Nursery Care Corporation v. Acevedo, G.R. No.

180651, July 30, 2014

Facts:
This case began when Manila City imposed business taxes on the petitioners under
Sections 15 and 17 of its Revenue Code, which are taxes on wholesalers,
distributors, dealers, and retailers. Later, when petitioners applied to renew their
business licenses for 1999, the city required them to pay additional taxes under
Section 21 of the same Revenue Code.
Although the petitioners disagreed with the additional tax, they paid under protest
for the first quarter of 1999 and later requested a refund from the City Treasurer’s
office. When their request was denied, they asked for reconsideration, but it was
rejected again. This led them to file petitions for certiorari with the Regional Trial
Court (RTC) of Manila, which were eventually consolidated and assigned to Branch
19.
The RTC ruled against the petitioners, stating that the additional tax did not
constitute double taxation. The petitioners appealed to the Court of Appeals (CA),
but the CA dismissed their case, saying it lacked jurisdiction since the petition
raised only questions of law. This led the petitioners to bring the case to the
Supreme Court.
Issues:
1. Should the petitioners get a tax refund for the additional business tax under
Section 21?
2. Did the additional tax under Section 21 amount to double taxation, violating
the Local Government Code of 1991?
Ruling:
 The Court determined that the additional tax under Section 21 did result in
double taxation, which is not allowed.
Ratio:
 The Court highlighted the concept of double taxation, which happens when:
The same taxpayer is taxed twice for the same reason by the same taxing
authority in the same jurisdiction and during the same period. In this case,
Sections 15, 17, and 21 of the Revenue Code of Manila all imposed business
taxes on the same activity. Since the petitioners had already paid their taxes
under Sections 15 and 17, the additional tax under Section 21 was
unnecessary and illegal. Because of this, the petitioners were entitled to a
refund for the taxes they paid under Section 21.
 City of Manila v. Cosmos, G.R. No. 196681, June 27, 2018
Facts:
This case involves the City of Manila and its City Treasurer (petitioners) against
Cosmos Bottling Corporation (respondent). The dispute began in January 2007 when
the City of Manila issued a local business tax and regulatory fees assessment
against Cosmos amounting to ₱1,226,781.05, as stated in a Statement of Account
dated January 15, 2007.
Cosmos protested the assessment on January 18, 2007, arguing that: The tax
ordinances (Nos. 7988 and 8011) used as the basis for the assessment were
declared null and void. The imposition of business tax under Section 21 of the
Revenue Code of Manila (RCM), in addition to Section 14, resulted in double
taxation.
Despite the protest, Cosmos attempted to pay only ₱131,994.23, which it
considered the correct amount, but the City Treasurer refused to accept the partial
payment. Eventually, Cosmos was forced to pay the full amount on February 13,
2007, as evidenced by Official Receipt No. BAJ-005340.
Seeking a refund, Cosmos, filed a claim for refund with the City Treasurer on March
1, 2007 and filed a complaint with the Regional Trial Court (RTC) of Manila on March
8, 2007, requesting a refund or tax credit certificate.
Issues:
 Can a taxpayer who initially protested and paid an assessment later file a
claim for refund?
Ruling:
 The Court ruled that a taxpayer who protests and pays an assessment can
later pursue a refund.
Ratio:
The Supreme Court clarified that a taxpayer who protests an assessment and later
pays the tax is not barred from filing for a refund.
 Sections 195 and 196 of the Local Government Code (LGC) allow taxpayers to
both:
(1) Challenge a tax assessment, and
(2) Seek a refund after payment, provided they act within the prescribed
period.
 The Court affirmed the CTA Division’s ruling that the City of Manila’s
assessment was erroneous, and Cosmos was entitled to a refund.
This case reinforces the importance of adhering to procedural rules in tax litigation
and protects taxpayers from unlawful double taxation by local governments.
 Cargill Philippines, Inc. v. CIR, G.R. No. 203346, September 9, 2020
(Treaty)
Facts:
The dispute arose when Cargill Philippines, Inc. (Cargill) entered into an Intellectual
Property License Agreement with CAN Technologies, Inc., a U.S. company, on June
1, 2002. Under the agreement, Cargill paid royalties for the use of patents and
copyrights related to animal feed production in the Philippines.
Between June 1, 2005, and April 30, 2007, Cargill paid ₱175,425,414.12 in royalties
and withheld 15% tax on these payments. However, on December 21, 2005, Cargill
sought confirmation from the Bureau of Internal Revenue (BIR) on whether it could
apply a reduced 10% tax rate based on the "most favored nation" (MFN) clause in
the RP-US Tax Treaty, citing the RP-Bahrain Tax Treaty as a reference.
On May 11, 2007, the BIR issued Ruling No. DA-ITAD 60-07, which granted the 10%
rate but based it on the RP-Czech Tax Treaty instead of the RP-Bahrain Tax Treaty.
Consequently, Cargill filed a claim for a refund of ₱8,771,270.71, arguing that it had
overpaid withholding taxes on its royalty payments.
Issues:
1. Does the Court of Tax Appeals have jurisdiction to review the validity of BIR
Ruling No. DA-ITAD 60-07?
2. Did the CTA err in declaring BIR Ruling No. DA-ITAD 60-07 invalid and not
binding?
3. Can the ruling invalidating BIR Ruling No. DA-ITAD 60-07 be applied
retroactively to Cargill?
4. Is Cargill entitled to a tax refund of ₱8,771,270.71 for overpaid withholding
taxes on royalties?
Ruling:

