1

COMPILATION OF SUPREME COURT DECISIONS

(MARCH 2014-MARCH 2015)

TAXATION LAW
G.R. No. 182399. March 12, 2014 CS
Garment, Inc. Vs. Commissioner of
Internal Revenue
The threshold question before this
Court is whether or not CS
Garment is already immune from
paying the deficiency taxes stated
in the 1998 tax assessments of the
CIR, as modified by the CTA.
Tax amnesty refers to the articulation of
the absolute waiver by a sovereign of its
right to collect taxes and power to impose
penalties on persons or entities guilty of
violating a tax law. Tax amnesty aims to
grant a general reprieve to tax evaders
who wish to come clean by giving them an
opportunity to straighten out their
records.
In 2007, Congress enacted R.A. 9480,
which granted a tax amnesty covering all
national internal revenue taxes for the
taxable year 2005 and prior years, with or
without assessments duly issued therefor,
that have remained unpaid as of
December 31, 2005. These national
internal revenue taxes include (a) income
tax; (b) VAT; (c) estate tax; (d) excise
tax; (e) donors tax; (f) documentary
stamp tax; (g) capital gains tax; and (h)
other percentage taxes.
Pursuant to Section 6 of the 2007 Tax
Amnesty
Law,
those
who
availed
themselves of the benefits of the law
became immune from the payment of
taxes, as well as additions thereto, and
the
appurtenant
civil,
criminal
or
administrative
penalties
under
the
National Internal Revenue Code of 1997,
as amended, arising from the failure to
pay any and all internal revenue taxes for
taxable year 2005 and prior years.
Amnesty taxpayers may immediately
enjoy the privileges and immunities
under the 2007 Tax Amnesty Law, as
soon as they fulfill the suspensive

conditions imposed therein

A careful scrutiny of the 2007 Tax
Amnesty Law would tell us that the law
contains two types of conditions one
suspensive, the other
resolutory. Borrowing from the concepts
under our Civil Code, a condition may be
classified
as
suspensive
when
the
fulfillment of the condition results in the
acquisition of rights. On the other hand, a
condition may be considered resolutory
when the fulfillment of the condition
results in the extinguishment of rights. In
the context of tax amnesty, the rights
referred to are those arising out of the
privileges and immunities granted under
the applicable tax amnesty law.
CS Garment has complied with all of the
documentary requirements of the law.
Consequently, and contrary to the
assertion of the OSG, no further
assessment by the BIR is necessary. CS
Garment is now entitled to invoke the
immunities and privileges under Section 6
of the law.
Similarly, we reject the contention of OSG
that the BIR was given a one-year period
to contest the correctness of the SALN
filed by CS Garment, thus making
petitioners motion premature. Neither the
2007 Tax Amnesty Law nor Department of
Finance (DOF) Order No. 29-07 (Tax
Amnesty Law IRR) imposes a waiting
period of one year before the applicant
can enjoy the benefits of the Tax Amnesty
Law. It can be surmised from the cited
provisions that the law intended the
immediate enjoyment of the immunities
and privileges of tax amnesty upon
fulfilment of the requirements. Further, a
reading of Sections 4 and 6 of the 2007
Tax Amnesty Law shows that Congress
has adopted a no questions asked
policy, so long as all the requirements of
the law and the rules are satisfied. The
one-year period referred to in the law
should thus be considered only as a

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

COMPILATION OF SUPREME COURT DECISIONS

(MARCH 2014-MARCH 2015)
prescriptive period within which third
parties, meaning parties other than the
BIR or its agents, can question the SALN
not as a waiting period during which the
BIR may contest the SALN and the
taxpayer prevented from enjoying the
immunities and privileges under the law.
This clarification, however, does not mean
that the amnesty taxpayers would go
scot-free in case they substantially
understate the amounts of their net worth
in their SALN. The 2007 Tax Amnesty Law
imposes a resolutory condition insofar as
the
enjoyment
of
immunities
and
privileges under the law is concerned.
Pursuant to Section 4 of the law, third
parties
may
initiate
proceedings
contesting the declared amount of net
worth of the amnesty taxpayer within one
year following the date of the filing of the
tax amnesty return and the SALN. Section
6 then states that All these immunities
and privileges shall not apply x x x where
the amount of networth as of December
31, 2005 is proven to be understated to
the extent of thirty percent (30%) or
more, in accordance with the provisions of
Section 3 hereof. Accordingly, Section 10
provides that amnesty taxpayers who
willfully understate their net worth shall
be (a) liable for perjury under the Revised
Penal Code; and (b) subject to immediate
tax fraud investigation in order to collect
all taxes due and to criminally prosecute
those found to have willfully evaded lawful
taxes due.
Nevertheless, in this case we note that the
OSG has already indicated that the CIR
had not filed a case relative to the tax
amnesty
application of CS Garment, from the time
the documents were filed in March 2008.
Neither did the OSG mention that a third
party
had
initiated
proceedings
challenging the declared amount of net
worth of the amnesty taxpayer within the
one-year period.

Taxpayers with pending tax cases are

still qualified to avail themselves of
the tax amnesty program.
We
cull
from
the
aforementioned
provisions that neither the law nor the
implementing rules state that a court
ruling that has not attained finality would
preclude the availment of the benefits of
the Tax Amnesty Law. Both R.A. 9480 and
DOF Order No. 29-07 are quite precise in
declaring that [t]ax cases subject of
final and executory judgment by the
courts are the ones excepted from the
benefits of the law.
While tax amnesty, similar to a tax
exemption, must be construed strictly
against the taxpayer and liberally in favor
of the taxing authority, it is also a wellsettled doctrine that the rule-making
power of administrative agencies cannot
be extended to amend or expand
statutory requirements or to embrace
matters not originally encompassed by the
law. Administrative regulations should
always be in accord with the provisions of
the statute they seek to carry into effect,
and any resulting inconsistency shall be
resolved in favor of the basic law. We thus
definitively declare that the exception
[i]ssues and cases which were ruled by
any court (even without finality) in favor
of the BIR prior to amnesty availment of
the taxpayer under BIR RMC 19-2008 is
invalid, as the exception goes beyond the
scope of the provisions of the 2007 Tax
Amnesty Law.
Considering
the completion
of
the
aforementioned requirements, we find
that petitioner has successfully availed
itself of the tax amnesty benefits granted
under the Tax Amnesty Law. Therefore,
we no longer see any need to further
discuss the issue of the deficiency tax
assessments. CS Garment is now deemed
to have been absolved of its obligations
and is already immune from the payment
of taxes including the assessed
deficiency in the payment of VAT, DST,

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

COMPILATION OF SUPREME COURT DECISIONS

(MARCH 2014-MARCH 2015)

and income tax as affirmed by the CTA en

banc as well as of the additions thereto
(e.g.,
interests
and
surcharges).
Furthermore, the tax amnesty benefits
include immunity from the appurtenant
civil, criminal, or administrative penalties
under the NIRC of 1997, as amended,
arising from the failure to pay any and all
internal revenue taxes for taxable year
2005 and prior years.
G.R. No. 169778. March 12, 2014
Commissioner of Internal Revenue Vs.
Silicon Philippines, Inc. (formerly Intel
Philippines Manufacturing, Inc.)

To obviate the possibility that its

decision inay be rendered void, the
Court can, by its own initiative,
rule on the question ofjurisdiction,
although not raised by the parties.
As a corollary thereto, to inquire
into the existence o f jurisdiction
over the subject matter is the
primary concern o f a court, for
thereon would depend the validity
of its entire proceedings.

The core issue for the Courts resolution is

whether or not respondent is entitled to
its claim for refund or issuance of a tax
credit certificate in its favor in the amount
of
P21,338,910.44
representing
its
unutilized creditable input taxes for the
period covering 1 April 1998 to 30 June
1998 (second quarter), pursuant to the
applicable provisions of the NIRC of 1997,
as amended.
Pertinent to the instant case, it is worth
mentioning that Section 112 of the NIRC
of 1997, as amended, was already the
applicable law at the time that respondent
filed its administrative and judicial claims,
Based on the foregoing provisions, prior to
seeking judicial recourse before the CTA, a
VAT-registered person may apply for the
issuance of a tax credit certificate or
refund of creditable input tax attributable
to zero- rated or effectively zero-rated
sales within two (2) years after the close
of taxable quarter when the sales or

purchases were made.

Additionally, further reading of the
provisions of Section 112 shows that
under
paragraph
(D)
thereof,
the
Commissioner of Internal Revenue is
given
a
120-day
period,
from
submission of complete documents in
support of the administrative claim
within which to act on claims for
efund/applications for issuance of the tax
credit certificate. Upon denial of the claim
or application, or upon expiration of the
120-day period, the taxpayer only has
30 days within which to appeal said
adverse decision or unacted claim
before the CTA.
a taxpayer-claimant only had a limited
period of thirty (30) days from the
expiration of the 120-day period of
inaction of the Commissioner of Internal
Revenue to file its judicial claim with this
Court. Failure to do so, the judicial claim
shall prescribe or be considered as filed
out of time.
Applying the foregoing discussion in the
case at bench, although respondent has
indeed complied with the required twoyear period within which to file a
refund/tax credit claim with the BIR by
filing its administrative claim on 6 May
1999 (within the period from the close of
the subject second quarter of taxable year
1998 when the relevant sales or
purchases were made), it appears
however, that respondents corresponding
judicial claim filed with the CTA on 30
June 2000 was filed beyond the 30- day
period,
Since respondents judicial claim for the
aforementioned quarter was filed before
the CTA only on 30 June 2000, which was
way beyond the mandatory 120+30 days
to seek judicial recourse, such noncompliance with the said mandatory
period of thirty (30) days is fatal to its
refund
claim
on
the
ground
of

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

COMPILATION OF SUPREME COURT DECISIONS

(MARCH 2014-MARCH 2015)
prescription.
As regards the prints on the supporting
receipts or invoices, it is worth mentioning
that the High Court already ruled on the
significance of imprinting the word zerorated for zero-rated sales covered by its
receipts or invoices,
Clearly, the foregoing pronouncement
affirms that absence or non- printing of
the word zero-rated in respondents
invoices is fatal to its claim for the refund
and/or
tax
credit
representing
its
unutilized input VAT attributable to its
zero-rated sales.
On the other hand, while this Court
considers the importance of imprinting the
word "zero-rated" in said invoices, the
same does not apply to the phrase "BIR
authority to print." In Intel Technology
Philippines,
Inc.
v.
Commissioner
ofInternal Revenue, the Court ruled that
there is no law or BIR rule or regulation
requiring
the
taxpayer-claimant's
authority from the BIR to print its sales
invoices (BIR authority to print) to be
reflected or indicated therein. It stressed
"that while entities engaged in business
are required to secure from the BIR an
authority to print receipts or invoices and
to issue duly registered receipts or
invoices, it is not required that the BIR
authority to print be reflected or indicated
therein."

All told, the CTA has no jurisdiction over

respondent's judicial appeal considering
that its Petition for Review was filed
beyond the mandatory 30-day period
pursuant to Section 112(D) of the NIRC of
1997,
as
amended.
Consequently,
respondent's instant claim for refund must
be denied.
G.R. No. 179260. April 2, 2014
Commissioner of Internal Revenue Vs.
Team (Philippines) Operations Corporation
(formerly
Mirant
Phils.,
Operation
Corporation)

ISSUE: claim for refund in the amount of

P69,562,412.00 representing unutilized
tax credits for taxable period ending 31
December 2001.
In Banco Filipino Savings and Mortgage
Bank v. Court of Appeals,
this Court had previously articulated that
there are three essential conditions for the
grant of a claim for refund of creditable
withholding income tax, to wit: (1) the
claim is filed with the Commissioner of
Internal Revenue within the two-year
period from the date of payment of the
tax; (2) it is shown on the return of the
recipient that the income payment
received was declared as part of the gross
income; and (3) the fact of withholding is
established by a copy of a statement duly
issued by the payor to the payee showing
the amount paid and the amount of the
tax withheld therefrom.
In addition to the abovementioned
requisites, the NIRC of 1997, as amended,
likewise provides for the strict observance
of the concept of the irrevocability rule,
that says: Once the option to carryover and apply the excess quarterly
income tax against income tax due for
the
taxable
quarters
of
the
succeeding taxable years has been
made, such option shall be considered
irrevocable for that taxable period
and no application for cash refund or
issuance of a tax credit certificate
shall be allowed therefor. (Emphasis
supplied)
Applying the foregoing discussion to the
present case, we find that respondent had
indeed complied with the abovementioned
requirements.
Here, it is undisputed that the claim for
refund was filed within the two-year
prescriptive period
prescribed under
Section 229 of the NIRC of 1997, as
amended. Respondent filed its income tax
return for taxable year 2001 on 15 April

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

COMPILATION OF SUPREME COURT DECISIONS

(MARCH 2014-MARCH 2015)

