
proceeding has been held to be petition ruling that the deficiency assessments for probate or estate settlement court's approval of
necessary a proceeding in rem. In the the estate and income taxes have already become the state's claim for estate taxes, before the
Philippine experience, the enforcement final and unappealable and may thus be enforced same can be enforced and collected.
and collection of estate tax, is executive by summary remedy of levying upon the real
in character, as the legislature has seen property.
it fit to ascribe this task to the Bureau of
Internal Revenue.
9. Dizon v. CIR, G.R. the estate as such, but it is against the Jose P. Fernandez (Jose) died. Thereafter, a Whether the actual claims of Yes. It is admitted that the claims of the Estate's
No. 140944, 30 June interest or property right which the heir petition for the probate of his will was filed. the creditors may be fully aforementioned creditors have been condoned
2008. legatee, devisee, etc., has in the allowed as deductions from - mode of extinguishing an obligation. It may be
property formerly held by decedent. The probate court then appointed retired SC Justice the gross estate of Jose fully allowed as deductions following the Date-
Further, under some statutes, it has Dizon and petitioner Aty. Dizon as Special and despite the fact that the said of-Death Valuation Rule.
been held that it is not a suit or Assistant Special Administrator, respectively of the claims were reduced or
controversy estate of Fernandez. condoned through
compromise agreements There is no law, nor do we discern any
Atty. Gonzales wrote a letter addressed to the BIR entered into by the Estate with legislative intent in our tax laws, which
Regional Director and filed the estate tax return with its creditors disregard the date-of-death valuation principle
the same BIR Regional Office, showing therein a and particularly provide that post-death
NIL estate tax liability. Consequently, BIR Regional developments must be considered in
Director issued Certification stating that the taxes determining the net value of the estate. It bears
due on the transfer of real and personal properties emphasis that tax burdens are not to be
of Jose had been fully paid and said properties may imposed, nor presumed to be imposed, beyond
be transferred to his heirs. what the statute expressly and clearly imports,
 tax statutes being construed strictissimi juris
Petitioner requested the probate court's authority to against the government. Any doubt on whether
sell several properties forming part of the Estate, for a person, article or activity is taxable is
the purpose of paying its creditors. However, the generally resolved against taxation.
Assistant Commissioner for Collection of the BIR,
issued Estate Tax Assessment Notice demanding Further, such construction finds relevance and
the payment of P66,973,985.40 as deficiency consistency in our Rules on Special
estate tax. Proceedings wherein the term "claims"
required to be presented against a decedent's
estate is generally construed to mean debts or
demands of a pecuniary nature which could
have been enforced against the deceased in
his lifetime, or liability contracted by the
deceased before his death.

Hence, the claims existing at the time of death

are significant to, and should be made the basis
of, the determination of allowable deductions.
10. CIR v. Fisher, G.R. Section 122 of the National Internal "The decedent is a British subject born in the Whether the estate of No. In the Philippines, upon the death of any
No. L-11622, January Revenue Code exempts payment of both Philippines. He was married in Manila to Beatrice, Stevenson can avail itself of citizen or resident, or non-resident with
28, 1961. estate and inheritance taxes on another British subject. He died in 1951 in California the reciprocity proviso properties therein, there are imposed upon his
intangible personal properties if the laws where he and his wife moved to. Among the embodied in Section 122 of estate and its settlement, both an estate and an
of the foreign country of which the properties acquired by the spouses in the the NIRC. inheritance tax. Under the laws of California,
decedent was a resident at the time of Philippines were 210,000 shares of stock of only inheritance tax is imposed. On the other
his death allow a similar exemption from Mindanao Mother Lode Mines, Inc. hand, the Federal Internal Revenue Code
transfer taxes or death taxes of every imposes an estate tax on non-residents not
character in respect of intangible Ian Murrat Statt (Statt), the appointed ancillary citizens of the United States, but does not
personal property owned by citizens of administrator of his estate and an estate and provide for any exemption on the basis of
the Philippines not resident of that inheritance tax return. He made a preliminary return reciprocity. Applying these laws in the manner
foreign country. On the other hand , to secure the waiver of the CIR on the inheritance the Court of Tax Appeals did in the instant case,
Section 13851 of the California Law of the Mines shares of stock. we will have a situation where a Californian,
exempts the payments of inheritance tax who is non-resident in the Philippines but has
if the laws of the country in which the Beatric assigned all her rights and interests in the intangible personal properties here, will be
decedent resided allow a similar estate to the spouses Fisher. Statt filed amended subject to the payment of an estate tax,
exemption from legacy, succession, or return filed by the ancillary administrator, an although exempt from the payment of the
death taxes of every character. It is clear exemption pertaining to the above-stated shares inheritance tax. This being the case, will a
from these provisions that the reciprocity was claimed to amount to Php4,000.00. Filipino, non-resident of California, but with
must be total, that is, with respect to intangible personal properties there, be entitled
transfer or death taxes of any and every CFI ruled that 1/2 share of Beatrice should be to the exemption clause of the California law,
character, in the case of the Philippines deducted from the net estate of Walter, (b) the since the Californian has not been exempted
law, and to legacy, succession, or death intangible personal property belonging to the estate from every character of legacy, succession, or
tax of any and every character, in the of Walter is exempt from inheritance tax pursuant to death tax because he is, under our law, under
case of the California law. Therefore, if the reciprocity proviso in NIRC. obligation to pay an estate tax? Upon the other
any of the two states collects or imposes hand, if we exempt the Californian from paying
and does not exempt any transfer, death, " the estate tax, we do not thereby entitle a
legacy, or succession tax of any Filipino to be exempt from a similar estate tax
 character, the reciprocity does not work. in California because under the Federal Law,
This is the underlying principle of the which is equally enforceable in California, he is
reciprocity clauses in both laws. Since in bound to pay the same, there being no
the Philippines two taxes are collectible reciprocity recognized in respect thereto. In
from the decedent’s estate (inheritance both instances, the Filipino citizen is always at
and estate taxes) and in California, only a disadvantage. We do not believe that our
inheritance tax, reciprocal exemption of legislature has intended such an unfair
the inheritance tax in both countries, situation to the detriment of our own
leaving payable the estate tax in the government and people. We, therefore, find
Philippines, will not work as that would and declare that the lower court erred in
violate the California law that authorizes exempting the estate in question from payment
exemption only when there is in the other of the inheritance tax.
country an exemption from legacy,
succession or death taxes of every
character. Held: There could not be
partial reciprocity. It would have to be
total or none at all.

DONOR’S TAX

Case Title Case Principle Summary of Facts Issue/s Ruling

1. Republic v. AFP The processes of the State should not be Lots X, Y-1 and Y-2 were lands of the public domain Did the CA err in ruling that the From the wording of Proc. 168, the land it comprises is subject to
Retirement and trifled with. The failure of a party to avail pursuant to Proclamation No. 168 (Proc. 168). In lands in question are alienable thus alienable and disposable. However, this alienable and disp
Separation Benefits of the proper remedy to acquire or 1983, Proclamation No. 2273 (Proc. 2273) was and disposable lands? land covered by the proclamation was subsequently withdrawn
System, G.R. No. perfect one’s title to land cannot justify a issued which removed and segregated Lots Y-1 classified by then President Macapagal to pave the way for the e
180463, January 16, resort to other remedies which are and Y-2 from the reservation and declaring them reservation, subject only to previously acquired private rights. Th
2013. otherwise improper and do not provide open for disposition to qualified applicants. As a the exclusion of certain portions of the reservation which they
for the full oppot1unity to prove his title, result, only Lot X which consists of 15,020 square allegedly acquired by their predecessor Kusop through pre
but instead require him to concede it meters remained part of the reservation now known successful, for in 1983, then President Marcos issued Proc. 227
before availment. as Magsaysay Park.The record discloses that the segregated Lots Y-1 and Y-2 from the coverage of Proc. 168.
heirs of CabaloKusop and Atty. Flaviano petitioned declared Lots Y-1 and Y-2 open for distribution to qualified bene
the President to have Lots Y-1 and Y-2 taken out of the heirs. However, Lot X was retained as part of the reservation
the reservation for the reason that through their
predecessor CabaloKusop (Kusop), they have The heirs and Flavianos actions betray their claim of ownership
acquired vested private rights over these lots. This 168 was issued, they did not institute action to question its vali
campaign resulted in Proc. 2273, which re- action their claimed ownership and title over the land. The same i
classified and returned Lots Y-1 and Y-2 to their came out. They did not file suit to invalidate it because it con
original alienable and disposable state. ownership over Lot X. They simply sat and waited for the good gra
to fall on their laps. They simply waited for the State to declare th
In 1997, the heirs and Flaviano filed applications for land.
the issuance of individual miscellaneous sales
patents over the whole of Lot X. Consequently, 16
original certificates of title (OCTs) covering Lot X
were issued in the names of the heirs, Flaviano and
 several others. These 16 titles were simultaneously
conveyed to respondent AFP-Retirement and
Separation Benefits System (AFP-RSBS).
2. Republic of the "Three essential elements of a donation: David Rey Guzman, a natural-born American Whether or not there was a Not all the elements of a donation are present.
Philippines v. David 1. Reduction in the patrimony of the citizen, is the son of the spouses Simeon Guzman donation inter vivos The transfer of the properties by virtue of a
Rey Guzman, G.R. No. donor 2. Increase in the patrimony of the (naturalized American) and Helen Meyers Guzman Deed of Quitclaim resulted in the (1) reduction
132964, February 18, donee 3. Intent to do an act of liberality (American citizen). In 1968, Simeon died leaving to of her patrimony as donor and the (2)
2000. or nimus donandi his heirs, Helen and David, an estate consisting of consequent increase in the patrimony of
several parcels of land in Bulacan. David as donee. However, Helen’s (3)
intention to perform an act of liberality in favor
It is also required that the donation be of David was not sufficiently established. The
made in a public document and that its In 1970, Helen and David executed a Deed of 2 Quitclaims reveal that Helen intended to
acceptance be made in the same deed Extrajudicial Settlement of the Estate, dividing and convey to her son certain parcels of land and
of donation or in a separate public adjudicating to themselves all of the property, and to re-affirm it, she executed a waiver and
document, which has to be recorded as registered it to the RD a year after. renunciation of her rights over these
well." properties. It is clear that Helen merely
contemplated a waiver of her rights, title,
In 1981, Helen executed a Deed of Quitclaim, interest over the lands in favor of David, not a
assigning, transferring and conveying her ½ share donation. She was also aware that donation
of the properties to David. But since it was not was not possible.
registered, she executed another Deed of Moreover, the essential element of
Quitclaim to confirm the first. acceptance in the proper form and registration
to make the donation valid is lacking. The SPA
executed by David in favor of Atty. Abela was
In 1994, Atty. Batongbacal wrote the OSG not his acceptance, but an acknowledgment
andfurnished it with documents showing that that David owns the property referred to and
David’s ownership of ½ of the estate was defective. that he authorizes Atty. Abela to sell the same
He argued that Art. XII of the Constitution only in his name. Further, there was nothing in the
allows Filipinos to acquire private lands in the SPA to show that he indeed accept the
country. The only instances when a foreigner may donation.
acquire private property are by hereditary
succession and if he was formerly a natural-born However, the inexistence of a donation does
citizen who lost his Filipino citizenship. Moreover, it not make the repudiation of Helen in favor
contends that the Deeds of Quitclaim executed by David valid. There is NO valid repudiation of
Helen were really donations inter vivos. inheritance as Helen had already accepted
her share of the inheritance when she,
together with David, executed a Deed of
Extrajudicial Settlement of the Estate, dividing
and adjudicating between them all the
properties. By virtue of that settlement, the
properties were registered in their names and
for 11 years, they possessed the land in the
concept of owner. Thus, the 2 Quitclaims
have no legal force and effect. Helen still owns
½ of the property.
3. Manuel G. Abello, et Donative intent is a creature of the mind. During the 1987 national elections, petitioners, who Whether the contributions are Yes. The NIRC does not define transfer of
al. v. CIR, G.R. No. It cannot be perceived except by the are partners in the ACCRA law firm, contributed liable for donor's tax. property by gift. However, the Civil Code, by
120721. February 23, material and tangible acts which P882,661.31 each to the campaign funds of reference, considers such as donations. The
2005. manifest its presence. This being the Senator Edgardo Angara, then running for the present case falls squarely within the
case, donative intent is presumed Senate. The BIR then assessed each of the definition of a donation. There was intent to do
present when one gives a part of ones petitioners P263,032.66 for their contributions. an act of liberality or animus donandi was
patrimony to another without Petitioners questioned the assessment claiming present since each of the petitioners gave
consideration. Donative intent is not that political or electoral contributions are not their contributions without any consideration.
negated when the person donating has considered gifts under NIRC therefore, not liable for
other intentions, motives or purposes donors tax. The claim for exemption was denied by Taken together with the Civil Code definition
which do not contradict donative intent the Commissioner. of donation, Section 91 of the NIRC is clear
and unambiguous, thereby leaving no room
The BIR denied their motion. They then filed a for construction.
petition with the CTA, which was granted.
Petitioners contribution of money without any
On appeal, the CA again held in favor of the BIR. material consideration evinces animus
donandi. The fact that their purpose for
donating was to aid in the election of the
donee does not negate the presence of
donative intent.

Petitioners raise the fact that since 1939 when

the first Tax Code was enacted, up to 1988
the BIR never attempted to subject political
contributions to donors tax.

This Court holds that the BIR is not precluded

from making a new interpretation of the law,
especially when the old interpretation was
flawed. It is a well-entrenched rule that

4. Lydia Sumipat, et al. Title to immovable property does not Lauro Sumipat executed a document denominated Whether the questioned deed NO. A perusal of the deed reveals that it is
vs. Brigido Banga, et pass from the donor to the donee by “DEED OF ABSOLUTE TRANSFER AND/OR by its terms or under the actually a gratuitous disposition of property —
al., G.R. No. 155810, virtue of a deed of donation until and QUIT-CLAIM OVER REAL PROPERTIES” (the surrounding circumstances a donation — although Lauro Sumipat
August 13, 2004. unless it has been accepted in a public assailed document) in favor of defendants- has validly transferred title to imposed upon the petitioners the condition
instrument and the donor duly notified appellees covering the three parcels of land (the the disputed properties to the that he and his wife, Placida, shall be entitled
thereof. properties). On the document appears the petitioners? to one-half (1/2) of all the fruits or produce of
signature of his wife Placida indicating her marital the parcels of land for their subsistence and
consent thereto. support.

It appears that when the assailed document was Title to immovable property does not pass
executed, Lauro Sumipat was already very sick and from the donor to the donee by virtue of a
bedridden; that upon defendant-appellee Lydia’s deed of donation until and unless it has been
 request, their neighbor Benjamin Rivera lifted the accepted in a public instrument and the donor
body of Lauro Sumipat whereupon Lydia guided his duly notified thereof. The acceptance may be
(Lauro Sumipat’s) hand in affixing his signature on made in the very same instrument of
the assailed document which she had brought; that donation. If the acceptance does not appear
Lydia thereafter left but later returned on the same in the same document, it must be made in
day and requested Lauro’s unlettered wife Placida another. Where the deed of donation fails to
to sign on the assailed document, as she did in show the acceptance, or where the formal
haste, even without the latter getting a responsive notice of the acceptance, made in a separate
answer to her query on what it was all about. instrument, is either not given to the donor or
else not noted in the deed of donation and in
After Lauro Sumipat’s death, his wife Placida, the separate acceptance, the donation is null
hereinafter referred to as plaintiff-appellant, and and void.
defendants-appellees jointly administered the
properties 50% of the produce of which went to In this case, the donees’ acceptance of the
plaintiff-appellant. donation is not manifested either in the deed
itself or in a separate document. Hence, the
As plaintiff-appellant’s share in the produce of the deed as an instrument of donation is patently
properties dwindled until she no longer received void.
any and learning that the titles to the properties in
question were already transferred/made in favor of Neither can we give effect to the deed as a
the defendants-appellees, she filed a complaint for sale, barter or any other onerous conveyance,
declaration of nullity of titles, contracts, partition, in the absence of valid cause or consideration
recovery of ownership now the subject of the and consent competently and validly given.
present appeal.

5. Sps. Gestopa v. CA, In ascertaining the intention of the donor, Spouses Danlag own six parcels of land. To four Whether the (second) It was donation inter vivos. The spouses were
G.R. No. 111904, 5 all of the deed’s provisions parcels of land, they executed a donation mortis donation was inter vivos or aware of the difference between the two
October 2000. must be read together. causa in favor of respondent Mercedes Danlag- mortis causa donations, and that they needed to execute
Pilapil, reserving donor's rights to amend, cancel, another deed of donation inter vivos, since it
or revoke the donation and to sell or encumber has a different application to a donation mortis
such properties. Years later, they executed another causa. Also, the court stated four reasons to
donation, this time inter vivos, to six parcels of land the matter: (1) that the spouses donated the
in favor of respondents, reserving their rights to the parcels of land out of love and affection, a
fruits of the land during their lifetime and for clear indication of a donation inter vivos; (2)
prohibiting the donee to sell or dispose the the reservation of a lifetime usufruct; (3)
properties donated. Subsequently, the spouses reservation of sufficient properties for
sold 2 parcels to herein petitioners, spouses maintenance that shows the intention to part
Gestopa, and eventually revoking the donation. with their six lot; and (4) respondent's
Respondent filed a petition to quiet title, stating that acceptance, contained in the deed of
she had already become the owner of the parcels donation. Once a deed of donation has been
of land. Trial Court ruled in favor of petitioners, but accepted, it cannot be revoked, except for
CA reversed.
 officiousness or ingratitude, which the
spouses failed to invoke

6. Rev/Atty. Tayoto v. The Bureau of Internal Revenue should On 1945, Atanasio Pineda died, leaving his wife whether or not the The Government can require Manuel B.
Heirs of Cabalo Kusop be given, in instances like the case at and 15 children his estate. One of the children, government can require Pineda to pay the full amount of the taxes
et. Al., G.R. No. 74203, bar, the necessary discretion to avail Manuel B. Pineda, had a share that amounted to manuel pineda to pay the full assessed.
April 17, 1990. itself of the most expeditious way to about P2,500.00. After the estate proceedings amount of taxes assessed Liability of Heir for Tax Due the Estate Pineda
collect the tax as may be envisioned in were closed, the BIR investigated the income is liable for the assessment as an heir and as
the particular provision of the Tax Code tax liability of the estate for the years 1945, 1946, a holder- transferee of property belonging to
above quoted, because taxes are the 1947 and 1948 to which amounted to a total of the estate/taxpayer. As an heir he is
lifeblood of Government and their P760.28 (the whole tax on the estate). Manuel B. individually answerable for the part of the tax
prompt and certain availability is an Pineda opposes on the ground that as an heir he is proportionate to the share he received from
imperious need. liable for unpaid income tax due the estate only up the inheritance. His liability however cannot
to the extent of and in proportion to any share he exceed the amount of his share. As a holder
received. He relies on Government of the Philippine of property belonging to the estate, Pineda is
Islands vs. Pamintuan, where We held that "after liable for the tax up to the amount of the
the partition of an estate, heirs and distributees are property in his possession. The reason is that
liable individually for the payment of all lawful the Government has a lien on the P2,500.00
outstanding claims against the estate in proportion received by him from the estate as his share
to the amount or value of the property they have in the inheritance, for unpaid income taxes for
respectively received from the estate. which said estate is liable, pursuant to the last
paragraph of Section 315 of the Tax Code. By
virtue of such lien, the Government has the
right to subject the property in Pineda's
possession, i.e., the P2,500.00, to satisfy the
income tax assessment in the sum of
P760.28. After such payment, Pineda will
have a right of contribution from his co-heirs,
to achieve an adjustment of the proper share
of each heir in the distributable estate.

The Government has two ways of collecting

the taxes in question. One, by going after all
the heirs and collecting from each one of them
the amount of the tax proportionate to the
inheritance received. Another, pursuant to the
lien
created by Section 315 of the Tax Code upon
all property and rights to property belonging to
the taxpayer for unpaid income tax, is by
subjecting said property of the estate which is
in the hands of an heir or transferee to the
payment
 of the tax due the estate. This second remedy
is the very avenue the Government took in this
case to collect the tax. The Bureau of Internal
Revenue should be given, in instances like
the case at bar, the necessary discretion to
avail itself of the most expeditious way to
collect the tax as may be envisioned in the
particular provision of the Tax Code above
quoted, because taxes are the lifeblood of
Government and their prompt and certain
availability is an imperious need.

VALUE ADDED TAX

Case Title Case Principle Summary of Facts Issue/s Ruling

1. CIR v. Deutsche Even though the Petitioner was able to Petitioner is a licensed branch to operate as a Is the Petitioner entitled to a No. It was declared that Petitioner is not
Knowledge Services present the SEC Certifications of Non- regional operating headquarter (ROHQ) that claim for refund or issuance of entitled to a tax refund/credit by reason of its
Pte. Ltd., G.R. No. registration of its clientele, the absence provides general administration and planning, tax credit certificate for its failure to prove that all their clients were
234445, July 15, 2020 of the Articles of Association/Certificates sourcing, logistics services, personnel unutilized input VAT? indeed foreign corporations doing business
of Incorporation of some of its clients management, and other related services outside the Philippines pursuant to Section
proving that the affiliate/client is not doing (“qualifying services”) to its foreign affiliates/related 4.112-1(a) of RR No. 16-05 in relation to
business here in the Philippines was fatal parties. Petitioner filed an administrative claim for Section 112 of
to its claim for credit or refund of excess refund of unutilized input VAT for its zero-rated the NIRC.
input VAT attributable to zero-rated sales to foreign affiliates-clients. Even though the Petitioner was able to
sales. present the SEC Certifications of Non-
registration of its clientele, the absence of the
The Petitioner is of the position that its sale of Articles of Association/Certificates of
services was subject to zero-rated VAT pursuant to Incorporation of some of its clients proving that
Section 112 of the NIRC. In order to support its the affiliate/client is not doing business here in
claim for zero-rated VAT, Petitioner presented the the Philippines was fatal to its claim for credit
SEC Certification of Non-registration of Company or refund of excess input VAT attributable to
and Authenticated Articles of Association and/or zero-rated sales.
Certificates of Registration/Good The Petitioner in this case was only able to
Standing/Incorporation in order to establish the prove the NRFC status of 11 foreign
Non-resident Foreign Corporation (NRFC) status of affiliates/clients out of the initial 34 entities it
some of its clientele. claimed.

2. CIR v. Filminera Sales made to a BOI-registered buyer Company C, a domestic corporation registered with
Resources are export sales subject to the zero the Board of Investments (BOI), entered into a Is the BOI Certification No, a BOI Certification presented was not a
Corporation, G.R. No. percent rate if the following conditions Sales and Purchase Agreement with Company D. presented a sufficient sufficient document to prove that sales were
236325, September 16, are met: (I) the buyer is a BOI-registered For the third and fourth quarters of the FY ending document to prove that sales exported.
2020. manufacturer/producer; (2) the buyer's June 30, 2010, Company D 's sales were all made were exported? Sales made to a BOI-registered buyer are
 products are 100% exported; and (3) the to Company C. On March 30, 2012 and June 29, export sales subject to the zero percent rate if
BOI certified that the buyer exported 2012, Company D filed administrative claims for the following conditions are met: (I) the buyer
100% of its products. For this purpose, refund or issuance of Tax Credit Certificates of its is a BOI-registered manufacturer/producer;
the BOI Certification is vital for the seller- unutilized input VAT attributable to its zero-rated (2) the buyer's products are 100% exported;
taxpayer to avail of the benefits of zero- sales for the third and fourth quarters. Thereafter, and (3) the BOI certified that the buyer
rating. The certification is evidence that on August 16, 2012 and November 23, 2012, exported 100% of its products. For this
the buyer exported its entire products Company D filed separate petitions for review purpose, the BOI Certification is vital for the
and shall serve as authority for the seller before the CTA. seller-taxpayer to avail of the benefits of zero-
to claim for refund or tax credit. rating. The certification is evidence that the
buyer exported its entire products and shall
The CTA Division initially denied Company D’s serve as authority for the seller to claim for
petition on the ground of insufficiency of evidence. refund or tax credit.
In seeking reconsideration, Company D submitted A plain reading of the certification shows that
a certified true copy of a BOI Certification to Company C exported 100% of its total sales
establish that Company C was a BOI-registered volume/value, from January 1 to December
enterprise that exported its total sales volume from 31, 2009. However, nothing in the certification
July 1, 2009 to June 30, 2010. The CTA Division shows that Company C similarly exported its
amended its decision and granted the refund to entire products for the third and fourth quarters
Company D. The CTA En Banc adopted the CTA of FY 2010, or from January 1 to June 30,
Division’s decision. 2010. The validity period of the BOI
certification (January 01 to December 31,
2010) should not be confused with the period
identified in the certification when the buyer
actually exported 100% of its products.
In order for the sales made to Company C
during the third and fourth quarters of FY 2010
qualify as zero-rated sales, the BOI must still
certify that Company C actually exported its
entire product from January 1 to December
31, 2010. The BOI Certification failed to
ascertain this fact.

3. CIR v. Philex Mining The law does not require that subsidiary Company P filed its claims for refund on the excess Are tax declarations and No. There was nothing in the Tax Code or in
Corporation, G.R. No. journals where the sales and purchases input tax arising from its zero-rated sales with the subsidiary journals part of the RR No. 16-2005 that would suggest that the
230016, November 23, (and the output taxes and their Department of Finance (DOF)’s One-Stop Shop requirements of the law for the subsidiary journals and monthly VAT
2020. corresponding input taxes) were Center (OSS). Petitioner CIR alleged that grant declarations are part of the substantiation
recorded, are also kept. Indeed, courts Company P did not submit to the DOF-OSS the of tax credit or refund, and is it requirements that must be complied with to
may not, in the guise of interpretation, required checklist of documents, and Company P the obligation of respondent support a claim for tax refund or credit. The
enlarge the scope of a statute and failed to comply with the accounting requirements, to prove compliance thereto? language used in Section 110 of the Tax Code
include therein situations not provided specifically the keeping of subsidiary sales journal is plain, clear, and unambiguous. To be
nor intended by the lawmakers. To do so and subsidiary purchase journal, and the filing of creditable, the input taxes must be evidenced
would be to do violence to the language monthly VAT declarations as required by RR No. by validly issued invoices and/ or official
16-2005. The CTA in Division, as affirmed by the receipts containing the information
 of the law and to invade the legislative CTA En Banc, ruled that Company P timely filed its enumerated in Sections 113 and 237. The law
sphere. administrative and judicial claims for refund and does not require that subsidiary journals
that properly it attached the required documents to where the sales and purchases (and the
support its claims. output taxes and their corresponding input
taxes) were recorded, are also kept. Indeed,
courts may not, in the guise of interpretation,
enlarge the scope of a statute and include
therein situations not provided nor intended by
the lawmakers. To do so would be to do
violence to the language of the law and to
invade the legislative sphere. In all, Company
P’s failure to maintain subsidiary sales and
purchase journals or to file the monthly VAT
declarations should not result in the outright
denial of its claim for refund or credit of
unutilized input VAT attributable to its zero.

4. CIR v. Federation of Membership fees, assessment dues, Federation of Golf Clubs of the Philippines, Inc. Is the issuance of RMC No. No, RMC No. 35-2012 is invalid. The
Golf Clubs of the and the like are neither income nor part (FEDGOLF) questioned the validity of Revenue 35-2012 valid? interpretation under RMC No. 35-2012 is
Philippines, Inc., G.R. of gross receipts of recreational clubs; Memorandum Circular (RMC) No. 35-2012 issued erroneous as it effectively eradicated the
No. 226449, July 28, hence, they are not taxable insofar as by the Commissioner of Internal Revenue (CIR) distinction between “income” and “capital”
2020 income tax and VAT are concerned. before the Regional Trial Court (RTC). when it classified membership dues,
RMC No. 35-2012 clarifies the taxability of clubs assessment fees, and the like as “income”
that are organized and operated exclusively for which are subject to income tax.
pleasure, recreation, and other non-profit purposes Income is the “amount of money coming to a
(recreational clubs), and provides that the income person or corporation within a specified time,
of such clubs from whatever source, including whether as payment for services, interest or
membership fees, assessment dues, rental profit from investment” while capital is the
income, and service fees are subject to income tax, “fund” or “wealth.”
and that the recreational club’s gross receipts Membership fees and the like are considered
including membership fees, assessment dues, as “capital” as they are intended for the
rental income and service fees are subject to value- upkeep of the facilities and operations of
added tax (VAT). recreational clubs, and not to generate
The CIR argues that a recreational club’s income revenue. Only the recreational club’s income
from whatever source is subject to income tax. is subject to income tax.
Moreover, the CIR maintained that the Tax Code RMC No. 35-2012 also erroneously included
provides that non-stock, non-profit organizations the membership dues and the like as part of
are subject to VAT on their sale of goods and gross receipts of recreational clubs which are
services. subject to VAT. In collecting such fees from
The RTC declared RMC No. 35-2012 invalid and members, recreational clubs are not selling
the CIR appealed to the Supreme Court. any kind of service, in the same way that
members are not procuring services from
them. Thus, there could be no “sale, barter, or
 exchange of goods or services” that is subject
to VAT.

5. CIR v. Chevron RMO No. 53-98 is not a benchmark in Respondent Chevron is a corporation duly (1) Is the failure of the (1) No. RMO No. 53-98 is addressed to
Holdings, Inc. G.R. No. determining whether the documents organized and existing under the laws of the State taxpayer to submit all the internal revenue officers and employees, for
233301, February 17, submitted by a taxpayer are actually of Delaware, USA. It is licensed by the SEC to documents enumerated in purposes of equity and uniformity, to guide
2020. complete to support a claim for tax credit transact business in the Philippines as regional Revenue Memorandum Order them as to what documents they may require
or refund of excess unutilized input VAT. operating headquarters (ROHQ) and duly (RMO) No. 53-98 fatal to its taxpayers to present upon audit of their tax
RMO No. 53-98 assumes relevance only registered with the BIR as a Value-Added Tax judicial claim for VAT refund? liabilities. Nothing stated in the issuance would
on matters pertinent to an audit of tax (VAT) taxpayer. As ROHQ, it established a shared (2) Did Chevron timely file the show that it was intended to be a benchmark
liabilities, not for a claim of refund of input services center in the Philippines that provides application for tax credit or in determining whether the documents
tax. The law allows the taxpayer to file an finance, information technology, human resource, refund of excess unutilized submitted by a taxpayer are actually complete
administrative claim for refund with the procurement and customer interaction services to input VAT? to support a claim for tax credit or refund of
BIR within 2 years after the close of the its affiliates, subsidiaries or branches in the Asia excess unutilized input VAT.
taxable quarter when the purchase was Pacific and North America Regions. Further, RMO No. 53-98 assumes relevance
made (for the input tax paid on capital On November 2, 2010, Chevron filed with the BIR only on matters pertinent to an audit of tax
goods) or after the close of the taxable an Application for Tax Credits/Refunds (BIR Form liabilities. Thus, it finds no application in the
quarter when the zero-rated or effectively 1914) of its excess and unutilized input VAT credits present case since Chevron’s claim is one for
zero-rated sale was made (for input tax for the four taxable quarters of 2009. refund of its input tax. Chevron submitted all
attributable to zero-rated sale) Upon CIR’s failure to act on the refund claim, documents it deemed necessary for the grant
Chevron filed a Petition for Review before the Court of its refund claim and the CIR did not notify
of Tax Appeals (CTA) in Division on March 23, Chevron of the document it failed to submit, if
2011. The CTA in Division partially granted the any.
refund claim. Both Chevron and the CIR filed their
petitions before the CTA En Banc which affirmed (2) Yes. Section 112 (A) and (C) of the Tax
the decision of the CTA in Division. The CIR moved Code supplies the periods relative to the filing
for reconsideration but the same was denied. of a claim for VAT refunds.
Hence, this Petition for Review before the Supreme As such, the law allows the taxpayer to file an
Court (SC). administrative claim for refund with the BIR
within 2 years after the close of the taxable
quarter when the purchase was made (for the
input tax paid on capital goods) or after the
close of the taxable quarter when the zero-
rated or effectively zero-rated sale was made
(for input tax attributable to zero-rated sale).
The CIR must then act on the claim within 120
days from the submission of complete
documents in support of the application. In the
event of an adverse decision, the taxpayer
may elevate the matter to the CTA by way of
a petition for review within 30 days from the
receipt of the CIR’s decision. If, on the other
hand, the 120-day period lapse without any
 action from the CIR, the taxpayer may validly
treat the inaction as denial and file a petition
for review before the CTA within 30 days from
the expiration of the 120-day period. An
appeal taken prior to the expiration of the 120-
day period without a decision or action of the
CIR is premature, without a cause of action,
and therefore, dismissible on the ground of
lack of jurisdiction.

6. CIR v. First E-Bank Condominium association dues, fees, The First E-Bank Tower Condominium Corp. (First Whether or not the No. Association dues, membership fees, and
Tower Condominium and other charges are not subject to E-Bank) filed a petition to declare as invalid BIR condominium dues and other assessments/charges collected by a
Corp., G.R. No. income tax, VAT, and withholding tax. Revenue Memorandum Circular No. 65-2012 membership fees collected by condominium corporation are not subject to
215801.218924, (RMC No. 65-2012). In its petition alleging that: a condominium corporation income tax, VAT, and withholding tax. The
January 15, 2020. 1. It is a non-stock non-profit condominium are taxable? expenditures incurred by the condominium
corporation; RMC No. 65-2012 burdened the corporation on behalf of the condominium
owners of the condominium units with income tax owners are not intended to generate revenue
and Value-Added Tax (VAT) on their own money nor equate to the cost of doing business. The
which they exclusively used for the maintenance association dues, fees, and other charges are
and preservation of the building and its premises; collected purely for the benefit of the
2. RMC No. 65-2012 was oppressive and condominium owners and are incidental to
confiscatory because it required condominium unit condominium corporation’s responsibility to
owners to produce additional amounts for the thirty- oversee, maintain, or even improve the
two percent (32%) income tax and twelve percent common areas of the condominium as well as
(12%) VAT. its governance.

7. CIR v. Bases Sale proceeds of certain properties Bases Conversion & Development Authority, a Whether or not Bases Yes. The Court ruled that the GOCC is exempt
Conversion & which are deemed appropriated by government-owned and controlled corporation Conversion & Development from CWT on the sale of the real properties in
Development Congress to specific recipients are (GOCC), sold real properties in Bonifacio Global Authority is exempt from Bonifacio Global City. Such exemption is
Authority, G.R. No. exempt from all kinds of fees and taxes. City to a joint venture (JV). After the GOCC failed Creditable Withholding Tax found on Section 8 of the Bases Conversion
217898, January 6, to obtain a certificate of tax exemption for the sale, on the sale of its Global City and Development Act. Under the said
2020 the JV withheld taxes and remitted the same to the properties. provision of the law, the sale proceeds of
BIR. Due to the Commissioner of Internal certain properties are deemed appropriated
Revenue’s (CIR) inaction on the claim for refund by Congress to specific recipients.
filed by the GOCC, the claim was elevated to the Consequently, the sale proceeds are not the
Court of Tax Appeals (CTA). The CTA, both in income of the GOCC but public funds subject
Division and En Banc, affirmed the claim for refund to the distribution scheme and purposes
of creditable withholding taxes (CWT) in provided in the law itself.Further, the said
connection with the sale of the aforementioned real provision expressly enjoins that the proceeds
properties. of the sale shall not be diminished by any item
or circumstance, including all forms of taxes
and fees.
In addition, Section 27 of the Tax Code, as
amended, did not repeal the tax exemption
 under Section 8 of the Bases Conversion and
Development Act. The former is a general law
while the latter is a special law. As a rule, a
general law cannot impliedly repeal a special
law.

8. Power Sector Asset Sale of the power plants by a GOCC not The Power Sector Assets and Liabilities Are the sales of generating No, the sales are not subject to VAT.
and Liabilities “in the course of trade or business” as Management Corporation (PSALM), a assets (power plants) by This issue has been passed upon in the 2017
Management contemplated by the Tax Code is not government-owned and controlled corporation PSALM subject to VAT? case of PSALM vs. Commissioner of Internal
Corporation v. CIR, subject to VAT. created under the Electric Power Industry Reform Revenue, where the Court ruled that the BIR’s
G.R. No. 226556, July Act of 2001 (or EPIRA Law), is mandated to position is anchored on the wrong premise
3, 2019. manage the orderly sale, disposition, and that PSALM is a successor-in-interest of the
privatization of the National Power Corporation’s NPC.
(NPC’s) generation assets, real estate and other Under its charter, the NPC is mandated to
disposable assets, and Independent Power “undertake the development of hydroelectric
Producer contracts with the objective of liquidating generation of power and the production of
all NPC financial obligations and stranded contract electricity from nuclear, geothermal and other
costs in an optimal manner. sources, as well as the transmission of electric
The BIR assessed PSALM for deficiency VAT for power on a nationwide basis.” Under the
the year 2008, alleging that PSALM’s sales of EPIRA Law, which restructured the electric
generating assets (power plants), lease of the power industry into generation, transmission,
Naga Complex, collection of income and distribution, and supply sectors, the NPC is
receivables should be subject to the 12% VAT. now primarily mandated to perform missionary
PSALM filed its protest, arguing that the electrification functions. PSALM, on the other
privatization of the NPC’s assets is an original hand, was created to liquidate all of the NPC’s
mandate of PSALM and hence, the above financial obligations.
transactions are not subject to VAT. PSALM is not a successor-in-interest of the
Upon denial of the protest, PSALM appealed to the NPC and therefore, the repeal of the NPC’s
CTA, which ruled that the sale of generating assets VAT exemption does not affect PSALM.
of PSALM is subject to VAT since this was done in Even if PSALM is deemed a successor-in-
the course of PSALM’s trade or business, and that interest of the NPC, still the sale of the power
the Tax Code, as amended by Republic Act No. plants is not “in the course of trade or
9337, placed the electric power industry under the business” as contemplated by the Tax Code
VAT system. and, is therefore, not subject to VAT.
The sale of the power plants is not in pursuit
of a commercial or economic activity, but of a
governmental function mandated by law to
privatize NPC generation assets. The sale of
the power plants is clearly not the same as the
sale of electricity by generation, transmission,
and distribution companies, which is subject to
VAT under the Tax Code.
This is similar to the 2006 case of Magsaysay
 Lines where the Court ruled that the sale of
vessels of the National Development
Company to Magsaysay Lines is not subject to
VAT since it was not made in the course of
trade or business, as it was involuntary and
made pursuant to the government’s policy of
privatization.
PSALM is also not liable to pay VAT on the
following activities: a) lease of the Naga
Complex; b) collection of income from
participation fees, site visit fees, plant CDs,
photocopying charges and data room access
fees; and c) collection of receivables from
employees for the excess utilization of allowed
mobile phone services, inventory variance
receivables from the custodian, refunds from
a successor-generation company of the
insurance premiums paid by PSALM and
interest from mandatory dollar deposits.
Under the EPIRA Law, PSALM, as the
conservator of NPC assets, operated and
maintained NPC assets and manages its
liabilities in trust for the national government
until the NPC assets could be sold or disposed
of. Thus, during its corporate life, PSALM has
powers relating to the management of its
personnel and leasing of its properties as may
be necessary to discharge its mandate.
Since the lease of the NAGA Complex and the
collection of income and receivables are within
PSALM’s powers, which are necessary to
discharge its mandate under the law, and
likewise undertaken in the exercise of
PSALM’s governmental function, these
activities are not subject to VAT.

9. CIR v. Team Energy Requirements for special law must be Respondent is VAT registered taxpayer principally (1) WON the respondent’s (1) NO. Requirements of the EPIRA must be
Corporation (formerly complied only if the claim for refund is engaged in the business of power generation and failure to submit a Certificate complied with only if the claim for refund is
Mirant Pagbilao based on that special law. A written the subsequent sale to the National Power of Compliance required under based on EPIRA. However, respondents
Corporation), G.R. No. notice requiring the respondent to submit Corporation (NPC). Respondent filed for Effective Electric Power Industry anchored its claim for tax refund or tax credit
230412. March 27, additional documents is indispensable in ZeroRate for the supply of electricity to the NPC for Reform Act issued by the under Section 108(B)(3) of the Tax Code.
2019. computing the 120+30 day period. the period January 1, 2005, to December 31, 2005, Energy Regulatory Section 108(B)(3) of the Tax Code in relation
which was subsequently approved. Subsequently, Commission disqualifies it to Section 13 of the NPC Charter, clearly
 the respondent filed an administrative claim for a from claiming a tax refund or provides that the sale of electricity to NPC is
cash refund or issuance of a tax credit certificate tax credit. (2) WON the effectively zero-rated for VAT purposes. Thus,
corresponding to the input VAT reported in its judicial claim was prematurely it cannot be required to comply with the
Quarterly VAT Returns for the first three quarters of filed for its failure to exhaust requirements under the EPIRA before its sale
2005 and Monthly VAT Declaration for October administrative remedies when of generated power to NPC should qualify for
2005 in the amount of P80,136,251.60. Due to the it failed to submit complete VAT zero-rating. (2) NO. There is no showing
petitioner's inaction on its claim, the respondent supporting documents for its that the CIR sent a written notice requiring the
filed a Petition for Review before the Court in administrative claim. respondent to submit additional documents —
Division. On July 13, 2010, the Court in Division a process that is indispensable in computing
issued a decision partially granting the the 120+30day period. The Rule is that from
respondent's petition in the amount of the date an administrative claim for excess
P79,185,617.33. However, upon petitioner's unutilized VAT is filed, a taxpayer has thirty
Motion for Reconsideration, it reversed and set (30) days within which to submit the
aside the Decision and dismissed the Petition for documentary requirements sufficient to
Review for having been filed prematurely. support his claim unless given a further
Respondent filed a "Petition for Review" before the extension by the CIR. Then, upon filing by the
Court En Banc however it was denied due course taxpayer of his complete documents to
for lack of merit. Eventually, the case was elevated support his application, or expiration of the
to the Supreme Court which issued a decision period given, the CIR has 120 days within
granting respondent's Petition for Review on which to decide the claim for tax credit or
Certiorari, reversing and setting aside the decision refund. Should the taxpayer, on the date of his
of CTA en banc and remanding the case to the CTA filing, manifest that he no longer wishes to
En Banc for the proper determination of the submit any other additional documents to
refundable amount. The CTA En Banc reinstated complete his administrative claim, the 120 day
the July 13, 2010 CTA Decision and ruled that the period allowed to the CIR begins to run from
judicial claim was not prematurely filed and the the date of filing. However, CIR, upon a written
failure of the respondent to present its Certificate of request, is not precluded from requiring
Compliance (COC) is not fatal to its claim for refund additional documents necessary to decide the
of unutilized input VAT. claim, or even denying the claim if the
taxpayer fails to submit the additional
documents requested. Thus, the petitioner
could no longer validly argue that the judicial
claim was premature on account of alleged
nonsubmission of complete documents as it is
the petitioner himself who fails to inform the
respondent about the need to submit
additional documents at the administrative
level.

10. CIR v. Negros While the sale of raw sugar, by express Negros Consolidated Farmers Multi-Purpose WON COFA is VAT- exempt, YES. COFA is a VAT-exempt agricultural
Consolidated Farmers provision of law, is exempt from VAT, the Cooperative (COFA) is a multi-purpose agricultural at the time of the subject cooperative. Exemption from the payment of
Multi-Purpose sale of refined sugar, on the other hand, cooperative organized under RA 6938 which transactions (May 12, 2009 to VAT on sales made by the agricultural
Cooperative, G.R. No. is not exempted as refined sugar already delivers sugarcane produce to be milled and July 22, 2009) and therefore cooperatives to members or to non-members
212735, December 5, underwent several refining processes processed with the sugar mill/refinery. COFA's entitled to a tax refund for the necessarily includes exemption from the
2018. and as such, is no longer considered to farmer-members deliver the sugarcane produce to advance VAT it paid. payment of "advance VAT" upon the
be in its original state. However, if the be milled and processed in COFA's name with the withdrawal of the refined sugar from the sugar
sale of the sugar, whether raw or refined, sugar mill/refinery. Before the refined sugar is mill. VAT is a tax on transactions, imposed at
was made by an agricultural cooperative released by the sugar mill, however, an every stage of the distribution process on the
to its members or non-members, such Authorization Allowing the Release of Refined sale, barter, exchange of goods or property,
transaction is still VAT-exempt. Sugar (AARRS) from the Bureau of Internal and on the performance of services, even in
Revenue (BIR) is required from COFA. The BIR the absence of profit attributable thereto, so
has always issued the AARRS without requiring much so that even a non-stock, non-profit
COFA to pay advance VAT pursuant to COFA's tax organization or government entity, is liable to
exemption under RA 6938. However, in February pay VAT on the sale of goods or services.
2009, the BIR required as a condition for the There are, however, certain transactions
issuance of the AARRS the payment of "advance exempt from VAT such as the sale of
VAT" on the premise that COFA, as an agricultural agricultural products in their original state,
cooperative, does not fall under the term including those which underwent simple
"producer." COFA filed with the CIR a claim for processes of preparation or preservation for
refund of the advance VAT it paid. The CIR then the market, such as raw cane sugar. While the
raised COFA’s alleged failure to comply with the sale of raw sugar, by express provision of law,
requisite of a prior claim for refund or credit with the is exempt from VAT, the sale of refined sugar,
CIR and present a quedan of raw sugar as fatal to on the other hand, is not so exempted as
the refund claim. refined sugar already underwent several
refining processes and as such, is no longer
considered to be in its original state. However,
if the sale of the sugar, whether raw or refined,
was made by an agricultural cooperative to its
members or non-members, such transaction
is still VAT-exempt. However, withdrawal of
refined sugar is exempted from advance VAT
upon the concurrence of a two-pronged
criteria: First, the seller must be an agricultural
cooperative duly registered with the CDA. An
agricultural cooperative is "duly registered"
when it has been issued a certificate of
registration by the CDA. This certificate is
conclusive evidence of its registration.
Second, the cooperative must sell either: 1)
exclusively to its members; or 2) to both
members and non-members, its produce,
whether in its original state or processed form.
Having established that COFA is a
cooperative in good standing and duly
registered with the CDA and the producer of
the sugar, its sale of refined sugar whether
 sold to members or non-members, following
the express provisions of Section 109(L) of RA
8424, as amended, is exempt from VAT. As a
logical and necessary consequence then of its
established VAT exemption, COFA is likewise
exempted from the payment of advance VAT
As regards the CIR's contention that COFA
failed to submit complete documentary
requirements fatal to its claim for a tax refund,
suffice it to say, that COFA was a recipient and
holder of certificates of tax exemption issued
by the BIR which presupposes that the
cooperative submitted to the BIR the complete
documentary requirements.

11. San Roque Power As a general rule, a taxpayer can file a San Roque Power Corporation (SPC) is a VAT- WON the CTA En Banc was NO. The Court had jurisdiction over the case
Corporation v. CIR, judicial claim only within thirty (30) days registered taxpayer which was granted by the BIR correct in ruling that the Court pursuant to the BIR Ruling No. DA-489- 03
G.R. No. 203249, July from the expiration of the 120-day period a zero-rating on its sales of electricity to NPC. In did not have jurisdiction over which is an exception to the mandatory and
23, 2018 if the Commissioner does not act within 2005 and 2006, SPC filed two separate the case on the ground of the jurisdictional nature of the 120-day and 30-
the 120-day period. This requirement is administrative claims for refund of its alleged premature filing of the same. day periods. BIR Ruling No. DA-489-03, which
mandatory and jurisdictional. By way of unutilized input tax for specific months in 2004. Due provides that a taxpayer-claimant need not
an exception, however, judicial claims to the inaction of respondent CIR, the petitioner wait for the lapse of the 120- day period before
filed during the window period from 10 filed petitions for review before the CTA in Mar. it could seek judicial relief with the CTA, can
December 2003 to 6 October 2010, need 2006 and in June 2006, respectively. The CTA be relied on by the taxpayers from the time of
not wait for the exhaustion of the 120-day Division granted the petitioner's petition but this its issuance on Dec. 10, 2003 until Oct. 6,
period pursuant to BIR Ruling No. DA- was overturned by the CTA En Banc ruling that the 2010 which is the promulgation of the Aichi
489-03. judicial claims of the petitioner were prematurely case (mandating for dismissal due to
filed in violation of the 120-day and 30-day periods premature filing). This is pursuant to the
prescribed in Section 112 (D) of the NIRC. The principle of equitable estoppel enshrined in
CTA bank held that by reason of prematurity of its Sec. 246 of the NIRC which decrees that a BIR
petitions for review, San Roque Power Corporation regulation or ruling cannot adversely prejudice
failed to exhaust administrative remedies which is a taxpayer who in good faith relied on the BIR
fatal to its invocation of the court's power of review. regulation or ruling prior to its reversal. In
effect, the 120+30-day period to seek judicial
relief by the CTA is generally mandatory and
jurisdictional from the effectivity of the 1997
NIRC on 1 January 1998, up to the present.
By way of an exception, however, judicial
claims filed during the window period from 10
December 2003 to 6 October 2010, need not
wait for the exhaustion of the 120-day period.
In this case, the two judicial claims filed by the
 petitioner fell within the window period, thus,
the CTA can take cognizance over them.

12. Nippon Express A VAT invoice and a VAT receipt are Petitioner Nippon Express is a domestic WON sales invoices and NO. For sales of services, invoices other than
(Philippines) Corp. v. different. A VAT invoice is necessary for corporation registered with the Large Taxpayer documents other than official official receipts are not proper. A VAT invoice
CIR, G.R. No. 191495, every sale, barter or exchange of goods District Officeis as a VAT Taxpayer. As a claim for receipts are proper in and a VAT receipt are different. A VAT invoice
July 23, 2018. or properties while a VAT official receipt refund, Nippon applied for a tax credit certificate substantiating zero-rated is necessary for every sale, barter or
properly pertains to every lease of goods (TCC) of its excess input tax from its zero-rated sales of services for the exchange of goods or properties while a VAT
or properties, and for every sale, barter sales for all four taxable quarters of 2004, under purpose of tax refund. official receipt properly pertains to every lease
or exchange of services Hence, in a Sec 112 of the NIRC. As BIR did nothing, Nippon of goods or properties, and for every sale,
claim for refund under Section 112 of the filed a Petition for Review with the CTA. The CIR barter or exchange of services. A taxpayer
National Internal Revenue Code (NIRC), countered that Nippon’s excess input VAT was not claimant who seeks a refund his excess or
the claimant must show that: (1) it is fully substantiated by proper documents. The CTA unutilized creditable input VAT has the burden
engaged in zero-rated sales of goods or denied Nippon’s claim on the ground of failure to to prove (1) payment of input VAT to suppliers;
services; and (2) it paid input VAT that submit VAT official receipts as proof of zero-rated and (2) zero-rated sales to purchasers and (3)
are attributable to such zero-rated sales. sales, as required by Sec 113 of the NIRC as the Input VAT is attributable to his zero-rated
Otherwise stated, the claimant must amended for businesses that provide services. The sales. The CTA En Banc held the view that
prove that it made a purchase of taxable CTA En Banc Ruling affirmed the CTA. Nippon while Sections 113 and 237 used the
goods or services for which it paid VAT argued that the laws do not expressly limit the disjunctive term "or," it must not be interpreted
(input), and later on engaged in the sale acceptable evidence of sale of goods or properties as giving a taxpayer an unconfined choice to
of goods or services subject to VAT to be supported only by sales invoices, or the sale select between issuing an invoice or an official
(output) but at zero rate. There is a of services by official receipts only, thus sales receipt. To the court a quo, sales invoices
refundable sum when the amount of invoices and documents other than official receipts must support sales of goods or properties
input (VAT (attributable to zero-rated should be accepted. while official receipts must support sales of
sale) is higher than the claimant's output services. Irrefutably, when a VAT-taxpayer
VAT during one taxable period (quarter). claims to have zero-rated sales of services, it
must substantiate the same through valid VAT
official receipts, not any other document, not
even a sales invoice that properly pertains to
a sale of goods or properties. In this case, the
documentary proofs presented by Nippon
Express to substantiate its zero-rated sales of
services consisted of sales invoices and other
secondary evidence like transfer slips, credit
memos, cargo manifests, and credit notes. It
is very clear that these are inadequate to
support the petitioner's sales of services.
Consequently, the CTA, albeit without
jurisdiction, correctly ruled that Nippon
Express is not entitled to its claim. The CTA
did not acquire jurisdiction over Nippon
Express' judicial claim considering that its
petition was filed beyond the mandatory 30-
 day period of appeal. Logically, there is no
reason to allow the petitioner to submit further
evidence by way of official receipts to
substantiate its zero-rated sales of services.
Likewise, there is no need to pass upon the
issue on whether sales invoices or documents
other than official receipts can support a sale
of service considering the CTA's lack of
jurisdiction. The mandatory and jurisdictional
period to appeal to the CTA from the CIR is 30
days counted from the receipt of the decision
or inaction by the CIR. The CIR has 120 days
to decide, counted from the submission of
documents for the tax refund or tax credit. An
application for a cash refund or issuance of
TCC for excess and unutilized creditable input
VAT attributable to zero-rated sales can be
filed within two (2) years after the close of the
taxable quarter when the sales were made. In
sum, VAT official receipts are indispensable to
prove sales of services by a VAT-registered
taxpayer. Consequently, the petitioner is not
entitled to the claimed refund or TCC.

13. CIR v. Euro- Failure to comply with invoicing Euro-Phil (respondent) is an exclusive passenger WON the transaction sale YES. Services rendered by Euro-Phil were to
Philippine Airline requirements, non-imprintment of the sales agent of British Airways, PLC, an off-line made by Euro-Phil is entitled a person engaged in international air-
Services Inc., G.R. No. word "zero-rated," as mandated by law international airline in the Philippines to service the to the benefit of zero-rated transport operations. Thus, by application,
222436, July 23, 2018. does not deem the transaction subject to latter's passengers in the Philippines. In this case, VAT despite its failure to Section 108 of the NIRC subjects the services
12% VAT. Euro-Phil received a Formal Assessment Notice comply with invoicing of Euro-Phil to British Airways PLC, to the rate
from petitioner CIR consisting of deficiency requirements as mandated by of zero percent VAT. Also, Section 113 of the
assessment of VAT for services rendered as law. NIRC nowhere states a presumption created
passenger sales agent of British Airways PLC. by law that the non-imprintment of the word
Euro-Phil filed a final protest arguing that the "zero-rated" deems the transaction subject to
receipts that are supposedly subject to 12% VAT 12% VAT. In addition, Section 4.113-4 of
actually pertained to "services rendered to persons Revenue Regulations 16-2005, also do not
engaged exclusively in international air transport" state that the non-imprintment of the word
hence, zero-rated. On the other hand, CIR said that "zero-rated" deems the transaction subject to
the presentation of VAT official receipts with the 12% VAT. Thus, failure to comply with
words "zero-rated" imprinted in it is indispensable invoicing requirements as mandated by law
to cancel the VAT assessment against Euro-Phil. does not deem the transaction subject to 12%
VAT.

14. Power Sector The power plants, which were previously PSALM is a GOCC with a purpose under RA 9136 WON the sale of the power NO, PSALM is not liable to pay the deficiency
Asset and Liabilities owned by NPC were transferred to to manage the orderly sale, disposition, and plants or PSALM’s VAT. SEC 105. Persons Liable. - Any person
Management PSALM for the specific purpose of privatization of the National Power Corporation privatization of activities is who, in the course of trade or business, sells,
Corporation v. CIR, privatizing such assets. The sale of the (NPC) generation assets, real estate, and other subject to VAT. barters, exchanges, leases goods or
G.R. No. 198146, power plants cannot be considered as an disposable assets, and Independent Power properties, renders services, and any person
August 8, incidental transaction made in the course Producer contracts with the objective of liquidating who imports goods shall be subject to the
2017 of NPC's or PSALM's business. all NPC financial obligations and stranded contract value-added tax (VAT) imposed in Sections
Therefore, the sale of the power plants costs in an optimal manner. PSALM conducted 106 to 108 of this Code. xxx In the course of
should not be subject to VAT. Sec 108 of public biddings for the privatization of the trade or business means the regular conduct
NIRC is inapplicable to this case. Pantabangan-Masiway Hydroelectric Power Plant, or pursuit of commercial or economic activity,
which First Gen Hydropower Corporation with its including transactions incidental thereto, by
$129 Million bid, and SN Aboitiz Power Corporation any person regardless of whether or not the
with its $530 Million bid won respectively. NPC person engaged therein is a nonstock,
received a letter on Aug. 17, 2007 from BIR nonprofit private organization (irrespective of
demanding immediate payment of P3,813,080,472 the disposition of its net income and whether
deficiency of VAT for the Plants. BIR, NPC, and or not it sells exclusively to members or their
PSALM executed a Memorandum of Agreement. In guests), or government entity. Even if PSALM
compliance with the MOA, PSALM remitted the is deemed a successor-in-interest of NPC, still
P3,813,080,472 under protest to the BIR, the sale of the power plants is not "in the
representing the total basic VAT due. On course of trade or business" as contemplated
September 21, PSALM filed with the DOJ a petition under Section 105 of the NIRC, and thus, not
for the adjudication of the dispute with the BIR to subject to VAT. The sale of the power plants
resolve the issue of whether the sale of the power is not in pursuit of a commercial or economic
plants should be subject to VAT, which the DOJ activity but a governmental function mandated
ruled in favor of PSALM. BIR filed for a MR alleging by law to privatize NPC generation assets.
that the DOJ had no jurisdiction because the PSALM owned the power plants which were
dispute involved tax laws administered by the BIR sold. PSALM's ownership of the NPC assets
and thus within the jurisdiction of the Court of Tax is clearly stated under Sections 49, 51, and 55
Appeals. Further, the sale of the Plants by PSALM of the EPIRA law. Under the EPIRA law, the
to private entities is in the course of trade or ownership of the generation assets, real
business contemplated under Section 105 of the estate, IPP contracts, and other disposable
NIRC of 1997, which covers incidental assets of the NPC was transferred to PSALM.
transactions. Hence, the sale is subject to VAT. Clearly, PSALM is not a mere trustee of the
NPC assets but is the owner thereof.
Precisely, PSALM, as the owner of the NPC
assets, is the government entity tasked under
the EPIRA law to privatize such NPC assets.
The sale of the power plants cannot be
considered as an incidental transaction made
in the course of NPC's or PSALM's business.
Therefore, the sale of the power plants should
not be subject to VAT.

15. Medicard For purposes of determining the VAT Petitioner MEDICARD is a Health Maintenance Whether or not the amounts The Court rules that for purposes of
Philippines, Inc. v. liability of an HMO, the amounts Organization (HMO) that provides prepaid health that medicard earmarked and determining the VAT liability of an HMO, the
CIR, G.R. No. 222743, earmarked and actually spent for medical and medical insurance coverage to its clients. eventually paid to the medical amounts earmarked and actually spent for
April 5, 2017 utilization of its members should not be MEDICARD filed its First, Second, and Third service providers should still medical utilization of its members should not
included in the computation of its gross Quarterly VAT Returns through Electronic Filing form part of its gross receipts be included in the computation of its gross
receipts. and Payment System (EFPS) on April 20, 2006, for vat purposes. receipts.
July 25, 2006 And October 20, 2006, respectively, Since an HMO like MEDICARD is primarily
and its Fourth Quarterly VAT Return on January 25, engaged in arranging for coverage or
2007. Upon finding some discrepancies between designated managed care services that are
MEDICARD's Income Tax Returns (ITR) and VAT needed by plan holders/members for fixed
Returns, the CIR informed MEDICARD and issued prepaid membership fees and for a specified
a Letter Notice (LN). Subsequently, the CIR also period of time, then MEDICARD is principally
issued a Preliminary Assessment Notice (PAN) engaged in the sale of services. Its VAT base
against MEDICARD for deficiency VAT. A and corresponding liability is, thus, determined
Memorandum dated December 10, 2007 was under Section 108 (A) of the Tax Code, as
likewise issued recommending the issuance of a amended by Republic Act No. 9337. Prior to
Formal Assessment Notice (FAN) against RR No. 16-2005, an HMO, like a pre-need
MEDICARD. company, is treated for VAT purposes as a
On January 4, 2008, MEDICARD received CIR's dealer in securities whose gross receipts is the
FAN dated December 10, 2007 for alleged amount actually received as contract price
deficiency VAT for taxable year 2006 in the total without allowing any deduction from the gross
amount of P196,614,476.69, inclusive of penalties. receipts.
According to the CIR, the taxable base of HMOs for The CTA en banc overlooked that the
VAT purposes is its gross receipts without any definition of gross receipts under RR No. 16-
deduction under Section 4.108.3 (k) of Revenue 2005 merely presumed that the amount
Regulations (RR) No. 16-2005. Citing received by an HMO as membership fee is the
Commissioner of Internal Revenue v. Philippine HMO's compensation for their services. As a
Health Care Providers, Inc., the CIR argued that mere presumption, an HMO is, thus, allowed
since MEDICARD does not actually provide to establish that a portion of the amount it
medical and/or hospital services, but merely received as membership fee does NOT
arranges for the same, its services are not VAT actually compensate it but some other person,
exempt. which in this case are the medical service
On February 14, 2008, the CIR issued a Tax providers themselves. Absent a statutory
Verification Notice authorizing Revenue Officer definition, this Court has construed the term
Romualdo Plocios to verify the supporting gross receipts in its plain and ordinary
documents of MEDICARD's Protest. MEDICARD meaning, that is, gross receipts is understood
also submitted additional supporting documentary as comprising the entire receipts without any
evidence in aid of its Protest through a letter dated deduction.
March 18, 2008. 15 On June 19, 2009, MEDICARD As an HMO, MEDICARD primarily acts as an
received CIR's Final Decision on Disputed intermediary between the purchaser of
Assessment dated May 15, 2009, denying healthcare services (its members) and the
MEDICARD's protest healthcare providers (the doctors, hospitals
The CTA Division held that: (1) the determination and clinics) for a fee. By enrolling membership
of deficiency VAT is not limited to the issuance of with MEDICARD, its members will be able to
Letter of Authority (LOA) alone as the CIR is avail of the pre-arranged medical services
granted vast powers to perform examination and from its accredited healthcare providers
assessment functions; (2) in lieu of an LOA, an LN without the necessary protocol of posting cash
was issued to MEDICARD informing it of the bonds or deposits prior to being attended to or
discrepancies between its ITRs and VAT Returns admitted to hospitals or clinics, especially
and this procedure is authorized under Revenue during emergencies, at any given time. Apart
Memorandum Order (RMO) No. 30-2003 and 42- from this, MEDICARD may also directly
2003; (3) MEDICARD is estopped from questioning provide medical, hospital and laboratory
the validity of the assessment on the ground of lack services, which depends upon its member's
of LOA since the assessment issued against choice. Thus, in the course of its business as
MEDICARD contained the requisite legal and such, MEDICARD members can either avail of
factual bases that put MEDICARD on notice of the medical services from MEDICARD's
deficiencies and it in fact availed of the remedies accredited healthcare providers or directly
provided by law without questioning the nullity of from MEDICARD. In the former, MEDICARD
the assessment; (4) the amounts that MEDICARD members obviously knew that beyond the
earmarked and eventually paid to doctors, agreement to pre-arrange the healthcare
hospitals and clinics cannot be excluded from the needs of its members, MEDICARD would not
computation of its gross receipts under the actually be providing the actual healthcare
provisions of RR No. 4-2007 because the act of service. Thus, based on industry practice,
earmarking or allocation is by itself an act of MEDICARD informs its would-be members
ownership and management over the funds by beforehand that 80% of the amount would be
MEDICARD which is beyond the contemplation of earmarked for medical utilization and only the
RR No. 4-2007; (5) MEDICARD's earnings from its remaining 20% comprises its service fee. In
clinics and laboratory facilities cannot be excluded the latter case, MEDICARD's sale of its
from its gross receipts because the operation of services is exempt from VAT under Section
these clinics and laboratory is merely an incident to 109 (G).
MEDICARD's main line of business as an HMO The CTA's ruling and CIR's Comment have
and there is no evidence that MEDICARD not pointed to any portion of Section 108 of the
segregated the amounts pertaining to this at the NIRC that would extend the definition of gross
time it received the premium from its members; and receipts even to amounts that do not only
(6) MEDICARD was not able to substantiate the pertain to the services to be performed by
amount pertaining to its January 2006 income and another person, other than the taxpayer, but
therefore has no basis to impose a 10% VAT rate. even to amounts that were indisputably
MEDICARD filed a Motion for Reconsideration but utilized not by MEDICARD itself but by the
it was denied. Hence, MEDICARD elevated the medical service providers.
matter to the CTA en banc. In a Decision 21 dated For this Court to subject the entire amount of
September 2, 2015, the CTA en banc partially MEDICARD's gross receipts without
granted the petition only insofar as the 10% VAT exclusion, the authority should have been
rate for January 2006 is concerned but sustained reasonably founded from the language of the
the findings of the CTA Division in all other matters. statute. In the scheme of judicial tax
Disagreeing with the CTA en banc's decision, administration, the need for certainty and
MEDICARD filed a motion for reconsideration but it predictability in the implementation of tax laws
was denied. Hence, this petition. is crucial. The CIR's interpretation of gross
receipts in the present case is patently
erroneous for lack of both textual and
nontextual support. As to the CIR's argument
that the act of earmarking or allocation is by
itself an act of ownership and management
over the funds, the Court does not agree. On
the contrary, it is MEDICARD's act of
earmarking or allocating 80% of the amount it
received as membership fee at the time of
payment that weakens the ownership imputed
to it. By earmarking or allocating 80% of the
amount, MEDICARD unequivocally
recognizes that its possession of the funds is
not in the concept of owner but as a mere
administrator of the same. For this reason, at
most, MEDICARD's right in relation to these
amounts is a mere inchoate owner which
would ripen into actual ownership if, and only
if, there is underutilization of the membership
fees at the end of the fiscal year. Prior to that,
MEDICARD is bound to pay from the amounts
it had allocated as an administrator once its
members avail of the medical services of
MEDICARD's healthcare providers. Before
the Court, the parties were one in submitting
the legal issue of whether the amounts
MEDICARD earmarked, corresponding to
80% of its enrollment fees, and paid to the
medical service providers should form part of
its gross receipt for VAT purposes, after
having paid the VAT on the amount
comprising the 20%.
It is significant to note in this regard that
MEDICARD established that upon receipt of
payment of membership fee it actually issued
two official receipts, one pertaining to the
VATable portion, representing compensation
for its services, and the other represents the
non-vatable portion pertaining to the amount
earmarked for medical utilization. Therefore,
the absence of an actual and physical
segregation of the amounts pertaining to two
different kinds of fees cannot arbitrarily
disqualify MEDICARD from rebutting the
 presumption under the law and from proving
that indeed services were rendered by its
healthcare providers for which it paid the
amount it sought to be excluded from its gross
receipts.

16. Aichi Forging Asia An appeal outside the 2-year period is Petitioner AICHI is a domestic corporation duly Whether or not AICHI availed No. On the judicial claim for refund or tax credit
v. CTA, G.R. No. not legally infirm for as long as it is taken organized and existing under the laws of the of the correct remedy and can of AICHI, the CTA did not validly acquire
193625. August 30, within 30 days from the decision or Philippines. It is duly registered with the Bureau of question the CTA ruling. jurisdiction over such judicial claim because
2017 inaction on the administrative claim that Internal Revenue (BIR) as a VAT taxpayer and with the appeal before the court was made
must have been initiated within the 2- the Board of Investments (BOI) as an expanding prematurely. When the CTA acts without
year prescriptive period. The appeal to producer of closed impression die steel forgings. jurisdiction, its decision is void. Consequently,
the CTA is always initiated within 30 days On 26 September 2002, AICHI filed with the BIR the answer to the second issue, i.e., whether
from decision or inaction regardless District Office in San Pedro, Laguna, a written claim AICHI can still question the CTA ruling,
whether the date of its filing is within or for refund and/or tax credit of its unutilized input becomes irrelevant.
outside the 2-year period of limitation. VAT credits for the third and fourth quarters of 2000 From the submission of the complete
and the four taxable quarters of 2001. AICHI documents to support the claim, the CIR has
sought the tax refund/credit of input VAT for the a period of one hundred twenty (120) days to
said taxable quarters representing VAT payments decide on the claim. If the CIR decides within
on importation of capital goods and domestic the 120-day period, the taxpayer may initiate
purchases of goods and services. As respondent a judicial claim by filing within 30 days an
CIR failed to act on the refund claim a petition for appeal before the CTA. If there is no decision
Review was filed before the CTA. within the 120-day period, the CIR's inaction
After finding that both the administrative and shall be deemed a denial of the application. In
judicial claims were filed within the statutory two- the latter case, the taxpayer may institute the
year prescriptive period, the CTA Division partially judicial claim, also by an appeal, within 30
granted the refund claim of AICHI. The CTA days before the CTA.
Division denied AICHI's refund claim with respect It is not disputed that AICHI had timely filed its
to its purchase of capital goods for the period 1 July administrative claim for refund or tax credit
2000 to 31 December 2001 because of the latter's before the BIR. The records show that the
failure to show that the goods purchased formed claim for refund/tax credit of input taxes
part of its Property, Plant and Equipment Account covering the six separate taxable periods from
and that they were subjected to depreciation the 3rd Quarter of 2000 up to the 4th Quarter
allowance. of 2001 was made on 26 September 2002.
The CIR questioned the partial grant of the refund Both the CTA Division and CTA En Banc
claim in favor of AICHI. It claimed that the court did correctly ruled that it fell within the two-year
not acquire jurisdiction over the refund claim in view statute of limitations. However, its judicial
of AICHI's failure to observe the 30-day period to claim was filed a mere four days later on 30
claim refund/tax credit as specified in Sec. 112 of September 2002, or before the window period
the Tax Code, i.e., appeal to the CTA may be filed when the taxpayers need not observe the 120-
within 30 days from receipt of the decision denying day mandatory and jurisdictional period.
the claim or after expiration of 120 days (denial by All that is required under the law is that the
inaction). With the filing of the administrative claim appeal to the CTA is brought within 30 days
 on 26 September 2002, the CIR had until 20 from either decision or inaction. Under the
January 2003 to act on the matter; and if it failed to foregoing interpretation, there may be two
do so, AICHI had the right to elevate the case possible scenarios when an appeal to the CTA
before the CTA within 30 days from 20 January is considered fatally defective even when
2003, or on or before 20 February 2003. However, initiated within the two-year prescriptive
AICHI filed its Petition for Review on 30 September period: first, when there is no decision and the
2002, or before the 30-day period of appeal had appeal is taken prior to the lapse of the 120-
commenced. According to the CIR, this period is day mandatory period, 45 except only the
jurisdictional, thus, AICHI's failure to observe it appeal within the window period from 10
resulted in the CTA not acquiring jurisdiction over December 2003 to 6 October 2010; 46
its appeal. The CTA En Banc was not persuaded. second, the appeal is taken beyond 30 days
The court ruled that the law does not prohibit the from either decision or inaction "deemed a
simultaneous filing of the administrative and judicial denial."In contrast, an appeal outside the 2-
claims for refund. It further declared that what is year period is not legally infirm for as long as
controlling is that both claims for refund are filed it is taken within 30 days from the decision or
within the two-year prescriptive period. inaction on the administrative claim that must
Citing Section 1, Rule 15 of A.M. No. 05-11-07-CTA have been initiated within the 2-year
or the Revised Rules of the Court of Tax Appeals prescriptive period. In other words, the appeal
(Revised CTA Rules), AICHI claims that it has to the CTA is always initiated within 30 days
fifteen (15) days from receipt of the questioned from decision or inaction regardless whether
decision of the CTA En Banc within which to file a the date of its filing is within or outside the 2-
motion for reconsideration. Considering that it year period of limitation.
received the 18 February 2010 Decision of the CTA Considering our holding that the CTA did not
En Banc on 25 February 2010, and that it filed the acquire jurisdiction over the appeal of AICHI,
Motion for Reconsideration on 12 March 2010, the decision partially granting the refund claim
AICHI asserts that the filing of the said motion was must therefore be set aside as a void
made within the prescriptive period provided in the judgment. The rule is that where there is want
law. Hence, this petition. of jurisdiction over a subject matter, the
judgment is rendered null and void. A void
judgment is in legal effect no judgment, by
which no rights are divested, from which no
right can be obtained, which neither binds nor
bars anyone, and under which all acts
performed and all claims flowing out are void.

17. CIR v. PAGCOR, A special law must be interpreted to Respondent Philippine Amusement and Gaming Whether or not PAGCOR is Yes. The CIR insists that under VAT Ruling
G.R. No. 177387. constitute an exception to the general Corporation (PAGCOR) has operated under a exempt from VAT. No. 04-96 (dated May 14, 1996), VAT Ruling
November 9, 2016. law in the absence of special legislative franchise granted by Presidential No. 030-99 (dated March 18, 1999), and VAT
circumstances warranting a contrary Decree No. 1869 (P.D. No. 1869), its Charter, Ruling No. 067-01 (dated October 8, 2001),
conclusion. whose Section 13 (2) provides that: (2) Income and R.A. No. 7716 has expressly repealed,
other Taxes — (a) Franchise Holder: No tax of any amended, or withdrawn the 5% franchise tax
kind or form, income or otherwise, as well as fees, provision in PAGCOR's Charter; hence,
charges or levies of whatever nature, whether PAGCOR was liable for the 10% VAT. The
National or Local, shall be assessed and collected relevant provisions of R.A. No. 7716 on which
under this Franchise from the Corporation; nor the insistence has been anchored are the
shall any form of tax or charge attach in any way to following: Section 102 of the National Internal
the earnings of the Corporation, except a Franchise Revenue Code, as amended, is hereby further
Tax of five percent (5%) of the gross revenue or amended to read as follows: "SEC. 102.
earnings derived by the Corporation from its Value-added tax on sale of services and use
operation under this Franchise. or lease of properties. — (a) Rate and base of
Notwithstanding the aforesaid 5% franchise tax tax. — There shall be levied, assessed and
imposed, the Bureau of Internal Revenue (BIR) collected, a value-added tax equivalent to
issued several assessments against PAGCOR for 10% of gross receipts derived from the sale or
alleged deficiency value-added tax (VAT). exchange of services, including the use or
On December 18, 2002, PAGCOR filed a letter- lease of properties. "The phrase 'sale or
protest with the BIR against Assessment Notice exchange of services' means the performance
No. 33-1996/1997/1998 and Assessment Notice of all kinds of service in the Philippines for
No. 33-99. On March 31, 2003, PAGCOR filed a others for a fee, remuneration or
letter-protest against Assessment Notice No. 33- consideration, including x x x service of
2000, in which it reiterated the assertions made in franchise grantees of telephone and
its December 18, 2002 letter-protest. In reply to telegraph, radio and television broadcasting
both letters-protest, the BIR requested PAGCOR to and all other franchise grantees except those
submit additional documents to enable the conduct under Section 117 of this Code;"
of the reinvestigation. The CIR did not act on Section 117 of the National Internal Revenue
PAGCOR's letter-protest against Assessment Code, as amended, is hereby further
Notice No. 33-1996/1997/1998 and Assessment amended further to read as follows: "SEC.
Notice No. 33-99 within the 180-day period from 117. Tax on Franchises. — Any provision of
the latter's submission of additional documents. general or special law to the contrary
Hence, PAGCOR filed an appeal with the notwithstanding, there shall be levied,
Secretary of Justice on January 5, 2004 relative to assessed and collected in respect to all
Assessment Notice No. 33-1996/1997/1998 and franchises on electric, gas and water utilities a
Assessment Notice No. 33-99. Meanwhile, in tax of two percent (2%) on the gross receipts
response to PAGCOR's letter-protest dated March derived from the business covered by the law
31, 2003, BIR Regional Director Teodorica Arcega granting the franchise. x x x" SEC. 20.
issued a letter dated December 15, 2003 reiterating Repealing Clauses. — The provisions of any
the assessment for deficiency VAT for taxable year special law relative to the rate of franchise
2000. taxes are hereby expressly repealed. x x x
However, the BIR only recomputed the deficiency The CIR argues that PAGCOR's gambling
final withholding tax on fringe benefits and operations are embraced under the phrase
expanded withholding tax, and reduced the sale or exchange of services, including the
assessments to P12,212,199.85 and use or lease of properties; that such
P6,959,525.10, respectively. PAGCOR elevated its operations are not among those expressly
protest against Assessment Notice No. 33-2000 to exempted from the 10% VAT under Section 3
the CIR, but the 180-day period prescribed by law of R.A. No. 7716; and that the legislative
also lapsed without any action on the part of the purpose to withdraw PAGCOR's 5% franchise
CIR. Consequently, on August 4, 2004, PAGCOR tax was manifested by the language used in
brought another appeal to the Secretary of Justice Section 20 of R.A. No. 7716.
covering Assessment Notice No. 33-2000. The The CIR's arguments lack merit. Firstly, a
Secretary of Justice consolidated PAGCOR's two basic rule in statutory construction is that a
appeals. After the parties traded pleadings, the special law cannot be repealed or modified by
Secretary of Justice summoned them to a a subsequently enacted general law in the
preliminary conference to discuss, inter alia, any absence of any express provision in the latter
possible settlement or compromise. When no law to that effect. A special law must be
amicable settlement was reached, the consolidated interpreted to constitute an exception to the
appeals were considered submitted for resolution. general law in the absence of special
On December 22, 2006, Secretary of Justice Raul circumstances warranting a contrary
M. Gonzales rendered the first assailed resolution conclusion. R.A. No. 7716, a general law, did
declaring PAGCOR exempt from the payment of all not provide for the express repeal of
taxes except the 5% franchise tax provided in its PAGCOR's Charter, which is a special law;
Charter. On March 12, 2007, Secretary Gonzales hence, the general repealing clause under
issued the second assailed resolution denying the Section 20 of R.A. No. 7716 must pertain only
CIR's motion for reconsideration. Hence, this to franchises of electric, gas, and water
petition. utilities, while the term other franchises in
Section 102 of the NIRC should refer only to
transport, communications and utilities,
exclusive of PAGCOR's casino operations.
Secondly, R.A. No. 7716 indicates that
Congress has not intended to repeal
PAGCOR's privilege to enjoy the 5% franchise
tax in lieu of all other taxes. A contrary
construction would be unwarranted and
myopic nitpicking. In this regard, we should
follow the following apt reminder uttered in
Fort Bonifacio Development Corporation v.
Commissioner of Internal Revenue: A law
must not be read in truncated parts; its
provisions must be read in relation to the
whole law. Every part of the statute must be
interpreted with reference to the context, i.e.,
that every part of the statute must be
considered together with other parts of the
statute and kept subservient to the general
intent of the whole enactment. In construing a
statute, courts have to take the thought
conveyed by the statute as a whole. Although
Section 3 of R.A. No. 7716 imposes 10% VAT
on the sale or exchange of services, including
the use or lease of properties, the provision
also considers transactions that are subject to
0% VAT. On the other hand, Section 4 of R.A.
No. 7716 enumerates the transactions exempt
from VAT, viz.: SEC. 4. Section 103 of the
National Internal Revenue Code, as
amended, is hereby further amended to read
as follows: "SEC. 103. Exempt transactions.
— The following shall be exempt from the
value-added tax: xxx xxx xxx "(q) Transactions
which are exempt under special laws, except
those granted under Presidential Decree Nos.
66, 529, 972, 1491, and 1590, and nonelectric
cooperatives under republic Act No. 6938, or
international agreements to which the
Philippines is a signatory; xxx xxx xxx"
R.A. No. 7716 does not specifically exclude
PAGCOR's exemption under P.D. No. 1869
from the grant of exemptions from VAT;
hence, the petitioner's contention that R.A.
No. 7716 expressly amended PAGCOR's
franchise has no leg to stand on. Moreover,
PAGCOR's exemption from VAT, whether
under R.A. No. 7716 or its amendments, has
been settled in Philippine Amusement and
Gaming Corporation (PAGCOR) v. The
Bureau of Internal Revenue, whereby the
Court, citing Commissioner of Internal
Revenue v. Acesite (Philippines) Hotel
Corporation, has declared: Petitioner is
exempt from the payment of VAT, because
PAGCORs charter, P.D. No. 1869, is a special
law that grants petitioner exemption from
taxes.
The assessments for deficiency VAT issued
against PAGCOR should be canceled for lack
of legal basis. The Court also deems it
warranted to cancel the assessments for
deficiency withholding VAT pertaining to the
payments made by PAGCOR to its catering
service contractor. In two separate letters
dated December 12, 2003 41 and December
15, 2003, the BIR conceded that the
unmonetized meal allowances of PAGCOR's
employees were not subject to fringe benefits
 tax (FBT).
However, the BIR held PAGCOR liable for
expanded withholding VAT for the payments
made to its catering service contractor who
provided the meals for its employees. The
payments made by PAGCOR to its catering
service contractor are subject to zero-rated
(0%) VAT in accordance with Section 13 (2) of
P.D. No. 1869 in relation to Section 3 of R.A.
No. 7716. SEC. 3. Section 102 of the National
Internal Revenue Code, as amended, is
hereby further amended to read as follows:
"SEC. 102. Value-added tax on sale of service
and use or lease of properties. — x x x "(b)
Transaction subject to zero-rate. — The
following services performed in the Philippines
by VAT-registered persons shall be subject to
0%: "xxx xxx xxx "(3) Services rendered to
persons or entities whose exemptions under
special laws or international agreements to
which the Philippines is a signatory effectively
subjects the supply of such services to zero
rate. As such, the catering service contractor,
who is presumably a VAT-registered person,
shall impose a zero rate (0%) output tax on its
sale or lease of goods, services or properties
to PAGCOR. Consequently, no withholding
tax is due on such a transaction.