The Supreme Court ruled that the CTA has the authority to review and declare BIR
rulings invalid under Republic Act No. 1125 (as amended). Since tax refunds and
preferential tax rates involve tax law interpretations, the CTA has judicial power to
assess whether BIR’s rulings comply with tax treaties. The Court held that BIR
rulings are not binding if they misinterpret tax treaties. To apply the most favored
nation (MFN) clause, a taxpayer must prove two conditions: (1) The royalties in
question must be of the same kind and (2) The tax treatment must be similar in the
referenced treaties.
In this case, Cargill failed to present sufficient evidence that the RP-US and RP-
Czech tax treaties had identical tax treatments for royalties. The U.S. tax credit
limitations under the RP-US Tax Treaty were not adequately demonstrated, leading
to the rejection of the 10% preferential rate claim.
The Supreme Court ruled that invalid rulings have no legal effect from the
beginning, meaning Cargill could not rely on an erroneous BIR interpretation. Since
tax refunds are matters of strict compliance, ambiguities in tax laws must be
construed against the taxpayer. The Court reiterated that tax refunds are matters of
strict interpretation, and the burden of proof rests entirely on the taxpayer. Since
Cargill failed to establish its entitlement to the 10% tax rate, it was not entitled to a
refund of overpaid withholding taxes.
 Air Canada v. CIR, G.R. No. 169507, January 11, 2016
Facts:
The case involves Air Canada, a foreign corporation registered in Canada, and the
Commissioner of Internal Revenue (CIR). The Supreme Court’s Second Division
rendered its decision on January 11, 2016. Air Canada was granted authority to
operate as an offline international air carrier by the Civil Aeronautics Board (CAB) on
April 24, 2000, valid until April 24, 2005. As an offline carrier, it did not operate
direct flights to or from the Philippines. Instead, it engaged Aerotel Ltd., Corp.
(Aerotel) as its general sales agent (GSA) on July 1, 1999 to sell its tickets in the
Philippines. From Q3 of 2000 to Q2 of 2002, Air Canada paid ₱5,185,676.77 in
income tax on its Gross Philippine Billings (GPB). On November 28, 2002, Air
Canada filed a claim for a tax refund, arguing it should be taxed under Section 28(A)
(3) of the 1997 National Internal Revenue Code (NIRC) as an international carrier
(subject to a 2.5% tax on GPB) rather than under Section 28(A)(1), which imposes
the regular corporate income tax of 32%. However, the Bureau of Internal Revenue
(BIR) denied the refund claim, leading Air Canada to file a Petition for Review with
the Court of Tax Appeals (CTA).

Issues:
1. Is Air Canada subject to the 2.5% tax on Gross Philippine Billings (GPB) under
Section 28(A)(3), or does the regular 32% corporate income tax under
Section 28(A)(1) apply?
2. Does the Republic of the Philippines-Canada Tax Treaty apply, particularly
regarding the definition of “permanent establishment”?
3. Is Air Canada entitled to a tax refund of ₱5,185,676.77 for allegedly
erroneously paid taxes?