2002. Counting from said date, it indeed

had until 14 April 2004 within which to file
its claim for refund or issuance of tax
credit certificate in its favor both
administratively and judicially. Thus,
petitioners administrative claim and
petition for review filed on 19 March 2003
and 27 March 2003, respectively, fell
within the abovementioned prescriptive
period.
G.R. No. 197561. April 7, 2014Coca-Cola
Bottlers Philippines, Inc. Vs. City of
Manila, et al.
ISSUE: the controversy boils down to the
propriety of the issuance of the writ of
execution of the judgment ordering
respondents either to refund or credit the
tax assessed
After careful consideration of the facts and
laws obtaining in this case, we find that
the issuance of the Writ of Execution was
superfluous, given the clear directive of
the RTC-Manila in its Decision dated
September 28, 2001. We do not, however,
agree with respondents view that
Administrative Circular No. 10-2000 is
applicable to the instant case for reasons
discussed hereinbelow.
In its first assigned error, petitioner
argues that the writ of execution issued by
the Branch Clerk of Court does not involve
the levy or garnishment of funds and
property used or being used for public
purpose given that the writ was issued
For:
Special
Judgment.
Thus,
Administrative Circular No. 10-2000 has
no relevance in the instant case.
In its Decision dated September 28, 2001,
the RTC-Manila directs respondents to
either refund or credit the tax under
Section 21 of the Revenue Code of Manila,
which was improperly assessed but
nevertheless paid for by petitioner on the
first quarter of year 2000 in the amount of
P3,036,887.33. The judgment does not
actually involve a monetary award or a
settlement
of
claim
against
the

government.
Under the first option, any tax on income
that is paid in excess of the amount due
the government may be refunded,
provided that a taxpayer properly applies
for the refund. On the other hand, the
second option works by applying the
refundable amount against the tax
liabilities of the petitioner in the
succeeding taxable years.
Hence, instead of moving for the issuance
of a writ of execution relative to the
aforesaid Decision, petitioner should have
merely requested for the approval of the
City of Manila in implementing the tax
refund or tax credit, whichever is
appropriate. In other words, no writ was
necessary to cause the execution thereof,
since the implementation of the tax refund
will effectively be a return of funds by the
City of Manila in favor of petitioner while a
tax credit will merely serve as a deduction
of petitioners tax liabilities in the future.
In fact, Section 252 (c) of the Local
Government Code of the Philippines is
very clear that [i]n the event that the
protest is finally decided in favor of the
taxpayer, the amount or portion of the tax
protested shall be refunded to the
protestant, or applied as tax credit against
his existing or future tax liability. It was
not necessary for petitioner to move for
the issuance of the writ of execution
because the remedy has already been
provided by law.
the issuance of the Writ of Execution
relative thereto was superfluous, because
the judgment of the RTC-Manila can
neither be considered a judgment for a
specific sum of money susceptible of
execution by levy or garnishment under
Section 9, Rule 39 of the Rules of Court
nor a special judgment under Section 11,
Rule 39 thereof.
G.R. No. 180654. April 21, 2014National
Power
Corporation
Vs.
Provincial
Government of Bataan, et al.

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

COMPILATION OF SUPREME COURT DECISIONS

(MARCH 2014-MARCH 2015)

This case is about the distinction

between an action contesting a
local tax assessment and an action
seeking
to
enjoin
the
local
government from enforcing a tax
assessment against a person who
claims that the taxable business
does not belong to him.

The above created the TRANSCO and

transferred to it the NPCs electrical
transmission function with effect on June
26, 2001. The NPC, therefore, ceased to
operate that business in Bataan by
operation of law. Since the local franchise
tax is imposed on the privilege of
operating a franchise, not a tax on the
ownership of the transmission facilities, it
is clear that such tax is not a liability of
the NPC.
Nor could the Province levy on the
transmission facilities to satisfy the tax
assessment against the NPC since, as
Section 8 above further provides, the
latter ceased to own those facilities six
months from the effectivity of the EPIRA.
Those facilities have since belonged to
TRANSCO.
Section 49 above created the Power
Sector Assets and Liabilities Management
Corporation
(PSALM
Corp.)
and
transferred to it all of the NPC's
"generation assets" which would include
the Bataan Thermal Plant. Clearly, the
NPC had ceased running its former power
transmission and distribution business in
Bataan by operation of law from June 26,
2001. It is, therefore, not the proper party
subject to the local franchise tax for
operating that business. Parenthetically,
Section 49 also transferred "all existing xx
x liabilities" of the NPC to PSALM Corp.,
presumably including its unpaid liability
for local franchise tax from January 1 to
June 25, 2001. Consequently, such tax is
collectible solely from PSALM Corp.
An indispensable party is one who has an
interest in the controversy or subject

matter and in whose absence there cannot

be a determination between the parties
already before the court which is effective,
complete or equitable. Here, since the
subject properties belong to PSALM Corp.
and
TRANSCO,
they
are
certainly
indispensable parties to the case that
must be necessarily included before it may
properly go forward. For this reason, the
proceedings below that held the NPC liable
for the local franchise tax is a nullity. It
did not matter where the RTC Decision
was appealed, whether before the CA or
the CTA.
Here, since the subject properties belong
to PSALM Corp. and TRANSCO, they are
certainly indispensable parties to the case
that must be necessarily included before it
may properly go forward. For this reason,
the proceedings below that held the NPC
liable for the local franchise tax is a
nullity. It did not matter where the RTC
Decision was appealed, whether before
the CA or the CTA.
G.R. No. 185432. June 4, 2014
As earlier stated, the proper
interpretation of the above-quoted
provision was finally settled in the
San Roque case23 by this Court
sitting En Banc. The relevant
portions of the discussion pertinent
to the focal issue in the present
case are quoted hereunder as
follows:chanroblesvirtuallawlibrary

To repeat, a claim for tax refund or

credit, like a claim for tax refund
exemption, is construed strictly
against the taxpayer. One of the
conditions for a judicial claim of
refund or credit under the VAT
System is compliance with the
120+30 day mandatory and
jurisdictional periods.
Thus,
strict compliance with the
120+30
day
periods
is
necessary for such a claim to
prosper,
whether
before,
during, or after the effectivity
of the Atlas doctrine, except for

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

COMPILATION OF SUPREME COURT DECISIONS

(MARCH 2014-MARCH 2015)
the period from the issuance of
BIR Ruling No. DA-489-03 on
10 December 2003 to 6 October
2010 when the Aichi doctrine
was adopted, which again
reinstated the 120+30 day
periods as mandatory and
jurisdictional.24
(Emphasis
supplied)ChanRoblesVirtualawlibrar
y

In
Mindanao
II
Geothermal
Partnership v. Commissioner of
Internal Revenue, ,25 the Second
Division of this Court, in applying
therein the ruling in the San Roque
case, provided a Summary of Rules
on Prescriptive Periods Involving
VAT as a guide for all parties
concerned,
to
wit:chanroblesvirtuallawlibrary
We summarize the rules on the
determination of the prescriptive
period for filing a tax refund or
credit of unutilized input VAT
as provided in Section 112 of
the
1997
Tax
Code,
as
follows:chanroblesvirtuallawlibrary

considered
inaction.

(1) An administrative claim must

be filed with the CIR within two
years after the close of the taxable
quarter when the zero-rated or
effectively zero-rated sales were
made.
(2) The CIR has 120 days from the
date of submission of complete
documents in support of the
administrative claim within which
to decide whether to grant a refund
or
issue
a
tax
credit
certificate. The 120-day period
may extend beyond the two-year
period from the filing of the
administrative claim if the claim is
filed in the later part of the twoyear period. If the 120-day
period expires without any
decision from the CIR, then the
administrative claim may be

to

be

denied

by

(3) A judicial claim must be

filed with the CTA within 30
days from the receipt of the
CIRs decision denying the
administrative claim or from
the expiration of the 120-day
period without any action from
the CIR.
(4) All taxpayers, however, can
rely on BIR Ruling No. DA-48903 from the time of its issuance
on 10 December 2003 up to its
reversal by this Court in Aichi
on 6 October 2010, as an
exception to the mandatory and
jurisdictional
120+30
day
periods.26
(Emphasis
supplied)ChanRoblesVirtualawlibrar
y
Certainly, it is evident from the
foregoing
jurisprudential
pronouncements that a taxpayerclaimant only had a limited period
of thirty (30) days from the
expiration of the 120-day period of
inaction of the Commissioner of
Internal Revenue (CIR) to file its
judicial claim with the CTA, with
the exception of claims made
during the effectivity of BIR Ruling
No. DA-489-03 (from 10 December
2003 to 5 October 2010).27 Failure
to do so, the judicial claim shall
prescribe or be considered as filed
out of time.
Applying the foregoing discussion
in the case at bench, although it
appears that petitioner has indeed
complied with the required twoyear period within which to file a
refund/tax credit claim with the
BIR by filing its administrative
claims on 24 February 2003 and 25
March 2004 (within the period from
the close of the taxable quarters
for the years 2002 and 2003,

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

COMPILATION OF SUPREME COURT DECISIONS

(MARCH 2014-MARCH 2015)
respectively, when the relevant
sales or purchases were made),
this Court finds that petitioners
corresponding judicial claim insofar
as to the four quarters of taxable
year 2002 was filed beyond the 30day period, detailed hereunder as
follows:chanroblesvirtuallawlibrary

Taxab
le
year
(clos
e
of
taxabl
e
quarte
rs)

Filing
date of
the
adminis
trative
claim
(within
the
2year
period)

Last
day of
the
120day
period
under
Sectio
n
112(D
)
from
the
date
of
submi
ssion
of
compl
ete
docu
ments
in
suppo
rt
of
its
applic
ation

Taxab
le
year
2002
1st
Quart
er
(31
March
2002)
2nd
Quart
er
(30
June

24
Februar
y
200328

24
June
2003

Last
day
of
the
30day
perio
d to
judic
ially
appe
al
said
inact
ion

Filing
dat
e of
the
Peti
tion
for
Revi
ew

24
July
200
3

30
Mar
ch
200
4

2002)
3rd
Quart
er
(30
Septe
mber
2002)
4th
Quart
er
(31
Dece
mber
2002)
Taxab
le
year
2003
1st
Quart
er
(31
March
2003)
2nd
Quart
er
22
30
(30
25
23
Aug
Mar
June
March
July
ust
ch
2003)
200429
2004
200
200
3rd
4
4
Quart
er
(30
Septe
mber
2003)
4th
Quart
er
(31
Dece
mber
2003)

Section 112(D) specifically states

that in case of failure on the part of
the respondent to act on the
application within the 120-day
period prescribed by law, petitioner

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

COMPILATION OF SUPREME COURT DECISIONS

(MARCH 2014-MARCH 2015)
only has thirty (30) days after the
expiration of the 120-day period to
appeal the unacted claim with the
CTA.
Since petitioners judicial
claim for the aforementioned
quarters for taxable year 2002 was
filed before the CTA only on 30
March 2004,30 which was way
beyond the mandatory 120+30
days to seek judicial recourse, such
non-compliance
with
the
mandatory period of thirty (30)
days is fatal to its refund claim on
the ground of prescription.

Parenthetically, even if it is shown that

petitioner did not strictly comply with the
mandatory
120+30
day
prescriptive
periods35 under Section 112 of the NIRC of
1997, as amended, its administrative
claim covering taxable year 2003 falls
within the effectivity of BIR Ruling No. DA489-03 (10 December 2003 to 5 October
2010),
being
an
exception
thereto. Hence, there is no more need for
petitioner to wait for the 120-day period
to expire before it can file its appropriate
judicial claim before the CTA. Accordingly,
the CTA indeed acquired jurisdiction over
petitioners refund claim for taxable year
2003.
Visayas Geothermal Power Company Vs.
Commissioner of Internal Revenue
G.R. No. 197525. June 4, 2014
It has been definitively settled in
the recent En Banc case of CIR v.
San Roque Power Corporation (San
Roque),12 that it is Section 112 of
the NIRC which applies to claims
for tax credit certificates and tax
refunds arising from sales of VATregistered persons that are zerorated or effectively zero-rated,
which are, simply put, claims for
unutilized creditable input VAT.

Thus, under Section 112(A), the

taxpayer may, within 2 years after
the close of the taxable quarter
when the sales were made, via an
administrative claim with the CIR,
apply for the issuance of a tax

credit certificate or refund of

creditable input tax due or paid
attributable to such sales. Under
Section 112(D), the CIR must then
act on the claim within 120 days
from the submission of the
taxpayers complete documents. In
case of (a) a full or partial denial
by the CIR of the claim, or (b) the
CIRs failure to act on the claim
within 120 days, the taxpayer may
file a judicial claim via an appeal
with the CTA of the CIR decision or
unacted claim, within 30 days (a)
from receipt of the decision; or (b)
after the expiration of the 120-day
period.