18. Silicon Philippines The 120/30-day prescriptive periods Petitioner SPI, formerly known as Intel Philippines Whether or not the petition No. In San Roque: Section 112(C) expressly
v. CIR, G.R. No. under the NIRC are mandatory and Manufacturing, Inc., is a corporation duly organized before the CTA was timely grants the Commissioner 120 days within
173241, March 25, jurisdictional, and the matter of and existing under Philippine laws. It is registered filed and thus granted it which to decide the taxpayer's claim. The law
2015 jurisdiction cannot be waived because it with the BIR as a VAT taxpayer. SPI filed on May jurisdiction over the petition of is clear, plain, and unequivocal: ". . . the
is conferred by law and is not dependent 6, 1999 with the One-Stop Shop Inter-Agency Tax Petitioner. Commissioner shall grant a refund or issue the
on the consent or objection or the acts or Credit and Duty Drawback Center of the tax credit certificate for creditable input taxes
omissions of the parties or any one of Department of Finance an Application for Tax within one hundred twenty (120) days from the
them. Credit/Refund of Value-Added Tax Paid covering date of submission of complete
the Third Quarter of 1998. SPI sought the tax documents."Section 112(C) also expressly
credit/refund of input VAT for the said tax period in grants the taxpayer a 30-day period to appeal
the sum of P25,531,312.83, to the CTA the decision or inaction of the
When the Respondent Commissioner of Internal Commissioner, thus: . . . the taxpayer affected
Revenue (CIR) failed to act upon its Application for may, within thirty (30) days from the receipt of
Tax Credit/Refund, SPI filed on September 29, the decision denying the claim or after the
2000 a Petition for Review before the CTA Division. expiration of the one hundred twenty day-
The CTA Division rendered a Decision on period, appeal the decision or the unacted
November 24, 2003 partially granting the claim of claim with the Court of Tax Appeals.
SPI for tax credit/refund. The CTA Division
disallowed the claim of SPI for tax credit/refund of The taxpayer can file an appeal in one of two
input VAT in the amount of P23,105,548.83 for ways: (1) file the judicial claim within thirty
failure of SPI to properly substantiate the zero- days after the Commissioner denies the claim
rated sales to which it attributed said taxes. The within the 120-day period, or (2) file the judicial
CTA Division particularly pointed out the failure of claim within thirty days from the expiration of
SPI to comply with invoicing requirements under the 120-day period if the Commissioner does
Sections 113, 237, and 238 of the National Internal not act within the 120-day period. The 30-day
Revenue Code of 1997 (1997 Tax Code) and period always applies, whether there is a
Section 4.108-1 of Revenue Regulations No. 7-95, denial or inaction on the part of the CIR. As a
i.e., registration of receipts or sales or commercial general rule, the 30-day period to appeal is
invoices with the BIR; securing an authority to print both mandatory and jurisdictional. (Aichi and
receipts or sales or commercial invoices from the San Roque) As an exception to the general
BIR; and imprinting the words "zero-rated" on the rule, premature filing is allowed only if filed
invoices covering zero-rated sales. As for the claim between 10 December 2003 and 5 October
of SPI for tax credit/refund of input VAT on its 2010, when BIR Ruling No. DA-489-03 was
purchases of capital goods in the amount of still in force. (San Roque)Late filing is
P2,425,764.00, the CTA Division held that Section absolutely prohibited, even during the time
112 (B) of the 1997 Tax Code did not require that when BIR Ruling No. DA-489-03 was in force.
such a claim be attributable to zero-rated sales; (San Roque)
and that SPI was able to comply with all the SPI filed on May 6, 1999 its administrative
requirements under said provision. claim for tax credit/refund of the input VAT
SPI filed a Motion for Partial Reconsideration and attributable to its zero-rated sales and on its
Supplemental Motion for Partial Reconsideration of purchases of capital goods for the Third
the foregoing Decision dated November 24, 2003 Quarter of 1998. The two-year prescriptive
of the CTA Division. In a Resolution dated August period for filing an administrative claim,
10, 2004, the CTA Division additionally noted that reckoned from the close of the taxable quarter,
the claim of SPI covered the period of July 1, 1998 prescribed on September 30, 2000.
to September 30, 1998 and it was issued a permit Therefore, the herein administrative claim of
to generate computerized sales invoices and SPI was timely filed. Evidently, SPI belatedly
official receipts only on August 31, 2002. filed its judicial claim. It filed its Petition for
SPI sought recourse from the CTA en banc by filing Review with the CTA 391 days after the lapse
a Petition for Review assailing the Decision dated of the 120-day period without the CIR acting
November 24, 2003 and Resolution dated August on its application for tax credit/refund, way
10, 2004 of the CTA Division. In its Decision dated beyond the 30-day period under Section 112
January 27, 2006, the CTA en banc found no of the 1997 Tax Code.
cogent justification to disturb the conclusion spelled The inaction of the Commissioner on Philex's
out in the assailed Decision dated November 24, claim during the 120-day period is, by express
2003 and Resolution dated August 10, 2004 of the provision of law, "deemed a denial" of Philex's
CTA Division. claim. Philex had 30 days from the expiration
 SPI filed a Motion for Reconsideration but said of the 120-day period to file its judicial claim
Motion was denied for lack of merit by the CTA en with the CTA. Philex's failure to do so
banc in a Resolution dated June 26, 2006. Hence, rendered the "deemed a denial" decision of
this petition. the Commissioner final and unappealable.
Because the 30-day period for filing its judicial
claim had already prescribed by the time SPI
filed its Petition for Review with the CTA
Division, the CTA Division never acquired
jurisdiction over the said Petition. The CTA
Division had absolutely no jurisdiction to act
upon, take cognizance of, and render
judgment upon the Petition for Review of SPI
in CTA Case No. 6170, regardless of the merit
of the claim of SPI. The Court stresses that the
120/30-day prescriptive periods are
mandatory and jurisdictional, and are not mere
technical requirements. The Court should not
establish the precedent that noncompliance
with mandatory and jurisdictional conditions
can be excused if the claim is otherwise
meritorious, particularly in claims for tax
refunds or credit. Such precedent will render
meaningless compliance with mandatory and
jurisdictional requirements.
It is not lost upon the Court that the
prescription of the judicial claim has not been
raised as an issue by any of the parties
whether before the CTA Division, CTA en
banc, or this Court. Nonetheless, the 120/30-
day prescriptive periods are mandatory and
jurisdictional, and the matter of jurisdiction
cannot be waived because it is conferred by
law and is not dependent on the consent or
objection or the acts or omissions of the
parties or any one of them. More importantly,
courts have the power to motu proprio dismiss
an action that already prescribed. According to
Rule 9, Section 1 of the Revised Rules of
Court.

19. Fort Bonifacio Act No. 7716 clarifies that it is the real This case revolves around three consolidated 1.) Whether or not the 1.) No. There is nothing in Section 105 of the
Development properties "held primarily for sale to petitions between Petitioner Fort Bonifacio transitional/presumptive input Old NIRC that prohibits the inclusion of real
Corporation v. CIR, et. customers or held for lease in the Development Corporation (FBDC) and the tax credit under Section 105 properties, together with the improvements
al., consolidated ordinary course of trade or business" that Respondent Commissioner of Internal Revenue. of the NIRC may be claimed thereon, in the beginning inventory of goods,
cases of G.R. No. are subject to the VAT, and not when the The parties entered into a Stipulation of Facts, only on the "improvements" materials and supplies, based on which
175707, G.R. NO. real estate transactions are engaged in Documents, and Issue before the CTA for each on real properties. 2.) inventory the transitional input tax credit is
18003, G.R. No. by persons who do not sell or lease case. It was established before the CTA that the Whether or not there must computed. It can be conceded that when it
181092, November 19, properties in the ordinary course of trade petitioner is engaged in the development and sale have been previous payment was drafted Section 105 could not have
2014 or business. Prior payment of taxes is of real property. It is the owner of, and is developing of sales tax or value-added possibly contemplated concerns specific to
not required for a taxpayer to avail of the and selling, parcels of land within a "newtown" tax by petitioner on its land real properties, as real estate transactions
8% transitional input tax credit provided development area known as the Fort Bonifacio before petitioner may claim were not originally subject to VAT. At the same
in Section 105 of the old NIRC Global City (the Global City), located within the the input tax credit granted by time, when transactions on real properties
former military camp known as Fort Bonifacio, Section 105 (now Section 111 were finally made subject to VAT beginning
Taguig, Metro Manila. The National Government, [A]) of the NIRC. with Rep. Act No. 7716, no corresponding
by virtue of Republic Act No. 7227 and Executive amendment was adopted as regards Section
Order No. 40, was the one that conveyed to 105 to provide for a differentiated treatment in
petitioner these parcels of land on February 8, the application of the transitional input tax
1995. credit with respect to real properties or real
In May 1996, petitioner commenced developing the estate dealers. It was Section 100 of the Old
Global City, and since October 1996, had been NIRC, as amended by Rep. Act No. 7716,
selling lots to interested buyers. At the time of which made real estate transactions subject to
acquisition, value-added tax (VAT) was not yet VAT for the first time. Prior to the amendment,
imposed on the sale of real properties. Republic Section 100 had imposed the VAT "on every
Act No. 7716 (the Expanded Value-Added Tax [E- sale, barter or exchange of goods", without
VAT] Law), which took effect on January 1, 1996, however specifying the kind of properties that
restructured the VAT system by further amending fall within or under the generic class "goods"
pertinent provisions of the National Internal subject to the tax.
Revenue Code (NIRC). Section 100 of the old Rep. Act No. 7716, which significantly is also
NIRC was amended by including "real properties" known as the Expanded Value-Added Tax
in the definition of the term "goods or properties," (EVAT) law, expanded the coverage of the
thereby subjecting the sale of "real properties" to VAT by amending Section 100 of the Old
VAT. NIRC in several respects, some of which we
While prior to Republic Act No. 7716, real estate will enumerate. First, it made every sale,
transactions were not subject to VAT, they became barter or exchange of "goods or properties"
subject to VAT upon the effectivity of said law. subject to VAT. Second, it generally defined
Thus, the sale of the parcels of land by petitioner "goods or properties" as "all tangible and
became subject to a 10% VAT, and this was later intangible objects which are capable of
increased to 12%, pursuant to Republic Act No. pecuniary estimation." Third, it included a
9337. Petitioner afterwards became a VAT- nonexclusive enumeration of various objects
registered taxpayer. On September 19, 1996, in that fall under the class "goods or properties"
accordance with Revenue Regulations No. 7- 95 subject to VAT, including "[r]eal properties
(Consolidated VAT Regulations), petitioner held primarily for sale to customers or held for
submitted to respondent BIR, an inventory list of its lease in the ordinary course of trade or
properties as of February 29, 1996. The total book business." From these amendments to
value of the petitioner's land inventory amounted to Section 100, is there any differentiated VAT
P71,227,503,200.00. On the basis of Section 105 treatment on real properties or real estate
of the NIRC, petitioner claims a transitional or dealers that would justify the suggested
presumptive input tax credit of 8% of limitations on the application of the transitional
P71,227,503,200.00, the total value of the real input tax on them? We see none. Rep. Act No.
properties listed in its inventory, or a total input tax 7716 clarifies that it is the real properties "held
credit of P5,698,200,256.00. After the value of the primarily for sale to customers or held for
real properties was reduced due to a reconveyance lease in the ordinary course of trade or
by petitioner to BCDA of a parcel of land, petitioner business" that are subject to the VAT, and not
claims that it is entitled to input tax credit in the when the real estate transactions are engaged
reduced amount of P4,250,475,000.48. What in by persons who do not sell or lease
petitioner seeks to be refunded are the actual VAT properties in the ordinary course of trade or
payments made by it in cash, which it claims were business.
either erroneously paid by or illegally collected from 2.) No. Section 105 states that the transitional
it. Each Claim for Refund is based on petitioner's input tax credits become available either to (1)
position that it is entitled to a transitional input tax a person who becomes liable to VAT; or (2)
credit under Section 105 of the old NIRC, which any person who elects to be VATregistered.
more than offsets the aforesaid VAT payments. The clear language of the law entitles new
Hence, this petition. trades or businesses to avail of the tax credit
In G.R. No. 175707 is an appeal by certiorari once they become VATregistered. The
pursuant to Rule 45 of the 1997 Rules of Civil transitional input tax credit, whether under the
Procedure from (a) the Decision dated April 22, Old NIRC or the New NIRC, may be claimed
2003 of the Court of Appeals in CA-G.R. SP No. by a newly-VAT registered person such as
61516 dismissing FBDC's Petition for Review with when a business as it commences
regard to the Decision of the Court of Tax Appeals operations. . . . [I]t is not always true that the
(CTA) dated October 13, 2000 in CTA Case No. acquisition of such goods, materials and
5885, and from (b) the Court of Appeals Resolution supplies entail the payment of taxes on the
dated November 30, 2006 denying its Motion for part of the new business. In fact, this could
Reconsideration. occur as a matter of course by virtue of the
In G.R. No. 180035 an appeal by certiorari operation of various provisions of the NIRC,
pursuant to Rule 45 was filed by Petitioner from (a) and not only on account of a specially
the Court of Appeals Decision dated April 30, 2007 legislated exemption.
in CA-G.R. SP No. 76540 denying FBDC's Petition The interpretation proffered by the CTA would
for Review with respect to the CTA Resolution exclude goods and properties which are
dated March 28, 2003 in CTA Case No. 6021, and acquired through sale not in the ordinary
from (b) the Court of Appeals Resolution dated course of trade or business, donation or
October 8, 2007 denying its Motion for through succession, from the beginning
Reconsideration. inventory on which the transitional input tax
In G.R. No. 181092 an appeal by certiorari was filed credit is based. Nothing in the Old NIRC (or
by Petitioner pursuant to Rule 45 from the Court of even the New NIRC) speaks of such a
Appeals Decision dated December 28, 2007 inCA- possibility or qualifies the previous payment of
G.R. SP No. 61158 dismissing FBDC's petition for VAT or any other taxes on the goods,
review with respect to the CTA Decision dated materials and supplies as a pre-requisite for
September 29, 2000 in CTA Case No. 5694. The inclusion in the beginning inventory. It is
aforesaid CTA Decision, which the Court of apparent that the transitional input tax credit
Appeals affirmed, denied petitioner's Claim for operates to benefit newly VAT-registered
Refund in the amount of P269,340,469.45, persons, whether or not they previously paid
representing "VAT erroneously paid by or illegally taxes in the acquisition of their beginning
collected from petitioner for the fourth quarter of inventory of foods, materials and supplies.
1996." Hence, this petition. During that period of transition from non-VAT
to VAT status, the transitional input tax credit
serves to alleviate the impact of the VAT on
the taxpayer. At the very beginning, the VAT-
registered taxpayer is obliged to remit a
significant portion of the income it derived from
its sales as output VAT. The transitional input
tax credit mitigates this initial diminution of the
taxpayer's income by affording the opportunity
to offset the losses incurred through the
remittance of the output VAT at a stage when
the person is yet unable to credit input VAT
payments.
Under Section 105 of the Old NIRC, the rate
of the transitional input tax credit is "8% of the
value of such inventory or the actual value-
added tax paid on such goods, materials and
supplies, whichever is higher." If indeed the
transitional input tax credit is premised on the
previous payment of VAT, then it does not
make sense to afford the taxpayer the benefit
of such credit based on "8% of the value of
such inventory" should the same prove higher
than the actual VAT paid. This intent that the
CTA alluded to could have been implemented
with ease had the legislature shared such
intent by providing the actual VAT paid as the
sole basis for the rate of the transitional input
tax credit.
The common standard for the application of
the transitional input tax credit, as enacted by
E.O. No. 273 and all subsequent tax laws
which reinforced or reintegrated the tax credit,
is simply that the taxpayer in question has
become liable to VAT or has elected to be a
VAT-registered person. E. O. No. 273 and the
subsequent tax laws are all decidedly neutral
and accommodating in ascertaining who
should be entitled to the tax credit, and it
 behooves the CIR and the CTA to adopt a
similarly judicious perspective.
The Court has thus categorically ruled that
prior payment of taxes is not required for a
taxpayer to avail of the 8% transitional input
tax credit provided in Section 105 of the old
NIRC and that petitioner is entitled to it,
despite the fact that petitioner acquired the
Global City property under a tax-free
transaction.

20. CIR vs. Team Sual Failure to comply with the 120-day On November 26, 1999, the petitioner CIR granted Whether or not the CTA en Yes. Any unutilized input VAT attributable to
Corporation (Formerly mandatory period under Section 112 (C) respondent TSC's application for zero rating from banc erred in holding that zero-rated or effectively zero rated sales may
Mirant Sual of the NIRC renders its petition for review its sale of power generation services to NPC for the TSC's petition for review with be claimed as a refund/tax credit. Initially,
Corporation), G.R. No. with the CTA is void because the 120- taxable year 2000. As a VAT-registered entity, TSC the CTA was not prematurely claims for refund/tax credit for unutilized input
194105. February 5, day mandatory period under the NIRC is filed its VAT returns for the first, second, third, and filed. VAT should be filed with the BIR, together with
2014 mandatory and jurisdictional. fourth quarters of taxable year 2000 on April 24, the complete documents in support of the
2000, July 25, 2000, October 25, 2000, and claim. Pursuant to Section 112 (A) of the
January 25, 2001, respectively. NIRC, the administrative claim for refund/tax
On March 11, 2002, TSC filed with the BIR an credit must be filed with the BIR within two
administrative claim for refund, claiming that it is years after the close of the taxable quarter
entitled to the unutilized input VAT in the amount of when the sales were made. Under Section
P179,314,926.56 arising from its zero-rated sales 112 (C) of the NIRC, the CIR is given 120 days
to NPC for the taxable year 2000. On April 1, 2002, from the submission of complete documents
without waiting for the CIR's resolution of its in support of the application for refund/tax
administrative claim for refund/tax credit, TSC filed credit within which to either grant or deny the
a petition for review with the CTA seeking the claim. In case of (1) full or partial denial of the
refund or the issuance of a tax credit certificate in claim or (2) the failure of the CIR to act on the
the amount of P179,314,926.56 for its unutilized claim within 120 days from the submission of
input VAT for the taxable year 2000. complete documents, the taxpayer-claimant
The CIR claimed that TSC's claim for refund/tax may, within 30 days from receipt of the CIR
credit should be denied, on the ground that TSC decision denying the claim or after the lapse of
failed to comply with the conditions precedent for the 120-day period, file a petition for review
claiming refund/tax credit of unutilized input VAT. with the CTA.
The CIR pointed out that TSC failed to submit In Commissioner of Internal Revenue v. San
complete documents in support of its application for Roque Power Corporation, the Court
refund/tax credit contrary to Section 112 (C) of the emphasized that the 120-day period that is
NIRC. given to the CIR within which to decide claims
On January 26, 2009, the CTA First Division for refund/tax credit of unutilized input VAT is
rendered a Decision, which granted TSC's claim mandatory and jurisdictional. The Court
for refund/tax credit of input VAT. Nevertheless, the categorically held that the taxpayer-claimant
CTA First Division found that, from the total must wait for the 120-day period to lapse,
unutilized input VAT of P179,314,926.56 that it should there be no decision fully or partially
claimed, TSC was only able to substantiate the denying the claim, before a petition for review
amount of P173,265,261.30. may be filed with the CTA. Otherwise, the
The CIR sought a reconsideration of the CTA First petition would be rendered premature and
Division maintaining that TSC is not entitled to a without a cause of action. Consequently, the
refund/tax credit of its unutilized input VAT for the CTA does not have the jurisdiction to take
taxable year 2000 since it failed to submit all the cognizance of a petition for review filed by the
necessary and relevant documents in support of its taxpayer-claimant should there be no decision
administrative claim. The CIR further claimed that by the CIR on the claim for refund/tax credit or
TSC's petition for review was prematurely filed, the 120-day period had not yet lapsed.
alleging that under Section 112 (C) of the NIRC, the The two-year prescriptive period within which
CIR is given 120 days from the submission of to file a claim for refund/tax credit of unutilized
complete documents within which to either grant or input VAT under Section 112 (A) of the NIRC
deny TSC's application for refund/tax credit of its is about to lapse is inconsequential and would
unutilized input VAT. The CIR pointed out that TSC not justify the immediate filing of a petition for
filed its petition for review with the CTA sans any review with the CTA sans compliance with the
decision on its claim and without waiting for the 120-day mandatory period. To stress, under
120-day period to lapse. Section 112 (C) of the NIRC, a taxpayer may
On June 19, 2009, the CTA First Division issued a only file a petition for review with the CTA
Resolution, which denied the CIR's motion for within 30 days from either: (1) the receipt of
reconsideration. The CTA First Division found that the decision of the CIR denying, in full or in
TSC's petition for review was not prematurely filed part, the claim for refund/tax credit; or (2) the
notwithstanding that the 120-day period given to lapse of the 120-day period given to the CIR
the CIR under Section 112 (C) of the NIRC had not to decide the claim for refund/tax credit. The
yet lapsed. It ruled that, pursuant to Section 112 (A) 120-day mandatory period may extend
of the NIRC, claims for refund/tax credit of beyond the two-year prescriptive period for
unutilized input VAT should be filed within two filing a claim for refund/tax credit under
years after the close of the taxable quarter when Section 112 (A) of the NIRC.
the sales were made; that the 120-day period TSC's failure to comply with the 120-day
under Section 112 (C) of the NIRC is also covered mandatory period under Section 112 (C) of the
by the two year prescriptive period within which to NIRC renders its petition for review with the
claim the refund/tax credit of unutilized input VAT. CTA void. It is a mere scrap of paper from
Aggrieved by the foregoing disquisition of the CTA which TSC cannot derive or acquire any right
First Division, the CIR filed a Petition for Review notwithstanding the supposed failure on the
with the CTA en banc. The CTA en banc ruled that, part of the CIR to raise the issue of TSC's non-
pursuant to Section 112 (A) of the NIRC, both the compliance with the 120-day period in the
administrative and judicial remedies under Section proceedings before the CTA First Division.
112 (C) of the NIRC must be undertaken within the However, BIR Ruling No. DA-489-03 provided
two-year period from the close of the taxable that the taxpayer-claimant may already file a
quarter when the relevant sales were made. judicial claim for refund/tax credit with the CTA
Hence, this petition. notwithstanding that the 120-day mandatory
period under Section 112 (C) of the NIRC had
not yet lapsed. Being a general interpretative
rule, the CIR is barred from questioning the
 CTA's assumption of jurisdiction on the
ground that the 120-day mandatory period
under Section 112 (C) of the NIRC had not yet
lapsed since estoppel under Section 246 24 of
the NIRC had already set in. Nevertheless, the
Court clarified that taxpayers can only rely on
BIR Ruling No. DA-489-03 from the time of its
issuance on December 10, 2003 up to its
reversal by this Court in Aichi on October 6,
2010, where it was held that the 120-day
period under Section 112 (C) of the NIRC is
mandatory and jurisdictional.
TSC filed its judicial claim for refund/tax credit
of its unutilized input VAT with the CTA on
April 1, 2002 — more than a year before the
issuance of BIR Ruling No. DA-489-03.
Accordingly, TSC cannot benefit from the
declaration laid down in BIR Ruling No. DA-
489-03.

21. CBK Power Section 112 (D) further provides that the Petitioner is engaged, among others, in the Whether the petitioner’s claim It must be emphasized that this is not a case
Company Limited vs. CIR has to decide on an administrative operation, maintenance, and management of the for refund of unutilized input of premature filing of a judicial claim. Although
CIR, G.R. No. 198729- claim within one hundred twenty (120) Kalayaan II pumped-storage hydroelectric power VAT for the first to third petitioner did not file its judicial claim with the
30, January 15, 2014. days from the date of submission of plant, the new Caliraya Spillway, Caliraya, quarters of 2005. CTA prior to the expiration of the 120-day
complete documents in support thereof. Botocan; and the Kalayaan I hydroelectric power waiting period, it failed to observe the 30-day
Bearing in mind that the burden to prove plants and their related facilities located in the prescriptive period to appeal to the CTA
entitlement to a tax refund is on the Province of Laguna. counted from the lapse of the 120-day period.
taxpayer, it is presumed that in order to On 29 December 2004, petitioner filed an
discharge its burden, petitioner had Application for VAT Zero-Rate with the Bureau of As this Court enunciated in San Roque,
attached complete supporting Internal Revenue (BIR) in accordance with Section petitioner cannot rely on Atlas either, since the
documents necessary to prove its 108 (B) (3) of the National Internal Revenue Code latter case was promulgated only on 8 June
entitlement to a refund in its application, (NIRC) of 1997, as amended. The application was 2007. Moreover, the doctrine in Atlas which
absent any evidence to the contrary. duly approved by the BIR. Thus, petitioner's sale of reckons the two-year period from the date of
Thereafter, the taxpayer affected by the electricity to the NPC from 1 January 2005 to 31 filing of the return and payment of the tax,
CIR's decision or inaction may appeal to October 2005 was declared to be entitled to the does not interpret — expressly or impliedly —
the CTA within 30 days from the receipt benefit of effectively zero-rated value added tax the 120+30 day periods. Simply stated, Atlas
of the decision or from the expiration of (VAT). referred only to the reckoning of the
the 120-day period within which the claim prescriptive period for filing an administrative
has not been acted upon. Petitioner filed its administrative claims for the claim.
issuance of tax credit certificates for its alleged
unutilized input taxes on its purchase of capital For failure of petitioner to comply with the
goods and alleged unutilized input taxes on its local 120+30 day mandatory and jurisdictional
purchases and/or importation of goods and period, petitioner lost its right to claim a refund
 services, other than capital goods, pursuant to or credit of its alleged excess input VAT.
Section 112 (A) and (B) of the NIRC of 1997, as With regard to petitioner's argument that Aichi
amended, with BIR Revenue District Office (RDO) should not be applied retroactively, we
Laguna. reiterate that even without that ruling, the law
There was alleged no action on the part of the CIR, is explicit on the mandatory and jurisdictional
thus the p Petition for Review with the CTA. nature of the 120+30 day period.
Accordingly, petitioner timely filed its administrative
claims for the three quarters of 2005. However,
considering that the judicial claim was filed on 18
April 2007, the CTA Division denied the claim for
the first quarter of 2005 for having been filed out of
time. The CTA 2nd division granted the claim and
ordered the issuance of a tax credit certificate in
favor of petitioner in the reduced amount of
P27,170,123.36.

The CTA En Banc ruled that the judicial claims for

the first, second, and third quarter of 2005 were
belatedly filed.

22. CIR vs. Mindanao II It is only the administrative claim that Mindanao II is a partnership registered with the The resolution of this case The lessons of this case may be summed up
Geothermal must be filed within the two-year Securities and Exchange Commission. It is hinges on the question of as follows:
Partnership, G.R. No. prescriptive period; the judicial claim engaged in the business of power generation and compliance with the following A. Two-Year Prescriptive Period
191498, January 15, need not fall within the two-year sale of electricity to the National Power Corporation time requirements for the 1. It is only the administrative claim that must
2014 prescriptive period. (NAPOCOR) and is accredited by the Department grant of a claim for refund or be filed within the two-year prescriptive period.
Having disposed of this question, we of Energy. credit of unutilized input VAT: (Aichi)
proceed to the date for reckoning the (1) the two-year prescriptive 2. The proper reckoning date for the two-year
prescriptive period under Section 112 Mindanao II filed its Quarterly VAT Returns for the period for filing an application prescriptive period is the close of the taxable
(A). second, third and fourth quarters of taxable year for refund or credit of quarter when the relevant sales were made.
2004. unutilized input VAT; and (2) (San Roque) CHDAEc
On 6 October 2005, Mindanao II filed with the the 120+30 day period for 3. The only other rule is the Atlas ruling, which
Bureau of Internal Revenue (BIR) an application for filing an appeal with the CTA. applied only from 8 June 2007 to 12
the refund or credit of accumulated unutilized September 2008. Atlas states that the two-
creditable input taxes. In support of the year prescriptive period for filing a claim for tax
administrative claim for refund or credit, Mindanao refund or credit of unutilized input VAT
II alleged, among others, that it is registered with payments should be counted from the date of
the BIR as a value-added taxpayer and all its sales filing of the VAT return and payment of the tax.
are zero-rated under the EPIRA law. It further (San Roque)
stated that for the second, third, and fourth quarters B. 120+30 Day Period
of taxable year 2004, it paid input VAT in the 1. The taxpayer can file an appeal in one of
aggregate amount of P7,167,005.84, which were two ways: (1) file the judicial claim within thirty
directly attributable to the zero-rated sales. The days after the Commissioner denies the claim
input taxes had not been applied against output within the 120-day period, or (2) file the judicial
tax. claim within thirty days from the expiration of
Pursuant to Section 112 (D) of the 1997 Tax Code, the 120-day period if the Commissioner does
the Commissioner of Internal Revenue (CIR) had a not act within the 120-day period.
period of 120 days, or until 3 February 2006, to act 2. The 30-day period always applies, whether
on the claim. The administrative claim, however, there is a denial or inaction on the part of the
remained unresolved on 3 February 2006. CIR.
Under the same provision, Mindanao II could treat 3. As a general rule, the 30-day period to
the inaction of the CIR as a denial of its claim, in appeal is both mandatory and jurisdictional.
which case, the former would have 30 days to file (Aichi and San Roque)
an appeal to the CTA, that is, on 5 March 2006. 4. As an exception to the general rule,
Mindanao II, however, did not file an appeal within premature filing is allowed only if filed between
the 30-day period. 10 December 2003 and 5 October 2010, when
Apparently, Mindanao II believed that a judicial BIR Ruling No. DA-489-03 was still in force.
claim must be filed within the two-year prescriptive (San Roque)
period provided under Section 112 (A) and that 5. Late filing is absolutely prohibited, even
such time frame was to be reckoned from the filing during the time when BIR Ruling No. DA-489-
of its Quarterly VAT Returns for the second, third, 03 was in force. (San Roque)
and fourth quarters of taxable year 2004, that is,
from 26 July 2004, 22 October 2004, and 25
January 2005, respectively. Thus, on 21 July 2006,
Mindanao II, claiming inaction on the part of the
CIR and that the two-year prescriptive period was
about to expire, filed a Petition for Review with the
CTA docketed as CTA.

The CTA 2nd division rendered a Decision

ordering the CIR to grant a refund or a tax credit
certificate, but only in the reduced amount of
P6,791,845.24, representing unutilized input VAT
incurred for the second, third and fourth quarters of
taxable year 2004.

In support of its ruling, the CTA Second Division

held that Mindanao II complied with the twin
requisites for VAT zero-rating under the EPIRA
law: first, it is a generation company, and second,
it derived sales from power generation. It also ruled
that Mindanao II satisfied the requirements for the
grant of a refund/credit under Section 112 of the
Tax Code: (1) there must be zero-rated or
effectively zero-rated sales; (2) input taxes must
have been incurred or paid; (3) the creditable input
tax due or paid must be attributable to zero-rated
 sales or effectively zero-rated sales; (4) the input
VAT payments must not have been applied against
any output liability; and (5) the claim must be filed
within the two-year prescriptive period.
As to the second requisite, however, the input tax
claim to the extent of P375,160.60 corresponding
to purchases of services from Mitsubishi
Corporation was disallowed, since it was not
substantiated by official receipts.

23. Team Energy The theory that the 30-day period must Petitioner filed with the Bureau of Internal Revenue Sole issue for our resolution is Yes. There are three compelling reasons why
Corporation (formerly fall within the two-year prescriptive (BIR) its first to fourth quarterly value-added tax whether the petitioner timely the 30-day period need not necessarily fall
Mirant Pagbilao Corp.) period adds a condition that is not found (VAT) returns for the calendar year 2002. filed its judicial claim for within the two-year prescriptive period, as long
vs. CIR, G.R. No. in the law. It results in truncating 120 Subsequently, on December 22, 2003, petitioner refund of input VAT for the as the administrative claim is filed within the
190928, January 13, days from the 730 days that the law filed an administrative claim for refund of unutilized first quarter of 2002. two-year prescriptive period.
2014. grants the taxpayer for filing his input VAT with RDO No. 60, Lucena City, in the
administrative claim with the total amount of P79,918,002.95 for calendar year First, Section 112 (A) clearly, plainly and
Commissioner. This Court cannot 2002. Due to the CIR’s inaction, petitioner elevated unequivocally provides that the taxpayer
interpret a law to defeat, wholly or even its claim before the CTA 1st division wherein the "may, within two (2) years after the close of the
partly, a remedy that the law expressly appellate court partially granted the refund of the taxable quarter when the sales were made,
grants in clear, plain and unequivocal tax credit but reduced the amount to P69, 618, apply for the issuance of a tax credit certificate
language. Section 112 (A) and (C) must 971.19. or refund of the creditable input tax due or paid
be interpreted according to its clear, plain Not satisfied, respondent filed his Motion for Partial to such sales." In short, the law states that the
and unequivocal language. The taxpayer Reconsideration against said decision, which the taxpayer may apply with the Commissioner for
can file his administrative claim for refund CTA First Division denied in a Resolution dated a refund or credit "within two (2) years," which
or credit at any time within the two-year September 8, 2008. means at anytime within two years. Thus, the
prescriptive period. If he files his claim on The CTA En Banc affirmed the CTA First Division’s application for refund or credit may be filed by
the last day of the two-year prescriptive decision with the modification that the refundable the taxpayer with the Commissioner on the
period, his claim is still filed on time. The amount be reduced to ₱51,134,951.40. last day of the two-year prescriptive period
Commissioner will have 120 days from and it will still strictly comply with the law. The
such filing to decide the claim. If the Hence, the present petition wherein petitioner two-year prescriptive period is a grace period
Commissioner decides the claim on the raises the following issues for our resolution: in favor of the taxpayer and he can avail of the
120th day, or does not decide it on that The CTA En Banc committed grave abuse of full period before his right to apply for a tax
day, the taxpayer still has 30 days to file discretion amounting to lack or excess of refund or credit is barred by prescription.
his judicial claim with the CTA. This is not jurisdiction when it disallowed petitioner’s input
only the plain meaning but also the only VAT for the first quarter amounting to Second, Section 112 (C) provides that the
logical interpretation of Section 112 (A) ₱18,484,019.79 based on prescription because: Commissioner shall decide the application for
and (C). petitioner filed its judicial claim for refund well within refund or credit "within one hundred twenty
the two-year prescriptive period reckoned from the (120) days from the date of submission of
date of filing of the quarterly VAT. complete documents in support of the
application filed in accordance with
Subsection (A)." The reference in Section 112
(C) of the submission of documents "in
support of the application filed in accordance
with Subsection (A)" means that the
application in Section 112 (A) is the
administrative claim that the Commissioner
must decide within the 120-day period. In
short, the two-year prescriptive period in
Section 112 (A) refers to the period within
which the taxpayer can file an administrative
claim for tax refund or credit. Stated otherwise,
the two-year prescriptive period does not refer
to the filing of the judicial claim with the CTA
but to the filing of the administrative claim with
the Commissioner. As held in Aichi, the
"phrase ‘within two years x x x apply for the
issuance of a tax credit or refund" refers to
applications for refund/credit with the CIR and
not to appeals made to the CTA."

Third, if the 30-day period, or any part of it, is

required to fall within the two-year prescriptive
period (equivalent to 730 days), then the
taxpayer must file his administrative claim for
refund or credit within the first 610 days of the
two-year prescriptive period. Otherwise, the
filing of the administrative claim beyond the
first 610 days will result in the appeal to the
CTA being filed beyond the two-year
prescriptive period. Thus, if the taxpayer files
his administrative claim on the 611th day, the
Commissioner, with his 120-day period, will
have until the 731st day to decide the claim. If
the Commissioner decides only on the 731st
day, or does not decide at all, the taxpayer can
no longer file his judicial claim with the CTA
because the two-year prescriptive period
(equivalent to 730 days) has lapsed. The 30-
day period granted by law to the taxpayer to
file an appeal before the CTA becomes utterly
useless, even if the taxpayer complied with the
law by filing his administrative claim within the
two-year prescriptive period.
Based on the aforequoted discussions, we
therefore disagree with the CTA En Banc’s
 finding that petitioner’s judicial claim for the
first quarter of 2002 was not timely filed.

24. Fort Bonifacio The law is clear: a transitional input tax, Petitioner Fort Bonifacio Development Corporation Whether petitioner is not Yes. Section 112 of the Tax Code does not
Development which is merely an assumed payment of (FBDC) is a duly registered domestic corporation entitled to any refund of input prohibit cash refund or tax credit of transitional
Corporation v. CIR, et. tax and not an actual payment of tax, engaged in the development and sale of real [Value-added tax] VAT, since input tax in the case of zero-rated or effectively
al., G.R. No. 173425, cannot give rise to a cash refund, or even property. The Bases Conversion Development the sale by the national zero-rated VAT registered taxpayers, who do
January 22, 2013. to a tax credit where the taxpayer has no Authority (BCDA), a wholly owned government government of the Global City not have any output VAT. The phrase "except
output tax. The reason is plain common corporation created under Republic Act (RA) No. land to petitioner was not transitional input tax" in Section 112 of the Tax
sense. A taxpayer who has not actually 7227, owns 45% of petitioner's issued and subject to any input VAT Code was inserted to distinguish creditable
paid a tax cannot ask for its refund or outstanding capital stock; while the Bonifacio Land input tax from transitional input tax credit.
credit. Likewise, a taxpayer who has no Corporation, a consortium of private domestic Transitional input tax credits are input taxes on
output tax to offset a tax credit arising corporations, owns the remaining 55%. On a taxpayer's beginning inventory of goods,
from an assumed tax payment cannot February 8, 1995, by virtue of RA 7227 and materials, and supplies equivalent to 8% (then
ask the government for a cash refund or Executive Order No. 40, dated December 8, 1992, 2%) or the actual VAT paid on such goods,
credit, for to do so will require the petitioner purchased from the national government materials and supplies, whichever is higher. It
government to actually pay out public a portion of the Fort Bonifacio reservation, now may only be availed of once by first-time VAT
funds for a private purpose. known as the Fort Bonifacio Global City (Global taxpayers. Creditable input taxes, on the other
City). On January 1, 1996, RA 7716 restructured hand, are input taxes of VAT taxpayers in the
the Value-Added Tax (VAT) system by amending course of their trade or business, which should
certain provisions of the old National Internal be applied within two years after the close of
Revenue Code (NIRC). RA 7716 extended the the taxable quarter when the sales were
coverage of VAT to real properties held primarily made. The transitional input tax is a tax
for sale to customers or held for lease in the assumed to have been paid, whether actually
ordinary course of trade or business. On paid or not. The Tax Code always requires
September 19, 1996, petitioner submitted to the substantiation for any refund or credit of a tax,
Bureau of Internal Revenue (BIR) Revenue District, that is, the taxpayer must prove that he
an inventory of all its real properties, the book value actually paid the tax. The only exception is the
of which aggregated P71,227,503,200. 10 Based transitional input tax, which is assumed to
on this value, petitioner claimed that it is entitled to have been paid, whether actually paid or not.
a transitional input tax credit of P5,698,200,256, The transitional input tax is credited against
pursuant to Section 105 of the old NIRC. In output tax in the concept of a reduction of tax
October 1996, petitioner started selling Global City liability, 2 either to minimize the tax burden or
lots to interested buyers. For the first quarter of as a tax incentive. However, the transitional
1997, petitioner generated a total amount of input tax cannot be refunded in cash because
P3,685,356,539.50 from its sales and lease of lots, such cash refund will be a use of public funds
on which the output VAT payable was for a private purpose. If the taxpayer has no
P368,535,653.95. Petitioner paid the output VAT output tax, the taxpayer cannot ask a tax credit
by making cash payments to the BIR totalling for the unused transitional input tax because
P359,652,009.47 and crediting its unutilized input the transitional input tax merely serves to
tax credit on purchases of goods and services of reduce the output tax, if there is any. Thus, the
P8,883,644.48. Realizing that its transitional input Tax Code expressly prohibits any cash refund
tax credit was not applied in computing its output or tax credit of transitional input tax in the case
 VAT for the first quarter of 1997, petitioner on of zero-rated or effectively zero-rated VAT
November 17, 1998 filed with the BIR a claim for registered taxpayers, who do not have any
refund of the amount of P359,652,009.47 output VAT. Section 112 (A) of the Tax Code:
erroneously paid as output VAT for the said period. SEC. 112. Refunds or Tax Credits of Input
The CTA denied petitioner's claim for refund. Tax. ” (A) Zero-rated or Effectively Zero-rated
According to the CTA, "the benefit of transitional Sales. ” Any VAT-registered person, whose
input tax credit comes with the condition that sales are zero-rated or effectively zero-rated
business taxes should have been paid first." 19 In may, within two (2) years after the close of the
this case, since petitioner acquired the Global City taxable quarter when the sales were made,
property under a VAT-free sale transaction, it apply for the issuance of a tax credit certificate
cannot avail of the transitional input tax credit. The or refund of creditable input tax due or paid
CA affirmed the decision of the CTA. The CA attributable to such sales, except transitional
agreed that petitioner is not entitled to the 8% input tax, to the extent that such input tax has
transitional input tax credit since it did not pay any not been applied against output tax: . . . .
VAT when it purchased the Global City property. (Emphasis supplied) The law is clear: a
The CA opined that transitional input tax credit is transitional input tax, which is merely an
allowed only when business taxes have been paid assumed payment of tax and not an actual
and passed-on as part of the purchase price. payment of tax, cannot give rise to a cash
refund, or even to a tax credit where the
taxpayer has no output tax. The reason is
plain common sense. A taxpayer who has not
actually paid a tax cannot ask for its refund or
credit. Likewise, a taxpayer who has no output
tax to offset a tax credit arising from an
assumed tax payment cannot ask the
government for a cash refund or credit, for to
do so will require the government to actually
pay out public funds for a private purpose.

25. Accenture, Inc. vs. A taxpayer claiming a tax credit or refund Accenture, Inc. (Accenture) is a corporation Whether Accenture was No. The Court ruled that the recipient of the
CIR, G.R. No. 190102, has the burden of proof to establish the engaged in the business of providing management entitled to a refund or an service must be doing business outside the
July 11, 2012 factual basis of that claim. Tax refunds, consulting, business strategies development, and issuance of a TCC in the Philippines for the transaction to qualify for
like tax exemptions, are construed strictly selling and/or licensing of software. It is duly amount of P35,178,844.21 zero-rating under Section 108 (B) of the Tax
against the taxpayer. registered with the Bureau of Internal Revenue because its sales of goods Code. Accenture claims that these
(BIR) as a Value Added Tax (VAT) taxpayer or and services are zero-rated documentary pieces of evidence are
enterprise in accordance with Section 236 of the for VAT purposes under supported by the Report of Emmanuel
NIRC. Accenture filed its Monthly VAT Returns. Section 108(B)(2)(3) of the Mendoza, the Court-commissioned
These VAT returns were ammended. The monthly 1997 Tax Code Independent Certified Public Accountant. He
and quarterly VAT returns of Accenture show that, ascertained that Accenture's gross billings
notwithstanding its application of the input VAT pertaining to zero-rated sales were all
credits earned from its zero-rated transactions supported by zero-rated Official Receipts and
against its output VAT liabilities, it still had excess Billing Statements. These documents show
or unutilized input VAT credits. These VAT credits that these zero-rated sales were paid in
are in the amounts of P9,355,809.80 for the 1st foreign exchange currency and duly
period and P27,682,459.38 for the 2nd period, or a accounted for in the rules and regulations of
total of P37,038,269.18. Out of the the BSP. In the CTA's opinion, however, the
P37,038,269.18, only P35,178,844.21 pertained to documents presented by Accenture merely
the allocated input VAT on Accenture's "domestic substantiate the existence of the sales, receipt
purchases of taxable goods which cannot be of foreign currency payments, and inward
directly attributed to its zero-rated sale of services." remittance of the proceeds of these sales duly
This allocated input VAT was broken down to accounted for in accordance with BSP rules.
P8,811,301.66 for the 1st period and Petitioner presented no evidence whatsoever
P26,367,542.55 for the 2nd period. The excess that these clients were doing business outside
input VAT was not applied to any output VAT that the Philippines. Accenture insists, however,
Accenture was liable for in the same quarter when that it was able to establish that it had
the amount was earned — or to any of the rendered services to foreign corporations
succeeding quarters. Instead, it was carried doing business outside the Philippines, unlike
forward to petitioner's 2nd Quarterly VAT Return for in Burmeister, which allegedly involved a
2003. Accenture filed with the Department of foreign corporation doing business in the
Finance (DoF) an administrative claim for the Philippines. A taxpayer claiming a tax credit
refund or the issuance of a Tax Credit Certificate or refund has the burden of proof to establish
(TCC). The DoF did not act on the claim of the factual basis of that claim. Tax refunds,
Accenture. Hence, Accenture filed a Petition for like tax exemptions, are construed strictly
Review with the First Division of the Court of Tax against the taxpayer. Accenture failed to
Appeals (Division), praying for the issuance of a discharge this burden. It alleged and
TCC in its favor in the amount of P35,178,844.21. presented evidence to prove only that its
clients were foreign entities. However, as
found by both the CTA Division and the CTA
En Banc, no evidence was presented by
Accenture to prove the fact that the foreign
clients to whom petitioner rendered its
services were clients doing business outside
the Philippines. As ruled by the CTA En Banc,
the Official Receipts, Intercompany Payment
Requests, Billing Statements, Memo Invoices-
Receivable, Memo Invoices-Payable, and
Bank Statements presented by Accenture
merely substantiated the existence of sales,
receipt of foreign currency payments, and
inward remittance of the proceeds of such
sales duly accounted for in accordance with
BSP rules, all of these were devoid of any
evidence that the clients were doing business
outside of the Philippines. In view of the
 foregoing, the Court denied Accenture's
Petition for a tax refund.

26. Western Mindanao Under the NIRC, a creditable input tax Petitioner WMPC is a domestic corporation Whether the CTA En Banc No. Being a derogation of the sovereign
Power Corp. vs. CIR, should be evidenced by a VAT invoice or engaged in the production and sale of electricity. It seriously erred in dismissing authority, a statute granting tax exemption is
G.R. No. 181136, June official receipt, 17 which may only be is registered with the Bureau of Internal Revenue the claim of petitioner for a strictly construed against the person or entity
13, 2012 considered as such when it complies with (BIR) as a VAT taxpayer. Petitioner alleges that it refund or tax credit on input claiming the exemption. When based on such
the requirements of R 7-95, particularly sells electricity solely to the National Power tax on the ground that the statute, a claim for tax refund partakes of the
Section 4.108-1. This section requires, Corporation (NPC), which is in turn exempt from latter's Official Receipts do nature of an exemption. Hence, the same rule
among others, that "(i)f the sale is subject the payment of all forms of taxes, duties, fees and not contain the phrase "zero- of strict interpretation against the taxpayer-
to zero percent (0%) value-added tax, imposts, pursuant to Section 13 of Republic Act rated claimant applies to the claim. 14 In the present
the term 'zero-rated sale' shall be written (R.A.) No. 6395 (An Act Revising the Charter of the case, petitioner's claim for a refund or tax
or printed prominently on the invoice or National Power Corporation). In view thereof and credit of input VAT is anchored on Section 112
receipt." pursuant to Section 108 (B) (3) of the National (A) of the NIRC, viz.: Section 112 .Refunds or
Internal Revenue Code (NIRC), petitioner's power Tax Credits of Input Tax. — (A) Zero-rated or
generation services to NPC is zero-rated. Under Effectively Zero-rated Sales. — any VAT-
Section 112 (A) of the NIRC, 4 a VAT-registered registered person, whose sales are zero-rated
taxpayer may, within two years after the close of or effectively zero-rated may, within two (2)
the taxable quarter, apply for the issuance of a tax years after the close of the taxable quarter
credit or refund of creditable input tax due or paid when the sales were made, apply for the
and attributable to zero-rated or effectively zero- issuance of a tax credit certificate or refund of
rated sales. Hence, on 20 June 2000 and 13 June creditable input tax due or paid attributable to
2001, WMPC filed with the Commissioner of such sales, except transitional input tax, to the
Internal Revenue (CIR) applications for a tax credit extent that such input tax has not been applied
certificate of its input VAT covering the taxable 3rd against output tax: Provided, however, That in
and 4th quarters of 1999 (amounting to the case of zero-rated sales under Section
P3,675,026.67) 5 and all the taxable quarters of 106(A)(2)(a)(1), (2) and (B) and Section 108
2000 (amounting to P5,649,256.81). Noting that (B)(1) and (2), the acceptable foreign currency
the CIR was not acting on its application, and exchange proceeds thereof had been duly
fearing that its claim would soon be barred by accounted for in accordance with the rules and
prescription, WMPC on 28 September 2001 filed regulations of the Bangko Sentral ng Pilipinas
with the Court of Tax Appeals (CTA) in Division a (BSP): Provided, further, That where the
Petition for Review docketed, seeking refund/tax taxpayer is engaged in zero-rated or
credit certificates for the total amount of effectively zero-rated sale and also in taxable
P9,324,283.30. The CIR filed its Comment on the or exempt sale of goods of properties or
CTA Petition, arguing that WMPC was not entitled services, and the amount of creditable input
to the latter's claim for a tax refund in view of its tax due or paid cannot be directly and entirely
failure to comply with the invoicing requirements attributed to any one of the transactions, it
under Section 113 of the NIRC in relation to shall be allocated proportionately on the basis
invoicing requirments. On 1 September 2006, the of the volume of sales. A taxpayer engaged in
CTA Second Division dismissed ° the Petition. It zero-rated or effectively zero-rated sale may
held that while petitioner submitted in evidence its apply for the issuance of a tax credit
Quarterly VAT Returns for the periods applied for, certificate, or refund of creditable input tax due
 "the same do not reflect any zero-rated or or paid, attributable to the sale. In a claim for
effectively zero-rated sales allegedly incurred tax refund or tax credit, the applicant must
during said periods. The spaces provided for such prove not only entitlement to the grant of the
amounts were left blank, which only shows that claim under substantive law. It must also show
there existed no zero- rated or effectively zero- satisfaction of all the documentary and
rated sales for the 3rd and 4th quarters of 1999 and evidentiary requirements for an administrative
the four quarters of 2000." Moreover, it found that claim for a refund or tax credit. Hence. the
petitioner's VAT Invoices and Official Receipts did mere fact that petitioner's application for zero-
not contain on their face the phrase "zero-rated," rating has been approved by the CIR does not,
contrary to Section 4.108-1 of RR 7-95. by itself, justify the grant of a refund or tax
credit. The taxpayer claiming the refund must
further comply with the invoicing and
accounting requirements mandated by the
NIRC, as well as by revenue regulations
implementing them. Under the NIRC, a
creditable input tax should be evidenced by a
VAT invoice or official receipt, which may only
be considered as such when it complies with
the requirements of R 7-95, particularly
Section 4.108-1. This section requires, among
others, that "(i)f the sale is subject to zero
percent (0%) value-added tax, the term 'zero-
rated sale' shall be written or printed
prominently on the invoice or receipt.”

27. Silicon Phil., Inc. The burden of proving entitlement to a Silicon is engaged in the business of exporting WON it is required to indicate Yes, an Authority to Print and the word “zero-
vs. CIR, G.R. No. refund lies with the claimant since it is integrated circuit (IC’s) components. an Authority to Print and the rated” must be indicated.
172378, January 17, akin to an exemption from taxes. word “zerorated” in export
2011 It filed an application for credit/refund of unutilized sales invoices in order to There are two kinds of input VAT credits: one
input VAT in the amount of P31,902,507.50. claim for refund for unutilized is a credit of input VAT attributable to zero-
input VAT rated sales, and the other is a credit of input
However, BIR argues that Silicon’s failure to VAT on capital goods.
indicate their ATP and the words “zero-rated” in its
export sales invoices is fatal to its cause. While it is not required to indicate the ATP on
the invoices or receipts, securing an ATP prior
CTA only allowed the deduction of P9,898,867.00 to printing said invoices or receipts is required
because training, office supplies and other similar under the NIRC. Thus, it is required for a
items were not considered as input VAT on capital claimant of unutilized input VAT on zero-rated
goods sales to present proof that it has secured an
ATP from the BIR - failure to do so would be
fatal. In this case, there was non-presentation
of the ATP.
 Failure to print the word “zero-rated” on the
sales invoices is fatal to a claim for refund as
it is required by RR 7-95.

Credit of input VAT on capital goods refers

only to properties with estimated useful life
greater than one year and which are treated
as depreciable assets, used directly or
indirectly in the production or sale of taxable
goods or services. It is clearly apparent that
training materials, office supplies and other
similar items are not capital goods.

28. Renato V. Diaz, et Tollway operators are franchise grantees Renato Diaz and Aurora Timbol filed a petition for WON the government is No, the government is not unlawfully
al. vs. Secretary of and they do not belong to exceptions (the declaratory relief assailing the validity of value- unlawfully expanding VAT expanding VAT.
Finance, et al., G.R. low-income radio and/or television added tax (VAT) on the collections of tollway coverage by including tollway
No. 193007, July 19, broadcasting companies with gross operators. Petitioners hold the view that Congress operators and tollway Tollway operators are franchise grantees and
2011 annual incomes of less than P10 million did not, when it enacted the NIRC, intend to include operations in the terms they do not belong to exceptions that Section
and gas and water utilities) that Section toll fees within the meaning of sale of services that franchise grantees and sale of 119 spares from the payment of value added
119 spares from the payment of VAT. are subject to VAT; that a toll fee is a users tax, not services tax (VAT); The word “franchise” broadly
The word “franchise” broadly covers a sale of services; that to impose VAT on toll fees covers government grants of a special right to
government grants of a special right to do would amount to a tax on public service; and that, do an act or series of acts of public concern.—
an act or series of acts of public concern. since VAT was never factored into the formula for And not only do tollway operators come under
computing toll fees, its imposition would violate the the broad term “all kinds of services,” they also
non-impairment clause of the constitution. The come under the specific class described in
government avers that the NIRC imposes VAT on Section 108 as “all other franchise grantees”
all kinds of services of franchise grantees, including who are subject to VAT, “except those under
tollway operations, except where the law provides Section 119 of this Code.” Tollway operators
otherwise. are franchise grantees and they do not belong
to exceptions (the low-income radio and/or
television broadcasting companies with gross
annual incomes of less than P10 million and
gas and water utilities) that Section 119
spares from the payment of VAT. The word
“franchise” broadly covers government grants
of a special right to do an act or series of acts
of public concern.

29. KEPCO Phils. V. For a VAT-registered taxpayer to claim a KEPCO is a domestic corporation, and a VAT- WON KEPCO’s failure to No, KEPCO is not entitled to the refund.
CIR, G.R. No. 179961, refund for unutilized input VAT for zero- registered taxpayer, engaged in the production and imprint the words "zero-rated"
31 January 2011 rated sales, it must duly prove its sale of electricity as an independent power on its official receipts issued Based on the Sec. 108 (b)(3) of the NIRC in
compliance to the requirements for tax producer. It sells electricity to the NPC. It filed an to NPC justifies an outright relation to Sec. 13 of the Revised NPC
exemption. One of these requirements is application for effective zero-rating of its sales of Charter, there is no doubt that NPC is an entity
electricty to the NPC at the CIR, claiming that it was with a special charter and exempt from
 the imprinting of the words "zerorated" in entitled to refund of P10,527,202.54 for its reported denial of its claim for refund of payment of all forms of taxes, including VAT.
every invoice issued with each sale. unutilized input VAT for the four quarters of 1999. unutilized input tax credits As such, services rendered by any VAT-
registered person/entity, like KEPCO, to NPC
The CTA denied the claim for refund for KEPCO’s are effectively subject to 0% rate. However, for
failure to properly substantiate its effectively zero- effective zero rating, the VAT-registered
rated sales by noncompliance with the invoicing taxpayer must comply with invoicing
requirements. requirements under Secs. 113 and 237 of the
NIRC. Such provisions provide that a VAT-
registered person shall for every sale issue an
invoice or receipt wherein the word "zero-
rated" is imprinted therein.

Well-settled in this jurisdiction is the fact that

actions for tax refund are in the nature of a
claim for exemption and the law is construed
in strictissimi juris against the taxpayer. The
pieces of evidence presented entitling a
taxpayer to an exemption are also strictissimi
scrutinized and must be duly proven.

30. CIR vs. Sony Phil., There must be a grant of authority before On November 1998, the CIR issued Letter of WON Sony is liable for The Court finds no merit in the petition, and
Inc., G.R. No. 178697, any revenue officer can conduct an Authority No. 000019734 (LOA 19734) authorizing deficiency VAT therefore the petition was denied.
November 17, 2010 examination or assessment. certain revenue officers to examine Sony’s books
of accounts and other accounting records The CIR insists that LOA 19734, although it
regarding revenue taxes for ―the period 1997 and states ―the period 1997 and unverified\ prior
unverified prior years. On December 1999, a years, should be understood to mean the
preliminary assessment for 1997 deficiency taxes fiscal year ending in March 31, 1998. The
and penalties was issued by the CIR which Court cannot agree.

Sony protested. Thereafter, acting on the protest, Based on Section 13 of the Tax Code, a Letter
the CIR issued final assessment notices, the formal of Authority or LOA is the authority given to the
letter of demand and the details of discrepancies, appropriate revenue officer assigned to
with a total of Php 15,895,632.65. Sony asked for perform assessment functions. There must be
re-evaluation of the aforementioned assessment a grant of authority before any revenue officer
on February 2000, and submitted relevant can conduct an examination or assessment.
documents in support of its protest On October Equally important is that the revenue officer so
2000, within 30 days after the lapse of 180 days authorized must not go beyond the authority
from submission of the said supporting documents given. In the absence of such an authority, the
to the CIR, Sony filed a petition for review before assessment or examination is a nullity.
the CTA.
The phrase ―and unverified prior years,‖
violated Section C of Revenue Memorandum
Order No. 43-90 dated September 20, 1990,
 the pertinent portion of which reads:

3. A Letter of Authority should cover a taxable

period not exceeding one taxable year. The
practice of issuing L/As covering audit
of ―unverified prior years is hereby
prohibited. If the audit of a taxpayer shall
include more than one taxable period, the
other periods or years shall be specifically
indicated in the L/A. Page 54 of 68.

31. Panasonic A taxpayer has to be VAT-registered and Panasonic is a registered value-added tax (VAT) WON the CTA en banc Yes, it was denied correctly.
Communications must comply with invoicing requirements enterprise. correctly denied petitioner
Imaging Corp. of the otherwise its claim for tax credit/refund of Panasonic’s claim for refund The VAT is a tax on consumption, an indirect
Phil. vs. CIR, G.R. No. VAT on its purchases shall be denied Believing its export sales were zerorated for VAT of the VAT it paid as a tax that the provider of goods or services may
178090, February 8, under Section 106(A)(2)(a)(1) of the 1997 NIRC, zerorated taxpayer on the pass on to his customers. Under the VAT
2010 Panasonic paid input VAT attributable to its zero- ground that its sales invoices method of taxation, which is invoice-based, an
rated sales and later asked for a refund or tax credit did not state on their faces entity can subtract from the VAT charged on
of what it paid which they believed were in excess that its sales were "zero- its sales or outputs the VAT it paid on its
or unapplied. When the BIR did not act on the rated." purchases, inputs and imports.The difference
same, Panasonic filed a petition for review with the in tax shown on invoices passed and invoices
CTA, averring the inaction of the respondent CIR. received is the tax paid to the government. In
case the tax on invoices received exceeds that
CTA’s First Division denied the petition and said on invoices passed, a tax refund may be
that while petitioner Panasonic’s export sales were claimed.
subject to 0% VAT the same did not qualify for
zero-rating because the word "zerorated" was not For the effective zero rating of such
printed on its export invoices which violates the transactions, however, the taxpayer has to be
invoicing requirements of Section 4.108-1 of VAT-registered and must comply with
Revenue Regulations (RR) 7-95. invoicing requirements otherwise its claim for
tax credit/refund of VAT on its purchases shall
Petitioner Panasonic points out, however, that in be denied considering that the invoice it is
requiring the printing on its sales invoices of the issuing to its customers does not depict its
word "zerorated," the Secretary of Finance unduly being a VAT-registered taxpayer whose sales
expanded, amended, and modified by a mere are classified as zero-rated sales.
regulation (Section 4.108-1 of RR 7-95) the letter
and spirit of Sections 113 and 237 of the 1997 Section 4.108-1 of RR 7-95 proceeds from the
NIRC, prior to their amendment by R.A. 9337 rule-making authority granted to the Secretary
of Finance under Section 245 of the 1977
NIRC (Presidential Decree 1158) for the
efficient enforcement of the tax code and of
course its amendments.The requirement is
reasonable and is in accord with the efficient
 collection of VAT from the covered sales of
goods and services.

32. CIR v. SM Prime Operators of cinemas and theater The BIR sent a Preliminary Assessment Notice to WON SM Prime is subject to No, It is not subject to VAT.
Holdings, Inc., G.R. houses are not subject to VAT but the respondents for VAT deficiency on cinema VAT
No. 183505, 26 subject to local amusement tax imposed ticket sales in the amount of P119M for taxable Section 108 of the Tax Code provides that
February 2010 by the LGU. year 2000. After protest and appeal, the CTA First subject to VAT is the “sale or exchange of
Division however ruled that the activity of showing services including lessors or distributors of
cinematographic films is not a service covered by cinematographic films and other similar
VAT under the NIRC of 4. 1997, but an activity services does not include cinema”. However,
subject to amusement tax under RA 7160. in this case, the Supreme Court noted that the
words, “including” and “similar services”
CTA En Banc also had a different interpretation merely indicate that the enumeration is by way
and decided that Sec. 108 of the NIRC actually had of example only.
set forth an exhaustive enumeration of what
services are intended to be subject to VAT and What Section 108 contemplates is not the
therefore should subject the cinema-relative same as the showing or exhibition of motion
activities of SM Prime to VAT. picture films because “exhibition” means to
show or display while “lease” is defined as a
“contract by which the owner grants another
the right to possess, use, and enjoy it in a
specified period of time in exchange for a
stipulated price”.

In the case, SM Prime was merely exhibiting

and not leasing cinematographic films. It was
not legislative intent to impose VAT on
operators of cinemas, as it had become their
intent to transfer the power to impose
amusement tax exclusively to the local
government.

33. Tambunting Pawnshops, being The Commissioner issued anv assessment for WON pawnshops are liable to NO. R.A. No. 9238 (2004) finally classified
Pawnshop, Inc. v. CIR, non-bank financial deficiency VAT against H. Tambunting Pawnshop pay VAT. pawnshops as Other Non-bank Financial
G.R. No. 179085, 21 intermediaries, are for the year 1999. Intermediaries. The Court finds that pawn
January 2010 exempted from VAT but liable to 0%-5% shops should have been treated as non-bank
percentage tax on grossvreceipts as the Petitioner protested the assessment. As the protest financial intermediaries from the very
case mayvbe. merited no response, it filed a Petition for Review beginning, subject to the appropriate taxes
with the Court of Tax Appeals (CTA) pursuant to provided by law.
Section 228 of the National Internal Revenue
Code, raising the argumentthat Pawnshops are not Since petitioner is a non-bank financial
subject to Value Added Tax pursuant to Section intermediary, it is subject to 10% VAT for the
108 of the National Internal Revenue tax years 1996 to 2002; however, with the
Code. levy, assessment and collection of VAT from
 non-bank financial intermediaries being
The CTA ruled that the petitioner is liable for the specifically deferred by law, then petitioner is
deficiency VAT. The petitioner asserted that a not liable for VAT during these tax years.
pawnshop is not enumerated as one of those But with the full implementation of the VAT
engaged in "sale or exchange of services" in system on non-bank financial intermediaries
Section 108 starting January 1, 2003, petitioner is liable for
of the NIRC and cited the case of Commissioner of 10% VAT for said tax year.
Internal Revenue v. Michel J. Lhuillier Pawnshops,
Inc. And beginning 2004 up to the present, by
virtue of R.A. No. 9238, petitioner is no longer
liable for VAT but it is subject to percentage
tax on gross receipts from 0% to 5%, as
the case may be.

34. CIR vs. Burmeister In order for services to be subjected to Burmeister and Wain Scandinavian Contractor WON BWSCMI should be NO. Section 102 of the NIRC (Now Section
and Wain 0% VAT it must meet the following Mindanao Inc. (BWSCMI), a domestic company, ubject to 0% VAT as it is 108) provides the requirements in order for
Scandinavian requirements: was subcontracted by the Consortium to operate performing services for a services subjected to 0% VAT. In order for
Contractor Mindanao, and maintain power barges awarded by the person/company doing services to be subjected to 0% VAT it must
Inc., G.R. No. 153205, 1. Services should be NAPOCOR. business outside of the meet the following requirements:
January 22, 2007 other than “processing, manufacturing or BWSCMI asked for a ruling from BIR to ensure the Philippines.
repacking of goods.” tax implications on the services it will perform in 1. Services should be other than “processing,
favor of the Consortium. It was able to secure two manufacturing or repacking of goods.”
2. Services are paid in acceptable foreign BIR rulings stating that it shall be subject to zero- 2. Services are paid in acceptable foreign
currency and are accounted for in rated VAT. However, BWSCMI mistakenly paid for currency and are accounted for in accordance
accordance with the VAT. with the Bangko Sentral ng
Bangko Sentral ng Pilipinas rules. Pilipinas rules.
On the strength of the two rulings BWSCMI filed a
3. Recipient of such claim for the issuance of a tax credit in its favor. To 3. Recipients of such service are doing
service is doing business outside the stop the prescriptive period of the tax credit business outside the Philippines. In this case,
Philippines. BWSCMI filed a petition for review with the CTA. the recipient of the services of BWSCMI is the
consortium. While the Consortium’s principal
BIR claimed that in order for BWSCMI to enjoy the members are nonresident foreign
zerorating for VAT the services it performs should corporations, the Consortium itself is doing
be destined to be consumed abroad as stated in business in the Philippines.
Sec. 102 of the NIRC.
The Consortium’s contract with NAPOCOR is
for a term of 15 years. Considering the length
of time that the Consortium will operate and
maintain the power barges it cannot be
classified as a single or isolated transaction.

35. CIR v. American As a general rule, the Respondent, a VAT taxpayer, is the Philippine WON AMEX Philippines is YES. Section 102 (now Section 108) (B) (2)
Express International, VAT system uses the Branch of AMEX USA entitled to a refund. of the Tax Code provides for the services or
destination principle. tasked with servicing a unit of AMEX-Hongkong transactions subject to a 0% rate.
Inc., G.R. No. 152609, Branch. It facilitates the collection of the latter’s
29 June 2005 However, our VAT law itself provides for receivables from card members situated in the As a general rule, the VAT system uses the
a clear Philippines and payment to service establishments destination principle as a basis for the
exception, under which the supply of in the Philippines. jurisdictional reach of the tax.
service shall be zero-rated when the
following requirements are met: It filed with BIR a letter request for the refund of its In the present case, the services rendered by
1997 excess input taxes, citing as basis Section the respondent are performed upon its
1. The service is 110B of the 1997 Tax Code. sending to its foreign client the credit card
performed in the drafts and bills it has gathered from service
Philippines; In addition, the respondent relied on VAT Ruling establishments here, and are, therefore,
2. The service falls No. 080-89. Petitioner CIR claimed, among others, services also consumed in the Philippines.
under any of the that the claim for refund should be construed strictly
categories provided against the claimant as they partake of the nature Under the destination principle, such service
in Section 102(b) of of tax exemption. is subject to 10% VAT. However, the law
the Tax Code; and clearly provides for an exception to the
3. It is paid for in destination principle --- that is 0% VAT rate for
acceptable foreign services that are performed in the Philippines,
currency that is “paid for in acceptable foreign currency and
accounted for in accounted for in accordance with the rules and
accordance with regulations of BSP.” The respondent meets
the regulations of requirements for exemption, and
the Bangko Sentral thus should be zero-rated.
ng Pilipinas.

If services meet these

requirements, they are
zero-rated.

36. Contex Corp. vs. Only VAT-Registered Contex is an SMBA-registered firm which exempts WON the CA is correct in YES. Petitioner’s claim to VAT exemption in
Commissioner of entities can claim Input it from local and finding that the VAT the instant case for its purchases of supplies
Internal Revenue, G.R. VAT Credit/Refund. national internal revenue taxes, except for the exemption embodied in Rep. and raw materials is founded mainly on
No. 151135, July 2, preferential tax provided for in sec. 12 of RA 7227. Act No. 7227 does not apply Section 12 (b) and (c) of Rep. Act No. 7227,
2004 Petitioner is registered to the petitioner as a which basically exempts them from all national
as a NON-VAT taxpayer Cortext Corp. also registered with the BIR as a non- purchaser. and local internal revenue taxes, including
and thus, is exempt from VAT taxpayer. Context now is claiming a tax credit VAT and Section 4 (A)(a) of BIR Revenue
VAT. As an exempt VAT for 10% VAT passed by its suppliers to Contex Regulations No. 1-95.
taxpayer, it is not when Contex purchased materials from the said
allowed any tax credit on suppliers. Petitioner’s claim, however, for exemption
VAT (input tax) from VAT for its purchases of supplies and raw
previously paid. BIR asked the CTA to apply the rule that claims for materials is incongruous with its claim that it is
refund are strictly VAT-Exempt, for only VAT-Registered entities
construed against the taxpayer. Since the can claim Input VAT Credit/Refund.
petitioner failed to establish both its right to a tax
 refund or tax credit and its compliance with the While it is true that the petitioner should not
rules on tax refund as provided for in Sections 204 have been liable for the VAT inadvertently
and 229 of the Tax Code, its claim should be passed on to it by its supplier since such is a
denied. zero-rated sale on the part of the supplier, the
petitioner is not the proper party to claim such
CTA partially granted the refund and held that the VAT refund. Since the transaction is deemed
petitioner is exempt from the imposition of input a zero-rated sale, the petitioner's supplier may
VAT on its purchases of supplies and materials. CA claim an Input VAT credit with no
then reversed CTA ruling and held that the corresponding Output VAT
exemption from duties and taxes on the importation liability.Congruently, no Output VAT may be
of raw materials, capital, and equipment of SBFZ- passed on to the petitioner.
registered enterprises under Rep. Act No. 7227
and its implementing rules covers only “the VAT
imposable under Section 107 of the [Tax Code],
which is a direct liability of the importer, and in no
way includes the value-added tax of the seller
exporter the burden of which was passed on to.

DOCUMENTARY STAMP TAX

Case Title Case Principle Summary of Facts Issue/s Rulinig

1. CIR v. Traders Tax assessments by tax examiners are Traders Royal Bank (TRB) is a domestic WON the Trust Indenture YES. The conduct by banks, such as TRB, of
Royal Bank, G.R. No. presumed correct and made in good faith. corporation duly registered with the Securities and Agreement of TRB can be trusts and other fiduciary business (in 1996
167134, March 18, The taxpayer has the duty to prove Exchange Commission (SEC) and authorized by considered as deposits and
2015. otherwise. the Bangko Sentral ng Pilipinas (BSP) to engage in thus subject to DST and 1997) was governed by the 1993 MORB,
commercial which enumerated the minimum documentary
In the absence of proof of any banking. requirements for trusts, including a written
irregularities in the agreement or indenture and a plan (i.e.,
performance of duties, an assessment The BIR conducted an investigation concerning all written declaration of trust) for common trust
duly made by a Bureau of national internal revenue tax liabilities of TRB for funds (CTF). The importance of the actual
Internal Revenue examiner and taxable years 1996-1997. Following the Trust Indenture Agreements cannot be
approved by his superior officers investigation, the BIR issued a Pre-Assessment gainsaid. The only way the Court can
will not be disturbed. All presumptions are Notice and later on issued a Formal Letter of determine the actual relationship between
in favor of the correctness of tax Demand and Assessment Notice against TRB for TRB and its clients is through a scrutiny of the
assessments. deficiency Documentary Stamp Tax (DST) for 1996 terms and conditions embodied in the said
and 1997, in the total amount of ₱28,867,296.90 Agreements.
from special savings deposit, trust fund, mega
savings deposit and surcharge. In this case, not a single copy of a Trust
Indenture Agreement and/or the Certificate of
TRB VP Navarro wrote a letter protesting the Participation (issued to the client as evidence
 assessments of the BIR on the following grounds: of the trust) could be found in the records. The
(a) that the Special Savings Deposits being savings burden fell upon TRB to produce the Trust
deposit accounts are not subject to the DST, and Indenture Agreements, not only because the
(b) the Trust Indenture Agreement[s] are not said Agreements were in its possession, but
subject to DST for the reason thatrelationship more importantly, because its protest against
established between parties is that of the trustor the DST assessments was entirely grounded
and on the allegation that said Agreements were
trustee. trusts. Thus, TRB had the obligation of proving
this fact.
The CIR denied the protest of TRB and adopted the
position of the BIRexaminers that the Special TRB made no attempt to explain why it did not
Savings Deposit should be deemed a time deposit present the Trust Indenture Agreements, and
account subject to DST under Section 180 of the it also did not take the effort to establish that
Tax Code of 1977. any of the exceptional circumstances under
Rule 130, Section 9 of the ROC was extant in
As for the Trust Indenture Agreements, the CIR this case. Moreover, Mr. Navarro’s testimony
opined that they were but a form of deposit, consisted essentially of conclusions of law and
likewise subject to DST. In an earlier case, CIR general descriptions of trusts using the very
ruled that the essential features/characteristics of a same words and terms under Section X407 of
Trust the 1993 MORB.
Agreement are as follows: a) The required
minimum deposit is ₱50,000.00; b) The shortest In contrast, records show that the BIR
maturity date is 30 days; c) It is not payable on sight examiners conducted a thorough audit and
or demand, in case of pre-termination, prior written investigation of the books of account of TRB.
notice is required; d) It is automatically renewed in Mr. Martinez, a BIR Revenue Officer, testified
case the depositor fails to withdraw the deposit at that it took the BIR team of examiners more
maturity date; e) The bank used confirmation of than 1-year to conduct and complete the audit
participation to evidence the acceptance of the and examination of the documents of TRB,
funds from the trustor. which consisted of approximately 20,000
pages.
CTA ruled that the Special Savings Deposits, Mega
Savings Deposits are subject to DST. The ordinary Given the failure of TRB to present proof of
saving account passbook can be considered a error in the tax assessments of the BIR, the
certificate of deposit and thus subject to DST. While Court ordered TRB to pay the deficiency
the Trust Indenture Agreements were not subject Documentary Stamp Taxes on its Trust
to DST. Indenture Agreements for the taxable years
1996 and 1997 plus 20% delinquency interest
The CTA en banc affirmed the decision of the CTA from February 14, 2002 until full payment
division. thereof.