Ruling:

The Court rejected Air Canada's claim that it should be taxed under Section 28(A)
(3), clarifying that this provision applies only to international carriers operating
flights originating from the Philippines. Since Air Canada did not operate flights to or
from the Philippines, it could not avail of the preferential 2.5% tax on Gross
Philippine Billings (GPB). On the Application of the Philippines-Canada Tax Treaty,
the Supreme Court ruled that the tax treaty between the Philippines and Canada
applies, particularly its definition of a "permanent establishment". The treaty states
that if a foreign corporation has a fixed place of business or an agent that regularly
conducts business on its behalf, it has a taxable presence in the country. Since
Aerotel was selling Air Canada’s tickets in the Philippines, the Court held that this
constituted a permanent establishment (PE), subjecting Air Canada to Philippine tax
laws. On Air Canada’s Claim for a Refund, the Supreme Court denied Air Canada’s
refund claim, ruling that the taxes paid were correctly assessed under the
applicable tax laws and treaty provisions. Since Air Canada was an RFC with a PE, it
was properly taxed at 32% under Section 28(A)(1) of the NIRC.
 Mitsubishi Corporation – Manila Branch v. CIR, G.R. No. 175772, June 5,
2017

Facts:
The case involves Mitsubishi Corporation-Manila Branch and the Commissioner of
Internal Revenue (CIR). In 1987, the governments of Japan and the Philippines
executed an Exchange of Notes, under which Japan extended a loan of ¥40.4 billion
to the Philippines for the Calaca II Coal-Fired Thermal Power Plant Project. Despite
the tax assumption agreement, Mitsubishi paid ₱8.32 million in Branch Profit
Remittance Tax (BPRT) and later sought a ₱52.61 million refund from the Bureau of
Internal Revenue (BIR), arguing that the taxes were erroneously collected since the
government had assumed its tax liabilities. Mitsubishi based its claim on BIR Ruling
No. DA-407-98, which affirmed the government’s obligation to bear such taxes.
However, the BIR denied the refund, prompting Mitsubishi to file a Petition for
Review with the Court of Tax Appeals (CTA).

The CTA Division initially ruled in favor of Mitsubishi, granting the refund. However,
the CTA En Banc reversed the decision, ruling that the Exchange of Notes did not
grant tax exemption and that Mitsubishi should claim the refund from NPC, not the
CIR. Mitsubishi appealed to the Supreme Court, which ruled in its favor. The Court
held that the Exchange of Notes obligated the Philippine Government to assume the
tax liabilities of Japanese contractors, meaning Mitsubishi’s tax payments were
indeed erroneous.

Issues:

1. Is Mitsubishi Corporation-Manila Branch entitled to a refund of the

erroneously paid income tax and Branch Profit Remittance Tax (BPRT)?
2. If so, which government entity is responsible for issuing the refund?

Ruling:

The Philippine Government Assumed Tax Liabilities under the Exchange of Notes
 The Exchange of Notes explicitly provided that the Philippine Government
would assume all tax obligations imposed on Japanese contractors.
 The Supreme Court clarified that the word "assume" does not mean
"exempt", but rather that the Philippine Government, not the Japanese
contractor, would bear the tax burden.
 This assumption of tax obligations meant that Mitsubishi should not have
been liable for paying the income tax and BPRT in the first place.

Erroneously Collected Taxes are Refundable under the NIRC

 The Supreme Court ruled that taxes erroneously or illegally collected can be
refunded under Sections 204 and 229 of the National Internal Revenue Code
(NIRC).
  Since the Philippine Government contractually assumed the taxes,
Mitsubishi’s payment was erroneous, making it eligible for a tax refund from
the CIR.

The CTA En Banc's Interpretation was Incorrect

 The CTA En Banc ruled that Mitsubishi should recover the taxes from NPC, not
from the CIR.
 However, the Supreme Court rejected this argument, stating that the CIR has
the authority to issue tax refunds for erroneously collected taxes, regardless
of any contractual arrangements with NPC.
 The Court further emphasized that administrative issuances, such as RMC No.
42-99, cannot override the CIR’s statutory authority to grant tax refunds.

Mandanas v. Ochoa, Jr., G.R. No. 199802, April 10, 2019