The
2-year
period
under
Section 229 does not apply to
appeals before the CTA in
relation to claims for a refund
or tax credit for unutilized
creditable input VAT. Section
229 pertains to the recovery of
taxes erroneously, illegally, or
excessively collected.13San Roque
stressed that input VAT is not
excessively
collected
as
understood under Section 229
because, at the time the input VAT
is collected, the amount paid is
correct and proper.14 It is,
therefore,
Section
112
which
applies specifically with regard to
claiming a refund or tax credit for
unutilized
creditable
input
VAT.15cralawred
There is, however, an exception to the
mandatory and jurisdictional nature of the
120+30 day period. The Court in San
Roque noted that BIR Ruling No. DA-48903, dated December 10, 2003, expressly
stated that the taxpayer-claimant need
not wait for the lapse of the 120-day
period before it could seek judicial relief
with the CTA by way of Petition for
Review.21 This BIR Ruling was recognized
as a general interpretative rule issued by
the CIR under Section 422 of the NIRC
and, thus, applicable to all taxpayers.
Since the CIR has exclusive and original

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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COMPILATION OF SUPREME COURT DECISIONS

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jurisdiction to interpret tax laws, it was
held that taxpayers acting in good faith
should not be made to suffer for adhering
to such interpretations. Section 24623 of
the Tax Code, in consonance with
equitable estoppel, expressly provides
that a reversal of a BIR regulation or
ruling cannot adversely prejudice a
taxpayer who in good faith relied on the
BIR regulation or ruling prior to its
reversal. Hence, taxpayers can 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+30 day period was mandatory and
jurisdictional.

Accordingly, the general rule is

that the 120+30 day period is
mandatory and jurisdictional from
the effectivity of the 1997 NIRC on
January 1, 1998, up to the present.
As an exception, judicial claims
filed from December 10, 2003 to
October 6, 201024need not wait for
the exhaustion of the 120-day
period.
A review of the facts of the present
case reveals that petitioner VGPC
timely filed its administrative claim
with the CIR on December 6, 2006,
and later, its judicial claim with the
CTA on January 3, 2007. The
judicial claim was clearly filed
within the period of exception and
was, therefore, not premature and
should not have been dismissed by
the CTA En Banc.
Atlas doctrine has no relevance
to the 120+30 day period for
filing judicial claim
Although the core issue of prematurity of
filing has already been resolved, the Court
deems it proper to discuss the petitioners
argument that the doctrine in Atlas, which
allegedly upheld the primacy of the 2-year
prescriptive period under Section 229,
should prevail over the ruling in Aichi
regarding the mandatory and jurisdictional
nature of the 120+30 day period in

Section 112.
In this regard, it was thoroughly explained
in San Roque that the Atlas doctrine only
pertains to the reckoning point of the 2year prescriptive period from the date of
payment of the output VAT under Section
229, and has no relevance to the 120+30
day period under Section 112, to
wit:ChanRoblesVirtualawlibrary
The Atlas doctrine, which held that claims
for refund or credit of input VAT must
comply with the two-year prescriptive
period under Section 229, should be
effective only from its promulgation
on 8 June 2007 until its abandonment
on 12 September 2008 in Mirant. The
Atlas doctrine was limited to the reckoning
of the two-year prescriptive period from
the date of payment of the output VAT.
Prior to the Atlas doctrine, the two-year
prescriptive period for claiming refund or
credit of input VAT should be governed by
Section 112(A) following the verba legis
rule. The Mirant ruling, which abandoned
the Atlas doctrine, adopted the verba legis
rule, thus applying Section 112(A) in
computing the two-year prescriptive
period in claiming refund or credit of input
VAT.
The Atlas doctrine has no relevance to the
120+30 day periods under Section 112(C)
because the application of the 120+30
day periods was not in issue in Atlas. The
application of the 120+30 day periods was
first raised in Aichi, which adopted the
verba legis rule in holding that the
120+30 day periods are mandatory and
jurisdictional. The language of Section
112(C) is plain, clear, and unambiguous.
When Section 112(C) states that the
Commissioner shall grant a refund or
issue the tax credit within one hundred
twenty (120) days from the date of
submission of complete documents, the
law clearly gives the Commissioner 120
days within which to decide the taxpayers
claim. Resort to the courts prior to the
expiration of the 120-day period is a
patent violation of the doctrine of

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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exhaustion of administrative remedies, a
ground for dismissing the judicial suit due
to prematurity. Philippine jurisprudence is
awash with cases affirming and reiterating
the
doctrine
of
exhaustion
of
administrative remedies. Such doctrine is
basic and elementary.25cralawred
[Underscoring supplied]
Thus, Atlas is only relevant in determining
when to file an administrative claim with
the CIR for refund or credit of unutilized
creditable input VAT, and not for
determining when to file a judicial claim
with the CTA. From June 8, 2007 to
September
12,
2008,
the
2-year
prescriptive period to file administrative
claims should be counted from the date of
payment of the output VAT tax. Before
and after said period, the 2-year
prescriptive period is counted from the
close of the taxable quarter when the
sales were made, in accordance with
Section 112(A). In either case, the
mandatory and jurisdictional 120+30 day
period must be complied with for the filing
of the judicial claim with the CTA, except
for the period provided under BIR Ruling
No. DA-489-03, as previously discussed.
The Court further noted that Atlas was
decided in relation to the 1977 Tax Code
which had not yet provided for the 30-day
period for the taxpayer to appeal to the
CTA from the decision or inaction of the
CIR over claims for unutilized input VAT.
Clearly then, the Atlas doctrine cannot be
invoked to disregard compliance with the
120+30 day mandatory and jurisdictional
period.26
Aichi not applied prospectively
Petitioner VGPC also argues that Aichi
should be applied prospectively and,
therefore, should not be applied to the
present case. This position cannot be
given consideration.
Article 8 of the Civil Code provides that
judicial decisions applying or interpreting
the law shall form part of the legal system

of the Philippines and shall have the force

of law. The interpretation placed upon a
law by a competent court establishes the
contemporaneous legislative intent of the
law. Thus, such interpretation constitutes
a part of the law as of the date the statute
is enacted. It is only when a prior ruling of
the Court is overruled, and a different
view adopted, that the new doctrine may
have to be applied prospectively in favor
of parties who have relied on the old
doctrine and have acted in good
faith.28cralawred
Considering that the nature of the 120+30
day period was first settled in Aichi, the
interpretation by the Court of its being
mandatory and jurisdictional in nature
retroacts to the date the NIRC was
enacted.
It
cannot
be
applied
prospectively as no old doctrine was
overturned.
The petitioner cannot rely either on the
alleged jurisprudence prevailing at the
time it filed its judicial claim. The Court
notes that the jurisprudence relied upon
by the petitioner consists of CTA cases. It
is elementary that CTA decisions do not
constitute precedent and do not bind this
Court or the public. Only decisions of this
Court constitute binding precedents,
forming part of the Philippine legal
system.29cralawred
As regards the cases30 which were later
decided allegedly in contravention of Aichi,
it is of note that all of them were decided
by Divisions of this Court, and not by the
Court En Banc. Any doctrine or principle of
law laid down by the Court, either
rendered En Banc or in Division, may be
overturned or reversed only by the Court
sitting En Banc.31 Thus, the cases cited by
the petitioner could not have overturned
the doctrine laid down in Aichi.
CIR not estopped
The petitioners argument that the CIR
should
have
been
estopped
from
questioning the jurisdiction of the CTA
after
actively
participating
in
the

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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(MARCH 2014-MARCH 2015)
proceedings before the CTA Second
Division deserves scant consideration.
It is a well-settled rule that the
government cannot be estopped by the
mistakes, errors or omissions of its
agents.32 It has been specifically held that
estoppel
does
not
apply
to
the
government, especially on matters of
taxation. Taxes are the nations lifeblood
through which government agencies
continue to operate and with which the
State discharges its functions for the
welfare of its constituents.33 Thus, the
government cannot be estopped from
collecting
taxes
by
the
mistake,
negligence, or omission of its agents.
Upon taxation depends the ability of the
government to serve the people for whose
benefit taxes are collected. To safeguard
such interest, neglect or omission of
government officials entrusted with the
collection of taxes should not be allowed
to bring harm or detriment to the
people.34cralawred
Rules on claims for refund or tax credit of
unutilized input VAT
For clarity and guidance, the Court deems
it proper to outline the rules laid down in
San Roque with regard to claims for
refund or tax credit of unutilized creditable
input
VAT.
They
are
as
follows:ChanRoblesVirtualawlibrary
When to file an administrative claim
with the CIR:
General rule Section 112(A)
and MirantWithin 2 years
from the close of the
taxable quarter when the
sales were made.
Exception Atlas Within 2
years from the date of
payment of the output VAT,
if the administrative claim
was filed from June 8, 2007
(promulgation of Atlas) to
September
12,
2008
(promulgation of Mirant).

When to file a judicial claim with the

CTA:
General rule Section 112(D);
not Section 229
Within 30 days from the
full or partial denial
of the administrative
claim by the CIR; or
Within 30 days from the
expiration
of
the
120-day
period
provided to the CIR
to decide on the
claim.
This
is
mandatory
and
jurisdictional
beginning January 1,
1998 (effectivity of
1997 NIRC).
Exception BIR Ruling No. DA-489-03
The judicial claim need not await the
expiration of the 120-day period, if such
was filed from December 10, 2003
(issuance of BIR Ruling No. DA-489-03) to
October 6, 2010 (promulgation of Aichi).
Commissioner of Internal Revenue Vs. The
Insular Life Assurance Co., Ltd.G.R.
No. 197192. June 4, 2014
Time and again, the Court has held that
it is a very desirable and necessary
judicial practice that when a court has laid
down a principle of law as applicable to a
certain state of facts, it will adhere to that
principle and apply it to all future cases in
which the facts are substantially the
same.
Stare decisis et non quieta
movere. Stand by the decisions and
disturb not what is settled. Stare decisis
simply means that for the sake of
certainty, a conclusion reached in one
case should be applied to those that follow
if the facts are substantially the same,
even though the parties may be
different. It proceeds from the first
principle of justice that, absent any
powerful countervailing considerations,
like
cases
ought
to
be
decided
alike. Thus, where the same questions
relating to the same event have been put
forward by the parties similarly situated as

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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COMPILATION OF SUPREME COURT DECISIONS

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in a previous case litigated and decided by
a competent court, the rule of stare
decisis is a bar to any attempt to relitigate
the same issue.1cralawred
Issue
WHETHER OR NOT THE CTA EN BANC
ERRED IN RULING THAT RESPONDENT IS
A COOPERATIVE AND [IS] THUS[,]
EXEMPT FROM DOCUMENTARY STAMP
TAX.8
Ruling
The Court has pronounced in Republic of
the Philippines v. Sunlife Assurance
Company of Canada9 that [u]nder the
Tax Code although respondent is a
cooperative, registration with the CDA is
not necessary in order for it to be exempt
from the payment of both percentage
taxes on insurance premiums, under
Section 121; and documentary stamp
taxes on policies of insurance or annuities
it grants, under Section 199.10cralawred
A perusal of Section 3(e) of R.A. No. 6939
evidently shows that it is merely a
statement of one of the powers exercised
by CDA. Neither Section 3(e) of R.A. No.
6939 nor any other provision in the
aforementioned
statute
imposes
registration with the CDA as a condition
precedent
to
claiming
DST
exemption. Even then, R.A. No. 6939 is
inapplicable to the case at bar, as will be
discussed shortly.
The NIRC of 1997 defined a cooperative
company or association as conducted by
the members thereof with the money
collected from among themselves and
solely for their own protection and not for
profit.15 Consequently, as long as these
requisites are satisfied, a company or
association is deemed a cooperative
insofar as taxation is concerned. In this
case, the respondent has sufficiently
established that it conforms with the
elements of a cooperative as defined in
the NIRC of 1997 in that it is managed by
members, operated with money collected

from the members and has for its main

purpose
the
mutual
protection
of
members for profit.16cralawred
The Court presented three justifications in
Sunlife why registration with the CDA is
not 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.17cralawred
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 treatment18
- 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:Chan
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.19 The history of the Cooperative
Code was amply discussed in Sunlife
where it was noted that cooperatives
under the old law, Presidential Decree

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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COMPILATION OF SUPREME COURT DECISIONS

(MARCH 2014-MARCH 2015)
(P.D.) No. 17520 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.] 175.21cralawred
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,
The
distinguishing
feature
of
a
cooperative enterprise is the mutuality of
cooperation
among
its
memberpolicyholders united for that purpose. So
long as respondent meets this essential
feature, it does not even have to use and
carry the name of a cooperative to
operate its mutual life insurance business.
Gratia argumenti that registration is
mandatory, it cannot deprive respondent
of its tax exemption privilege merely
because it failed to register. The nature of
its operations is clear; its purpose welldefined. Exemption when granted cannot
prevail
over
administrative
convenience.23cralawred
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.24cralawred
There being no cogent reason for the
Court to deviate from its ruling in Sunlife,
the Court holds that the respondent, being
a cooperative company not mandated by
law to be registered with the CDA, cannot
be required under RMC No. 48-91, a mere
circular, to be registered prior to availing
of DST exemption.
While administrative agencies, such as
the Bureau of Internal Revenue, may
issue regulations to implement statutes,
they are without authority to limit the
scope of the statute to less than what it
provides, or extend or expand the statute
beyond its terms, or in any way modify
explicit provisions of the law. Indeed, a
quasi-judicial body or an administrative
agency for that matter cannot amend an
act of Congress. Hence, in case of a
discrepancy between the basic law and an
interpretative or administrative ruling, the
basic law prevails.25cralawr
The Hong Kong and Shanghai Banking
Corporation
Limited-Philippine
Branches Vs. Commssioner of Internal
Revenue/The
Hong
Kong
and
Shanghai
Banking
Corporation
Limited-Philippine
Branches
Vs.
Commissioner of Internal Revenue
G.R. Nos. 166018/167728. June 4, 2014
The Court agrees with the CTA that
the DST under Section 181 of the
Tax Code is levied on the
acceptance or payment of a bill of
exchange purporting to be drawn
in a foreign country but payable in
the Philippines and that a bill of
exchange is an unconditional order
in writing addressed by one person
to another, signed by the person
giving it, requiring the person to
whom it is addressed to pay on
demand
or
at
a
fixed
or
determinable future time a sum
certain in money to order or to
bearer. A bill of exchange is one