2. CIR vs. The Insular A registration for CDA is not necessary Whether Insular Life is required to pay the DST Whether Insular Life is No. The Supreme Court, in reference to its
Life Assurance Co. for a cooperative to be exempted from the assailed by Facts: Respondent Insular Life required to pay the DST pronouncement in Republic of the Philippines
payment of percentages. Assurance, a corporation duly organized and assailed by the CIR v. Sunlife Assurance Company of Canada
Ltd., G.R. No. 197192, existing under and by virtue of laws of the which states that “under the Tax Code
June 4, 2014. Philippines received an Assessment Notice with although respondent is a cooperative,
Formal letter of Demand both dated July 29, 2004, registration with the CDA is not necessary in
assessing respondent for deficiency DST on its order for it to be exempt from the payment of
premiums on direct/business sums assured for both percentage taxes on insurance
calendar 2002 amounting P93, 934,59.21. Hence, premiums, under Section 121, and
Insular Life filed its Protest Letter on November 4, documentary stamp taxes on policies of
2004 which was denied by the CIR for lack of insurance annuities it grants, under Section
factual and legal bases as Insular life received the 199. Applying the rule on stare decisis, the
Final Decision on Disputed Assessment (FDDA) CTA based on the doctrine enunciated in the
only on June 23, 2005. case of Sunlife as the factual circumstances of
both cases are substantially the same. The
On July 15, 2005, Insular Life filed a petition for Court ruled that Section 3 (e) of R.A. No. 6939
review before the Court of Tax Appeals (CTA). The does not impose registration with the CDA as
CTA rendered a Decision in favor of Insular Life as a condition precedent to claiming DST
it sufficiently established that it is a cooperative exemption. Even this law does not apply in this
company and therefore, it exempt from the DST on case.
the insurance policies it grants to its members. CIR
filed for a motion for reconsideration, but was The Court presented three justifications in
dismissed by the CTA. The subsequent Petition for Sunlife why registration with the CDA is not
Review before the CTA en banc was also denied. necessary for cooperatives to claim exemption
from DST.

First, the NIRC of 1997 does not require

registration with the CDA. No tax provision
requires a mutual life insurance company to
register with that agency in order to enjoy
exemption from both percentage and DST.
Although a provision of Section 8 of the
Revenue Memorandum Circular (RMC) No.
48-91 requires the submission of the
Certificate of Registration with the CDA before
the issuance of a tax exemption certificate,
that provision cannot prevail over the clear
absence of an equivalent requirement under
the Tax Code

The respondent correctly pointed out that in

other provisions of the NIRC, registration with
the CDA is expressly required in order to avail
of certain tax exemptions or preferential tax
treatment 18 — a requirement which is
noticeably absent in Section 199 of the NIRC.
Quoted below are examples of cooperatives
which are expressly mandated by law to be
registered with the CDA before their
transactions could be considered as
exempted from value added tax. This absence
of the registration requirement under Section
199 clearly manifests the intention of the
Legislative branch of the government to do
away with registration before the CDA for a
cooperative to benefit from the DST
exemption under this particular section.

Second, the provisions of the Cooperative

Code of the Philippines do not apply. The
history of the Cooperative Code was amply
discussed in Sunlife where it was noted that
cooperatives under the old law, Presidential
Decree (P.D.) No. 175 20 "referred only to an
organization composed primarily of small
producers and consumers who voluntarily
joined to form a business enterprise that they
themselves owned, controlled, and
patronized. The Bureau of Cooperatives
Development — under the Department of
Local Government and Community
Development (later Ministry of Agriculture) —
had the authority to register, regulate and
supervise only the following cooperatives: (1)
barrio associations involved in the issuance of
certificates of land transfer; (2) local or primary
cooperatives composed of natural persons
and/or barrio associations; (3) federations
composed of cooperatives that may or may
not perform business activities; and (4) unions
of cooperatives that did not perform any
business activities. Respondent does not fall
under any of the abovementioned types of
cooperatives required to be registered under
[P.D. No.] 175." Thus, when the subsequent
law, R.A. No. 6939, concerning cooperatives
was enacted, the respondent was not covered
by said law and was not required to be
registered.
 Third, the Insurance Code does not require
registration with the CDA. "The provisions of
this Code primarily govern insurance
contracts; only if a particular matter in question
is not specifically provided for shall the
provisions of the Civil Code on contracts and
special laws govern.

Following the above-stated reasoning, the

petition was denied.

3. CIR vs. Pilipinas The imposition of DST does not apply to Respondent Pilipinas Shell Petroleum Corporation Whether the respondent is Yes. PSPC is entitled for refund. The Court
Shell Petroleum all conveyances of real propery, but only (PSPC) was incorporated to construct, operate and entitled to the refund of the found no merit in petitioner's contention that
Corporation, G.R. No. sales of real property. maintain petroleum refineries, works, plant DST paid with the BIR Section 196 covers all transfers and
192398, September machinery, equipment dock and harbor facilities conveyances of real property for a valuable
29, 2014. and auxiliary works and other facilities of all kinds consideration. A perusal of the subject
and used in or in connection with the manufacture provision would clearly show it pertains only to
of products of all kinds which are wholly or partly sale transactions where real property is
derived from crude oil. PSPC entered into a Plan of conveyed to a purchaser for a consideration.
Merger with its affiliate, Shell Philippine Petroleum The phrase "granted, assigned, transferred or
Corporation (SPPC). In the said Plan of Merger, it otherwise conveyed" is qualified by the word
was provided that the entire assets and liabilities of "sold" which means that documentary stamp
SPPC will be transferred to, and absorbed by, tax under Section 196 is imposed on the
respondent as the surviving entity. The Securities transfer of realty by way of sale and does not
and Exchange Commission approved the merger apply to all conveyances of real property.
on July 1, 1999. Hence, on August 10, 1999, Indeed, as correctly noted by the respondent,
respondent paid to the BIR documentary stamp the fact that Section 196 refers to words
taxes amounting to P524,316.00 on the original "sold", "purchaser" and "consideration"
issuance of shares of stock of respondent issued in undoubtedly leads to the conclusion that only
exchange for the surrendered SPPC shares sales of real property are contemplated
pursuant to Section 175 of the National Internal therein. PSPC and SPPC entered into a
Revenue Code (NIRC). merger which might have a dissolution of the
absorbed or merged corporations, but there
The BIR confirmed that the merger between PSPC was no winding up of their affairs or liquidation
and SPPC was tax-free in nature as there was no of assets because the surviving corporation
gain nor loss shall be recognized, if, in pursuance automatically acquires all their rights,
to a plan of merger or consolidation, a shareholder privileges, and powers as well as their
exchanges stock in a corporation which is a party liabilities. Here, SPPC ceased to have any
to the merger or consolidation solely for the stock legal personality and respondent PSPC
of another corporation which is also a party to the stepped into everything that was SPPC's,
merger or consolidation. This ruling is pursuant to pursuant to the law and the terms of their Plan
Section 40 (C) (2) and (6) (b) of the NIRC. The BIR of Merger.
ruled, among others, that no gain or loss shall be
recognized by the stockholders of SPPC on the In a merger, the real properties are not
exchange of their shares of stock of SPPC solely deemed "sold" to the surviving corporation
for shares of stock of respondent pursuant to the and the latter could not be considered as
Plan of Merger. However, the BIR stated that the "purchaser" of realty since the real properties
issuance by PSPC of its own shares of stock to the subject of the merger were merely absorbed
shareholders of SPPC in exchange for the by the surviving corporation by operation of
surrendered certificates of stock of SPPC shall be law and these properties are deemed
subject to the documentary stamp tax (DST). This automatically transferred to and vested in the
led to PSPC to pay the amount of P22,101,407.64 surviving corporation without further act or
to the BIR representing DST on the transfer of real deed. Therefore, the transfer of real properties
property from SPPC to respondent. to the surviving corporation in pursuance of a
PSPC believed that it erroneously paid DST on its merger is not subject to documentary stamp
absorption of real property owned by SPPC, the tax. As stated at the outset, documentary
former filed a formal claim for refund or tax credit of stamp tax is imposed only on all conveyances,
the DST it paid to BIR. No action was taken by the deeds, instruments or writing where realty sold
BIR, thus, PSPC filed a petition for review before shall be conveyed to a purchaser or
the Court of Tax Appeals (CTA) in order to suspend purchasers. The transfer of SPPC's real
the running of the prescriptive period of two years. property to respondent was neither a sale nor
was it a conveyance of real property for a
Petitioner’s contention: PSPC is liable for the DST consideration contracted to be paid as
pursuant to BIR Ruling No. 2-2001 dated February contemplated under Section 196 of the Tax
2, 2001 which stated that, “tax-deferred exchange Code. Hence, Section 196 of the Tax Code is
of properties of a corporation, which is a party to a inapplicable and respondent is not liable for
merger or consolidation, solely for shares of stock documentary stamp tax.
in a corporation, which is also a party to the merger
or consolidation, is subject to the DST under
Section 176 if the properties to be transferred are
shares of stock or even certificates of obligations,
and also to the documentary stamp tax under
Section 196, if the properties to be transferred are
real properties.”

Respondent’s contention: The DST on the second

transaction has been erroneously paid and it
sought to claim for a refund or tax credit on the
amount it paid the BIR as the petitioner, in
referencing the BIR ruling vis-à-vis Section 196,
disregarded the qualifying word “sold” which
described the kind of transfer contemplated as
subject to DST.
 Both the CTA and the Court of Appeals held the
respondent is entitled for refund.

4. H. Tambunting In ruling for tax exemptions, strictissimi H. Tambunting Pawnshop appealed the adverse Whether Tambunting is No. Tambunting is not entitled to its claims of
Pawnshop, Inc. v. CIR, juris on claims of deduction should be decision promulgated on April 24, 2006 whereby entitled to its claim of deductions. The Court has agreed with the
G.R. No. 173373, July applied such that a taxpayer should be the Court of Tax Appeals En Banc (CTA En Banc) deductions CTA En Banc that because this case involved
29, 2013. able to prove that he is entitled for affirmed the decision of the CTA First Division assessments relating to transactions incurred
deduction under a specific provision of ordering the former to pay deficiency income taxes by Tambunting prior to the effectivity of
the statute amounting to P4,536,687.15 for the taxable year Republic Act No. 8424, (1997 NIRC), the
1997, plus 20% delinquency interest computed provisions governing the propriety of the
from August 29, 2000 until full payment, but deductions was Presidential Decree 1158
cancelling the compromise penalties for lack of (1977 NIRC). Following the rule on strictissimi
basis. The Bureau of Internal Revenue (BIR) juris on tax exemptions, when the taxpayer
issued assessment notices and demand letters claims a deduction, he must point to some
assessing Tambunting for deficiency percentage specific provision of the statute in which that
tax, income tax and compromise penalties for deduction is authorized and must be able to
taxable year 1997. Hence, Tambunting instituted prove that he is entitled to the deduction which
an administrative protest against the assessment the law allows. An item of expenditure,
notices and demand letters with the Commissioner therefore, must fall squarely within the
of Internal Revenue (CIR). Due to the CIR’s language of the law in order to be deductible.
inaction within the 180-day period prescribed by A mere averment that the taxpayer has
law, Tambunting brought a petition for review incurred a loss does not automatically warrant
before the CTA and En banc which denied it, a deduction from its gross income.
respectively.
As the CTA En Banc held, Tambunting did not
Petitioner’s contention: The CTA should have properly prove that it had incurred losses. The
allowed the deductions because it had been able to subasta books it presented were not the
point out the provisions of law authorizing the proper evidence of such losses from the
deductions; that it proved its entitlement to the auctions because they did not reflect the true
deductions through all the documentary and amounts of the proceeds of the auctions due
testimonial evidence presented in court. the to certain items having been left unsold after
provisions of Section 34 (A) (1) (b) of the 1997 the auctions. The rematado books did not also
NIRC, governing the types of evidence to prove a prove the amounts of capital because the
claim for deduction of expenses, were applicable figures reflected therein were only the
because the law took effect during the pendency of amounts given to the pawnees. It is interesting
the case in the CTA. They also incurred losses in to note, too, that the amounts received by the
its auction sales of which were shown in their pawnees were not the actual values of the
compliance of the requirements of Revenue pawned articles but were only fractions of the
Regulations No. 12-77 on the deductibility of its real values. Tambunting did not discharge its
losses. burden of substantiating its claim for
deductions due to the inadequacy of its
documentary support of its claim. Its reliance
on withholding tax returns, cash vouchers,
 lessor's certifications, and the contracts of
lease was futile because such documents had
scant probative value. As the CTA En Banc
succinctly put it, the law required Tambunting
to support its claim for deductions with the
corresponding official receipts issued by the
service providers concerned. Failing to
support with substantial evidence on its
claims, the petition was denied.

5. Fort Bonifacio The payment of taxes is not a condition This is a resolution for the motion for (1) Whether the prior payment No on both issues. On the first issue, the Court
Development precedent before a taxpayer can avail of reconsideration raised by the respondents on the of tax is necessary before a already settled the rule that prior payment of
Corporation v. CIR, the transitional input tax following arguments: 1) Prior payment of tax is taxpayer can avail of the 8% taxes is not necessary before a taxpayer could
G.R. No. 173425, inherent in the nature and payment of the 8% transitional input tax credit; (2) avail of the 8% transitional input tax credit.
January 22, 2013 transitional input tax; 2) For failure to clearly prove Whether or not the petitioner Section 105 of the NIRC provides that for a
its entitlement to the transitional input tax credit, is entitled to transitional input taxpayer to avail of the 8% transitional input
petitioner's claim for tax refund must fail in light of tax credits or tax refund tax credit, all that is required from the taxpayer
the basic doctrine that tax refund partakes of the is to file a beginning inventory with the Bureau
nature of a tax exemption which should be of Internal Revenue (BIR). It was never
construed strictissimi juris against the taxpayer. mentioned in Section 105 that prior payment
of taxes is a requirement. On the second
issue, A transitional input tax credit is not a tax
refund per se but a tax credit. Logically, prior
payment of taxes is not required before a
taxpayer could avail of transitional input tax
credit. As the Court has declared on its
decision, "[t]ax credit is not synonymous to tax
refund. Tax refund is defined as the money
that a taxpayer overpaid and is thus returned
by the taxing authority. Tax credit, on the other
hand, is an amount subtracted directly from
one's total tax liability. It is any amount given
to a taxpayer as a subsidy, a refund, or an
incentive to encourage investment." It also
emphasized that a transitional input tax credit
can be claimed even if there is no actual
payment of VAT in the underlying transaction.
In such cases, the tax base used shall be the
value of the beginning inventory of goods,
materials and supplies.

As regards Section 110, while the law only

provides for a tax credit, a taxpayer who
 erroneously or excessively pays his output tax
is still entitled to recover the payments he
made either as a tax credit or a tax refund. In
this case, since petitioner still has available
transitional input tax credit, it filed a claim for
refund to recover the output VAT it
erroneously or excessively paid for the 1st
quarter of 1997. Thus, there is no reason for
denying its claim for tax refund/credit. The
motion for reconsideration was denied.

6. PHILACOR Credit The issuance and assignment of Philacor is engaged in the business of retail Whether Philacor is liable for No. Philacor is not liable for the DST on the
Corporation v. CIR, promissory note will not be liable for the financing. It is a form of selling in which a the DST due on the issuance issuance of promissory notes. Section 173 of
G.R. No. 169899, payment of DST prospective buyer of a home appliance with neither and assignment of promissory the 1997 NIRC names those who are primarily
February 6, 2013 cash nor any credit card may purchase appliances notes liable for the DST: the person (1) making; (2)
on installment basis from an appliance dealer. After signing; (3) issuing; (4) accepting; or (5)
Philacor conducts a credit investigation and transferring the taxable documents,
approves the buyer's application, the buyer instruments or papers. Should these parties
executes a unilateral promissory note in favor of be exempted from paying tax, the other party
the appliance dealer. The same promissory note is who is not exempt would then be liable.
subsequently assigned by the appliance dealer to Philacor did not make, sign, issue, accept or
Philacor. Pursuant to a Letter of Authority, transfer the promissory notes. The acts of
Philacor’s books of account and other accounting making, signing, issuing and transferring are
record were examined by a Revenue Officer Mejia. unambiguous. The buyers of the appliances
Philacor received tentative computations of made, signed and issued the documents
deficiency taxes. RO Mejia sent a letter to Philaco subject to tax, while the appliance dealer
revising the preliminary assessments. Philacor transferred these documents to Philacor which
then received Pre-Assessment Notices (PANs), all likewise indisputably received or "accepted"
dated July 18, 1996, covering the alleged them. "Acceptance," however, is an act that is
deficiency income, percentage and DSTs, not even applicable to promissory notes, but
including increments. On February 3, 1998, only to bills of exchange. The Court clarified
Philacor received demand letters and the that a party to a taxable transaction who
corresponding assessment notices, all dated "accepts" any documents or instruments in the
January 28, 1998 totaling to P17,442,231.61. plain and ordinary meaning of the act (such as
Philacor protested the PANs with request of the shipper in the cited case) does not become
reconsideration and reinvestigation. It alleged that primarily liable for the tax.
the assessed deficiency income tax was
erroneously computed failing to consider the In the same way, Philacor cannot be made
reversing entries of the revenue re As for the primarily liable for the DST on the issuance of
deficiency DST, Philacor claims that the accredited the subject promissory notes, just because it
appliance dealers were required by law to affix the had "accepted" the promissory notes in the
documentary stamps on all promissory notes plain and ordinary meaning. In this regard,
purchased until the enactment of Republic Act No. Section 173 of the 1997 NIRC assumes
 7660, otherwise known as An Act Rationalizing materiality as it determines liability should the
Further the Structure and Administration of the parties who are primarily liable turn out to be
Documentary Stamp Tax, 9 which took effect on exempted from paying tax; the other party to
January 15, 1994. In addition, Philacor filed, on the the transaction then becomes liable. In the
following day, a supplemental protest, arguing that same way, Philacor is not liable for the
the assessments were void for failure to state the assignment of promissory notes as there are
law and the facts on which they were based. no laws that specify such transfer and/or
assignment is to be taxed, there would be no
The CTA Division ruled that Philacor failed to basis to recognize an imposition. The settled
declare part of its income, making it liable for rule is that in case of doubt, tax laws must be
deficiency income tax and percentage tax. construed strictly against the State and
However, it also found that the Commissioner of liberally in favor of the taxpayer. The reason
Internal Revenue (CIR) erred in his analysis of the for this ruling is not hard to grasp: taxes, as
entries in Philacor's books thereby considerably burdens which must be endured by the
reducing Philacor's liability to a deficiency income taxpayer, should not be presumed to go
tax of P1,757,262.47 and a deficiency percentage beyond what the law expressly and clearly
tax of P613,987.86. The CTA also ruled that declare. The petition was granted.
Philacor is liable for the DST on the issuance of the
promissory notes and their subsequent transfer or
assignment. It failed to prove that the DST on its
promissory notes had been paid for these two
transactions. Hence, the CTA held Philacor to be
liable for deficiency DST.

NIRC RMEDIES
Case Title Case Principle Summary of Facts Issue/s Ruling
1. CIR v. Yumex A company registered with the PEZA A Notice of Informal Conference was issued by the Whether the CTA Division YES. The payment by respondent of the other
Philippines and is under ITH is exempt from IAET. If Revenue District Officer (RDO) to Yumex informing can take cognizance of the items in the FLD/FAN, particularly, the basic
Corporation, G.R. No. the CIR issues an IAET assessment the latter that the investigation of its accounting issue of the invalidity of the deficiency income and fringe benefits taxes
222476, May 5, 2021. against it on the basis that only PEZA- records for the taxable year 2007 resulted in a assessment against and compromise penalty, preclude it from
registered companies under the 5% tax preliminary assessment of income tax, value- respondent for allegedly questioning the validity of the issuance of the
regime are exempt from IAET, the added tax, expanded withholding tax, fringe having been issued in assessment notices.
company may protest the assessment. benefits tax, IAET, and compromise penalty. violation of respondent's due
Additionally, Section 228 of the Tax Yumex then claimed that it is PEZA registered and process considering that it The manner by which the assessment is
Code clearly requires that the taxpayer should not be subject to IAET. had paid deficiency taxes issued is a distinct matter in itself from the
must first be informed that he is liable for which are uncontested. contents of the assessment. Respondent's
deficiency taxes through the sending of It was however just sent by mail and the BIR did not voluntary payment, while it may be viewed as
a PAN. offer any explanation for the verification of the an acknowledgment of its tax deficiencies for
details of the post office. BIR said that sending such some of the assessed items, is not necessarily
He must be informed of the facts and the mail already constitutes constructive notice for an outright waiver of its right to question the
law upon which the assessment is Yumex. CIR said that, according to the law, if no impropriety of the issuance of the assessment
made. The law imposes a substantive, response is received from the taxpayer within the notices, especially in this case wherein
 not merely a formal, requirement. To prescribed period, the same shall be considered respondent consistently protested the IAET
proceed heedlessly with tax collection constructively received. It also added that because assessment against it.
without first establishing a valid Yumex was able to file a protest, then there is
assessment is evidently violative of the already knowledge to them about the assessments. The fact that respondent's right to due process
cardinal principle in administrative was violated because it was denied the
investigations — that taxpayers should opportunity to respond to the PAN remains
be able to present their case and glaringly evident and cannot be deemed
adduce supporting evidence. erased or cured by respondent's volitional
payment of other assessed items.

2. CIR v. Philex Mining The submission of subsidiary sales Philex is a domestic corporation engaged in the Whether CTA en banc erred No, the petition is denied. Records show that
Corporation, G.R. No. journal and subsidiary purchase journal mining business. In January 2010, Philex filed its in granting the tax refund. Philex filed its application for a tax refund,
218057, January 18, is not indispensable to support a claim original Quarterly VAT Return for the fourth quarter attaching therewith the necessary documents,
2021 for refund. of 2009. Subsequently, it filed an amended on September 28, 2011. As previously held, it
Quarterly VAT Return for its total zero-rated sales is Philex that determines the completeness of
of, importation of goods, and purchases of services the documents submitted for purposes of
along with their respective input taxes Philex filed counting the 120-day period. Within the period
its claim for refund/tax credit with the One-Stop- of 120 days from September 28, 2011, the CIR
Shop (OSS) Center of the Department of Finance could have notified Philex, by way of a request,
in the amount of P27,115,507.10, on September to submit additional documents which he/she
28, 2011. The CIR failed to act on Philex's deems necessary.
administrative claim for a refund which prompted
Philex to file a Petition for Review with the CTA. Considering that no notice was given by the
CIR or no other action was taken within the
said 120 days, Philex had 30 days from
January 26, 2012, the expiration of the 120-day
period, or until February 26, 2012, to appeal to
the CTA. Again, records show that Philex
properly and timely filed its judicial claim on
February 3, 2012.

There is thus no merit in the CIR's contention

that Philex's judicial claim was premature or
that its supporting documents were
incomplete. They may be utilized by the CIR as
vital sources of information for other purposes
such as making assessments but they are
indispensable requirements.

3. CIR v. T Shuttle Section 228 of the National Internal CIR issued a Letter of Notice (LN) to T Shuttle Whether the CTA erred in NO. In this case, the CTA En Banc ruled in the
Services, Inc. G.R. No. Revenue Code (NIRC) of 1997, as Services informing it of the discrepancy found after declaring the assessments negative; hence, it sustained the CTA
240729, August 24, amended, requires the assessment to comparing its tax returns. The LN was received and void for failure of the CIR to Division's finding that T Shuttle Services was
2020 inform the taxpayer in writing of the law signed by a certain Malou Bohol on July 24, 2009. not accorded due process and declared void
and the facts on which the assessment Due to T Shuttle Services inaction, the CIR issued the assessments made against respondent for
is made; otherwise, the assessment an (1) LN for the examination of its book of prove service to T Shuttle deficiency IT and VAT for CY 2007. The Court
shall be void. accounts and other accounting records and (2) a Services. recognizes that the CTA's findings can only be
Notice of Informal Conference (NIC). disturbed on appeal if they are not supported
by substantial evidence, or there is a showing
The CIR then issued a Preliminary Assessment of gross error or abuse on the part of the tax
Notice (PAN) with attached Details of court.
Discrepancies that found respondent liable for
deficiency income tax (IT) and value-added tax There is no such gross error or abuse in this
(VAT) in the total amount of P6,485,579.49. On July case. Section 228 of the National Internal
20, 2010, the CIR issued a Final Assessment Revenue Code (NIRC) of 1997, as amended,
Notice (FAN), assessing respondent with requires the assessment to inform the taxpayer
deficiency VAT in the amount of P3,720,488.73 and in writing of the law and the facts on which the
deficiency IT in the amount of P5,305,486.50. On assessment is made; otherwise, the
November 28, 2012, the Revenue District Officer assessment shall be void. As ruled by the CTA
(RDO) issued a Preliminary Collection Letter En Banc, the CIR's mere presentation of
requesting T Shuttle Services to pay the assessed Registry Receipt Nos. 5187 and 2581 was
tax liability within 10 days from notice. insufficient to prove respondent's receipt of the
PAN and the FAN.
On January 23, 2013, the RDO issued a Final
Notice Before Seizure (FNBS) giving T Shuttle It held that the witnesses for the CIR failed to
Services the last opportunity to settle its tax liability identify and authenticate the signatures
within 10 days from notice. On April 2, 2013, the appearing on the registry receipts; thus, it
RDO denied the requested one-month grace cannot be ascertained whether the signatures
period. The CTA ruled in favor of T Shuttle appearing in the documents were those of
Services, holding that it was not accorded due respondent's authorized representatives. It
process in the issuance of the PAN and the FAN as further noted that Revenue Officer Joseph V.
there was a failure to prove that the notices were Galicia (Galicia), the CIR's witness, had in fact
properly and duly served upon and received by admitted during cross-examination that he was
them. Hence, it declared void the assessments uncertain whether the PAN and FAN were
made against T Shuttle Services for deficiency IT actually received by respondent.
and VAT.
The Court sees no reason to set aside the
findings of the CTA En Banc. "It is doctrinal that
the Court will not lightly set aside the
conclusions reached by the CTA which, by the
very nature of its functions, has accordingly
developed exclusive expertise on the
resolution unless there has been an abuse or
improvident exercise of authority." In any
event, the Court finds significant the fairly
recent issuance by no less than the CIR
himself of Revenue Memorandum Order No.
(RMO) 40-2019 which prescribes the
 procedures for the proper service of
assessment notices.

Notably, among the details to be recorded by

the Chief of the Assessment Division or the
Head of the Reviewing Office are the "[n]ame
of [t]axpayer/[p]erson who received the
assessment notice" and, more importantly, the
"[p]osition/designation/relationship to the
taxpayer, if not served to the taxpayer named
in the assessment notice."

Hence, it is readily apparent that the CIR could

not have complied with the requirement of
noting the position/designation/relationship of
Mr. B. Benitez, the recipient, to respondent, the
taxpayer.

4. CIR v. East Asia As the amendment in RR No. 11-2005 East Asia Utilities (EAU) is a domestic corporation Whether the enumeration of NO. Under Section 24 of RA No. 7916 53
Utilities Corporation, now stands, the enumeration of registered with the PEZA as an ECOZONE Utilities direct costs deductible from (PEZA Law), a PEZA-registered enterprise,
G.R. No. 225266, allowable deductions was only made by Enterprise at the Mactan Economic Zone and West a PEZA-registered such as East Asia Utilities, is entitled to the
November 16, 2020. way of example or illustration of the Cebu Industrial Park-Special Economic Zone. enterprise's gross income in special tax of 5% on gross income earned
nature and type of expenses that may Under PEZA Certificate of Board Resolution, EAU RR No. 11-2005 is exclusive. within the ECOZONE in lieu of all national and
be deducted from a PEZA-registered is entitled to the incentives under Sections 24 and local taxes.
enterprise's gross income for purposes 42 of (RA) No. 7916, as amended, such as
of computing the 5% GIT. As such, the payment of the special five percent (5%) tax on Gross income refers to "gross sales or gross
maxim expressio unius est exclusio gross income in lieu of national and local taxes. revenues derived from business activity within
alterius does not apply. the ECOZONE, net of sales discounts, sales
In 2009, EAU received a Preliminary Assessment returns and allowances and minus costs of
Notice (PAN) from the CIR assessing it for sales or direct costs but before any deduction
deficiency tax consisting of (a) income tax and (b) is made for administrative expenses or
expanded withholding tax (EWT) for the calendar incidental losses during a given taxable
year ending December 2006, plus interest to be period.''
computed upon payment. After trial, the CTA
Division rendered its Decision finding East Asia By using the phrase "shall consist only of the
Utilities liable for deficiency income tax in the following cost or expense item," RR No. 2-2005
reduced amount. restricted the allowable deductions from gross
income of a PEZA-registered enterprise to the
The CTA Division held that the amendment of enumerated cost and expenses.
Revenue Regulations (RR) No. 2-2005 by RR No.
11-2005 rendered the enumeration of allowable Later, the BIR issued RR No. 11-2005 56
deductions from gross income of a PEZA- revoking Section 7 of RR No. 2-2005 and
registered enterprise, such as East Asia Utilities, no removing the exclusivity of the enumeration of
 longer exclusive. The criteria for determining the cost or expense that is allowed as a deduction
deductibility of an expense for computing the 5% from gross income. As the amendment in RR
Gross Income Tax (GIT) is the direct relation of the No. 11-2005 now stands, the enumeration of
item in the rendition of PEZA-registered services. allowable deductions was only made by way of
example or illustration of the nature and type of
East Asia Utilities and the CIR separately filed expenses that may be deducted from a PEZA-
motions for reconsideration but were denied by the registered enterprise's gross income for
CTA Division on August 6, 2014, for lack of merit. purposes of computing the 5% GIT.
The CTA Division held that the word "included" as
used in RR No. 11-2005 necessarily conveys the The maxim expressio unius est exclusio
idea of non-exclusivity of the enumeration of alterius does not apply. Besides, the BIR
allowable deductions and that the principle of should not have issued RR No. 11-2005 and
expressio unius est exclusio alterius does not deleted the phrase "shall consist only of the
apply. following cost or expense item" and changed it
to "the following direct costs are included in the
allowable deductions" if it did not intend to
remove the restriction on the expenses that
may be deducted.

The deletion of the restrictive word "only" is

also consistent with Section 24 of the PEZA
Law that costs and expenses directly related to
the enterprise's PEZA-registered activity and
are not administrative, marketing, selling,
and/or operating expenses or incidental losses
shall be allowed as a deduction from gross
income.

Accordingly, the CTA En Banc did not err in

examining the nature and type of each of the
expenses East Asia Utilities claimed as
deductions vis-à-vis their relation to East Asia
Utilities' PEZA-registered activities in
computing the correct amount of tax
deficiency.

5. Games & Klub is an organization whose members Klub is an organization whose members are Whether the RTC has NO. The case was correctly dismissed. The
Amusement Board/BIR are racehorse owners regularly racehorse owners regularly participating in horse jurisdiction to take issuance of an injunction against the collection
v. Klub Don Juan De participating in horse racing conducted racing conducted by different racing clubs. MJCI, cognizance of the complaint of internal revenue taxes is prohibited based
Manila et. al., G.R. No. by different racing clubs. MJCI, PRCI, PRCI, and MMTCI are grantees of legislative filed by Klub Don Juan. on the lifeblood theory. Whether the complaint
252189, November 3, and MMTCI are grantees of legislative franchises, allowing them to construct, maintain, filed by Klub Don Juan should be treated as an
2020 franchises, allowing them to construct, and operate horse racing tracks. Their legislative action for declaratory relief and not injunction
maintain, and operate horse racing franchises imposed upon the racing clubs the duty is of no moment.
tracks. Their legislative franchises to withhold and remit DST to the BIR.
imposed upon the racing clubs the duty Since the issue, in this case, is the validity of
to withhold and remit DST to the BIR. Klub filed a complaint for Injunction against BIR, the provision of the TRAIN Law on the higher
GAB, and the racing clubs. The three laws (RA DST rate, the RTC has no jurisdiction. No court
Klub filed a complaint for Injunction 8407, RA 9753, 7978) granting franchise to the shall have the authority to grant an injunction
against BIR, GAB, and the racing clubs. three racing clubs imposed 10 centavos of DST for to restrain the collection of any national internal
The three laws (RA 8407, RA 9753, every peso worth of horse racing ticket and in case revenue tax, fee, or charge imposed by this
7978) granting franchise to the three of forecast/quinella and trifecta bets, 5 centavos for Code.
racing clubs imposed 10 centavos of every peso worth of ticket. However, the TRAIN
DST for every peso worth of horse Law increased the DST to 20 centavos.
racing ticket and in case of
forecast/quinella and trifecta bets, 5 Klub alleged that there is a conflict between the
centavos for every peso worth of ticket. provisions of the franchises of the racing clubs
However, the TRAIN Law increased the being a special law and the provisions of the TRAIN
DST to 20 centavos. Law. Klub asserted that GAB and the BIR should
be restrained from enforcing the TRAIN provision
Klub alleged that there is a conflict as the franchise rates should continue to apply
between the provisions of the franchises since it was not specifically amended by the TRAIN
of the racing clubs being a special law Law. GAB and BIR argued that the RTC cannot
and the provisions of the TRAIN Law. restrain the collection of the DST under the TRAIN
Klub asserted that GAB and the BIR Law as it is outside the territorial jurisdiction of the
should be restrained from enforcing the RTC of Mandaluyong City, Branch 213 because
TRAIN provision as the franchise rates horse race tickets may be purchased all over the
should continue to apply since it was not country and not just in Metro Manila.
specifically amended by the TRAIN Law.
GAB and BIR argued that the RTC They added that Section 218 of the NIRC prohibits
cannot restrain the collection of the DST the grant of injunction to restrain the collection of
under the TRAIN Law as it is outside the national internal revenue taxes including DST. The
territorial jurisdiction of the RTC of RTC dismissed the case on the ground that it has
Mandaluyong City, Branch 213 because no jurisdiction to restrain the collection of the DST
horse race tickets may be purchased all under Section 218 of the NIRC. The CA treated the
over the country and not just in Metro complaint for injunction as one for declaratory relief
Manila. as there has been no breach of the TRAIN law yet
and there is a ripening judicial controversy. The CA
They added that Section 218 of the declared the RTC dismissal was premature.
NIRC prohibits the grant of injunction to
restrain the collection of national internal
revenue taxes including DST. The RTC
dismissed the case on the ground that it
has no jurisdiction to restrain the
collection of the DST under Section 218
of the NIRC. The CA treated the
complaint for injunction as one for
 declaratory relief as there has been no
breach of the TRAIN law yet and there
is a ripening judicial controversy. The
CA declared the RTC dismissal was
premature.

6. Philippine Dream Final notice before seizure is considered a Petitioner Philippine Dream Company, Inc. filed a Whether or not a Final The decision of the CIR that may be appealed
Company v. CIR, G.R. denial of protest and court has no Petition for Review seeking reversal of the earlier NoticeBefore Seizure sent to the CTA may not always be in the form of a
NO. 216044, August 27, jurisdiction on petitions belatedly filed. decision of CTA dismissing the Petition for lack of by the BIR to a taxpayer is Final Decision on Disputed Assessment. It may
2020 jurisdiction. Petitioner argued that the Final Notice appealable to the CTA also come in other forms, such as a Final
Before Seizure is not a final decision of Respondent Notice Before Seizure.The determining factor
Commissioner of Internal Revenue (CIR) on its of whether the decision of the CIR may already
protest, therefore, cannot be the basis of appeal to be appealed to the CTA depends on the
the CTA. On the other hand, Respondent language used in, and tenor of, the CIR's
countered that the Final Notice Before Seizure is communication.
already a final decision denying the Petitioner’s
protest, and, as such, Petitioner had 30 days to In this case, the BIR issued a Final Notice
appeal from receipt thereof. In ruling, Section 228 Before Seizure while the taxpayer’s protest
of the 1997 Tax Code, as discussed in the case against a tax assessment was pending review
Lascona Land Co., Inc. vs. CIR, provides that a by the BIR. The Supreme Court ruled that a
taxpayer has two (2) options in case of the inaction Final Notice Before Seizure is considered a
of the CIR on the protested assessment. First, the final decision of the Commissioner of Internal
taxpayer has the option to file a Petition for Review Revenue (CIR) on a disputed assessment.
with the CTA within 30 days after the expiration of Accordingly, pursuant to Section 228 of the
the 180-day period. Second, the taxpayer may Tax Code, the taxpayer must file an appeal to
await the final decision of the CIR on the disputed question the Final Notice Before Seizure with
assessment and appeal such final decision to the the CTA within 30 days from its receipt of the
CTA within 30 days after the receipt of a copy of same. Being a court of special jurisdiction, the
such decision. CTA can only take cognizance of matters
which are within its jurisdiction. While the right
to appeal a decision of the CIR to the CTA is a
statutory remedy, the requirement that the
appeal must be brought within the prescribed
30-day period is jurisdictional.

As ruled in CIR vs. Isabela Cultural

Corporation, the Final Notice Before Seizure
was considered as CIR’s denial of a protest. As
such, Petitioner should have disputed the final
decision on the assessment with the Court
within 30 days upon its receipt of the Final
Notice Before Seizure. In the instant case, the
Petition was filed after the lapse of the said 30-
day period. As held in the case RCBC vs. CIR,
the 30-day period within which to file an appeal
is jurisdictional and failure to comply therewith
 would bar the appeal and deprive the CTA of
its jurisdiction to entertain and determine the
correctness of the assessments. Thus, the
Petition was DENIED and the earlier decisions
of the CTA were AFFIRMED.
7. CIR v. HSBC- Goodwill is essentially characterized as The Hong Kong Shanghai Banking Corporation Whether or not the “sale of The Supreme Court upheld the decision of the
Philippine Branch, G.R. an intangible asset derived from the (HSBC) entered into the following two transactions: goodwill” resulting from the CTA En Banc in cancelling the deficiency
No. 227121, December conduct of business and cannot (a) The transfer of its Point of Sales (POS) sale of shares is separately income tax assessment against taxpayer,
9, 2020. therefore be allocated and transferred Terminals, other information technology assets, subject to income tax in HSBC on the alleged sale of “goodwill” of its
separately and independently from the and Merchant Agreements of its Merchant addition to the capital gains Merchant Acquiring Business (MAB). It ruled
business as a whole. Acquiring Business (MAB) in the Philippines, in tax due from the sale of that goodwill is essentially characterized as an
exchange for shares in Global Payments Asia shares intangible asset derived from the conduct of
Pacific-Phils., Inc. (GPAP PH). This occurred in business and cannot therefore be allocated
2008. Accordingly, GPAP PH was incorporated, and transferred separately and independently
and HSBC subscribed into shares in GPAP PH in from the business as a whole.
exchange for the fair market value of certain assets
of HSBC and the transfer of its MAB to GPAP PH. Here, when HSBC transferred its MAB in the
(b) The subsequent sale or assignment by HSBC Philippines, inclusive of POS terminals, other
of its GPAP PH shares to Global Payments Asia information technology assets and merchant
Pacific (Singapore Holdings) (GPAP Singapore). agreements, to GPAP-Phils. Inc. in exchange
To implement this, HSBC and GPAP Singapore for shares, the goodwill of the business was
entered into a Share Sale and Purchase also transferred to GPAP-Phils. Inc., being the
Agreement on July 24, 2008, for the transfer by new owner of the MAB and its assets. When
HSBC of its GPAP PH shares. On September 28, HSBC subsequently assigned its GPAP-Phils
2008, HSBC and GPAP Singapore executed a inc. shares to GPAP-Singapore, the goodwill of
Deed of Assignment, wherein HSBC assigned its MAB remains with GPAP-Phils. Inc. GPAP-
GPAP PH shares to the GPAP Singapore. Singapore merely steps into the shoes of
HSBC as the majority stockholder of GPAP-
For the first transaction, HSBC filed an Application Phils. Consequently, the subsequent sale of
and Joint Certification with the Bureau of Internal shares acquired by HSBC through a tax-fee
Revenue (BIR) on September 22, 2008, to secure exchange shall be subject to capital gains tax
a ruling on tax-free exchange under Section pursuant to Section 7(D)(2) of the 1997 NIRC,
40(C)(2) of the National Internal Revenue Code, as and not regular corporate income tax.
amended (Tax Code), regarding the transfer of
HSBC’s assets in exchange for the issuance to it of Both the CTA and the Supreme Court ruled
GPAP PH shares. HSBC secured a Certification that HSBC is not liable for the deficiency
Ruling certifying that the asset transfer in exchange income taxes and stated that the second
for GPAP PH shares is a tax-free exchange that is transaction (i.e., sale by HSBC of GPAP PH
not subject to tax pursuant to Section 40(C)(2) of shares) is covered by CGT and not RCIT. The
the Tax Code. For the second transaction, which Supreme Court ruled that goodwill is an
involves the assignment or transfer by HSBC of the intangible asset derived from the conduct of
GPAP PH shares to GPAP Singapore, the CGT business and cannot therefore be allocated
and DST were paid. The BIR assessed HSBC for and transferred separately and independently
deficiency income tax on the alleged sale of from the business as a whole. Thus, when
goodwill arising from the transfer of HSBC’s MAB HSBC transferred its MAB in the Philippines to
to GPAP PH (which is under the first transaction). GPAP PH in exchange for shares (as part of
 the first transaction), the goodwill of the
business was also transferred to GPAP PH.
When HSBC subsequently assigned its GPAP
PH shares to GPAP Singapore, the goodwill of
the MAB remains with GPAP PH. GPAP
Singapore merely stepped into the shoes of
HSBC as the majority stockholder of GPAP
PH.
8. AFP General The failure to revalidate the LOA after Taxpayer argues that the LOA issued by the BIR is Whether or not the failure to In ruling against the taxpayer, the Court held
Insurance Corp. v. CIR, 120 days merely renders the same invalid for failure of the concerned revenue officer revalidate the LOA after 120 that failure to revalidate the LOA after 120 days
G.R. No. 222133, unenforceable. to have the same revalidated after 120 days, days render the same invalid does not void the LOA ab initio. The expiration
November 4, 2020 pursuant to RMO No. 28-88, as reiterated by RMC or merely unenforceable of the 120-day period merely renders an LOA
No. 40-2006. unenforceable, inasmuch as the revenue
officer must seek ratification of his expired
authority to audit to be able to validly continue
investigation beyond the first 120 days.

In this case, the taxpayer did not contest the

LOA upon receipt when they could have
refused service of the LOA it believed was
defective due to lack of revalidation. Its failure
to exercise its right to refuse the service of an
allegedly defective LOA shows that they had
acquiesced to the tax authorities' investigation.
9. CIR v. Lucio Co et. No prior confirmatory ruling from the The respondents filed a claim for tax refund Whether or not a taxpayer is The Supreme Court, however, ruled that the
al., G.R. No. 241424, Bureau of Internal Revenue (“BIR”) is pursuant to an exchange of stocks entered into required to first secure a prior CIR was mistaken as “there is nothing in
February 26, 2020, G.R. needed before a taxpayer can file a where their stockholdings in Puregold Price Club, confirmatory ruling before Section 40(C)(2) of the NIRC of 1997, as
No. 241424, February claim for tax exemption or refund. Inc. increased from 66.5720% to 75.8329%, the transaction may be amended, which requires the taxpayer to first
26, 2020. alleging that the transaction was a tax-free considered as a tax-free secure a prior confirmatory ruling before the
exchange under the National Internal Revenue exchange transaction may be considered as a tax-free
Code (“NIRC”). exchange. The BIR should not impose
additional requirements not provided by law,
While the Supreme Court ultimately ruled that the which would negate the availment of the tax
transaction was a tax-free exchange under Section exemption. Instead of resorting to formalities
40(C)(2) of the NIRC, the Commissioner of Internal and technicalities, the BIR should have made
Revenue (“CIR”) insisted that the tax refund claim its own determination of the merits of
filed by respondents should be denied because respondents’ claim for exemption in
they failed to secure a prior confirmatory ruling that respondents’ administrative application for
the subject transaction qualifies as a tax-free refund.”
exchange. According to the CIR, the certification or
ruling is important to confirm that the transaction
satisfies the conditions set by law, and the authority
to do so is vested upon the BIR.
10. Qatar Airways LLC A. For late filing of Tax Returns with Tax On November 30, 2011, Qatar Airways Company Whether or not the CTA NO. In the present case, the Court finds no
v. CIR, G.R. No. 238914, Due to be paid, the following penalties with Limited Liability (petitioner) filed, through the committed an abuse of abuse of authority on the part of the CTA. The
June 8, 2020. will be imposed upon filing, in addition to Electronic Filing and Payment System (eFPS) of authority in not abetting or Court agrees that the surcharge imposed upon
the tax due: the Bureau of Internal Revenue its 2nd Quarterly canceling the petitioner was not unjust or excessive pursuant
Income Tax Return (ITR) for the Fiscal Year ending surcharge of Qatar Airways to Section 248 of the 1997 NIRC which
1. Surcharge March 31, 2012 and paid the corresponding tax due amounting to Php provides for the imposition of a penalty
thereon in the amount of P29,540,836.00. The said 7,385,209.00 for being equivalent to 25% of the amount due for failure
NIRC SEC. 248. - Civil Penalties. filing though was one day late. Thus, petitioner sent unjust and to timely file any return and pay the tax due
a Letter addressed to respondent Commissioner of excessive and for just a one thereon.
(A) There shall be imposed, in addition Internal Revenue (CIR) requesting for the day late in filing for the
to the tax required to be paid, a penalty abatement of surcharge. reason beyond its control Further, the findings of the CTA, supported as
equivalent to twenty-five percent (25%) they are by logic and law, carry great weight in
of the amount due, in the following However, BIR issued Assessment Notice informing the proper interpretation of what constitutes
cases: petitioner of the following charges/fees: "circumstances beyond control." Undeniably, a
a) 25% surcharge in the amount of P7,385,209.00; TECHNICAL MALFUNCTION is not a situation
(1) Failure to file any return and pay the b) interest amounting to P16,186.76 for late too bleak so as to render petitioner completely
tax due thereon as required under the payment; and without recourse. As correctly observed by the
provisions of this Code or rules and c) compromise penalty of P50,000.00. CTA, petitioner would not incur delay in the
regulations on the date prescribed; or filing of its ITR if only it filed the same before
On July 3, 2012, via the Electronic Filing and the deadline and not at the 11th hour or on the
(2) Unless otherwise authorized by the Payment System (eFPs), petitioner paid the last day of filing. Hence affirmed the decision
Commissioner, filing a return with an compromise penalty and the interest for late of the CTA En Banc.
internal revenue officer other than those payment. As for the P7,385,209.00 surcharge,
with whom the return is required to be petitioner sent Letters to the CIR requesting for its
filed; or abatement or cancellation on the ground that its
imposition was unjust and excessive considering
(3) Failure to pay the deficiency tax that:
within the time prescribed for its 1) petitioner paid the tax due just one day after the
payment in the notice of assessment; or deadline;
2) such belated filing was due to circumstances
(4) Failure to pay the full or part of the beyond petitioner's control; and
amount of tax shown on any return 3) petitioner acted in good faith. The BIR informed
required to be filed under the provisions petitioner that its application for abatement has
of this Code or rules and regulations, or been denied and that its payment shall be deemed
the full amount of tax due for which no as partial payment of the total amount due for the
return is required to be filed, on or before surcharge.
the date prescribed for its payment.
The BIR also requested that the balance for the
surcharge be paid within 10 days from receipt of the
letter. Petitioner sought reconsideration, but the
BIR denied due course thereon and reiterated the
request for payment of the balance within 10 days.
Petitioner appealed for another reconsideration,
but was again denied, hence, petitioner filed a
Petition for Review before the CTA unfortunately, it
was denied for lack of jurisdiction. Petitioner filed a
 Motion for Reconsideration, but the same was not
granted as well. Upon appeal, the CTA En Banc
ruled that while the petition for review was
seasonably filed, the surcharge imposed by the BIR
was not unjust nor excessive pursuant to the
National Intemal Revenue Code(NIRC).
WHEREFORE, the Petition for Review filed by
[petitioner] is hereby DENIED, for lack of merit. The
Motion for Reconsideration filed by petitioner was
denied by the CTA En Banc. Hence, this petition.
11. Kepco Philippines The compromise agreement is the law On September 8, 2009 , Kepco received Whether the Compromise There is no dispute that Kepco entered into a
Corp. v. CIR, G.R. No. between the parties Preliminary Assessment Notice for alleged Agreement entered into by compromise agreement with the CIR on its
225750-51, July 28, deficiency income tax, value-added tax (VAT), Kepco with the CIR is valid deficiency taxes for TY 2006, and the CIR
2020. expanded withholding tax, and final withholding tax issued Certificate of Availment on December
(FWT) for taxable year 2006. On October 30, 2009, 11, 2017. On this basis, the deficiency tax
Kepco received Final Letter of Demand (FLD) for assessment subject of the Petition can now be
deficiency VAT in the amount of P159,640,750.79 considered closed and terminated. However,
and for deficiency FWT in the amount of the OSG opposed the motion and questioned
P124,286,821.11. Kepco filed its protest to the FLD the validity of the compromise alleging
on November 26, 2009. irregularity in the procedure that led to its
approval. cEaSHC
Subsequently, on June 25, 2010, Kepco filed its
petition before the CTA Division (docketed as CTA We grant the motion and rule in favor of the
Case No. 8112). The Commissioner of Internal compromise.
Revenue (CIR) filed his Answer on September 29,
2010. 9 In due course, after trial, both parties The power of the CIR to enter into compromise
submitted their respective memorandum and the agreements for deficiency taxes is explicit in
case was submitted for Decision. On December 6, Section 204 (A) 37 of the 1997 National
2013, the CTA Division partly granted Kepco's Internal Revenue Code, 38 as amended (1997
petition and cancelled the deficiency FWT NIRC). The CIR may compromise an
assessment and the compromise penalties. Kepco assessment when a reasonable doubt as to the
was ordered to pay deficiency VAT plus interest validity of the claim against the taxpayer exists,
and surcharges. Kepco and the CIR filed motions or the financial position of the taxpayer
for reconsideration but were denied for lack of demonstrates a clear inability to pay the tax.
merit. Kepco's case falls under paragraph e — the
assessment became final because Kepco
Not satisfied, on May 5, 2014, Kepco elevated the failed to appeal the inaction or "deemed denial"
case to the CTA En Banc; 13 while the CIR filed his of the CIR to the CTA within 30 days after the
Petition for Review on May 22, 2014. 14 After expiration of the 180-day period and there is
consolidation and the filing by the parties of their reason to believe that the assessment is
comments and memorandum, 15 the CTA En Banc lacking in legal and/or factual basis.
rendered its Decision on November 26, 2015,
dismissing Kepco's petition in CTA Case No. 8112 It must be noted that when Kepco filed its
for being filed out of time, and granting the CIR's protest to the FLD on November 26, 2009, the
petition. The dispositive portion of the Decision CIR had 180 days or until May 25, 2010 to act
reads: WHEREFORE, foregoing premises on the protest. 39 Thereafter, Kepco may
considered: elevate its protest to the CTA within 30 days
from the lapse of the 180-day period, 40 or until
Thus, Kepco filed the instant petition 18 on August June 24, 2010. Section 7 (a) (2) 41 of RA No.
3, 2016. The CIR, through the Office of the Solicitor 9282 42 provides that the "inaction" of the CIR
General (OSG), filed his Comment 19 on May 29, or his failure to decide a disputed assessment
2017, and Kepco, its Reply 20 on June 14, 2017. within the 180-day period is "deemed a denial"
of the protest. 43 Section 3 (a) (2), 44 Rule 4 of
Meantime, on December 28, 2017, Kepco filed a the Revised Rules of the CTA further clarifies
Manifestation 21 that it entered into a compromise that "that in case of disputed assessments, the
agreement with the CIR on its tax assessments for inaction of the [CIR] within the [180]-day period
the years 2006, 2007 and 2009. For TY 2006, n under [Section] 228 of the [1997 NIRC] shall
which is the subject of the instant petition, Kepco be deemed a denial for purposes of allowing
paid a total of P134,193,534.12. 22 As proof, Kepco the taxpayer to appeal his case to the [CTA]."
attached the Certificate of Availment 23 issued by Clearly, the inaction is deemed an adverse
the CIR on December 11, 2017 certifying that the decision of the CIR on the administrative
National Evaluation Board (NEB) approved protest. Thus, for purposes of determining
Kepco's application for compromise settlement for whether taxpayers may already appeal to the
deficiency taxes for TYs 2006, 2007 and 2009. CTA, the inaction of the CIR within 180 days
Thus, Kepco moved that the case be declared shall be deemed denial or an adverse decision
closed and terminated. of the CIR. Since Kepco failed to appeal the
inaction or deemed denial or adverse decision
In compliance with this Court's Resolution 24 dated of the CIR on June 24, 2010, the assessment
February 14, 2018, the OSG filed its Comment 25 for deficiency VAT and FWT for TY 2006
on July 20, 2018 opposing Kepco's manifestation became final, executory and demandable.
and motion. DHITCc

The OSG avers that the compromise agreement is

not valid because first, it failed to allege and prove
any of the grounds for a valid compromise under
Section 3 26 of Revenue Regulations (RR) No. 30-
2002; 27 second, the CTA did not yet issue any
adverse Decision against Kepco, hence, there is no
"doubtful validity" to speak of as a ground for a valid
compromise pursuant to Section 2 28 of RR No. 8-
2004; 29 and third, Kepco did not pay in full the
compromise amount upon filing of the application in
violation of Section 2 30 of RR No. 9-2013. 31 The
OSG posits that the CIR improperly arrogated unto
himself the power of the NEB to decide on the offer
of compromise when the CIR accepted Kepco's
additional payment of P16,661,759.20 before the
NEB could approve or reject Kepco's original
application.

Further, the OSG manifests that it is entitled to

collect 5% success fee in case of government
approved compromise agreements, pursuant to
Section 11 (i) 32 of Republic Act (RA) No. 9417,
otherwise known as "An Act to Strengthen the
Office of the Solicitor General by Expanding and
Streamlining its Bureaucracy, Upgrading Employee
Skills and Augmenting Benefits, and Appropriating
Funds Therefor and for Other Purposes."
Accordingly, the OSG prays that Kepco be ordered
to pay the balance of P343,248,516.65 plus
additional interest, fees, or surcharges as a
consequence of its void tax compromise settlement
with the CIR, and that the OSG be awarded the sum
of P17,162,425.83 or 5% of the P343,248,516.65
balance. 33

In its Reply, 34 Kepco insists that there exists

doubtful validity on the assessment for TY 2006
which prompted the CIR to consider and accept
Kepco's compromise offer. Contrary to the OSG's
claim, Kepco paid 40% of the basic tax assessed
for TYs 2006, 2007 and 2009 in the amount of
P143,891,831.90. In compliance with the
recommendation of the Technical Working Group
(TWG) of the Bureau of Internal Revenue (BIR) to
increase the compromise offer, Kepco paid
additional amounts and finalized the compromise
offer to P260,848,425.80. This amount was
approved by the NEB on December 11, 2017.

Meanwhile, the CIR filed his own Reply 35 to the

OSG's Comment. The CIR asserts that Kepco paid
the full 40% of the basic tax assessed for TYs 2006,
2007 and 2009 when it applied for compromise. In
consonance with Revenue Memorandum Order
(RMO) No. 20-2007, 36 the application was
evaluated and processed, the LT Enforcement
Collection Division recommended the approval of
Kepco's application and thereafter, forwarded the
 favorable recommendation to Large Taxpayers
Service (LTS)-Evaluation Board. After various
proposals from the LTS-Evaluation Board to
increase the compromise amount and the
immediate compliance of Kepco by paying the
proposed increase, the LTS-Evaluation Board
recommended the approval of the application to the
NEB based on doubtful validity. Eventually, the
NEB approved Kepco's application and the CIR
issued Certificate of Availment in its favor.

12. CIR v. BPI, G.R. No. Waivers by the CIR of the statute of Through a letter dated May 6, 1991, the CIR sent The Court shall resolve three The petition lacks merit.
227049, September 16, limitations shall conform to statutory Assessment Notices 6 to Citytrust Banking issues:
2020. limitations Corporation (Citytrust) in connection with its The CTA properly exercised its
deficiency internal revenue taxes for the year 1986 (1) Did the CTA have jurisdiction over BPI's petition for
in the aggregate amount of P20,865,320.29 7: jurisdiction over BPI's review.
Second CTA Petition?
The assessments came after Citytrust's execution The OSG relies heavily on the letter dated
of three Waivers of the Statute of Limitations (2) Did the CIR timely issue February 5, 1992 — that it was a "final
(Waivers) under the National Internal Revenue assessments against decision" denying Citytrust's protest. 34
Code (NIRC) dated August 11, 1989, July 12, 1990, Citytrust for deficiency EWT, Citytrust's failure to appeal the "final decision"
and November 8, 1990 extending the prescriptive WTD, DFT, and WTC within 30 days from receipt thereof 35 rendered
period for the CIR to issue an assessment. 10 pertaining to the taxable year the tax assessment final, executory, and
1986? unappealable. 36 Thus, BPI's Second CTA
Citytrust protested the assessments on May 30, petition in 2011 was filed out of time, over
1991 and, again, on February 17, 1992. 11 In the (3) May the CIR still collect which the court below did not acquire
interim, through the Bureau of Internal Revenue the unpaid taxes? jurisdiction.
(BIR) Office of the Accounting Receivable/Billing
Section letter dated February 5, 1992, the CIR Petitioner's reasoning is specious and
demanded the payment of the subject deficiency misplaced.
taxes within 10 days from receipt thereof. 12
First, this was the CIR's same argument in the
At this juncture, two portions of the total 2018 Case. To recall, the Court did not give
assessment (P20,865,320.29) became the subject evidentiary weight to the letter dated February
of separate proceedings: first, the compromise and 5, 1992 due to the CIR's failure to prove
collection of the deficiency IT portion that led to Citytrust's receipt thereof. In the present case,
another Supreme Court case of the same title, not only is there still no proof of receipt. The
docketed as G.R. No. 224327 — the case was CIR did not even attach a copy of the letter
decided on November 16, 2018 (2018 Case); and relied upon to the present petition. Notably,
second, the collection of deficiency EWT, WTD, failure to append ''material portions of the
DFT, and WTC portion is the subject of the present record as would support the petition" is a
petition. ground for dismissal thereof. 37

A) Deficiency IT and G.R. No. 224327 Second, the aforementioned letter is irrelevant
in ascertaining whether or not the tax court
1. Compromise properly took cognizance of BPI's Second CTA
Petition. As the CTA correctly pointed out, BPI
The deficiency IT portion of the assessment did not come to question any final decision
became the subject of a compromise settlement, issued in connection with Citytrust's
pursuant to Revenue Memorandum Order No. assessments. They went before the CTA
(RMO) 45-93. 13 However, the parties tailed to primarily to assail the November 2011
reach an agreement. The CIR, which initially Warrant's issuance and implementation. To be
agreed to a settlement amount of P8,607,517.00, sure, the issue for the CTA to resolve was the
eventually denied Citytrust's application for propriety not of any assessment but of a tax
compromise settlement. On July 27, 1995, Citytrust collection measure implemented against BPI.
requested reconsideration. Accordingly, the CTA's disposition 38 was
distinctly for the cancellation of the warrant and
On October 4, 1996, Citytrust and BPI entered into nothing else.
a merger agreement, wherein the latter emerged as
the surviving corporation. 14 The law expressly vests the CTA the authority
to take cognizance of "other matters" arising
Subsequently, the CIR issued a Notice of Denial from the 1977 Tax Code and other laws
dated May 26, 2011 addressed to BPI and administered by the BIR 39 which necessarily
requested for the payment of Citytrust's deficiency includes rules, regulations, and measures on
IT for 1986 amounting to P19,202,589.97. CIR the collection of tax. Tax collection is part and
reiterated the request on July 28, 2011 in another parcel of the CIR's power to make
letter. assessments and prescribe additional
requirements for tax administration and
2. Collection enforcement. 40

The CIR sought to collect the above-mentioned Thus, the CTA properly exercised jurisdiction
amount and issued a Warrant of Distraint and/or over BPI's Second Petition.
Levy on September 21, 2011 (September 21, 2011
Warrant) against BPI. The CIR's right to assess has already
prescribed.
BPI questioned the warrant before the CTA (First
CTA Petition). The CTA Special Third Division The OSG insists that the CIR's right to assess
cancelled and set aside the September 21, 2011 the subject taxes did not prescribe because the
Warrant (CTA Case No. 8350) which the CTA En waivers of the statute of limitations were valid
Banc affirmed (CTA EB No. 1173). The CIR and binding. BPI is estopped from assailing the
appealed the case to the Court (G.R. No. 224327). documents' validity because they did not do so
15 in the administrative level. 41
In the 2018 Case, the CIR argued as follows: first, On the other hand, both the CTA Division and
the letter dated February 5, 1992 was a "final CTA EB carefully reviewed and examined the
decision" on the assessment. Under the law, records (i.e., tax returns for each tax type,
Citytrust had 30 days from the time of the letter's waivers of the statutes of limitations, etc.) to
issuance to appeal it to the CTA. However, BPI only precisely ascertain whether the period to
went to the CTA on October 7, 2011. Having been assess each tax type has prescribed. The court
filed out of time, CTA did not acquire jurisdiction a quo ultimately invalidated the waivers of the
over BPI's petition in CTA Case No. 8350. Second, statutes of limitations due to the absence of the
BPI's allegations on the waivers' defects were also CIR's signature and found that only the
made belatedly. Thus, they are estopped from assessments for EWT 42 and DFT have not
invoking the defense of prescription (i.e., CIR's right prescribed.
to assess) on the basis of these flaws. 16
The Court shall no longer disturb the afore-
However, in the Decision dated November 16, cited findings.
2018, the Court upheld the September 21, 2011
Warrant's cancellation. The Court explained that:
first, the CIR did not offer proof that Citytrust
received the letter dated February 5, 1992. This
failure "lead[s] to the conclusion that no
assessment was issued." 17 Second, estoppel
does not lie against BPI. It was the tax authorities
who had caused the aforementioned defects. The
flawed waivers did not extend the prescriptive
periods for assessment. 18 Thus, CIR's right to
assess Citytrust/BPI "already prescribed and [BPI]
is not liable to pay the deficiency tax assessment."
19

B) Collection of Deficiency EWT,

WTD, DFT, and WTC, and the
present petition

Meanwhile, on November 4, 2011, BPI received a

separate Warrant of Distraint and/or Levy
(November 2011 Warrant), 20 this time in relation
to Citytrust's deficiency EWT, WTD, DFT, and WTC
assessments amounting to P1,624,930.32. 21

Similarly, BPI assailed the November 2011 Warrant

before the CTA through a petition for review
(Second CTA Petition) asking the tax court to
suspend the collection of the alleged deficiency
taxes, cancel the November 2011 Warrant, and
enjoin the CIR from further implementing it. It also
prayed for the CTA to declare the assessments as
prescribed and to cancel the assessments related
thereto.

Ruling of the CTA Division

In the Decision 22 dated April 16, 2014, the CTA

Division cancelled and set aside the subject
Warrant of Distraint and/or Levy. 23 It ruled as
follows:

First, the CTA can take cognizance of BPI's

petition. The questions surrounding the CIR's right
to assess and collect deficiency taxes which
stemmed from the CIR's issuance of the warrant of
distraint and/or levy falls within the CTA's exclusive
appellate jurisdiction to review by appeal "other
matters arising under the [NIRC] or other laws
administered by the [BIR]." 24

Second, the CIR's issuance of the above-

mentioned Assessment Notices on May 6, 1991
was beyond the three-year prescriptive period to
assess deficiency EWT, WTD, and WTC against
Citytrust, pursuant to the National Internal Revenue
Code of 1977 (1977 Tax Code) and relevant tax
regulations. 25 On the other hand, the assessment
for deficiency DFT was issued within the 10-year
prescriptive period to assess taxes for which no
return was filed. 26

Third, there was no showing that Citytrust's request

for reinvestigation/reconsideration was ever
granted by the CIR. Thus, the prescriptive periods
to assess and collect the alleged deficiency taxes
were not suspended. 27

Fourth, RMO No. 20-90 dated April 4, 1990

prescribed a specific form by which all waivers of
the statutes of limitations shall be executed. In turn,
Citytrust executed three waivers dated August 11,
1989, July 12, 1990, and November 8, 1990,
respectively. However, only the first waiver was
valid and extended the period for assessment to
August 31, 1990. The later waivers were executed
during the effectivity of RMO 20-90. Since the other
waivers did not conform with the RMO's formal
requirements, they were invalid and did not extend
the prescriptive period. 28

Fifth, the CIR issued the Assessment Notices

against Citytrust on May 6, 1991. However, it
issued the subject warrant of distraint and/or levy to
collect the taxes so assessed only in 2011, which
was beyond the three-year prescriptive period to
collect assessed taxes. 29

The CTA Division also denied the CIR's

subsequent motion for reconsideration. This
prompted the CIR to elevate the case to the CTA
EB.

Ruling of the CTA EB

In the assailed Decision, the CTA EB affirmed the

CTA Division's ruling.

In upholding the tax court's jurisdiction over the

Second CTA Petition, the court a quo added that
BPI did not initiate an action before the CTA to
assail a final decision rendered by the CIR on the
subject assessments. BPI's petition primarily
questioned the CIR's right to assess and collect, an
issue cognizable by the CTA in the exercise of its
appellate jurisdiction over "other matters'' arising
from tax laws. 30

The court a quo then proceeded to invalidate all

three waivers discussed above. It found that the
waiver dated August 11, 1989 was not an
agreement between the CIR and the taxpayer, as
contemplated under the 1977 Tax Code, 31
because the CIR did not sign it. It could not have
validly extended the prescriptive period for tax
assessment.
 Further, the CTA EB echoed the CTA Division's
ruling that the CIR's letter dated May 6, 1991 and
the accompanying assessment notices were
issued past the general three-year prescriptive
period to assess Citytrust for deficiency EWT,
WTC, and WTD. However, it explained that, by
exception, the 10-year prescriptive period for
assessment shall apply not only to the subject
deficiency DFT, but also to deficiency EWT
pertaining to selected months, 32 for which BPI
likewise failed to present the corresponding returns
to establish the fact of filing. 33

Nevertheless, just as the CTA Division did, the

court a quo ruled that the CIR could no longer
enforce payment for the aforementioned deficiency
DFT and EWT, despite having issued the
corresponding assessments within the 10-year
period. By the time the subject distraint and/or levy
was issued in 2011, the CIR's right to collect any of
these taxes had already prescribed.

The CIR moved to reconsider the Decision, but the

court a quo denied it.

Hence, the CIR, represented by the Office of the

Solicitor General (OSG), filed the present petition.

13. Imelda Sze et. al. v. Prescriptive Period for filing of suit for The respondent Bureau of Internal Revenue (BIR) Whether or not the CA erred While this petition is pending, the petitioners
CIR, G.R. No. 210238, violations of the Tax Code shall be made issued Revenue Regulations 8-2001 or the in finding probable cause for manifested to the Court that pursuant to the
January 6, 2020 within 5 years Voluntary Assessment Program (VAP), granting violation of the NIRC.||| (Sze May 31, 2012 CA Decision, an Amended
taxpayers the privilege of last priority in the audit v. Bureau of Internal Information in Criminal Case Nos. O-385 to O-
and investigation of all internal revenue taxes for Revenue, G.R. No. 210238, 392 were filed against them in the Court of Tax
the taxable year December 31, 2000, and all prior [January 6, 2020]) Appeals (CTA).They moved to quash the
years under certain conditions. Chiat Sing Amended Information due to prescription and
Cardboard Corporation (Chiat Corp.) availed of the double jeopardy. On July 8, 2015, the CTA
VAP and was issued a certificate of qualification for issued a resolution dismissing all the cases on
1999 and 2000. The BIR clarified that availment of the ground of prescription. The CTA resolution
the VAP should not be construed to cover up any became final and executory, and an entry of
fraud or illegal acts that the taxpayer may commit judgment was later issued. The petitioners
as it is a mere privilege. 1 aver that with this development, the issues in
 their petition have become moot and
On March 25, 2003, the BIR issued a Letter of academic. 14
Authority (LOA) for the examination of accounting
books and records of Chiat Corp. for all internal The BIR confirmed in its Manifestation and
revenue taxes for 1999 and 2000. Chiat Corp.'s Comment, that the DOJ complied with the CA's
Master Payroll, Beth Tugade (Tugade) received the decision and filed criminal Information against
LOA, but the required documents were not Sze, For, and Ng. On July 8, 2015, the CTA
presented. On May 5, 2003, Tugade received the promulgated a resolution dismissing Criminal
BIR's second notice and final notice, and still the Case Nos. O-385 to O-392 due to prescription.
records were not presented. 2 15

Due to Chiat Corp's. refusal to present its In its Reply, the petitioners reiterated that the
accounting records, the BIR conducted an propriety of the CA's decision in finding
investigation and discovered that Chiat Corp.:(1) probable cause was rendered moot and
underdeclared its sales amounting to academic by the CTA decision dismissing the
P160,588,321.63 and P113,578,182.69; (2) Amended Information against them. 16
underdeclared its income amounting to
P10,663,130.96 and P5,678,909.13 for 1999 and Section 281 of the Tax Reform Act of 1997 17
2000, respectively; (3) derived income from states that the prescriptive period for violation
undeclared importation of raw materials; (4) the of the law is five years.
underdeclared sales and income should have been
subjected to VAT and income tax; (5) deliberately SEC. 281. Prescription for Violations of any
and wilfully misdeclared its taxable base to evade Provision of this Code. — All violations of any
payment of correct internal revenue liabilities; (6) provision of this Code shall prescribe after five
failed to withhold taxes on labor cost it claimed (5) years.
amounting to P427,010,000.00; (7) failed to rectify
its income, value-added and withholding tax Prescription shall begin to run from the day of
returns, which should reflect the actual and correct the commission of the violation of the law, and
taxable base; and (8) understated the payment of if the same be not known at the time, from the
its correct tax liabilities by more than 30%.3 discovery thereof and the institution of judicial
proceedings for its investigation and
Thereafter, the BIR issued a Notice of Informal punishment.
Conference (NIC),Preliminary Assessment Notice
(PAN),Formal Letter of Demand (FLD),and Final The prescription shall be interrupted when
Assessment Notice (FAN).Despite these notices, proceedings are instituted against the guilty
Chiat Corp. failed to interpose any protest; thus, the persons and shall begin to run again if the
BIR's assessment for deficiency taxes for 1999 and proceedings are dismissed for reasons not
2000 amounting to P33,847,574.18 became final, constituting jeopardy.
executory and demandable. 4
xxx xxx xxx
On May 19, 2005, the BIR charged the officers of
Chiat Corp., petitioners Imelda T. Sze (Sze), Sze The CTA explained that Revenue
Kou For (For), and Teresita A. Ng (Ng), with tax Memorandum Circular 101-90 provides that an
evasion and/or tax fraud for violation of Sections 27 offense under the Tax Code is considered
(A), 31, 32, 56 (A) (1), 79 (A) (B), 80 (A), 81, 106, discovered only after the manner of
114 (A) (B), in relation to Sections 251, 253 (d), commission and the nature and extent of fraud
254, 255, and 256 of the National Internal Revenue has been definitely ascertained. This occurs
Code of 1997 (NIRC). 5 when the BIR renders its final decision and
requires the taxpayer to pay the deficiency tax.
Petitioners Sze, For, and Ng denied the 18
accusations against them and claimed, among
other allegations, that: (1) there was no factual and The CTA determined that the FLD and the FAN
legal basis for the charges; (2) the filing was for taxable years 1999 and 2000 were served
premature and violated their rights to due process; on Chiat Corp. on February 7, 2005. Chiat
(3) they did not receive the notices; (4) they were Corp. did not file a protest, resulting in the
not responsible for any underdeclaration, finality, demandability, and executory nature of
misdeclaration or importation; (5) they were not the assessment for deficiency taxes. Counting
responsible for the preparation and filing of tax 30 days from the service of the FLD and the
returns; (6) Chiat Corp. has no assets to satisfy the FAN, the violations were considered
assessed taxes; (7) Chiat Corp. notified the BIR of discovered on March 9, 2005. The BIR's
the termination of business as of December 2004; revenue officers filed their joint affidavit in the
and (8) the BIR presumed that Chiat Corp. DOJ for preliminary investigation on May 26,
manufactured the raw materials into final products 2005. However, the original Information was
and sold them. 6 only filed in court on April 23, 2014, which
exceeded the five-year prescriptive period.
The State Prosecutor dismissed the complaint on Therefore, the action had prescribed. 19
July 12, 2006. The BIR moved for reconsideration,
which was denied on November 29, 2006. The BIR The Court observed that the Public Prosecutor
filed a petition for review before the Department of did not appeal or move for reconsideration of
Justice (DOJ),which denied the same in a the CTA's decision; thus rendering it final and
resolution dated April 27, 2007. The DOJ also executory.
denied the BIR's motion for reconsideration on
June 17, 2010. The BIR elevated the case before The Court dismisses the petition for being moot
the Court of Appeals (CA) through a petition for and academic.
certiorari.7
In Peñafrancia Sugar Mill, Inc. v. Sugar
The CA Decision Regulatory Administration,20 the Court defined
moot and academic as:
In its May 31, 2012 Decision, 8 the CA gave due
course to the petition after finding that the records A case or issue is considered moot and
showed sufficient evidence of probable cause for academic when it ceases to present a
tax evasion and violation of the NIRC. Chiat Corp. justiciable controversy by virtue of supervening
failed to present countervailing evidence to refute events, so that an adjudication of the case or a
the documents and other importation records from declaration on the issue would be of no
different government agencies. 9 practical value or use. In such instance, there
is no actual substantial relief which a petitioner
 The CA held that the DOJ abused its discretion would be entitled to, and which would be
when it failed to consider various documents from negated by the dismissal of the petition. Courts
the Department of Trade and Industry's Bureau of generally decline jurisdiction over such case or
Import Services, the BIR's Audit Information Tax dismiss it on the ground of mootness. This is
Exemption Incentive Division, and the Bureau of because the judgment will not serve any useful
Custom's Management Information System purpose or have any practical legal effect
Technology Group. 10 because, in the nature of things, it cannot be
enforced. (Citation omitted)
The CA observed that Chiat Corp. filed an
application for retirement of business after applying Here, the dismissal of the criminal cases on the
for VAP. The CA found this move as suspicious, if ground of prescription rendered the issue on
not an indication of bad faith. 11 the propriety of the CA's decision in finding
probable cause as moot and academic. Thus,
The CA resolved that probable cause was the Court finds it appropriate to abstain from
sufficiently established, and ordered the DOJ to file passing upon the merits of this petition where
the corresponding Information with the proper legal relief is neither needed nor called for.
court. 12
WHEREFORE,the petition is DISMISSED for
Chiat Corp. moved for reconsideration, which the being moot and academic.
CA denied in its November 26, 2013 Resolution. 13
Undeterred, petitioners Sze, For, and Ng filed this
petition for review on certiorari before the Court.

||| (Sze v. Bureau of Internal Revenue, G.R. No.