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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COMPILATION OF SUPREME COURT DECISIONS

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of two general forms of negotiable
instruments under the Negotiable
Instruments Law.15cralawred

The Court further agrees with the

CTA that the electronic messages
of
HSBCs
investor-clients
containing instructions to debit
their respective local or foreign
currency
accounts
in
the
Philippines and pay a certain
named recipient also residing in the
Philippines is not the transaction
contemplated under Section 181 of
the Tax Code as such instructions
are parallel to an automatic bank
transfer of local funds from a
savings account to a checking
account maintained by a depositor
in one bank. The Court favorably
adopts the finding of the CTA that
the electronic messages cannot be
considered negotiable instruments
as they lack the feature of
negotiability, which, is the ability to
be transferred and that the said
electronic messages are mere
memoranda of the transaction
consisting of the actual debiting of
the [investor-client-]payors local
or foreign currency account in the
Philippines and entered as such
in the books of account of the local
bank, HSBC.16cralawred
More
fundamentally,
the
instructions
given
through
electronic
messages
that
are
subjected to DST in these cases
are not negotiable instruments as
they do not comply with the
requisites of negotiability under
Section 1 of the Negotiable
Instruments
Law,
which
provides:chanRoblesvirtualLawlibra
ry
Sec.
1.
Form
of
negotiable
instruments. An instrument to be
negotiable must conform to the
following
requirements:chanRoblesvirtualLaw

library

(a) It must be in writing and

signed by the maker or drawer;
(b) Must contain an unconditional
promise or order to pay a sum
certain in money;
(c) Must be payable on demand,
or at a fixed or determinable future
time;
(d) Must be payable to order or to
bearer; and
(e)
Where the instrument is
addressed to a drawee, he must be
named or otherwise indicated
therein with reasonable certainty.

The electronic messages are not

signed by the investor-clients as
supposed drawers of a bill of
exchange; they do not contain an
unconditional order to pay a sum
certain in money as the payment is
supposed to come from a specific
fund or account of the investorclients; and, they are not payable
to order or bearer but to a
specifically
designated
third
party.
Thus,
the
electronic
messages
are
not
bills
of
exchange. As there was no bill of
exchange or order for the payment
drawn abroad and made payable
here in the Philippines, there could
have been no acceptance or
payment that will trigger the
imposition of the DST under
Section 181 of the Tax Code.
DST is an excise tax on the exercise of a
right or privilege to transfer obligations,
rights
or
properties
incident
thereto.23 Under Section 173 of the 1997
Tax Code, the persons primarily liable for
the payment of the DST are those (1)
making, (2) signing, (3) issuing, (4)
accepting, or (5) transferring the taxable
documents,
instruments
or
papers.24cralawred

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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COMPILATION OF SUPREME COURT DECISIONS

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In general, DST is levied on the exercise

by persons of certain privileges conferred
by law for the creation, revision, or
termination of specific legal relationships
through
the
execution
of
specific
instruments. Examples of such privileges,
the exercise of which, as effected through
the issuance of particular documents, are
subject to the payment of DST are leases
of lands, mortgages, pledges and trusts,
and
conveyances
of
real
property.25cralawred
As stated above, Section 230 of the 1977
Tax Code, as amended, now Section 181
of the 1997 Tax Code, levies DST on
either (a) the acceptance or (b) the
payment of a foreign bill of exchange or
order for the payment of money that was
drawn abroad but payable in the
Philippines. In other words, it levies DST
as an excise tax on the privilege of the
drawee to accept or pay a bill of exchange
or order for the payment of money, which
has been drawn abroad but payable in the
Philippines, and on the corresponding
privilege of the drawer to have acceptance
of or payment for the bill of exchange or
order for the payment of money which it
has drawn abroad but payable in the
Philippines.
Acceptance applies only to bills of
exchange.26 Acceptance of a bill of
exchange has a very definite meaning in
law.27 In particular, Section 132 of the
Negotiable
Instruments
Law
provides:chanRoblesvirtualLawlibrary
Sec. 132. Acceptance; how made, by and
so forth. The acceptance of a bill [of
exchange28] is the signification by the
drawee of his assent to the order of the
drawer. The acceptance must be in writing
and signed by the drawee. It must not
express that the drawee will perform his
promise by any other means than the
payment of money.
Under the law, therefore, what is accepted
is a bill of exchange, and the acceptance

of a bill of exchange is both the

manifestation of the drawees consent to
the drawers order to pay money and the
expression of the drawees promise to
pay. It is the act by which the drawee
manifests his consent to comply with the
request contained in the bill of exchange
directed to him and it contemplates an
engagement or promise to pay.29 Once
the drawee accepts, he becomes an
acceptor.30 As acceptor, he engages to
pay the bill of exchange according to the
tenor of his acceptance.31cralawred
Acceptance is made upon presentment of
the bill of exchange, or within 24 hours
after such presentment.32 Presentment
for acceptance is the production or
exhibition of the bill of exchange to the
drawee for the purpose of obtaining his
acceptance.33cralawred
Presentment for acceptance is necessary
only in the instances where the law
requires it.34 In the instances where
presentment for acceptance is not
necessary, the holder of the bill of
exchange
can
proceed
directly
to
presentment for payment.
Presentment
for
payment
is
the
presentation of the instrument to the
person primarily liable for the purpose of
demanding
and
obtaining
payment
thereof.35cralawred
Thus, whether it be presentment for
acceptance or presentment for payment,
the negotiable instrument has to be
produced and shown to the drawee for
acceptance or to the acceptor for
payment.
Revenue Regulations No. 26 recognizes
that the acceptance or payment (of bills of
exchange or orders for the payment of
money that have been drawn abroad but
payable in the Philippines) that is
subjected to DST under Section 181 of the
1997 Tax Code is done after presentment
for acceptance or presentment for
payment, respectively. In other words,

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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COMPILATION OF SUPREME COURT DECISIONS

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the acceptance or payment of the subject
bill of exchange or order for the payment
of money is done when there is
presentment either for acceptance or for
payment of the bill of exchange or order
for the payment of money.
Applying the above concepts to the matter
subjected to DST in these cases, the
electronic messages received by HSBC
from its investor-clients abroad instructing
the former to debit the latters local and
foreign currency accounts and to pay the
purchase price of shares of stock or
investment in securities do not properly
qualify
as
either
presentment
for
acceptance
or
presentment
for
payment.
There
being
neither
presentment
for
acceptance
nor
presentment for payment, then there was
no acceptance or payment that could have
been subjected to DST to speak of.

Indeed,
there had
been no
acceptance of a bill of exchange or
order for the payment of money on
the part of HSBC. To reiterate,
there was no bill of exchange or
order for the payment drawn
abroad and made payable here in
the Philippines. Thus, there was no
acceptance
as
the
electronic
messages did not constitute the
written and signed manifestation of
HSBC to a drawers order to pay
money. As HSBC could not have
been an acceptor, then it could not
have made any payment of a bill of
exchange or order for the payment
of money drawn abroad but
payable here in the Philippines. In
other words, HSBC could not have
been held liable for DST under
Section 230 of the 1977 Tax Code,
as amended, and Section 181 of
the 1997 Tax Code as it is not a
person making, signing, issuing,
accepting, or, transferring the
taxable instruments under the said
provision. Thus, HSBC erroneously
paid DST on the said electronic
messages for which it is entitled to

a tax refund.
Commissioner of Internal Revenue Vs.
Manila Electric Company G.R. No.
181459. June 9, 2014
The sole issue presented before us
is whether or not respondent
MERALCO is entitled to a tax
refund/credit
relative
to
its
payment of final withholding taxes
on interest payments made to
NORD/LB from January 1999 to
September 2003.

First, as correctly decided by the CTA En

Banc, the certification issued by the
Embassy of the Federal Republic of
Germany, dated March 27, 2002, explicitly
states that NORD/LB is owned by the
State of Lower Saxony, Saxony-Anhalt
and Mecklenburg-Western Pomerania, and
serves as a regional bank for the said
states which offers support in the public
sector financing,
the
interest
income
remitted
by
respondent
MERALCO
to
NORD/LB
Singapore Branch is not subject to
Philippine income tax, and accordingly,
not subject to ten percent (10%)
withholding tax. Contrary to petitioners
view, therefore, the same constitutes a
compelling basis for establishing the taxexempt status of NORD/LB,
Based on the foregoing, we are of the
considered
view
that
respondent
MERALCO has shown clear and convincing
evidence
that
NORD/LB
is
owned,
controlled or enjoying refinancing from the
Federal Republic of Germany, a foreign
government,
pursuant
to
Section
32(B)(7)(a) of the Tax Code, as amended,
which
provides
that:chanRoblesvirtualLawlibrary
Section 32. Gross Income.
x x x x.
(B) Exclusions from Gross Income. - The
following items shall not be included in
gross income and shall be exempt from
taxation
under
this

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COMPILATION OF SUPREME COURT DECISIONS

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title:ChanRoblesVirtualawlibrary
xxxx
(7) Miscellaneous Items. (a)
Income
Derived
by
Foreign
Government. - Income derived from
investments in the Philippines in
loans, stocks, bonds or other domestic
securities, or from interest on deposits in
banks in the Philippines by (i) foreign
governments, (ii) financing institutions
owned,
controlled,
or
enjoying
refinancing
from
foreign
governments, and (iii) international or
regional financial institutions established
by foreign governments.
x x x x.32
Notwithstanding the foregoing, however,
we uphold the ruling of the CTA En Banc
that the claim for tax refund in the
aggregate amount of Thirty-Nine Million
Three Hundred Fifty-Nine Thousand Two
Hundred Fifty-Four Pesos and SeventyNine
Centavos
(P39,359,254.79)
pertaining to the period from January
1999 to July 2002 must fail since the
same has already prescribed under
Section 229 of the Tax Code,
As can be gleaned from the foregoing, the
prescriptive period provided is mandatory
regardless of any supervening cause that
may arise after payment. It should be
pointed out further that while the
prescriptive period of two (2) years
commences to run from the time that the
refund is ascertained, the propriety
thereof is determined by law (in this case,
from the date of payment of tax), and not
upon the discovery by the taxpayer of the
erroneous or excessive payment of taxes.
The issuance by the BIR of the Ruling
declaring the tax-exempt status of
NORD/LB, if at all, is merely confirmatory
in nature. As aptly held by the CTA-First
Division, there is no basis that the subject
exemption was provided and ascertained
only through BIR Ruling No. DA-3422003, since said ruling is not the operative

act from which an entitlement of refund is

determined.34 In other words, the BIR is
tasked only to confirm what is provided
under the Tax Code on the matter of tax
exemptions as well as the period within
which to file a claim for refund.
In this regard, petitioner is misguided
when it relied upon the six (6)-year
prescriptive period for initiating an action
on the ground of quasi-contract or solutio
indebiti under Article 1145 of the New
Civil Code. There is solutio indebiti where:
(1) payment is made when there exists no
binding relation between the payor, who
has no duty to pay, and the person who
received the payment; and (2) the
payment is made through mistake, and
not through liberality or some other
cause.35 Here, there is a binding relation
between petitioner as the taxing authority
in this jurisdiction and respondent
MERALCO which is bound under the law to
act as a withholding agent of NORD/LB
Singapore Branch, the taxpayer. Hence,
the first element of solutio indebiti is
lacking. Moreover, such legal precept is
inapplicable to the present case since the
Tax Code, a special law, explicitly provides
for a mandatory period for claiming a
refund for taxes erroneously paid.
Tax refunds are based on the general
premise that taxes have either been
erroneously or excessively paid. Though
the Tax Code recognizes the right of
taxpayers to request the return of such
excess/erroneous payments from the
government, they must do so within a
prescribed period. Further, a taxpayer
must prove not only his entitlement to a
refund, but also his compliance with the
procedural due process as non-observance
of the prescriptive periods within which to
file the administrative and the judicial
claims would result in the denial of his
claim.36cralawred
In the case at bar, respondent MERALCO
had ample opportunity to verify on the
tax-exempt status of NORD/LB for
purposes of claiming tax refund. Even