210238, [January 6, 2020])

14. Misnet, Inc. vs. The filing of Relief of Judgement has On February 9, 2007, petitioner paid the amount of whether or not the CTA En Section 228 of the 1997 National Internal
Commissioner of stopped the running of the period to P2,152.41 for certain undisputed assessments. 5 Banc correctly dismissed Revenue Code of the Philippines (NIRC) which
Internal Revenue, G.R. appeal and may constitute excusable On the same day, petitioner administratively petitioner's Petition for provides for the remedies of a taxpayer in case
No. 210604, June 3, delay protested the FAN by filing a request for Review on the ground of lack of an adverse final decision by the CIR on
2019. reconsideration. 6 The CIR acknowledged receipt of jurisdiction.||| (Misnet, Inc. Disputed Assessment, thus:
of the payment and the protest letter and informed v. Commissioner of Internal
the petitioner that its tax docket had been Revenue, G.R. No. 210604, SEC. 228. Protesting of Assessment.— When
forwarded to Revenue District Officer (RDO) No. [June 3, 2019]) the Commissioner or his duly authorized
049, North Makati. 7 On May 28, 2007, the CIR representative finds that proper taxes should
informed petitioner that Revenue Officer (RO) be assessed, he shall first notify the taxpayer
Josephine L. Paralejas has been authorized to of his findings: Within a period to be prescribed
verify the documents relative to its request for by implementing rules and regulations, the
reinvestigation and reiterated the previous taxpayer shall be required to respond to said
assessment of petitioner's deficiency taxes for notice. If the taxpayer fails to respond, the
taxable year 2003 in the amount of Commissioner or his duly authorized
P11,580,749.31. 8 On June 1, 2007, petitioner sent representative shall issue an assessment
a letter to RO Josephine L. Paralejas reiterating its based on his findings.
protest to the PAN and the FAN.
Such assessment may be protested
On April 28, 2008, the CIR again wrote a letter to administratively by filing a request for
petitioner informing it that it found additional reconsideration or reinvestigation within thirty
deficiency taxes due. 9 On May 8, 2008, petitioner (30) days from receipt of the assessment in
protested this letter. such form and manner as may be prescribed
by implementing rules and regulations.
On March 28, 2011, petitioner received an
Amended Assessment Notice reflecting an Within sixty (60) days from filing of the protest,
amended deficiency EWT after reinvestigation. On all relevant supporting documents shall have
the same date, petitioner received a Final Decision been submitted; otherwise, the assessment
on Disputed Assessment (FDDA) stating that after shall become final.
reinvestigation, there was still due from petitioner
the amount of P14,564,323.34, representing If the protest is denied in whole or in part, or is
deficiency taxes: not acted upon within one hundred eighty (180)
days from submission of documents, the
This FDDA was received by petitioner on March 28, taxpayer adversely affected by the decision or
2011. 10 inaction may appeal to the Court of Tax
Appeals within (30) days from receipt of the
On April 8, 2011, petitioner filed a letter-reply 11 to said decision,or from the lapse of the one
the Amended Assessment Notice and FDDA, which hundred eighty (180)-day period; otherwise,
was received by the CIR on April 11, 2011. On May the decision shall become final, executory and
9, 2011, the CIR sent a letter 12 to petitioner which demandable. (Emphasis supplied)
states in part that petitioner's letter-reply dated April
8, 2011 produced no legal effect since it availed of It bears to stress that the perfection of an
the improper remedy. 13 It should have appealed appeal within the statutory period is a
the final decision of the CIR to the Court of Tax jurisdictional requirement and failure to do so
Appeals within thirty (30) days from the date of renders the questioned decision or decree final
receipt of the said Decision, otherwise, the and executory and no longer subject to review.
assessment became final, executory and 25
demandable. 14
In the instant case, petitioner allegedly failed to
On May 27, 2011, petitioner filed a Petition for observe the 30-day period within which to
Relief from Judgment 15 with respondent appeal the final decision of the CIR to the CTA.
Commissioner arguing that it was not able to file its As records would show, petitioner admittedly
proper appeal of the FDDA due to its mistake and received the FDDA on March 28, 2011.
excusable negligence as it was not assisted by Reckoned from this date of receipt, it has until
counsel. On June 29, 2011, petitioner received a April 27, 2011, within which to appeal with the
Preliminary Collection Letter 16 dated June 22, CTA. However, petitioner filed its appeal
2011, which is deemed a denial of petitioner's (Petition for Review) only on July 26, 2011 or
Petition for Relief. 17 after the lapse of ninety-three (93) days from
its receipt of the FDDA. It appears that
On July 26, 2011, petitioner filed a Petition for petitioner's filing of an appeal with the CTA was
Review 18 docketed as CTA Case No. 8313, with beyond the statutory period to appeal.
the Court of Tax Appeals which was raffled to the
First Division. Meanwhile, the CIR filed a Motion to Nonetheless, this Court has on several
Dismiss the petition on the ground of lack of occasions relaxed this strict requirement. We
jurisdiction — arguing that the assessment against have on several instances allowed the filing of
petitioner has become final, executory and an appeal outside the period prescribed by law
demandable for its failure to file an appeal within in the interest of justice, and in the exercise of
the prescribed period of thirty (30) days. its equity jurisdiction. 26 Thus:

In a Resolution dated March 27, 2012, 19 the CTA x x x [F]or a party to seek exception for its
1st Division granted CIR's Motion to Dismiss. failure to comply strictly with the statutory
Petitioner filed a Motion for Reconsideration 20 of requirements for perfecting its appeal, strong
the March 27, 2012 Resolution. On June 27, 2012, compelling reasons such as serving the ends
petitioner received from CTA 1st Division a of justice and preventing a grave miscarriage
Resolution dated June 22, 2012 21 denying its thereof must be shown, in order to warrant the
Motion for Reconsideration. Court's suspension of the rules. Indeed, the
Court is confronted with the need to balance
On July 12, 2012, petitioner filed a Petition for stringent application of technical rules vis-a-vis
Review (CTA EB Case No. 915) with the CTA En strong policy considerations of substantial
Banc. significance to relax said rules based on equity
and justice. 27 (Emphasis supplied; citation
In a Decision dated July 15, 2013, the CTA En Banc omitted)
dismissed petitioner's Petition for Review on the
ground of lack of jurisdiction as the lapse of the Petitioner averred that after receiving the
statutory period to appeal rendered the subject Amended Assessment Notice and the FDDA of
deficiency taxes final, executory and demandable. the CIR on March 28, 2011, it filed, without the
22 On August 6, 2013, petitioner filed a Motion for assistance of a counsel, a letter protesting the
Reconsideration but the said Motion was denied in Amended Assessment Notice, with Regional
a Resolution dated December 9, 2013. Director Mr. Jaime B. Santiago, of RDO No.
049, Makati City. This letter of protest was filed
||| (Misnet, Inc. v. Commissioner of Internal by petitioner on April 11, 2011 28 or within the
Revenue, G.R. No. 210604, [June 3, 2019]) statutory period within which to appeal.
Apparently, petitioner was merely relying on
the statement in the said Amended
Assessment Notice, which reads:

IF YOU DISAGREE WITH THIS

ASSESSMENT, FILE YOUR PROTEST IN
WRITING INDICATING YOUR REASONS
WITH THE COMMISSIONER OF INTERNAL
REVENUE, BIR DILIMAN, QUEZON CITY OR
THE REGIONAL DIRECTOR WITHIN 30
DAYS FROM RECEIPT HEREOF: x x x 29
Thus, petitioner opted to file the protest with the
Regional Director. On May 12, 2011, petitioner
received a letter informing it that its filing of a
letter of protest was an improper remedy. 30
Therefore, petitioner, on May 27, 2011, filed a
Petition for Relief from Judgment on the
ground of mistake in good faith for relying on
the statement provided in the Amended
Assessment Notice. Petitioner contends that
the CTA En Banc should have taken into
consideration that the filing of the Petition for
Relief from Judgment has stopped the running
of the period to appeal. Petitioner insists that
all of these incidents constitute excusable
delay that justified its belated filing of an appeal
with the CTA.

We sustain petitioner's argument.

When petitioner sent a letter-reply 31 dated

April 8, 2011 to the Regional Director, it was
actually protesting both the Amended
Assessment Notice and the FDDA. The
Amended Assessment Notice 32 reflects the
amended deficiency EWT of petitioner after
reinvestigation while the FDDA 33 reflects the
Final Decision on: (a) petitioner's deficiency
EWT; (b) Final Withholding of VAT; and (c)
Compromise Penalty. Since the deficiency
EWT is a mere component of the aggregate tax
due as reflected in the FDDA, then the FDDA
cannot be considered as the final decision of
the CIR as one of its components — the
amended deficiency EWT — is still under
protest.

Petitioner was correct when it protested with

the Regional Director the deficiency EWT as
per the Amended Assessment Notice sent by
the BIR. However, instead of resolving the
protest, the Regional Director informed the
petitioner that it was an improper remedy. A
ruling totally inconsistent with the statement
reflected in the Amended Assessment Notice,
which states that protest must be filed with the
CIR or the Regional Director within 30 days
from receipt thereof. 34 Apparently, the
Regional Director has hastily presumed that
petitioner was already protesting the FDDA,
which incidentally was received by petitioner
on the same date as that of the Amended
Assessment Notice.

With petitioner's pending protest with the

Regional Director on the amended EWT, then
technically speaking, there was yet no final
decision that was issued by the CIR that is
appealable to the CTA. It is still incumbent for
the Regional Director to act upon the protest on
the amended EWT — whether to grant or to
deny it. Only when the CIR settled (deny/grant)
the protest on the deficiency EWT could there
be a final decision on petitioner's liabilities. And
only when there is a final decision of the CIR,
would the prescriptive period to appeal with the
CTA begin to run.

Hence, petitioner's belated filing of an appeal

with the CTA is not without strong, compelling
reason. We could say that petitioner was
merely exhausting all administrative remedies
available before seeking recourse to the
judicial courts. While the rule is that a taxpayer
has 30 days to appeal to the CTA from the final
decision of the CIR, the said rule could not be
applied if the Assessment Notice itself clearly
states that the taxpayer must file a protest with
the CIR or the Regional Director within 30 days
from receipt of the Assessment Notice. Under
the circumstances obtaining in this case, we
opted not to apply the statutory period within
which to appeal with the CTA considering that
no final decision yet was issued by the CIR on
petitioner's protest. The subsequent appeal
taken by petitioner is from the inaction of the
CIR on its protest.

In this case, petitioner's appeal with the CTA

was basically anchored on two points of
contention, to wit: (a) the BIR's assessment of
EWT which has no basis in fact and in law.
Petitioner argues that it is not a top 10,000
Corporation, hence, not all its purchases are
subject to the 1% and 2% EWT; and (b) the
withholding of the VAT on royalty payments for
the software application it purchased from a
non-resident foreign corporation. Petitioner
argues that it is only a reseller (engaged in the
buy and sell) of Microsoft products and not a
licensor. Thus, the income payments made to
Microsoft do not constitute royalty income
subject to withholding VAT but merely a
business income. It maintained that even
Revenue Memorandum Circular (RMC) No.
44-2005 issued by the Bureau of Internal
Revenue (BIR) on September 7, 2005 does not
consider payments for computer software as
royalties but business income. And lastly,
petitioner argues that RMC No. 7-2003 issued
on November 18, 2003, which was relied upon
by the BIR in assessing it with deficiency
withholding tax on VAT on royalties, does not
expressly state when it would take effect. Thus,
petitioner opined that it cannot be given
retroactive effect (to cover its case), otherwise,
it will impose liabilities not existing at the time
of its passage.

If petitioner's right to appeal would be curtailed

by the mere expediency of holding that it had
belatedly filed its appeal, then this Court as the
final arbiter of justice would be deserting its
avowed objective, that is to dispense justice
based on the merits of the case and not on a
mere technicality. 35

Since the CTA First Division has the exclusive

appellate jurisdiction over decisions of the
 Commissioner of Internal Revenue on disputed
assessment, 36 it is just proper to remand the
case to it in order to determine whether
petitioner is indeed liable to pay the deficiency
withholding tax on VAT on royalties. It should
be noted that the CTA has developed an
expertise on the subject of taxation because it
is a specialized court dedicated exclusively to
the study and resolution of tax problems. 37
Thus, this Court has no jurisdiction to review
tax cases at the first instance without first
letting the CTA study and resolve the same. 38

WHEREFORE,the instant petition is

GRANTED.The case is REMANDED to the
Court of Tax Appeals 1st Division which is
DIRECTED to reinstate petitioner's Petition for
Review (appeal),in CTA Case No. 8313 and to
resolve the same on the merits with reasonable
dispatch.

SO ORDERED.

15. CIR vs. V.Y. The Doctrine of exhaustion of This is petition for review on certiorari under Rule whether the First Division of The taxpayers shall be informed in writing of
Domingo Jewellers, administrative remedies must be 45 seeking to reverse and set aside the Court of the CTA has jurisdiction to the law and the facts on which the assessment
Inc., G.R. No. 221780, adhered to Tax Appeals (CTA) En Banc Decision 1 dated July entertain V.Y. Domingo's is made; otherwise, the assessment shall be
March 25, 2019 1, 2015 in CTA EB Case No. 1170, which granted petition for review.||| void.
respondent V.Y. Domingo Jewellers, Inc.'s (V.Y. (Commissioner of Internal
Domingo) petition for review, and ordered the Revenue v. V.Y. Domingo Within a period to be prescribed by
remand of the case to the CTA First Division for Jewellers, Inc., G.R. No. implementing rules and regulations, the
further proceedings; and the Resolution 2 dated 221780, [March 25, 2019]) taxpayer shall be required to respond to said
December 3, 2015 which denied petitioner notice.
Commissioner of Internal Revenue's (CIR) motion
for reconsideration. If the taxpayer fails to respond, the
Commissioner or his duly authorized
The facts are as follows: representative shall issue an assessment
based on his findings.
On September 9, 2009, the Bureau of Internal
Revenue (BIR) issued a Preliminary Assessment Such assessment may be protested
Notice 3 (PAN) against V.Y. Domingo, a administratively by filing a request for
corporation primarily engaged in manufacturing reconsideration or reinvestigation within thirty
and selling emblematic jewelry, assessing the latter (30) days from receipt of the assessment in
the total amount of P2,781,844.21 representing such form and manner as may be prescribed
deficiency income tax and value-added tax, by implementing rules and regulations.
inclusive of interest, for the taxable year 2006.
Within sixty (60) days from filing of the protest,
V.Y. Domingo filed a Request for Re- all relevant supporting documents shall have
evaluation/Re-investigation and Reconsideration 4 been submitted; otherwise, the assessment
dated September 17, 2009 with the Regional shall become final.
Director of BIR-Revenue Region No. 6, requesting
a "thorough re-evaluation and re-investigation to If the protest is denied in whole or in part, or is
verify the accuracy of the computation as well as not acted upon within one hundred eighty (180)
the accounts included in the Preliminary days from submission of documents, the
Assessment Notice." taxpayer adversely affected by the decision or
inaction may appeal to the Court of Tax
V.Y. Domingo then received a Preliminary Appeals within thirty (30) days from receipt of
Collection Letter 5 (PCL) dated August 10, 2011 the said decision, or from the lapse of one
from the Revenue District Office (RDO) No. 28- hundred eighty (180)-day period; otherwise,
Novaliches, informing it of the existence of the decision shall become final, executory and
Assessment Notice No. 32-06-IT-0242 and demandable. 21
Assessment Notice No. 32-06-VT-0243, both dated
November 18, 2010, for collection of its tax On the other hand, Section 3.1.5 of Revenue
liabilities in the amounts of P1,798,889.80 and Regulations No. 12-99, 22 implementing
P1,365,727.63, respectively, for a total amount of Section 228 above, provides:
P3,164,617.43. The PCL likewise stated:
3.1.5. Disputed Assessment. — The taxpayer
If you want to know the details and/or settle this or his duly authorized representative may
assessment, may we invite you to come to this protest administratively against the aforesaid
office, within ten (10) days from receipt of this formal letter of demand and assessment notice
notice. However, if payment had already been within thirty (30) days from date of receipt
made, please send or bring us copies of the thereof . . .
receipts of payment together with this letter to be
our basis for canceling/closing your liability/ies. xxx xxx xxx

We will highly appreciate if you can give this matter If the taxpayer fails to file a valid protest against
your preferential attention, otherwise we shall be the formal letter of demand and assessment
constrained to enforce the collection thereof thru notice within thirty (30) days from date of
Administrative Summary Remedies provided for by receipt thereof, the assessment shall become
the law, without further notice. 6 cDSAEI final, executory and demandable.

On September 12, 2011, V.Y. Domingo sent a letter If the protest is denied, in whole or in part, by
to the BIR Revenue District Office No. 28 in Quezon the Commissioner, the taxpayer may appeal to
City, requesting certified true copies of Assessment the Court of Tax Appeals within thirty (30) days
Notice Nos. 32-06-IT-0242 and 32-06-VT-0243. from the date of receipt of the said decision,
Upon receipt of the requested copies of the notices otherwise, the assessment shall become final,
on September 15, 2011, V.Y. Domingo filed on executory and demandable.
September 16, 2011 a Petition for Review 7 with
the CTA in Division, under Section 7 (1) of RA No. In general, if the protest is denied, in whole or
1125 and Section 4, Rule 8 of the Revised Rules of in part, by the Commissioner or his duly
the Court of Tax Appeals (RRCTA), praying that authorized representative, the taxpayer may
Assessment Notice Nos. 32-06-IT-0242 and 32-06- appeal to the Court of Tax Appeals within thirty
VT-0243 dated November 18, 2010 and the PCL (30) days from date of receipt of the said
dated August 10, 2011 be declared null and void, decision, otherwise, the assessment shall
cancelled, withdrawn, and with no force and effect, become final executory and demandable:
for allegedly having been issued beyond the Provided, however, that if the taxpayer
prescriptive period for assessment and collection of elevates his protest to the Commissioner within
internal revenue taxes. thirty (30) days from date of receipt of the final
decision of the Commissioner's duly
During trial, the CIR filed her Motion to Dismiss 8 authorized representative, the latter's decision
the petition for lack of jurisdiction. She argued that shall not be considered final, executory and
under Republic Act (R.A.) No. 1125 ("An Act demandable, in which case, the protest shall
Creating the Court of Tax Appeals"), as amended, be decided by the Commissioner. CDHaET
and the RRCTA, it is neither the assessment nor
the formal letter of demand that is appealable to the If the Commissioner or his duly authorized
CTA but the decision of the CIR on a disputed representative fails to act on the taxpayer's
assessment. Claiming that V.Y. Domingo's petition protest within one hundred eighty (180) days
was anchored on its receipt of the PCL, which it from date of submission, by the taxpayer, of the
treated as a denial of its Request for Re- required documents in support of his protest,
evaluation/Re-investigation and Reconsideration, the taxpayer may appeal to the Court of Tax
the CIR further argued that there was no disputed Appeals within thirty (30) days from the lapse
assessment to speak of, and that the CTA had no of the said 180-day period, otherwise the
jurisdiction to entertain the said Petition for Review. assessment shall become final, executory and
demandable. (Emphasis ours)
In a Resolution 9 dated January 29, 2014, the CTA
First Division granted the CIR's motion and It is clear from the said provisions of the law
dismissed V.Y. Domingo's Petition for Review. It that a protesting taxpayer like V.Y. Domingo
held that it was without jurisdiction to entertain the has only three options to dispute an
petition, as the rule is that for the CTA to acquire assessment:
jurisdiction, as assessment must first be disputed
by the taxpayer and either ruled upon by the CIR to 1. If the protest is wholly or partially denied by
warrant a decision, or denied by the CIR through the CIR or his authorized representative, then
inaction. The CTA First Division ruled that what the taxpayer may appeal to the CTA within 30
were appealed to it were the subject assessments, days from receipt of the whole or partial denial
not a decision or the CIR's denial of its protest; thus, of the protest;
the said assessments had attained finality, and the
CTA in Division was without jurisdiction to entertain 2. If the protest is wholly or partially denied by
the appeal. the CIR's authorized representative, then the
taxpayer may appeal to the CIR within 30 days
V.Y. Domingo's motion for reconsideration having from receipt of the whole or partial denial of the
been denied in a Resolution dated April 23, 2014, it protest;
filed on May 30, 2014 a petition for review before
the CTA En Banc. It argued that the CTA First 3. If the CIR or his authorized representative
Division erred when it upheld the CIR's position that failed to act upon the protest within 180 days
V.Y. Domingo should have administratively from submission of the required supporting
protested the Assessment Notices first before filing documents, then the taxpayer may appeal to
its Petition for Review. Furthermore, V.Y. Domingo the CTA within 30 days from the lapse of the
claimed that it was denied due process when the 180-day period. 23
CIR failed to send the Notice of Final Assessment
to it. In this case, records show that on August 11,
2011, V.Y. Domingo received the PCL issued
In its Decision dated July 1, 2015, the CTA En Banc by petitioner CIR informing it of Assessment
granted V.Y. Domingo's Petition for Review, Notice Nos. 32-06-IT-0242 and 32-06-VT-0243
reversing and setting aside the January 29, 2014 dated November 18, 2010. On September 12,
and April 23, 2014 Resolutions of the CTA First 2011, the former sent a letter request to the
Division. It remanded the case to the CTA First BIR requesting for certified true copies of the
Division for further proceedings to afford the CIR said Assessment Notices.
full opportunity to present her evidence. It held —
However, instead of filing an administrative
Petitioner's case did not fall within the usual protest against the assessment notice within
procedure in the issuance of an assessment as thirty (30) days from its receipt of the requested
respondent failed to serve or send the FAN to copies of the Assessment Notices on
petitioner. Section 228 of the NIRC of 1997, as September 15, 2011, V.Y. Domingo elected to
amended, and Section 3 of Revenue Regulations file its petition for review before the CTA First
No. 12-99 are silent as to the procedure to be Division on September 16, 2011, ratiocinating
followed in case the taxpayer did not receive the that the issuance of the PCL and the alleged
FAN but instead receives a preliminary collection finality of the terms used for demanding
letter or a warrant of distraint/levy or similar payment therein proved that its Request for
communications, informing the taxpayer of the Re-evaluation/Re-investigation and
existence of a FAN for the first time. Reconsideration had been denied by the CIR.
Understandably, this would cause some confusion
as to what the next step it. Hence, petitioner cannot That V.Y. Domingo believed that the PCL
be faulted for not filing an administrative protest "undeniably shows" the intention of the CIR to
before filing a petition for review before the Court in make it as its final "decision" did not give it
Division since it did not receive the FAN and the cause of action to disregard the procedure set
language of the PCL shows that the respondent is forth by the law in protesting tax assessments
already demanding payment from petitioner and act prematurely by filing a petition for
presupposing that the assessment has become review before the courts. The word "decisions"
final. in the aforementioned provision of R.A. No.
9282 has been interpreted to mean the
The CIR argues that assessment notices are not decisions of the CIR on the protest of the
appealable to the CTA as the power to decide taxpayer against the assessments. 24
disputed assessments is vested in the CIR, subject Definitely, said word does not signify the
only to the exclusive appellate jurisdiction of the assessment itself. 25 Where a taxpayer
CTA. The CIR adds that a thorough review of V.Y. questions an assessment and asks the
Domingo's petition for review before the CTA First Collector to reconsider or cancel the same
Division would readily show that it was an original because he (the taxpayer) believes he is not
protest on the assessment made by the petitioner, liable therefor, the assessment becomes a
a matter that, under R.A. No. 1125, is not within the "disputed assessment" that the Collector must
jurisdiction of the CTA. SIcCTD decide, and the taxpayer can appeal to the
CTA only upon receipt of the decision of the
The CIR likewise claims that a close scrutiny of V.Y. Collector on the disputed assessment. 26
Domingo's petition for review before the CTA would
reveal that it was anchored on its receipt of the PCL Admitting for the sake of argument the claim of
issued by the BIR, which V.Y. Domingo mistakenly V.Y. Domingo in its Comment — that its case
treated as a denial of its motion for reinvestigation does not involve an appeal from a decision of
of the PAN. 11 Before V.Y. Domingo filed its the CIR on a disputed assessment since in the
petition for review before the CTA First Division on first place, there is no "'disputed' assessment
September 16, 2011, it had already received copies to speak of" — admits the veracity of petitioner
of Assessment Notice Nos. 32-06-IT-0242 and 32- CIR's claim: there being no disputed
06-VT-0243 and the Formal Letter of Demand assessment to speak of when V.Y. Domingo
(FLD) dated September 9, 2010. However, instead filed its petition for review before the CTA First
of challenging the contents of the said assessment Division, the latter had no jurisdiction to
notices by filing the appropriate protest or motion entertain the same. Thus, the latter's dismissal
for reinvestigation within thirty (30) days from of the petition for review was proper.
September 15, 2011, the date it received the copies
of the notices, the CIR laments that V.Y. Domingo Evidently, V.Y. Domingo's immediate recourse
opted to immediately institute a petition for review to the CTA First Division was in violation of the
on the basis of the PCL. 12 This, argues the CIR, is doctrine of exhaustion of administrative
in clear violation of the doctrine of exhaustion of remedies.
administrative remedies.
Under the doctrine of exhaustion of
This Court, through a Resolution 13 dated March 7, administrative remedies, before a party is
2016, required respondent V.Y. Domingo to allowed to seek the intervention of the court, he
comment on the Petition for Review. or she should have availed himself or herself of
all the means of administrative processes
In its Comment, 14 V.Y. Domingo contends that afforded him or her. 27 Section 228 of the Tax
contrary to the CIR's allegation, the CTA has Code requires taxpayers to exhaust
jurisdiction to take cognizance of its Petition for administrative remedies by filing a request for
Review. Citing Section 7 of R.A. No. 1125, as reconsideration or reinvestigation within 30
amended, V.Y. Domingo suggests that the CIR days from receipt of the assessment. 28
may have disregarded the fact that the jurisdiction Exhaustion of administrative remedies is
of the CTA is not limited to review of decisions of required prior to resort to the CTA precisely to
the CIR in cases involving disputed assessments give the Commissioner the opportunity to "re-
only, but also includes "other matters arising under examine its findings and conclusions" and to
the National Internal Revenue or other laws decide the issues raised within her
administered by the Bureau of Internal Revenue." competence. 29 HASDcC
15 V.Y. Domingo reiterates that its case does not
involve an appeal from a decision of the CIR on a V.Y. Domingo posits that its case is an
disputed assessment since in the first place, there exception to the rule on exhaustion of
is no "disputed" assessment to speak of. 16 administrative remedies and the rule on
primary jurisdiction as it cannot be expected to
Furthermore, V.Y. Domingo also claims that the be able to file an administrative protest to the
tenor of the PCL forecloses any opportunity for it to Assessment Notices which it never received.
file its administrative protest as a reading of the 30 It expressly admitted that it did not file an
same will show that the CIR had already decided to administrative protest, based on its alleged
deny any protest as regards the assessment made non-receipt of the same. 31 Citing the case of
against the respondent taxpayer. Allied Banking Corporation v. CIR, 32 wherein
this Court ruled that the filing of therein
petitioner of a petition for review with the CTA
without first contesting the FAN issued against
it was an exception to the rule on exhaustion of
administrative remedies, V.Y. Domingo
maintains that in its case, the CIR was similarly
estopped from claiming that the filing of the
petition for review was premature.

However, as previously mentioned, the records

of the case show that V.Y. Domingo did receive
the certified true copies of the Assessment
Notices it requested on September 15, 2011,
the day before it filed its petition for review
before the CTA First Division. V.Y. Domingo
cannot now assert that its recourse to the court
was based on its non-receipt of the
Assessment Notices that it requested.

Likewise, this Court cannot apply the ruling in

Allied Banking Corporation v. CIR, 33 wherein
the demand letter sent by the CIR was worded
as follows:

It is requested that the above deficiency tax be

paid immediately upon receipt hereof, inclusive
of penalties incident to delinquency. This is our
final decision based on investigation. If you
disagree, you may appeal the final decision
within thirty (30) days from receipt hereof,
otherwise said deficiency tax assessment shall
become final, executory and demandable. 34

The ruling of this Court in the said case was

grounded on the language used and the tenor
of the demand letter, which indicate that it was
the final decision of the CIR on the matter. The
words used, specifically the words "final
decision" and "appeal," taken together led
therein petitioner to believe that the Formal
Letter of Demand with Assessment Notices
was, in fact, the final decision of the CIR on the
letter-protest it filed and that the available
remedy was to appeal the same to the CTA. 35

Comparing the wording of the above-quoted

demand letter with that sent by the CIR to V.Y.
Domingo in the instant case, it becomes
apparent that the latter's invocation of the
ruling in the Allied Banking Corporation case is
misguided as the foregoing statements and
terms are not present in the subject PCL dated
August 10, 2011.

What is evident in the instant case is that

Assessment Notice Nos. 32-06-IT-0242 and
32-06-VT-0243 dated November 18, 2010
have not been disputed by V.Y. Domingo at the
administrative level without any valid basis
therefor, in violation of the doctrine of
exhaustion of administrative remedies. To
reiterate, what is appealable to the CTA are
decisions of the CIR on the protest of the
taxpayer against the assessments. There
being no protest ruling by the CIR when V.Y.
Domingo's petition for review was filed, the
dismissal of the same by the CTA First Division
was proper. As correctly put by Associate
Justice Roman G. Del Rosario in his
Dissenting Opinion, "(C)learly, petitioner did
not exhaust the administrative remedy
provided under Section 228 of the NIRC of
1997, as amended, and RR No. 12-99 which is
 fatal to its cause. Consequently, the non-filing
of the protest against the FLD led to the finality
of the assessment." 36

WHEREFORE, in view of the foregoing, the

Court GRANTS the petition for review on
certiorari. The assailed July 1, 2015 Decision
and December 3, 2015 Resolution of the Court
of Tax Appeals En Banc are hereby
REVERSED and SET ASIDE, and the January
29, 2014 and April 23, 2014 Resolutions of the
First Division of the Court of Tax Appeals are
REINSTATED

16. CIR vs. La Flor De Section 53 (c) of the NIRC, the Respondent La Flor dela Isabela, Inc. (La Flor) is Held: No
La Isabela, Inc., G.R. withholding agent who is “required to a domestic corporation. It filed monthly returns for . Whether the prescriptive
No. 211289, January deduct and withhold any tax” is made the Expanded Withholding Tax (EWT) and period under Section 203 of
14, 2019 “personally liable for such tax” and Withholding Tax on Compensation (WTC) for the NIRC do not apply to It is true that withholding tax is a method of
indeed is indemnified against any calendar year 2005. EWT and WTC collecting tax in advanceand that a
claims and demands which the assessments because they withholding tax on income necessarily implies
stockholder might wish to make in On September 3, 2008, La Flor executed a Waiver are not considered as that the amount of tax withheld comes from
questioning the amount of payments of the Statute of Limitations (Waiver) in connection internal revenue taxes but the income earned by the
effected by the withholding agent in with its internal revenue liabilities for the calendar “penalties” taxpayer/payee.Nonetheless, the Court does
accordance with the provisions of the year ending December 31, 2005. On February 16, not agree with the CIR that withholding tax
NIRC. 2009, it executed another Waiverto extend the assessments are merely an imposition of a
period of assessment until December 31, 2009. penalty on the withholding agent, and thus,
outside the coverage of Section 203 of the
On November 20, 2009, La Flor received a copy NIRC.
of the Preliminary Assessment Notice for
deficiency taxes for the taxable year 2005. The liability of the withholding agent is distinct
Meanwhile, on December 2, 2009, it executed and separate from the tax liability of the
another Waiver. income earner. It is premised on its duty to
withhold the taxes paid to the payee. Should
On January 7, 2010, La Flor received Formal the withholding agent fail to deduct the
Letter of Demand and Final Assessment Notice for required amount from its payment to the
late filing and payment of WTCs and EWTs. The payee, it is liable for deficiency taxes and
above-mentioned assessment notices were all applicable penalties. In Commissioner of
dated December 17, 2009 and covered the Internal Revenue v. Procter & Gamble
deficiency taxes for the taxable year 2005. Philippine Manufacturing Corporation the
Court explained:
La Flor filed its Letter of Protest contesting the
assessment notices. The Commissioner of It thus becomes important to note that under
Internal Revenue (CIR) issued the Final Decision Section 53 (c) of the NIRC, the withholding
on Disputed Assessment (FDDA) involving the agent who is “required to deduct and withhold
alleged deficiency withholding taxes in the any tax” is made “personally liable for such
aggregate amount of P6,835,994.76. Aggrieved, tax” and indeed is indemnified against any
La Flor filed a petition for review before the CTA claims and demands which the stockholder
Division. might wish to make in questioning the amount
of payments effected by the withholding agent
The CTA Division ruled in favor of La Flor and in accordance with the provisions of the NIRC.
cancelled the deficiency tax assessments against The withholding agent, P&G-Phil., is directly
it. It noted that based on the dates La Flor had and independently liable for the correct
filed its returns for EWT and WTC, the CIR had amount of the tax that should be withheld from
until February 15, 2008 to March 1, 2009 to issue the dividend remittances. The withholding
an assessment pursuant to the three-year agent is, moreover, subject to and liable for
prescriptive period under Section 203 of the deficiency assessments, surcharges and
National Internal Revenue Code (NIRC). The CTA penalties should the amount of the tax
Division pointed out that the assessment was withheld be finally found to be less than the
issued beyond the prescriptive period considering amount that should have been withheld under
that the CIR issued the FANs only on December law.
17, 2009.
A “person liable for tax” has been held to be a
The CTA Division ruled further that the Waivers “person subject to tax” and properly
entered into by the CIR and La Flor did not considered a “taxpayer.” The terms “liable for
effectively extend the prescriptive period for the tax” and “subject to tax” both connote legal
issuance of the tax assessments. It pointed out obligation or duty to pay a tax. It is very
that the Waivers dated September 3, 2008 and difficult, indeed conceptually impossible, to
December 2, 2009 were never presented or consider a person who is statutorily made
offered in evidence, while the Waiver dated “liable for tax” as not “subject to tax.” By any
February 16, 2009 did not comply with the reasonable standard, such a person should
provisions of Revenue Memorandum Order be regarded as a party in interest, or as a
(RMO) No. 20-90 because it failed to state the person having sufficient legal interest, to bring
nature and amount of the tax to be assessed. a suit for refund of taxes he believes were
illegally collected from him.
The CIR moved for reconsideration but it was
denied by the CTA Division. Undeterred, it filed a Thus, withholding tax assessments such as
Petition for Reviewbefore the CTA En Banc. EWT and WTC clearly contemplate deficiency
internal revenue taxes. Their aim is to collect
The CTA En Banc affirmed the Decision of the unpaid income taxes and not merely to
CTA Division. Thus, the CIR filed a petition for impose a penalty on the withholding agent for
review on certiorari under Rule 45 of the Rules of its failure to comply with its statutory duty.
Court.

The CIR argued that the prescriptive period under

Section 203 of the NIRC does not apply to
withholding agents such as La Flor. It explained
 that the amount collected from them is not the tax
itself but rather a penalty. The CIR pointed out that
the provision of Section 203 of the NIRC only
mentions assessment of taxes as distinguished
from assessment of penalties. It highlighted that
La Flor was made liable for EWT and WTC
deficiencies in its capacity as a withholding agent
and not in its personality as a taxpayer.

On the other hand, the CIR maintained that even

applying the periods set in Section 203 of the
NIRC, the EWT and WTC assessment of La Flor
had not yet prescribed. It pointed out that La Flor
had executed three Waivers extending the
prescriptive period under the NIRC. The CIR
lamented that the CTA erred in disregarding them
because evidence not formally offered may be
considered if they form part of the records. It noted
that in the Answer it filed before the CTA Division,
the subject Waivers were included as annexes. In
addition, the CIR assailed that failure to comply
with RMO No. 20-90 does not invalidate the
Waivers.

In its Comment, other than challenging the merits

of the CIR’s petition, La Flor believes that the
former’s petition for review on certiorari should be
dismissed outright on procedural grounds. It points
out that failure to include the date of issue of the
MCLE compliance number of a counsel in a
pleading is a ground for dismissal. Further, La Flor
highlights that the paragraphs in the CIR’s petition
for review on certiorari were not numbered.

17. CIR vs. BPI, G.R. An assessment becomes final and Citytrust Banking Corporation (CBC) filed its Was there a valid notice of An assessment becomes final and
No. 224327. June 11, unappealable if within thirty (30) days Annual Income Tax Returns for its Regular Banking assessment made by the unappealable if within thirty (30) days from
2018. from receipt of the assessment, the Unit, and Foreign Currency Deposit Unit for taxable CIR to BPI? receipt of the assessment, the taxpayer fails to
taxpayer fails to file his or her protest year 1986 on April 15, 1987. Thereafter, on August file his or her protest requesting for
requesting for reconsideration or 11, 1989, July 12, 1990 and November 8, 1990, reconsideration or reinvestigation as provided
reinvestigation as provided in Section CBC executed Waivers of the Statute of Limitations in Section 229 of the NIRC.
229 of the NIRC. under the National Internal Revenue Code (NIRC).
The CTA was correct in ruling that petitioner
On March 7, 1991, petitioner CIR issued a Pre- failed to prove that it sent a notice of
Assessment Notice (PAN) against CBC for assessment and that it was received by
deficiency taxes, among which is for deficiency respondent. The assessment notice dated May
Income Tax for taxable year 1986. Petitioner, on 6, 1991 should be deemed as the final decision
May 6, 1991, issued a Letter, with attached of the CIR on the matter, in which BPI timely
Assessment Notices. The counsel for CBC filed its protested on May 27, 1991. While a mailed
Protest against the assessments on May 27, 1991 letter is deemed received by the addressee in
and another Protest on February 17, 1992. the ordinary course of mail, this is still merely a
disputable presumption subject to
The counsel for CBC issued a Letter addressed to controversion, and a direct denial of the receipt
petitioner offering a compromise settlement on its thereof shifts the burden upon the party
deficiency Income Tax assessment for Taxable favored by the presumption to prove that the
year 1986. The petitioner, CIR, approved the first mailed letter was indeed received by the
compromise settlement. However, after the request addressee. In the instant case, BPI denies
for final reconsideration of compromise settlement receiving the assessment notice, and the CIR
made by the CBC, the CIR disapproved the was unable to present substantial evidence
application of such compromise and ordered CBC that such notice was, indeed, mailed or sent
to pay its tax deficiency liabilities and also issued a before the BIR's right to assess had prescribed
Warrant of Distraint and/or Levy against and that said notice was received by BPI. As a
respondent BPI (Securities and Exchange matter of fact, there was an express admission
Commission approved the Articles of Merger on the part of the CIR that there was no proof
between respondent BPI and CBC, with BPI as the that indeed the alleged Final Assessment
surviving corporation). Notice was ever sent to or received by BPI.

Respondent BPI filed a Petition for Review with the Thus, the failure of petitioner to prove the
CTA, and the CTA ruled that the Assessment receipt of the assessment by respondent would
Notices, being issued only on May 6, 1991, were necessarily lead to the conclusion that no
already issued beyond the three-year period to assessment was issued.
assess, counting from April 15, 1987, when CBC
filed its Annual Income Tax Returns for the taxable
year 1986. The same Court also held that the
Waivers of Statute of Limitations executed on July
12, 1990 and November 8, 1990 were not in
accordance with the proper form of a valid waiver
pursuant to RMO No. 20-90, thus, the waivers
failed to extend the period given to petitioner to
assess.
18. Macario Lim Gaw It is well-settled that the taxpayer's FACTS: On July 11, 2008, petitioner conveyed the ISSUES: HELD.NO
vs. CIR, G.R. No. obligation to pay the tax is an obligation 10 parcels of land to Eagle I Landholdings, Inc. [1] Is the civil action filed by
222837, July 23, 2018 that is created by law and does not (Eagle I), via an Agreement to Sell. petitioner to question the Under the Revised Rules of the Court of Tax
arise from the offense of tax evasion, as FDDA deemed instituted in Appeals (RRCTA), the civil action filed by the
such, the same is not deemed instituted In compliance with Revenue Memorandum Order the criminal case for tax petitioner to question the FDDA is not deemed
in the criminal case. No. 15-2003, petitioner requested the BIR-RDO to evasion? instituted with the criminal case for tax
compute the tax liabilities due on the sale of the evasion. Civil liability arising from a different
10 parcels of land to Eagle I. source of obligation, such as when the
obligation is created by law, such civil liability
In accordance with the One Time Transactions is not deemed instituted with the criminal
(ONETT) Computation sheets, petitioner paid action.
Capital Gains Tax amounting to P505,177,213.81
and Documentary Stamp Tax amounting to It is well-settled that the taxpayer's obligation
P330,390.00. to pay the tax is an obligation that is created
by law and does not arise from the offense of
On July 23, 2008, the BIR-RDO No. 52 issued the tax evasion, as such, the same is not deemed
corresponding Certificates Authorizing instituted in the criminal case.
Registration and Tax Clearance Certificates.
Civil liability to pay taxes arises from the fact
Two years later, the CIR said petitioner is liable that one has engaged himself in business,
NOT for the 6% capital gains tax but for the 32% and not because of any criminal act
regular income tax and 12% value added tax, on committed by him. The acquittal in the said
the theory that the properties petitioner sold were criminal cases cannot operate to discharge
ordinary assets and not capital assets. Further, the taxpayer from the duty of paying the taxes
respondent found petitioner to have misdeclared which the law requires to be paid, since that
his income, misclassified the properties and used duty is imposed by statute prior to and
multiple tax identification numbers to avoid being independently of any attempts by the taxpayer
assessed the correct amount of taxes. to evade payment.

CIR issued a Letter of Authority to commence

investigation on petitioner's tax account.

The next day, CIR filed with the DOJ a Joint

Complaint Affidavit for tax evasion against
petitioner.

The DOJ then filed two criminal informations for

tax evasion against petitioner in the CTA. At the
time the Informations were filed, CIR had not yet
issued a final decision on the deficiency
assessment against petitioner.

Halfway through the trial, the respondent issued a

Final Decision on Disputed Assessment (FDDA)
against petitioner, assessing him of deficiency
income tax and VAT covering taxable years 2007
and 2008.

With respect to the deficiency assessment against

petitioner for the year 2007, petitioner filed a
petition for review with the CTA, docketed as CTA
Case No. 8502. The clerk of court of the CTA
assessed petitioner for filing fees which the latter
promptly paid.

However, with respect to the deficiency

assessment against petitioner for the year 2008,
the same involves the same tax liabilities being
recovered in the pending criminal cases. Thus,
petitioner filed before the CTA a motion to clarify
as to whether petitioner has to file a separate
petition to question the deficiency assessment for
the year 2008.

On June 6, 2012, the CTA issued a Resolution

granting petitioner's motion and held that the
recovery of the civil liabilities for the taxable year
2008 was deemed instituted with the consolidated
criminal cases.

However, as a caution, petitioner still filed a

Petition for Review Ad Cautelam (with Motion for
Consolidation with CTA Criminal Case Nos. O-206
and O-207). Upon filing of the said petition, the
clerk of court of the CTA assessed petitioner with
"zero filing fees."

Petitioner was acquitted in Criminal Case Nos. O-

206 and O-207 and the CTA directed the litigation
of the civil aspect in CTA Case No. 8503.

Thereafter, CIR filed a Motion to Dismiss the

Petition for Review Ad Cautelam on the ground
that the CTA First Division lacks jurisdiction to
resolve the case due to petitioner's non-payment
of the filing fees.
CTA First Division granted the Motion to Dismiss.
Petitioner elevated the case to the CTA En Banc.
Dismissal affirmed.
19. Asian As a general rule a waiver that did not In this appeal, ATC insists The appeal has no merit.
Transmission Corp. v. comply with the requisites for validity as [ATC] is a corporation duly organized and existing that the CTA En Banc acted
CIR, G.R. No. 230861, specified in RMO No. 20-90 and RDAO under Philippine Laws and with business address in excess of jurisdiction or Principles:
September 19, 2018 01- 05 is considered invalid and at Carmelray Industrial Park, Canlubang, Calamba with grave abuse of
ineffective to extend the prescriptive City, Laguna. ATC is a manufacturer of motor discretion amounting to lack In this case, the CTA in Division noted that the
period to assess the deficiency taxes. vehicle transmission component parts and or excess of jurisdiction in eight waivers of ATC contained the following
Notwithstanding the non-compliance, engines of Mitsubishi vehicles applying the ruling in defects, to wit: The notarization of the Waivers
the Supreme Court treated the case as Commissioner of Internal was not in accordance with the 2004 Rules on
an exception to the rule and considered Revenue v. Next Mobile Notarial Practice;Several waivers clearly failed
the waivers as valid for the following On August 11, 2004, ATC received Letter of Inc.[11] as well as the to indicate the date of acceptance by the
reasons, viz: (a) Parties are in pari Authority [(LOA)] No. 200000003557 where [the equitable principles of in pari Bureau of Internal Revenue; The Waivers
delicto or "in equal fault"; (b) Parties CIR] informed ATC that its revenue officers from delicto, unclean hands, and were not signed by the proper revenue officer;
who do not come to court with clean the Large Taxpayers Audit and Investigation estoppel. and The Waivers failed to specify the type of
hands cannot be allowed to benefit from Division II shall examine its books of accounts and tax and the amount of tax due.[14] We agree
their own wrongdoing. Following the other accounting records for the taxable year with the holding of the CTA En Banc that
foregoing principle, respondent should 2002. ATC's case was similar to the case of the
not be allowed to benefit from the flaws taxpayer involved in Commissioner of Internal
in its own Waivers and successfully Revenue v. Next Mobile Inc. The foregoing
insist on their invalidity in order to evade Thereafter, [the CIR] issued a Preliminary defects noted in the waivers of ATC were not
its responsibility to pay taxes; (c) One of Assessment Notice (PAN) to ATC. Consequently, solely attributable to the CIR. Indeed,
the parties is estopped from questioning on various dates, ATC, through its Vice President although RDAO 01-05 stated that the waiver
the validity of its Waivers; and (d) for Personnel and Legal Affairs, Mr. Roderick M. should not be accepted by the concerned BIR
Negligence in the execution of the Tan, executed several documents denominated as office or official unless duly notarized, a
waiver "Waiver of the Defense of Prescription Under the careful reading of RDAO 01-05 indicates that
Statute of Limitations of the National Internal the proper preparation of the waiver was
Revenue Code" (Waiver) primarily the responsibility of the taxpayer or
its authorized representative signing the
waiver. Such responsibility did not pertain to
Meanwhile, on February 28, 2008, ATC availed of the BIR as the receiving party. Consequently,
the Tax Amnesty [P]rogram under Republic Act ATC was not correct in insisting that the act or
No. 9480. On July 15, 2008, ATC received a omission giving rise to the defects of the
Formal Letter of Demand from [the] CIR for waivers should be ascribed solely to the
deficiency [WTC] in the amount of respondent CIR and her subordinates.
P[hp]62,977,798.02, [EWT] in the amount of
P[hp]6,916,910.51, [FWT] in the amount of Moreover, the principle of estoppel was
P[hp]501,077.72. On August 14, 2008, ATC filed applicable. The execution of the waivers was
its Protest Letter in regard thereto. Accordingly, on to the advantage of ATC because the waivers
April 14, 2009, ATC received the Final Decision on would provide to ATC the sufficient time to
Disputed Assessment where [the] CIR found ATC gather and produce voluminous records for
liable to pay deficiency tax in the amount of the audit. It would really be unfair, therefore,
P[hp]75,696,616.75. Thus, on May 14, 2009, ATC were ATC to be permitted to assail the
filed an appeal letter/request for reconsideration waivers only after the final assessment proved
with [the] CIR. to be adverse. Indeed, the Court observed in
 Commissioner of Internal Revenue v. Next
Mobile Inc. that: In this case, respondent, after
On November 28, 2014, the CTA in Division deliberately executing defective waivers,
rendered its decision granting the petition for raised the very same deficiencies it caused to
review of ATC. It held that ATC was not estopped avoid the tax liability determined by the BIR
from raising the invalidity of the waivers inasmuch during the extended assessment period. It
as the Bureau of Internal Revenue (BIR) had itself must be remembered that by virtue of these
caused the defects thereof, namely: (a) the Waivers, respondent was given the
waivers were notarized by its own employee opportunity to gather and submit documents
despite not being validly commissioned to perform to substantiate its claims before the CIR
notarial acts; (b) the BIR did not indicate the date during investigation. It was able to postpone
of its acceptance; (c) the BIR did not specify the the payment of taxes, as well as contest and
amounts of and the particular taxes involved; and negotiate the assessment against it. Yet, after
(d) respondent CIR did not sign the waivers enjoying these benefits, respondent
despite the clear mandate of RMO 20-90 to that challenged the validity of the Waivers when
effect. It ruled that the waivers, being invalid, did the consequences thereof were not in its
not operate to toll or extend the three-year period favor. In other words, respondent's act of
of prescription.[4] impugning these Waivers after benefiting
On August 9, 2016, the CTA En Banc therefrom and allowing petitioner to rely on
promulgated the assailed decision reversing and the same is an act of bad faith.[15] Thus, the
setting aside the decision of the CTA in Division, CTA En Banc did not err in ruling that ATC,
and holding that the waivers were valid after having benefitted from the defective
waivers, should not be allowed to assail them.
In short, the CTA En Banc properly applied
the equitable principles of in pari delicto,
unclean hands, and estoppel as enunciated in
Commissioner of Internal Revenue v. Next
Mobile case. WHEREFORE, the Court
DENIES the petition for review on certiorari
20. San Roque Power The 120-day and 30-day San Roque Power Corporation is a WON the CTA En Banc was NO. The Court was able to acquire jurisdiction
Corporation v. CIR, periods, as held in the VAT-registered taxpayer which was correct in ruling that the pursuant to the BIR Ruling No. DA-489- 03
G.R. No. 203249. July case of Aichi, are granted by the BIR a zero-rating on Court which is an exception to the mandatory and
23, 2018 mandatory and its sales of electricity to National did not have jurisdiction over jurisdictional nature of the 120-day and 30-
jurisdictional.Thus, Power Corporation (NPC) effective the case and should be day periods. BIR Ruling No. DA-489-03,
noncompliance with the 14 January 2004, up to 31 December dismissed. which
mandatory 120+30-day 2004. The said corporation filed two provides that a taxpayer-claimant need not
period renders the separate administrative claims for wait for the lapse of the 120- day period
petition before the CTA refund of its alleged unutilized input before
void. The ruling in said tax. However, due to the inaction of it could seek judicial relief with the CTA, can
case as to the the CIR, petitioners filed petitions for be relied by the taxpayers from the time of its
mandatory and review before the CTA on Mar. 30, issuance on Dec. 10, 2003 until Oct. 6, 2010
jurisdictional character of 2006 and on June 20, 2006, which is the promulgation of the Aichi case.
said periods was respectively. The CTA Division This is pursuant to the principle of equitable
reiterated in San Roque granted the petitioner's petition but estoppel enshrined in Sec. 246 of the NIRC
and a host of succeeding this was overturned by the CTA En which decrees that a BIR regulation or ruling
similar cases. Banc. The latter argued that the case cannot adversely prejudice a taxpayer who in
However, this rule does should have been dismissed due to good faith relied on the BIR regulation or
not apply from Dec. 10, lack of jurisdiction because the ruling
2003 until Oct. 6, 2010 petitioner did not exhaust the prior to its reversal.
pursuant to BIR Ruling available remedies, particularly Sec.
No. DA-489-03. Thus, 112(D) of the NIRC. Furthermore,
claimants may file a CIR cited the Aichi case wherein the
judicial action even Supreme Court ruled that the
before the lapse of the 120-day and 30-day periods were
said period as a BIR mandatory and jurisdictional.
regulation or ruling
cannot adversely
prejudice a taxpayer who
in good faith relied on
the BIR regulation or
ruling prior to its
reversal.
21. Rhombus Energy, Once the option to carry In its Annual ITR for 2005, which was Whether or not Rhombus NO. The CTA En Banc misappreciated the
Inc. v. CIR, G.R. No. over and apply the filed on April 17, 2006, Rhombus Energy, Inc. is fact
206362, August 1, excess quarterly income Energy, Inc. reported a tax barred by the irrevocability that Rhombus had already exercised the
2018 tax against income tax overpayment of Php1,500,623.00, rule in claiming for the option for its unutilized creditable withholding
due for the taxable years attributable to its excess creditable refund tax for the year 2005 to be refunded when it
of the succeeding withholding taxes. In the same return, of its excess/or unutilized filed its annual ITR for the taxable year ending
taxable years has been it indicated its option “To be creditable withholding tax. December 31, 2005.
made, such option shall refunded.”
be considered Based on the disquisition in Republic v. Team
irrevocable for that Subsequent quarterly returns, (Phils.) Energy Corporation, supra, the
taxable period and no however, presented the Php1.50 irrevocability rule took effect when the option
application for cash million as “prior year’s excess credit.” was exercised. In the case of Rhombus,
refund or issuance of a Said manner of presentation was therefore, its marking of the box "To be
tax credit certificate shall consistent among the first three refunded" in its 2005 annual ITR constituted
be allowed therefor. quarterly income tax returns for 2006. its
exercise of the option, and from then onwards
The irrevocability rule In the 2006 Annual Income Tax Rhombus became precluded from
takes effect when the Return, the line item Prior Year’s carrying-over the excess creditable
option is exercised. excess credits was zero. The return withholding tax. The fact that the prior year's
was filed on April 2, 2007. excess credits were reported in its 2006
quarterly ITRs did not reverse the option to be
refunded exercised in its 2005 annual ITR. As
such, the CTA En Banc erred in applying the
irrevocability rule against Rhombus.
22. CIR v. Standard No court shall have the Respondent received from the BIR a WON the injunctive relief is NO. Section 218 of the NIRC expressly
Insurance Co., Inc., authority to grant an Preliminary Assessment Notice available as a remedy to provides that "[n]o court shall have the
G.R. No. 219340. injunction to restrain the (PAN) regarding its liability arising assail the collection of a tax. authority to grant an injunction to restrain the
November 7, 2018 collection of any national from a deficiency in the payment of collection of any national internal revenue tax,
internal revenue tax, fee documentary stamp taxes, VAT, WON the action for fee or charge imposed by th[e] [NIRC]."
or charge imposed by income tax, EWT and FBT. The declaratory relief was
the NIRC. respondent contested the PAN but procedurally proper as a Also, pursuant to Section 11 of R.A. No. 1125,
the Final Decision on Disputed remedy. as amended, the decisions or rulings of the
Assessing any tax, or Assessment (FDDA) was issued. Commissioner of Internal Revenue, among
levying, or distraining, or others, assessing any tax, or levying, or
selling any property of Respondent commenced an action in distraining, or selling any property of
taxpayers for the the RTC with prayer for issuance of a taxpayers
satisfaction of their tax TRO or of a writ of preliminary for the satisfaction of their tax liabilities are
liabilities are immediately injunction for the judicial immediately executory, and their enforcement
executory, and their determination of the constitutionality is not to be suspended by any appeals thereof
enforcement is not to be of Section 108 and Section 184 of to the CTA unless "in the opinion of the CTA
suspended by any the NIRC with respect to the taxes to the collection by the BIR or the Commissioner
appeals thereof to the be paid by non-life insurance of Customs may jeopardize the interest of the
CTA unless the CTA, in companies. In its petition, the Government and/or the taxpayer," in which
its opinion, the collection respondent contended that the facts case the Court of Tax Appeals "at any stage
may jeopardize the of the case must be appreciated in of
interest of the light of the effectivity of RA 10001 the proceeding may suspend the said
Government and/or the (An Act Reducing the Taxes on Life collection and require the taxpayer either to
taxpayer. Insurance Policies) whereby the tax deposit the amount claimed or to file a surety
rate for life insurance premiums was bond for not more than double the amount."
reduced from 5% to 2%; and the
pendency of deliberations on House As such, the RTC not only grossly erred in
Bill No. 3235, whereby an equal giving due course to the petition for
treatment for both life and non-life declaratory relief, and in ultimately deciding to
companies was being sought as a permanently enjoin the enforcement of the
response to the supposed inequality specified provisions of the NIRC against the
generated by the enactment of R.A. respondent, but even worse acted without
No. 10001. jurisdiction.

The RTC issued the TRO prayed for With regards to the action of declaratory relief,
by enjoining the BIR, its agents, the SC said that it was also IMPROPER.
representatives, assignees, or any An action for declaratory relief is governed by
persons acting for and in its behalf Sec. 1, Rule 63 of the Rules of Court. It is
from implementing the provisions of predicated on the attendance of several
the NIRC adverted to with respect to requisites, specifically: (1) the subject matter
the FDDA for the respondent's of the controversy must be a deed, will,
taxable year 2011, and to the contract or other written instrument, statute,
pending assessments for taxable executive order or regulation, or ordinance;
years 2012 and 2013. (2)
the terms of said documents and the validity
In 2015, the RTC issued the writ of thereof are doubtful and require judicial
preliminary injunction. construction; (3) there must have been no
Then, the RTC rendered the assailed breach of the documents in question; (4) there
judgment wherein it permanently must be an actual justiciable controversy or
enjoined the respondent from the "ripening seeds" of one between persons
proceeding with the implementation whose interests are adverse; (5) the issue
of Section 108 and 184 of the NIRC must be ripe for judicial determination; and (6)
against the petitioner until the adequate relief is not available through other
Congress shall have enacted House means or other forms of action or proceeding.
Bill no. 3235.
The third, fourth, fifth and sixth requisites were
Hence, this petition. patently wanting.

Here, the taxes accrued at the time the

insurance policies were issued.
Actual controversy that was also not ripe for
judicial determination since congress has not
yet addressed the difference in tax treatment
of the life and non-life insurance policies. The
respondent would not be entitled to
declaratory relief because its right is still
dependent upon contingent legislation, thus
was still inchoate.

The adequate remedy upon receipt of the

FDDA was not the action for declaratory relief
but an appeal taken in due course to the CTA.
23. CIR v. Philippine A waiver of the statute of BIR alleged that based on the WON the BIR’s assessment NO. Fraud was never imputed. The entry of
Daily Inquirer, Inc., limitations is a computerized matching it conducted was made within the wrong information due to mistake,
G.R. No. 213943. derogation of the on the information and data provided prescriptive period. carelessness, or ignorance, without intent to
March 22, 2017 taxpayer's right to by third party sources against PDI's evade tax, does not constitute a false return.
security against declaration on its VAT Returns for Here, there is not enough evidence to prove
prolonged and taxable year 2004, there was an fraud or intentional falsity on the part of PDI.
unscrupulous under declaration of domestic
investigations and thus, purchases from its suppliers. PDI Since the case does not fall under the
it must be carefully and was assessed for alleged deficiency exceptions, Section 203 of the NIRC should
strictly construed. income tax and VAT. PDI responded apply internal revenue taxes shall be
by executing three Waivers of the assessed within three (3) years after the last
Statute of Limitation. day prescribed by law for the filing of the
PDI filed a Petition for Review return, and no proceeding in court without
against the Commissioner of Internal assessment for the collection of such taxes
Revenue (CIR) alleging that the shall be begun after the expiration of such
180-day period within which the BIR period.
should act on its protest had already
lapsed. Section 222(b) of the NIRC provides that the
period to assess and collect taxes may only
The CTA granted the petition be
invoking section 203 of the NIRC extended upon a written agreement between
considering the three-year period of the CIR and the taxpayer executed before the
limitation for the assessment of expiration of the three-year period
internal revenue tax liabilities. CIR
filed a petition for review on certiorari Here, the Waivers executed by the BIR and
alleging that PDI filed a false or PDI were meant to extend the three-year
fraudulent return. As such, Section prescriptive period, but the defects in the
222 of the NIRC should apply to this Waivers resulted to the non-extension of the
case and the applicable prescriptive period to assess or collect taxes, and made
period is 10 years from the discovery the assessments issued by the BIR beyond
of the falsity of the return. the three-year prescriptive period void.

The CIR alleges that PDI filed a false

or fraudulent return. As such, Section
222 of the NIRC should apply to this
case and the applicable prescriptive
period is 10 years from the discovery
of the falsity of the return. The CIR
argues that the ten-year period starts
from the time of the issuance of its
Letter Notice on 10 August 2006. As
such, the assessment made through
the Formal Letter of Demand dated
 11 March 2008 is within the
prescriptive period

24. CIR v. Asalus Generally, internal revenue taxes shall Asalus Corporation was issued a Preliminary Did the CTA err in ruling that YES, the failure to report sales, receipts or
Corporation, G.R. No. be assessed within 3 years after the last Assessment Notice (PAN) finding it liable for the assessment against incomein an amount exceeding 30% what is
221590. February 22, day prescribed by law for the filing of deficiency VAT for 2007 in the aggregate Asalus had prescribed? declared in the returns constitute prima facie
2017 the return or where the return is filed amount of ₱413, 378, 058.11, inclusive of evidence of substantial underdeclaration.
beyond the period, from the day the surcharge and interest, and subsequently, the
return was actually filed. However, in amount of ₱95,681,988.64. After protest, Asalus The Court ruled that when there is a
the case of false or fraudulent return received the Final Decision on Disputed showing that a taxpayer has substantially
with intent to evade tax or failure to file Assessment8 (FDDA) showing VAT deficiency for underdeclared its sales, receipt or income,
a return, the assessment may be made 2007 in the aggregate amount of there is a presumption that it has filed a
₱106,761,025.17, inclusive of surcharge and false return. As such, the CIR need not
 within 10 years from the discovery of interest and ₱25,000.00 as compromise penalty. immediately present evidence to support the
the falsity, fraud or omission. As a result, it filed a petition for review before the falsity of the return, unless the taxpayer fails
CTA Division. to overcome the presumption against it.
Applied in this case, the audit investigation
The petition was granted and the VAT assessment revealed that there were undeclared VA Table
and its accompanying penalty cancelled and sales more than 30% of that declared in
withdrawn on the ground that the VAT assessment Asalus' VAT returns. Moreover, Asalus' lone
had prescribed and was consequentlydeemed witness testified that not all membership
invalid since the ten (10)-year prescriptive period fees, particularly those pertaining to
under Section 222 of the NIRC was inapplicable medical practitioners and hospitals, were
as neither the FAN nor the FDDA indicated that reported in Asalus' VAT returns. The
Asalus had filed a false VAT return warranting the testimony of its witness, in trying to justify why
application of the ten (10)-year prescriptive period. not all of its sales were included in the gross
Hence, the assessment had prescribed because it receipts reflected in the VAT returns,
was made beyond the three (3)-year period as supported the presumption that the return filed
provided in Section 203 of the NIRC. The CTA En was indeed false precisely because notall the
Banc sustained this ruling. sales of Asalus were included in the VAT
The CIR however claims that the finding of the returns.
CTA must be set aside since they were not Thus, substantial compliance with the
supported with substantial evidence or if there requirement as laid down under Section 228
was a showing of gross error or abuse. It of the NIRC suffices, for what is important is
repeated that there was presumption of falsity that the taxpayer has been sufficiently
in light of the 30% underdeclaration of sales. informed of the factual and legal bases of the
It further insisted that Asalus was sufficiently assessment so that it may file an effective
informed of its assessment based on the protest against the assessment.
prescriptive period under Section 222 of the NIRC Considering the existing circumstances, the
as early as when the PAN was issued. assessment was timely made because the
applicable prescriptive period was the ten
(10)-year prescriptive period under Section
222 of the NIRC.

25. CIR v. Transitions A PAN merely informs the taxpayer of This a Petition for Review on Certiorari which Whether the two (2) SC said that although the waivers were valid,
Optical Philippines, the initial findings of the Bureau of seeks to nullify and set aside the June7, 2016 Waivers of the Defense of the period to assess has already prescribed
Inc., G.R. No. 227544, InternalRevenue. It contains the Decision 2 and September 26, 2016 Resolution 3 Prescription entered into by since the waivers merely extended the
November 22, 2017 proposed assessment, and the facts, of the Court of Tax Appeals En Banc in CTA EB the parties on October 9, assessment period to Nov. 28. Since the FAN
law, rules, andregulations or No. 1251. 2007 and June 2, 2008 were was sent on Dec. 2, the same is
jurisprudence on which the proposed valid alreadybeyond the extended period. The
assessment is based. It does notcontain Transition Optical received a LOA from the BIR. Court said that considering the functions
a demand for payment but usually Parties allegedly executed a Waiver of the andeffects of a PAN vis à vis a FAN, it is clear
requires the taxpayer to reply within Defense of Prescription (First Waiver). A Second that the assessment contemplated in Sections
15days from receipt. Otherwise, the Waiver was executed. The PAN was issued on 203 and 222 of the National Internal Revenue
Nov. 11, 2008. CIR issued a FAN and FLD dated
Nov. 28, 2008 for deficiency income tax, value-
 Commissioner of Internal Revenue will added tax, expanded withholding tax, and final tax Code refers to the service of the FAN upon
finalize anassessment and issue a FAN for taxable year 2004 amounting to the taxpayer.
P19,701,849.68. A protest letter was submitted by
the respondent alleging that the demand for
deficiency taxes had already prescribed at the
time the FAN was mailed on December 2, 2008

26. Edison (Bataan) Section 4 of Rule 129 of the Rules of Petitioner received from CIR a final assessment 1.Whether or not EBCC is The SC ruled that the petition lacks merit.
Cogeneration Court states: notice on deficiency income tax, VAT, withholding liable for deficiency FWT for
Corporation v. CIR, tax on compensation, EWT, and FWT for taxable the year 2000; 1.No, EBCC is not liable for deficiency FWT
G.R. No. 210665, 30 SEC. 4. Judicial Admissions. - An year 2000, for a total of P85Million. On March 3, for the year 2000. Considering that under RR
August 2017 admission, verbal or written, made by a 2004, EBCC filed with the CIR a letter-protest 2.Whether or no RR. No. 12- No. 02-98, the obligation of EBCC to
party in the course of the proceedings in dated March 2, 2004 and furnished the CIR with 01 should be applied in this deduct or withhold tax arises at the time
the same case, does not require proof. therequired documents. Due to the inaction of the case an income is paid or payable, whichever
The admission may be contradicted CIR, EBCC elevated the matter to the CTA via a comes first, and considering further that under
only by showing that it was made Petition for Review raffled to CTA second division. the said RR, the term "payable" refers to the
through palpable mistake or that no While the case was pending, EBCC availed itself date the obligation becomes due, demandable
such admission was made. of the Tax Amnesty Program under Republic Act or legally enforceable, SC finds no error on
(RA) No. 9480.7Thus, in a November 7, 2008 the part of the CTA En Banc in ruling that
Section 2.57.4 of Revenue Regulations EBCC had no obligation to withhold any taxes
No. 2-98 provides: Resolution, the CTA Second Division deemed the
Petition partially withdrawn and the case on the interest payment for the year 2000 as
SEC. 2.57.4. Time of Withholding. - The closed and terminated with regard to EBCC's the obligation to withhold only commenced on
obligation of the payor to deduct and deficiency income tax and VAT for the year 2000. June 1, 2002, and thus cancelling
withhold the tax under Section 2.57 of The CTA Second Division partially granted theassessment for deficiency FWT on interest
these regulations arises at the time an thepetition of EBCC. It cancelled the deficiency on payments arising from EBCC's loan from
income is paid or payable, whichever the EWT and WT on compensation, and on the Ogden.
comes first, the term 'payable' refers to loan interests. However it was made liable as to 2.Neither do we find any reason for the
the date the obligation becomes due, the FWT to a reduced amount of P2.2Miliion. Both retroactive application of RR No. 12-01, which
demandable or legally enforceable. parties appealed to the CTA En Banc.CTA En provides that the withholding of final tax
banc denied both appeals and affirmed the commences "at the time an income payment
decision of CTA Second Division. is paid or payable, or the income payment is
EBCC insists that it was not liable for any accrued or recorded as an expense or
deficiency taxes for the year 2000 since it had asset, whichever is applicable in the
already remitted the amount of P2842630.20 as payor's book, whichever comes first." To
payment for its FWT for 2000, and that no begin with, this issue was never raised before
proof of such payment was necessary the CTA. Thus, we cannot rule on this matter
considering the CIR' s admission in her now. It is a settled rule that issues not raised
Memorandum that the original assessment below cannot be pleaded for the first time on
ofPl0,227,622.72 was reduced to P7,384,992.52. appeal because a party is not allowed to
EBCC argued that it was not required to pay FWT change his theory on appeal; to do so would
at the end of the taxable year 2000 as the
 interest payment became due on 2002. be unfair to the other party and offensive to
EBCC alleges that the retroactive application of rules of fair play, justice and due process.
Revenue Regulation No. 12-01 is in clear violation
of its constitutional right to due process. In any case, even if the first payment was due
on January 4, 2001 as claimed by the CIR,
The CIR, however, denies that she made any EBCC would still not be liable, as the tax
judicial admission of payment and maintains that assessment pertained to taxable year 2000
in the absence of evidence of payment, EBCC is and not 2001. All told, we find no reason to
liable to pay the deficiency assessment as the reverse the January30, 2012 Decision and the
party who alleges payment have the burden of April 17, 2012 Resolution of the CTA in CTA
proving the same. CIR deems EBSS liable for EB Case Nos. 766 and 769
payment of FWT.

27. Medicard An LOA is the authority given to the MEDICARD is a health maintenance organization 1. Is the absence of 1. Yes.
Philippines, Inc. v. appropriate revenue officer assigned to (HMO) that provides prepaid health and medical the Letter of The absence of the LOA violated
CIR, G.R. No. 222743. perform assessment functions. In the insurance coverage to its clients. Individuals Authority fatal? MEDICARD’s right to due process. An
April 5,2017 absence of such an authority, the enrolled in its health care programs pay an annual 2. Should the amounts LOA is the authority given to the
assessment or examination is a nullity. membership fee and are entitled to various that MEDICARD appropriate revenue officer assigned
preventive, diagnostic and curative medical earmarked and to perform assessment functions.
services provided by duly licensed physicians, eventually paid to Under the NLRC, unless authorized
specialists, and other professional technical staff the medical service by the CIR himself or by his duly
participating in the group practice health delivery providers still form authorized representative, through an
system at a hospital or clinic owned, operated or part of its gross LOA, an examination of the taxpayer
accredited by it. receipts for VAT cannot ordinarily be undertaken. An
purposes? LOA is premised on the fact that the
MEDICARD filed it first, second, and third examination of a taxpayer who has
quarterly VAT Returns through Electronic Filing already filed his tax returns is a power
and Payment System (EFPS) on April 20, July 25, that statutorily belongs only to the CIR
and October 25, 2006, respectively, and its fourth himself or his duly authorized
quarterly VAT Return on January 25, 2007. representatives. In this case, there is
Upon finding some discrepancies between no dispute that no LOA was issued
MEDICARD’s Income Tax Returns (ITR) and VAT prior to the issuance of a PAN and
Returns, the CIR issued a Letter Notice (LN) dated FAN against MEDICARD. Therefore,
September 20, 2007. Subsequently, the CIR also no LOA was also served on
issued a Preliminary Assessment Notice (PAN) MEDICARD.
against MEDICARD for deficiency VAT.
MEDICARD received CIR’s FAN dated December The LN cannot replace the LOA
10, 2007 for allegedly deficiency VAT for taxable required under the law even if the
year 2006 including penalties. same was issued by the CIR himself.
Under RR No. 12-2002, LN is issued
MEDICARD filed a protest arguing, among others, to a person found to have
that that the services it render is not limited merely underreported sales/receipts per data
to arranging for the provision of medical and/or generated under the RELIEF system.
hospitalization services but include actual and Upon receipt of the LN, a taxpayer
direct rendition of medical and laboratory services. may avail of the BIR’s Voluntary
On June 19, 2009, MEDICARD received CIR’s Assessment and Abatement Program.
Final Decision denying its protest. The petitioner If a taxpayer fails or refuses to avail of
MEDICARD proceeded to file a petition for review the said program, the BIR may avail
before the CTA. of administrative and criminal
remedies, particularly closure,
The CTA Division held that the determination of criminal action, or audit and
deficiency VAT is not limited to the issuance of investigation. Since the law
Letter of Authority (LOA) alone and that in lieu of specifically requires an LOA and
an LOA, an LN was issued to MEDICARD RMO No. 32-2005 requires the
informing it if the discrepancies between its ITRs conversion of the previously issued
and VAT Returns and this procedure is authorized LN to an LOA, the absence thereof
under Revenue Memorandum Order (RMO) No. cannot be simply swept under the rug,
30-2003 and 42-2003. Also, the amounts that as the CIR would have it. In fact,
MEDICARD earmarked and eventually paid to Revenue Memorandum Circular No.
doctors, hospitals and clinics cannot be excluded 40-2003 considers an LN as a notice
from the computation of its gross receipts because of audit or investigation only for the
the act of earmarking or allocation is by itself an purpose of disqualifying the taxpayer
act of ownership and management over the funds from amending his returns. The
by MEDICARD which is beyond the contemplation revenue officers not having authority
of RR No. 4-2007. Furthermore, MEDICARD’s to examine MEDICARD in the first
earnings from its clinics and laboratory facilities place, the assessment issued by the
cannot be excluded from its gross receipts CIR is inescapably void.
because the operation of these clinics and
laboratory is merely an incident to MEDICARD’s 2. No.
line of business as an HMO. The VAT is a tax on the value added
MEDICARD filed a Motion for Reconsideration but by the performance of the service by
it was denied. Petitioner elevated the matter to the the taxpayer. It is, thus, this service
CTA en banc. and the value charged thereof by the
taxpayer that is taxable under the
CTA en banc partially granted the petition only NLRC.
insofar as 10% VAT rate for January 2006 is
concerned but sustained the findings of the CTA
Division.
28. CIR v. Systems DEFECTIVE WAIVER OF STATUTE Before the Court is a petition for review on Whether or not the right Yes. The right of the government to
Technology Institute, OF LIMITATIONS DOES NOT EXTEND certiorari under Rule 45 of the ROC filed by of the government to assess or collect the alleged deficiency
Inc., G.R. No. 220835, THE PERIOD TO ASSESS OR petitioner CIR, assailing the Decision of the assess or collect the taxes is already barred by prescription. The
26 July 2017 COLLECT ALLEGED DEFICIENCY CTA En Banc which affirmed the Decision alleged deficiency taxes is Waivers of Statute of Limitations, being
TAXES CTA 2nd Division, granting the petition for already barred by defective and invalid, did not extend the CIR's
review filed by respondent Systems Technology prescription. period to issue the subject assessments.
Section 203 of the NIRC of 1997 states
Institute, Inc. (STI).
that assessments issued after the Section 203 of the NIRC of 1997, as
expiration of three (3) years counted STI's Amiel Sangalang signed a Waiver of the amended, limits the CIR's period to assess
from the last day prescribed by law for Defense of Prescription under the Statute of and collect internal revenue taxes to three (3)
the filing of the return or from the day Limitations of the NIRC, with the proviso that the years counted from the last day prescribed by
the return was filed are no longer valid
assessment and collection of taxes of fiscal year law for the filing of the return or from the day
and effective.
2003 shall come "no later than December 31, the return was filed, whichever comes
2006." Another waiver was executed extending later. Thus, assessments issued after the
the period to assess and collect the assessed expiration of such period are no longer
taxes to March 31, 2007. Both waivers were valid and effective. Clearly, the final
signed by Sangalang and accepted by assessment notice dated June 16, 2007,
Cembrano, Large Taxpayers District Officer. A assessing STI for deficiency income tax, VAT
third waiver was executed by the same signatories and EWT for fiscal year 2003, which STI
extending further the period to June 30, 2007. received on June 28, 2007, was issued
beyond the three-year prescriptive period.
STI received a Formal Assessment Notice from However, the CIR maintains that
the CIR, assessing STI for deficiency income tax, prescription had not set in because the
VAT and EWT for fiscal year 2003. STI filed a parties validly executed a waiver of statute
request for reconsideration/reinvestigation. STI of limitations under Section 222(b) of the
received from the CIR the Final Decision on NIRC.
Disputed Assessment (FDDA) dated finding STI
liable for deficiency income tax, VAT and EWT but To implement the said provision, the BIR
in a lesser amount. STI appealed the FDDA by issued RMO 20-90 and RDAO 05-01,
filing a petition for review with the CTA. The CTA outlining the procedures for the proper
2nd Division promulgated its decision denying the execution of a valid waiver which are required
assessment on the ground of prescription. The and mandatory.Tested against the
CTA Division found the waivers executed by requirements of RMO 20-90 and relevant
STI defective for failing to strictly comply with jurisprudence, the Court cannot but agree with
the requirements provided by Revenue the CTA's finding that the waivers subject of
Memorandum Order (RMO) No. 20-90 and this case suffer from the following defects: (1)
Revenue Delegation Authority Order (RDAO) That at the time when the first waiver took
No. 05-01. consequently, the periods for the CIR effect, the period for the CIR to assess STI for
to assess or collect internal revenue taxes were deficiency EWT and deficiency VAT for fiscal
never extended; and the subject assessment for year ending March 31, 2003, had already
deficiency income tax, VAT and EWT against STI, prescribed; (2) STI's signatory to the three
which the CIR issued beyond the three-year waivers had no notarized written authority
prescriptive period provided by law, was already from the corporation's board of directors; and
barred by prescription. The CIR appealed to the
CTA En Banc. The CTA En Banc denied the CIR's (3) the waivers did not specify the kind of tax
petition for lack of merit and affirmed the Decision and the amount of tax due.
CTA Division. Hence, this petition for review on
certiorari. Verily, considering the foregoing defects in the
waivers executed by STI, the periods for the
CIR to assess or collect the alleged deficiency
income tax, deficiency EWT and deficiency
VAT were not extended. The assessments
subject of this case, which were issued by the
BIR beyond the three-year prescriptive, are
therefore considered void and of no legal
effect.
29. CIR v. Lancaster Even though the date after the words Petitioner Commissioner of Internal Revenue I. The Court of Tax Appeals We deny the petition.
Philippines, Inc., G.R. "taxable year 1998 to" is unstated, it is (CIR) is authorized by law, among others, to En Banc erred in holding
No. 183408, July 12, not at all difficult to discern that the investigate or examine and, if necessary, issue that petitioner's revenue I. The CTA En Banc did not err when it ruled
2017 period of examination is the whole assessments for deficiency taxes. On the other officers exceeded their that the BIR revenue officers had exceeded
taxable year 1998. It could not have hand, respondent Lancaster Philippines, Inc. authority to investigate the their authority.
contemplated a longer period. The (Lancaster) is a domestic corporation established period not covered by their
examination for the full taxable year in 1963 and is engaged in the production, letter of authority. A. The Jurisdiction of the CTA
1998 only is consistent with the processing, and marketing of tobacco. The jurisdiction of the CTA is not limited only
guideline in Revenue Memorandum to cases which involve decisions or inactions
Order (RMO) No. 43-90, that the LOA In 1999, the Bureau of Internal Revenue (BIR) II. The court of Tax Appeals of the CIR on matters relating to assessments
shall cover a taxable period not issued Letter of Authority (LOA) No. 00012289 En Banc erred in ordering or refunds but also includes other cases
exceeding one taxable year. authorizing its revenue officers to examine petitioner to cancel and arising from the NIRC or related laws
Lancaster's books of accounts and other withdraw the deficiency administered by the BIR. The jurisdiction of
accounting records for all internal revenue taxes assessment issued against the CTA on such other matters arising under
due from taxable year 1998 to an unspecified respondent. the NIRC was retained under the
date. After the conduct of an examination pursuant amendments introduced by R.A No. 9282.
to the LOA, the BIR issued a Preliminary
Assessment Notice (PAN) which cited Lancaster Sec. 7. Jurisdiction. - The CTA shall exercise:
for: 1) overstatement of its purchases for the fiscal
year April 1998 to March1999; and 2) a. Exclusive appellate jurisdiction to review by
noncompliance with the generally accepted appeal, as herein provided:
accounting principle of proper matching of cost
and revenue. More concretely, the BIR disallowed 1. Decisions of the Commissioner of Internal
the purchases of tobacco from farmers covered by Revenue in cases involving disputed
Purchase Invoice Vouchers (PIVs) for the months assessments, refunds of internal revenue
of February and March 1998 as deductions taxes, fees or other charges, penalties in
against income for the fiscal year April 1998 to relation thereto, or other matters arising under
March 1999. the National Internal Revenue or other laws
administered by the Bureau of Internal
In its petition before the CTA Division, Lancaster Revenue;
essentially reiterated its arguments in the protest
against the assessment, maintaining that the 2. Inaction by the Commissioner of Internal
tobacco purchases in February and March 1998 Revenue in cases involving disputed
are deductible in its fiscal year ending 31 March assessments, refunds of internal revenue
1999. After trial, the CTA Division granted the taxes, fees or other charges, penalties in
petition of Lancaster. The CIR move but failed to relation thereto, or other matters arising under
obtain reconsideration of the CTA Division ruling. the National Internal Revenue Code or other
Aggrieved, the CIR sought recourse from the CTA laws administered by the Bureau of Internal
En Banc, however, the CTA En Banc found no Revenue, where the National Internal
reversible error in the CTA Division's ruling, thus, Revenue Code provides a specific period of
it affirmed the cancellation of the assessment action. in which case the inaction shall be
against Lancaster. Hence, this petition. deemed a denial;
It must be stressed that the assessment of
internal revenue taxes is one of the duties of
the BIR. Section 2 of the NIRC states:

Sec. 2. Powers and Duties of the Bureau of

Internal Revenue. - The Bureau of Internal
Revenue shall be under the supervision and
control of the Department of Finance and its
powers: and duties shall comprehend the
assessment and collection of all national
internal revenue taxes, fees, and charges,
and the enforcement of all forfeitures,
penalties, and fines connected therewith,
including the execution of judgments in all
cases decided in its favor by the Court of Tax
Appeals and the ordinary courts.

In connection therewith, the CIR may

authorize the examination of any taxpayer and
correspondingly make an assessment
whenever necessary. The powers granted by
law to the CIR are intended, among other
things, to determine the liability of any person
for any national internal revenue tax. It is
pursuant to such pertinent provisions of the
NIRC conferring the powers to the CIR that
the petitioner (CIR) had, in this case,
authorized its revenue officers to conduct an
examination of the books of account and
accounting records of Lancaster, and
eventually issue a deficiency assessment
against it.

On whether the CTA can resolve an issue

which was not raised by the parties, we rule in
the affirmative.

Under Section 1, Rule 14 of A.M. No. 05-11-

07-CTA, or the Revised Rules of the Court of
Tax Appeals, the CTA is not bound by the
issues specifically raised by the parties but
may also rule upon related issues necessary
to achieve an orderly disposition of the case.
On the basis thereof, the CTA Division was,
therefore, well within its authority to consider
in its decision the question on the scope of
authority of the revenue officers who were
named in the LOA even though the parties
had not raised the same in their pleadings or
memoranda. The CTA En Banc was likewise
correct in sustaining the CTA Division's view
concerning such matter.

B. The Scope of the Authority of the

Examining Officers

The audit process normally commences with

the issuance by the CIR of a Letter of
Authority. The LOA gives notice to the
taxpayer that it is under investigation for
possible deficiency tax assessment; at the
same time it authorizes or empowers a
designated revenue officer to examine, verify,
and scrutinize a taxpayer's books and
records, in relation to internal revenue tax
liabilities for a particular period.

Even though the date after the words "taxable

year 1998 to" is unstated, it is not at all difficult
to discern that the period of examination is the
whole taxable year 1998. This means that the
examination of Lancaster must cover the FY
period from 1 April1997 to 31 March1998. It
could not have contemplated a longer period.
The examination for the full taxable year 1998
only is consistent with the guideline in
Revenue Memorandum Order (RMO) No. 43-
90, that the LOA shall cover a taxable period
not exceeding one taxable year. In other
words, absent any other valid cause, the LOA
issued in this case is valid in all respects.

Nonetheless, a valid LOA does not

necessarily clothe validity to an assessment
issued on it, as when the revenue officers
designated in the LOA act in excess or
outside of the authority granted them under
said LOA. The taxable year covered by the
assessment being outside of the period
specified in the LOA in this case, the
assessment issued against Lancaster is,
therefore, void.

This point alone would have sufficed to

invalidate the subject deficiency income tax
assessment, thus, obviating any further
necessity to resolve the issue on whether
Lancaster erroneously claimed the February
and March 1998 expenses as deductions
against income for FY 1999.

II. The CTA En Banc correctly sustained the

order cancelling and withdrawing the
deficiency tax assessment.

The issue essentially boils down to the proper

timing when Lancaster should recognize its
purchases in computing its taxable income.
Such issue directly correlates to the fact that
Lancaster's 'crop year ' does not exactly
coincide with its fiscal year for tax purposes.

In the present case, we find it wholly justifiable

for Lancaster, as a business engaged in the
production and marketing of tobacco, to adopt
the crop method of accounting. A taxpayer is
authorized to employ what it finds suitable for
its purpose so long as it consistently does so,
and in this case, Lancaster does appear to
have utilized the method regularly for many
decades already. Considering that the crop
year of Lancaster starts from October up to
September of the following year, it follows that
all of its expenses in the crop production
made within the crop year starting from
October 1997 to September 1998, including
the February and March 1998 purchases
covered by purchase invoice vouchers, are
rightfully deductible for income tax purposes
in the year when the gross income from the
crops are realized. Pertinently, nothing from
the pleadings or memoranda of the parties, or
even from their testimonies before the CTA,
would support a finding that the gross income
from the crops (to which the subject expenses
refer) was actually realized by the end of
March 1998, or the closing of Lancaster's
fiscal year for 1998. Instead, the records show
that the February and March 1998 purchases
were recorded by Lancaster as advances and
later taken up as purchases by the close of
the crop year in September 1998, or as stated
very clearly above, within the fiscal year 1999.

Evident from the foregoing, the crop year

basis is one unusual method of accounting
wherein the entire cost of producing the crops
(including purchases) must be taken as a
deduction in the year in which the gross
income from the crop is realized. Since the
petitioner's crop year starts in October and
ends in September of the following year, the
same does not coincide with petitioner's fiscal
year which starts in April and ends in March of
the following year. However, the law and
regulations consider this peculiar situation and
allow the costs to be taken up at the time the
gross income from the crop is realized, as in
the instant case.

The matching principle

In essence, the matching concept, which is

one of the generally accepted accounting
principles, directs that the expenses are to be
reported in the same period that related
revenues are earned. It attempts to match
revenue with expenses that helped earn it.
The expenses are matched with the related
incomes which are eventually earned. Nothing
from the provision is it strictly required that for
the expense to be deductible, the income to
which such expense is related to be realized
in the same year that it is paid or incurred. As
noted by the CTA, the crop method is an
unusual method of accounting, unlike other
recognized accounting methods that, by
mandate of Sec. 45 of the NIRC, strictly
require expenses be taken in the same
taxable year when the income is 'paid or
incurred, ' or 'paid or accrued, ' depending
upon the method of accounting employed by
the taxpayer.

Provisions of the Tax Code Shall Prevail

All returns required to be filed by the Tax

Code shall be prepared always in conformity
with the provisions of the Tax Code, and the
rules and regulations implementing said Tax
Code. Taxability of income and deductibility of
expenses shall be determined strictly in
accordance with the provisions of the Tax
Code and the rules and regulations issued
implementing said Tax Code. In case of
difference between the provisions of the Tax
Code and the rules and regulations
implementing the Tax Code, on one hand,
and the general(v accepted accounting
principles (GAAP) and the generally accepted
accounting standards (GAAS), on the other
hand, the provisions of the Tax Code and the
rules and regulations issued implementing
said Tax Code shall prevail.

RAM No. 2-95 is clear-cut on the rule on when

to recognize deductions for taxpayers using
the crop method of accounting. The rule
prevails over any GAAP, including the
matching concept as applied in financial or
business accounting.

In sum, and considering the foregoing

premises, we find that the assessment is void
for being issued without valid authority.
Furthermore, there is no legal justification for
the disallowance of Lancaster's expenses for
the purchase of tobacco in February and
March 1998.
30. Procter & Gamble There is no dispute that the 120-day P&G is a foreign corporation duly organized and Whether the CTA En Banc The Court finds the petition meritorious.
Asia PTE LTD. v. CIR, period is mandatory and jurisdictional, existing under the laws of Singapore and is erred in dismissing P&G's
G.R. No. 205652, 6 and that the CTA does not acquire maintaining a Regional Operating Headquarter in judicial claims for refund on Exception to the mandatory and jurisdictional
September 2017 jurisdiction over a judicial claim that is the Philippines. It provides management, the ground of prematurity. 120+30-day periods under Section 112(C) of
filed before the expiration of the 120- marketing, technical and financial advisory, and the NIRC
day period. There are, however, two other qualified services to related companies as
exceptions to this rule. specified by its Certificate of Registration and There is no dispute that the 120-day period is
License issued by the Securities and Exchange mandatory and jurisdictional, and that the
The first exception is if the Commission. It is a VAT-registered taxpayer and CTA does not acquire jurisdiction over a
Commissioner, through a specific ruling, is covered by Bureau of Internal Revenue (BIR). judicial claim that is filed before the expiration
misleads a particular taxpayer to of the 120-day period. There are, however,
prematurely file a judicial claim with the On March 22, 2007 and May 2, 2007, P&G filed two exceptions to this rule.
CTA. Such specific ruling is applicable applications and letters addressed to the BIR
only to such particular taxpayer. Revenue District Office (RDO) No. 49, requesting The first exception is if the Commissioner,
the refund or issuance of tax credit certificates through a specific ruling, misleads a particular
The second exception is where the (TCCs) of its input VAT attributable to its zero- taxpayer to prematurely file a judicial claim
Commissioner, through a general rated sales covering the taxable periods of with the CTA. Such specific ruling is
interpretative rule issued under Section January 2005 to March 2005, and April 2005 to applicable only to such particular taxpayer.
4 of the Tax Code, misleads all June 2005.
taxpayers into filing prematurely judicial The second exception is where the
claims with the CTA. In these cases, the On March 28, 2007, P&G filed a petition for review Commissioner, through a general
Commissioner cannot be allowed to with the CTA seeking the refund or issuance of interpretative rule issued under Section 4 of
later on question the CTA's assumption TCC in the amount of P23,090,729.17 the Tax Code, misleads all taxpayers into
of jurisdiction over such claim since representing input VAT paid on goods or services filing prematurely judicial claims with the CTA.
equitable estoppel has set in as attributable to its zero-rated sales for the first In these cases, the Commissioner cannot be
expressly authorized under Section 246 quarter of taxable year 2005. On June 8, 2007, allowed to later on question the CTA's
of the Tax Code. P&G filed with the CTA another judicial claim for assumption of jurisdiction over such claim
refund or issuance of TCC in the amount of since equitable estoppel has set in as
P19,006,753.58 representing its unutilized input expressly authorized under Section 246 of the
VAT paid on goods and services attributable to its Tax Code.
zero-rated sales for the second quarter of taxable
year 2005. The case was docketed as CTA Case xxxx
No. 7639. On July 30, 2007, the CTA Division
granted P&G's Motion to Consolidate. Clearly, BIR Ruling No. DA-489-03 is a
general interpretative rule. Thus, all taxpayers
The CTA Division dismissed P&G's judicial claim, can rely on BIR Ruling No. DA-489-03 from
for having been prematurely filed. Citing Aichi, the the time of its issuance on 10 December 2003
CTA Division held that the CIR is granted by law a up to its reversal by this Court in Aichi on 6
period of 120 days to act on the administrative October 2010, where this Court held that the
claim for refund. Upon denial of the claim, or after 120+30 day periods are mandatory and
the expiration of the 120-day period without action jurisdictional.
by the CIR, only then may the taxpayer-claimant
seek judicial recourse to appeal the CIR's action Application and validity of BIR Ruling No. DA-
 or inaction on a refund/tax credit claim, within a 489-03
period of 30 days. According to the CTA Division,
P&G failed to observe the 120-day period granted In Commissioner of Internal Revenue v.
to the CIR. Its judicial claims were prematurely Deutsche Knowledge Services, Pte. Ltd., the
filed with the CTA only six (6) days and thirty- Court reiterated that all taxpayers may rely
seven (37) days, respectively, from the filing of the upon BIR Ruling No. DA-489-03, as a general
applications at the administrative level. Thus, the interpretative rule, from the time of its
CTA Division ruled that inasmuch as P&G's issuance on December 10, 2003 until its
petitions were prematurely filed, it did not acquire effective reversal by the Court in Aichi. The
jurisdiction over the same. Court further held that while RR 16-2005 may
have re-established the necessity of the 120-
P&G moved for reconsideration but this was day period, taxpayers cannot be faulted for
denied by the CTA Division. Aggrieved, P&G still relying on BIR Ruling No. DA-489-03 even
elevated the matter to the CTA En Banc. The CTA after the issuance of RR 16-2005 because the
En Banc rendered the assailed Decision affirming issue on the mandatory compliance of the
in toto the CTA Division's Decision and 120-day period was only brought before the
Resolution. It agreed with the CTA Division in Court and resolved with finality in Aichi.38
applying the ruling in Aichi which warranted the
dismissal of P&G's judicial claim for refund on the Accordingly, in consonance with the doctrine
ground of prematurity. laid down in San Roque, the Court finds that
P&G's judicial claims were timely filed and
P&G filed the present petition. should be given due course and consideration
by the CTA.

31. Asiatrust In order for the CTA En Banc to take On separate dates in February 2000, Asiatrust GR NO. 201530 The Petitions lack merit.
Development Bank, cognizance of an appeal via a petition Development Bank, Inc. (Asiatrust) received from
Inc. v. CIR, G.R. No. for review, a timely motion for the Commissioner of Internal Revenue (CIR) three Whether the [CTA] En Banc G.R. No. 201530
201530. April 19, 2017 reconsideration or new trial must first be Formal Letters of Demand (FLD) with Assessment erred in finding that
filed with the CTA Division that issued Notices for deficiency internal revenue taxes in the [Asiatrust] is liable for An application for tax abatement is considered
the assailed decision or resolution. amounts of P131,909,161.85, P83,012,265.78, deficiency final withholding approved only upon the issuance of a
Failure to do so is a ground for the and ₱l44,012,918.42 for fiscal years ending June tax for fiscal year ending termination letter.
dismissal of the appeal as the word 30, 1996, 1997, and 1998, respectively. On March June 30, 1998.
"must" indicates that the filing of a prior 17, 2000, Asiatrust timely protested the The last step in the tax abatement process is
assessment notices. II. the issuance of the termination letter. The
motion is mandatory, and not merely Whether the order of the presentation of the termination letter is
directory. Due to the inaction of the CIR on the protest, [CTA] En Banc for petitioner essential as it proves that the taxpayer's
Asiatrust filed before the CTA a Petition for to pay again the final application for tax abatement has been
Review praying for the cancellation of the tax withholding tax for fiscal approved. Thus, without a termination letter, a
assessments for deficiency income tax, year ending June 30, 1998 tax assessment cannot be considered closed
documentary stamp tax (DST) - regular, DST - would amount to double and terminated.
industry issue, final withholding tax, expanded taxation.
withholding tax, and fringe benefits tax issued In this case, Asiatrust failed to present a
against it by the CIR. On December 28, 2001, the III. termination letter from the BIR. Instead, it
CIR issued against Asiatrust new Assessment Whether xx x the [CTA] En presented a Certification issued by the BIR to
Notices for deficiency taxes in the amounts of ₱l Banc erred in resolving the prove that it availed of the Tax Abatement
12,816,258.73, ₱53,314,512.72, and issue of alleged deficiency Program and paid the basic tax. It also
₱133,013,458.73, covering the fiscal years ending final wri1ffiolding tax for attached copies of its BIR Tax Payment
June 30, 1996, 1997, and 1998, respectively. On fiscal year ending June 30, Deposit Slips and a letter issued by RDO
the same day, Asiatrust partially paid said 1998 based on mere Nacar. These documents, however, do not
deficiency tax assessments technicalities. prove that Asiatrust's application for tax
abatement has been approved. If at all, these
On April 19, 2005, the CIR approved Asiatrust's G.R. NOS. 201680-81 documents only prove Asiatrust's payment of
Offer of Compromise of DST - regular basic taxes, which is not a ground to consider
assessments for the fiscal years ending June 30, I. its deficiency tax assessment closed and
1996, 1997, and 1998. During the trial, Asiatrust Whether xx x the [CTA] En terminated.
manifested that it availed of the Tax Abatement Banc committed reversible
Program for its deficiency final withholding tax - error when it dismissed [the Since no termination letter has been issued by
trust assessments for fiscal years ending June 30, CIR’s] petition for review on the BIR, there is no reason for the Court to
1996 and 1998; and that on June 29, 2007, it paid the ground that the latter consider as closed and terminated the tax
the basic taxes in the amounts of P4,187,683.27 allegedly failed to comply assessment on Asiatrust's final withholding
and P6,097,825.03 for the said fiscal years, with section 1, rule 8 of the tax for fiscal year ending June 30, 1998.
respectively. Asiatrust also claimed that on March revised rules of the [CTA]. Asiatrust's application for tax abatement will
6, 2008, it availed of the provisions of Republic Act be deemed approved only upon the issuance
(RA) No. 9480, otherwise known as the Tax II. of a termination letter, and only then will the
Amnesty Law of 2007. Whether the [CTA] En Banc deficiency tax assessment be considered
committed reversible error closed and terminated. However, in case
Ruling of the Court of Tax Appeals Division when it sustained the Asiatrust's application for tax abatement is
amended decision dated 16 denied, any payment made by it would be
The CTA Division rendered a Decision partially march 2010 of the first applied to its outstanding tax liability. Thus,
granting the Petition. The CTA Division declared division declaring closed and the Court finds no error on the part of the CTA
void the tax assessments for fiscal year ending terminated respondent's En Banc in affirming the said tax assessment.
June 30, 1996 for having been issued beyond the liability for deficiency
three-year prescriptive period. However, due to documentary stamp tax for G.R. Nos. 201680-81
the failure of Asiatrust to present documentary and taxable years 1997 and
testimonial evidence to prove its availment of the 1998. An appeal to the CTA En Banc must be
Tax Abatement Program and the Tax Amnesty preceded by the filing of a timely motion for
Law, the CTA Division affirmed the deficiency reconsideration or new trial with the CTA
DST- Special Savings Account (SSA) Division.
assessments for the fiscal years ending June 30,
1997 and 1998 and the deficiency DST - Interbank In order for the CTA En Banc to take
Call Loans (IBCL) and deficiency final withholding cognizance of an appeal via a petition for
tax - trust assessments for fiscal year ending June review, a timely motion for reconsideration or
30, 1998, in the total amount of ₱142,777,785.91. new trial must first be filed with the CTA
Division that issued the assailed decision or
Both parties appealed to CTA En Banc. The CTA resolution. Failure to do so is a ground for the
En Banc denied the motions for partial dismissal of the appeal as the word "must"
reconsideration of the CIR and Asiatrust.45. indicates that the filing of a prior motion is
Hence, the instant consolidated Petitions under mandatory, and not merely directory.
Rule 45 of the Rules of Court.
The same is true in the case of an amended
decision. Section 3, Rule 14 of the same rules
defines an amended decision as "[a]ny action
modifying or reversing a decision of the Court
En Banc or in Division." As explained in CE
Luzon Geothermal Power Company, Inc. v.
Commissioner of Internal Revenue, an
amended decision is a different decision, and
thus, is a· proper subject of a motion for
reconsideration.

In this case, the CIR's failure to move for a

reconsideration of the Amended Decision of
the CTA Division is a ground for the dismissal
of its Petition for Review before the CTA En
Banc. Thus, the CTA En .Banc did not err in
denying the CIR's appeal on procedural
grounds.

Due to this procedural lapse, the Amended

Decision has attained finality insofar as the
CIR is concerned. The CIR, therefore, may no
longer question the merits of the case before
this Court. Accordingly, there is no reason for
the Court to discuss the other issues raised by
the CIR.

As the Court has often held, procedural rules

exist to be followed, not to be trifled with, and
thus, may be relaxed only for the most
 persuasive reasons. WHEREFORE, the
Petitions are hereby DENIED.

32. CIR v. Liquigaz Section 228 of the NIRC declares that Liquigaz Philippines Corporation (Liquigaz) is a Whether the Court of Tax The importance of providing the taxpayer of
Philippines, G.R. Nos. an assessment is void if the taxpayer is corporation duly organized and existing under Appeals En Banc erred in adequate written notice of his tax liability is
215534 & 215557, not notified in writing of the facts and Philippine laws. On July 11, 2006, it received a partially upholding the undeniable. Section 228 of the NIRC declares
April 18, 2016 law on which it is made. Again, Section copy of Letter of Authority (LOA) No. 00067824, validity of the assessment as that an assessment is void if the taxpayer is
3.1.4 of RR No. 12-99 requires that the dated July 4, 2006, issued by the Commissioner of to the withholding tax on not notified in writing of the facts and law on
FLD must state the facts and law on Internal Revenue (CIR), authorizing the compensation but declaring which it is made. Again, Section 3.1.4 of RR
which it is based, otherwise, the investigation of all internal revenue taxes for invalid the assessment on No. 12-99 requires that the FLD must state
FLD/FAN itself shall be void. taxable year 2005. Liquigaz received an undated expanded withholding tax the facts and law on which it is based,
Meanwhile, Section 3.1.6 of RR No. 12- letter purporting to be a Notice of Informal and fringe benefits tax otherwise, the FLD/FAN itself shall be void.
99 specifically requires that the decision Conference (NIC), as well as the detailed Meanwhile, Section 3.1.6 of RR No. 12-99
of the CIR or his duly authorized computation of its supposed tax liability. It also specifically requires that the decision of the
representative on a disputed received a copy of the Preliminary Assessment CIR or his duly authorized representative on a
assessment shall state the facts, law Notice (PAN), together with the attached details of disputed assessment shall state the facts, law
and rules and regulations, or discrepancies for the calendar year ending and rules and regulations, or jurisprudence on
jurisprudence on which the decision is December 31, 2005. Upon investigation, Liquigaz which the decision is based. Failure to do so
based. Failure to do so would invalidate was initially assessed with deficiency withholding would invalidate the FDDA.
the FDDA. tax liabilities, inclusive of interest, in the aggregate
amount of P23,931,708.72, The use of the word "shall" in Section 228 of
----- Thereafter, it received a Formal Letter of Demand the NIRC and in RR No. 12-99 indicates that
(FLD)/Formal Assessment Notice (FAN), together the requirement of informing the taxpayer of
A "decision" differs from an with its attached details of discrepancies, for the the legal and factual bases of the assessment
"assessment" and failure of the FDDA calendar year ending December 31, 2005. The and the decision made against him is
to state the facts and law on which it is total deficiency withholding tax liabilities, inclusive mandatory. The requirement of providing the
based renders the decision void—but of interest, under the FLD was P24,332,347.20. taxpayer with written notice of the factual and
not necessarily the assessment. Tax Liquigaz filed its protest against the FLD/FAN and legal bases applies both to the FLD/FAN and
laws may not be extended by subsequently submitted its supporting documents. the FDDA.
implication beyond the clear import of
their language, nor their operation It received a copy of the FDDA covering the tax To rule otherwise would tolerate abuse and
enlarged so as to embrace matters not audit under LOA No. 00067824 for the calendar prejudice. Taxpayers will be unable to file an
specifically provided. year ending December 31, 2005. As reflected in intelligent appeal before the CTA as they
the FDDA, the CIR still found Liquigaz liable for would be unaware on how the CIR or his'
deficiency withholding tax liabilities, inclusive of authorized representative appreciated the
interest, in the aggregate amount of defense raised in connection with the
P22,380,025.19. Liquigaz filed its Petition for assessment. On the other hand, it raises the
Review before the CTA Division assailing the possibility that the amounts reflected in the
validity of the FDDA issued by the CIR. The CTA FDDA were arbitrarily made if the factual and
Division partially granted Liquigaz's petition legal bases thereof are not shown.
cancelling the EWT and FBT assessments but
affirmed with modification the WTC assessment. A void FDDA does not ipso facto render the
On the other hand, it upheld the WTC assessment assessment void
against Liquigaz. It noted that the factual bases
used in the FLD and the FDDA with regard thereto In resolving the issue on the effects of a void
were the same as the difference in the amount FDDA, it is necessary to differentiate an
merely resulted from the use of a different tax rate. "assessment" from a "decision."
An assessment becomes a disputed
Both the CIR and Liquigaz moved for assessment after a taxpayer has filed its
reconsideration, but their respective motions were protest to the assessment in the
denied by the CTA Division. Aggrieved, they filed administrative level. Thereafter, the CIR either
their respective petitions for review before the issues a decision on the disputed assessment
CTA En Banc. The CTA En Banc affirmed the or fails to act on it and is, therefore,
assailed decision of the CTA Division. The CTA considered denied. The taxpayer may then
En Banc sustained Liquigaz' WTC assessment. It appeal the decision on the disputed
observed that the basis for the assessment was assessment or the inaction of the CIR. As
the same for the FLD and the FDDA, which was a such, the FDDA is not the only means that the
comparison of the salaries declared in the Income final tax liability of a taxpayer is fixed, which
Tax Return (ITR) and the Alpha list that resulted in may then be appealed by the taxpayer. Under
a discrepancy of P9,318,255.84. The CTA En the law, inaction on the part of the CIR may
Banc highlighted that the change in the amount of likewise result in the finality of a taxpayer's tax
assessed WTC deficiency simply arose from the liability as it is deemed a denial of the protest
revision of the tax rate used—from 32% to the filed by the latter, which may also be appealed
effective tax rate of 25.40% suggested by before the CTA.
Liquigaz.
Clearly, a decision of the CIR on a disputed
Both parties filed their respective petitions for assessment differs from the assessment itself.
review. Hence, the invalidity of one does not
necessarily result to the invalidity of the
other—unless the law or regulations otherwise
provide.

Section 228 of the NIRC provides that an

assessment shall be void if the taxpayer is not
informed in writing of the law and the facts on
which it is based. It is, however, silent with
regards to a decision on a disputed
assessment by the CIR which fails to state the
law and facts on which it is based. This void is
filled by RR No. 12-99 where it is stated that
failure of the FDDA to reflect the facts and law
on which it is based will make the decision
void. It, however, does not extend to the
nullification of the entire assessment.

The FDDA must state the facts and law on

which it is based to provide the taxpayer the
opportunity to file an intelligent appeal

The reason for requiring that taxpayers be

informed in writing of the facts and law on
which the assessment is made is the
constitutional guarantee that no person shall
be deprived of his property without due
process of law. Merely notifying the taxpayer
of its tax liabilities without elaborating on its
details is insufficient.

In the instant case, respondent has not been

informed of the basis of the estate tax liability.
Without complying with the unequivocal
mandate of first informing the taxpayer of the
government's claim, there can be no
deprivation of property, because no effective
protest can be made. The haphazard shot at
slapping an assessment, supposedly based
on estate taxation's general provisions that
are expected to be known by the taxpayer, is
utter chicanery.

Even a cursory review of the preliminary

assessment notice, as well as the demand
letter sent, reveals the lack of basis for — not
to mention the insufficiency of — the gross
figures and details of the itemized deductions
indicated in the notice and the letter. This
Court cannot countenance an assessment
based on estimates that appear to have been
arbitrarily or capriciously arrived at. Although
taxes are the lifeblood of the government,
their assessment .and collection "should be
made in accordance with law as any
arbitrariness will negate the very reason for
government itself."
In the present case, a mere perusal of the
FAN for the deficiency EWT for taxable year
1994 will show that other than a tabulation of
the alleged deficiency taxes due, no further
detail regarding the assessment was provided
by petitioner. Only the resulting interest,
surcharge and penalty were anchored with
legal basis. Petitioner should have at least
attached a detailed notice of discrepancy or
stated an explanation why the amount of
P48,461.76 is collectible against respondent
and how the same was arrived at.
The law requires that the legal and factual
bases of the assessment be stated in the
formal letter of demand and assessment
notice. Thus, such cannot be presumed.
Otherwise, the express provisions of Article
228 of the NIRC and RR No. 12-99 would be
rendered nugatory. The alleged "factual
bases" in the advice, preliminary letter and
"audit working papers" did not suffice. There
was no going around the mandate of the law
that the legal and factual bases of the
assessment be stated in writing in the formal
letter of demand accompanying the
assessment notice.

We note that the old law merely required that

the taxpayer be notified of the assessment
made by the CIR. This was changed in 1998
and the taxpayer must now be informed not
only of the law but also of the facts on which
the assessment is made. Such amendment is
in keeping with the constitutional principle that
no ' person shall be deprived of property
without due process. In view of the absence of
a fair opportunity for Enron to be informed of
the legal and factual bases of the assessment
against it, the assessment in question was
void.....

Nevertheless, the requirement of providing the

taxpayer with written notice of the facts and
law used as basis for the assessment is not to
be mechanically. applied. Emphasis on the
purpose of the written notice is important. The
requirement should be in place so that the
taxpayer could be adequately informed of the
basis of the assessment enabling him to
prepare an intelligent protest or appeal of the
assessment or decision.

Considering the foregoing exchange of

correspondence and documents between the
parties, 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.

Thus, substantial compliance with the

requirement under Section 228 of the NIRC is
permissible, provided that the taxpayer would
be eventually apprised in writing of the factual
and legal bases of the assessment to allow
him to file an effective protest against.

Guided by the foregoing, the Court now turns

to the FDDA in issue.

It is undisputed that the FDDA merely showed

Liquigaz' tax liabilities without any details on
the specific transactions which gave rise to its
supposed tax deficiencies. While it provided
for the legal bases of the assessment, it fell
short of informing Liquigaz of the factual
bases thereof. Thus, the FDDA as regards the
EWT and FBT tax deficiency did not comply
with the requirement in Section 3.1.6 of RR
No. 12-99, as amended, for failure to inform
Liquigaz of the factual basis thereof.
The CIR erred in claiming that Liquigaz was
informed of the factual bases of the
assessment because the FDDA made
reference to the PAN and FAN/FLD, which
were accompanied by details of the alleged
discrepancies. Failure to do so would deprive
Liquigaz adequate opportunity to prepare an
intelligent appeal. It would have no way of
determining what were considered by the CIR
in the: defenses it had raised in the protest to
the FLD. Further, without the details of the
assessment, it would open the possibility that
the reduction of the assessment could have
been arbitrarily or capriciously arrived at.

The Court, however, finds that the CTA erred

in concluding that the assessment on EWT
and FBT deficiency was void because the
FDDA covering the same was void. The
assessment remains valid notwithstanding the
nullity of the FDDA because as discussed
above, the assessment itself differs from a
decision on the disputed assessment.

As established, an FDDA that does not inform

the taxpayer in writing of the facts and law on
which it is based renders the decision void.
Therefore, it is as if there was no decision
rendered by the CIR. It is tantamount to a
denial by inaction by the CIR, which may still
be appealed before the CTA and the
assessment evaluated on the basis of the
available evidence and documents. The
merits of the EWT and FBT assessment
should have been discussed and not merely
brushed aside on account of the void FDDA.

On the other hand, the Court agrees that the

FDDA substantially informed Liquigaz of its
tax liabilities with regard to its WTC
assessment.

To recapitulate, a "decision" differs from an

 "assessment" and failure of the FDDA to state
the facts and law on which it is based renders
the decision void—but not necessarily the
assessment. Tax laws may not be extended
by implication beyond the clear import of their
language, nor their operation enlarged so as
to embrace matters not specifically provided

33. Sps. Pacquiao v. Section 11 of Republic Act No. 1125 is The genesis of the foregoing controversy began a Respondent Court acted Appeal will not suspend the collection of tax;
CTA, G.R. No. 213394, therefore premised on the assumption few years before the petitioners became elected with grave abuse of Exception
April 6, 2016 that the collection by summary officials in their own right. Prior to their election as discretion amounting to lack
proceedings is by itself in accordance public officers, the petitioners relied heavily on or excess of jurisdiction The Court went on to explain the reason for
with existing laws; and then what is Pacquiao's claim to fame as a world-class when it required the empowering the courts to issue such
suspended is the act of collecting, professional boxer. Due to his success, Pacquiao Petitioners to post a bond injunctive writs. It wrote:
whereas, in the case at bar what the was able to amass income from both the even if the tax collection
respondent Court suspended was the Philippines and the United States of America (US). processes employed by "Section 11 of Republic Act No. 1125 is
use of the method employed to verify His income from the US came primarily from the Respondent Commissioner therefore premised on the assumption that the
the collection which was evidently illegal purses he received for the boxing matches he took against Petitioners was collection by summary proceedings is by itself
after the lapse of the three-year part under Top Rank, Inc. On the other hand, his patently in violation of law in accordance with existing laws; and then
limitation period. The respondent Court income from the Philippines consisted of talent thereby blatantly breaching what is suspended is the act of collecting,
issued the injunction in question on the fees received from various Philippine corporations Petitioners' constitutional whereas, in the case at bar what the
basis of its findings that the means for product endorsements, advertising right to due process respondent Court suspended was the use of
intended to be used by petitioner in the commercials and television appearances. the method employed to verify the collection
collection of the alleged deficiency which was evidently illegal after the lapse of
taxes were in violation of law. It would In compliance with his duty to his home country, the three-year limitation period. The
certainly be an absurdity on the part of Pacquiao filed his 2008 income tax return on April respondent Court issued the injunction in
the Court of Tax Appeals to declare that 15, 2009 reporting his Philippine-sourced income. question on the basis of its findings that the
the collection by the summary methods It was subsequently amended to include his US- means intended to be used by petitioner in the
of distraint and levy was violative of the sourced income. The controversy began on March collection of the alleged deficiency taxes were
law, and then, on the same breath 25, 2010, when Pacquiao received a Letter of in violation of law. It would certainly be an
require the petitioner to deposit or file a Authority (March LA) from the Regional District absurdity on the part of the Court of Tax
bond as a prerequisite of the issuance Office No. 43 (RDO) of the Bureau of Internal Appeals to declare that the collection by the
of a writ of injunction. Revenue (BIR) for the examination of his books of summary methods of distraint and levy was
accounts and other accounting records for the violative of the law, and then, on the same
period covering January 1, 2008 to December 31, breath require the petitioner to deposit or file a
2008. bond as a prerequisite of the issuance of a
writ of injunction. Let us suppose, for the sake
On April 15, 2010, Pacquiao filed his 2009 income of argument, that the Court a quo would have
tax return, which although reflecting his required the petitioner to post the bond in
Philippines-sourced income, failed to include his question and that the taxpayer would refuse
income derived from his earnings in the US. He or fail to furnish said bond, would the Court a
also failed to file his Value Added Tax (VAT) quo be obliged to authorize or allow the
returns for the years 2008 and 2009. Collector of Internal Revenue to proceed with
the collection from the petitioner of the taxes
Finding the need to directly conduct the due by a means it previously declared to be
investigation and determine the tax liabilities of the contrary to law?"
petitioners, respondent Commissioner on Internal
Revenue (CIR) issued another Letter of Authority, Thus, despite the amendments to the law, the
dated July 27, 2010 (July LA), authorizing the Court still holds that the CTA has ample
BIR's National Investigation Division (NID) to authority to issue injunctive writs to restrain
examine the books of accounts and other the collection of tax and to even dispense with
accounting records of both Pacquiao and Jinkee the deposit of the amount claimed or the filing
for the last 15 years, from 1995 to 2009. On of the required bond, whenever the method
September 21, 2010 and September 22, 2010, the employed by the CIR in the collection of tax
CIR replaced the July LA by issuing to both jeopardizes the interests of a taxpayer for
Pacquiao and Jinkee separate electronic versions being patently in violation of the law. Such
of the July LA pursuant to Revenue Memorandum authority emanates from the jurisdiction
Circular (RMC) No. 56-2010. conferred to it not only by Section 11 of R.A.
No. 1125, but also by Section 7 of the same
Due to these developments, the petitioners, law.
through counsel, wrote a letter questioning the
propriety of the CIR investigation. According to the From all the foregoing, it is clear that the
petitioners, they were already subjected to an authority of the courts to issue injunctive writs
earlier investigation by the BIR for the years prior to restrain the collection of tax and to
to 2007, and no fraud was ever found to have dispense with the deposit of the amount
been committed. They added that pursuant to the claimed or the filing of the required bond is not
March LA issued by the RDO, they were already simply confined to cases where prescription
being investigated for the year 2008. has set in. As explained by the Court in those
cases, whenever it is determined by the
The CIR informed the petitioners that its courts that the method employed by the
reinvestigation of years prior to 2007 was justified Collector of Internal Revenue in the collection
because the assessment thereof was pursuant to of tax is not sanctioned by law, the bond
a "fraud investigation" against the petitioners requirement under Section 11 of R.A. No.
under the "Run After Tax Evaders" (RATE) 1125 should be dispensed with. The purpose
program of the BIR. of the rule is not only to prevent jeopardizing
the interest of the taxpayer, but more
On January 5 and 21, 2011, the petitioners importantly, to prevent the absurd situation
submitted various income tax related documents wherein the court would declare "that the
for the years 2007-2009. As for the years 1995 to collection by the summary methods of
2006, the petitioners explained that they could not distraint and levy was violative of law, and
furnish the bureau with the books of accounts and then, in the same breath require the petitioner
other, tax related documents as they had already to deposit or file a bond as a prerequisite for
been disposed in accordance with Section 235 of the issuance of a writ of injunction."
the Tax Code. They added that even if they
wanted to, they could no longer find copies of the The determination of whether the petitioners.'
documents because during those years, their case falls within the exception provided under
accounting records were then managed by Section 11, R.A No. 1125 cannot be
previous counsels, who had since passed away. determined at this point
Finally, the petitioners pointed out that their tax
liabilities for the said years had already been fully In this case, the alleged illegality of the
settled with then CIR Jose Mario Buñag, who after methods employed by respondent to effect
a review, found no fraud against them. the collection of tax is not at all patent or
evident as in the foregoing cases. At this early
On June 21; 2011, on the same day that the stage of the proceedings, it is premature for
petitioners made their last compliance in this Court to rule on the issues of whether or
submitting their tax-related documents, the CIR not the warrants were defectively issued; or
issued a subpoena duces tecum requiring the whether the service thereof was done in
petitioners to submit additional income tax and violation of the rules; or whether or not
VAT-related documents for the years 1995-2009. respondent's assessments were valid. These
matters are evidentiary in nature, the
After conducting its own- investigation, the CIR resolution of which can only be made after a
made its initial assessment finding that the full blown trial.
petitioners were unable to fully settle their tax
liabilities. Thus, the CIR issued its Notice of Initial Though it may be true that it would have been
Assessment-Informal Conference (NIC), , directly premature for the CTA to immediately
addressed to the petitioners, informing them that determine whether the assessment made
based on the best evidence obtainable, they were against the petitioners was valid or whether
liable for deficiency income taxes in the amount of the warrants were properly issued and served,
P714,061,116.30 for 2008 and P1,446,245,864.33 still, it behooved upon the CTA to properly
for 2009, inclusive of interests and surcharges. determine, at least preliminarily, whether the
CIR, in its assessment of the tax liability of the
petitioners, and its effort of collecting the
same, complied with the law and the pertinent
issuances of the BIR itself. The CTA should
have conducted a preliminary hearing and
received evidence so it could have properly
determined whether the requirement of
providing the required security under Section
11, R.A. No. 1125 could be reduced or
dispensed with pendente lite.

The Court cannot make a preliminary

determination on whether the CIR used
methods not sanctioned by law

Absent any evidence and preliminary

determination by the CTA, the Court cannot
make any factual finding and settle the issue
of whether the petitioners should comply with
the security requirement under Section 11,
R.A. No. 1125. The determination of whether
the methods, employed by the CIR in its
assessment, jeopardized the interests of a
taxpayer for being patently in violation of the
law is a question of fact that calls for the
reception of evidence which would serve as
basis. In this regard, the CTA is in a better
position to initiate this given its time and
resources. The remand of the "case to the
CTA on this question is, therefore, more
sensible and proper.

As stated earlier, there is no evidentiary basis.

All the arguments are mere allegations from
both sides. Moreover, any finding by the Court
would pre-empt the CTA from properly
exercising its jurisdiction and settle the main
issues presented before it, that is, whether the
petitioners were afforded due process;
whether the CIR has valid basis for its
assessment; and whether the petitioners
should be held liable for the deficiency taxes.

Petition to be remanded to the CTA; CTA to

conduct preliminary hearing

As the CTA is in a better, position to make

such a preliminary determination, a remand to
the CTA is in order.

In case the CTA finds that the petitioners

should provide the necessary security under
Section 11 of R.A. 1125, a recomputation of
the amount thereof is in order.- If there would
be a need for a bond or to reduce the same,
the CTA should take note that the Court, in
A.M. No. 15-92-01-CTA, resolved to approve
the CTA En Banc Resolution No. 02-2015,
where the phrase "amount claimed" stated in
Section 11 of R.A. No. 1125 was construed to
refer to the principal amount of the deficiency
taxes, excluding penalties, interests and
surcharges.

Moreover, the CTA should also consider the

claim of the petitioners that they already paid
a total of P32,196,534.40 deficiency VAT
assessed against' them.. Despite said
payment, the CIR still assessed them the total
amount of P3,298,514,894.35, including the
amount assessed as VAT deficiency, plus
surcharges, penalties and interest. If so, these
should also be deducted from the amount of
the bond to be computed and required.

In the conduct of its preliminary hearing, the

CTA must balance the scale between the
inherent power of the State to tax and its right
to prosecute perceived transgressors of the
law, on one side; and the constitutional rights
 of petitioners to due process of law and the
equal protection of the laws, on the other. In
case of doubt, the tax court must remember
that as in all tax cases, such scale should
favor the taxpayer, for a citizen's right to due
process and equal protection of the law is
amply protected by the Bill of Rights under the
Constitution.

34. CIR v. Standard Generally, the period for CIR to assess On July 14, 2004 CIR sent a Formal Demand Whether or not CIR’s right to YES. CIR only had three years, counted from
Chartered Bank, G.R. and collect internal revenue taxes is Letter to the respondent bank for deficiency in assess respondent bank for the date of actual filing of the return or from
No. 192173, July 29, only up to 3 years after the last day income tax, final income tax, withholding tax on deficiencies has already the last date prescribed by law for the filing of
2015. prescribed by law. One of the compensation, final withholding tax for the taxable prescribed for failure to such return, whichever comes later, to assess
exceptions, this can be extended by a year of 1998. In the middle of the ligation, the comply with the a national internal revenue tax or to begin a
written agreement between the parties bank paid for WTC and FWT. Nonetheless, both requirements set forth in court proceeding for the collection thereof
provided the same is executed before CTA in Division and CTA En Banc ruled that the RMO. without an assessment. However, the law
the 3-yr prescription period. Provided Formal Letter of Demand and Assessment Notices authorizes the extension of the original 3-year
further that there must be proper and are void for having been issued beyond the 3year prescriptive period by the execution of a valid
valid execution of a waiver of the prescriptive period. Their findings are grounded on waiver, where the taxpayer and the CIR may
Statute of Limitations. the fact that waiver of extension were defective stipulate to extend the period of assessment
and found to have failed to abide by the strict by a written agreement executed prior to the
provisions of the RMO. CIR contested that lapse of the period prescribed by law, and by
respondent is estopped from questioning the subsequent written agreements before the
validity of the waivers of the Statute of Limitations expiration of the period previously agreed
executed by its representatives in view of the upon. However, the execution of a Waiver of
partial payments it made on the deficiency taxes Statute of Limitations must be executed in
sought to be collected. accordance with pre-set guidelines and
procedural requirements. Otherwise, it does
not serve its purpose, and the taxpayer has all
the right to invoke its nullity. In this case, the
RMO No. 20-90 implements the provisions of
the NIRC relating to the period of prescription
for the assessment and collection of taxes,
which are mandatory in nature.

The waivers were void due to the defects and

the supposed suspensions of the prescriptive
periods within which to issue the assessments
were not legally effected. Also, the facts of
this case do not call for the application of the
doctrine of estoppel.
35. China Banking The time limit for the government to China Banking Corporation (CBC) was engaged in Whether or not the right of YES. When the BIR issued the assessment
Corporation v. CIR, collect the assessed tax is set at three transactions involving sales of foreign exchange to the BIR to collect the for deficiency DST, the applicable rule was
G.R. No. 172509, years, to be reckoned from the date the Central Bank of the Philippines (now the BSP), assessed DST from CBC is Section 319 (c) 10 of the NIRC. Under such
February 4, 2015. when the BIR mails/releases/sends the which was commonly known as SWAP barred by prescription. provision, the time limit for the government to
assessment notice to the taxpayer and transactions. collect the assessed tax is set at three years,
the assessed tax must be collected by to be reckoned from the date when the BIR
distraint or levy and/or court proceeding CBC did not file tax returns or pay tax on the mails/releases/sends the assessment notice
within the three-year period. SWAP transactions and was found by the BIR to the taxpayer and the assessed tax must be
liable for deficiency DST on the sales of foreign collected by distraint or levy and/or court
bills of exchange to the Central Bank. proceeding within the three-year period.

More than 12 years after the filing of CBC’s However, the records did not show when the
protest, the CIR rendered a decision reiterating assessment notice was mailed, released or
the deficiency DST assessment and ordered for its sent to CBC, nor was a warrant of distraint or
payment plus increments within 30 days from the levy served on CBC’s properties nor a
receipt of such decision. collection case filed in court by the BIR within
the three-year period.
CBC invoked the argument of prescription and
stated that the government has three years from The demand was made almost thirteen years
the date the former received the assessment of from the date from which the prescriptive
the CIR to collect the tax, but that within such time period was to be reckoned, the claim of the
frame, neither a warrant of distraint or levy was CIR for deficiency DST from petitioner was
issued, nor a collection case filed in court. already barred by prescription.
36. CIR v. CBK Power The obligation to comply with a tax CBK Power is a limited partnership duly organized Whether or not the BIR may YES. The Philippine Constitution provides for
Company Limited, treaty must take precedence over the and existing under the laws of the Philippines, and add a requirement – prior adherence to the general principles of
G.R. Nos. 193383-84, objective of RMO No. 12000. Logically, primarily engaged in the development and application for an ITAD international law as part of the law of the land.
January 14, 2015. noncompliance with tax treaties has operation of hydroelectric power generating plants ruling – that is not found in The time-honored international principle of
negative implications on international in Laguna. It is registered with the Board of the income tax treaties pacta sunt servanda demands the
relations, and unduly discourages Investments (BOI) as engaged in a preferred signed by the Philippines performance in good faith of treaty obligations
foreign investors. While the pioneer area of investment under the Omnibus before a taxpayer can avail on the part of the states that enter into the
consequences sought to be prevented Investment Code of 1987. In February 2001, CBK of preferential tax rates agreement. In this jurisdiction, treaties have
by RMO No. 12000 involve an Power borrowed money from Industrial Bank of under said treaties. the force and effect of law.
administrative procedure, these may be Japan, Fortis-Netherlands, Raiffesen Bank, Fortis-
remedied through other system Belgium, and Mizuho Bank for which it remitted Bearing in mind the rationale of tax treaties,
management processes, e.g., the interest payments from May 2001 to May 2003. It the period of application for the availment of
imposition of a fine or penalty. But we allegedly withheld final taxes from said payments tax treaty relief as required by RMO No. 1-
cannot totally deprive those who are based on the following rates, and paid the same to 2000 should not operate to divest entitlement
entitled to the benefit of a treaty for the Revenue District Office No. 55 of the Bureau to the relief as it would constitute a violation of
failure to strictly comply with an of Internal Revenue (BIR): (a) fifteen percent the duty required by good faith in complying
administrative issuance requiring prior (15%) for Fortis-Belgium, Fortis-Netherlands, and with a tax treaty. The denial of the availment
application for tax treaty relief. Raiffesen Bank; and (b) twenty percent (20%) for of tax relief for the failure of a taxpayer to
Industrial Bank of Japan and Mizuho Bank. apply within the prescribed period under the
administrative issuance would impair the
However, according to CBK Power, under the value of the tax treaty. At most, the application
relevant tax treaties between the Philippines and for a tax treaty relief from the BIR should
the respective countries in which each of the merely operate to confirm the entitlement of
banks is a resident, the interest income derived by the taxpayer to the relief. The obligation to
the aforementioned banks are subject only to a comply with a tax treaty must take
preferential tax rate of 10%. Accordingly, on April precedence over the objective of RMO No. 1-
14, 2003, CBK Power filed a claim for refund of its 2000. Logically, noncompliance with tax
excess final withholding taxes allegedly treaties has negative implications on
erroneously withheld and collected for the years international relations, and unduly
2001 and 2002 with the BIR Revenue Region No. discourages foreign investors. While the
9. The claim for refund of excess final withholding consequences sought to be prevented by
taxes in 2003 was subsequently filed on March 4, RMO No. 1-2000 involve an administrative
2005. The Commissioner of Internal Revenue’s procedure, these may be remedied through
(Commissioner) inaction on said claims prompted other system management processes, e.g.,
CBK Power to file petitions for review before the the imposition of a fine or penalty. But we
CTA. cannot totally deprive those who are entitled
to the benefit of a treaty for failure to strictly
The CTA First Division granted the petitions and comply with an administrative issuance
ordered the refund of the amount of requiring prior application for tax treaty relief.
P15,672,958.42 upon a finding that the relevant
tax treaties were applicable to the case. The CTA It bears reiterating that the application for a
First Division categorically declared in the August tax treaty relief from the BIR should merely
28, 2008 Decision that the required International operate to confirm the entitlement of the
Tax Affairs Division (ITAD) ruling was not a taxpayer to the relief. Since CBK Power had
condition sine qua non for the entitlement of the requested for confirmation from the ITAD on
tax relief sought by CBK Power. However, upon June 8, 2001 and October 28, 2002 before it
motion for reconsideration filed by the filed on April 14, 2003 its administrative claim
Commissioner, the CTA First Division amended its for refund of its excess final withholding taxes,
earlier decision by reducing the amount of the the same should be deemed substantial
refund from P15,672,958.42 to P14,835,720.39 on compliance with RMO No. 12000, as in
the ground that CBK Power failed to obtain an Deutsche Bank. To rule otherwise would
ITAD ruling with respect to its transactions with defeat the purpose of Section 229 of the NIRC
Fortis-Netherlands. CBK Power elevated the in providing the taxpayer a remedy for
matter to the CTA En Banc on petition for review. erroneously paid tax solely on the ground of
failure to make prior application for tax treaty
The CTA En Banc affirmed the ruling of the CTA relief. As the Court exhorted in Republic v.
First Division that a prior application with the ITAD GST Philippines, Inc., while the taxpayer has
is indeed required by Revenue Memorandum an obligation to honestly pay the right taxes,
Order (RMO) 1-2000, which administrative the government has a corollary duty to
issuance has the force and effect of law and is just implement tax laws in good faith; to discharge
as binding as a tax treaty. its duty to collect what is due to it; and to justly
return what has been erroneously and
excessively given to it.

In view of the foregoing, the Court holds that

the CTA En Banc committed reversible error
in affirming the reduction of the amount of
refund to CBK Power from P15,672,958.42 to
P14,835,720.39 to exclude its transactions
with FortisNetherlands for which no ITAD
ruling was obtained. CBK Power’s petition in
G.R. Nos. 193383-84 is therefore granted.
37. CIR v. Team Every corporation liable to tax under Respondent Mirant (Philippines) Energy Whether or not the YES. Section 76 of the NIRC outlines the
(Phils.) Energy Section 27 shall file a final adjustment Corporation is a domestic corporation primarily respondent proved its mechanisms and remedies that a corporate
Corporation, G.R. No. return covering the total taxable income engaged in the business of power generating entitlement to the refund taxpayer may opt to exercise, viz:
188016, January 14, for the preceding calendar of fiscal year. plants and related facilities for conversion into
2015. If the sum of the quarterly tax payments electricity, coal, distillate and other fuel. Section 76. Final Adjusted Return.Every
made during the said taxable year is not corporation liable to tax under Section 27 shall
equal to the total tax due on the entire The respondent filed its annual income tax return file a final adjustment return covering the total
taxable income of that year, the (ITR) for calendar years 2002 and 2003 on April taxable income for the preceding calendar of
corporation shall either: (A) Pay the 15, 2003 and April 15, 2004, respectively, fiscal year. If the sum of the quarterly tax
balance of the tax still due; or (B) Carry reflecting overpaid income taxes or excess
over the excess credit; or (C) Be creditable withholding taxes in the amounts of payments made during the said taxable year
credited or refunded with the excess ₱6,232,003.00 and ₱10,134,410.00 for taxable is not equal to the total tax due on the entire
amount paid, as the case may be. years 2002 and 2003, respectively . It indicated in taxable income of that year, the corporation
the ITRs its option for the refund of the tax shall either: (A) Pay the balance of the tax still
overpayments for calendar years 2002 and 2003. due; or

On March 22, 2005, the respondent filed an (B) Carry over the excess credit; or
administrative claim for refund or issuance of tax
credit certificate with the Bureau of Internal (C) Be credited or refunded withthe excess
Revenue (BIR) in the total amount of amount paid, as the case may be.
₱16,366,413.00, representing the overpaid
income tax or the excess creditable withholding In case the corporation is entitled to a tax
tax of the respondent for calendar years 2002 and credit or refund of the excess estimated
2003. quarterly income taxes paid, the excess
amount shown on its final adjustment return
Due to the inaction of the BIR and in order to toll may be carried over and credited against the
the running of the twoyear prescriptive period for estimated quarterly income tax liabilities for
claiming a refund under Section 229 of the the taxable quarters of the succeeding taxable
National Internal Revenue Code (NIRC) of 1997, years. Once the option to carry over and apply
the respondent filed a petition for review in the the excess quarterly income tax against
Court of Tax Appeals (CTA) on April 14, 2005. income tax due for the taxable years of the
succeeding taxable years has been made,
On May 15, 2008, the CTA in Division rendered its such option shall be considered irrevocable
decision in favor of the respondent. for that taxable period and no application for
cash refund or issuance of a tax credit
Aggrieved, the petitioner has brought this appeal certificate shall be allowed therefor. The two
options are alternative and not cumulative in
nature, that is, the choice of one precludes the
other.

The requirements for entitlement of a

corporate taxpayer for a refund or the
issuance of tax credit certificate involving
excess withholding taxes are as follows:

1. That the claim for refund was filed within

the two-year reglementary period pursuant to
Section 22918 of the NIRC;

2. When it is shown on the ITR that the

income payment received is being declared
part of the taxpayer’s gross income; and

3. When the fact of withholding is established

by a copy of the withholding tax statement,
duly issued by the payor to the payee,
showing the amount paid and income tax
withheld from that amount.

The first requirement has been complied with

because even the petitioner does not contest
that the respondent filed its administrative and
judicial claim for refund within the statutory
period.

The second requirement has been factually

determined and verified by the CTA and it is
fundamental that the findings of fact by the
CTA in Divisionare not to be disturbed without
any showing of grave abuse of discretion.

With respect to the third requirement, the

respondent proved that it had met the
requirement by presenting the 10 certificates
of creditable taxes withheld at source. The
petitioner did not challenge he respondent’s
compliance with the requirement.

We are likewise unmoved by the assertion of

the petitioner that the respondent should have
submitted the quarterly returns of the
respondent to show that it did not carry-over
the excess withholding tax to the succeeding
quarter. When the respondent was able to
establish prima facie its right to the refund by
testimonial and object evidence, the petitioner
should have presented rebuttal evidence to
shift the burden of evidence back to the
respondent. Indeed, the petitioner ought to
have its own copies of the respondent’s
quarterly returns on file, on the basis of which
it could rebut the respondent's claim that it did
not carry over its unutilized and excess
creditable withholding taxes for the
immediately succeeding quarters. The BIR's
failure to present such vital document during
the trial in order to bolster the petitioner's
contention against the respondent's claim for
the tax refund was fatal.
38. Banco De Oro et. Petitions for writs of certiorari against In 2001, the Bureau of Treasury issued P35 billion Whether or not the doctrine YES. The case should have been filed with
al. v. CIR, G.R. No. the acts and omissions of the applicable pesos worth of 10 -year treasury bonds at an of the hierarchy of courts the Court of Tax Appeals.
198756, January 13, quasi-judicial agencies regarding tax auction. was violated.
2015. cases should, thus, be filed before the According to jurisprudence, Court of Tax
Court of Tax Appeals. In 2011, or ten years after, The Commissioner of Appeals has exclusive jurisdiction to
Internal Revenue issued BIR Ruling No. 370-2011 determine the constitutionality or validity of tax
declaring therein that PEACe bonds, which are laws, rules and regulations, and other
thus treated as deposit substitutes, are subject to administrative issuances of the Commissioner
a 20% Final Withholding Tax. The ruling was of Internal Revenue. It thus has the authority
given 11 days prior to the maturity of said bonds. to issue writs of certiorari since it is inherent in
Pursuant to the ruling, the Secretary of Finance the exercise of its appellate jurisdiction.
directed the Bureau of Treasury to withhold 20%
Final Withholding Tax from the face value of the Judicial power likewise authorizes lower
PEACe bonds upon their payment at maturity on courts to determine the constitutionality or
October 2011. validity of a law or regulation in the first
instance.
Banco de Oro filed with the Supreme court a
petition for Certiorari, prohibition and/or Republic Act no. 1125 created the Court of
mandamus with an urgent application for a Tax Appeals and Republic Act no. 9282
temporary restraining order. expanded the jurisdiction of the Court of Tax
appeals and elevated its rank to a level similar
The court issued a temporary restraining order to a collegiate court with special jurisdiction. It
enjoining the application of the BIR Ruling subject thus possesses all the inherent powers of a
to the condition that the 20% final withholding tax Court of Justice.
on interest income shall be withheld and placed in
escrow pending the resolution of the petition. Court of Tax Appeals may likewise take
cognizance of cases directly challenging the
The CIR questions the direct resort to the constitutionality or validity of a tax law or
Supreme Court made by the petitioners. They regulation or administrative issuance (revenue
argue that the petitioners should have challenged orders, revenue memorandum circulars,
first the rulings before the Secretary of Finance rulings).
which is consistent with the doctrine on exhaustion
of administrative remedies. Thus, petitions for writs of certiorari against
the acts and omissions of the applicable
quasi-judicial agencies should, thus, be filed
before the Court of Tax Appeals.

Since the case was filed at the first instance

with the Supreme Court, it violated the
doctrine of hierarchy of courts.
39. Winebrenner & the presentation of the annual ITR On April 15, 2004, petitioner filed its Annual WHETHER OR NOT THE NO. Requiring that the ITR or the FAR of the
Iñigo Insurance would suffice in proving that prior year’s Income Tax Return for CY 2003. PRESENTATION OF succeeding year be presented to the BIR in
Brokers, Inc. v. CIR, excess credits were not utilized for the QUARTERLY ITR OF THE requesting a tax refund has no basis in law
G.R. No. 206526, taxable year in order to make a final About two years thereafter or on April 7, 2006, SUCCEEDING PERIOD IS and jurisprudence.
January 28, 2015 determination of the total tax due. petitioner applied for the administrative tax INDISPENSABLE.
credit/refund claiming entitlement to the refund of First, Section 76 of the Tax Code does not
its excess or unutilized CWT for CY 2003, by filing mandate it. The law merely requires the filing
BIR Form No. 1914 with the Revenue District of the FAR for the preceding – not the
Office No. 50 of the Bureau of Internal Revenue succeeding – taxable year. Indeed, any
(BIR). There being no action taken on the said refundable amount indicated in the FAR of the
claim, a petition for review was filed by petitioner preceding taxable year may be credited
before the CTA on April 11, 2006. The case was against the estimated income tax liabilities for
docketed as CTA Case No. 7440 and was raffled the taxable quarters of the succeeding taxable
to the Special First Division (CTA Division). On year. However, nowhere is there even a tinge
April 13, 2010, CTA Division partially granted of a hint in any provisions of the [NIRC] that
petitioner’s claim for refund of excess and the FAR of the taxable year following the
unutilized CWT for CY 2003 in the reduced period to which the tax credits are originally
amount of ₱2,737,903.34 in its April 13, 2010 being applied should also be presented to the
Decision (original decision). The dispositive BIR.
portion of the decision reads:
Second, Section 5 of RR 12-94, amending
In view of the foregoing, the Petition for Review is Section 10(a) of RR 6-85, merely provides
hereby PARTIALLY GRANTED. Accordingly, that claims for refund of income taxes
respondent is hereby ORDERED to REFUND or deducted and withheld from income payments
ISSUE A TAX CREDIT CERTIFICATE in favor of shall be given due course only (1) when it is
the petitioner in the reduced amount of shown on the ITR that the income payment
₱2,737,903.34 representing its excess/unutilized received is being declared part of the
creditable withholding taxes for the year 2003. taxpayer’s gross income; and (2) when the
fact of withholding is established by a copy of
SO ORDERED. the withholding tax statement, duly issued by
the payor to the payee, showing the amount
Petitioner filed a Motion for Partial paid and the income tax withheld from that
Reconsideration with Leave to Submit amount.
Supplemental Evidence. It prayed that an
amended decision be issued granting the entirety It has been submitted that Philam cannot be
of its claim for refund, or in the alternative, that it cited as a precedent to hold that the
be allowed to submit and offer relevant documents presentation of the quarterly income tax return
as supplemental evidence. Respondent is not indispensable as it appears that the
Commissioner of Internal Revenue (CIR) also quarterly returns for the succeeding year were
moved for reconsideration, praying for the denial presented when the petitioner therein filed an
of the entire amount of refund because petitioner administrative claim for the refund of its
failed to present the quarterly Income Tax Returns excess taxes withheld in 1997.
(ITRs) for CY 2004. To the CIR, the presentation
of the 2004 quarterly ITRs was indispensable in It appears however that there is
proving petitioner’s entitlement to the claimed misunderstanding in the ruling of the Court in
amount because it would prove that no carry-over Philam. That factual distinction does not
of unutilized and excess CWT for the four (4) negate the proposition that subsequent
quarters of CY 2003 to the succeeding four (4) quarterly ITRs are not indispensable. The
quarters of CY 2004 was made. In the absence of logic in not requiring quarterly ITRs of the
said ITRs, no refund could be granted. In the succeeding taxable years to be presented
CIR’s view, this was in accordance with the remains true to this day. What Section 76
irrevocability rule under Section 76 of the NIRC requires, just like in all civil cases, is to prove
which reads: the prima facie entitlement to a claim,
including the fact of not having carried over
SEC. 76. Final Adjustment Return. – Every the excess credits to the subsequent quarters
corporation liable to tax under Section 27 shall file or taxable year. It does not say that to prove
an adjustment return covering the total taxable such a fact, succeeding quarterly ITRs are
income for the preceding calendar or fiscal year. If absolutely needed.
the sum of the quarterly tax payments made
during the said taxable year is not equal to the This simply underscores the rulethat any
total tax due on the entire taxable income of that document, other than quarterly ITRs may be
year, the corporation shall either: used to establish that indeed the non-carry
over clause has been complied with, provided
(A) Pay the balance of tax still due; or that such is competent, relevant and part of
the records. The Court is thusnot prepared to
(B) Carry-over the excess credits; or make a pronouncement as to the
indispensability of the quarterly ITRs in a
(C) Be credited or refunded with the excess claim for refund for no court can limit a party
amount paid, as the case may be. to the means of proving a fact for as long as
they are consistent with the rules of evidence
In case the corporation is entitled to a tax credit or and fair play. The means of ascertainment of
refund of the excess estimated quarterly income a fact is best left to the party that alleges the
taxes paid, the excess amount shown on its final same. The Court’s power is limited only to the
adjustment return may be carried over and appreciation of that means pursuant to the
credited against the estimated quarterly income prevailing rules of evidence. To stress, what
tax liabilities for the taxable quarters of the the NIRC merely requires is to sufficiently
succeeding taxable years. Once the option to prove the existence of the non-carry over of
carry-over and apply the excess quarterly income excess CWT in a claim for refund.
tax against income tax due for the taxable
quarters of the succeeding taxable years has been It goes without saying that the annual ITR
made, such option shall be considered irrevocable (including any other proof that may be
for that taxable period and no application for cash sufficient to the Court)can sufficiently reveal
refund or issuance of a tax credit certificate shall whether carry over has been made in
be allowed therefor. subsequent quarters even if the petitioner has
chosen the option of tax credit or refund inthe
On July 27, 2011, the CTA-Division reversed itself. immediately 2003 annual ITR. Section 76 of
 In an Amended Decision, it denied the entire claim the NIRC requires a corporation to file a Final
of petitioner. It reasoned out that petitioner should Adjustment Return (or Annual ITR) covering
have presented as evidence its first, second and the total taxable income for the preceding
third quarterly ITRs for the year 2004 to prove that calendar or fiscal year. The total taxable
the unutilized CWT being claimed had not been income contains the combined income for the
carried over to the succeeding quarters. Thus: four quarters of the taxable year, as well as
the deductions and excess tax credits carried
WHEREFORE,in view of the foregoing, over in the quarterly income tax returns for the
petitioner’s Motion for Partial Reconsideration is same period.If the excess tax credits of the
hereby DENIED while respondent’s Motion for preceding year were deducted, whether in
Reconsideration is hereby GRANTED. whole or in part, from the estimated income
Accordingly, the Decision dated April 13, 2010 tax liabilities of any of the taxable quarters of
granting petitioner’s claim in the reduced amount the succeeding taxable year, the total amount
of ₱2,737,903.34 is hereby REVERSED AND SET of the tax credits deducted for the entire
ASIDE. Consequently, the instant Petition for taxable year should appear in the Annual ITR
Review is hereby DENIEDdue to insufficiency of under the item “Prior Year’s Excess Credits.”
evidence. Otherwise, or if the tax credits were carried
over to the succeeding quarters and the
corporation did not report it in the annual ITR,
there would be a discrepancy in the amounts
of combined income and tax credits carried
over for all quarters and the corporation would
end up shouldering a bigger tax payable. It
must be remembered that taxes computed in
the quarterly returns are mere estimates. It is
the annual ITR which shows the aggregate
amounts of income, deductions, and credits
for all quarters of the taxable year. It is the
final adjustment return which shows whether a
corporation incurred a loss or gained a profit
during the taxable quarter.

40. CIR vs. Team Sual a person committing a void act contrary Team Sual Corporation (TSC) filed its VAT returns Whether or not the Petition Granted. Under Section 112(C) of the
Corporation, G.R. No. to a mandatory provision of law cannot for the first, second, third, and fourth quarters of taxpayer’s petition for review NIRC, the CIR is given 120 days from the
194105. February 5, claim or acquire any right from his void the taxable year 2000 on April 24, 2000, July 25, was prematurely filed. submission of
2014 act. A right cannot spring in favor of a 2000, October 25, 2000, and January 25, 2001, complete documents in support of the
person from his own void or illegal act. respectively. On March 11, 2002, TSC filed with application for refund/tax credit within which to
This doctrine is repeated in Article 2254 the BIR an administrative claim for refund claiming either grant
of the that it is entitled to the unutilized input VAT arising or deny the claim. In case of (1) full or partial
from its zero-rated sales to NPC for the taxable denial of the claim or (2) the failure of the CIR
Civil Code, which states, "No vested or year 2000. to act on
acquired right can arise from acts or the claim within 120 days from the submission
omissions which are against the law or Without awaiting for CIR’s decision, on April 1, of complete documents, the taxpayer-claimant
which infringe upon the rights of others. 2002, TSC filed a petition for review with the CTA may,
seeking the refund or the issuance of a tax credit within 30 days from receipt of the CIR
certificate for its unutilized input VAT. On January decision denying the claim or after the lapse
26, 2009, the CTA Division rendered a Decision in of the 120-day
favor of TSC. The CIR filed a motion for period, file a petition for review with the CTA.
reconsideration and claimed that TSC's petition for
review was prematurely filed, alleging that under The pivotal question of whether the imminent
Section 112( C) of the NIRC, the CIR is given 120 lapse of the two-year period under Section
days from the submission of complete documents 112(A) of
within which to either grant or deny TSC's the NIRC justifies the filing of a judicial claim
application for refund/tax credit of its unutilized with the CTA without awaiting the lapse of the
input 120- day
VAT. CIR pointed out that TSC filed its petition for period given to the CIR to decide the
review with the CTA without any decision on its administrative claim for refund/tax credit had
claim and without waiting for the 120-day period to already been
lapse. settled by the Court. In Commissioner of
Internal Revenue v. Aichi Forging Company of
Subsequently, the CTA Division rendered a Asia, Inc., the
decision denying CIR’s motion. It ruled that, Court held that: Section 112([C]) of the NIRC
pursuant to clearly provides that the CIR has "120 days,
Section 112(A) of the NIRC, claims for refund/tax from the date of
credit of unutilized input VAT should be filed within the submission of the complete documents in
two years after the close of the taxable quarter support of the application [for tax
when the sales were made; that the 120-day refund/credit]," within which to grant or deny
period the claim. In case of full or partial denial by
under Section 112(C) of the NIRC is also covered the CIR, the taxpayer's recourse is to file an
by the two-year prescriptive period within which appeal before the CTA within 30 days from
to claim the refund/tax credit of unutilized input receipt of the decision of the CIR. However, if
VAT. The CIR filed a Petition for Review with the after the 120-day period the CIR fails to act on
CTA En Banc, which was denied. Hence, the the application for tax refund/credit, the
petition remedy of the taxpayer is to appeal the
inaction of
the CIR to CTA within 30 days.
41. CIR vs. United The requirement for issuing a Respondent (USTP) is engaged in the business of Whether or not the EWT NO. In order to determine whether the
Salvage and Towage preliminary or final notice, as the case sub-contracting work for service assessment issued against requirement for a valid assessment is duly
(Phils), Inc., G.R. No. may be, informing a taxpayer of the contractorsengaged in petroleum operations in the the respondent for taxable complied with,it is important to ascertain the
197515, July 2, 2014. existence of a deficiency tax Philippines.In the course of respondent’s year 1994 werevalid. governing law, rules and regulations and
assessment is markedly different from operations,petitioner found respondent liable for jurisprudence at the timethe assessment was
the requirement of what such notice deficiency income tax, withholding tax, value- issued. In the instant case, the PANs and
must contain. Just because the CIR added taxand documentary stamp tax (DST) FANs pertaining to the deficiencyEWT for
issued an advice, a preliminary letter for taxable years 1992,1994, 1997 and taxable years 1994 and 1998, respectively,
during the pre-assessment stage and a 1998. Petitioner,through BIR officials, issued were issued on January 19, 1998, when
final notice, in the order required by law, demand letters with attached assessment notices theTax Code was already in effect, as
does not necessarily mean that Enron for withholdingtax on compensation (WTC) and correctly found by the CTA En Banc. The date
was informed of the law and facts on expanded withholding tax (EWT) for taxable years of issuance ofthe notice of assessment
which the deficiency tax assessment 1992, 1994and 1998.USTP filed administrative determines which law applies- the 1997 NIRC
was made. protests against the 1994 and 1998 EWT or the old Tax Code. In the instant case, the
assessments, respectively. In2003, the USTP 1997 NIRC covers the 1994 and 1998 EWT
appealed by way of Petition for Review before the FANs because there wereissued on January
CTA, but moved to withdrawthe same during the 19, 1998 and September 21, 2001,
pendency of the proceedings because it availed of respectively, at the time of the effectivity ofthe
the benefits of the TaxAmnesty Program. Having 1997 NIRC. Clearly, the assessments are
complied with all the requirements therefor, the governed by the law. Indeed, Section 228 of
CTA-Special FirstDivision partially granted the theTax Code provides that the taxpayer shall
Motion to Withdraw and declared the issues on be informed in writing of the law and the facts
income tax, VATand DST deficiencies closed and onwhich the assessment is made. Otherwise,
terminatedThe CTA-Special First Division the assessment is void. To implement the
held that the Preliminary Assessment aforesaidprovision, Revenue Regulation No.
Notices (PANs) fordeficiency EWT for taxable 12-99was enacted by the BIR, of which
years 1994 and 1998 were not formally offered; Section 3.1.4 thereofreads: 3.1.4. Formal
hence, pursuant toSection 34, Rule 132 of the Letter of Demand and Assessment
Revised Rules of Court, the Court shall neither Notice. –The formal letter of demand
consider the same asevidence nor rule on their andassessment notice shall be issued by the
validity. As regards the Final Assessment Notices Commissioner or his duly authorized
(FANs) for deficiency EWT for taxable years 1994 representative. Theletter of demand calling for
and1998, the CTA-Special First Division held that payment of the taxpayer’s deficiency tax or
the same do not show the law and the facts taxes shall state the facts,the law, rules and
onwhich the assessments were based. Said regulations, or jurisprudence on which the
assessments were, therefore, declared void for assessment is based, otherwise, theformal
failure tocomply with Section 228 of the 1997 Tax letter of demand and assessment notice shall
Code. From the foregoing, the only remaining be void. The same shall be sent to
validassessment is for taxable year thetaxpayer only by registered mail or by
1992.Nevertheless, the CTA-Special First Division personal delivery.The law requires that the
declared that the right of petitioner to collect legal and factual bases of the assessment be
thedeficiency EWT and WTC, respectively, for stated in the formal letterof demand and
taxable year 1992 had already lapsed pursuant assessment and notice. Such cannot be
toSection 203 of the Tax Code. Thus, in assumed. The alleged “factual bases” inthe
ruling for USTP, the CTA-Special First advice, preliminary letter and “audit working
Divisioncancelled Assessment Notices both dated papers” did not suffice. There was no
January 9, 1996 and covering the period of 1992. goingaround the mandate of the law that the
Petitioner moved to reconsider the aforesaid ruling legal and factual bases of the assessment be
however it was denied the same for lack ofmerit. stated inwriting in the formal letter of demand
Upon appeal, the CTA En Banc affirmed with accompanying the assessment notice.
modification the of the CTA-Special FirstDivision.
The CTA En Banc upheld the 1998 EWT
assessment. In addition to the basic
EWTdeficiency of ₱14,496.79, USTP is ordered
to pay surcharge, annual deficiency interest,
andannual delinquency interest from the date due
until full payment pursuant to Section 249 of
the1997 NIRC.
42. CIR vs. PNB, G.R. In several transactions including but not limited to whether respondent's claim These issues require a review, examination,
No. 180920, the sale of real properties, lease and for refund of unutilized evaluation, or weighing of the probative value
September 29, 2014. commissions, [respondent] allegedly earned excess creditable of evidence presented, especially the
income and paid the corresponding income taxes withholding taxes amounting withholding tax certificates, which this court
due which were collected and remitted by various to P23,762,347.83 were duly does not have the jurisdiction to do, barring
payors as withholding agents to the Bureau of supported by valid the presence of any exceptional...
Internal Revenue ("BIR") during the taxable year certificates of creditable tax circumstance, as it is not a trier of facts.
2000. withheld at source
Besides, as pointed out by respondent,
On April 18, 2001, [respondent] filed its tentative petitioner did not object to the admissibility of
income tax return for taxable year 2000 which [it] the 622 withholding tax certificates when
subsequently amended on July 25, 2001. these were formally offered by respondent
Respondent] filed again an amended income tax before the tax court. Hence, petitioner is
return for taxable year 2000 on June 20, 2002, deemed to have admitted the... validity of
declaring no income tax liability . . . as it incurred a these documents. Petitioner's "failure to
net loss in the amount of P11,318,957,602.00 and object to the offered evidence renders it
a gross loss of P745,713,454.00 from its Regular admissible, and the court cannot, on its own,
Banking Unit ("RBU") transactions. However, disregard such evidence.
[respondent] had a 10% final income tax liability of
P210,364,280.00 on taxable income of At any rate, the Court of Tax Appeals First
P1,959,931,182.00 earned from its Foreign Division and En Banc uniformly found that
Currency Deposit Unit ("FCDU") transactions for respondent has established its claim for
the same year. Likewise, in the [same] return, refund or issuance of a tax credit certificate for
[respondent] reported a total amount of unutilized excess creditable withholding taxes
P245,888,507.00 final and creditable withholding for the taxable year 2000 in the amount of
taxes which was applied against the final income P23,762,347.83. The Court of Tax Appeals
tax due of P210,364,280.00 leaving an First Division thoroughly passed upon the
overpayment of P35,524,227.00. In its second evidence presented by respondent and the
amended return, [respondent's] income tax report of the court-commissioned auditing
overpayment of P35,524,227.00 consisted of the firm, SGV & Co. This court accords respect to
balance of the prior year's (1999) excess credits of the conclusion reached by the Court of Tax
P9,057,492.00 to be carried-over as tax credit to Appeals and will not presumptuously set it
the succeeding quarter/year and excess creditable aside absent any showing of gross error or
withholding taxes for taxable year 2000 in the abuse on its part.
amount of P26,466,735.00 which [respondent]
opted to be refunded. On November 11, 2002, The certificate of creditable tax withheld at
[respondent] . . . filed a claim for refund or the source is the competent proof to establish the
issuance of a tax credit certificate in the amount of fact that taxes are withheld. It is not
P26,466,735.40 for the taxable year 2000 with the necessary for the person who executed and
[BIR]. Due to [BIR's] inaction on its administrative prepared the certificate of creditable tax...
claim, [respondent] appealed before [the Court of withheld at source to be presented and to
Tax Appeals] by way of a Petition for Review on testify personally to prove the authenticity of
April 11, 2003. (Citation omitted) On January 30, the certificates.
2007, the Court of Tax Appeals First Division
rendered a decision in favor of respondent Finally, petitioner's allegation that the
submission of the certificates of withholding
Petitioner's motion for reconsideration was taxes before the Court of Tax Appeals was
subsequently denied for lack of merit. late is untenable. The samples of the
withholding tax certificates attached to
On appeal, the Court of Tax Appeals En Banc respondent's comment bore the receiving
sustained the First Division's ruling. It held that the stamp of the Bureau of
fact of withholding and the amount of taxes
withheld from the income payments received by Internal Revenue's Large Taxpayers
respondent were sufficiently established by the Document Processing and Quality Assurance
creditable withholding tax certificates, and there Division. As observed by the Court of Tax
was no need to present the testimonies of the Appeals En Banc, "[t]he Commissioner is in
various payors or withholding agents who issued no position to assail the authenticity of the
the certificates and made the entries therein. It CWT certificates due to PNB's alleged...
also held that respondent need not prove actual failure to submit the same before the
remittance of the withheld taxes to the Bureau of administrative level since he could have easily
Internal Revenue because the functions of directed the claimant to furnish copies of
withholding and remittance of income taxes are these documents, if the refund applied for
vested in the payors who are considered the casts him any doubt." Indeed, petitioner's
agents of petitioner. inaction prompted respondent to... elevate its
claim for refund to the tax court.
The Court of Tax Appeals En Banc also denied
petitioner's motion for reconsideration. Hence, this More importantly, the Court of Tax Appeals is
instant petition was filed. not precluded from accepting respondent's
evidence assuming these were not presented
at the administrative level. Cases filed in the
Court of Tax Appeals are litigated de novo.
Thus,... respondent "should prove every
minute aspect of its case by presenting,
formally offering and submitting . . . to the
Court of Tax Appeals [all evidence] . . .
required for the successful prosecution of [its]
administrative claim."
43. CIR vs. BASF Prescription in the assessment and in 2/3 of Basf Coating's (BC) board members and Whether or not the running No, even if BC failed to notify about its change
Coating + Inks the collection of taxes is provided by the stockholders voted to dissolve the corporation, so of the 3-year prescriptive of residence, the 3-year prescriptive time to
Philippines, Inc. G.R. Legislature for the benefit of both the cutting its 50-year life beginning in 1990 only until period to assess suspended assess was not suspended in favor of the
No. 198677, Government and the taxpayer; for the March 31, 2001. Following that, BC relocated from when Basf Coating failed to CIR.
November 26, 2014. Government for the purpose of Las Pias City to Carmelray Industrial Park in notify the CIR of its change
expediting the collection of taxes, so Canlubang, Calamba, Laguna. of address? It is true that, according to the Tax Code, the
that the agency charged with the running of the Statute of Limitations is
assessment and collection may not BC sent two letters to BIR on June 26, 2001. The suspended when the taxpayer cannot be
tarry too long or indefinitely to the first was a dissolution notification. The found at the location specified in the return on
prejudice of the interests of the transmission was accompanied by documentation which a tax is assessed or collected.
Government, which needs taxes to run supporting the dissolution, such as BIR Form Furthermore, Section 11 of RR 12-85 requires
it; and for the taxpayer so that within a 1905, which relates to a change of information the taxpayer to provide written notification of a
reasonable time after filing his return, included in the company's tax registration. change of address to the RDO or district
he may know the amount of the Following that, a FAN was sent to BC's previous having jurisdiction over his previous legal
assessment he is required to pay, address in Las Piñas City. For the taxable year residence and/or place of business.
whether or not such assessment is well 1999, the FAN reported a total of 18 million pesos However, the Supreme Court determined that
founded and reasonable so that he may in income tax, VAT, WTC, EWT, and DST.On the above-mentioned restrictions on the
either pay the amount of the March 5, 2004, BIR's RDO No. 39, South Quezon postponement of the 3-year assessment
assessment or contest its validity in City, issued a First Notice Before Issuance of period apply only if the CIR is unaware of the
court. Warrant of Distraint and Levy (FNB), which was taxpayer's location.
sent to one of BC's directors' residence.
The CIR in this matter, by all accounts, was
BC submitted a complaint letter on March 19, well aware that BC had relocated to its new
2004, alleging lack of due process and address in Calamba, Laguna, as evidenced
prescription as grounds. After 180 days passed by the documentation that comprised part of
with no action from the CIR, BC filed a petition for respondent's BIR records.
review with the CTA. A trial was held. The CTA 1D
ruled that because the CIR was aware of BC's Furthermore, before to sending the FAN to
new address, the error in mailing should not be BC's old address, the RDO gave BC a letter
held against BC. According to the CTA 1D, outlining the findings of its inquiry as well as
because no legitimate notifications were provided an invitation to an information conference.
to BC, the following assessments against it are This would not have been possible if BC's
void. The CIR filed a Motion of Reconsideration, new address had not been known. Finally,
which was denied. As a result, it was referred to before sending the FAN, the PAN was
CTA en banc. The CTA En Banc ruled that CIR's "returned to sender."
power to assess respondent for deficient taxes for Thus, notwithstanding the lack of a formal
the taxable year 1999 had already been written notification of Bc's change of address,
mandated, and that the FAN issued to respondent the fact remains that petitioner became aware
never became final since BC did not receive it. of respondent's new address as evidenced by
CIR filed a Motion for Reconsideration, which was papers abundant in its archives. As a result,
denied. the three-year term for assessing respondents
was not suspended and has already begun.
 Subsection (A) of the said provision states
that "any VAT-registered person, whose sales
are
zero-rated or effectively zero-rated may,
within two years after the close of the taxable
quarter when the sales were made, apply for
the issuance of a tax credit certificate or
refund
of creditable input tax due or paid attributable
to such sales." The phrase "within two (2)
years x x x apply for the issuance of a tax
credit certificate or refund" refers to
applications
for refund/credit filed with the CIR and not to
appeals made to the CTA.
This is apparent in the first paragraph of
subsection (C) of the same provision, which
states
that the CIR has "120 days from the
submission of complete documents in support
of the
application filed in accordance with
Subsections (A) and (B)" within which to
decide on the
claim.