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assuming that respondent MERALCO could

not have emphatically known the status of
NORD/LB, its supposition of the same was
already confirmed by the BIR Ruling which
was issued
on October 7, 2003.
Nevertheless, it only filed its claim for tax
refund on July 13, 2004, or ten (10)
months from the issuance of the aforesaid
Ruling. We agree with the CTA-First
Division,
therefore,
that
respondent
MERALCOs claim for refund in the amount
of Two Hundred Twenty-Four Million
Seven Hundred Sixty Thousand Nine
Hundred Twenty-Six Pesos and Sixty-Five
Centavos (P224,760,926.65) representing
erroneously paid and remitted final
income taxes for the period January 1999
to July 2002 should be denied on the
ground of prescription.
Commissioner of Internal Revenue Vs.
Minadanao II Geothermal Partnership
G.R. No. 189440. June 18, 2014
Notwithstanding the timely filing of the
respondents administrative claim, we are
constrained to order the dismissal of the
respondents judicial claim for tax refund
or tax credit for having been filed beyond
the mandatory and jurisdictional periods
provided in Section 112(C) of the
NIRC. Section 112(C) expressly grants
the taxpayer a 30-day period to appeal to
the CTA the decision or inaction of the
Commissioner of Internal Revenue (CIR).
This
law
is
clear,
plain,
and
unequivocal. Following the well-settled
verba legis doctrine, this law should be
applied exactly as worded since it is clear,
plain, and unequivocal. As this law states,
the taxpayer may, if he wishes, appeal the
decision of the CIR to the CTA within 30
days from receipt of the CIRs decision, or
if the CIR does not act on the taxpayers
claim within the 120-day period, the
taxpayer may appeal to the CTA within 30
days from the expiration of the 120-day
period.
Thus, as long as the administrative claim
is filed within the two-year prescriptive
period under Section 112(A) of the NIRC,
the 30-day prescriptive period under

Section 112(C) can extend beyond two

years after the close of the taxable
quarter where the sales were made.
In the present case, the respondent filed
its administrative claim on May 30,
2003. The petitioner CIR therefore had
only until September 27, 2003 to decide
the claim, and following the petitioners
inaction, the respondent had until October
27, 2003, the last day of the 30-day
period to file its judicial claim. However,
the respondent filed its judicial claim with
the CTA only on March 31, 2004 or 155
days late.
Clearly, the respondents
judicial claim has prescribed and the CTA
did not acquire jurisdiction over the
claim. Well to remember, the right to
appeal to the CTA from a decision or
deemed a denial decision of the CIR is
merely a statutory privilege, not a
constitutional right. The exercise of such
statutory
privilege
requires
strict
compliance with the conditions attached
by the statute for its exercise.22 The
respondent failed to comply with the
statutory conditions and must thus bear
the consequences. Further, well settled is
the rule that tax refunds or credits, just
like tax exemptions, are strictly construed
against the taxpayer.23 The burden is on
the taxpayer to show that he has strictly
complied with the conditions for the grant
of
the
tax
refund
or
credit.cra1awlaw1ibrary
Taganito
Mining
Corporation
Vs.
Commissioner of Internal Revenue
G.R. No. 197591. June 18, 2014
Reconciling the pronouncements in
the Aichi and San Roque cases, the
rule must therefore be that during
the period December 10, 2003
(when BIR Ruling No. DA-489-03
was issued) to October 6, 2010
(when
the
Aichi
case
was
promulgated), taxpayers-claimants
need not observe the 120-day
period before it could file a judicial
claim for refund of excess input
VAT before the CTA. Before and
after the aforementioned period
(i.e., December 10, 2003 to

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October 6, 2010), the observance
of the 120-day period is mandatory
and jurisdictional to the filing of
such claim.

San

In this case, records disclose that

Taganito filed its administrative
and judicial claims for refund on
December 28, 2005 and March 31,
2006, respectively or during the
period when BIR Ruling No. DA489-03 was in place. As such, it
need not have waited for the
expiration of the 120-day period
before filing its judicial claim for
refund before the CTA. In view of
the foregoing, the CTA En Banc,
thus, erred in dismissing Taganitos
claim
on
the
ground
of
prematurity.
However, as adverted to earlier,
Taganito did not appeal the CTA
Divisions partial denial of its claim
for refund on the ground that it
failed to provide sufficient evidence
that its suppliers did not avail of
the benefits of zero-rating. It is
well-settled that a party who does
not appeal from a judgment can no
longer
seek
modification
or
reversal of the same.26 For this
reason, Taganito may no longer
question
the
propriety
and
correctness of the said partial
disallowance as it had lapsed into
finality and may no longer be
modified. In fine, Taganito is only
entitled to the partial refund of its
unutilized input VAT in the amount
of P537,645.43, as was originally
granted to it by the CTA Division
and
herein
upheld.cra1awlaw1ibrary

Roque
Power
Corporation
Vs.
Commissioner of Internal Revenue
G.R. No. 205543. June 30, 2014
At the crux of the controversy are the
prescriptive periods for the filing of
administrative and judicial claims for
refund or tax credit of creditable input

taxes under Section 112 of the NIRC of

1997,
Because San Roque filed C.T.A. Case Nos.
7744 and 7802 beyond the 30-day
mandatory period under Section 112(C) of
the NIRC of 1997, as amended, the CTA
First Division did not acquire jurisdiction
over said cases and correctly dismissed
the same.
Unable to contest the belated filing of its
judicial claims, San Roque argues against
the supposedly retroactive application of
Aichi and the strict observance of the
120+30 day periods.
As the CTA en banc held, Aichi was not
applied retroactively to San Roque in the
instant case. The 120+30 day periods
have already been prescribed under
Section 112(C) of the NIRC of 1997, as
amended, when San Roque filed its
administrative and judicial claims for
refund or tax credit of its creditable input
taxes for the four quarters of 2006. The
Court highlights the pronouncement in
San Roque (2013) that strict compliance
with the 120+30 day periods is necessary
for the judicial claim to prosper, except
for the period from the issuance of
BIR
Ruling
No.
DA-489-03
on
December 10, 2003 to October 6,
2010 when Aichi was promulgated, which
again reinstated the 120+30 day periods
as mandatory and jurisdictional.22
It is still necessary for the Court to explain
herein how BIR Ruling No. DA-489-03 is
an exception to the strict observance of
the 120+30 day periods for judicial
claims.
BIR Ruling No. DA-489-03
affected only the 120-day period as the
BIR held therein that a taxpayer-claimant
need not wait for the lapse of the 120-day
period before it could seek judicial relief
with the CTA by way of Petition for
Review. Neither is it required that the
Commissioner should first act on the claim
of a particular taxpayer before the CTA
may acquire jurisdiction, particularly if the
claim
is
about
to
prescribe.

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Consequently, BIR Ruling No. DA-489-03

may only be invoked by taxpayers who
relied on the same and prematurely
filed their judicial claims before the
expiration of the 120-day period for the
CIR to act on their administrative claims,
provided that the taxpayers filed such
judicial claims from December 10, 2003 to
October 6, 2010. BIR Ruling No. DA-48903 did not touch upon the 30-day
prescriptive period for filing an appeal with
the CTA and cannot be cited by taxpayers,
such as San Roque, who belatedly filed
their judicial claims more than 30 days
after receipt of the adverse decision of the
CIR on their administrative claims or the
lapse of 120 days without the CIR acting
on their administrative claims.
Commissioner of Internal Revenue Vs.
United Salvage and Towage (Phils.),
IncG.R. No. 197515. July 2, 2014
Under Section 828 of Republic Act
(R.A.) No. 1125, the CTA is
categorically described as a court
of record.29 As such, it shall have
the power to promulgate rules and
regulations for the conduct of its
business, and as may be needed,
for the uniformity of decisions
within its jurisdiction.30 Moreover,
as cases filed before it are litigated
de novo, party-litigants shall prove
every minute aspect of their
cases.31 Thus, no evidentiary value
can be given the pieces of evidence
submitted by the BIR, as the rules
on documentary evidence require
that these documents must be
formally
offered
before
the
CTA.32 Pertinent is Section 34,
Rule 132 of the Revised Rules on
Evidence
which
reads:chanroblesvirtuallawlibrary

SEC. 34. Offer of evidence. The

court shall consider no evidence
which has not been formally
offered. The purpose for which the
evidence is offered must be
specified.

Although in a long line of cases, we

have relaxed the foregoing rule

and allowed evidence not formally
offered to be admitted and
considered by the trial court, we
exercised
extreme
caution
in
applying the exceptions to the rule,
The evidence may, therefore, be admitted
provided the following requirements are
present: (1) the same must have been
duly
identified
by
testimony
duly
recorded; and (2) the same must have
been incorporated in the records of the
case. Being an exception, the same may
only be applied when there is strict
compliance with the requisites mentioned
above; otherwise, the general rule in
Section 34 of Rule 132 of the Rules of
Court should prevail.35
In the case at bar, petitioner categorically
admitted that it failed to formally offer the
PANs as evidence. Worse, it advanced no
justifiable
reason
for
such
fatal
omission. Instead, it merely alleged that
the existence and due execution of the
PANs were duly tackled by petitioners
witnesses. We hold that such is not
sufficient to seek exception from the
general rule requiring a formal offer of
evidence, since no evidence of positive
identification of such PANs by petitioners
witnesses was presented. Hence, we
agree with the CTA En Bancs observation
that the 1994 and 1998 PANs for EWT
deficiencies were not duly identified by
testimony and were not incorporated in
the records of the case, as required by
jurisprudence.
While we concur with petitioner that the
CTA is not governed strictly by technical
rules of evidence, as rules of procedure
are not ends in themselves but are
primarily intended as tools in the
administration
of
justice,36
the
presentation of PANs as evidence of the
taxpayers liability is not mere procedural
technicality. It is a means by which a
taxpayer is informed of his liability for
deficiency taxes. It serves as basis for the
taxpayer to answer the notices, present
his
case
and
adduce
supporting

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evidence.37 More so, the same is the only
means by which the CTA may ascertain
and verify the truth of respondent's
claims. We are, therefore, constrained to
apply our ruling in Heirs of Pedro Pasag v.
Spouses Parocha,38viz.:
x x x. A formal offer is necessary
because judges are mandated to rest
their findings of facts and their
judgment only and strictly upon the
evidence offered by the parties at the
trial. Its function is to enable the trial
judge to know the purpose or purposes for
which the proponent is presenting the
evidence. On the other hand, this allows
opposing parties to examine the
evidence
and
object
to
its
admissibility. Moreover, it facilitates
review as the appellate court will not be
required
to
review
documents
not
previously scrutinized by the trial court.
Indeed, Section 228 of the Tax Code
provides that the taxpayer shall be
informed in writing of the law and the
facts on which the assessment is made.
Otherwise, the assessment is void.
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.
In the present case, a mere perusal of the
FAN for the deficiency EWT for taxable
year 1994will 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.45
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
respondent46 and how the same was
arrived at. Any short-cuts to the
prescribed content of the assessment or
the process thereof should not be

countenanced.
Applying the aforequoted rulings to the
case at bar, it is clear that the assailed
deficiency tax assessment for the EWT in
1994disregarded the provisions of Section
228 of the Tax Code, as amended, as well
as Section 3.1.4 of Revenue Regulations
No. 12-99 by not providing the legal and
factual bases of the assessment. Hence,
the formal letter of demand and the notice
of assessment issued relative thereto are
void.
In any case, we find no basis in
petitioners claim that Revenue Regulation
No. 12-99 is not applicable at the time the
PAN and FAN for the deficiency EWT for
taxable
year
1994
were
issued.
Considering that such regulation merely
implements the law, and does not create
or take away vested rights, the same may
be applied retroactively,
Indubitably, the disputed assessments for
taxable year 1994 should have already
complied with the requirements laid down
under Revenue Regulation No. 12-99.
Having failed so, the same produces no
legal effect.
The statute of limitations on assessment
and collection of national internal revenue
taxes was shortened from five (5) years to
three (3) years by virtue of Batas
Pambansa Blg. 700.55 Thus, petitioner has
three (3) years from the date of actual
filing of the tax return to assess a national
internal revenue tax or to commence
court proceedings for the collection
thereof
without
an
assessment.56
However, when it validly issues an
assessment within the three (3)-year
period, it has another three (3) years
within which to collect the tax due by
distraint, levy, or court proceeding.57 The
assessment of the tax is deemed made
and the three (3)-year period for
collection of the assessed tax begins to
run on the date the assessment notice had
been released, mailed or sent to the
taxpayer.58
Commissioner of Customs Vs. Oilink
International Corporation G.R. No.