44. Samar-I Electric There is a difference between “false Samar-I Electric Cooperative, Inc. (Petitioner) is Whether or not the 1997 and Yes. It was petitioner’s substantial
Cooperative vs. CIR, return” and “fraudulent return”. While an electric cooperative, with principal office at 1998 assessments on underdeclaration of withholding taxes in the
G.R. No. 193100 the first merely implies deviation from Barangay Carayman, Calbayog City. withholding tax on amount of P2,690,850.91 which constituted
December 10, 2014. the truth, whether intentional or not, the On July 13, 1999 and April 17, 2000 Petitioner compensation were issued the “falsity” in the subject returns – giving
second implies intentional or deceitful filed its 1998 and 1999 income tax returns, within the prescriptive period respondent the benefit of the period under
entry with intent to evade the taxes due. respectively. Petitioner filed its 1997, 1998, and provided by law; Section 222 of the NIRC of 1997 to assess
1999 Annual Information Return of Income Tax the correct amount of tax “at any time within
Withheld on Compensation, Expanded and Final ten (10) years after the discovery of the falsity,
Withholding Taxes on February 17, 1998, fraud or omission.”
February 1, 1999, and February 4, 2000, in that the proper and reasonable interpretation of
order. said provision should be that in the three
On November 13, 2000 respondent issued a duly different cases of
signed Letter of Authority (LOA) No. 1998 (1) false return,
00023803. Petitioner cooperated in the audit and (2) fraudulent return with intent to evade tax,
investigation conducted by the Special (3) failure to file a return, the tax may be
Investigation Division of the BIR by submitting the assessed, or a proceeding in court for the
required documents on December 5, 2000. collection of such tax may be begun without
 On October 19, 2001 respondent sent a Notice for assessment, at any time within ten years after
Informal Conference which was received by the discovery of the (1) falsity,
petitioner in November 2001; indicating the (2) fraud,
allegedly income and withholding tax liabilities of (3) omission.
petitioner for 1997 to 1999. In response, petitioner There is a difference between “false return”
sent a letter dated November 26, 2001 to and “fraudulent return”. While the first merely
respondent maintaining its indifference to the implies deviation from the truth, whether
latter’s findings and requesting details of the intentional or not, the second implies
assessment. intentional or deceitful entry with intent to
On December 13, 2001 Petitioner executed a evade the taxes due.
Waiver of the Defense of Prescription under the The ordinary period of prescription of 5 years
Statute of Limitations, good until March 29, 2002. within which to assess tax liabilities under
On February 28, 2002 Respondent issued a Sec. 331 of the NIRC should be applicable to
Preliminary Assessment Notice (PAN). The PAN normal circumstances, but whenever the
was received by petitioner on April 9, 2002, which government is placed at a disadvantage so as
was protested on April 18, 2002. to prevent its lawful agents from proper
On July 8, 2002 Respondent dismissed assessment of tax liabilities due to false
petitioner’s protest and recommended the returns, fraudulent return intended to evade
issuance of a Final Assessment Notice payment of tax or failure to file returns, the
On September 15, 2002 petitioner received a period of ten years provided for in Sec. 332
demand letter and assessments notices (Final (a) NIRC, from the time of the discovery of the
Assessment Notices) for the alleged 1997, 1998, falsity, fraud or omission even seems to be
and 1999 deficiency withholding tax in the amount inadequate and should be the one enforced.
of [P]3,760,225.69, as well as deficiency income
tax covering the years 1998 to 1999 in the amount
of [P]440,545.71, or in the aggregate amount of
[P]4,200,771.40.
On April 10, 2003 the Final Decision on Disputed
Assessment, petitioner was still held liable for the
alleged tax liabilities

45. Team Pacific A taxpayer dissatisfied with a local TPC is a domestic corporation which conducts its Whether or not Petition for NO. A taxpayer dissatisfied with a local
Corporation vs. Daza treasurer’s denial of or inaction on his business at the FTI Complex in the then Certiorari under Rule 65 the treasurer’s denial of or inaction on his protest
(Taguig Treasurer), protest over an assessment has thirty Municipality of Taguig. It appears that since the proper remedy from the over an assessment has thirty (30) days
G.R. No. 167732, July (30) days within which to appeal to the start of its operations in 1999, TPC had been denial of an assessment within which to appeal to the court of
11, 2012. court of competent jurisdiction. Under paying local business taxes assessed at one-half protest by a local treasurer? competent jurisdiction. Under the law, said
the law, said period is to be reckoned (1/2) rate pursuant to the Taguig Revenue Code. period is to be reckoned from the taxpayer’s
from the taxpayer’s receipt of the denial When it renewed its business license in 2004, receipt of the denial of his protest or the lapse
of his protest or the lapse of the sixty however, TPC's business tax for the first quarter of the sixty (60) day period within which the
(60) day period within which the local of the same year was assessed in the sum of local treasurer is required to decide the
treasurer is required to decide the P208,109.77(applying the full value of the tax protest, from the moment of its filing. This
protest, from the moment of its filing. rates) by respondent Josephine Daza, in her much is clear from Section 195 of the Local
capacity as then Municipal Treasurer of Taguig. Government Code. The foregoing
Constrained to pay the assessed business tax on pronouncements notwithstanding, we find that
19 January 2004 in view of its being a TPC erroneously availed of the wrong remedy
precondition for the renewal of its business permit, in filing a Rule 65 petition for certiorari to
TPC filed on the same day a written protest with question Daza’s inaction on its letter-protest.
Daza, insisting on the one-half (1/2) rate on which The rule is settled that, as a special civil
its business tax was previously assessed. action, certiorari is available only if the
Subsequent to its 13 April 2004 demand for the following essential requisites concur: (1) it
refund and/or issuance of a tax credit for the sum must be directed against a tribunal, board, or
of P104,054.88 which it considered as an officer exercising judicial or quasi-judicial
overpayment of its business taxes for the same functions; (2) the tribunal, board, or officer
year, TPC filed its 15 April 2004 Rule 65 petition must have acted without or in excess of
for certiorari which was docketed as SCA No. jurisdiction or with grave abuse of discretion
2662 before the RTC. amounting to lack or excess of jurisdiction;
and, (3) there is no appeal nor any plain,
RTC: Dismissed the petition for lack of merit. speedy, and adequate remedy in the ordinary
While finding that the absence of proof of Atty. course of law. Judicial function entails the
Miranda's denial of TPC's letter-protest meant that power to determine what the law is and what
the latter had thirty (30) days from the lapse of the the legal rights of the parties are, and then
sixty (60) days prescribed under Article 195 of the undertakes to determine these questions and
Local Government Code within which to perfect its adjudicate upon the rights of the parties.
appeal, the RTC ruled that, rather than the special Quasi-judicial function, on the other hand,
civil action of certiorari provided under Rule 65 of refers to the action and discretion of public
the 1997 Rules of Civil Procedure, an ordinary administrative officers or bodies, which are
appeal would have been the proper remedy from required to investigate facts or ascertain the
the assessment complained against. Without existence of facts, hold hearings, and draw
moving for the reconsideration of the foregoing conclusions from them as a basis for their
order, TPC filed a petition for Certiorari Rule 65 official action and to exercise discretion of a
before the SC, on pure questions of law. judicial nature.Gauged from the foregoing
definitions, Daza cannot be said to be
performing a judicial or quasi-judicial function
in assessing TPC’s business tax and/or
effectively denying its protest as then
Municipal Treasurer of Taguig. For this
reason, Daza’s actions are not the proper
subjects of a Rule 65 petition for certiorari
which is the appropriate remedy in cases
where the tribunal, board, or officer exercising
judicial or quasi-judicial functions acted
without or in grave abuse of discretion
amounting to lack or excess of jurisdiction and
there is no appeal or any plain, speedy, and
adequate remedy in law.
46. Lucas G. While the laws governing the CTA have A deficiency tax assessment was issued against (1) Does the CIR issue an (1) NO. The recommendation letter of the
Adamson, et al. vs. expanded the jurisdiction of the Court, Petitioners relating to their payment of capital assessment? Commissioner cannot be considered a formal
CA, et al., G.R. Nos. they did not change the jurisdiction of gains tax and VAT on their sale of shares of stock (2) Must a criminal assessment as (a) it was not addressed to the
120935 & 124557, May the CTA to entertain an appeal only and parcels of land. Subsequent to the preliminary prosecution for tax evasion taxpayers; (b) there was no demand made on
21, 2009 from a final decision of the conference, the CIR filed with the Department of be preceded by a deficiency the taxpayers to pay the tax liability, nor a
Commissioner, or in cases of inaction Justice her Affidavit of Complaint against tax assessment? period for payment set therein; (c) the letter
within the prescribed period. Petitioners. The Court of Appeals ultimately ruled (3) Does the CTA have was never mailed or sent to the taxpayers by
that, in a criminal prosecution for tax evasion, jurisdiction on the case? the Commissioner. It was only an affidavit of
assessment of tax deficiency is not required the computation of the alleged liabilities and
because the offense of tax evasion is complete or thus merely served as prima facie basis for
consummated when the offender has knowingly filing criminal informations.
and willfully filed a fraudulent return with intent to
evade the tax. (2) YES. When fraudulent tax returns are
involved as in the cases at bar, a proceeding
• Lucas Adamson and AMC sold 131,897 common in court after the collection of such tax may be
shares of stock in Adamson and Adamson, Inc. begun without assessment considering that
(AAI) to APAC Holding Limited (APAC). The upon investigation of the examiners of the
shares were valued at P7,789,995.00.[1] On June BIR, there was a preliminary finding of gross
22, 1990, P159,363.21 was paid as capital gains discrepancy in the computation of the capital
tax for the transaction. gains taxes due from the transactions. The
• AMC sold to APAC Philippines, Inc. another Tax Code is clear that the remedies may
229,870 common shares of stock in AAI for proceed simultaneously.
P17,718,360.00. AMC paid the capital gains tax
of P352,242.96. (3) NO. While the laws governing the CTA
• The Commissioner issued a “Notice of Taxpayer” have expanded the jurisdiction of the Court,
to AMC, Lucas G. Adamson, Therese June D. they did not change the jurisdiction of the CTA
Adamson and Sara S. de los Reyes, informing to entertain an appeal only from a final
them of deficiencies on their payment of capital decision of the Commissioner, or in cases of
gains tax and Value Added Tax (VAT). The notice inaction within the prescribed period. Since in
contained a schedule for preliminary conference. the cases at bar, the Commissioner has not
issued an assessment of the tax liability of the
G.R. No. 120935 Petitioners, the CTA has no jurisdiction.
• Lucas G. Adamson, Therese June D. Adamson
and Sara S. de los Reyes were charged before
the Regional Trial Court (RTC) of Makati, Branch
150 in Criminal Case Nos. 94-1842 to 94-1846.
They filed a Motion to Dismiss or Suspend the
Proceedings. They invoked the grounds that there
was yet no final assessment of their tax liability,
and there were still pending relevant Supreme
Court and CTA cases.
• Initially, the trial court denied the motion. A
Motion for Reconsideration was however filed, this
time assailing the trial court’s lack of jurisdiction
over the nature of the subject cases.
• On August 8, 1994, the trial court granted the
Motion. It ruled that the complaints for tax evasion
filed by the Commissioner should be regarded as
a decision of the Commissioner regarding the tax
liabilities of Lucas G. Adamson, Therese June D.
Adamson and Sara S. de los Reyes, and
appealable to the CTA. It further held that the said
cases cannot proceed independently of the
assessment case pending before the CTA, which
has jurisdiction to determine the civil and criminal
tax liability of the respondents therein.
• Court of Appeals reversed the trial court’s
decision and reinstated the criminal complaints.
o The appellate court held that, in a criminal
prosecution for tax evasion, assessment of tax
deficiency is not required because the offense of
tax evasion is complete or consummated when
the offender has knowingly and willfully filed a
fraudulent return with intent to evade the tax.
o It ruled that private respondents filed false and
fraudulent returns with intent to evade taxes, and
acting thereupon, petitioner filed an Affidavit of
Complaint with the Department of Justice, without
an accompanying assessment of the tax
deficiency of private respondents, in order to
commence criminal action against the latter for tax
evasion.

G.R. No. 124557

• AMC, Lucas G. Adamson, Therese June D.
Adamson and Sara S. de los Reyes filed a letter
request for re-investigation with the Commissioner
of the “Examiner’s Findings” earlier issued by the
Bureau of Internal Revenue (BIR), which pointed
out the tax deficiencies.

• On March 15, 1994 before the Commissioner

could act on their letter-request, AMC, Lucas G.
Adamson, Therese June D. Adamson and Sara S.
de los Reyes filed a Petition for Review with the
CTA. They assailed the Commissioner’s finding of
 tax evasion against them.

• The Commissioner moved to dismiss the

petition, on the ground that it was premature, as
she had not yet issued a formal assessment of the
tax liability of therein petitioners.

• On September 19, 1994, the CTA denied the

Motion to Dismiss. It considered the criminal
complaint filed by the Commissioner with the DOJ
as an implied formal assessment, and the filing of
the criminal informations with the RTC as a denial
of petitioners’ protest regarding the tax deficiency.

• The Commissioner repaired to the Court of

Appeals on the ground that the CTA acted with
grave abuse of discretion. She contended that,
with regard to the protest provided under Section
229 of the NIRC, there must first be a formal
assessment issued by the Commissioner, and it
must be in accord with Section 6 of Revenue
Regulation No. 12-85. She maintained that she
had not yet issued a formal assessment of tax
liability, and the tax deficiency amounts mentioned
in her criminal complaint with the DOJ were given
only to show the difference between the tax
returns filed and the audit findings of the revenue
examiner.

• The Court of Appeals sustained the CTA’s denial

of the Commissioner’s Motion to Dismiss. Hence,
this petition.

47. RCBC vs. CIR, RCBC received a Formal Letter of Demand dated Whether or not the taxpayer No. As provided in Sec. 228, the failure of the
G.R. No. 168498, April May 25, 2001 from the respondent CIR for its tax may still appeal taxpayer to appeal from an assessment on
24, 2007 liabilities particularly for Gross Onshore Tax in the time rendered the assessment final, executory
The failure of the taxpayer to appeal amount of P53,998,428.29 and Documentary and demandable. RCBC is precluded from
from an assessment on time rendered Stamp Tax for its Special Savings Placements in disputing the correctness of the assessment.
the assessment final, executory and the amount of P46,717,952.76, for the taxable While the right to appeal a decision of the
demandable. RCBC is precluded from year 1997.Petitioner filed a protest letter/request Commissioner of CTA is merely a statutory
disputing the correctness of the for reconsideration/reinvestigation pursuant to remedy, nevertheless the requirement that it
assessment. Section 228 of the NIRC. As the protest was not must be brought within 30 days is
acted upon by the respondent, petitioner filed a jurisdictional. If a statutory remedy provides
petition for review with the CTA for the as a condition precedent that the action to
cancellation of the assessments. Respondent filed enforce it must be commenced within a
a motion to resolve first the issue of CTA’s prescribed time, such requirement is
jurisdiction, which was granted by the CTA in a jurisdictional and failure to comply therewith
Resolution dated September 10, 2003. The may be raised in a MTD.
petition for review was dismissed because it was
filed beyond the 30-day period following the lapse
of 180 days from petitioner’s submission of
documents in support of its protest, as provided
under Section 228 of the NIRC and Section 11 of
R.A. No. 1125, otherwise known as the Law
Creating the Court of Tax Appeals. Petitioner did
not file a motion for reconsideration or an appeal
to the CTA En Banc from the dismissal of its
petition for review. Consequently, the September
10, 2003 Resolution became final and executory
on October 1, 2003 and Entry of Judgment was
made on December 1, 2003.

Thereafter, respondent sent a Demand Letter to

petitioner for the payment of the deficiency tax
assessments. On February 20, 2004, petitioner
filed a Petition for Relief from Judgment on the
ground of excusable negligence of its counsel’s
secretary who allegedly misfiled and lost the
September 10, 2003 Resolution. The CTA Second
Division set the case for hearing on April 2, 2004
during which petitioner’s counsel was present.
Respondent filed an Opposition while petitioner
submitted its Manifestation and Counter-Motion.
On May 3, 2004, the CTA Second Division
rendered a Resolution denying petitioner’s Petition
for Relief from Judgment. Petitioner’s motion for
reconsideration was denied in a Resolution dated
November 5, 2004, hence it filed a petition for
review with the CTA En Banc, docketed as C.T.A.
EB No. 50, which affirmed the assailed
Resolutions of the CTA Second Division in a
Decision dated June 7, 2005.
48. Capitol Steel Public Hearing/Notice to the Public Capitol Steel owns 65 parcels of land while Whether or not RTC is No. When the second expropriation case was
Corp. vs. Phividec PHIVIDEC is a GOCC which is vested with correct in using the TCRPV re-filed, R.A. 8974, which provides for
Industrial Authority, 1. A public hearing shall be held with governmental and proprietary functions including valuation. substantive requirements before a writ of
G.R. No. 169453, the following in attendance: (a) the power of eminent domain for the purpose of possession is issued, was already in force
December 6, 2006 Revenue Regional Director, (b) acquiring rights of way or any property for the and in effect.
Chairman and members of the establishment or expansion of the Phividec SECTION 4. Guidelines for Expropriation
STCRPV, (c) representatives of the Industrial Areas. The properties of Capitol Steel Proceeding (a) Upon the filing of the
TCRPV, and (d) representatives of the were identified as the most ideal site for the complaint, and after due notice to the
Secretariat of the TCRPV. The public Mindanao International Container Terminal defendant, the implementing agency shall
hearing shall be given wide publicity in Project. Phividec filed an expropriation case but immediately pay the owner of the property the
newspapers of general circulation, was later dismissed due to the unauthorized amount equivalent to the sum of one hundred
radio, and television. The Revenue engagement by PHIVIDEC of the legal services of percent (100%) of the value of the property
District Officer concerned shall likewise a private lawyer. In the meantime, Capitol Steel based on the current relevant zonal valuation
disseminate the information by requested the Technical Committee on Real of the Bureau of Internal Revenue (BIR) …
preparing notices of the hearing to be Property Valuation (TCRPV) of BIR. TCRPV The "current relevant zonal valuation" under
posted in strategic places and letters of thereafter issued Resolution No. 36-2001 fixing Section 4 of R.A. 8974 pertains to the values
invitation for local officials, associations the "reasonable and realistic zonal valuation" of reflected in the schedule of zonal values
of realtors/appraisers and other civil the properties at P700 per square meter. embodied in a Department Order issued
organizations. PHIVIDEC, refilled the case. PHIVIDEC filed an pursuant to Revenue Memorandum Order
Urgent Motion for the Issuance of a Writ of (RMO) No. 56-89 issued by the Commissioner
2. Notice to the Public - Possession. The total amount deposited of Internal Revenue. Court finds that the
represents 100% of the value of the properties determination of P300 and P500 per square
In the municipalities where a public based on the schedule of zonal valuation for real meter zonal values were, along with the zonal
hearing is not feasible, notice to the properties under Department Order No. 40-97 values of other real properties located in all
public regarding the recommended fixing the zonal valuation of the properties at municipalities under the jurisdiction of
zonal values shall instead be made Sugbongcogon and Casinglot at P300 and P500 Revenue District Office No. 98 was subject to
through the Municipal and Barangay per square meter, respectively. Capitol Steel hearing.
officials thereat, by posting the said opposed claiming instead that under the TCRPV The zonal values were approved by both the
proposed zonal values in public places Resolution, the properties have been revalued at TCRPV and the ECRPV and on even date,
within the municipality for thirty (30) P700 per square meter. RTC ruled in favor of the Secretary of Finance, upon the
days and/or weekly publication in local Capitol. CA reversed holding that the zonal recommendation of the BIR, issued D.O. 40-
newspapers of general circulation for valuation established under D.O. 40-97 should be 97 to implement the schedule of zonal values.
three (3) consecutive weeks. If no the basis in computing the provisional value of the In contrast, the P700 per square meter zonal
comment/objection is received within properties, and that the valuation made by the value provided for under TCRPV Resolution
the said period, the schedule of values TCRPV was neither binding nor effective for was not approved by the ECRPV, was not
shall be forwarded to the TCRPV and failure to comply with the guidelines relative to the embodied in a Department Order, and did not
ECPPV and ECRPV and to the establishment of zonal values of real properties. undergo the required public hearing and
Secretary of Finance for final approval. publication required. To clarify, the payment of
the provisional value as a prerequisite to the
issuance of a writ of possession differs from
the payment of just compensation for the
expropriated property.
While the provisional value is based on the
 current relevant zonal valuation, just
compensation is based on the prevailing fair
market value of the property.
While the law grants to the CIR the power to
determine zonal values, including the
authority to delegate to the Assistant
Commissioner of the Assessment Service the
authority to approve and sign TCRPV
resolutions involving requests for revaluation
of established zonal values of real properties,
the same is for the purpose of computing
internal revenue taxes. The revaluation under
RDAO 4-2001 is, as correctly held by the
appellate court, "a specific rather than a zonal
valuation," and is "not a revaluation of the
schedule of zonal values [under D.O. 40-97]
but merely the fine tuning of the value of a
specific property of an individual taxpayer in
order to reflect fair market values."

49. CIR vs. Sony Phil., There must be a sale, barter or The CIR, through a LOA (Letter of Authority) Whether or not the subsidy NO. Insofar as the above-mentioned subsidy
Inc., G.R. No. 178697, exchange of goods or properties before examined Sony Philippines, Inc. (Sony)’s books of received by Sony may be considered as income and, therefore,
November 17, 2010 any VAT may be levied. Certainly, there accounts for the period 1997 and unverified prior Corporation can be subject subject to income tax, the Court agrees.
was no such sale, barter or exchange in years. A preliminary assessment for 1997 to 10% VAT However, the Court does not agree that the
the subsidy given by SIS to Sony. It was deficiency taxes and penalties was issued by the same subsidy should be subject to the10%
but a dole out by SIS and not in CIR which Sony protested. The CTA-First Division VAT. To begin with, the said subsidy termed
payment for goods or properties sold, partly granted Sony’s petition by cancelling the by the CIR as reimbursement was not even
bartered or exchanged by Sony. deficiency VAT assessment but upheld a modified exclusively earmarked for Sony’s advertising
deficiency EWT assessment as well as the expense for it was but an assistance or aid in
penalties. view of Sony’s dire or adverse economic
Sony International Singapore (SIS) has granted to conditions, and was only equivalent to the
Sony a subsidy equivalent to the latter’s latter’s advertising expenses.
advertising expenses, due to adverse economic Section 106 of the Tax Code explains when
conditions. The CIR argued that Sony’s VAT may be imposed or exacted. Thus:
advertising expense could not be considered as SEC. 106. Value-added Tax on Sale of Goods
an input VAT credit because the same was or Properties.
eventually reimbursed by SIS and that since (A) Rate and Base of Tax. There shall be
Sony’s advertising expense was reimbursed by levied, assessed and collected on every sale,
SIS, the former never incurred any advertising barter or exchange of goods or properties,
expense. A sa result, Sony is not entitled to a tax value-added tax equivalent to ten percent
credit. At most, the CIR continues, the said (10%) of the gross selling price or gross value
in money of the goods or properties sold,
bartered or exchanged, such tax to be paid by
advertising expense should be for the account of the seller or transferor.
SIS, and not Sony. Thus, there must be a sale, barter or
exchange of goods or properties before any
VAT may be levied. Certainly, there was no
such sale, barter or exchange in the subsidy
given by SIS to Sony. It was but a dole out by
SIS and not in payment for goods or
properties sold, bartered or exchanged by
Sony
In the case of CIR v. Court of Appeals (CA),
the Court had the occasion to rule that
services rendered for a fee even on
reimbursement-on-cost basis only and without
realizing profit are also subject to VAT. The
case, however, is not applicable to the
present case. In that case, COMASERCO
rendered service to its affiliates and, in turn,
the affiliates paid the former reimbursement-
on-cost which means that it was paid the cost
or expense that it incurred although without
profit. This is not true in the present case.
Sony did not render any service to SIS at all.
The services rendered by the advertising
companies, paid for by Sony using SIS dole-
out, were for Sony and not SIS. SIS just gave
assistance to Sony in the amount equivalent
to the latter’s advertising expense but never
received any goods, properties or service
from Sony.
50. CIR vs. Pascor An assessment is not necessary before The CIR authorized certain BIR officers to 1. Whether or not the 1. No. The filing of the criminal complaint with
Realty and Devt. criminal charges can be filed. A criminal examine the books of accounts and other criminal complaint for tax the DOJ cannot be construed as a formal
Corp., et al., G.R. No. charge need not only be supported by a accounting records of Pascor Realty and evasion can be construed as assessment. Neither the Tax Code nor the
128315, June 29, 1999 prima facie showing of failure to file a Development Corp. (PRDC) for 1986, 1987 and an assessment revenue regulations governing the protest
required return. The CIR had, in such 1988. The examination resulted in 2. Whether or not an assessments provide a specific definition or
tax evasion cases, discretion on recommendation for the issuance of an assessment is necessary form of an assessment.
whether to issue an assessment, or to assessment of P7,498,434.65 and P3,015,236.35 before criminal charges for An assessment must be sent to and received
file a criminal case against the taxpayer, for 1986 and 1987, respectively. On March 1, tax evasion may be by the taxpayer, and must demand payment
or to do both. 1995, Commissioner filed a criminal complaint for instituted of the taxes described therein within a specific
tax evasion against PRDC, its president and period. The revenue officer’s affidavit merely
treasurer before the DOJ. Private respondents contained a computation of respondent’s tax
filed immediately an urgent request for liability. It did not state a demand or period for
reconsideration on reinvestigation disputing the payment. It was addressed to the Secretary of
tax assessment and tax liability. Justice not to the taxpayer. They joint affidavit
was meant to support the criminal complaint
On March 23, 1995, private respondents received for tax evasion; it was not meant to be a
a subpoena from the DOJ in connection with the notice of tax due and a demand to private
criminal complaint. In a letter dated, May 17, 1995, respondents for the payment thereof. The fact
the Commissioner denied private respondent’s that the complaint was sent to the DOJ, and
request for reconsideration (reinvestigation on the not to private respondent, shows that
ground that no formal assessment has been commissioner intended to file a criminal
issued which the latter elevated to the CTA on a complaint for tax evasion, not to issue an
petition for review. The Commissioner’s motion to assessment.
dismiss on the ground of the CTA’s lack of
jurisdiction inasmuch as no formal assessment 2. No. An assessment is not necessary before
was issued against private respondent was denied criminal charges can be filed. A criminal
by CTA and ordered the Commissioner to file an charge need not only be supported by a prima
answer but did not instead filed a petition with the facie showing of failure to file a required
CA alleging grave abuse of discretion and lack of return. The CIR had, in such tax evasion
jurisdiction on the part of CTA for considering the cases, discretion on whether to issue an
affidavit/report of the revenue officers and the assessment, or to file a criminal case against
endorsement of said report as assessment which the taxpayer, or to do both.
may be appealed to he CTA. The CA sustained
the CTA decision and dismissed the petition.
51. Republic of the An assessment is deemed made when The estate of the late Esteban de la Rama was W/N the assessment The estate was still under the administration
Phils. vs. Leonor de the notice to that effect is released, the subject of Special Proceedings No. 401 of the became final and executory. of Eliseo Hervas as regards the collection of
la Rama, et al., G.R. mailed or sent to the taxpayer for the Court of First Instance of Iloilo. The executor- (NO) The notice was not said dividends. The administrator was the
No. L-21108, purpose of giving effect to the administrator, Eliseo Hervas, filed on March 12, sent to the taxpayer for the representative of the estate, whose duty it
November 29, 1966 assessment. Where an estate is under 1951, income tax returns of the estate purpose of giving effect to was to pay and discharge all debts and
administration, the notice of corresponding to the taxable year 1950, declaring the assessment, and said charges on the estate and to perform all
assessment must be sent to the a net income of P22,796.59, on the basis of which notice could not produce any orders of the court by him to be performed
administrator. In the case at bar, notices the amount of P3,919.00 was assessed and was effect. ... It appearing that (Rule 71, Section 1), and to pay the taxes and
were sent to persons other than the paid by the estate as income tax. The Bureau of the person liable for the assessments due to the Government or any
administrator; hence, they could not Internal Revenue later claimed that it had found payment of the tax did not branch or subdivision thereof (Section 7, Rule
produce any legal effect. out that there had been received by the estate in receive the assessment, the 89, Old Rules of Court). The tax must be
1950 from the De la Rama Steamship Company, assessment could not collected from the estate of the deceased, and
Inc. cash dividends amounting to P86,800.00 become final and executory it is the administrator who is under obligation
which amount was not declared in the income tax to pay such claim (Estate of Claude E.
return of the estate for the year 1950. The Bureau Haygood, Collector of Internal Revenue vs.
of Internal Revenue then, on March 7, 1956, made Haygood, 65 Phil., 520). The notice of
an assessment as deficiency income tax against assessment, therefore, should have been sent
the estate in the sum of P56,032.50, of which to the administrator. In this case, notice was
amount P37,355.00 was the deficiency and first sent to Lourdes de la Rama-Osmeña on
P18,677.60 was the 50% surcharge. February 29, 1956, and later to Leonor de la
Rama on November 27, 1956, neither of
The Collector of Internal Revenue wrote a letter, whom had authority to represent the estate.
dated February 29, 1956, to Mrs. Lourdes de la As the lower court said in its decision: "Leonor
Rama-Osmeña informing her of the deficiency de la Rama was not the administratrix of the
income tax and asking payment thereof. On March estate of the late Esteban de la Rama and as
13, 1956 the latter's counsel wrote to the Collector such the demand unto her, Exh. Def. 8, p.
acknowledging receipt of the assessment, but 112, was not a correct demand before
contended that Lourdes de la Rama-Osmeña had November 27, 1956, because the real
no authority to represent the estate, and that the administrator was the late Eliseo Hervas;.." (p.
assessment should be sent to Leonor de la Rama 45, Record on Appeal) The notice was not
who was pointed to by said counsel as the sent to the taxpayer for the purpose of giving
administratrix of the estate of her late father. On effect to the assessment, and said notice
the basis of this information the Deputy Collector could not produce any effect. In the case of
of Internal Revenue, on November 22, 1956, sent Bautista and Corrales Tan vs. Collector of
a letter to Leonor de la Rama as administratrix of Internal Revenue, L-12259, May 27, 1959,
the estate, asking payment. The tax, as assessed, this Court had occasion to state that "the
not having been paid, the deputy Commissioner of assessment is deemed made when the notice
Internal Revenue, on September 7, 1959, wrote to this effect is released, mailed or sent to the
another letter to Mrs. Lourdes de la Rama- taxpayer for the purpose of giving effect to
Osmeña demanding, through her, upon the heirs, said assessment." It appearing that the
the payment of the deficiency income tax within person liable for the payment of the tax did
the period of thirty days from receipt thereof. The not receive the assessment, the assessment
counsel of Lourdes de la Rama-Osmeña, in a
letter dated September 25, 1959, insisted that the could not become final and executory (R. A.
letter should be sent to Leonor de la Rama. The 1125, Section 11).
Deputy Commissioner of Internal Revenue wrote
to Leonor de la Rama another letter, dated
February 11, 1960, demanding, through her as
administratrix, upon the heirs of Esteban de la
Rama, the payment of the sum of P56,032.50, as
deficiency income tax including the 50%
surcharge, to the City Treasurer of Pasay City
within thirty days from receipt thereof.

The deficiency income tax not having been paid,

the Republic of the Philippines filed on March 6,
1961 with the Court of First Instance of Manila a
complaint against the heirs of Esteban de la
Rama, seeking to collect from each heir his/her
proportionate share in the income tax liability of
the estate.
52. CIR vs. Rosemarie The requirements under Section 230 for Rosemary Acosta, an employee of Intel 1. W/N the amended return 1. NO. The requirements under Section 230
Acosta, G.R. No. refund claims are as follows: Manufacturing Phils. Inc. assigned in a foreign is sufficient compliance of for refund claims are as follows
154068, August 3, a. A written claim for refund or tax credit country filed on March 21, 1977 for a period of written claim a. A written claim for refund or tax credit must
2007 must be filed by the taxpayer with the January 1, 1996-December 31, 1996, a Joint 2. W/N the 1997 tax reform be filed by the taxpayer with the
Commissioner; Individual Income Tax Return with her husband on can be applied Commissioner;
b. The claim for refund must be a October 8, 1997, she filed an amended return retrospectively b. The claim for refund must be a categorical
categorical demand for reimbursement; indicating an overpayment of P 358,274 due to the demand for reimbursement;
c. The claim for refund or tax credit income taxes withheld and paid by Intel. c. The claim for refund or tax credit must be
must be filed, or the suit or proceeding April 15, 1999: She filed a petition for review with filed, or the suit or proceeding therefor must
therefor must be commenced in court the CTA who dismissed her petition for failing to be commenced in court within 2 years from
within 2 years from date of payment of file a written claim for refund required under Sec. date of payment of the tax or penalty
the tax or penalty regardless of any 230 of the old tax code. Also, the omission of the regardless of any supervening cause.
supervening cause. date of filing the final adjustment return deprived It is intended to afford the CIR an opportunity
It is intended to afford the CIR an the court of its jurisdiction over the subject matter to correct the action of its subordinate officers
opportunity to correct the action of its of the case. and to be notified. Tax refunds are in the
subordinate officers and to be notified. CA: reversed the CTA holding that the filing of an nature of tax exemptions which are construed
Tax refunds are in the nature of tax amended return indicating an overpayment was strictissimi juris against the taxpayer and
exemptions which are construed sufficient compliance with the requirement of a liberally in favor of the government.
strictissimi juris against the taxpayer written claim for refund. As tax refund involve a return of revenue from
and liberally in favor of the government. Applying sec. 204 (c) of the 1997 NIRC, the CIR the government, the claimant must show the
As tax refund involve a return of sought reconsideration but was denied so it specific provision of law as basis of her right.
revenue from the government, the elevated the matter with the SC. 2. NO. Tax laws are prospective in
claimant must show the specific operation, unless the language of the statute
provision of law as basis of her right. clearly provides otherwise. Moreover, a party
seeking an administrative remedy must not
merely initiate the prescribed administrative
procedure to obtain relief, but also pursue it to
its appropriate conclusion before seeking
judicial intervention in order to give the
administrative agency an opportunity to
decide the matter itself correctly and prevent
unnecessary and premature resort to court
action. Revenue statutes are substantive laws
and in no sense must their application be
equated with that of remedial laws which
must be faithfully and strictly implemented.
53. CIR vs. The Estate Cibeles Insurance Corporation (CIC) authorized 1. Whether or not the tax 1. Yes. Tax evasion is a scheme not
of Benigno P. Toda, Benigno P. Toda, Jr., President and owner of planning scheme adopted by sanctioned by law and when it is availed of, it
Jr., et al., G.R. No. 99.991% of its issued and outstanding capital CIC constitutes tax evasion subjects the taxpayer to further or additional
147188, September stock, to sell a 16-storey commercial building that would justify an civil or criminal liabilities. Tax evasion
14, 2004 known as Cibeles Building and the two parcels of assessment of deficiency connotes the integration of three factors:
land on which the building stands for an amount of income tax. (1) the end to be achieved, i.e., the payment
not less than P90 million. 2. Whether or not the Estate of less than that known by the taxpayer to be
Six months later, Toda purportedly sold the is liable for the 1989 legally due, or the non-payment of tax when it
property for P100 million to Rafael A. Altonaga, deficiency income tax of is shown that a tax is due;
who, in turn, sold the same property on the same Cibeles Insurance (2) an accompanying state of mind which is
day to Royal Match Inc. (RMI) for P200 million. Corporation. described as being “evil,” in “bad faith,”
These two transactions were evidenced by Deeds “willfull,” or “deliberate and not accidental”;
of Absolute Sale notarized on the same day by the and
same notary public. For the sale of the property to (3) a course of action or failure of action which
RMI, Altonaga paid capital gains tax in the amount is unlawful.
of P10 million. All these factors are present in the instant
When CIC filed for corporate annual income tax case. It was proven that the real buyer of the
return for the year 1989, it declared its gain from properties was RMI, and not the intermediary
the sale of real property in the amount of Altonaga. The scheme resorted to by CIC in
P75,728.021. After crediting withholding taxes of making it appear that there were two sales of
P254,497.00, it paid P26,341,2078 for its net the subject properties, i.e., from CIC to
taxable income of P75,987,725. Altonaga, and then from Altonaga to RMI,
On 12 July 1990, Toda sold his entire shares of thereby reducing the tax from 35% to 5%,
stocks in CIC to Le Hun T. Choa for P12.5 million, cannot be considered a legitimate tax
as evidenced by a Deed of Sale of Shares of planning because it is tainted with fraud.
Tax evasion is a scheme not sanctioned Stocks.Three and a half years later, Toda died. 2. Yes. Toda agreed to hold himself
by law and when it is availed of, it personally liable when he sold his shares of
subjects the taxpayer to further or stock to Le Hun T. Choa. In the Deed of Sale
additional civil or criminal liabilities. Tax of Shares of Stock Toda, Toda undertook and
evasion connotes the integration of agreed “to hold the BUYER and Cibeles free
three factors: from any all income tax liabilities of Cibeles for
(1) the end to be achieved, i.e., the the fiscal years 1987, 1988, and 1989.
payment of less than that known by the It is important to note that a corporation has a
taxpayer to be legally due, or the non- juridical personality distinct and separate from
payment of tax when it is shown that a the persons owning or composing it. Thus, the
tax is due; owners or stockholders of a corporation may
(2) an accompanying state of mind not generally be made to answer for the
which is described as being “evil,” in liabilities of a corporation and vice versa.
“bad faith,” “willfull,” or “deliberate and However, there are certain instances in which
not accidental”; and personal liability may arise. Personal liability
(3) a course of action or failure of action of a corporate director, trustee, or officer
which is unlawful. along with the corporation may validly attach
when:
 1. He assents to the (a) patently unlawful act
of the corporation, (b) bad faith or gross
negligence in directing its affairs, or (c) conflict
of interest, resulting in damages to the
corporation, its stockholders, or other
persons;
2. He consents to the issuance of watered
down stocks or, having knowledge thereof,
does not forthwith file with the corporate
secretary his written objection thereto;
3. He agrees to hold himself personally and
solidarily liable with the corporation; or
4. He is made, by specific provision of law, to
personally answer for his corporate action.

54. CIR vs. Metro Star Section 228 of the Tax Code clearly The BIR through a Letter of Authority caused the Whether or not the failure to Yes. The sending of a PAN to taxpayer to
Superama, Inc., G.R. requires that the taxpayer must first be examination of respondent's books of accounts strictly comply with notice inform him of the assessment made is but part
No. 185371, informed that he is liable for deficiency and other accounting records for income tax and requirements prescribed of the "due process requirement in the
December 8, 2010 taxes through the sending of a PAN. He other internal revenue taxes for the taxable year under Section 228 of the issuance of a degiciency tax assessment", the
must be informed of the facts and the 1999. For the latter's failure to comply with several NIRC of 1997 and R.R. No absence of which renders nugatory any
law upon which the assessment is requests of the presentation of records and 12-99 is tantamount to a assessment made by the tax authorities. The
made. The law imposes a substantive, subpoena duces tecum, the BIR Legal Division denial of due process. pursuasiveness of the right to due process
not merely a formal, requirement. To issued an Indorsement to proceed with the reaches both substantial and procedural rights
proceed heedlessly with tax collection investigation based on the best evidence and the failure of the CIR to strictly comply
without first establishing a valid obtainable preparatory to the issuance of with the requirements laid down by law and its
assessment is evidently violative of the assessment notice. own rules is a denial of Metro Star's right to
cardinal principle in administrative due process. Thus, for its failure to send the
investigations — that taxpayers should Respondent received a preliminary 15-day letter PAN stating the facts and the law on which
be able to present their case and on 09 November 2001 and a Formal Letter of the assessment was made as required by
adduce supporting evidence. Demand on 11 April 2002 assessing it with Section 228 of RA No. 8424, the assessment
deficiency VAT and withholding tax for the taxable made by the CIR is void.
year 1999.
55. CIR vs. Enron Section 228 of the NIRC provides that During the pre-assessment stage of the Whether or not the No. The advice of tax deficiency given bu the
Subic Power Corp., the taxpayer shall be informed in writing investigation of respondent for the year 1996, assessment notice sent to CIR to an employess of Enron, as well as the
G.R. No. 166387, of the law and the facts on which the petitioner advised Enron`s representative of the respondent is valid. prelimnary five-day letter were not valid
January 19, 2009 assessment is made. Otherwise, the latter`s tax deficiency, informed it of the proposed substitutes for the mandatory notice in writing
assessment is void. To implement the tax deficiency through a preliminary five-day letter of the legal and factual bases of the
provisions of Section 228 of the NIRC, and furnished Enron a copy of the audit working assessment. These steps were mere
RR No. 12-99 was enacted. Section paper allegedly showing in detail the legal and perfunctory discharges of the CIR`s duties in
3.1.4 of the revenue regulation reads: factual bases of the assessment notice, itemizing correctly assessing a taxpayer,
therein the deductions disallowed and imposing
3.1.4. Formal Letter of Demand and the preferential rate of 5% on some items The requirementof issuinga preliminary or
Assessment Notice.— The formal letter respondent categorized as costs. The legal and final notice, as the case may be, informing a
of demand and assessment notice shall factual bases were, however, not indicated. taxpayer of the existence of adeficeincy tax
be issued by the Commissioner or his assessment is markedly different from the
duly authorized representative. The requirement of what such notice must contain.
letter of demand calling for payment of Just because the CIR issued an advice, a
the taxpayer's deficiency tax or taxes preliminary letter during the pre-assessment
shall state the facts, the law, rules and stage and a final notice, in the order required
regulations, or jurisprudence on which by law, does not necessarily mean that Enron
the assessment is based, otherwise, the was informed of the law and facts on which
formal letter of demand and the deficiency tax assessment was made.
assessment notice shall be void.The
same shall be sent to the taxpayer only
by registered mail or by personal
delivery.

It is clear from the foregoing that a

taxpayer must be informed in writing of
the legal and factual bases of the tax
assessment made against him. The use
of the word "shall" in these legal
provisions indicates the mandatory
nature of the requirements laid down
therein.
56. CIR vs. Isabela Section 228 of the National Internal Respondent received an assessment letter dated Whether or not the Final Yes. The Final Notice Before Seizure cannot
Cultural Corp., G.R. Revenue Code states that a delinquent 09 February 1990 stating that it had delinquent Notice Before Seizure but be considered as the CIR`s decision
No. 135210, July 11, taxpayer may nevertheless directly taxes due. It subsequently filed its motion for constitutes the final decision disposing of the request for reconsideration
2001 appeal a disputed assessment, if its reconsideration on 23 March 1990. In support of of the CIR appealable to the filed by the respondent, who received no other
request for reconsideration remains its request for reconsideration, it sent to the CIR CTA. response to its request. Not only was the
unacted upon 180 days after additional documents on 18 April 1990. The next Notice the only regarding the request for
submission thereof. In this case, the communication respondent received was already consideration. The very title expressly
said period of 180 days had already the Final Notice Before Seizure dated 10 indicated that it was a final notice prior to
lapsed when respondent filed its November 1994. seizure of property. The letter itself clearly
request for reconsideration on March stated that respondent was being given "the
23, 1990, without any action on the part LAST OPPORTUNITY" to pay; otherwise, its
of the CIR. Lastly, jurisprudence properties would be subjected to distraint and
dictates that a final demand letter for levy.
payment of delinquent taxes may be
considered a decision on a disputed or
protested assessment.

57. CIR vs. Phil. Taxes are the lifeblood of the Respondent on 21 April 1994 received a Whether or not the No. Where the taxpayer merely filed two
Global government and so should be collected Preliminary Assessment Notice (PAN) dated 13 respondent's administratice protest letters requesting for a
Communication, Inc., without unnecessary hindrance. On the April 1994 for deficiency income tax. The following protest embodied in two reconsideration, and where the BIR could not
G.R. No. 167146, other hand, such collection should be day, it received a Formal Assessment Notice letters suspended the have conducted a reinvestigation because no
October 31, 2006 made in accordance with law as any (FAN). It protested against the FAN in two protest running of the statute of new or addistional evidence was submitted,
arbitrariness will negate the very reason letters dated 06 May and 23 May 1994. In both limitation. the running of statute of limitations cannot be
for government itself. It is therefore letters, respondent requested for the cancellation interrupted.
necessary to reconcile the apparently of the tax assessment, which they alleged was
conflicting interest of the authorities and invalid for lack of factual and legal basis.
the taxpayers so that the real purpose
of taxation, which is the promotion of On 16 October 2002, respondent received from
common good, may be achieved. the CIR a Final Decision dated 08 October 2002
denying respondent's protest against the FAN and
Thus, the three-year statute of affirming the same in toto.
limitations on the collection of an
assessed tax provided under Section
269(c) of the Tax Code of 1977, a law
enacted to protect the interests of the
taxpayer, must be given effect. In
providing for exceptions to such rule in
Section 271, the law strictly limits the
suspension of the running of the
prescription period to, among other
instances, protests wherein the
taxpayer requests for a reinvestigation.
58. Fishwealth Section 228 of the 1997 Tax Code Petitioner in a letter protested against the Final Whether otr not a motion for No. Since the petitioner received the denial of
Canning Corp. v. CIR, provides that an assessment: Assessment Notice (FAN) issued against it for reconsideration of the FDDA its administrative protest on 04 August 2005, it
G.R. No. 179343, 21 deficiency income tax and VAT. Thereafter, it tolls the period to appeal to had 30 days or until 30 September 2005 to file
January 2010 . . . may be protested administratively received on 04 August 2005 respondents` Final the CTA. a petition for review before the CTA Division.
by filing a request for reconsideration or Decision on Disputed Assessment (FDDA) It filed one, however, on 20 October 2005,
reinvestigation within thirty (30) days denying the protest, apprising tpetitioner of its tax hence it was filed out of time. A motion for
from receipt of the assessment in such liabilities, and requesting the immediate payment reconsideration of the denial of the
form and manner as may be prescribed thereof. It filed a Letter of Reconsideration on 01 administrative protest does not toll the 30-day
by implementing rules and regulations. September 2005. period to appeal to the CTA.
Within sixty (60) days from filing of the
protest, all relevant supporting After respondent demanded payment of its tax
documents shall have been submitted; liabilities in a Preliminary Collection Letter,
otherwise, the assessment shall petittioner filed a petition for review before the
become final. CTA on 20 October 2005. CTA dismissed the
petiotion for being filed out of time.
If the protest is denied in whole or in
part, or is not acted upon within one
hundred eighty (180) days from
submission of documents, the taxpayer
adversely affected by the decision or
inaction may appeal to the Court of Tax
Appeals within thirty (30) days from
receipt of the said decision, or from the
lapse of the one hundred eighty (180)-
day period; otherwise, the decision shall
become final, executory and
demandable.

In the case at bar, petitioner's

administrative protest was denied by
Final Decision on Disputed Assessment
dated August 2, 2005 issued by
respondent and which petitioner
received on August 4, 2005. Under the
above-quoted Section 228 of the 1997
Tax Code, petitioner had 30 days to
appeal respondent's denial of its protest
to the CTA.
59. Lascona Land In case of the inaction of CIR issued an Assessment Notice Whether or not the subject NO. In arguing that the assessment became
Co., Inc. vs. CIR, G.R. the CIR on the protested against Lascona for alleged assessment final and executory by the sole reason that
No. 171251, March 5, assessment, the deficiency income tax. Lascona filed has become final, executory, petitioner failed to appeal the inaction of the
2012 taxpayer has two a letter protest, however, it was and demandable due to the Commissioner within 30 days after the
options, either: (1) file a denied by the BIR O-I-C for the failure of petitioner to file an 180-day reglementary period, respondent, in
petition for review with reason being that said case was not appeal before the CTA effect, limited the remedy of Lascona, as a
the CTA within 30 days elevated to the Court of Tax Appeals within taxpayer, under Section 228 of the NIRC to
after the expiration of the as mandated by the provisions of the thirty (30) days from the just one, that is - to appeal the inaction of the
180-day period; or (2) last paragraph of Section 228 of the lapse Commissioner on its protested assessment
await the final decision of Tax Code and said assessment of the One Hundred Eighty after the lapse of the 180-day period. This is
the Commissioner on the notice has become final, executory, (180)-day period pursuant to incorrect.
disputed assessment and demandable. Lascona appealed Section 228 of the NIRC.
and appeal such final the decision before the CTA. The In the case of CIR v. Villa, it was already
decision to the CTA CIR, however, maintained that established that the word "decisions" in
within 30 days after the Lascona's failure to timely file an paragraph 1, Section 7 of Republic Act No.
receipt of a copy of such appeal with the CTA after the lapse 1125, has been interpreted to mean the
decision. These options of the 180-day reglementary period decisions of the Commissioner of Internal
are mutually exclusive provided under Section 228 of the Revenue on the protest of the taxpayer
and resort to one bars National Internal Revenue Code against the assessments. Definitely, the said
the application of the (NIRC) resulted in the finality of the word does not signify the assessment itself.
other. assessment. We quote what this Court said aptly in a
previous case:
CTA, in its Decision, nullified the
subject assessment. It held that in “In the first place, we believe the respondent
cases of inaction by the CIR on the court erred in holding that the assessment in
protested assessment, Section 228 question is the respondent Collector's
of the NIRC provided two options for decision
the taxpayer: (1) appeal to the CTA or ruling appealable to it and that
within thirty (30) days from the lapse consequently, the period of thirty days
of the one hundred eighty (180)-day prescribed by section 11 of Republic Act No.
period, or (2) wait until the 1125 within which petitioner should have
Commissioner decides on his protest appealed to the respondent court must be
before he elevates the case. counted from its receipt of said assessment.
Where a taxpayer questions an assessment
and asks the Collector to reconsider or cancel
the same because he (the taxpayer) believe
he is not liable, therefore, the assessment
becomes a "disputed assessment" that the
Collector must decide, and the taxpayer can
appeal to the Court of Tax Appeals only upon
receipt of the decision of the Collector on the
disputed assessment, . . . "
Therefore, as in Section 228, when the law
provided for the remedy to appeal the inaction
of the CIR, it did not intend to limit it to a
single
remedy of filing of an appeal after the lapse of
the 180-day prescribed period. Precisely,
when a taxpayer protested an assessment, he
naturally expects the CIR to decide either
positively or negatively. A taxpayer cannot be
prejudiced if he chooses to wait for the final
decision of the CIR on the protested
assessment. More so, because the law and
jurisprudence have always contemplated a
scenario where the CIR will decide on the
protested assessment.

It must be emphasized, however, that in case

of the inaction of the CIR on the protested
assessment, while we reiterate − the taxpayer
has two options, either: (1) file a petition for
review with the CTA within 30 days after the
expiration of the 180-day period; or (2) await
the final decision of the Commissioner on the
disputed assessment and appeal such final
decision to the CTA within 30 days after the
receipt of a copy of such decision, these
options are mutually exclusive and resort to
one bars the application of the other.

Accordingly, considering that Lascona opted

to
await the final decision of the Commissioner
on the protested assessment, it then has the
right to appeal such final decision to the Court
by filing a petition for review within thirty days
after receipt of a copy of such decision or
ruling, even after the expiration of the 180-day
period fixed by law for the Commissioner of
Internal Revenue to act on the disputed
assessments. Thus, Lascona, when it filed an
appeal on April 12, 1999 before the CTA, after
its receipt of the Letter dated March 3, 1999
on March 12, 1999, the appeal was timely
 made as it was filed within 30 days after
receipt of the copy of the decision.

60. CIR vs. Primetown In computing for the On March 11, 1999, Gilbert Yap, Whether or not a petition YES.
Property Group, Inc., prescriptive period, a vice-chair of respondent Primetown was filed Sec. 229. Recovery of Taxes Erroneously or
G.R. No. 162155, year is composed of 12 Property Group, Inc., applied for the within the two-year period. Illegally Collected. —
August 28, 2007 calendar months and not refund or credit of income tax xxxx
365 days. respondent paid in 1997. In Yap's
letter to petitioner BIR revenue In any case, no such suit or proceeding shall
district officer Arturo V. Parcero be filed after the expiration of two (2) years
explained that the increase in the from the date of payment of the tax or penalty
cost of labor and materials and regardless of any supervening cause that may
difficulty in obtaining financing for arise after payment: Provided, however, That
projects and collecting receivables the Commissioner may, even without a claim
caused the real estate industry to therefor, refund or credit any tax, where on
slow down. As a consequence, while the
business was good during the first face of the return upon which payment was
quarter of 1997, respondent suffered made, such payment appears clearly to have
losses amounting to P71,879,228 been erroneously paid.
that year.
The respondent’s petition was filed on April
Revenue officer Elizabeth Y. Santos 14, 2000, which is the last day of the 24
required the respondent to submit thcalendar month from the day the respondent
additional documents to support its filed its final adjusted return on April 14, 1998.
claim. Respondent compiled but its The conclusion of the CA that respondent filed
claim was not acted upon. Thus, on its petition for review in the CTA within the
April 14, 2000, it filed a petition for two-year prescriptive period provided in
review in the CTA. Section 229 of the NIRC is correct. Its basis,
however, is not.
The CTA found that respondent filed Article 13 of the Civil Code and Section 31,
its final adjusted return on April 14, Chapter VIII, Book I of the Administrative
1998. Thus, its right to claim a refund Code of 1987 deal with the same subject
or credit commenced on that date. matter – computation of legal periods. Under
The CTA dismissed the petition as it the Civil Code, a year is equivalent to 365
was filed beyond the two-year days, whether it is a leap year or not. Under
prescriptive period for filing a judicial the Administrative Code of 1987, a year is
claim for tax refund or tax credit. It composed of 12 calendar months. Based on
invoked Section 229 of the NIRC the two (2) laws, there exists a manifest
wherein it provided the two-year incompatibility in the manner of computing
prescriptive period for the filing of legal periods. For this reason, the Supreme
judicial claims which was equivalent Court held that Section 31, Chapter VIII, Book
to 730 days. The year 2000 was a I of the Administrative Code of 1987 shall
leap year, thus, the respondent’s govern the computation of legal periods, being
petition was filed after 731 days. the more recent law.

CA reversed the CTA’s decision. The Respondent’s petition, which was filed on
rule that a year has 365 days applies, April
notwithstanding the fact that a 14, 2000, was filed on the last day of the 24
particular year is a leap year. Hence, thcalendar month from the day the respondent
this petition. filed its final adjusted return. Hence, it was
filed within the 2-year period.
61. CIR vs. Smart The person entitled to On May 25, 2001, respondent, Smart Whether or not the YES.
Communication, Inc., claim a tax refund is the Communications, Inc., entered into respondent has the First, he is considered a "taxpayer" under the
G.R. Nos. 179045-46, taxpayer. However, in three Agreements for Programming right to file the claim for NIRC as he is personally liable for the
August 25, 2010 case the taxpayer does and Consultancy Services with Prism refund. withholding tax as well as for deficiency
not file a claim for a Transactive (M) Sdn. Bhd. (Prism), a assessments, surcharges, and penalties,
refund, the withholding non-resident corporation duly should the amount of the tax withheld be
agent may file the claim. organized and existing under the finally found to be less than the amount that
laws of Malaysia. should have been withheld under law. Second,
as an agent of the taxpayer, his authority to file
Under the agreements, Prism was to the necessary income tax return and to remit
provide programming and the tax withheld to the government impliedly
consultancy services for the includes the authority to file a claim for refund
installation of the Service Download and to bring an action for recovery of such
Manager (SDM) and the Channel claim.
Manager (CM), and for the
installation and implementation of In this connection, it is however significant to
Smart Money and Mobile Banking add that while the withholding agent has the
Service SIM Applications (SIM right to recover the taxes erroneously or
Applications) and Private Text illegally collected, he nevertheless has the
Platform (SIM Application). obligation to remit the same to the principal
taxpayer. As an agent of the taxpayer, it is his
On June 25, 2001, Prism billed the duty to return what he has recovered;
respondent in the amount of otherwise, he would be unjustly enriching
$547,822.45. Thinking that these himself at the expense of the principal
payments constitute royalties, taxpayer from whom the taxes were withheld,
respondent withheld the amount of and from whom he derives his legal right to file
$136,955.61 or P7,008,840.43, a claim for refund.
representing the 25% royalty tax
under the RP-Malaysia Tax Treaty
62. Michel J. Lhuillier Statutes granting tax Petitioner, a corporation engaged in Whether or not surcharges NO. Surcharges and interests should not be
Pawnshop, Inc. vs. exemptions must be the pawnshop business, received and interest imposed against the petitioner.
CIR, G.R. No. 166786, construed in strictissimi assessment notices for deficiency should be imposed against The settled rule is that good faith and honest
September 11, 2006 juris against the taxpayer VAT and DST. the belief that one is not subject to tax on the
and liberally in favor of petitioner. basis of previous interpretation of government
the taxing authority. The case was elevated to the agencies tasked to implement the tax law are
Supreme Court. The lone question to sufficient justification to delete the imposition
be resolved therein was whether of surcharges and interest.
petitioner's pawnshop transactions
are subject to DST. The Supreme
Court ruled in the affirmative.

Petitioner now files a motion for

reconsideration of the decision of the
Supreme Court.

LOCAL GOVERNMENT TAXATION

Case Title Case Principle Summary of Facts Issue/s Ruling

1. Manila Electric However, in order for an ordinance to be WON Sec. 25 of MO 93-35 Ferrer, Jr. v. Bautista30 enumerates the
Company v. City of valid, it must not only be within the LGU's was cured by Sec. 56 of RA requirements for an ordinance to be valid,
Muntinlupa, G.R. No. corporate powers to enact and passed Meralco has been granted a franchise to build, 7926. legally binding, and enforceable, to wit:
198529, February 9, according to the legal procedure, but it operate, and maintain an energy distribution
2021 must also meet the following system in the NCR's cities and municipalities. On For an ordinance to be valid though, it must not
requirements. January 1, 1994, the Revenue Code was only be within the corporate powers of the LGU
(1) not contrary to the Constitution or any amended. Mun. of Muntinlupa (MO 93-35) became to enact and must be passed according to the
statute; (2) not unfair or oppressive;(3) effective. Section 25 of the act levied a franchise procedure prescribed by law, it should also
not partial or discriminatory; (4) not fee of 50% of 1% of the gross yearly receipts of the conform to the following requirements: (1) not
prohibit but may regulate trade; (5) prior calendar year on private persons or contrary to the Constitution or any statute; (2)
general and consistent with public policy; businesses operating public utilities within its not unfair or oppressive; (3) not partial or
and (6) not unreasonable territorial jurisdiction. discriminatory; (4) not prohibit but may regulate
trade; (5) general and consistent with public
Muntinlupa City has been converted from a policy; and (6) not unreasonable.31
Only provinces and localities have the municipality into a highly urbanized city by virtue of
authority to collect a franchise tax. RA 7926. Sec. 56 of it adopted all existing municipal Legaspi v. City of Cebu32 explains the two
ordinances of the Municipality of Muntinlupa and tests in determining the validity of an
shall all continue to take effect within the City unless ordinance, i.e., the Formal Test and the
its sangguniang panlungsod enacts an ordinance Substantive Test.33 The Formal Test requires
providing otherwise. Barlis sent a letter to Meralco the determination of whether the ordinance
demanding payment of the franchise tax it owed to was enacted within the corporate powers of the
Muntinlupa City from 1992 to 1999. LGU, and whether the same was passed
 pursuant to the procedure laid down by law.
Meralco likewise ignored the demand letters for Meanwhile, the Substantive Test primarily
payment of the franchise tax on the premise that the assesses the reasonableness and fairness of
City of Muntinlupa, then a municipality, did not have the ordinance and significantly its compliance
the power and authority to impose and collect a with the Constitution and existing statutes.
franchise tax as the power and authority to impose
and collect a franchise tax lies with the provinces As correctly ruled by the RTC and the CA, MO
and cities. 93-35, particularly Section 25 thereof, has
failed to meet the requirements of a valid
ordinance. Applying the Formal Test, the
passage of the subject ordinance was beyond
the corporate powers of the then Municipality
of Muntinlupa, hence, ultra vires.

Based on the Substantive Test, Section 25 of

MO 93-35 deviated from the express provision
of RA 7160. While ordinances, just like other
laws and statutes, enjoy the presumption of
validity, they may be struck down and set aside
when their invalidity or unreasonableness is
evident on the face or has been established in
evidence.34 In this case, Section 25 of MO 93-
35 was evidently passed beyond the powers of
a municipality in clear contravention of RA
7160.
2. FDCP v. Colon When there is a clash WON there is a violation of YES. The Court struck down as invalid and
Heritage Realty between the inherent Congress passed R.A. 9167 creating the Film local fiscal autonomy unconstitutional Sections 13 and 14 of RA
Corp, City of Cebu, taxing power of the legislature and the Development Council of the Philippines (FDCP). 9167, essentially holding that these provisions
et. al. G.R. No. constitutionally-delegated power to tax Sections 13 and 14 thereof provide that the violated the principle of local fiscal autonomy
203754 (En Banc), local governments, the latter shall amusement tax on certain graded films which would because they authorized FDCP to earmark,
November 3, 2020. prevail. otherwise accrue to the cities and municipalities in and hence, effectively confiscate the
Metropolitan Manila and highly urbanized and amusement taxes which should have
independent component cities in the Philippines, otherwise inured to the benefit of the local
pursuant to Section 140 of R.A. 7160 or the LGC government units (LGUs).
during the period the graded film is exhibited,
should be deducted and withheld by the However, recognizing the existence of these
proprietors, operators, or lessees of cinemas and statutory provisions and the reliance of the
remitted to the FDCP. public thereto prior to their being declared
unconstitutional, the Court applied the doctrine
of operative fact and held, among others, that:
FDCP and the producers of graded films need
not return the amounts already received from
the LGUs because they merely complied with
the provisions of RA 9167 which were in effect
at that time; and
(2) any amounts retained by cinema
proprietors and operators due to FDCP at that
time should be remitted to the latter since
Sections 13 and 14 of RA 9167 produced legal
effects prior to their being declared
unconstitutional.
3. City of Makati v. nder local business tax, the rule on tax Respondent Luzon Hydro Corp. (LHC) instituted WON LHC’s Makati office NO. The Makati office is a mere administrative
Luzon Hydro Corp. allocation in relation to tax situs applies this interpleader case for the determination of the was a project office to office. The City of Makati has no right to claim
et. al., G.R. No. when the business operates a branch, rightful claims on LHC’s liability for local business determine whether the City from LHC’s LBT. A local business tax is a tax
225226, July 7, 2020 sales office outside its principal office, tax between Petitioner City of Makati, and of Makati had a right to the on business imposed on gross sales recorded
but has a factory, project office or plant Respondent Municipality of Bakun and Alilem. LHC 70% of their local business hence, the consideration of the invoices and
situated in different localities, whether or operates a hydroelectric power plant harnessing tax (LBT) records of sales are relevant. In this case,
not sales are made. the Bakun River which passes through the LHC’s Makati office did not handle sales nor
Provinces of Ilocos Sur and Benguet housing its does it operate any aspect or primary purpose
Hence, a locality may have a claim on power station in Alilem, tunnels and weir in Bakun, of LHC as provided in its Articles of
the LBT of a company even if no sales and an office in Makati City. After its 6 year tax Incorporation. The rule on tax allocation in
are made so long as the project office, holiday, LHC proceeded to pay local business relation to tax situs under R.A. 7160 come into
factory or plant is located within their area taxes in these three political subdivision; dividing play when a business subject to it does not
or jurisdiction. the 70% portion of the local business tax (LBT) operate a branch or sales office outside of its
equally between the three. principal office where all sales are recorded,
but has a factory, project office, plant or
A resolution from Bakun questioned the sharing plantation situated in different localities,
scheme of the 70% portion of LBT and this was whether or not sales are made in these
submitted to the Bureau of Local Government and localities.
Finance (BGLF) who was of the opinion that only
Bakun and Alilem should share in the LBT since Hence, even if no sales were recorded or
Makati office was a mere administrative office and undertaken at LHC’s Makati office, Makati
not a project office. would have been entitled to the share in the
portion if it could show that the Makati office
RTC held that LHC’s Makati office was a project was a project office of LHC akin to a factory.
office entitling Makati to an equal share from their For failure to do so, it was concluded that it was
70% LBT, albeit decreasing its share to 20% a mere administrative office since the office is
instead as concession. This was reversed by the not directly involved in LHC’s production and
CTA 1st Div. and En Banc holding that it is a mere operations. Mere label of a project office does
administrative office since none of their sales are not convert an administrative office into one
recorded and undertaken in Makati. since the term, by its very nature, carries the
tax implications.

4. Philippine Heart The Philippine Heart Center (PHC) was established WON PHC is exempt from YES. The court held that PHC is a government
Center v. Quezon Real properties owned by the Republic, under P.D. 673 as a specialty hospital mandated to paying real property taxes on instrumentality with corporate powers exempt
City, G.R. No. whether it is in the name of the Republic provide cardiovascular care to the general public. It its properties in Quezon city from local taxes. Real properties owned by the
225409, March 11, itself or in the name of agencies or exempted PHC from the payment of all taxes, Republic, whether it is in the name of the
2020 instrumentalities of the national charges, fees imposed by the Government or any Republic itself or in the name of agencies or
government, are exempt from real political subdivision or instrumentality for ten years. instrumentalities of the national government,
property tax. In order to be classified as The government of Quezon City issued 3 final are exempt from real property tax. Government
a government instrumentality vested with Notices of Delinquency for the unpaid real property instrumentalities vested with corporate powers
corporate powers, the following twin taxes for the 11 properties of PHC in Quezon City. or government corporate entities is recognized
requirements must be established: The notices were unheeded. Thus, respondent as the third category of government agencies.
 a) it performs governmental functions, levied the PHC’s properties. It remains as a government instrumentality
and because they are not integrated within the
b) it enjoys operational autonomy. PHC and the Quezon City Government entered a department framework and are also vested
Memorandum of Agreement to settle PHC’s tax with special functions to carry out a policy of
liabilities. PHC was informed of the ruling in Manila the national government.
International Airport Authority v. Court of Appeals
where the court held that government entities are In order to be classified as a government
exempt from taxes, fees, or charges of any kind instrumentality vested with corporate powers,
imposed by a local government unit. PHC then the following twin requirements must be
withheld the efficacy of the MOA. Both parties then established: a) it performs governmental
forged a second MOA with the same stipulations. functions, and b) it enjoys operational
However, PHC suspended its implementation and autonomy. In this case, PHC has satisfied both
reiterated its exemption from the payment of taxes. requirements since it is under the supervision
of the DOH. The PHC’s functions are less
commercial than governmental. It is more for
The Quezon City Government stood firm on its public use and public welfare than for profit
position that the PHC is still liable for real property oriented services.
taxes since most of its properties were being leased
to private individuals. The properties of PHC are properties of public
dominion devoted to public use and welfare.
Thus, it is exempt from real property taxes and
levy without prejudice to the liability of taxable
persons who benefit from the use of these
properties. The fact that PHC entered into
transactions regarding the said properties does
not detract the characterization of the
properties as that of the public dominion and
for public use.

However, citing various jurisprudence, the

court held that the respondents’ argument is
correct. The properties of PHC leased to
private individuals are no longer covered by tax
exemptions. However, it does not validate the
respondents’ acts of assessing, levying, and
selling the 11 properties of PHC. Respondents’
recourse is through judicial action for collection
of real property taxes against the private
individuals benefited
5. City of Davao v. AP Coconut Industry Investment Fund (CIIF) WON APHI is liable to pay
Holdings Inc., G.R. companies, including APHI, are public The Coconut Industry Investment Fund (CIIF) is a local business taxes on its NO. In the recent case of City of Davao, et al.
No. 245887, January assets owned by the Republic of the fund form part of the levy imposed on the initial sale dividend earnings from its v. Randy Allied Ventures, Inc. (RAVI), the
22, 2020. Philippines. These companies are not by coconut farmers and other coconut products. SMC preferred shares, since Court ordained that RAVI, a CIIF holding
liable to pay local business taxes on its Sometime in 1983, the CIIF bought shares of stock it is a CIIF holding company. company like APHI, was exclusively
dividend earnings. They cannot be from SMC. It then established 14 holding established to own and hold SMC shares of
considered as a non-bank financial companies, one of which is APHI, for the sole stock. As such, it is not liable to pay local
intermediary since its investment and purpose of owning and holding SMC shares. APHI business taxes on the dividends earned from
placement of funds are not done in a received cash and stock dividends from its SMC its SMC preferred shares as the same shares
regular or recurring manner for the preferred shares. are government assets owned by the national
purpose of earning profit. government for the benefit of the coconut
These dividends were deposited in a trust account industry.
which earned interest from market placements. In
1986, APHI’s SMC shares were sequestered by the Therefore, CIIF companies, including APHI
PCGG. itself, are public assets owned by the Republic
of the Philippines. Consequently, dividends
Petitioner, through its City Treasurer, issued a and any income from these shares are also
Business Tax Order of Payment directing APID to owned by the Republic. On this score, APHI
pay 0.55 % local business tax. APHI paid the cannot be considered as a non-bank financial
assessment under protest. It filed an administrative intermediary since its investment and
claim for refund or tax credit with the City Treasure. placement of funds are not done in a regular or
recurring manner for the purpose of earning
RTC ruled that APHI's primary purpose resembles profit. Rather, its management of dividends
the definition of a financial intermediary. CTA- from the SMC shares is only in furtherance of
Division affirmed RTC’s decision. CTA En Banc its purpose as a CIIF company for the benefit
reversed and declared APHI entitled to a tax refund of the Republic.
or credit.
6. Mactan Cebu Under Section 2(10) and (13) of the Petitioner Mactan-Cebu International Airport Whether or not the petitioner YES. MIAA is not a government-owned or
International Airport Introductory Provisions of the Authority (MCIAA) was created by Congress to is a government controlled corporation under Section 2(13) of
Authority (MCIAA) v. Administrative Code, MIAA is a undertake the effective control and management instrumentality exempt from the Introductory Provisions of the
City of Lapu-Lapu, government instrumentality and not a and supervision of the Mactan International Airport, paying real property taxes. Administrative Code because it is not
G.R. No. 181756, government-owned or controlled Lahug Airport, and other airports as may be organized as a stock or non-stock corporation.
15/06/2015 corporation. Under Section 133(o) of the established by the Province of Cebu. MCIAA Neither is MIAA a government-owned or
Local Government Code, MIAA as a enjoyed exemption from realty taxes as per RA controlled corporation under Section 16, Article
government instrumentality is not a 6958. However, the Supreme Court ruled in XII of the1987 Constitution because MIAA is
taxable person because it is not subject another case that MCIAA was no longer exempt not required to meet the test of economic
to “[t]axes, fees or charges of any kind” from real estate taxes upon the effectivity of the viability. MIAA is a government instrumentality
by local governments. The only Local Government Code of 1991. vested with corporate powers and performing
exception is when MIAA leases its real essential public services pursuant to Section
property to a “taxable person” as 2(10) of the Introductory Provisions of the
provided in Section 234(a) of the Local Administrative Code. As a government
Government Code, in which case the instrumentality, MIAA is not subject to any kind
specific real property leased becomes of tax by local governments under Section
subject to real estate tax. Thus, only 133(o) of the Local Government Code. The
portions of the Airport Lands and exception to the exemption in Section 234(a)
Buildings leased to taxable persons like does not apply to MIAA because MIAA is not a
private parties are subject to real estate taxable entity under the Local Government
tax. Code. Such exception applies only if the
beneficial use of real property owned by the
Republic is given to a taxable entity.

7. Smart "If the generating of revenue is the Smart constructed a telecommunications tower Whether or not the fees NO. The purpose of the assailed Ordinance is
Communications, primary purpose and regulation is merely within the territorial jurisdiction of the Municipality of imposed under Ordinance to regulate the enumerated activities
Inc. v. Municipality of incidental, the imposition is a tax; but if Malvar. The Municipality passed Ordinance No. 18, No. 18 are taxes. particularly related to the construction and
Malvar, Batangas, regulation is the primary purpose, the series of 2003, entitled "An Ordinance Regulating maintenance of various structures. The fees in
G.R. No. 20442. fact that incidentally revenue is also the Establishment of Special Projects." Smart Ordinance No. 18 are not impositions on the
February 18, 2014 obtained does not make the imposition a received an assessment letter with a schedule of building or structure itself; rather, they are
tax." Section 142 of the LGC grants payment its telecommunications tower. Smart filed impositions on the activity subject of
municipalities the power to levy taxes, a protest, claiming lack of due process in the government regulation, such as the installation
fees, and charges not otherwise levied issuance of the assessment and closure notice. In and construction of the structures.
by provinces. Section 143 of the LGC the same protest, Smart challenged the validity of
provides for the scale of taxes on Ordinance No. 18 on which the assessment was Since the main purpose of Ordinance No. 18 is
business that may be imposed by based. to regulate certain construction activities of the
municipalities while Section 147 of the identified special projects, which included "cell
same law provides for the fees and sites" or telecommunications towers, the fees
charges that may be imposed by imposed in Ordinance No. 18 are primarily
municipalities on business and regulatory in nature, and not primarily revenue-
occupation. raising. While the fees may contribute to the
revenues of the Municipality, this effect is
 merely incidental. Thus, the fees imposed in
Ordinance No. 18 are not taxes.

8. The City of Manila, While there is no express grant of such Private respondents filed with the Regional Trial Whether or not the CTA has YES. While there is no express grant of such
etc. et al. v. Hon. power, with respect to the CTA, Section Court a complaint denominated as one for “Refund jurisdiction over a special power, with respect to the CTA, Section 1,
Caridad H. Grecia- 1, Article VIII of the 1987 Constitution or Recovery of Illegally and/or Erroneously- civil action for certiorari Article VIII of the 1987 Constitution provides
Cuerdo etc., et al, provides, nonetheless, that judicial Collected Local Business Tax, Prohibition with assailing an interlocutory that judicial power shall be vested in one
G.R. No. 175723. power shall be vested in one Supreme Prayer to Issue TRO and Writ of Preliminary order issued by the RTC in a Supreme Court and in such lower courts as
February 4, 2014. Court and in such lower courts as may be Injunction” against City of Manila before public local tax case. may be established by law and that judicial
established by law and that judicial respondent’s sala alleging that, in relation to power includes the duty of the courts of justice
power includes the duty of the courts of Section 21 thereof, Sections 14, 15, 16, 17, 18, 19 to settle actual controversies involving rights
justice to settle actual controversies and 20 of the RRCM were violative of the limitations which are legally demandable and
involving rights which are legally and guidelines under Section 143 (h) of Republic enforceable, and to determine whether or not
demandable and enforceable, and to Act No. 7160[Local Government Code] on double there has been a grave abuse of discretion
determine whether or not there has been taxation. The CA dismissed petitioners’ petition for amounting to lack or excess of jurisdiction on
a grave abuse of discretion amounting to certiorari holding that it has no jurisdiction over the the part of any branch or instrumentality of the
lack or excess of jurisdiction on the part said petition since appellate jurisdiction over private Government.
of any branch or instrumentality of the respondents’ complaint for tax refund, which was
Government. filed with the RTC, is vested in the Court of Tax Therefore, CTA can determine whether or not
Appeals (CTA), pursuant to its expanded there has been grave abuse of discretion
jurisdiction under Republic Act No. 9282 (RA 9282). amounting to lack or excess of jurisdiction on
the part of the RTC in issuing an interlocutory
order in cases falling within the exclusive
appellate jurisdiction of the tax court. Thus,
CTA, by constitutional mandate, is vested with
jurisdiction to issue writs of certiorari in these
cases.
9. Coca-Cola Section 252 (c) of the Local Government In the case entitled Coca-Cola Bottlers Philippines, Whether or not the issuance NO. The issuance of the Writ of Execution was
Bottlers Philippines, Code of the Philippines is very clear that Inc. v. City of Manila, et al., docketed as Civil Case of the writ of execution of the superfluous. Instead of moving for the
Inc. vs. City of Manila "[i]n the event that the protest is finally No. 00-97081, granting petitioner’s request for tax judgment ordering issuance of a writ of execution relative to the
et. al., G.R. No. decided in favor of the taxpayer, the refund or credit assessed under Section 213 of the respondents either to refund aforesaid Decision, petitioner should have
197561, April 7, 2014. amount or portion of the tax protested Revenue Code of Manila upon finding that there or credit the tax assessed merely requested for the approval of the City of
shall be refunded to the protestant, or was double taxation in the imposition of local under Section 2118 of the Manila in implementing the tax refund or tax
applied as tax credit against his existing business taxes. Petitioner filed with the RTC-Manila Revenue Code of Manila credit, whichever is appropriate. In other
or future tax liability." It was not a Motion for Execution for the enforcement of the was proper. words, no writ was necessary to cause the
necessary for petitioner to move for the Decision and the issuance of the corresponding writ execution thereof, since the implementation of
issuance of the writ of execution because of execution. However, respondents filed a Motion the tax refund will effectively be a return of
the remedy has already been provided to Quash Writ of Execution and it was granted. funds by the City of Manila in favor of petitioner
by law. Hence, petitioner's appeal. while a tax credit will merely serve as a
deduction of petitioner’s tax liabilities in the
future.

10. Government Beneficial Use Doctrine: SEC. 234. GSIS owns or used to own two (2) parcels of land 1. Whether GSIS under its 1. YES. RA 8291 restored in 1997 the tax
Service Insurance Exemptions from Real Property Tax. – located at Katigbak, Manila (Katigbak property), charter is exempt from real exempt status of GSIS by reenacting under its
System vs. City The following are exempted from and the other, at Concepcion, Manila (Concepcion- property taxation. 2. Sec. 39 what was once Sec. 33 of P.D. 1146.
Treasurer and City payment of the real property tax: Arroceros property). Title to the Concepcion- Assuming that it is so The subject properties under GSIS’s name are
Assessor of the City Arroceros property was transferred to this Court in exempt, whether GSIS is likewise owned by the Republic. The GSIS is
of Manila, G.R. No. (a) Real property owned by the Republic 2005 pursuant to Proclamation No. 835 dated April liable for real property taxes but a mere trustee of the subject properties
186242, December of the Philippines or any of its political 27, 2005. Both the GSIS and the Metropolitan Trial for its properties leased to a which have either been ceded to it by the
23, 2009. subdivisions except when the beneficial Court (MeTC) of Manila occupy the Concepcion- taxable entity. Government or acquired for the enhancement
use thereof has been granted, for Arroceros property, while the Katigbak property of the system.
consideration or otherwise, to a taxable was under lease. the City Treasurer of Manila 2. YES. The Republic to grant the beneficial
person. issued separate Notices of Realty Tax Delinquency use of its property to an agency or
for the subject properties, with the usual warning of instrumentality of the national government.
This exemption, however, must be read seizure and/or sale. On October 8, 2002, GSIS, Such grant does not necessarily result in the
in relation with Sec. 133(o) of the LGC, through its legal counsel, wrote back emphasizing loss of the tax exemption. The tax exemption
which prohibits LGUs from imposing the GSIS’ exemption from all kinds of taxes, the property of the Republic or its
taxes or fees of any kind on the national including realty taxes, under Republic Act No. (RA) instrumentality carries ceases only if, as stated
government, its agencies, and 8291. in Sec. 234(a) of the LGC of 1991, "beneficial
instrumentalities. use thereof has been granted, for a
consideration or otherwise, to a taxable
person." GSIS, as a government
instrumentality, is not a taxable juridical person
under Sec. 133(o) of the LGC. GSIS, however,
lost in a sense that status with respect to the
Katigbak property when it contracted its
beneficial use to MHC, doubtless a taxable
person.
11. Team Pacific The proper remedy from the denial of an TPC is a DC engaged in the business of NO. It is well settled that certiorari is available
Corporation vs. Daza assessment protest by a local treasurer assembling and exporting semiconductor devices. only when directed against an officer
as Municipal is an ordinary appeal, and not Rule 65 It had been paying local business taxes assessed exercising judicial or quasi-judicial function
Treasurer of Taguig, petition on certiorari as the local at one-half (1/2) rate pursuant to Section 75 (c) of who has acted with grave abuse of discretion
G.R. No. 167732, July treasurer is not exercising judicial or the Taguig Revenue Code granted to exporters of amounting to lack or excess of jurisdiction and
11, 2012 quasi- judicial function in assessing one’s essential commodities as enumerated therein. that there is no appeal nor any plain, speedy,
taxes and/or denying its protest. TPC is a DC engaged in the business of and adequate remedy in the ordinary course of
assembling and exporting semiconductor devices. law. TPC erroneously availed of the wrong
It had been paying local business taxes assessed remedy in filing a Rule 65 petition. The
at one-half (1/2) rate pursuant to Section 75 (c) of Municipal Treasurer cannot be said to be
the Taguig Revenue Code granted to exporters of performing a judicial or quasi- judicial function
essential commodities as enumerated therein. in assessing TPC's business tax and/or
effectively denying its protest. Such actions are
not the proper subjects of a Rule 65 petition for
certiorari which is an extraordinary remedy
designed for the correction of errors of
jurisdiction and not errors of judgment.

12. Republic of the In the absence of a clear language of the The Public Estates Authority (PEA) is a government Whether or not the local NO. PRA is a government instrumentality
Philippines law imposing tax, the local government corporation created by virtue of P.D. No. 1084. It government of Parañaque vested with corporate powers and performing
represented by the unit is prohibited from imposing tax was designated as the agency primarily City may impose Real an essential public service pursuant to Section
Philippine against the national government, its responsible for integrating, directing and Property Tax against 2 (10) of the Introductory Provisions of the
Reclamation agencies and instrumentalities. coordinating all reclamation projects for and on Philippine Reclamation Administrative Code. Being an incorporated
Authority vs. City of behalf of the National Government by virtue of E.O. Authority (PRA). government instrumentality, it is exempt from
Paranaque, G.R. No. No. 525. PEA was transformed into Philippine payment of real property tax. Clearly,
191109, July 18, Reclamation Authority (PRA) by E.O. No. 380. By respondent has no valid or legal basis in taxing
2012. virtue of its mandate, PRA reclaimed several the subject reclaimed lands managed by PRA.
portions of the foreshore and offshore areas of On the other hand, Section 234 (a) of the LGC,
Manila Bay, including those located in Parañaque in relation to its Section 133 (o), exempts PRA
City. The Parañaque City Treasurer issued from paying realty taxes and protects it from
Warrants of Levy on PRA's reclaimed properties the taxing powers of local government units. It
(Central Business Park and Barangay San is clear from Section 234 that real property
Dionisio) located in Parañaque City based on the owned by the Republic of the Philippines (the
assessment for delinquent real property taxes for Republic) is exempt from real property tax
tax years 2001 and 2002. PRA filed a Motion for unless the beneficial use thereof has been
Leave to File and Admit Attached Supplemental granted to a taxable person. In this case, there
Petition which sought to declare as null and void the is no proof that PRA granted the beneficial use
assessment for real property taxes, the levy based of the subject reclaimed lands to a taxable
on the said assessment, the public auction sale entity. There is no showing on record either
conducted on April 7, 2003, and the Certificates of that PRA leased the subject reclaimed
Sale issued pursuant to the auction sale. RTC properties to a private taxable entity. This
dismissed PRA's petition. exemption should be read in relation to Section
133 (o) of the same Code, which prohibits local
governments from imposing "[t]axes, fees or
charges of any kind on the National
Government, its agencies and
instrumentalities . . . ." The Administrative
Code allows real property owned by the
Republic to be titled in the name of agencies or
instrumentalities of the national government.
Such real properties remain owned by the
Republic and continue to be exempt from real
estate tax. The rationale behind Section 133
(o) has also been explained in the case of the
Manila International Airport Authority, to wit:
Section 133(o) recognizes the basic principle
that local governments cannot tax the national
government, which historically merely
delegated to local governments the power to
tax. While the 1987 Constitution now includes
taxation as one of the powers of local
governments, local governments may only
exercise such power "subject to such
guidelines and limitations as the Congress may
provide." When local governments invoke the
power to tax on national government
instrumentalities, such power is construed
strictly against local governments. Another rule
is that a tax exemption is strictly construed
against the taxpayer claiming the exemption.
However, when Congress grants an exemption
to a national government instrumentality from
local taxation, such exemption is construed
liberally in favor of the national government
instrumentality. Section 133 of the Local
Government Code states that "unless
otherwise provided" in the Code, local
governments cannot tax national government
instrumentalities. This doctrine emanates from
the "supremacy" of the National Government
over local governments.
13. Sta. Lucia Realty The authority to collect real property Petitioner Sta. Lucia is the registered owner of Whether or not the YES. The resolution of the boundary dispute
& Development, Inc. taxes is vested in the locality where the several parcels of land with 3 TCTs, which were all settlement of boundary between Pasig and Cainta would determine
vs. City of Pasig, property is situated. However, while a located in Barrio Tatlong Kawayan, Municipality of dispute between Cainta and which local government unit is entitled to
G.R. No. 166838, local government unit is authorized under Pasig. The parcel of land covered by TCT No. Pasig presented a collect realty taxes from Sta. Lucia. Under
June 15, 2011. several laws to collect real estate tax on 39112 was consolidated with that covered by TCT "prejudicial question" to the Presidential Decree No. 464 or the "Real
properties falling under its territorial No. 518403, which was situated in Barrio Tatlong resolution of the case for Property Tax Code," the authority to collect real
jurisdiction, it is imperative to first show Kawayan, Municipality of Cainta, Province of Rizal. collection of real estate property taxes is vested in the locality where
that these properties are unquestionably Secondly, TCT No. 39110 was also divided into two taxes. the property is situated. However, while a local
within its geographical boundaries. lots, becoming TCT Nos. 92869 and 92870. Thirdly, government unit is authorized under several
the lot covered by TCT No. 38457 was not laws to collect real estate tax on properties
segregated, but a commercial building owned by falling under its territorial jurisdiction, it is
Sta. Lucia East Commercial Center, Inc., a imperative to first show that these properties
separate corporation, was built on it. Upon Pasig’s are unquestionably within its geographical
petition to correct the location stated in TCT Nos. boundaries. Clearly therefore, the local
532250, 598424, and 599131, the Land government unit entitled to collect real property
Registration Court ordered the amendment of the taxes from Sta. Lucia must undoubtedly show
TCTs to read that the lots with respect to TCT No. that the subject properties are situated within
39112 were located in Barrio Tatlong Kawayan, its territorial jurisdiction; otherwise, it would be
Pasig City. Cainta filed a petition for the settlement acting beyond the powers vested to it by law.
of its land boundary dispute with Pasig before the Although it is true that "Pasig" is the locality
RTC Antipolo. Meanwhile, Pasig filed a Complaint stated in the TCTs of the subject properties,
against Sta. Lucia for the collection of real estate both Sta. Lucia and Cainta aver that the metes
taxes, including penalties and interests, on the lots and bounds of the subject properties, as they
covered by TCT Nos. 532250, 598424, 599131, are described in the TCTs, reveal that they are
92869, 92870 and 38457, including the within Cainta's boundaries. This only means
improvements thereon. Sta. Lucia, in its Answer, that there may be a conflict between the
alleged that it had been religiously paying its real location as stated and the location as
estate taxes to Cainta, just like what its technically described in the TCTs. Mere
predecessors-in-interest did, by virtue of the reliance therefore on the face of the TCTs will
demands and assessments made and the Tax not suffice as they can only be conclusive
Declarations issued by Cainta on the claim that the evidence of the subject properties' locations if
subject properties were within its territorial both the stated and described locations point
jurisdiction. Sta. Lucia and Cainta thereafter moved to the same area. The Antipolo RTC, wherein
for the suspension of the proceedings, and claimed the boundary dispute case between Pasig and
that the pending petition in the Antipolo RTC, for the Cainta is pending, would be able to best
settlement of boundary dispute between Cainta and determine once and for all the precise metes
Pasig, presented a "prejudicial question" to the and bounds of both Pasig's and Cainta's
resolution of the case. Pasig maintains that the respective territorial jurisdictions. The
boundary dispute case before the Antipolo RTC is resolution of this dispute would necessarily
independent of the complaint for collection of realty ascertain the extent and reach of each local
taxes which was filed before the Pasig RTC. It government's authority, a prerequisite in the
avers that the doctrine of "prejudicial question,"
 which has a definite meaning in law, cannot be proper exercise of their powers, one of which
invoked where the two cases involved are both civil. is the power of taxation.

14. Republic of the The denial by the RTC to issue an On 8 August 1997, the DOTC entered into a Whether or not it was YES. This case is, ultimately, between a local
Philippines injunction or TRO does not automatically Revised and Restated Agreement to Build, Lease premature for the RTC to government's power to tax and the natio
(Department of give respondent the liberty to proceed and Transfer a Light Rail System for EDSA (BLT) issue a writ of possession. government's privilege of tax examption. That
Transportation and with the actions sought to be enjoined with Metro Rail Transit Corporation Limited (Metro issue needs full hearing and deliberation, as
Communications) vs Rail), a foreign corporation. Under the BLT indeed, the issue pends before the RTC, at first
City of Agreement, Metro Rail shall be responsible for the instance. Such trial of facts and issues must
Mandaluyong, G.R. design, construction, equipping, completion, proceed. It shoud not be pr-empted by the
No. 184879, February testing, and commissioning of the Light Rail Transit present petition that deals with the
23, 2011. System-LRTS Phase I The DOTC shall operate the respondent's intended end result. A writ of
same but ownership of the EDSA MRT III shall possession is a mere incident in In the instant
remain with Metro Rail during the Revenue and case, it stemmed from the exercise of alleged
Construction periods. At the end of the Revenue ownership by respondent over EDSA MRT III
Period, Metro Rail shall transfer to DOTC its properties by virtue of a tax delinquency sale.
Petitioner Republic filed a case for Declaration of The issue of whether the auction sale should
Nullity of Real Property Tax Assessment and be enjoined is still pending before the Court of
Warrant of Levy with a prayer for a Temporary Appeals. the transfer of title. Pending
Restraining Order (TRO) and Writ of Preliminary determination, it is premature for respondent to
Injunction. On the same date, the City Treasurer have conducted the auction sale and caused
issued and served a Warrant of Levy upon MRTC the transfer of title over the real properties to its
with the corresponding Notices of Levy upon the name. The denial by the RTC to issue an
City Assessor and the Registrar of Deeds of injunction or TRO does not automatically give
Mandaluyong City. Petitioner Republic alleged that respondent the liberty to proceed with the
since Metro Rail had transferred to the DOTC the actions sought to be enjoined, especially so in
actual use, possession and operation of the EDSA this case where a certiorari petition assailing
MRT III System, Metro Rail or MRTC does not have the denial is still being deliberated in the Court
actual or beneficial use and possession of the of Appeals. All the more it is premature for the
EDSA MRT III properties as to subject it to payment RTC to issue a writ of possession where the
of real estate taxes. On the other hand, ownership of the subject properties is derived
notwithstanding the transfer to DOTC of the actual from an auction sale, the validity of which is still
use, possession and operation of the EDSA MRT being threshed out in the Court of Appeals. The
III, petitioner Republic is not liable because local RTC should have held in abeyance the
government units are legally proscribed from issuance of a writ of possession. At this
imposing taxes of any kind on it under Section juncture, the writ issued is premature and has
133(o) of Republic Act No. 7160. Likewise, under no force and effect.
Section 234 of the same law, petitioner is exempted
from payment of real property tax. On the same
date, the City Treasurer issued and served a
Warrant of Levy upon MRTC with the
corresponding Notices of Levy upon the City
Assessor and the Registrar of Deeds
Consequently, on 24 March 2006, a public auction
was conducted. For lack of bidders, the real
properties were forfeited in favor of the City of
Mandaluyong for the price of P1,483,700,100.18. of
Mandaluyong City. MRTC filed a complaint-in-
intervention and sought to declare the nullity of the
real property tax assessments. Meanwhile,
respondent manifested before the Court of Appeals
that due to the failure of MRTC to exercise the right
of redemption, the City Treasurer of Mandaluyong
executed a Final Deed of Sale in favor of the
purchaser in the auction sale. On 30 July 2008, the
RTC Branch 213, through Judge Carlos A.
 Valenzuela, granted the petition for the issuance of
a writ of possession.

15. Alejandro Ty v. The Municipal or City Assessor cannot Petitioner Alejandro B. Ty is a resident of and Wheher or not R.A. 7160, NO, Both laws can be harmonized.
Hon. Trampe,et al., solely prepare schedules of market registered owner of lands and buildings in the otherwise known as the Presidential Decree No. 921 was promulgated
G.R. No. 117577, values. There should be a meeting Municipality (now City) of Pasig, while petitioner Local Government Cod of on 12 April 1976, with the aim of, inter alia,
December 1, 1995 between the Local Treasury and MVR Picture Tube, Inc. is a corporation duly 1991, repealed the evolving "a progressive revenue raising
Assessment District where different organized and existing under Philippine laws and is provisions of PD No. 921. program that will not unduly burden the tax
assessors shall compare their individual likewise a registered owner of lands and buildings payers . . . " in Metropolitan Manila. Hence, it
assessments, discuss and thereafter in the said Municipality. Respondent Assessor sent provided for the "administration of local
jointly agree and produce a schedule of a notice of assessment respecting certain real financial services in Metropolitan Manila" only,
values for their district, taking into properties of petitioners located in Pasig, Metro and for this purpose, divided the area into four
account the preamble of said P.D. that Manila. In a letter dated 18 March 1994, petitioners Local Treasury and Assessment Districts,
they should evolve "a progressive through counsel requested the Municipal Assessor regulated the duties and functions of the
revenue raising program that will not to reconsider the subject . assessments . treasurers and assessors in the cities and
unduly burden the taxpayers". The Petitioners filed with the RTC presided by municipalities in said area and spelled out the
schedule jointly agreed upon by the respondent Judge a Petition for Prohibition with process of assessing, imposing and
assessors shall then be published in a prayer for a restraining order and/or writ of distributing the proceeds of real estate taxes
newspaper of general circulation and preliminary injunction to declare null and void the therein. Upon the other hand, Republic Act No.
submitted to the Sanggunian concerned new tax assessments and to enjoin the collection of 7160, otherwise known and cited as the Local
for enactment by ordinance. real estate taxes based on said assessments. Government Code of 1991 took effect on 01
respondent Judge denied the petition "for lack of January 1992. It declared "genuine and
merit". Their MR was also denied. Rebuffed by said meaningful local autonomy" as a policy of the
Decision and Order, petitioners filed this present state. Such policy was meant to decentralize
Petition for Review directly before this Court, raising government "powers, authority, responsibilities
pure questions of law. The petitioners argue that and resources" from the national government
the assessment is void for failure to comply with PD to the local government units "to enable them
921 which provides for the preparation of schedule to attain their fullest development as self-
of values within Metro Manila to be prepared jointly reliant communities and make them more
by the City Assessors of the districts within said effective partners in the attainment of national
area. However, respondents argue that PD 921 goals." In the formulation and implementation
was impliedly repealed by the Local Government of policies and measures on local autonomy,
Code of 1991 as the same vests the authority to ''local government units may group
assess with the Municipal/City Assessors. themselves, consolidate or coordinate their
efforts, services and resources for purposes
commonly beneficial to them." From the above,
it is clear that the two laws are not co-extensive
and mutually inclusive in their scope and
purpose. While R.A. 7160 covers almost all
governmental functions delegated to local
government units all over the country, P.D. 921
embraces only the Metropolitan Manila area
and is limited to the administration of financial
services therein, especially the assessment
and collection of real estate (and some other
local) taxes. Coming down to specifics, Sec. 9
of P.D. 921 requires that the schedule of values
of real properties in the Metropolitan Manila
area shall be prepared jointly by the city
assessors in the districts created therein: while
Sec. 212 of R.A. 7160 states that the schedule
shall be prepared "by the provincial, city and
municipal assessors of the municipalities
within the Metropolitan Manila Area for the
different classes of real property situated in
their respective local government units for
enactment by ordinance of the Sanggunian
concerned. . . ." Harmony in these provisions is
not only possible, but in fact desirable,
necessary and consistent with the legislative
intent and policy. By reading together and
harmonizing these two provisions, we arrive at
the following steps in the preparation of the
said schedule, as follows: The assessor in
each municipality or city in the Metropolitan
Manila area shall prepare his/her proposed
schedule of values, in accordance with Sec.
212, R.A. 7160. Then, the Local Treasury and
Assessment District shall meet, per Sec. 9,
P.D. 921. In the instant case, that district shall
be composed of the assessors in Quezon City,
Pasig, Marikina, Mandaluyong and San Juan,
pursuant to Sec. 1 of said P.D. In this meeting,
the different assessors shall compare their
individual assessments, discuss and thereafter
jointly agree and produce a schedule of values
for their district, taking into account the
preamble of said P.D. that they should evolve
"a progressive revenue raising program that
 will not unduly burden the taxpayers". The
schedule jointly agreed upon by the assessors
shall then be published in a newspaper of
general circulation and submitted to the
Sanggunian concerned for enactment by
ordinance, per Sec. 212, R.A. 7160

16. Coca-Cola Procedural measure are needed to be The City Mayor of Manila approved Tax Ordinance Whether or not the Tax The Tax Ordinance No. 7988 has already been
Bottlers Phils. Inc. v. followed for the effectivity of and no. 7988 repealing Tax Ordinance no. 7794 Ordinance is null and void for declared by the DOJ Secretary, in its Order,
City of Manila, GR Ordinance. As mandated by Section 188 entitles, “Revenue Code of the City of Manila” Tax being published only once. dated 17 August 2000, as null and void and
No. 156252, June 27, of the Local Government Code of 1991, Ordinance no. 7988 amended certain sections of without legal effect due to respondents' failure
2006 the petitioners failed to publish Tax Tax Ordinance no. 7794 by increasing the rates to satisfy the requirement that said ordinance
Ordinance No. 7988 for three applicable to certain establishments operating be published for three consecutive days as
consecutive days in a newspaper of local within the territorial jurisdiction of the City of Manila, required by law and it had attained finality after
circulation. including herein petitioner Coca-Cola. Subject tax the lapse of the period to appeal.
ordinance was published only once. Aggrieved by
said tax ordinance, petitioner filed a Petition before The RTC of Manila reiterated the findings of the
the DOJ. On August 17, 2000, then DOJ Secretary DOJ Secretary that respondents failed to follow
issued a Resolution declaring the Tax Ordinance the procedure in the enactment of tax
no 7988 null and void and without legal effect. measures as mandated by Section 188 of the
Local Government Code of 1991, in that they
failed to publish Tax Ordinance No. 7988 for
three consecutive days in a newspaper of local
circulation. From the foregoing, it is evident
that Tax Ordinance No. 7988 is null and void
as said ordinance was published only for one
day in the 22 May 2000 issue of the Philippine
Post in contravention of the unmistakable
directive of the Local Government Code of
1991.

Despite the nullity of Tax Ordinance No. 7988,

the court a quo, in the assailed Order, dated 8
May 2002, went on to dismiss petitioner's case
on the force of the enactment of Tax Ordinance
No. 8011, amending Tax Ordinance No. 7988.
Significantly, said amending ordinance was
likewise declared null and void by the DOJ
Secretary in a Resolution, dated 5 July 2001,
elucidating that "[I]nstead of amending
Ordinance No. 7988, [herein] respondent
should have enacted another tax measure
which strictly complies with the requirements of
law, both procedural and substantive. The
passage of the assailed ordinance did not have
the effect of curing the defects of Ordinance
No. 7988 which, any way, does not legally
exist." Said Resolution of the DOJ Secretary
had, as well, attained finality by virtue of the
dismissal with finality by this Court of
respondents' Petition for Review on Certiorari
in G.R. No. 157490 assailing the dismissal by
the RTC of Manila, Branch 17, of its appeal due
to lack of jurisdiction in its Order, dated 11
August 2003.

Based on the foregoing, this Court must

reverse the Order of the RTC of Manila, Branch
21, dismissing petitioner's case as there is no
basis in law for such dismissal. The amending
law, having been declared as null and void, in
legal contemplation, therefore, does not exist.
Furthermore, even if Tax Ordinance No. 8011
was not declared null and void, the trial court
should not have dismissed the case on the
reason that said tax ordinance had already
amended Tax Ordinance No. 7988. As held by
this Court in the case of People v. Lim, if an
order or law sought to be amended is invalid,
then it does not legally exist, there should be
no occasion or need to amend it.
17. City of Manila v. Compliance with the reglementary period Respondent paid the local business tax only as a 1) Has Petitioner’s right to 1) NO. The petitioner complied with the
Coca-Cola, G.R. No. for filing the petition. manufacturers as it was expressly exempted from appeal with the CTA lapsed? reglementary period for filing the petition. From
181845, August 12, the business tax under a different section and which 2) Does the enforcement of April 20, 2007, Petitioner had 30 days, or until
2009 applied to businesses subject to excise, VAT or the succeeding section of the May 20, 2007, within which to file their Petition
percentage tax under the Tax Code. The City of tax ordinance constitute for Review with the CTA. The Motion for
Manila subsequently amended the ordinance by double taxation? Extension filed by the petitioners on May 18,
deleting the provision exempting businesses under 2007, prior to the lapse of the 30-day period on
the latter section if they have already paid taxes 20 May 2007, in which they prayed for another
under a different section in the ordinance. This extended period of 10 days, or until 30 May
amending ordinance was later declared by the 2007, to file their Petition for Review was, in
Supreme Court null and void. Respondent then reality, only the first Motion for Extension of
filed a protest on the ground of double taxation. petitioners. Thus, when Petitioner filed their
RTC decided in favor of Respondent and the Petition via registered mail their Petition for
decision was received by Petitioner on April 20, Review on 30 May 2007, they were able to
2007. On May 4, 2007, Petitioner filed with the CTA comply with the period for filing such a petition.
a Motion for Extension of Time to File Petition for
Review asking for a 15-day extension or until May (2) YES. There is indeed double taxation if
20, 2007 within which to file its Petition. A second respondent is subjected to the taxes under
Motion for Extension was filed on May 18, 2007, both Sections 14 and 21 of the tax ordinance
this time asking for a 10-day extension to file the since these are being imposed: (1) on the
Petition. Petitioner finally filed the Petition on May same subject matter — the privilege of doing
30, 2007 even if the CTA had earlier issued a business in the City of Manila; (2) for the same
resolution dismissing the case for failure to timely purpose — to make persons conducting
file the Petition. business within the City of Manila contribute to
city revenues; (3) by the same taxing authority
— petitioner City of Manila; (4) within the same
taxing jurisdiction — within the territorial
jurisdiction of the City of Manila; (5) for the
same taxing periods — per calendar year; and
(6) of the same kind or character — a local
business tax imposed on gross sales or
receipts of the business.
18. Napocor v. City Although as a general rule, LGUs cannot Pursuant to Sec. 37 of Ordinance No. 165-92, the 1) Is the NAPOCOR 1) NO. A franchise tax is imposed based not on
of Cabanatuan, G.R. impose taxes, fees, or charges of any city government of Cabanatuan assessed NPC, a excluded from the coverage the ownership but on the exercise by the
No. 149110, April 9, kind on the National Government, its GOCC tasked to undertake the development of of the franchise tax simply corporation of a privilege to do business. The
2003 agencies and instrumentalities, this rule power plants, a franchise tax amounting to because its stocks are wholly taxable entity is the corporation which
now admits an exception, i.e. when P808,606.41, representing 75 percent of 1 percent owned by the National exercises the franchise, and not the individual
specific provisions of the LGC authorize of the latter's gross receipts for the preceding year. Government and its charter stockholders. By virtue of its charter, petitioner
the LGUs to impose taxes, fees, or characterized is as a ‘non- was created as a separate and distinct entity
charges on the aforementioned entities. NPC refused to pay, arguing that the city profit organization’? from the National Government. It can sue and
government did not have the authority to impose tax 2) Is the NAPOCOR’s be sued under its own name, and can exercise
on government entities, and that as a non-profit exemption from all forms of all the powers of a corporation under the
organization, it is exempted from the payment of all taxes repealed by the Corporation Code.
forms of taxes, charges, duties or fees in provisions of the Local
accordance with Sec. 13 of RA No. 6395. Government Code (LGC)? 2) YES. One of the most significant provisions
of the LGC is the removal of the blanket
The city government, on the other hand, claimed exclusion of instrumentalities and agencies of
that NPC's exemption from payment of tax was the National Government from the coverage of
already repealed by Sec. 193 of the Local local taxation. The LGC provided for an
Government Code. express withdrawal of such exemptions or
privileges.

19. Palma Devt. Sec 56.01 Imposition of Fees. There Petitioner Palma Development Corporation is Whether or not the No. By the express language of section 153
Corp. v. Municipality shall be collected service fee for its use engaged in milling and selling rice and corn to imposition of service fee is and 155 RA 7160, local government units,
of Malangas, G.R. of the municipal roads or streets leading wholesalers in Zamboanga City. It uses the proper and valid. through their sanggunian, may prescribe the
No. 152492, October to the wharf and to any point along the municipal port of Malangas, Zamboanga del Sur as terms and conditions for the imposition of toll
16, 2003 shorelines within the jurisdiction of the transshipment port for its goods. The port, as well fees or charges for the use of any public road,
municipality and for police surveillance as the surrounding roads leading to it, belong to and pier or wharf funded and constructed by them.
on all goods and all equipment are maintained by the Municipality of Malangas, A service fee imposed on vehicles using
harboured or sheltered in the premises of Zamboanga del Sur. On January 16, 1994, the municipal roads leading to the wharf is thus
the wharf and other within the jurisdiction municipality passed municipal revenue code no. 09 valid, however, section 133 (e) of RA 7160
of the municipality series of 1993, which was subsequently approved prohibits the imposition, in the guise of
by the Sangguniang Panlalawigan of Zamboanga wharfage fees — as well as other taxes or
del Sur in resolution no. 1330 dated August 4, charges in any form whatsoever on goods or
1994.Accordingly, the service fees imposed by merchandise. It is therefore irrelevant if the fee
section 56.01 of the ordinance was paid by imposed are actually for police surveillance on
petitioner under protest. It contended that under the goods, because any other form of
Republic Act No. 7160, otherwise known as the imposition on goods passing through the
local government code of 1991, municipal territorial jurisdiction of the municipality is
governments did not have authority to tax goods clearly prohibited by section 133 (e).
and vehicles that passed through their jurisdictions.
Thereafter, before the Regional Trial Court of
Pagadian City, petitioner filed against the
 Municipality of Malangas on November 29, 1995,
an action for declaratory relief assailing the validity
of section 56.01 of the municipal ordinance.

20. Smart Tax exemptions are never presumed and On February 18, 2002, Smart filed a special civil Whether or not Smart is Yes. The SC find that there is no violation of
Communications, are strictly construed against the action for declaratory relief, for the ascertainment of liable to pay the franchise tax Article III, Section 10 of the 1987 Philippine
Inc. v. City of Davao, taxpayer and liberally in favor of the its rights and obligations under the Tax Code of the imposed by the City of Constitution. Tax exemptions are never
G.R. No. 155491, July taxing authority. They can only be given City of Davao. Smart contends that its telecenter in Davao. presumed and are strictly construed against
21, 2009. force when the grant is clear and Davao City is exempt from payment of franchise tax the taxpayer and liberally in favor of the taxing
categorical. to the City because the power of the City of Davao authority. They can only be given force when
to impose a franchise tax is subject to statutory the grant is clear and categorical. Moreover,
limitations such as the “in lieu of all taxes” clause Smarts franchise was granted with the express
found in Section 9 of R.A. No. 7294 (Smart’s condition that it is subject to amendment,
franchise). Respondents contested the tax alteration, or repeal. In this case since there is
exemption claimed by Smart. They invoked the doubt it must be resolved in favor of the City of
power granted by the Constitution to local Davao. The “in lieu” of all taxes clause applies
government units to create their own sources of only to national internal revenue taxes and not
revenue. On July 19, 2002, the RTC rendered its to local taxes.
Decision denying the petition. The trial court noted
that the ambiguity of the in “lieu of all taxes”
provision in R.A. No. 7294, on whether it covers
both national and local taxes, must be resolved
against the taxpayer.
21. Mobil Phil. Inc. v. Business taxes imposed in the Petitioner is a domestic corporation Whether or not the business NO. The trial court erred when it said that the
City Treasurer of exercise of police engaged in the manufacturing, taxes paid payments made by petitioner in 1998 are
Makati, G.R. No. power for regulatory importing, exporting and wholesaling by petitioner in 1998 were payments for business tax incurred in 1997
154092, 14 July 2005 purposes are paid for the of petroleum products, while business taxes for 1997 or which only accrued in January 1998.
privilege of carrying on a respondents are the local 1998.
business in the year the government officials of the City of Business taxes imposed in the exercise of
tax was paid. It is paid at Makati charged with the police power for regulatory purposes are paid
the beginning of the year implementation of the Revenue for the privilege of carrying on a business in
as a fee to allow the Code of the City of Makati, as well as the year the tax was paid. It is paid at the
business to operate for the collection and assessment of beginning of the year as a fee to allow the
the rest of the year. It is business taxes, license fees and business to operate for the rest of the year. It
deemed a prerequisite to permit fees within said city. is deemed a prerequisite to the conduct of
the conduct of business. business.
On August 20, 1998, petitioner filed
Income tax, on the other an application with the City Treasurer Income tax, on the other hand, is a tax on all
hand, is a tax on all of Makati for the retirement of its yearly profits arising from property,
yearly profits arising from business within the City of Makati as professions, trades or offices, or as a tax on a
property, professions, it moved its principal place of person's income, emoluments, profits and the
trades or offices, or as a business to Pasig City. like. It is tax on income, whether net or gross
tax on a person's realized in one taxable year.15 It is due on or
income, emoluments, Upon evaluation of petitioner's before the 15th day of the 4th month following
profits and the like. It is application, the OIC of the License the close of the taxpayer's taxable year and is
tax on income, whether Division issued to petitioner a billing generally regarded as an excise tax, levied
net or gross realized in slip assessing business tax of upon the right of a person or entity to receive
one taxable year. It is P1,898,106.967. Petitioner paid the income or profits.
due on or before the assessed amount under protest.
15th day of the 4th Petitioner then filed a claim for Under the Makati Revenue Code, it appears
month following the P1,331,638.84 refund which was that the business tax, like income tax, is
close of the taxpayer's denied on the ground that petitioner computed based on the previous year's
taxable year and is was merely transferring and not figures. This is the reason for the confusion. A
generally regarded as an retiring its business, and that the newly-started business is already liable for
excise tax, levied upon gross sales realized while petitioner business taxes (i.e. license fees) at the start of
the right of a person or still maintained office in Makati from the quarter when it commences operations. In
entity to receive income January 1 to August 31, 1998 should computing the amount of tax due for the first
or profits. be taxed in the City of Makati. quarter of operations, the business' capital
investment is used as the basis. For the
Petitioner then filed a petition with subsequent quarters of the first year, the tax is
the RTC seeking the refund of business taxes based on the gross sales/receipts for the
erroneously collected previous quarter. In the following year(s), the
by the City of Makati, but the trial business is then taxed based on the gross
court ruled that the payments made sales or receipts of the previous year. The
by the petitioner in 1998 were business taxes paid in the year 1998 is for the
privilege of engaging in business for the same
payments for the business taxes in year, and not for having engaged in business
1997. for 1997.

The Makati Revenue Code also provides that

on the year an establishment retires or
terminates its business within the municipality,
it would be required to pay the difference in
the amount if the tax collected, based on the
previous year's gross sales or receipts, is less
than the actual tax due based on the current
year's gross sales or receipts.

For the year 1998, petitioner paid a total of

P2,262,122.48 to the City Treasurer of
Makati18 as business taxes for the year 1998.
The amount of tax as computed based on
petitioner's gross sales for 1998 is only
P1,331,638.84. Since the amount paid is more
than the amount computed based on
petitioner's actual gross sales for 1998,
petitioner upon its retirement is not liable for
additional taxes to the City of Makati. Thus, we
find that the respondent erroneously treated
the assessment and collection of business tax
as if it were income tax, by rendering an
additional assessment of P1,331,638.84 for
the revenue generated for the year 1998.
22. Yamane v. BA In the instant case, the assessment Respondent BA Lepanto Whether or not the City of NO. This is because a condominium
Lepanto Condo. appears to be based solely on the Condominium Corporation is a duly Makati may corporation’s existence is not intended for the
Corp., G.R. No. Corporation’s collection of assessments organized condominium corporation collect business taxes on incurrence of profit but to shoulder the
154993, October 25, from unit owners, such assessments constituted in accordance with the condominium corporations. expenses for the maintenance of the
2005 being utilized to defray the Condominium Act, which owns and Condominium project.
necessary expenses for the holds title to the common and limited
Condominium Project and the common common areas of the BA Lepanto Condominium Under Section 151 of the Local Government
areas. (the “Condominium”), Code, cities such as Makati are authorized to
situated in Paseo de Roxas, Makati levy the same taxes, fees, and charges as
There is no contemplation of business City. The Corporation is authorized, provinces and municipalities. It is in Article II,
and no orientation towards profit in this under Article V of its Amended Title II, Book II of the Local Government Code,
case. Hence, the assailed tax By-Laws, to collect regular governing municipal taxes, where the
assessment has no basis under the assessments from its members for provisions on business taxation relevant to this
Local Government Code or the Makati operating expenses, capital petition may be found. However, nowhere
Revenue Code, and the insistence of the expenditures on the common areas, therein is there any citation made by the City
city in its collection of the void tax and other special assessments as Treasurer of any provision of the Revenue
constitutes a attempt at deprivation of provided for in the Master Deed with Code which would serve as the legal authority
property without due process of law. Declaration of Restrictions of the for the collection of business taxes from
Condominium. condominiums in Makati.

On December 15, 1998, the In the instant case, the assessment appears to
Corporation received a Notice of be based solely on the Corporation’s collection
Assessment dated December 14, of assessments from unit owners, such
1998 signed by the City Treasurer. assessments being utilized to defray the
The Notice of Assessment stated necessary expenses for the Condominium
that the Corporation is “liable to pay Project and the common areas. There is no
the correct city business taxes, fees, contemplation of business and no orientation
and charges,” totaling Php towards profit in this case.
1,601,013.77 for the years 1995 to
1997. The Notice of Assessment Hence, the assailed tax assessment has no
was silent as to the statutory basis of basis under the Local Government Code or
the business taxes assessed. the Makati Revenue Code, and the insistence
of the city in its collection of the void tax
The Corporation responded with a constitutes an attempt at deprivation of
written tax protest dated February property without due process of law.
12, 1999, addressed to the City Hence, the collection of business taxes from
Treasurer. It asserted that there was condominiums in Makati is void.
no basis as the Corporation is not
liable for business taxes and
surcharges and interest thereon,
under the Makati [Revenue] Code or
even under the Local Government
Code.
From the denial of the protest, the
Corporation filed an Appeal with the
Regional Trial Court (RTC) of Makati.
Makati RTC Branch 57 rendered a
Decision dismissing the appeal for
lack of merit. Accepting the premise
laid by the City Treasurer, the RTC
concluded that the activities of the
Corporation fell squarely under the
definition of “business” under Section
13 (b) of the Local Government
Code, and thus subject to local
business taxation.

On June 7, 2002, the Court of

Appeals Special Sixteenth Division
rendered the Decision and reversed
the RTC decision and declared that
the Corporation was not liable to pay
business taxes to the City of Makati.
23. Ericsson The local business tax Ericsson Telecommunications, Inc., a Whether or not contractors YES. It should be based on gross receipts.
Telecoms Inc. v. City on contractors should be corporation engaged in the design, should be based Section 143 (e) of LGC covering local
of Pasig, G.R. No. based on gross receipts engineering, and marketing of on gross receipts and not business tax contractors and other
176667, November and not gross revenue. telecommunication facilities/systems. gross revenue. independent contractors, says: “The
22, 2007 In an Assessment Notice dated municipality may impose taxes on the
October 25, 2000 issued by the City following businesses: (e) On contractors and
Treasurer of Pasig City, petitioner other independent contractors, in accordance
was assessed a business tax with the following schedule: With gross
deficiency for the years 1998 and receipts for the preceding calendar year in the
1999 amounting to P9,466,885.00 amount of: Amount of Tax Per Annum”. The
and P4,993,682.00, respectively, provision specifically refers to gross receipts
based on its gross revenues as which is defined under Section 131 of the
reported in its audited financial Local Government Code, as follows:
statements for the years 1997 and “(n) Gross Sales or Receipts include the total
1998. Ericsson filed a Protest amount of money or its equivalent
claiming that the computation of the representing the contract price, compensation
local business tax should be based or service fee, including the amount charged
on gross receipts and not on gross or materials supplied with the services and the
revenue. The City of Pasig issued deposits or advance payments actually or
another Notice of Assessment to petitioner on constructively received during the taxable
November 19, 2001, quarter for the services performed or to be
this time based on business tax performed for another person excluding
deficiencies for the years 2000 and discounts if determinable at the time of sales,
2001, amounting to P4,665,775.51 sales return, excise tax, and value-added tax
and P4,710,242.93, respectively, (VAT);”
based on its gross revenues for the
years 1999 and 2000. Again, The law is clear, the provision specifically
Ericsson filed a Protest claiming that states that the basis should be gross receipts.
the computation of the local business Gross receipts include money or its equivalent
tax should be based on gross actually or constructively received in
receipts and not on gross revenue. consideration of services rendered or articles
sold, exchanged or leased, whether actual or
constructive. There is constructive receipt
when the consideration for the articles sold,
exchanged or leased, or the services rendered
has already been placed under the control of
the person who sold the goods or rendered
the services without any restriction by the
payor.

In contrast, gross revenue covers money or its

equivalent actually or constructively received,
including the value of services rendered or
articles sold, exchanged or leased, the
payment of which is yet to be received. This is
in consonance with the International Financial
Reporting Standards, which defines revenue
as the gross inflow of economic benefits
(cash, receivables, and other assets) arising
from the ordinary operating activities of an
enterprise (such as sales of goods, sales of
services, interest, royalties, and dividends),
which is measured at the fair value of the
consideration received or receivable.
In this case, its audited financial statements
reflect income or revenue which accrued to it
during the taxable period although not yet
actually or constructively received or paid,
because Ericsson uses the accrual method of
accounting, where income is reportable when
all the events have occurred that fix the
taxpayers right to receive the income, and the
amount can be determined with reasonable
accuracy; the right to receive income, and not
the actual receipt, determines when to include
the amount in gross income.

The imposition of local business tax based on

Ericsson’s gross revenue will inevitably result
in the constitutionally proscribed double
taxation taxing of the same person twice by
the same jurisdiction for the same thing
inasmuch as petitioners revenue or income for
a taxable year will definitely include its gross
receipts already reported during the previous
year and for which local business tax has
already been paid.

Thus, respondent committed a palpable error

when it assessed petitioner’s local business
tax based on its gross revenue as reported in
its audited financial statements, as Section
143 of the Local Government Code and
Section 22 (e) of the Pasig Revenue Code
clearly provide that the tax should be
computed based on gross receipts.
24. Allied Thread The power to levy an Municipality of Manila enacted an Whether or not the ordinance YES. The ordinance conformed with PD 426,
Co., Inc. v. Manila, excise upon the ordinance imposing on as and Local Tax Regulation which require that a
G.R. No. L-40296,21 performance of an act or manufacturers, importers or amended is valid and local tax ordinance intended to take effect on
Nov. 1984 the engaging in an producers, doing business in Manila, petitioner Allied thread is a July 1, 1974 should be enacted by the local
occupation does not business taxes based. Petitioner proper subject thereto. chief executive not later than June 15, 1974.
depend upon the Allied Thread ,engaged in the The subsequent amendments to the basic
domicile of the person business of manufacturing sewing ordinance did not invalidate it nor move te
subject to the excise, nor thread and yarn, filed a petition for date of its effectivity.
upon the physical declaratory relief contending that the
location of the property ordinance is not valid nor There was substantial compliance of the law
and in connection with enforceable as the same is contrary on publication. Finally, Petitioner admits that
the act or occupation to Section 54 of PD 426. Petitioners doing business in the City of Manila through a
taxed, but depends upon further claim that they are not broker or agent doing business in the City of
the place in which the covered by the said ordinance Manila is all that is required to fall within the
act is performed or because it does not maintain a coverage of the ordinance
occupation engaged in. branch office in Manila and its
principal office.

25. Province of A province may not On June 26, 1992, the Sangguniang Whether or not petitioner NO. They are still prohibited from imposing
Bulacan v. CA, G.R. ordinarily impose taxes Panlalawigan of Bulacan passed province has taxes on stones, sand, gravel, earth and other
No. 126232, on stones, sand, gravel, Provincial Ordinance No. 3, known the authority to impose taxes quarry resources extracted from private lands.
November 27, 1998 earth and other quarry as "An Ordinance Enacting the on stones, sand, gravel, Section 186 of the Local Government Code
resources, as the same Revenue Code of the Bulacan earth allows a province to levy taxes other than
are already taxed under Province," which was to take effect and other quarry resources those specifically enumerated under the Code,
the National Internal on July 1, 1992. extracted from private lands. subject to the conditions specified therein.
Revenue Code. More so, Section 21. Imposition of Tax. — The tax imposed by the Province of Bulacan is
as to stones, sand, There is hereby levied and collected an excise tax, being a tax upon the
gravel, earth and other a tax of 10% of the fair market value performance, carrying on, or exercise of an
quarry resources in the locality per cubic meter of activity.
extracted from private ordinary stones, sand, gravel, earth
land, because of the and other quarry resources, such, Based on Section 133 (h) of the Local
limitation provided by but not limited to marble, granite, Government Code, a province may not levy
Section 133 of the Code volcanic cinders, basalt, tuff and rock excise taxes on articles already taxed by the
in relation to Section 151 phosphate, extracted from public National Internal Revenue Code.
of the National Internal lands or from beds of seas, lakes, It is clearly apparent from Section 151 of the
Revenue Code. rivers, streams, creeks and other NIRC that the National Internal Revenue Code
public waters within its territorial levies a tax on all quarry resources, regardless
jurisdiction. of origin, whether extracted from public or
private land.
Pursuant thereto, the Provincial
Treasurer of Bulacan, assessed Thus, a province may not ordinarily impose
private respondent Republic Cement taxes on stones, sand, gravel, earth and other
 Corporation extracting limestone, quarry resources, as the same are already
shale and silica from several parcels taxed under the National Internal Revenue
of private land in the province during Code.
the third quarter of 1992 until the
second quarter of 1993.
The province can, however, impose a tax on
stones, sand, gravel, earth and other quarry
Believing that the province, on the resources extracted from public land because
basis of above-said ordinance, had it is expressly empowered to do so under the
no authority to impose taxes on Local Government Code.
quarry resources extracted from
private lands, Republic Cement As to stones, sand, gravel, earth and other
formally contested the same. quarry resources extracted from private land,
The same was, however, denied by however, it may not do so, because of the
the Provincial Treasurer. limitation provided by Section 133 of the Code
in relation to Section 151 of the National
Internal Revenue Code.

Given the above disquisition, petitioners

cannot claim that the appellate court unjustly
deprived them of the power to create their
sources of revenue, their assessment of taxes
against Republic Cement being ultra vires,
traversing as it does the limitations set by the
Local Government Code.

26. Angeles City v. The prohibition on the issuance of a writ On June 18, 1964, AEC was granted a legislative Being a special civil action Petition is unmeritorious. The LGC does not
Angeles City Electric of injunction to enjoin the collection of franchise under Republic Act No. (RA) 4079 to for certiorari, the issue in the specifically prohibit an injunction enjoining the
Corp., GR No. taxes applies only to national internal construct, maintain and operate an electric light, instant case is limited to the collection of taxes. Unlike the National Internal
166134, 29 June 2010 revenue taxes, and not to local taxes. heat, and power system for the purpose of determination of whether the Revenue Code, the Local Tax Code does not
generating and distributing electric light, heat and RTC gravely abused its contain any specific provision prohibiting
power for sale in Angeles City, Pampanga. discretion in issuing the writ courts from enjoining the collection of local
Pursuant to Section 3-A thereof, AEC’s payment of of preliminary injunction taxes. Such statutory lapse or intent, however
franchise tax for gross earnings from electric enjoining Angeles City and it may be viewed, may have allowed
current sold was in lieu of all taxes, fees and its City Treasurer from preliminary injunction where local taxes are
assessments. levying, selling, and involved but cannot negate the procedural
disposing the properties of rules and requirements under Rule 58. A
On September 11, 1974, Presidential Decree No. AEC. All other matters principle deeply embedded in our
(PD) 551 reduced the franchise tax of electric pertaining to the validity of jurisprudence is that taxes being the lifeblood
franchise holders. On January 1, 1992, RA 7160 or the tax assessment and of the government should be collected
the Local Government Code (LGC) of 1991 was AEC’s tax exemption must promptly, without unnecessary hindrance or
passed into law, conferring upon provinces and therefore be left for the delay. In line with this principle, the National
cities the power, among others, to impose tax on determination of the RTC Internal Revenue Code of 1997 (NIRC)
businesses enjoying franchise. In accordance with where the main case is expressly provides that no court shall have the
the LGC, the Sangguniang Panlungsod of Angeles pending decision. authority to grant an injunction to restrain the
City enacted on December 23, 1993 Tax Ordinance collection of any national internal revenue tax,
No. 33, S-93, otherwise known as the Revised fee or charge imposed by the code. An
Revenue Code of Angeles City (RRCAC). On exception to this rule obtains only when in the
February 7, 1994, a petition seeking the reduction opinion of the Court of Tax Appeals (CTA) the
of the tax rates and a review of the provisions of the collection thereof may jeopardize the interest
RRCAC was filed with the Sangguniang of the government and/or the taxpayer.
Panlungsod by Metro Angeles Chamber of
Commerce and Industry Inc. (MACCI) of which The situation, however, is different in the case
AEC is a member. There being no action taken by of the collection of local taxes as there is no
the Sangguniang Panlungsod on the matter, express provision in the LGC prohibiting courts
MACCI elevated the petition to the Department of from issuing an injunction to restrain local
Finance, which referred the same to the Bureau of governments from collecting taxes.
Local Government Finance (BLGF). In the petition,
MACCI alleged that the RRCAC is oppressive,
excessive, unjust and confiscatory; that it was
published only once, simultaneously on January
22, 1994; and that no public hearings were
conducted prior to its enactment. Acting on the
petition, the BLGF issued a First Indorsement to the
City Treasurer of Angeles City, instructing the latter
to make representations with the Sangguniang
Panlungsod for the appropriate amendment of the
RRCAC in order to ensure compliance with the
provisions of the LGC, and to make a report on the
action taken within five days.

Thereafter, starting July 1995, AEC has been

paying the local franchise tax to the Office of the
City Treasurer on a quarterly basis, in addition to
the national franchise tax it pays every quarter to
the Bureau of Internal Revenue (BIR).
27. Pelizloy Realty A “place of amusement” as defined in the Pelizloy Realty Corp. owns Palm Grove Resort, a Whether or not the tax Yes. The tax ordinance is ultra vires. An LGU’s
Corp. v. The LGC covers only those places where one recreation facility located in Asin, Benguet, which ordinance is ultra vires power of taxation is not inherent and is granted
Province of Benguet, goes to view a show or performance. consists of swimming pools, a spa, and function only by law. An LGU’s authority to tax is
GR No. 183137, April Resorts, etc., are not places of halls. The Province of Benguet approved a Tax construed in strictissimi against it. LGUs may
10, 2013 amusement and thus cannot be subject Ordinance levying a 10% amusement tax on gross impose percentage tax, if such falls within the
to percentage tax. receipts from admissions to “resorts, swimming exception, such as if the institution taxed is a
pools, bath houses, hot springs, and tourist spots.” place of amusement. Resorts, etc. are not
Pelizloy assailed this ordinance with the argument covered by the exception. They are not places
that it was ultra vires, following Sec. 133(i) of the of “amusement,” which may be subjected to
LGC which prohibits an LGU from levying percentage tax. Sec. 131(c) of the LGC which
percentage taxes, albeit with exception. Benguet defines a place of “amusement” as where one
argues that its tax ordinance falls under the goes to entertain oneself by viewing a show or
exception because Pelizloy is a “place of performance. By the principle of ejusdem
amusement.” generis, resorts, etc. are not places of
amusement. Thus, the tax ordinance is ultra
vires.

REAL PROPERTY TAXATION

Case Title Case Principle Summary of Facts Issue/s Ruling

1. Province of Nueva An assessment does not automatically CE Casecnan is under a Build Operate Transfer Whether or not there was a Absence of a tax ordinance does not
Vizcaya et. al. v. CE become null and void just because there (BOT) agreement with the National Irrigation valid assessment against automatically make an assessment invalid.
Casecnan Water and is no tax ordinance for that specific year. Administration whereby CE Casecnan is respondent despite the Local governments are vested with the power
Energy Company, The absence of current tax ordinances responsible for the financing and construction of the absence of a tax ordinance to create their own sources of revenue. Article
Inc., G.R. No. for the purpose of updating its schedule project and the transportation of the collected water at the time of the assessment X, Section 5 of the 1987 Constitution provides
of fair market values and assessments to the designated locations. In return, the NIA will that:
will not prevent the government from be responsible for all the fees paid to the
levying real property tax. government. Because of NIA's lack of Section 5. Each local government unit shall
communication towards CE Casecnan, the latter have the power to create its own sources of
was forced to pay under protest the assessment revenues and to levy taxes, fees, and charges
made by the Provincial Assessor of Nueva Vizcaya. subject to such guidelines and limitations as
The respondent alleged that no tax liability should the Congress may provide, consistent with the
redound to CE Casecnan because there was no tax basic policy of local autonomy. Such taxes,
ordinance on the years wherein the Provincial fees, and charges shall accrue exclusively to
Assessor based their assessment. the local governments.

One of the taxes which a local government unit

may levy is real property tax. The base of the
RPT, or the assessment level, is defined as the
"percentage applied to the fair market value of
the property to determine its taxable value." In
other words, to compute the assessed value or
the taxable value of a real property, the fair
market value should be multiplied to the
assessment level. The local government units
can legislate the assessment levels through an
ordinance but subject to the maximum levels
provided by Section 218 of the LGC.

Pursuant to the power of the local government

units to fix the assessment level and adopt a
schedule of fair market values, the Province of
Nueva Vizcaya enacted Tax Ordinance No. 99-
002 adopting the 1999 Schedule of Fair Market
Values for the different classes of real
properties in Nueva Vizcaya and Tax
Ordinance No. 2000-003 fixing the assessment
levels for the years 2000 to 2002. While the
said tax ordinances are specifically for the
years 2000 to 2002 only, the failure of the
Province to update its schedule of fair market
values and assessment levels will not prevent
it from levying RPT using as basis the existing
assessment levels and schedule of fair market
value.

The ruling of the CTA En Banc invalidating the

assessment of the RPT in the absence of an
ordinance fixing the assessment levels and fair
market values is dangerous and it is
tantamount to cmiailing the power of local
governments to levy RPT. The prescription
under Section 219 of the LGC for local
governments to undertake a general revision of
real property assessments within two years
after the effectivity of the LGC and every three
years thereafter is only to make sure that the
schedule of fair market values and assessment
levels capture the true economic realities in the
community where the property is located taking
into consideration inflation and other economic
indicators.
 Hence, the assessment of RPT against CE
Casecnan was valid.

2. MWSS v. CBAA, Local governments cannot tax the MWSS was created "to insure an uninterrupted and Whether or not MWSS MWSS is a government instrumentality with
LBAA-Pasay, et. al., national government, which merely adequate supply and distribution of potable water should be liable for Real corporate powers, not liable to the local
G.R. No. 215955, delegated to local governments the for domestic and other purposes and the proper Property Tax. government of Pasay City for real property
January 13, 2021. power to tax. operation and maintenance of sewerage taxes.ℒαwρhi৷ The tax exemption that its
systems."5 It was vested with the power to exercise properties carries, however, ceases when their
supervision and control over all waterworks and beneficial use has been extended to a taxable
sewerage systems within Metro Manila, Rizal, and person. The liability to pay real property taxes
a portion of Cavite. In 1997, "National Water Crisis on government-owned properties, the
Act of 1995," MWSS entered into a concessionaire beneficial or actual use of which was granted
agreement with Maynilad Water Services, Inc. to a taxable entity, devolves on the taxable
(Maynilad) to service the West Zone of the beneficial user. In this case, there was an
Metropolitan Area that includes Pasay City. Under allegation that the beneficial use of MWSS's
the impression that the beneficial use of MWSS' properties in Pasay were given to Maynilad by
utilities have made its way to taxable persons, the virtue of a concession agreement. This factual
Pasay City Treasurer assessed Real Property Tax allegation, however, was not proved and
Computations. The MWSS filed it's protest merely based on a sweeping conclusion that
regarding the assessment. when MWSS entered into a concession
agreement, all its properties were effectively
turned over to the concessionaires for their
operations. At this point, the Court cannot
make a judicious determination of such factual
matter due to the insufficiency of evidence on
records. At any rate, the tax-exempt status of a
government instrumentality is not lost when it
grants the beneficial use of its real property to
a taxable person; only the exemption of the real
property ceases in such case. The LGC also
leaves no room for interpretation on the
corresponding liability of the taxable beneficial
user for the payment of real property taxes on
a government instrumentality property. In sum,
we hold that MWSS is not liable to the local
government of Pasay City for real property
taxes. The tax exemption of its properties,
however, ceases when the beneficial or actual
use is alleged and proven to have been
extended to a taxable person. All the
 assessments issued in the name of MWSS
should thus, be declared void. To be clear,
Pasay City is not precluded from availing of the
appropriate remedies under the law to assess
and collect real property taxes from the private
entities to whom MWSS may have granted the
beneficial use of its properties.

3. Provincial Gov’t of One does not inherit the liability to pay CQM Management, the success of Philippine Whether or not CQM No. CQM, the successor of PI One, is not liable
Cavite et. al. v. CQM Real Property Tax especially when the Investment One (PI One) acquired from Rizal Management, the successor for the said unpaid real property taxes. Citing
Management, Inc., current owner of the property did not Commercial Banking Corporation (RCBC) two non- of PI One, inherit the tax several jurisprudence, the Court ruled that
G.R. No. 248033, July possess or have beneficial use of the performing loans - that of Maxon and Ultimate. Both liability from both Maxon and contractual assumption of the obligation to pay
15, 2020. same property when it was assessed. loans were secured by a property mortgage. When Ultimate real property tax, by itself, is insufficient to
Maxon and Ultimate failed to pay during the three- make one liable for taxes. The contractual
month redemption period, PI One managed to assumption of tax liability must be
acquire the properties. However, upon further supplemented by an interest that the party
inquiry, it was revealed that both Maxon and assuming the liability had on the property; the
Ultimate had been delinquent on their real property person from whom payment is sought must
tax obligations for years. Furthermore, the have also acquired the beneficial use of the
Provincial Treasurer of Cavite issued a tax property taxed. In other words, he must have
assessment and warrant of levy because of the the use and possession of the property. The
unpaid taxes. Court also explained that the liability for taxes
generally rests on the owner of the real
property at the time the tax accrues as a
necessary repercussion of exclusive dominion.
However, personal liability for real property
taxes may also expressly rest on the entity with
the beneficial use of the real property. In either
case, the unpaid tax attaches to the property
and is chargeable against the taxable person
who had actual or beneficial use and
possession of it regardless of whether or not he
is the owner. Here, as correctly pointed out by
the CA, respondent was not yet the owner or
entity with the actual or beneficial use of the
building which was previously owned by
Maxon (Maxon property) and the building
which was previously owned by Ultimate
(Ultimate property) during the years for which
petitioners sought to collect real property
taxes. Specifically, petitioners sought to collect
from respondent real property taxes due on the
Maxon property for the years 2000-2013 and
 on the Ultimate property for the years 1997-
2013. However, respondent became the owner
of the Maxon property and the Ultimate
property only in March 2014, and August 2014,
respectively. To impose the real property taxes
on respondent, which was neither the owner
nor the beneficial user of the property during
the designated periods would not only be
contrary to law but also unjust.

4. Light Rail Transit Having a GOCC status does not at once The LRTA received several Whether or not LRTA's NO. The LRTA is a government instrumentality
Authority v. Quezon disqualify one from real property tax Statements of Delinquency and Final properties are to exercising corporate powers. An agency is a
City, G.R. No. exemption. Having a GOCC status Notices of Tax Delinquency, this be subject to real property government instrumentality when: (a) it
221626, October 9, simply means that the GOCC must find a time, from respondent Quezon City. tax. performs governmental functions, and (b) it
2019. legal basis for claiming real property tax enjoys operational autonomy. It does not
exemption Invoking MIAA v. Court of Appeals, matter that the government instrumentality is
other than what was previously granted the LRTA asserted that it is a endowed with corporate powers.
to it under the old real property tax laws government instrumentality, hence,
which exempt from real property tax. Here, the LRTA bears the elemental
the Local Government Code has already characteristics of a government
repealed. Quezon City countered that the instrumentality vested with corporate
LRTA is not a government powers. Through EO 603, it is vested with
When local governments instrumentality but a corporate powers. LRTA performs
invoke the power to tax government-owned and controlled governmental functions: construction,
on national government corporation (GOCC). Its activities are operation, maintenance, and/or lease of light
instrumentalities, such proprietary in nature and not purely rail transit systems. It also enjoys operational
power is construed governmental. It is clothed with autonomy, as it exists by virtue of a Charter.
strictly against the local corporate status and powers, earns
government. profit, and operates as an ordinary When local governments invoke the power to
private corporation. EO 603 does not tax on national government instrumentalities,
exempt the LRTA from real property such power is construed strictly against local
taxes. The Local Government Code governments. There is also no reason for local
of 1991 has removed or withdrawn governments to tax national government
the tax exemptions of GOCCs. instrumentalities for rendering essential public
services to inhabitants of local governments.
The only exception is when the legislature
clearly intended to tax government
instrumentalities for sound and compelling
policy considerations

The LRTA operations and properties of

public dominion are devoted to public use
and public welfare, hence, are owned by
 the Republic of the Philippines, and for
legal and socially significant reasons, are
exempt from real property taxes under
Section 234 (a) of the Local Government
Code.

5. Mactan Cebu Property owned by the Mactan-Cebu International Airport Whether or not properties YES. Property owned by the State is exempt
International Airport State is exempt from real Authority (MCIAA) was created on owned by the from real property tax, except when the
Authority (MCIAA) v. property tax, except July 31, 1990 under Republic Act State are exempt from Real beneficial use thereof has been granted to a
City of Lapu-Lapu, when the beneficial use No. 6958 for the “management and Property Taxes. taxable person.
G.R. No. 181756, thereof has been granted supervision of the Mactan
to a taxable person. International Airport in the Province The Court in the 2006 MIAA case that Section
of Cebu and the Lahug Airport in 234(a) of the Local Government Code
Properties of MCIAA that Cebu City x x x and such other exempts from real estate tax any “real
are actually, solely and airports as may be established in the property owned by the Republic of the
exclusively used for Province of Cebu.” Philippines.” The Court emphasized, however,
public purpose, Under its charter, Section 14 of RA that “portions of the Airport Lands and
consisting of the airport 6958, MCIAA enjoyed exemption Buildings that MIAA leases to private entities
terminal building, airfield, from realty taxes “imposed by the are not exempt from real estate tax.” For
runway, taxiway, and the National Government or any of its example, the land area occupied by hangars
lots on which they are political subdivisions, agencies, and that MIAA leases to private corporations is
situated, EXEMPT from instrumentalities” subject to real estate tax. In such a case,
real property tax. MIAA has granted the beneficial use of such
On September 11, 1996, however, land area for a consideration to a taxable
the Supreme Court rendered a person, and therefore such land area is
decision in Mactan-Cebu subject to real estate tax.
International Airport Authority v.
Marcos (the 1996 MCIAA case) Like in MIAA, the airport lands and buildings of
declaring that upon the effectivity of MCIAA are properties of public dominion
Republic Act No. 7160 (The Local because they are intended for public use. As
Government Code of 1991 or properties of public dominion, they
“LGC”), MCIAA was no longer indisputably belong to the State or the
exempt from real estate taxes. Thus, Republic of the Philippines and are outside the
in January 1997, respondent City of commerce of man. This, unless MCIAA leases
Lapu-Lapu issued to MCIAA a its real property to a taxable person, the
Statement of Real Estate Tax specific property leased becomes subject to
assessing the lots comprising the real property tax; in which case, only those
Mactan International Airport. portions of petitioner’s properties which are
leased to taxable persons like private parties
The City Treasurer Elena Pacaldo are subject to real property tax by the City of
sent MCIAA a Statement of Real Lapu-Lapu.
Property Tax Balances up to the year
2002 reflecting the amount of Hence, the properties of MCIAA that are
 P246,395,477.20. MCIAA claimed actually, solely and exclusively used for public
that the statement again included the purpose, consisting of the airport terminal
lots utilized solely and exclusively for building, airfield, runway, taxiway, and the lots
a public purpose such as the airfield, on which they are situated, EXEMPT from real
runway, and taxiway and the lots on property tax imposed by the City of
which these are built. Pacaldo then Lapu-Lapu.
issued Notices of Levy on 18 sets of
real properties of MCIAA.

6. Lung Center of the The tax exemption under Petitioner (Lung Center of the Whether or not the petitioner NO. Those portions of petitioner’s real
Philippines v. Section 28(3), Article VI Philippines) is a non-stock, non-profit is entirely property that are leased to private entities are
Quezon City, GR No. of the 1987 Philippine entity which seeks exemption from exempted from real property not exempt from real property taxes as these
144104, June 29, Constitution covers real property taxes when the City taxes. are not actually, directly, and exclusively used
2004 property taxes only. Assessor issued Tax Declarations for for charitable purposes.
What is exempted is not the land and the hospital building.
the institution itself. Section 2 of Presidential Decree No. 1823
A big space on the ground floor is provides that the petitioner shall enjoy the tax
Those exempted from being leased to private parties, for exemptions and privileges: The Lung Center
real estate taxes are canteen and small store spaces, and of the Philippines shall be exempt from the
lands, buildings and to medical or professional payment of taxes, charges, and fees imposed
improvements actually practitioners who use the same as by the Government or any political subdivision
directly and their private clinics for their patients or instrumentality thereof with respect to
exclusively used for whom they charge for their equipment purchases made by, or for the Lung
religious, charitable or professional services. Almost Center.
educational purposes.” one-half of the entire area on the left
side of the building, while a big Under the decree, the petitioner does not
portion on the right side is being enjoy any property tax exemption
leased for commercial purposes to a privileges for its real properties as well as
private enterprise known as the the building constructed thereon. If the
Elliptical Orchids and Garden Center. intentions were otherwise, the same should
have been among the enumeration of
Petitioner predicted on its claim that tax-exempt privileges under Section 2.
it is a charitable institution. The Section 28(3), Article VI of the 1987
request was denied, and a petition Philippine Constitution provides, thus:
was hereafter filed before the Local Charitable institutions, churches and
Board of Assessment Appeals of parsonages or convents appurtenant thereto,
Quezon City (QC-LBAA) for reversal mosques, non-profit cemeteries, and all lands,
of the resolution of the City buildings, and improvements, actually, directly
Assessor. Petitioner alleged that as a and exclusively used for religious, charitable
charitable institution, it is exempted or educational purposes shall be exempt from
from real property taxes under Sec taxation.
28(3) Art VI of the Constitution.
QC-LBAA dismissed the petition and The tax exemption under this constitutional
 the decision was likewise affirmed on provision covers property taxes only. What
appeal by the Central Board of is exempted is not the institution itself...; those
Assessment Appeals of Quezon City. exempted from real estate taxes are lands,
The Court of Appeals affirmed the buildings, and improvements actually,
judgment of the Central Board of directly and exclusively used for religious,
Assessment Appeals. charitable or educational purposes.”
What is meant by the actual, direct, and
exclusive use of the property for charitable
purposes is the direct and immediate and
actual application of the property itself to the
purposes for which the charitable institution is
organized. It is not the use of the income from
the real property that is determinative of
whether the property is used for tax-exempt
purposes.

7. Manila Real property owned by Petitioner Manila International Airport Whether or not the Airport YES. The Supreme Court ruled that the
International Airport the Republic is not Authority (MIAA) operates the Ninoy Lands and MIAA's Airport Lands and Buildings are
Authority v. CA, GR taxable. Aquino International Airport (NAIA) Buildings of MIAA are exempt from real estate tax imposed by local
No. 155650, July 20, Complex in Parañaque City under exempt governments for the following reasons:
2006, En banc, GR However, portions of the Executive Order No. 903, otherwise from real estate tax under 1. MIAA is not a government-owned or
No. 163072, April 2, (Airport) Lands and known as the Revised Charter of the existing laws. controlled corporation but an
2009 Buildings that the Manila International Airport Authority instrumentality of the National
Government ("MIAA Charter") which was issued Government and thus exempt from local
Instrumentality (MIAA) on 21 July 1983 by then President taxation.
leases to private entities Ferdinand E. Marcos. Subsequently, 2. Real properties of MIAA are owned by
are not exempt from real Executive Order Nos. 909 1 and 298 the Republic of the Philippines and thus
estate tax. 2 amended the MIAA Charter. exempt from real estate tax.

As the operator of the international MIAA is a government instrumentality

airport, MIAA administers the land, vested with corporate powers to perform
improvements, and equipment within efficiently its governmental functions. MIAA is
the NAIA Complex. The MIAA like any other government instrumentality, the
Charter transferred to MIAA only difference is that MIAA is vested with
approximately 600 hectares of land, corporate powers.
including the runways and buildings
("Airport Lands and Buildings") then Section 133 (o) of the Local Government Code
under the Bureau of Air recognizes the basic principle that local
Transportation. governments cannot tax the national
government, which historically merely
On 21 March 1997, the Office of the delegated to local governments the power to
Government Corporate Counsel tax.
(OGCC) issued Opinion No. 061
 which opined that the Local Section 234 (a) of the Local Government Code
Government Code of 1991 withdrew exempts from real estate tax any “real
the exemption from real estate tax property owned by the Republic of the
granted to MIAA under Section 21 of Philippines.
the MIAA Charter. Thus, MIAA This exemption should be read in relation with
negotiated with respondent City of Section 133 (o) of the same Code, which
Parañaque to pay the real estate tax prohibits local governments from imposing
imposed by the City. MIAA then paid "taxes, fees or charges of any kind on the
some of the real estate tax already National Government, its agencies and
due. MIAA received Final Notices of instrumentalities ..."
Real Estate Tax Delinquency from
the City of Parañaque for the taxable The real properties owned by the Republic are
years 1992 to 2001. titled either in the name of the Republic itself
or in the name of agencies or instrumentalities
The City of Parañaque, through its of the National Government.
City Treasurer, issued notices of levy
and warrants of levy on the Airport The Administrative Code allows real property
Lands and Buildings. The Mayor of owned by the Republic to be titled in the name
the City of Parañaque threatened to of agencies or instrumentalities of the national
sell at public auction the Airport government. Such real properties remain
Lands and Buildings should MIAA owned by the Republic and continue to be
fail to pay the real estate tax exempt from real estate tax.
delinquency.

8. Quezon City Govt The grant of taxing BAYANTEL’s real properties within Whether or not BAYANTEL’s YES. Section 11 of BAYANTEL’s amended
v. BayanTel Corp., powers to local the territorial jurisdiction of Quezon properties franchise, which took effect after the effectivity
GR N0. 162015, government units under City were subjected to real property are exempt from real of the Local Government Code impliedly
March 6, 2006 the Constitution and the tax pursuant to the Quezon City property repealing the same provision in the franchise,
LGC does not affect the Revenue Code. BAYANTEL taxes. provides that “The grantee, its successors or
power of Congress to requested the City for the exclusion assigns shall be liable to pay the same taxes
grant exemptions to of its properties. on their real estate, buildings, and personal
certain persons, property, exclusive of this franchise”. In other
pursuant to a declared When it was denied by the City, words, real properties of BAYANTEL that are
national policy. The legal BAYANTEL interposed an appeal to actually, directly, and exclusively used in its
effect of the the Local Board of Assessments radio or telecommunication business, are
constitutional grant to (LBAA) without paying the taxes exempt from real property taxes.
local governments assessed upon it. Petitioner City
simply means that in then proceeded to levy the said The question now revolves around whether
interpreting statutory properties and prepare them for the City’s Revenue Code effectively revoked
provisions on municipal public auction. this tax exemption. In support of this, they rely
taxing powers, doubts on Section 232 of the LGC. The Court does
must be resolved in favor BAYANTEL, threatened by the not agree for as in the case of Mactan Cebu
imminent loss, withdrew its appeal International Airport Authority, the power to
 of municipal before the LBAA and applied for a tax, which also includes the power to exempt,
corporations. petition for prohibition with an urgent is still primarily vested in Congress.
application for a temporary
restraining order (TRO) and/or writ of Moreover, the LGC provides that a city or
preliminary injunction before the RTC municipality may levy annual ad valorem tax
of Quezon. on real property not hereinafter specifically
exempted. By virtue of the enactment of
Accordingly, the RTC issued a TRO RA7633, which amended the original franchise
on the eve of the public auction. after the effectivity of the LGC, operated as an
After their motion for reconsideration exemption “hereinafter specifically exempted”
was denied, City applied directly under the Local Government Code.
before the Supreme Court on pure
question of law. To construe otherwise, would be absurd as it
would effectively reduce the meaning of such
phrase as mere jargon. The Court views this
subsequent piece of legislation as an express
and real intention on the part of Congress to
once again remove from the LGC's delegated
taxing power.