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161759. July 2, 2014
There is no question that the CTA had
the jurisdiction over the case. Republic
Act No. 1125, the law creating the
CTA, defined the appellate jurisdiction
of
the
CTA
as
follows:chanRoblesvirtualLawlibrary
Section 7. Jurisdiction. - The Court of
Tax Appeals shall exercise exclusive
appellate jurisdiction to review by
appeal,
as
herein
provided:cralawlawlibrary

reckoning the reglementary period to

appeal from November 25, 1998, the
date when URC received the final
demand letter, is unwarranted. We
note that the November 25, 1998 final
demand letter of the BoC was
addressed to URC, not to Oilink. As
such, the final demand sent to URC did
not bind Oilink unless the separate
identities of the corporations were
disregarded in order to consider them
as one.
2.
Oilink had a valid cause of action

xxxx
2. Decisions of the Commissioner of
Customs in cases involving liability for
Customs duties, fees or other money
charges; seizure, detention or release
of property affected; fines, forfeitures
or other penalties imposed in relation
thereto; or other matters arising under
the Customs Law or other law or part
of law administered by the Bureau of
Customs;chanroblesvirtuallawlibrary
x x x xchanrobleslaw
Nonetheless, the Commissioner of
Customs contends that the CTA should
not take cognizance of the case
because of the lapse of the 30-day
period within which to appeal, arguing
that on November 25, 1998 URC had
already received the BoCs final
assessment demanding payment of
the amount due within 10 days, but
filed the petition only on July 30,
1999.8cralawred
We rule against the Commissioner of
Customs. The CTA correctly ruled that
the reckoning date for Oilinks appeal
was July 12, 1999, not July 2, 1999,
because it was on the former date that
the Commissioner of Customs denied
the protest of Oilink. Clearly, the filing
of the petition on July 30, 1999 by
Oilink was well within its reglementary
period to appeal. The insistence by
the Commissioner of Customs on

The Commissioner of Customs posits

that the final demand letter dated July
2, 1999 from which Oilink appealed
was not the final action or ruling
from which an appeal could be taken
as contemplated by Section 2402 of
the Tariff and Customs Code; that
what Section 7 of RA No. 1125
referred to as a decision that was
appealable to the CTA was a judgment
or order of the Commissioner of
Customs that was final in nature, not
merely an interlocutory one; that
Oilink
did
not
exhaust
its
administrative remedies under Section
2308 of the Tariff and Customs Code
by paying the assessment under
protest; that only when the ensuing
decision of the Collector and then the
adverse decision of the Commissioner
of Customs would it be proper for
Oilink to seek judicial relief from the
CTA; and that, accordingly, the CTA
should have dismissed the petition for
lack of cause of action.
The position of the Commissioner of
Customs lacks merit.
The CA correctly held that the principle
of non-exhaustion of administrative
remedies was not an iron-clad rule
because there were instances in which
the immediate resort to judicial action
was proper. This was one such
exceptional
instance
when
the

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Ateneo de Davao University

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principle did not apply. As the records
indicate, the Commissioner of Customs
already decided to deny the protest by
Oilink on July 12, 1999, and stressed
then that the demand to pay was final.
In that instance, the exhaustion of
administrative remedies would have
been an exercise in futility because it
was already the Commissioner of
Customs demanding the payment of
the deficiency taxes and duties.
3.
There was no ground to pierce
the veil of corporate existence
A corporation, upon coming into
existence, is invested by law with a
personality separate and distinct from
those of the persons composing it as
well as from any other legal entity to
which it may be related. For this
reason, a stockholder is generally not
made to answer for the acts or
liabilities of the corporation, and vice
versa. The separate and distinct
personality of the corporation is,
however, a mere fiction established by
law for convenience and to promote
the ends of justice. It may not be used
or invoked for ends that subvert the
policy
and
purpose
behind
its
establishment, or intended by law to
which the corporation owes its being.
This is true particularly when the
fiction is used to defeat public
convenience, to justify wrong, to
protect fraud, to defend crime, to
confuse legitimate legal or judicial
issues, to perpetrate deception or
otherwise to circumvent the law. This
is likewise true where the corporate
entity is being used as an alter ego,
adjunct, or business conduit for the
sole benefit of the stockholders or of
another corporate entity. In such
instances, the veil of corporate entity
will be pierced or disregarded with
reference to the particular transaction
involved.9cralawred
In Philippine National Bank v. Ritratto

Group, Inc.,10 the Court has outlined

the following circumstances that are
useful in the determination of whether
a subsidiary is a mere instrumentality
of
the
parent-corporation,
viz:chanRoblesvirtualLawlibrary
1. Control, not mere majority or
complete
control,
but
complete
domination, not only of finances but of
policy and business practice in respect
to the transaction attacked so that the
corporate entity as to this transaction
had at the time no separate mind, will
or
existence
of
its
own;chanroblesvirtuallawlibrary
2. Such control must have been used
by the defendant to commit fraud or
wrong, to perpetrate the violation of a
statutory or other positive legal duty,
or dishonest and, unjust act in
contravention of plaintiff's legal rights;
andChanRoblesVirtualawlibrary
3. The aforesaid control and breach of
duty must proximately cause the
injury or unjust loss complained
of.chanrobleslaw
In applying the instrumentality or
alter ego doctrine, the courts are
concerned with reality, not form, and
with how the corporation operated and
the individual defendants relationship
to the operation.11 Consequently, the
absence of any one of the foregoing
elements disauthorizes the piercing of
the corporate veil.
Indeed, the doctrine of piercing the
corporate veil has no application here
because the Commissioner of Customs
did not establish that Oilink had been
set up to avoid the payment of taxes
or duties, or for purposes that would
defeat public convenience, justify
wrong, protect fraud, defend crime,
confuse legitimate legal or judicial
issues,
perpetrate
deception
or
otherwise circumvent the law. It is
also noteworthy that from the outset

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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the Commissioner of Customs sought
to collect the deficiency taxes and
duties from URC, and that it was only
on
July
2,
1999
when
the
Commissioner of Customs sent the
demand letter to both URC and Oilink.
That was revealing, because the failure
of the Commissioner of Customs to
pursue the remedies against Oilink
from the outset manifested that its
belated pursuit of Oilink was only an
afterthought.

Bank of the Philippine Islands Vs.

Commissioner of Internal Revenue
G.R. No. 181836. July 9, 2014
we proceed to determine whether
the period to collect the assessed
DST for the year 1985 has
prescribed.

To determine prescription, what is

essential only is that the facts
demonstrating the lapse of the
prescriptive period were sufficiently
and satisfactorily apparent on the
record either in the allegations of
the
plaintiffs
complaint,
or
otherwise
established
by
the
evidence.19
Under
the
then
applicable Section 319(c) [now,
222(c)]20 of the National Internal
Revenue Code (NIRC) of 1977, as
amended, any internal revenue tax
which has been assessed within the
period of limitation may be
collected by distraint or levy,
and/or court proceeding within
three
years21
following
the
assessment of the tax. The
assessment of the tax is deemed
made and the three-year period for
collection of the assessed tax
begins to run on the date the
assessment
notice
had
been
released, mailed or sent by the BIR
to the taxpayer.22

In the present case, although there

was no allegation as to when the
assessment
notice
had
been
released, mailed or sent to BPI,

still, the latest date that the BIR

could have released, mailed or sent
the assessment notice was on the
date BPI received the same on 16
June 1989. Counting the threeyear prescriptive period from 16
June 1989, the BIR had until 15
June 1992 to collect the assessed
DST. But despite the lapse of 15
June
1992,
the
evidence
established that there was no
warrant of distraint or levy served
on BPIs properties, or any judicial
proceedings initiated by the BIR.

The earliest attempt of the BIR to

collect the tax was when it filed its
answer in the CTA on 23 February
1999, which was several years
beyond the three-year prescriptive
period. However, the BIRs answer
in the CTA was not the collection
case contemplated by the law.
Before 2004 or the year Republic
Act No. 9282 took effect, the
judicial action to collect internal
revenue taxes fell under the
jurisdiction of the regular trial
courts, and not the CTA. Evidently,
prescription has set in to bar the
collection of the assessed DST.

The BIR nevertheless insists that the

running of the prescriptive period to
collect the tax was suspended by BPIs
filing of a request for the reinvestigation
and/or reconsideration on 23 June 1989.
In the present case, the protest letter of
BPI essentially raises the same question of
law, that is whether BPI was liable for DST
on its sales of foreign bills of exchange to
the Central Bank in the taxable year 1985.
Although it raised the issue of being taxed
twice, the BIR admitted that BPI did not
present any new or additional evidence to
substantiate its allegations.24 In its letter
dated 4 August 1998,25 the BIR itself
referred to the protest of BPI as a request
for reconsideration, found the arguments
in it legally untenable, and denied the
request. Hence, we find that the protest

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

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letter of BPI was a request for
reconsideration, which did not suspend
the running of the prescriptive period to
collect.

Even considering that BPIs protest was a

request for reinvestigation, there was
nothing in the records which showed that
the BIR granted such request. On the
other hand, the BIR only responded to BPI
on 4 August 1998 or after nine years from
the protest letter of BPI. In the Bank of
the Philippine Islands case,26 we clarified
and qualified our ruling in Commissioner
of Internal Revenue v. Wyeth Suaco
Laboratories, Inc.,27 such that the request
for reinvestigation in that case was
granted by the BIR. Thus, unlike in the
present case, there was a proper ground
for suspension of the prescriptive period in
Wyeth Suaco.
Commissioner of Internal Revenue Vs.
Team Sual Corporation, etc.G.R. No.
205055. July 18, 2014
Under Section 112(C) of the NIRC, the
CIR has 120 days to decide the taxpayers
claim from the date of submission of
complete documents in support of the
application filed in accordance with
Section 112(A) of the NIRC. In Intel
Technology v. Commissioner of Internal
Revenue,15 we ruled that once the
taxpayer has established by sufficient
evidence that it is entitled to a refund or
issuance of a tax credit certificate, in
accordance with the requirements of
Section 112(A) of the NIRC, its claim
should be granted.
The CIR, however, insists that TSC failed
to submit the complete documents
enumerated in RMO 53-98. Thus, the 120day period given for it to decide allegedly
did not commence.
The CIRs reliance on RMO 53-98 is
misplaced. There is nothing in Section 112
of the NIRC, RR 3-88 or RMO 53-98 itself
that requires submission of the complete
documents enumerated in RMO 53-98 for
a grant of a refund or credit of input VAT.
The subject of RMO 53-98 states that it is

a Checklist of Documents to be
Submitted by a Taxpayer upon Audit of
his Tax Liabilities x x x. In this case, TSC
was applying for a grant of refund or
credit of its input tax. There was no
allegation of an audit being conducted by
the CIR. Even assuming that RMO 53-98
applies, it specifically states that some
documents are required to be submitted
by the taxpayer if applicable.22
Moreover, if TSC indeed failed to submit
the complete documents in support of its
application, the CIR could have informed
TSC of its failure, consistent with Revenue
Memorandum Circular No. (RMC) 4203.23 However, the CIR did not inform
TSC of the document it failed to submit,
even up to the present petition. The CIR
likewise raised the issue of TSCs alleged
failure to submit the complete documents
only in its motion for reconsideration of
the CTA Special First Divisions 4 March
2010 Decision. Accordingly, we affirm the
CTA EBs finding that TSC filed its
administrative claim on 21 December
2005, and submitted the complete
documents in support of its application for
refund or credit of its input tax at the
same time.
Under Section 112(C) of the NIRC, in case
of failure on the part of the CIR to act on
the application, the taxpayer affected
may, within 30 days after the expiration of
the 120-day period, appeal the unacted
claim with the CTA. The charter of the
CTA24 also expressly provides that if the
Commissioner fails to decide within "a
specific period" required by law, such
"inaction shall be deemed a denial" of the
application for tax refund or credit. In
Commissioner of Internal Revenue v. San
Roque
Power
Corporation,25
we
emphasized that compliance with the 120day waiting period is mandatory and
jurisdictional. In this case, when TSC
filed its administrative claim on 21
December 2005, the CIR had a period of
120 days, or until 20 April 2006, to act on
the claim. However, the CIR failed to act
on TSC's claim within this 120-day period.

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Thus, TSC filed its petition for review with

the CTA on 24 April 2006 or within 30
days after the expiration of the 120-day
period. Accordingly, we do not find merit
in the CIR's argument that the judicial
claim was prematurely filed.
Nursery Care Corporation, et al. Vs.
Anthony Acevedo, in his capacity as
the Treasurer of Manila, and The City
of ManilaG.R. No. 180651. July 30, 2014
The issue here concerns double taxation.
There is double taxation when the same
taxpayer is taxed twice when he should be
taxed only once for the same purpose by
the same taxing authority within the same
jurisdiction during the same taxing period,
and the taxes are of the same kind or
character. Double taxation is obnoxious.
Collection of taxes pursuant to
Section 21 of the
Revenue Code of Manila constituted
double taxation
all the elements of double taxation
concurred upon the City of Manilas
assessment on and collection from the
petitioners of taxes for the first quarter of
1999 pursuant to Section 21 of the
Revenue Code of Manila.
Firstly, because Section 21 of the Revenue
Code of Manila imposed the tax on a
person who sold goods and services in the
course of trade or business based on a
certain percentage of his gross sales or
receipts in the preceding calendar year,
while Section 15 and Section 17 likewise
imposed the tax on a person who sold
goods and services in the course of trade
or business but only identified such person
with particularity, namely, the wholesaler,
distributor or dealer (Section 15), and the
retailer (Section 17), all the taxes being
imposed on the privilege of doing business
in the City of Manila in order to make the
taxpayers contribute to the citys revenues
were imposed on the same subject
matter and for the same purpose.
Secondly, the taxes were imposed by the
same taxing authority (the City of Manila)
and within the same jurisdiction in the

same taxing period (i.e., per calendar

year).
Thirdly, the taxes were all in the nature of
local business taxes.
We note that although Coca-Cola Bottlers
Philippines, Inc. and Swedish Match
Philippines, Inc. involved Section 21 vis-vis Section 14 (Tax on Manufacturers,
Assemblers and Other Processors)39 of the
Revenue Code of Manila, the legal
principles
enunciated
therein
should
similarly apply because Section 15 (Tax on
Wholesalers, Distributors, or Dealers) and
Section 17 (Tax on Retailers) of the
Revenue Code of Manila imposed the
same nature of tax as that imposed under
Section 14, i.e., local business tax, albeit
on a different subject matter or group of
taxpayers.
In fine, the imposition of the tax under
Section 21 of the Revenue Code of Manila
constituted double taxation, and the taxes
collected pursuant thereto must be
refunded.
Agriex Co., Ltd. Vs. Hon. Titus Villanueva,
et al. G.R. No. 158150. September 10,
2014
The Court affirms the exclusive
jurisdiction of the Bureau of
Customs over seizure cases within
the Subic Freeport Zone.
The Court declares that the
Collector
of
Customs
was
authorized to institute seizure
proceedings and to issue WSDs in
the Subic Bay Freeport, subject to
the review by the Commissioner of
Customs. Accordingly, the proper
remedy to question the order or
resolution of the Commissioner of
Customs was an appeal to the CTA,
not to the CA.
both the SBMA and the Bureau of Customs
have the power to seize and forfeit goods
or articles entering the Subic Bay
Freeport, except that SBMAs authority to
seize and forfeit goods or articles entering
the Subic Bay Freeport has been limited
only to cases involving violations of RA

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No. 7227 or its IRR. There is no question
therefore, that the authority of the Bureau
of Customs is larger in scope because it
covers cases concerning violations of the
customs laws.

The authority of the Bureau of

Customs to seize and forfeit goods
and articles entering the Subic Bay
Freeport does not contravene the
nature of the Subic Bay Freeport as
a
separate
customs
authority. Indeed, the investors
can generally and freely engage in
any kind of business as well as
import into and export out goods
with minimum interference from
the Government.39
Yet, the treatment of the Subic Bay
Freeport as a separate customs territory
cannot completely divest the Government
of its right to intervene in the operations
and management of the Subic Bay
Freeport, especially when patent violations
of the customs and tax laws are
discovered. After all, Section 602 of the
Tariff and Customs Code vests exclusive
original jurisdiction in the Bureau of
Customs over seizure and forfeiture cases
in the enforcement of the tariff and
customs laws.
In this case, an examination of the
shipment
by
the
customs
officials
pursuant to Mission Order No. 06-2001
initially revealed no cause to hold the
release of the 180,000 bags of rice. The
findings constituted sufficient probable
cause, as required by Section 2535 of the
Tariff and Customs Code,43 that violations
of the customs laws, particularly Section
102(k) and Section 2530, (a), (f) and (l),
par. 3, 4, and 5 of the Tariff and Customs
Code,44 had been committed. For that
reason, the institution of the seizure
proceedings and the issuance of WSD No.
2001-13B by the Collector of Customs
were well within the jurisdiction of the
Bureau of Customs.
Commissioner of Internal Revenue Vs. CE
Luzon Geothermal Power Company,
Inc. G.R. No. 190198. September 17,

2014

The Issue Before the Court

The primordial issue for the Courts

resolution is whether or not the
CTA En Banc correctly ruled that
CE Luzon did not prematurely file
its judicial claims for refund.
The petition is partly meritorious.
Executive Order No. 273, series of 1987,24
or the original VAT law first allowed the
refund or credit of unutilized excess input
VAT. Thereafter, the provision on refund
or credit was amended several times by
RA 7716,25 RA 8424,26 and RA 9337,27
which took effect on July 1, 2005. Since
CE Luzons claims for refund covered
periods before the effectivity of RA 9337,
Section 112 of the NIRC, as amended by
RA 8424, should apply,
In the case at bar, the following facts are
undisputed: (a) in C.T.A. Case No. 6792,
CE Luzon filed its administrative claim for
refund of unutilized input VAT for the third
quarter of 2001 on September 26, 2003
and the corresponding judicial claim on
September 30, 2003; and (b) in C.T.A.
Case No. 6837, the administrative claim
for refund of unutilized input VAT for the
fourth quarter of 2001 and all quarters of
2002 was filed on December 18, 2003 and
the judicial claim on December 19, 2003.
While both claims for refund were filed
within the two (2)-year prescriptive
period, CE Luzon failed to comply with the
120-day period as it filed its judicial claim
in C.T.A. Case No. 6792 four (4) days
after the filing of the administrative claim,
while in C.T.A. Case No. 6837, the judicial
claim was filed a day after the filing of the
administrative claim. Proceeding from the
aforementioned jurisprudence, only C.T.A.
Case No. 6792 should be dismissed on the
ground of lack of jurisdiction for being
prematurely filed.In contrast,CE Luzon
filed its administrative and judicial claims
for refund in C.T.A. Case No. 6837 during
the period,i.e., from December 10, 2003
to October 6, 2010, when BIR Ruling No.

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DA-489-03 was in place. As such, the
aforementioned rule on equitable estoppel
operates in its favor, thereby shielding it
from any supposed jurisdictional defect
which would have attended the filing of its
judicial claim before the expiration of the
120-day period.

Commissioner of Internal Revenue Vs.

Pilipinas Shell Corporation G.R. No.
192398. September 29, 2014
The issues presented for our resolution
are as follows: (1) whether the transfer of
SPPCs real properties to respondent is
subject to documentary stamp tax under
Section 196 of the Tax Code; and (2)
whether respondent is entitled to the
refund/tax credit in the amount of
P22,101,407.64
representing
documentary stamp tax paid for the
taxable year 2000 in connection with the
transfer of real properties from SPPC to
respondent.
As can be gleaned from the aforequoted
provision, documentary stamp tax is
imposed on all conveyances, deeds,
instruments or writings whereby land or
realty sold shall be conveyed to the
purchaser or purchasers.
Here, we do not find merit in petitioners
contention that Section 196 covers all
transfers
and
conveyances
of
real
property for a valuable consideration. A
perusal of the subject provision would
clearly show it pertains only to sale
transactions where real property is
conveyed
to
a
purchaser
for
a
consideration.
The phrase granted,
assigned,
transferred
or
otherwise
conveyed is qualified by the word sold
which means that documentary stamp tax
under Section 196 is imposed on the
transfer of realty by way of sale and does
not apply to all conveyances of real
property. Indeed, as correctly noted by
the respondent, the fact that Section 196
refers to words sold, purchaser and
consideration undoubtedly leads to the
conclusion that only sales of real property
are contemplated therein.

Thus, petitioner obviously erred when it

relied on the phrase granted, assigned,
transferred or otherwise conveyed in
claiming that all conveyances of real
property regardless of the manner of
transfer are subject to documentary
stamp tax under Section 196. It is not
proper to construe the meaning of a
statute on the basis of one part.
We quote with approval the following
statements of the appellate court in the
assailed decision,
Section 196 should be read as a whole
and not phrase by phrase. The phrase
granted,
assigned,
transferred
or
otherwise conveyed clearly refers to the
phrase whereby any land, tenement or
other realty is sold. This clearly shows
that the legislature intended Section 196
to refer to a transfer of realty by virtue of
sale. This is further bolstered by the fact
that the property is granted, assigned,
transferred or otherwise conveyed to the
purchaser, or purchasers, or to any other
person or persons designated by such
purchaser or purchasers. In addition, the
basis of the stamp tax is the consideration
agreed upon by the parties or the
propertys fair market value. Taking all of
these into consideration, it is beyond
doubt that Section 196 pertains to a
transfer
of
realty
by
way
of
sale.20chanrobleslaw
It should be emphasized that in the
instant case, the transfer of SPPCs real
property to respondent was pursuant to
their approved plan of merger. In a
merger of two existing corporations, one
of the corporations survives and continues
the business, while the other is dissolved,
and all its rights, properties, and liabilities
are
acquired
by
the
surviving
21
corporation.
Although there is a
dissolution of the absorbed or merged
corporations, there is no winding up of
their affairs or liquidation of their assets
because
the
surviving
corporation
automatically acquires all their rights,
privileges, and powers, as well as their

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

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liabilities.22
Here, SPPC ceased to have
any legal personality and respondent PSPC
stepped into everything that was SPPCs,
pursuant to the law and the terms of their
Plan of Merger.
In a merger, the real properties are not
deemed sold to the surviving corporation
and the latter could not be considered as
purchaser of realty since the real
properties subject of the merger were
merely
absorbed
by
the
surviving
corporation by operation of law and these
properties are deemed automatically
transferred to and vested in the surviving
corporation
without
further
act
or
deed. Therefore, the transfer of real
properties to the surviving corporation in
pursuance of a merger is not subject to
documentary stamp tax. As stated at the
outset, documentary stamp tax is imposed
only
on
all
conveyances,
deeds,
instruments or writing where realty sold
shall be conveyed to a purchaser or
purchasers. The transfer of SPPCs real
property to respondent was neither a sale
nor was it a conveyance of real property
for a consideration contracted to be paid
as contemplated under Section 196 of the
Tax Code. Hence, Section 196 of the Tax
Code is inapplicable and respondent is not
liable for documentary stamp tax.
Furthermore, it should be noted that a
documentary stamp tax is in the nature of
an excise tax because it is imposed upon
the privilege, opportunity or facility
offered at exchanges for the transaction of
the business.24 Documentary stamp tax
is a tax on documents, instruments, loan
agreements, and papers evidencing the
acceptance, assignment, or transfer of an
obligation, right or property incident
thereto.25
Documentary stamp tax is
thus imposed on the exercise of these
privileges through the execution of specific
instruments, independently of the legal
status of the transactions giving rise
thereto.26
Based on the foregoing, the
transfer of real properties from SPPC to
respondent is not subject to documentary
stamp tax considering that the same was
not conveyed to or vested in respondent

by means of any specific deed, instrument

or writing.
There was no deed of
assignment
and
transfer
separately
executed
by
the
parties
for
the
conveyance of the real properties. The
conveyance of real properties not being
embodied in a separate instrument but is
incorporated in the merger plan, thus,
respondent
is
not
liable
to
pay
documentary stamp tax.
Notably, RA 9243, entitled An Act
Rationalizing the Provisions of the
Documentary Stamp Tax of the National
Internal Revenue Code of 1997 was
enacted and took effect on April 27, 2004
which exempts the transfer of real
property of a corporation, which is a party
to the merger or consolidation, to another
corporation, which is also a party to the
merger
or
consolidation,
from
the
payment of documentary stamp tax.
The enactment of the said law now
removes any doubt and had made clear
that the transfer of real properties as a
consequence of merger or consolidation is
not subject to documentary stamp tax.
CNK
Power
Company
Limited
Vs.
Commissioner of Internal Revenue
G.R. No. 202066/G.R. No. 205353.
September 30, 2014
CBK Power Company Limited filed two
petitions
for
review1
assailing
the
dismissal of its judicial claim for tax credit
of unutilized input taxes on the ground of
premature filing.
Timeliness of judicial claim
A simple reading of the provision quoted
above reveals that the taxpayer may
appeal the denial or the inaction of the
Commissioner of Internal Revenue only
within thirty (30) days from receipt of the
decision that denied the claim or the
expiration of the 120-day period given to
the Commissioner to decide the claim.
In the fairly recent case of Commissioner
of Internal Revenue v. San Roque Power
Corporation,61 this court En Banc affirmed
with qualification the decision of its First

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Division in Commissioner of Internal
Revenue v. Aichi Forging Company of
Asia, Inc.62
This court held that
compliance with the 120-day and the 30day periods under Section 112 of the Tax
Code, save for those Value-added Tax
refund cases that were prematurely (i.e.,
before the lapse of the 120-day period)
filed with the Court of Tax Appeals
between December 10, 2003 (when the
Bureau of Internal Revenue Ruling No.
DA-489-03 was issued) and October 6,
2010,
is
mandatory
and
jurisdictional.63cralawlawlibrary
This court also declared that, following
Commissioner of Internal Revenue v.
Mirant Pagbilao Corporation,64 claims for
refund or tax credit of excess input tax are
governed not by Section 229 but only by
Section 112 of the 1997 National Internal
Revenue Code.65cralawlawlibrary
In
San
Roque,
a
motion
for
reconsideration and supplemental motion
for reconsideration in G.R. No. 187485
were filed, arguing for the prospective
application of the 120-day and 30-day
mandatory and jurisdictional periods. This
court
denied
the
motion
for
reconsideration with finality in the
resolution66 dated October 10, 2013. The
same
resolution
also
denied
the
Commissioners motion for reconsideration
in G.R. No. 196113 assailing the validity of
Ruling No. DA-489-03.67cralawlawlibrary
In G.R. No. 202066, petitioner filed its
judicial claim on March 27, 2009, only a
day after it had filed its administrative
claim on March 26, 2009.
In G.R. No. 205353, petitioner filed its
judicial claim on April 23, 2008 for the
taxable period of January 1, 2006 to
March 31, 2006, just 23 days after it had
filed its administrative claim on March 31,
2008. Petitioner also filed its judicial
claim on July 24, 2008 for the taxable
period of April 1, 2006 to December 31,
2006, only a day after it had filed its
administrative claim on July 23, 2008.