9. FELS Energy, Inc. Any owner or person NPC entered into a lease contract Whether or not the power NO. The power barges are real property and
v. Province of having legal interest in with Polar over diesel engine power barges are are thus subject to real property tax.
Batangas, G.R. No. the property who is not barges moored at Balayan Bay in exempt from real property
168557, February 16, satisfied with the action Calaca, Batangas. The contract tax. Article 415 (9) of the New Civil Code provides
2007 of the provincial, city, or contained a provision that Polar may that “docks and structures which, though
municipal assessor in be or become subject to real estate floating, are intended by their nature and
the assessment of his taxes and assessments, rates, and object to remain at a fixed place on a river,
property may, within sixty other charges in respect of the lake, or coast” are considered immovable
(60) days from the date power barges. property. Thus, power barges are categorized
of receipt of the written as immovable property by destination, being in
notice of assessment, Subsequently, Polar assigned its the nature of machinery and other implements
appeal to the Board of rights under the FELS. Later, FELS intended by the owner for an industry or work
Assessment Appeals of received an assessment of real which may be carried on in a building or on a
the province or city by property taxes on the power barges piece of land and which tend directly to meet
filing a petition under from the Provincial Assessor, that the needs of said industry or work.
oath in the form the owner or person having legal
prescribed. The 60-day interest may appeal the matter within Petitioners maintain nevertheless that the
period for making the 60 days from receipt to the Board of power barges are exempt from real estate tax
appeal to the LBAA runs Assessment Appeals of the province. under Section 234 (c) of R.A. No. 7160
without interruption. because they are actually, directly and
FELS referred the matter to NPC, exclusively used by petitioner NPC, a
which sought reconsideration of the government-owned and controlled corporation
Provincial Assessor’s decision to engaged in the supply, generation, and
 assess real property taxes on the transmission of electric power. We affirm the
power barges. However, the motion findings of the LBAA and CBAA that the owner
was denied and the Provincial of the taxable properties is petitioner FELS,
Assessor advised NPC to pay the which in fine, is the entity being taxed by the
assessment. After sixty (60) days local government.
from receipt of assessment from, the
NPC filed a petition with the Local It follows then that FELS cannot escape
Board of Assessment Appeals liability from the payment of realty taxes by
(LBAA) for the setting aside of the invoking its exemption in Section 234 (c) of
assessment and the declaration of R.A. No. 7160. Indeed, the law states that the
the barges as non-taxable items; it machinery must be actually, directly, and
also prayed that should LBAA find exclusively used by the government-owned or
the barges to be taxable, the controlled corporation; nevertheless, petitioner
Provincial Assessor be directed to FELS still cannot find solace.
make the necessary corrections.

10. NPC vs. Central To successfully claim exemption under First Private Power Corporation (FPPC) entered Under the terms of the BOT, NO. Neither can NAPOCOR pass its tax–
Board of Section 234 (c) of the LGC, the claimant into a Build-Operate-Transfer (BOT) agreement can the GOCC be deemed exempt status to its BOT partner.
Assessment must prove two elements: a) the with NAPOCOR for the construction of Bauang the actual, direct, and NAPOCOR’s basis for its claimed exemption –
Appeals, GR No. machineries and equipment are actually, Diesel Power Plant and creation of Bauang Power exclusive user of Section 234(c) of the LGC – is clear and not at
171470, January 30, directly, and exclusively used by local Plant Corporation (BPPC). The pertinent provisions machineries and equipment all ambiguous in its terms. Exempt from real
2009 water districts and government-owned or of the BOT agreement, include among others: “2.03 for tax exemption purposes? property taxation are: (a) all machineries and
controlled corporations; and b) the local NAPOCOR xxx shall be responsible for the If not, can it pass on its tax- equipment; (b) [that are] actually, directly, and
water districts and government-owned payment of all real estate taxes and exempt status to its BOT exclusively used by; (c) [local water districts
and controlled corporations claiming assessments, rates, and other charges in partner, a private and] government-owned or –controlled
exemption must be engaged in the respect of the Site and the buildings and corporation, through the corporations engaged in the [supply and
supply and distribution of water and/or improvements thereon.” The Municipal Assessor BOT agreement? distribution of water and/or] generation and
the generation and transmission of of Bauang issued a Notice of Assessment and Tax transmission of electric power.
electric power. Bill to BPPC. NAPOCOR sought tax exemption on
the basis if Sec. 234(c) of R.A. No. 7160. By [BOT’s] express terms, BPPC has complete
ownership – both legal and beneficial – of the
project, including the machineries and
equipment used, subject only to the transfer of
these properties without cost to NAPOCOR
after the lapse of the period agreed upon. As
agreed upon, BPPC provided the funds for the
construction of the power plant, including the
machineries and equipment needed for power
generation; thereafter, it actually operated and
still operates the power plant, uses its
machineries and equipment, and receives
payment for these activities and the electricity
generated under a defined compensation
 scheme. Notably, BPPC – as owner-user – is
responsible for any defect in the machineries
and equipment.

Consistent with the BOT concept and as

implemented, BPPC – the owner-manager-
operator of the project – is the actual user of its
machineries and equipment. BPPC’s
ownership and use of the machineries and
equipment are actual, direct, and immediate,
while NAPOCOR’s is contingent and, at this
stage of the BOT Agreement, not sufficient to
support its claim for tax exemption. Since
neither of the requirements were satisfied,the
claim for exemption must fall.

11. NPC v. Quezon Legal interest is defined as interest in NPC is a GOCC that entered into an Energy Can Petitioner claim NO. To successfully claim exemption under
Power, G.R. No. property or a claim cognizable at law, Conversion Agreement (ECA) under a build- exemption from the RPT Section 234 (c) of the LGC, the claimant must
171586, July 15, 2009 equivalent to that of a legal owner who operate-transfer (BOT) arrangement with Mirant given the BOT arrangement prove two elements: a) the machineries and
has legal title to the property. legal Pagbilao Corp. Under the agreement, Mirant will with Mirant? equipment are actually, directly, and
interest should be an interest that is build and finance a thermal power plant in Quezon, exclusively used by local water districts and
actual and material, direct and and operate and maintain the same for 25 years, government-owned or controlled corporations;
immediate, not simply contingent or after which, Mirant will transfer the power plant to and b) the local water districts and
expectant. the Respondent without compensation. NPC also government-owned and controlled
undertook to pay all taxes that the government may corporations claiming exemption must be
impose on Mirant. Quezon then assessed Mirant engaged in the supply and distribution of water
real property taxes on the power plant and its and/or the generation and transmission of
machineries. electric power. Since neither the Petitioner nor
Mirant satisfies both requirements, the claim
for exemption must fall. NPC is neither the
owner nor the possessor/user of the subject
machineries even if it will acquire ownership of
the plant at the end of 25 years. The Court said
that legal interest should be an interest that is
actual and material, direct and immediate, not
simply contingent or expectant. While the
Petitioner does indeed assume responsibility
for the taxes due on the power plant and its
machineries, the tax liability referred to is the
liability arising from law that the local
government unit can rightfully and successfully
enforce, not the contractual liability that is
enforceable between the parties to a contract.
COURT OF TAX APPEALS

Case Title Case Principle Summary of Facts Issue/s Ruling

1. Global Medical This landmark case strengthened the Global Medical Center of Laguna, Inc. (GMCLI) Whether or not the CA YES. CA misapplied its appellate function
Center of Laguna v. substantive right to avail of arbitration engaged the services of Ross Systems misapplied its appellate when it delved into settling the factual matters
Ross Systems as an alternative mode of resolving International, Inc. (RSII) for a construction project function when it delved into and modified the mathematical computation of
International, Inc., disputes. valued at PhP 248,500,000.00. Among the issues settling the factual matters the CIAC with respect to the presence or
G.R. No. raised are the inability of the parties to agree on the and modified the absence of an outstanding balance payable to
230112/230119, May Prior to this decision, the Construction percentage of completion, belated withholding of mathematical computation of RSII. This mathematical recomputation is an
11, 2021. Industry Arbitration Commission (CIAC), taxes and disagreements on the amount of the CIAC. error because the amounts reimbursable to
under Rule 43 of the Rules of Court, was progress billings to be paid. RSII were not specifically raised by the RSII as
one of the quasi-judicial agencies the an issue in its Rule 43 petition before the CA.
decisions of which may be appealed to Since the construction contract had an arbitration CIAC is a quasi-judicial agency at par with
the Court of Appeals (CA) with respect to clause, RSII commenced arbitration with the CIAC. other commercial tribunals. Courts therefore
issues of fact or law, or both. Direct An arbitral tribunal formed under the auspices of the must observe non-participation except on
recourse to the Supreme Court, CIAC then conducted the arbitration and issued an narrowest of grounds.
regarding arbitral awards issued by the arbitral award which denied, in part, the reliefs
CIAC, could not be availed. sought by the parties. RSII appealed the award to To be clear, Supreme Court en banc clarified
the Court of Appeals through a petition for review that, for the avoidance of doubt, the Court now
The inclusion of the CIAC under Rule 43 under Rule 43 of the Rules of Court (which allows holds that judicial review of CIAC arbitral
was said to have “weakened if not, an appellant to raise issues of fact or law or both on awards takes either of two remedial routes,
altogether destroyed the authoritative appeal). The Court of Appeals issued a decision depending on the issue being raised:
autonomy of the CIAC, as well as eroded partially granting RSII's petition. 1. If the appeal involves pure question/s of
if not totally obliterated its very nature as law, it should be filed directly with the Supreme
the expedited, economical, independent Both GMCLI and RSII sought reconsideration of the Court through a petition for review on certiorari
alternative dispute resolution to the decision and both were denied. GMCLI and RSII under Rule 45 of the Rules of Court.
otherwise protracted and costly court filed separate petitions with the Supreme Court, 2. If the appeal involves factual issues, the
litigation.” Hence, this over-inclusion was questioning the decision of the Court of Appeals. same should be brought to the Court of
held to be invalid for overstepping the Appeals through a petition for certiorari under
positive limitation of the rule-making Rule 65 of the Rules of Court. The factual
power of the Supreme Court under issues shall be limited to: (a) a challenge on the
Section 5(5), Article VIII of the integrity of the composition of the tribunal; or
Constitution on non-modification of (b) an allegation that the arbitral tribunal
substantive rights. violated the Constitution or positive law in the
conduct of the arbitral process.
The Supreme Court added that this new 3. No other circumstances other than those
precedent of carving out of the CIAC from provided above will be available to appeal a
the enumeration under Rule 43, along CIAC arbitral award.
with the effective reversal of The SC said the new guidelines with respect to
the modes of judicial review of the CIAC should
 jurisprudence, should be applied be applied prospectively and does not cover
prospectively cases that are pending with the CA.

2. Consolidated What sets apart BIR Rulings from other Between May 2010 to August 2011, the BIR issued Does the CTA have YES. It is apparent that the tenor and wording
cases of CIR v. CTA, issuances of the BIR is that it relates to a twenty-one (21) Authorities to Release Imported jurisdiction over the subject of Document No. M-059-2012 qualify it as a
Pilipinas Shell Corp., particular taxpayer's set of facts and Goods (ATRIG) which all stated that alkylate matter (Document No. M- BIR Ruling. BIR rulings "are the official
et. al.; COC v. circumstances and a consequent imported by the taxpayer was not subject to excise 059-2012)? position of the Bureau to queries raised by
Pilipinas Shell et. al., determination of taxability or tax tax considering that it is not among those articles taxpayers and other stakeholders relative
exemption, when applicable. enumerated Tax Code. to clarification and interpretation of tax
laws. Court of Tax Appeals may take
Within the judicial system, the law On June 4, 2012, the Commissioner of Customs cognizance of cases directly challenging the
intends the Court of Tax Appeals to have requested an opinion to the BIR on whether it could constitutionality or validity of a tax law or
exclusive jurisdiction to resolve all tax collect excise taxes on the taxpayer’s alkylate regulation or administrative issuance (revenue
problems. The CTA Law, Republic Act importation. The BIR then issued Document No. M- orders, revenue memorandum circulars,
No. 9282, a special and later law than 059-2012 stating that alkylate importations are rulings) pursuant to the CTA Law. Petitions for
Batas Pambansa Blg. 129 provides an subject to excise tax. writs of certiorari against the acts and
exception to the original jurisdiction of the omissions of the said quasi-judicial agencies
Regional Trial Courts over actions Aggrieved, the taxpayer filed a petition for review should, thus, be filed before the Court of Tax
questioning the constitutionality or with the CTA assailing Document No. M-059-2012 Appeals.
validity of tax laws or regulations. Except as an invalid BIR Ruling. The CIR and BOC
for local tax cases, actions directly questioned the jurisdiction of the CTA since Section 7 of Republic Act No. 1125, as
challenging the constitutionality or Document No. M-059-2012 was neither a ruling nor amended, is explicit that, appeals from the
validity of a tax law or regulation or an adverse decision but a mere internal decisions of quasi-judicial agencies
administrative issuance (revenue orders, communication. (Commissioner of Internal Revenue,
revenue memorandum circulars, rulings) Commissioner of Customs, Secretary of
may be filed directly before the Court of Finance, Central Board of Assessment
Tax Appeals. Appeals, Secretary of Trade and Industry) on
tax-related problems must be brought
exclusively to the Court of Tax Appeals.

Hence, although the query originated from the

Collector and not the taxpayer, in this case, the
clarificatory/ interpretative tenor of Document
No. M-059-2012 relative to the PSPC's excise
tax liability remains. As such, Document No. M-
059-2012 is effectively a BIR Ruling issued
against PSPC
3. CIR v. Air Supreme Court accords the findings and RA 8339, relation to Section 13 (PD) No. 1590, Whether or not the Yes. SC did not disturb the findings of CTA.
Philippines conclusions of the CTA with the highest granted the respondent Air Philippines (PAL) a tax respondent is entitled to tax
Corporation, G.R. respect. As a specialized court dedicated exemption from excise tax on its importations of exemption for its importation The petition only raised factual issues and
No. 243260, February exclusively to the resolution of tax aviation turbo jet fuel for its domestic flight of the subject Jet A-1 fuel. arguments in their appeal, which had already
5, 2020. problems, the CTA has accordingly operations. However, on January 29, 2003, BIR been fully passed upon by the CTA. CTA En
developed an expertise on the subject of Ruling discontinued PAL tax exemption on their Banc found the absence of locally available
taxation. Thus, its decisions are importations of petroleum products for domestic aviation fuel in reasonable quantity, quality or
presumed valid in every aspect and will operations, in the light of the Certification of the price – entitling PAL to the exemption. In
not be overturned on appeal, unless the Department of Energy dated December 20, 2002 essence, what the petitioner asks from this
Court finds that the questioned decision that aviation gas, fuel and oil for use in domestic Court is a re-evaluation of the certifications and
is not supported by substantial evidence operation of domestic airline companies are locally other relevant evidence already presented and
or there has been an abuse or available in reasonable quantity, quality, and price reviewed by the CTA. Clearly, this is a question
improvident exercise of authority on the -- there is now an absence of the second condition of fact which cannot be raised before this
part of the tax court. required for the airlines to continue to enjoy tax Court, except for recognized exceptions.
exemption.
This case clearly falls under none of the
BIR then assessed the respondent for specific recognized exception. In the instant case, the
taxes on its importations of Jet A-1 aviation fuel assailed CTA Decision is supported by
used for its domestic operations. Respondent made substantial evidence, as can be gleaned from
importations and paid its corresponding specific the quantity and quality of the testimonial and
taxes under protest. The alleged inaction of the documentary evidence presented. There is
petitioner on the written claims for refund prompted also no legal and factual basis to support the
the respondent to file four petitions for review allegation of CTA's abuse of authority.
before the CTA.
With respect to the findings of specialized
The CTA Division ruled that one of the three courts, such as the CTA, the conclusions of
requirements for the respondent's tax exemption which are not lightly set aside because of the
under Section 13 of PD No. 1590 was not fulfilled. very nature of its functions which is dedicated
To be specific, the third requisite is absent because exclusively to the resolution of tax problems
the imported Jet A-1 fuel was allegedly locally and has accordingly developed an expertise on
available in reasonable quantity. the subject. Thus, its decisions are presumed
valid in every aspect and will not be overturned
CTA en banc granted PAL exemption as DOE on appeal, unless the Court finds that the
Certification was considered irrelevant because it questioned decision is not supported by
was based on a 2002 report while the subject Jet substantial evidence or there has been an
A-1 fuel refers to the supply for year 2008 and abuse or improvident exercise of authority on
based on the ICPA's Financial and Supplemental the part of the tax court.
Reports, the respondent was able to prove that the
subject Jet A-1 fuel is not locally available in
reasonable price, qualifying the respondent to the
tax exemption.
4. Duty Free No decision of the CTA division may be Duty Free is a merchandising system established Whether or not the mode of No. The Supreme Court has no jurisdiction to
Philippines vs. BIR, elevated to this Court under Rule 45 of by Department of Tourism, pursuant EO 46 dated 4 appeal of petitioner is proper review the Decision and Resolution rendered
G.R. No 197228, the 1997 Rules of Civil Procedure without September 1986. It sought a clarification of its when it appeal by directly by the Special First Division of the CTA. Thus,
October 8, 2014. passing through the CTA en banc. exemption from the expanded withholding tax, before the Supreme Court the instant Petition must fail.
alleging that as a tax-exempt establishment under without first elevating the
It is worth emphasizing that an appeal is E.O. No. 46, it should not be subjected to the case to the CTA en banc as The enactment of R.A. No. 9282, elevated the
neither a natural nor a constitutional 1.1/2% expanded withholding taxes on certain provided under Rule 16 of rank of the CTA to the level of a collegiate
right, but is merely statutory. The income payments that were withheld by credit card the Revised Rules of the court, making it a co-equal body of the Court of
implication of its statutory character is companies in compliance with R.R. No. 6-94. In CTA. Appeals. Section 19 thereof, provides that a
that the party who intends to appeal must relation thereto, petitioner also inquired on the party adversely affected by a decision the CTA
always comply with the procedures and procedure for the refund of accumulated taxes en banc may file with the Supreme Court a
rules governing appeal, or else, the right withheld by credit card companies amounting to verified petition for review on certiorari
of appeal may be lost. P1.8 million. pursuant to Rule 45 .

On its ruling, BIR opined that by EO 93 dated In this case, petitioner filed with this Court on
December 17, 1986, it withdrew all the tax and duty 29 July 2011 the instant Petition from the denial
incentives granted to government and public of its Motion for Reconsideration by the Special
entities, including petitioner Duty Free. Hence, First Division of the CTA. At that time, R.A.
respondent denied the request of petitioner for a 9282 was already in effect, and it evidently
refund of the withholding tax on certain payments provides that the CTA en banc shall have
made by credit card companies and remitted to the exclusive jurisdiction over appeals from the
BIR. decision of its divisions. A party adversely
affected by the resolution of the CTA division
The ruling was elevated to DOF Secretary, CTA may, on motion for reconsideration, file a
First Division and CTA Division where all found that petition for review with the CTA en banc.
petitioner was not a tax-exempt entity in the Thereafter, the decision or ruling of the CTA en
absence of an express grant of tax exemption. banc may be elevated to Supreme Court.
Petitioner directly appealed to this Court under Rule Simply stated, no decision of the CTA
45 of the 1997 Rules of Civil Procedure, assailing division may be elevated to this Court
the aforesaid Decision and Resolution of the CTA under Rule 45 of the 1997 Rules of Civil
Division. Procedure without passing through the
CTA en banc.

In light of the above findings, the Court finds no

need to further discuss the other issues raised
by the parties.

5. The City of Manila, In order for any appellate court to The record shows that petitioner City of Manila, Whether or not the petition YES. A perusal of the above provisions would
etc. et al. v. Hon. effectively exercise its appellate through its treasurer, petitioner Liberty Toledo, for certiorari must be filed to show that, while it is clearly stated that the CTA
Caridad H. Grecia- jurisdiction, it must have the authority to assessed taxes for the taxable period from January the Court of Tax Appeals and has exclusive appellate jurisdiction over
Cuerdo etc., et al, issue, among others, a writ of certiorari. to December 2002 against private. respondents SM not to the Court of Appeals decisions, orders or resolutions of the RTCs in
G.R. No. 175723. In transferring exclusive jurisdiction over Mart, Inc., SM Prime Holdings, Inc., Star local tax cases originally decided or resolved
February 4, 2014. appealed tax cases to the CTA, it can Appliances Center, Supervalue, Inc., Ace by them in the exercise of their original or
reasonably be assumed that the law Hardware Philippines, Inc., Watsons Personal Care appellate jurisdiction, there is no categorical
intended to transfer also such power as Stores Phils., Inc., Jollimart Philippines Corp., statement under RA 1125 as well as the
is deemed necessary, if not Surplus Marketing Corp. and Signature Lines. In amendatory RA 9282, which provides that the
indispensable, in aid of such appellate addition to the taxes purportedly due from private CTA has jurisdiction over petitions for certiorari
jurisdiction. respondents pursuant to Sections 14, 15, 16, 17 of assailing interlocutory orders issued by the
the Revised Revenue Code of Manila (RRCM), said RTC in local tax cases filed before it.
assessment covered the local business taxes
petitioners were authorized to collect under Section The prevailing doctrine is that the authority to
21 of the same Code. Because payment of the issue writs of certiorari involves the exercise of
taxes assessed was a precondition for the issuance original jurisdiction which must be expressly
of their business permits, private respondents were conferred by the Constitution or by law and
constrained to pay the P19,316,458.77 assessment cannot be implied from the mere existence of
under protest. appellate jurisdiction. Thus, in the cases of
Pimentel v. COMELEC, Garcia v. De Jesus,
On January 24, 2004, private respondents filed Veloria v. COMELEC, Department of Agrarian
[with the Regional Trial Court of Pasay City] the Reform Adjudication Board v. Lubrica, and
complaint denominated as one for “Refund or Garcia v. Sandiganbayan, this Court has ruled
Recovery of Illegally and/or Erroneously-Collected against the jurisdiction of courts or tribunals
Local Business Tax, Prohibition with Prayer to over petitions for certiorari on the ground that
Issue TRO and Writ of Preliminary Injunction” which there is no law which expressly gives these
was docketed as Civil Case No. 04-0019-CFM tribunals such power. It must be observed,
before public respondent’s sala [at Branch 112]. In however, that with the exception of Garcia v.
the amended complaint they filed on February 16, Sandiganbayan, these rulings pertain not to
2004, private respondents alleged that, in relation regular courts but to tribunals exercising quasi-
to Section 21 thereof, Sections 14, 15, 16, 17, 18, judicial powers. With respect to the
19 and 20 of the RRCM were violative of the Sandiganbayan, Republic Act No. 8249 now
limitations and guidelines under Section 143 (h) of provides that the special criminal court has
Republic Act No. 7160[Local Government Code] on exclusive original jurisdiction over petitions for
double taxation. They further averred that petitioner the issuance of the writs of mandamus,
city’s Ordinance No. 8011 which amended prohibition, certiorari, habeas corpus,
pertinent portions of the RRCM had already been injunctions, and other ancillary writs and
declared to be illegal and unconstitutional by the processes in aid of its appellate jurisdiction.
Department of Justice.
In the same manner, Section 5 (1), Article VIII
In its Order dated July 9, 2004, the RTC granted of the 1987 Constitution grants power to the
private respondents’ application for a writ of Supreme Court, in the exercise of its original
preliminary injunction. Petitioners filed a Motion for jurisdiction, to issue writs ofcertiorari,
Reconsideration but the RTC denied it in its Order prohibition and mandamus. With respect to the
dated October 15, 2004. Petitioners then filed a Court of Appeals, Section 9 (1) of Batas
special civil action for certiorari with the CA Pambansa Blg. 129 (BP 129) gives the
assailing the July 9, 2004 and October 15, 2004 appellate court, also in the exercise of its
Orders of the RTC. original jurisdiction, the power to issue, among
others, a writ of certiorari, whether or not in aid
In its Resolution promulgated on April 6, 2006, the of its appellate jurisdiction. As to Regional Trial
CA dismissed petitioners’ petition for certiorari Courts, the power to issue a writ of certiorari, in
holding that it has no jurisdiction over the said the exercise of their original jurisdiction, is
petition. The CA ruled that since appellate provided under Section 21 of BP 129.
jurisdiction over private respondents’ complaint for
tax refund, which was filed with the RTC, is vested The foregoing notwithstanding, while there is
in the Court of Tax Appeals (CTA), pursuant to its no express grant of such power, with respect
expanded jurisdiction under Republic Act No. 9282 to the CTA, Section 1, Article VIII of the 1987
(RA 9282), it follows that a petition for certiorari Constitution provides, nonetheless, that
seeking nullification of an interlocutory order issued judicial power shall be vested in one Supreme
in the said case should, likewise, be filed with the Court and in such lower courts as may be
CTA. established by law and that judicial power
includes the duty of the courts of justice to
settle actual controversies involving rights
which are legally demandable and
enforceable, and to determine whether or not
there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on
the part of any branch or instrumentality of the
Government.

On the strength of the above constitutional

provisions, it can be fairly interpreted that the
power of the CTA includes that of determining
whether or not there has been grave abuse of
discretion amounting to lack or excess of
jurisdiction on the part of the RTC in issuing an
interlocutory order in cases falling within the
exclusive appellate jurisdiction of the tax court.
It, thus, follows that the CTA, by constitutional
mandate, is vested with jurisdiction to issue
writs of certiorari in these cases.

Indeed, 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.

Stated differently, it would be somewhat

incongruent with the pronounced judicial
abhorrence to split jurisdiction to conclude that
the intention of the law is to divide the authority
over a local tax case filed with the RTC by
giving to the CA or this Court jurisdiction to
issue a writ of certiorari against interlocutory
orders of the RTC but giving to the CTA the
jurisdiction over the appeal from the decision of
the trial court in the same case. It is more in
consonance with logic and legal soundness to
conclude that the grant of appellate jurisdiction
to the CTA over tax cases filed in and decided
by the RTC carries with it the power to issue a
writ of certiorari when necessary in aid of such
appellate jurisdiction. The supervisory power
or jurisdiction of the CTA to issue a writ of
certiorari in aid of its appellate jurisdiction
should co-exist with, and be a complement to,
its appellate jurisdiction to review, by appeal,
the final orders and decisions of the RTC, in
order to have complete supervision over the
acts of the latter.

A grant of appellate jurisdiction implies that

there is included in it the power necessary to
exercise it effectively, to make all orders that
will preserve the subject of the action, and to
give effect to the final determination of the
appeal. It carries with it the power to protect
that jurisdiction and to make the decisions of
the court thereunder effective. The court, in aid
of its appellate jurisdiction, has authority to
control all auxiliary and incidental matters
necessary to the efficient and proper exercise
of that jurisdiction. For this purpose, it may,
when necessary, prohibit or restrain the
performance of any act which might interfere
with the proper exercise of its rightful
jurisdiction in cases pending before it.
6. Smart Section 5, Article X of the 1987 Smart constructed a telecommunications tower 1. Whether or not the fees 1. Since the main purpose of Ordinance No. 18
Communications, Constitution provides that "[e]ach local within the territorial jurisdiction of the Municipality. imposed are taxes is to regulate certain construction activities of
Inc. v. Municipality of government unit shall have the power to The construction of the tower was for the purpose the identified special projects, which included
Malvar, Batangas, create its own sources of revenues and of receiving and transmitting cellular 2. Whether or not the Court "cell sites" or telecommunications towers, the
G.R. No. 20442. to levy taxes, fees, and charges subject communications within the covered area. of Tax Appeals should have fees imposed in Ordinance No. 18 are primarily
February 18, 2014 to such guidelines and limitations as the taken cognizance of the case regulatory in nature, and not primarily revenue-
Congress may provide, consistent with... On 30 July 2003, the Municipality passed raising. While the fees may contribute to the
the basic policy of local autonomy. Such Ordinance No. 18, series of 2003, entitled "An revenues of the Municipality, this effect is
taxes, fees, and charges shall accrue Ordinance Regulating the Establishment of Special merely incidental. Thus, the fees imposed in
exclusively to the local government." The Projects." Ordinance No. 18 are not taxes.
Local Government Code defines the term
"charges" as referring to pecuniary On 24 August 2004, Smart received from the Permit 2. Considering that the fees in Ordinance No.
liability, as rents or fees against persons and Licensing Division of the Office of the Mayor of 18 are not in the nature of local taxes, and
or property, while the term "fee" means the Municipality an assessment letter with a Smart is questioning the constitutionality of the
"a charge fixed by law or ordinance for schedule of payment for the total amount of ordinance, the CTA correctly dismissed the
the regulation or inspection of a business P389,950.00 for Smart’s telecommunications petition for lack of jurisdiction. Likewise,
or activity." tower. Due to the alleged arrears in the payment of Section 187 of the LGC, which outlines the
the assessment, the Municipality also caused the procedure for questioning the constitutionality
posting of a closure notice on the of a tax ordinance, is inapplicable, rendering
telecommunications tower. unnecessary the resolution of the issue on
non-exhaustion of administrative remedies.
On 9 September 2004, Smart filed a protest,
claiming lack of due process in the issuance of the An ordinance carries with it the presumption of
assessment and closure notice. In the same validity. The question of reasonableness
protest, Smart challenged the validity of Ordinance though is open to judicial inquiry. Much should
No. 18 on which the assessment was based. be left thus to the discretion of municipal
authorities. Courts will go slow in writing off an
In a letter dated 28 September 2004, the ordinance as unreasonable unless the amount
Municipality denied Smart’s protest. is so excessive as to be prohibitive, arbitrary,
unreasonable, oppressive, or confiscatory. A
RTC partially granted Smart’s petition, but did not rule which has gained acceptance is that
rule on the legality of Ordinance No. 18. It declared factors relevant to such an inquiry are the
that Smart is only liable for fees starting October 1, municipal conditions as a whole and the nature
2003, and null and void insofar as the assessment of the business made subject to imposition.
made from 2001 to 2003. MR denied. CTA denied.
CTA MR also denied. CTA en banc denied. CTA en To justify the nullification of the law or its
banc likewise denied. implementation, there must be a clear and
unequivocal, not a doubtful, breach of the
SMART’s arguments: Constitution. In case of doubt in the sufficiency
CTA erred in refusing to take cognizance of the of proof establishing unconstitutionality, the
case and for dismissing the case for lack of Court must sustain legislation because "to
jurisdiction considering the “unique” factual invalidate [a law] based on xx x baseless
circumstances involved. supposition is an affront to the wisdom not only
 of the legislature that passed it but also of the
The fees imposed in Ordinance No. 18 are actually executive which approved it." This presumption
taxes since they are not regulatory but rather, of constitutionality can be overcome only by
revenue-raising. the clearest showing that there was indeed an
infraction of the Constitution, and only when
Municipality is encroaching on the regulatory such a conclusion is reached by the required
powers of the National Telecommunications majority may the Court pronounce, in the
Commission (NTC). Smart cites Section 5(g) of discharge of the duty it cannot escape, that the
Republic Act No. 7925 which provides that the challenged act must be struck down.
NTC, in the exercise of its regulatory powers, shall
impose such fees and charges as may be
necessary to cover reasonable costs and expenses
for the regulation and supervision of the operations
of telecommunications entities. Thus, Smart
alleges that the regulation of telecommunications
entities and all aspects of its operations is
specifically lodged by law on the NTC.

Malvar’s arguments:
Said Ordinance is not a tax ordinance but a
regulatory fee imposed to regulate the “placing,
stringing, attaching, installing, repair and
construction of all gas mains, electric, telegraph
and telephone wires, conduits, meters and other
apparatus, and provide for the correction,
condemnation or removal of the same when found
to be dangerous, defective or otherwise hazardous
to the welfare of the inhabitant.

It was also envisioned to address the foreseen

"environmental depredation" to be brought about by
these "special projects" to the Municipality.
Pursuant to these objectives, the Municipality
imposed fees on various structures, which included
telecommunications towers.

The fees are not imposed to regulate the

administrative, technical, financial, or marketing
operations of telecommunications entities, such as
Smart’s; rather, to regulate the installation and
maintenance of physical structures – Smart’s cell
sites or telecommunications tower.
7. CIR v. Toledo, Tthe courts have no assessment powers, Toledo Power Corporation (TPC) is a general 1. Whether the 1. Both the administrative and the judicial
Power, Inc., G.R. No. and therefore, cannot issue assessments partnership principally engaged in the business of administrative and the claims were timely and validly filed
183880, January 20, against taxpayers. The courts can only power generation and sale of electricity to the judicial claims for tax refund
2014. review the assessments issued by the National Power Corporation (NPC), Cebu Electric or credit were timely and In filing tax refund claims - taxpayer has two (2)
CIR, who under the law is vested with the Cooperative III (CEBECO), Atlas Consolidated validly filed. years from the close of the taxable quarter
powers to assess and collect taxes and Mining and Development Corporation (ACMDC), when the zero-rated sales were made within
the duty to issue tax assessments within and Atlas Fertilizer Corporation (AFC). TPC filed 2. Whether the TPC is which to file with the CIR an administrative
the prescribed period. with the Bureau of Internal Revenue (BIR) Regional entitled to the full amount of claim for refund or credit of unutilized input VAT
District Office (RDO) No. 83 an administrative claim its claim for tax refund or attributable to such sales.
for refund or credit of its unutilized input Value credit.
Added Tax (VAT) for the taxable year 2002 under In this case, TPC applied for a claim for refund
EPIRA law and NIRC. or credit of its unutilized input VAT for the
taxable year 2002 on December 22, 2003.
Since NPC is exempt from the payment of all taxes, Since the CIR did not act on its application
including VAT, the CTA Division allowed TPC to within the 120- day period, TPC appealed the
claim a refund or credit of its unutilized input VAT inaction on April 22, 2004. Clearly, both the
attributable to its zero- rated sales of electricity to administrative and the judicial claims were filed
NPC for the taxable year within the prescribed period provided in
Section 112 of the NIRC.
2002. The CTA Division, however, denied the claim
attributable to TPC's sales of electricity to To the validity of TPC's claim, there is no
CEBECO, ACMDC and AFC due to the failure of question that TPC is entitled to a refund or
TPC to prove that it is a generation company under credit of its unutilized input VAT attributable to
the EPIRA. The CTA also ruled that Toledo its zero-rated sales of electricity to NPC for the
Company fails to be under the EPIRA law; because taxable year 2002 pursuant to Section 108 (B)
it was late with its COC application. (3)49 of the NIRC, as amended, in relation to
Section 1350 of the Revised Charter of the
NPC, as amended.

2. TPC is not entitled to a refund or credit of

unutilized input VAT attributable to its sales of
electricity to CEBECO, ACMDC, and AFC.

To be entitled to a refund or credit of unutilized

input VAT attributable to the sale of electricity
under the EPIRA, a taxpayer must establish:
(1) that it is a generation company, and (2) that
it derived sales from power generation.

Under the EPIRA, all new generation

companies and existing generation facilities
are required to obtain a COC from the ERC.
New generation companies must show that
 they have complied with the requirements,
standards, and guidelines of the ERC before
they can operate.

There is nothing in the JSFI to show that the

parties agreed that TPC is a generation
company under the EPIRA.

It was only on June 23,2005, when the ERC

issued a COC in favor of TPC, that it became
a generation company under EPIRA.
Consequently, TPC's sales of electricity to
CEBECO, ACMDC, and AFC cannot qualify for
VAT zero-rating under the EPIRA

TARIFF AND CUSTOMS CODE

Case Title Case Principle Summary of Facts Issue/s Ruling

1. COC v. PTT Forum shopping exists when a party A Special Audit Team (Audit Team) was formed Whether or not the cases No. Petition is without merit.
Philippines Trading repeatedly avails himself of several pursuant to Mission Order No. 018-2006 issued by filed by PTT Philippines
Corporation, G.R. judicial remedies in different courts, the Bureau of Customs (BOC) to conduct an audit Trading Corp constitute an Assuming arguendo that the filing of the three
No. 201138-40, either simultaneously or successively, all on the import shipments and inventory of all sale act of intentional forum Petitions for Review cannot be considered as
February 15, 2021. of which are substantially founded on the transactions of PTTPTC. shopping. forum shopping, CTA Case Nos. 8002 and
sarne fransactions and the same 8023 should still be dismissed for lack of
essential facts and circumstances, and In its Initial Audit Findings dated July 2, 2007, the jurisdiction of the CTA to hear both cases.
all raising substantially the same issues Audit Team declared PTTPTC to have mislabeled Petitioner argues that CTA Case Nos. 8002
either pending in or already resolved some of its imported fuel to make it eligible to avail and 8023 were both filed beyond the 30-day
adversely by some other court. of special tax benefits. The Audit Team found the period to protest the November 7, 2007
firm liable to pay P4,236,530,193.00 representing demand letter.
assessed Customs Duties, Value Added Tax and
Penalties. Even if both cases are to be treated as claims
for refund of erroneously paid taxes and duties
On July 31, 2007, then Com-missioner Napoleon instead of a protest of assessment, they
Morales (Commissioner Morales) of the BOC sent should be dismissed since the CTA has no
a demand letter to PTTPTC to settle its jurisdiction over actions questioning the ruling
outstanding obligation within seven (7) days from of the Commissioner of Customs under RA
notice. 9262.

On August 3, 2007, PTTPTC, through counsel, sent Forum shopping exists when a party
a letter to Commissioner Morales, asking for repeatedly avails himself of several judicial
reconsideration or reinvestigation of the Audit remedies in different courts, either
Team's conclusion and recommendation. simultaneously or successively, all of which are
substantially founded on the same transactions
On October l , 2007, PTTPTC tendered, under and the same essential facts and
protest, to the BOC the amount of circumstances, and all raising substantially the
P117,681 ,394.00 as partial payment of its same issues either pending in or already
obligation. resolved adversely by some other court.

On November 7, 2007, a Demand Letter was sent In finding that there was no forum shopping,
to PTTPTC to settle its discrepancy assessment of the CTA-EB held that the causes of action of
basic duties and taxes amounting to and its the three petitions differ. In CTA Case No.
corresponding penalty in the amount of until 7707, PTTPTC questioned the legality of the
November 15, 2007. November 7, 2007 demand letter and prayed
that it be nullified. CTA Case Nos. 8002 and
On November 20, 2007, PTTPTC filed with the CTA 8023 have similar causes of action as both
Second Division a Petition for Review il docketed pray for the refund of the amount that PTTPTC
as CTA Case No. 7707 assailing, among others, paid representing erroneously paid taxes and
the validity of the assessment and the final demand custom duties. However, CTA Case Nos. 8002
letter dated November 7, 2007. and 8023 are mere supplemental petitions to
CTA Case No. 7707.
It paid the BOC the amount of PI 76,522,091.50 on
November 29, 2007 and another PI December 18,
2007, with the total of both payments amounting to
its assessment balance.

On September 30, 2009, it filed CTA Case No. 7981

praying for the refund of the P117,681,394 it paid
under protest.

On December 1, 2009, PTTPTC instituted CTA

Case No. 8002 before the C TA First Division
asking for the refund of the P176,522,091.50 it paid
on November 29, 2007.

On January 8, 2010, petitioner moved to dismiss

CTA Case No. 7707 on the ground of litis pendentia
citing the pendency of C TA Case Nos. 7981 and
8002.16

On January 13, 2010, PTTPTC commenced

another Petition for Review, docketed as C TA
Case No. 8023, praying for the refund of the
amount of P176,522,091.50 it paid on December
18, 2007. The same was raffled to the Third
 Division of the CTA.

On February 22, 2010, petitioner filed a Motion to

Dismiss CTA Case No. 8002 on the ground of lack
of jurisdiction. The Commissioner alleged that the
November 7, 2007 demand letter on which the
refund of the amount of PI 76,522,091.50 was
based already attained finality since the petition for
review was filed beyond 30-day period to file a
protest under Section 11 of Republic Act No. 1125
(RA 1125), as amended by RA 9282.

PTTPTC filed three separate petitions for review

before the CTA-EB docketed as CTA EB Case No.
711 (CTA Case No. 7707), CTA EB Case No. 714
(CTA Case No. 8002) and CTA EB Case No. 719
(CTA Case No. 8023). In a Resolution dated July
20, 2011, the three petitions were consolidated. In
a Resolution dated April 17, 2012, the CTA-EB
reversed the questioned resolutions of its three
divisions and reinstated CTA Case Nos. 7707,
8002 and 8023

2. COA, CIR v. Social The books of accounts of Pilipinas Shell Respondent political party, Social Justice Society Whether the RTC is correct NO. RA 8479 vested to the DOE-DOJ Joint
Justice Society, et. Petroleum Corporation, Caltex (SJS), file with the RTC of Manila a Petition for in ordering COA, BIR, and Task Force the authority to determine the
al, G.R. No. 188760, Philippines, Inc., and Petron Corporation Declaratory Relief against Shell, Caltex, and BOC to open and examine issue, investigate and to order the prosecution
June 30, 2020 may not be opened and examined by the Petron. SJS allege that the “Big 3” oil companies’ the books of accounts of the of cartelization. Section 13 provides for the
Commission on Audit (“COA”), Bureau of practice of increasing the prices of their petroleum Big 3. Remedies under which the filing of actions by
Internal Revenue (“BIR”), and Bureau of products whenever the price of crude oil in the government prosecutors and the investigation
Customs (“BOC”) because said world market increases, despite having purchased by the Task Force is provided.
companies are beyond the audit their inventories at a much lower price before the
jurisdiction of these three (3) agencies for increase, constitutes monopoly and combination in Pursuant to Section 2, Article IX-D of the
the purposes of enforcing the anti-cartel restraint of trade, in violation of Article 186 of the Constitution and the Admin Code of 1987,
provisions of the Downstream Oil RPC and Section 11(a) of RA 8479 (Downstream COA’s audit jurisdiction generally covers public
Industry Deregulation Act. Oil Industry Deregulation Act of 1998). entities, but even non-governmental entities
insofar as the latter receives financial aid from
As to the COA, the Supreme Court noted The RTC directed the parties to refer the matter to the government. Without a doubt, the case of
that said oil companies are not public the Dept of Energy and DOJ pursuant to RA 8479, the Big 3 would not fall under the audit
entities nor are they nongovernmental and ordered the suspension of the proceedings. In jurisdiction of COA. They are neither public
entities receiving financial aid from the its report, the DOE-DOJ Join Task Force found no entities nor they are receiving financial aid from
government. With respect to the BIR, its clear evidence that the Big 3 violated the RPC or the government.
Commissioner is authorized to examine RA 8479.
books, papers, records, or other data of With respect to the BIR, its Commissioner is
taxpayers but only “to ascertain the authorized to examine books, paper, record, or
correctness of any return, or in making a other data of taxpayers but only to ascertain
return when none was made, or in the correctness of any return or in determining
determining the liability of any person for a person’s tax liability, or in collecting such
any internal revenue tax, or in collecting liability, or evaluating the person’s tax
such liability, or evaluating the person’s compliance.
tax compliance.” The BOC, on the other
hand, is “authorized to audit or examine The BOC, on the other hand, is authorized to
all books, records, and documents of audit or examine all books, records, and
importers necessary or relevant for the documents of importers necessary or relevant
purpose of collecting the proper duties for the purpose of collecting the proper duties
and taxes.” Since there are no taxes or and taxes. Since there are no taxes or duties
duties involved in this case, the BIR and involved in this case, the BIR and the BOC
the BOC likewise have no power and likewise have no power and authority to open
authority to open and examine the books and examine the books of account of the Big 3.
of accounts of the oil companies.
It is, therefore, the DOE-DOJ Joint Task Force
who has the sole power and authority to
monitor, investigate, and endorse the filing of
complaints, if necessary, against oil
companies. And in ordering the COA, BIR, and
BOC to open and examine the books of
accounts of the Big 3, the trial court divested
the DOE-DOJ Joint Task Force of its power
and authority and vested the same to the COA,
BIR, and BOC.
3. Kingson Any article or item, the importation of This is a Petition for Review on Certiorari filed by Whether or not forfeiture of YES. As provided under Section 2530 of the
International Trading which is effected on the strength of false petitioner Kingson International Trading petitioner’s shipment is TCCP, as amended, any article or item, the
Corp. v. COC, G.R. declaration or affidavit, or false invoice or Corporation against the CTA En Banc, affirming the warranted on the ground of importation of which is effected on the strength
No. 247768, July 13, other documents executed by the owner, CTA Division, which established that petitioner willful misdeclaration, of false declaration or affidavit, or false invoice
2020. importer, exporter or consignee shall be misdeclared its shipment consisting of 2,406 misclassification and or other documents executed by the owner,
forfeited in favor of the Government. bundles of steel products as to its value and tariff undervaluation of petitioner's importer, exporter or consignee shall be
classification which warranted the shipment's shipment of steel products forfeited in favor of the Government. Also,
forfeiture. Petitioner claimed that it merely restated Section 2503 of the TCCP provides that: (1)
the description of the steel products, its quantity, any misdeclared or underdeclared imported
volume, weight and customs value found in the articles/items found upon examination shall
commercial and shipping documents entirely ipso facto be forfeited in favor of the
prepared and provided by its Government; and (2) an undervaluation,
supplier/shipper/exporter Tranjin Mai Jia Hua Trade misdeclaration in weight, measurement or
Co. Ltd. in China. quantity of more than thirty percent (30%)
between the value, weight, measurement or
quantity declared in the entry, and the actual
value, weight, quantity or measurement shall
constitute a prima facie evidence of fraud
penalized under Section 2530 of the TCCP.

Details in the counterpart export documents

from the General Customs of the People's
Republic of China, vis-à-vis petitioner's Import
Entry differed as to the consignee's name, the
description of the imported shipment and the
value of the imported articles. The actual value
of the shipment as reflected in the export
counterpart documents was intentionally
reduced by more than 30% to reduce the
amount of duty that petitioner should have paid
for subject shipment. Such misdeclaration as
to the actual value by more than 30% is prima
facie evidence of fraud as provided under
Section 2503.
4. Asaali vs. The findings of the CTA, if supported by A customs patrol team intercepted 5 sailing vessels Whether or not the decision Despite being on the high seas, the offense of
Commissioner of substantial evidence, is binding for only on the high seas between British North Borneo and of the Collector of Customs smuggling was committed on board a
Customs (COC), G.R. questions of law are to be resolved by the Sulu while they were heading towards Tawi-tawi, was legal despite the Philippine ship, thus is within the jurisdiction of
No. L-24170, Supreme Court. Sulu. The vessels were ordered to stop and the expiration of RA No. 650 the Commissioner of Customs. The Revised
December 16, 1968 customs officers found cases of imported cigarettes Penal Code’s applicability and enforceability is
The Commissioner of Customs has and some pieces of rattan chairs. The vessels were Whether or not the not only within the Philippines, its interior
jurisdiction over the case despite the all registered in the Philippines, owned and manned Commissioner of Customs waters and maritime zone, but also outside of
expiration of RA No. 650 and to the by Filipino residents of Sulu. Despite coming from had jurisdiction to seize the its jurisdiction against those committing
vessels seized since they are registered British North Borneo, they did not have any permit vessels and cargo offenses while on board a Philippine ship.
in the Philippines. The Revised Penal from the Commissioner of Customs to engage in
Code is applicable and enforceable not importation as required by Section 1353(a) of the Also, it is a well settled doctrine of International
only within the interior waters and Revised Administrative Code and their cargoes Law that a state has the right to protect itself
maritime zone of the Philippines, but were likewise not covered by the required import and its revenues and that this right is not limited
extends outside of its territorial license under Republic Act No. 426. to its own territory but extends to the high seas.
jurisdiction against those committing an
offense while on board a Philippine ship. The Collector of Customs of Jolo found the case for As for the contention of the petitioners that the
forfeiture and this was affirmed by the repeal of RA No. 426 abated whatever liability
Commissioner of Customs and was sustained by they could have incurred, this was correctly
the Court of Tax Appeals. Hence this petition, held by the CTA as being devoid of any
persuasive force.
The petitioners contended that the Commissioner
did not have jurisdiction as the vessels were The Court held that that the expiration of RA
apprehended and seized on the high seas which No. 650 could not have produced the effect of
was beyond the territorial waters of the Philippines declaring legal the importation of the cotton
and since it could not have touched any place or counterpanes which were illegally imported
port in the Philippines, they could not have been and of declaring the seizure and forfeiture
engaged in the importation. They also alleged that ordered by the Collector of Customs illegal or
the absence of jurisdiction deprived them of their null and void. It did not have the effect of
right to due proves and that the liability that was annulling or setting aside the decision of the
imposed on them was abated with the repeal of RA Collector of Customs since the same was
No. 426. rendered while the law was in force and shall
stand until it is revoked by the appellate
tribunal.
The petition is denied.

5. Pilipinas Shell A suit for the collection of internal Petitioner Pilipinas Shell Petroleum Corporation Whether or not the Petition The parties argued over which act serves as
Petroleum Corp. vs. revenue taxes, where the assessment (Shell) is a domestic corporation engaged in the for Review was filed within the decision that can be the subject of an
Commissioner of has already become final and executory, importation of petroleum and its by-products into the 30-day reglementary appeal before the CTA and from which the 3-
Customs, G.R. No. the action to collect is akin to an action to the country. In 1997 and 1998, Shell settled its period day period to appeal shall be reckoned. Shell
176380, June 18, enforce the judgment. No inquiry can be custom duties and internal revenue taxes using tax insists it should be the filing of the collection
2009 made therein as to the merits of the credit certificates (TCC) transferred to it for value by suits as this was indicative of the finality of the
original case or the justness of the several Board of Investment (BOI) – registered respondent's action. The respondent, on the
judgment relied upon. companies. other hand, claims, it should be the earlier act
 of sending the collection letters where the
This was approved and accepted as payment by respondent finally indicated his resolve to
the One Stop Shop Inter-Agency Tax Credit and collect the duties due and demandable from
Duty Drawback Center (the Center) composed of Shell.
the DOF, BIR and the BOC. In a letter dated Nov.
3, 1999, the Center informed Shell that it was A tax protest case, under the TCCP, involves a
cancelling the TCCs because they were apparently protest of the liquidation of import entries. A
fraudulently secured by the original grantees who liquidation is the final computation and
transferred them to Shell. Shell was then required ascertainment by the collector of the duties on
to pay the amount that had been settled by the imported merchandise, based on official
cancelled TCCs. Shell contended that the reports as to the quantity, character, and value
cancellation was improper as this deprived him of thereof, and the collector's own finding as to
his right to due process. the applicable rate of duty; it is akin to an
assessment of internal revenue taxes under
After 3 years, 3 letters were sent to Shell dated the National Internal Revenue Code 15 where
February 15, February 20 and April 12, 2002, the tax liability of the taxpayer is definitely
formally demanding payment. Before Shell could determined.
respond, it received summons in one of the three
collection cases filed against him by the RTC. On None of the three letters received by Shell can
May 23, 2002, Shell filed with the CTA a Petition for be considered as a liquidation or an
Review contending that the BOC lacked legal and assessment of Shell’s import tax liabilities
factual basis in its collection efforts. which can then be the subject of an
administrative tax proceeding before the
The Commissioner of Customs filed a motion to respondent whose decision is appealable to
dismiss Shell’s petition on the ground of the CTA. It is important to note that Shell’s
prescription stating that it was filed beyond the 30- import tax liabilities had already been
day period provided by law for appeals of decisions computed and ascertained in the original
of the Commissioner of Customs to the CTA as this assessments and were already settled by Shell
was counted from the time Shell received the using the TCCs.
collection letters. On the other hand, Shell
contended that the 30-day period should be The issues Shell raised to the CTA were all
counted from the date it received the summons or related to the fact and efficacy of the payments
on April 23, 2002, the Petition for Review was thus made and these were payment and collection
instituted within the period provided by law. issues and not tax protest issues within the
CTA’s jurisdiction. Since the assessment has
The CTA denied the motion to dismiss and already been final, the Court removes all
consequently declared that it is the filing of the perceived hindrances to the continuation of the
collection cases in court that should be considered collection suits.
as the final decision of the respondent which is
when the 30-day period shall begin. The denial of
the motion for reconsideration led to the elevation
of the CTA decision to the CA by the
Commissioner.
 The CA annulled and set aside the CTA rulings
holding that the collection letters received by Shell
already indicated the Commissioner’s ruling on the
assessment and is therefore already appealable to
the CTA. CA denied Shel’s motion for
reconsideration hence this petition.

6. Jao v. CA, G.R. No. It is the Collector of Customs who has The Office of the Director, Enforcement and Whether or not the RTC had The Court held that the RTC are devoid of any
104604, October 6, exclusive jurisdiction to hear and Security Services (EES), Bureau of Customs, jurisdiction on the subject competence to pass upon the validity or
1995 determine all questions touching on the received information regarding the presence of matter regularity of seizure and forfeiture proceedings
seizure and forfeiture of dutiable goods. allegedly untaxed vehicle and parts in the premises conducted by the BOC and to enjoin or
owned by Pat Hao in 2 locations.After conducting otherwise interfere with these proceedings.
Actions of the Collector of Customs are surveillance, warrants of seizure and detention The Collector of Customs has exclusive
appealable to the Commissioner of were issued and executed. Articles were hauled jurisdiction to hear and determine all questions
Customs, whose decision, in turn, is pursuant to the warrants which prompted on the seizure and forfeiture of dutiable goods.
subject to the exclusive appellate Petitioners to file a case for Injunction and
jurisdiction of the Court of Tax Appeals Damages with prayer for Restraining Order and The actions of the Collector of Customs are
and from there to the Court of Appeals. Preliminary Injunction before the RTC of Makati. then appealable to the Commissioner of
Customs, whose decision, in turn, is subject to
Respondents filed a Motion to Dismiss on the the exclusive appellate jurisdiction of the Court
ground that the RTC has no jurisdiction over the of Tax Appeals, and from there to the Court of
subject matter, the exclusive jurisdiction of which Appeals.
belonging to the Bureau of Customs. This was
denied by the RTC and the application for This rule is anchored upon the policy of placing
preliminary injunction was granted. The no unnecessary hindrance on the
Respondents were also prohibited from seizing, government’s drive, not only to prevent
detaining, transporting and selling petitioner’s smuggling and other frauds upon Customs, but
properties. more importantly, to render effective and
efficient the collection of import and export
The Respondents filed a Motion for duties due the State, which enables the
Reconsideration which was also denied which led government to carry out the functions it has
them to file with the Court of Appeals on the ground been instituted to perform.
that the judge acted with grave abuse of discretion
in denying their motion to dismiss stating the same The Petition is dismissed for lack of merit
ground of the RTC’s lack of jurisdiction.

The CA ruled in favor of the Respondents and set

aside the questioned orders. The Petitioners filed a
petition with this Court to review this decision of the
CA contending that the CA erred in not holding (1)
that the Collector of Customs could no longer order
the seizure for the second time of items previously
 seized and released after amnesty payments of
duties and taxes; (2) that the Bureau of Customs
has lost jurisdiction to order the seizure of the items
because the importation had ceased; (3) that the
seizure of the items deprived the petitioners of their
properties without due process of law; and (4) that
there is no need to exhaust administrative
remedies.

7. Mison v. Nativitad, The Collector of Customs has exclusive A man informed the Commissioner of Customs of WON the RTC Judge has The RTC Judge did not have jurisdiction over
G.R. No. 82586, 11 original jurisdiction over the res subject of the existence of knocked-down vehicles, jurisdiction to issue the writ of the subject of the warrant of seizure and
September 1992 the warrant of seizure and detention an particularly Toyota Lite Aces at the compound CVC preliminary injunction detention since this was within the exclusive
issuance of which precludes the RTC Trading which was owned by a Mr. Castro. An and original jurisdiction of the Collector of
from interfering in the said proceeding. investigation and prosecution was then conducted. Customs. In issuing the TRO and granting the
Even if the warrant be illegal, this does writ of preliminary injunction as well as denying
not justify the RTC’s interference. 20 units of fully and partly assembled Toyota Lite the motion to dismiss, the RTC Judge deprived
Ace vans were found in a fenced area and the team the Collector of Customs of his original
took possession and control of these vehicles by jurisdiction, as the same is expressly provided
cordoning off the enclosure. Two members of the under the law.
team were then designated to secure a warrant of
seizure and detention from the Collector of A Warrant of Seizure and Detention was
Customs of the Subport of Clark who instituted already issued and this indisputably precluded
seizure proceedings for the violation of Section the RTC Judge from interfering in the said
2350(f) and (1)-1&5. The Warrant of Seizure and proceedings. The allegations of the private
Detention was issued the next day and the receipt respondent as the owner of the vehicles and
was refused by the owner/claimant or any of his that he has paid all the taxes and licenses
representatives so it was served by substituted neither divests the Collector of Customs of his
service. jurisdiction nor does it confer upon the RTC
jurisdiction over the case. The ownership of
When the team was about to haul the cars away, goods or the legality of its acquisition
RTC sheriffs arrived with a TRO issued by the procedure can be raised as defenses in the
respondent judge. The TRO was issued in seizure proceeding.
connection with a civil case filed by the private
respondent. He alleged that he owned several
vehicles which are legally registered in his name
and that he has paid all the taxes and
corresponding licenses therefor.
The lawyers of the BOC filed a Motion to Dismiss
the civil case alleging the lack of jurisdiction of the
RTC over the subject vehicles in view of the
exclusive jurisdiction of the Collector of Customs
over seizure and forfeiture cases as well as the
failure of the plaintiff to exhaust administrative
remedies.

The private respondent filed an

Opposition/Comment on the Motion to Dismiss
alleging that the warrant of seizure and detention
did not comply with the requirements for a valid
search warrant and that taxes for the vehicles have
been paid to the BIR.

In the meantime, the hearing of the Seizure case

was set but no appearance was entered for the
owner/claimant. The Collector of Customs
rendered a Decision declaring the vehicles forfeited
in favor of the Government to be disposed of in the
manner provided by law. The Motion to Dismiss the
civil case was denied and the writ of preliminary
injunction was granted on the same date.

Hence this petition.

8. Nestle Philippines, Under the Tariff and Customs Code, in all Petitioner transacted 16 separate importations of Whether or not the claims for The right to claim for refund of customs duties
Inc. v. CA, G.R. No. claims for refund of customs duties, the milk and milk products from different countries thus refund of alleged is specifically governed by Section 1708 of the
134114, 6 July 2001 Collector to whom such customs duties was assessed customs duties and advance sales overpayment of customs Tariff and Customs Code. In all claims for
are paid and upon receipt of such claim taxes by the Collector of Customs of Manila on the duties may be deemed refund of customs duties, the Collector to
is mandated to verify the same by the basis of the published Home Consumption Value established from the findings whom such customs duties are paid and upon
records of his Office. (HCV) indicated in the Bureau of Customs Revision of the tax court in C.T.A. receipt of such claim is mandated to verify the
Orders. Petitioner paid this but then filed Case No. 4114 on the same by the records of his Office.
The CTA's jurisdiction under the Tariff corresponding protests before the Collector of Advance Sales Tax.
and Customs Code is not concurrent with Customs alleging that the latter erroneously applied If such claim is found correct and in
that of the respondent Commissioner of higher HCV, thus Petitioner claims for refund on the accordance with law, the Collector shall certify
Customs due to the absence of any alleged import duties and advance sales taxes. the same to the Commissioner with his
certification from the Collector of A claim for refund of alleged overpaid advance recommendation together with all the
Customs sales taxes was filed by the Petitioner with the BIR necessary papers and documents. The CTA’s
and a Petition for Review was also filed with the jurisdiction is not concurrent with that of the
CTA just a day after. The CTA ruled in favor of the respondent Commissioner of Customs due to
Petitioner and ordered BIR to refund the overpaid the absence of any certification from the
advance sales taxes. Collector of Customs of Manila which is why
Petitioner was incorrect in alleging that t its
The Collector of Customs failed to render his claims for refund of alleged overpayment of
decision on the 16 protest cases for refund of the customs duties may be deemed established
alleged overpaid customs duties after almost 6 from the findings of the tax court in C.T.A. Case
years since Petitioner’s payment. The Petitioner No. 4114 on the Advance Sales Tax is not
then filed a Petition for Review with the CTA despite necessarily correct in the light of the above-
the absence of a ruling by the Collector of Customs cited provision of the Tariff and Customs Code.
and the Commissioner of Customs. This was done
by the Petitioner in order to prevent the claims from The fact alone tthat the CTA has awarded in
prescribing. favor of the petitioner the refund of overpaid
Advance Sales Tax involving the same sixteen
The CTA dismissed this for want of jurisdiction and (16) importations does not in any way excuse
the motion for reconsideration was likewise denied the petitioner from proving its claims for refund
for lack of merit. The Petitioner appealed the of alleged overpayment of customs duties.
judgement to the CA but it was also dismissed for
lack of merit. The CA held, among others, that the
CTA’s jurisdiction is not concurrent with the
appellate jurisdiction of the Commissioner of
Customs since there was no decision or ruling yet
of the Collector of Customs of Manila on the matter.

Hence this petition.

9. Chevron Phils. Inc. Tariff and customs duties are taxes Chevron Phils. Inc., is engaged in the business of Whether or not the "entry" The term "entry" in customs law has a triple
v. CTA, G.R. No. constituting a significant portion of the importing, distributing and marketing of petroleum under Section 1301 in meaning. It means: (1) the documents filed at
178759, 11 August public products in the Philippines. relation to Section 1801 of the customs house; (2) the submission and
2008 revenue which enables the government the TCC refers to the IEIRD acceptance of the documents; and (3) the
to carry The importations subject of this case arrived in or the Import Entry and procedure of passing goods through the
out the functions it has been ordained to 1996 and were unloaded onto petitioner’s oil tanks Internal Revenue customs house.
perform for the welfare of its constituents. over a period of 3 days. The Import Entry Declaration
Hence, Declarations (IED) were then filed and the Petitioner’s position that the import entry
their prompt and certain availability is an petitioner paid 90% of the total customs duties. should be filed within the 30-day period refers
imperative need and they must be to the IED and not the IEIRD is devoid of merit.
collected Then Finance Secretary received a letter 3 years
without unnecessary hindrance. ago denouncing the deliberate concealment, Under the relevant provisions of the TCC, both
manipulation, and scheme employed by petitioner the IED and IEIRD should be filed within 30
Clearly, and perhaps for that reason and Pilipinas Shell in the importation of crude oil, days from the date of discharge of the last
alone, the submission of thereby resulting in huge losses of revenue for the package from the vessel or aircraft. The IED
the IEIRD cannot be left to the exclusive government. This was the same year when the serves as basis for the payment of advance
discretion or whim of the importer. Petitioner received a demand letter for the duties on importations whereas the IEIRD
immediate settlement of the difference between the evidences the final payment of duties and
10% and 3% percent tariff rates on the shipments. taxes. The operative act that constitutes "entry"
of the imported articles at the port of entry is
The Petitioner raised the defense of prescription the filing and acceptance of the "specified entry
against the assessment pursuant to Section 1603 form" together with the other documents
of the Tariff and Customs Code (TCC). Thus, it required by law and regulations. The "specified
prayed that the assessment for deficiency customs entry form" refers to the IEIRD. The word
duties be cancelled and the notice of demand be "entry" refers to the regular consumption entry
withdrawn. (the IEIRD) and not the provisional entry (the
IED).
The Special Investigator found that there was an
irregularity in the filing and acceptance of the import There was evidence that showed that
entries beyond the 30-day non-extendible period Petitioner took its time to file the IEIRD to avail
prescribed under Section 1301 of the TCC and in of a lower rate which was a clear indication of
the release of the shipments after the same had its intention to defraud the government. Due to
already been deemed abandoned in favor of the this, the prescriptive period of the finality of
government. Petitioner was then ordered to pay the liquidat6ion under Section 1603 was
amount representing the total dutiable value of the inapplicable.
importations.
Petitioner's failure to file the required entries
This prompted the Petitioner’s filing of a Petition for within a non-extendible period of thirty days
Review to which ultimately led to the CTA en banc from date of discharge of the last package from
holding that it was the filing of the IEIRDs that the carrying vessel constituted implied
constituted entry under the TCC. Since these were abandonment of its oil importations. This
filed beyond the 30-day period, they were not means that from the precise moment that the
non-extendible thirty-day period lapsed, the
 seasonably "entered" in accordance with Section abandoned shipments were deemed the
1301 in relation to Section 205 of the TCC. property of the government.

10. RP v. Unimex The government cannot be held liable for Respondent, through Don Tim Shipping Corp., Whether or not legal interest 1. Interest may be paid only either as monetary
Micro-Electronics B, damages brought about by governmental shipped computer parts and accessories to may be imposed for use of interest(compensation for the use
G.R. No. 166309-10, 9 acts. However, the doctrine must be fairly Handyware Philippines, Inc. When the shipment money or as compensatory of money) or as damages(compensatory
March 2007 observed and the State should not avail arrived in Manila, the Bureau of Customs(BOC) damages against the BOC interest). In this case, the petitioner was
itself of this prerogative to take undue agents discovered that it did not tally with the never under monetary obligation to
advantage of parties that may have description appearing on the cargo manifest. Whether or not the respondent, no demand can be made either
legitimate claims against it. Hence, BOC instituted seizure proceedings against government is liable for judicially or extrajudicially. Hence, there could
Handyware. Handyware's failure to attend the actual damages be no default. Neither can it be
hearing caused the forfeiture of the goods. considered as one involving interest based on
Respondent, as owner of the goods intervened. damages under the second situation.
However, the default order against Handyware The petitioner is therefore not liable for
subsequently became final and executory. Upon payment of interest.
review, the CTA reversed the previous order but the
decision could no longer be executed due to the 2. Petitioner is liable for damages. This case
loss of respondent's shipment so the BOC warrants its exclusion from the purview
Commissioner was ordered to pay the commercial of the state immunity doctrine. BOC was
value of the goods instead. grossly negligent in the safekeeping of
respondent's goods. It cannot even provide a
cogent explanation on the goods'
disappearance. In this case, the doctrine must
be fairly observed and the
State should not avail itself of this prerogative
to take undue advantage of parties that
may have legitimate claims against it.
11. Rieta v. People of It is not incumbent upon the Petitioner in this case sought to set aside the CA Whether or not it is "There is an exception to the general rule
the Philippines, G.R. prosecution to adduce positive affirmation with modification to the decision of the incumbent on the accused to requiring the prosecution to prove a criminal
No. 147817, 12 evidence to support a negative RTC of Manila, finding him guilty for smuggling 305 prove his innocence charge predicated on a negative allegation, or
August 2004 averment the truth of which is cases of assorted brands of blue seal cigarettes, (Generally no, this case a negative averment constituting an essential
fairly indicated by established valued at P513.663.47. These were found in his provides an exception) element of a crime. It has been held before that
circumstances and which, if possession and control, which the petitioner fully it is not incumbent upon the prosecution to
untrue, could readily be well knew have not been properly declared and that adduce positive evidence to support a negative
disproved by the production of the duties and specific taxes thereon have not been averment the truth of which is fairly indicated
documents or other evidence paid to the proper authorities in violation of the Tariff by established circumstances and which, if
within the defendant’s and Customs Code. Among the other issues raised untrue, could readily be disproved by the
knowledge or control. by petitioner, he argues that the prosecution failed production of documents or other evidence
to prove the nonpayment of the taxes and duties on within the defendant’s knowledge or control.
the confiscated cigarettes, thus not proving guilt The truth of the negative averment that the
beyond reasonable doubt. duties and specific taxes on the cigarettes
were not paid to the proper authorities is fairly
Among the other issues raised by petitioner, he indicated and have been established by the
argues that the prosecution failed to prove the cargo truck, which carried the contraband
nonpayment of the taxes and duties on the cigarettes and some passengers including
confiscated cigarettes, thus not proving guilt petitioner, immediately came from the 2nd
beyond reasonable doubt. COSAC Detachment was intercepted at the
unholy hour of 4:00 a.m. Such truck fitted the
undisclosed informer’s earlier description of it
as one that was carrying contraband; and the
driver ran away. Hence, it was up to petitioner
to disprove these damning circumstances,
simply by presenting the receipts showing
payment of the taxes. But he did not do so; all
that he could offer was his bare and self-
serving denial."
12. El Greco Ship In administrative proceedings, such as The vessel M/V Criston was docked at a port in 1. Whether or not they The Supreme Court ruled that findings of facts
Manning and those before the BOC, technical rules of Albay carrying 35,000 bags of imported rice. The were denied the right to due of the CTA are binding on this court and can
Management Corp. procedure and evidence are not strictly BOC issued a warrant of seizure and detention for process only be disturbed upon appeal if not supported
v. Commissioner of applied and administrative due process the bags of imported rice because it left the port of 2. Whether or not the by substantial evidence. The essence of due
Customs, G.R. No. cannot be fully equated with due process Manila without the necessary clearance from the forfeiture was subject under process is simply an opportunity to be heard or,
177188, 04/12/2008 in its strict judicial sense. Philippine coast guard. Subsequently, a seizure section 2531 of the Tariff and as applied to administrative proceedings, an
and detention was issued for the M/V Criston as Customs Code opportunity to explain one's side or an
well. opportunity to seek reconsideration of the
action or ruling complained of.
A typhoon hit Albay and the M/V Criston was
allowed to proceed to another anchorage area. The Supreme Court also held that the penalty
After the typhoon had passed, the M/V Criston no of forfeiture was properly imposed. Section
longer returned. The Bureau of Customs and 2531 provides that: The penalty of forfeiture is
Philippine Coastguard went to find the missing imposed on any vessel engaged in smuggling,
vessel and later on discovered that it was sporting provided that the following conditions are
the name of M/V Neptune Breeze. present: 1) vessel used unlawfully the
importation or exportation of articles into or
It was later seized again. The petitioner El Greco from the Philippines, 2) the articles are
claimed that M/V Neptune breeze and M/V Criston imported or exported from any Philippine port,
are 2 different ships and that the former was a 3) and other provided by law. The M/V Neptune
foreign ship and the latter was registered in the Breeze then known as M/V Criston was
Philippines. They did not submit any other carrying 35,000 bags of imported rice without
evidence. necessary papers showing that they were
entered lawfully through a Philippine port after
The respondent found the chassis and engine the payment of taxes and duties thereon. This
number to be that of the same and concluded the gives rise to a presumption that the importation
ship was one and the same. CTA rendered a was illegal. El Greco as owner had the burden
decision in favor of the respondent. of proof but did not show any documentation.
13. Pilipinas Shell v. Section 1204. Liability of Importer for Department of Finance cancelled the tax debit 1. Whether or not the filing of 1, YES. Under Sec. 1204 of the Tariff and
Republic of the Duties. — Unless relieved by laws or memos and tax credit certificates of Shell because the collection case was a Customs Code, import duties constitute a
Philippines, G.R. No. regulations, the liability for duties, taxes, the same were alleged to be fraudulently issued proper remedy. personal debt of the importer that must be paid
161953, 6 March fees and other charges attaching on and transferred. Bureau of Customs (BOC) 2. Whether or not the subject in full. The importer’s liability constitutes a lien
2008 158540, 3 importation constitutes a personal debt demanded from petitioner the value of the matter falls within the on the article which the government may
August 2005 due from the importer to the cancelled TCCs. BOC did not act on the formal jurisdiction of the RTC. choose to enforce while the imported articles
government which can be discharged protest filed by petitioner. are either in its custody or under its control.
only by payment in full of all duties, taxes, When respondent released petitioner’s goods,
fees and other charges legally accruing. Shell then filed a petition for review questioning the its (respondent’s) lien over the imported goods
It also constitutes a lien upon the articles legality of the cancellation of the TCCs in the CTA. was extinguished. Respondent could then only
imported which may be enforced while Respondent filed a collection case in the RTC enforce the payment of petitioner’s import
such articles are in the custody or subject against Shell. duties by filing a case for collection against
to the control of the government. petitioner.
Petitioner contends that the RTC had no jurisdiction
RA 1125, Sec. 7 - The CTA shall exercise over the collection case inasmuch as the CTA had 2. YES. Respondent filed its complaint for
exclusive appellate jurisdiction to review not yet decided the petition for review. The RTC collection on Apr. 3, 2002. The governing law
by appeal: (2) Decisions of the should have dismissed the collection case and at that time was RA 1125 or the old CTA law.
Commissioner of Customs in cases transferred it to CTA where it should be treated as The present case did not involve a decision of
involving liability for customs duties, fees a counterclaim. the Commissioner of Customs in any of the
or other money charges; seizure, instances enumerated in Sec. 7(2) of RA 1125,
detention or release of property affected; hence, CTA had no jurisdiction over the subject
fines and forfeitures or other penalties matter. It was RTC that had jurisdiction under
imposed in relation thereto; or other Sec. 19 (6) of the Judiciary Reorganization Act
matters arising under Customs Law or of 1980, as amended. Despite the pending
other laws or part of law administered by petition for review in the CTA, respondent
the Bureau of Customs; Judiciary cannot and should not await the resolution of
Reorganization Act, Sec. 19 - RTC shall that case before it collects petitioner’s
exercise exclusive original jurisdiction: outstanding customs duties for such delay will
(6) In all cases not within the exclusive unduly restrain the performance of its
jurisdiction of any court, tribunal, person functions. Moreover, if the CTA case turns out
or body exercising judicial or QJA to be favorable to petitioner, the law affords it
functions,... adequate remedy of seeking a refund.
14. Southern Cross The positive final determination by the Philcemcor filed with the DTI an application for the 1. Whether or not decision of 1. Yes. SC held that the CTA had the
Cement Corp. v. Tariff Commission is an indispensable imposition of a definitive safeguard measure on the DTI secretary denying the jurisdiction to review the DTI secretary’s
Cement requisite to the imposition of general importation of Portland cements. They alleged that imposition of a safeguard decision even if that decision did not impose
Manufacturers safeguard measures. Portland cement was being imported in increased measure is appealable to the any safeguard measure. This based on the
Association of the quantities thus causing delay in domestic CTA; following reasons: First, split jurisdiction is
Phils., et al., G.R. No. production. The application was opposed by abhorred. The power of the DTI secretary to
158540, 3 August Southern Cross. 2. Whether or not the DTI adopt or withhold safeguard measures
2005 secretary could impose a emanates from the same source. Second,
DTI conducted a preliminary investigation which general safeguard measure section 29 of the SMA reveals that the
determined the existence of critical circumstances only upon a positive final Congress did not expressly bar the CTA from
which justified the imposition of provision determination by the Tariff reviewing a negative determination by the DTI
measures. The DTI referred the application to the Commission. secretary or confer on the CA such review
Tariff Commission which in turn made a negative authority. The law explicitly states that the CTA
recommendation by stating that no definite general is vested with jurisdiction to review the DTI
safeguard measure be imposed on the importation secretary’s rulings in connection with the
of Portland cement. imposition of a safeguard measure. The
phrase “in connection with” not only qualifies
But the DTI Secretary and the DOJ disregarded the but clarifies the succeeding one-- the
conclusion of the Tariff Commission. This prompted imposition of a safeguard measure. Third,
Philcemcor to file a petition for certiorari with the when there is ambiguity, such interpretation
CA. However, the CA refused to interfere with such that will avoid inconvenience and absurdity is
matters and respected the sound discretion of such to be adopted.
agencies. 2. Yes. The DTI head could not impose a
safeguard measure without a positive final
Southern Cross filed a petition before the Supreme determination by the Commission. The
Court alleging that the CA had no jurisdiction over conditions precedent that must be satisfied
Philcemcor’s petition, as the proper remedy before the DTI may impose a general
conformable to RA 8800 was a petition for review safeguard measure are as follows: First, there
at the CTA. TC’s factual findings were binding upon must be a positive final determination by the
the DTI Secretary. Tarriff Commission that a product is being
imported into the country in such increased
quantities as to be a substantial cause of
serious injury or threat to the domestic
industry; and Second, in the case of non-
agricultural products, the secretary must
establish that the application of a safeguard
measure is in the public interest.

The law explicitly authorizes the DTI secretary

to make a preliminary determination, and the
Tariff Commission to make the final one. These
functions are not interchangeable. In this
respect, the DTI head is bound by the TC’s
determination.

Legislative intent should be given full force and

effect as the executive power to impose
definitive safeguard measures is but a
delegated power, thus Congress has the
prerogative to impose limitations and
restrictions on the executive exercise of this
power. However, nothing in the SMA obliges
the DTI secretary to adopt the
recommendations made by the Tariff
Commission. The nonbinding force of the
Commission’s recommendations is congruent
with Sec 28(2) of the Article VI of the 1987
Constitution.

CA erred in remanding the case to the DTI

secretary with the instruction that the secretary
could impose a general safeguard measure,
even if there was no positive final
determination from the Tariff Commission.
More crucially that CA did not acquire
jurisdiction over the Philcemcor’s petition for
certiorari.