Clearly, petitioner failed to comply with

the 120-day waiting period, the time
expressly
given
by
law
to
the
Commissioner of Internal Revenue to
decide whether to grant or deny its
application for tax refund or credit.
Nevertheless, since the judicial claims
were filed within the window created in
San Roque, the petitions are exempted
from the strict application of the 120-day
mandatory period.
Timeliness of administrative claim
In G.R. No. 205353, the Court of Tax
Appeals
En
Banc
ruled
that
the
administrative claim for the second
quarter of 2006 was belatedly filed on July
23, 2008.68
This is consistent with
Section 112(A) of the Tax Code, as
amended, reckoning the two-year period
from the close of the taxable quarter when
the
sales
were
made:chanRoblesvirtualLawl
With
the
close of the second taxable quarter of
2006 being June 30, 2006, petitioner
should have filed its administrative claim
for this quarter on or before June 30,
2008, and not on July 23, 2008. This
applies the clear text of Section 112(A).
the 2013 San Roque case clarified the
effectivity of the Atlas and Mirant
doctrines on when to reckon the two-year
prescriptive
period
as
follows:chanRoblesvirtualLawlibrary
The Atlas doctrine, which held that claims
for refund or credit of input VAT must
comply with the two-year prescriptive
period under Section 229, should be
effective only from its promulgation on 8
June 2007 until its abandonment on 12
September 2008 in Mirant. The Atlas
doctrine was limited to the reckoning of
the two-year prescriptive period from the
date of payment of the output VAT. Prior
to the Atlas doctrine, the two-year
prescriptive period for claiming refund or
credit of input VAT should be governed by
Section 112(A) following the verba legis

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rule. The Mirant ruling, which abandoned
the Atlas doctrine, adopted the verba legis
rule, thus applying Section 112(A) in
computing the two-year prescriptive
period in claiming refund or credit of input
VAT.72 (Emphasis supplied)
Since July 23, 2008 falls within the
window of effectivity of Atlas, petitioners
administrative claim for the second
quarter of 2006 was filed on time
considering that petitioner filed its original
VAT return for the second quarter on July
25, 2006.

We note that there were dissents

submitted by other members of this court
in the 2013 San Roque case.73
The
ponente of a case, however, always writes
a decision for this court.
Duty Free Philippines Vs. Bureau of
Internal Revenue, represented by
Hon. Anselmo G. Adriano, acting
Regional Director, Revenue Region 8,
Makati CityG.R. No. 197228. October 8,
2014
The enactment of R.A. No. 9282,16 which
took effect on 23 April 2004, elevated the
rank of the CTA to the level of a collegiate
court, making it a co-equal body of the
Court of Appeals. The appeal of a CTA
decision under Section 18 of R.A. No.
1125 was also amended by R.A. No.
9282.
Furthermore, Section 2, Rule 4 of the
Revised Rules of the CTA17 reiterates the
exclusive appellate jurisdiction of the CTA
en banc relative to the review of the court
divisions decisions or resolutions on
motion for reconsideration or new trial in
cases arising from administrative agencies
such as the BIR.
Clearly, this Court is without jurisdiction to
review decisions rendered by a division of
the CTA, exclusive appellate jurisdiction
over which is vested in the CTA en
banc.18cralawlawlibrary
In this case, petitioner filed with this Court
on 29 July 2011 the instant Petition from

the denial of its Motion for Reconsideration

by the Special First Division of the
CTA. At that time, R.A. 9282 was already
in effect, and it evidently provides that the
CTA en banc shall have exclusive
jurisdiction over appeals from the decision
of its divisions. A party adversely affected
by the resolution of the CTA division may,
on motion for reconsideration, file a
petition for review with the CTA en banc.
Thereafter, the decision or ruling of the
CTA en banc may be elevated to this
Court. Simply stated, no decision of the
CTA division may be elevated to this Court
under Rule 45 of the 1997 Rules of Civil
Procedure without passing through the
CTA en banc.
In sum, this Court has no jurisdiction to
review the Decision and Resolution
rendered by the Special First Division of
the CTA. Thus, the instant Petition must
fail.
Commissioner of Internal Revenue Vs.
Aichi Forging Company of Asia, Inc.
G.R. No. 183421. October 22, 2014
At the outset, petitioner raises the
issue
of
the
timeliness
of
respondent's judicial claim before
the CTA. Petitioner contends that
the Petition of respondent was
prematurely filed with the CTA,
considering that it was filed barely
two days after respondent had filed
the administrative claim with the
BIR. Allegedly, petitioner was not
given the chance to properly
address the administrative claim.
The CTA, however, held that the
judicial claim clearly fell within the
two-year prescriptive period for
filing claims for a refund of input
VAT.

This Court will clarify.

Section 112(A) provides for a twoyear prescriptive period after the

close of the taxable quarter when
the sales were made, within which
a VAT-registered person whose
sales are zero-rated or effectively

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Ateneo de Davao University

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zero-rated may apply for the
issuance of a tax credit certificate
or refund of creditable input tax. In
the
consolidated
tax
cases
Commissioner of Internal Revenue
v. San Roque Power Corporation,
Taganito Mining Corporation v.
Commissioner of Internal Revenue,
and Philex Mining Corporation v.
Commissioner of Internal Revenue5
(hereby collectively referred to as
San Roque), the Court clarified that
the two-year period refers to the
filing of an administrative claim
with the BIR.

In this case, respondent's sales to

PEZA-registered entities amounted
to P149,075,454.37 for the period
1 January 2003 to 31 March 2003.
Accordingly, respondent was not
liable to pay any output VAT
thereon, and the unutilized input
VAT incurred by and attributable to
it may be the proper subject of a
claim for a refund. Therefore,
considering that respondent was
claiming the refund of input VAT
incurred for the first quarter of
2003, it had until 31 March 2005 or the close of the taxable quarter
when the zero-rated sales were
made - within which to file its
administrative claim for a refund.
On this note, we find that
petitioners had complied with the
two-year prescriptive period when
it filed its claim on 29 March 2005.
In accordance with Section 112(D)
of the NIRC of 1997, petitioner had
one hundred twenty (120) days
from the date of submission of
complete documents in support of
the application within which to
decide on the administrative claim.
Considering that the burden to
prove entitlement to a tax refund is
on the taxpayer, and absent any
evidence to the contrary, it is
presumed
that
in
order
to
discharge its burden, respondent

attached to its application6 filed on

29
March
2005
complete
supporting documents necessary to
prove its entitlement to a refund.
Thus, the 120-day period for the
CIR to act on the administrative
claim commenced on that date.

We agree with petitioner that the

judicial claim was prematurely filed
on
31
March
2005,
since
respondent failed to observe the
mandatory 120-day waiting period
to give the CIR an opportunity to
act on the administrative claim.
However, the Court ruled in San
Roque that BIR Ruling No. DA-48903 allowed the premature filing of
a judicial claim, which means nonexhaustion of the 120-day period
for the Commissioner to act on an
administrative claim:7
The old rule that the taxpayer may
file the judicial claim, without
waiting for the Commissioner's
decision
if
the
two-year
prescriptive period is about to
expire, cannot apply because that
rule was adopted before the
enactment of the 30-day period.
The 30-day period was adopted
precisely to do away with the old
rule, so that under the VAT System
the taxpayer will always have 30
days to file the judicial claim even
if the Commissioner acts only on
the 120th day, or does not act at
all during the 120-day period. With
the 30-day period always available
to the taxpayer, the taxpayer can
no longer file a judicial claim for
refund or credit of input VAT
without
waiting
for
the
Commissioner to decide until the
expiration of the 120-day period.
To repeat, a claim for tax refund or
credit, like a claim for tax
exemption, is construed strictly
against the taxpayer. One of the
conditions for a judicial claim of

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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refund or credit under the VAT
System is with the 12030 day
mandatory
and
jurisdictional
periods. Thus, strict compliance
with the 120+30 day periods is
necessary for such a claim to
prosper,
whether
before,
during, or after the effectivity
of the Atlas doctrine, except for
the period from the issuance of
BIR Ruling No. DA-489-03 on
10 December 2003 to 6 October
2010 when the Aichi doctrine
was adopted, which again
reinstated the 120+30 day
periods as mandatory and
jurisdictional.8
(Emphasis
supplied)chanroblesvirtuallawlibrar
y

In
Mindanao
II
Geothermal
Partnership v. Commissioner of
Internal Revenue and Mindanao I
Geothermal
Partnership
v.
Commissioner
of
Internal
Revenue,9
this
Court
has
reiterated:ChanRoblesVirtualawlibr
ary
Notwithstanding
a
strict
construction of any claim for tax
exemption or refund, the Court in
San Roque recognized that BIR
Ruling
No.
DA-489-03
constitutes equitable estoppel
in favor of taxpayers. BIR
Ruling No. DA-489-03 expressly
states that the "taxpayerclaimant need not wait for the
lapse of the 120-day period
before it could seek judicial
relief with the CTA by way of
Petition for Review." This Court
discussed BIR Ruling No. DA-48903 and its effect on taxpayers,
thus:
xxxx
Clearly, BIR Ruling No. DA-489-03
is a general interpretative rule.
Thus, all taxpayers can rely on BIR
Ruling No. DA-489-03 from the

time of its issuance on 10

December 2003 up to its reversal
by this Court in Aichi on 6 October
2010, where this Court held that
the 120+30 day periods are
mandatory and jurisdictional.

Therefore, respondent's filing of

the judicial claim barely two days
after the administrative claim is
acceptable, as it fell within the
period during which the Court
recognized the validity of BIR
Ruling No. DA-489-03.

Commissioner of Internal Revenue Vs.

Burmeistor
and
Wainscandinavian
Contractor Mindanao, Inc. G.R. No.
190021. October 22, 2014
The Issue Before the Court

The lone issue for the Court's

resolution is whether or not the
CIA En Banc correctly dismissed
the petition for review on the
ground
that
the
issue
of
prescription was belatedly raised.
The Court's Ruling
The petition is meritorious.
Section 112 of RA 8424,20 which was in
force at the time of the filing of
respondent's claim for credit or refund of
its creditable input tax,
To resolve the matter, the Court deems it
fit to briefly discuss the doctrinal
metamorphosis
of
the
two-year
prescriptive period provided under Section
112 (A) as above-cited.
In the case of Atlas Consolidated Mining
and Dev't. Corp. v. CIR26 (Atlas), which
was promulgated on June 8, 2007, the
two-year prescriptive period stated in
Section 112 (A)27 was counted from the
date of payment of the output VAT.28
At that time, the output VAT must be paid
at the time of filing of the quarterly tax
returns, which meant within 20 days

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Ateneo de Davao University

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following the end of each quarter.29
However, on September 12, 2008, the
Atlas doctrine was abandoned in the case
of Mirant which adopted the verba legis
rule and counted the two-year prescriptive
period from the "close of the taxable
quarter when the sales were made" as
expressly stated in the law,30 regardless
when the input VAT was paid.31 In the
recent case of CIR v. San Roque Power
Corporation32 (San Roque), promulgated
on February 12, 2013, the Court clarified
that (a) the Atlas doctrine was effective
only from its promulgation on June 8,
2007 until its abandonment on September
12, 2008 in Mirant, and (b) prior to the
Atlas doctrine, Section 112 (A) should be
applied following the verba legis rule
adopted in Mirant.33
Thus, applying Section 112 (A) strictly as
worded, it may then be concluded that the
administrative claim filed by respondent
on July 21, 1999 was filed within the twoyear prescriptive period reckoned from the
close of the fourth taxable quarter falling
on December 31, 1998, the last day of
filing being December 31, 2000.
In fact, whether the two-year prescriptive
period is counted from the date of
payment (January 21, 1999) of the output
VAT following Atlas, or from the close of
the taxable quarter when the sales were
made (December 31, 1998) pursuant to
Mirant,
the
conclusion
that
the
administrative claim was timely filed
would equally stand.
The CIR insists, however, that both the
administrative and judicial claims should
fall within the two-year prescriptive
period. This argument is untenable.
It should be pointed out that on October
6, 2010, the Court held in the case of CIR
v. Aichi Forging Company of Asia, Inc.34
(Aichi) that 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.35 The Court gave three (3)

compelling reasons for this ruling in San
Roque,
namely:ChanRoblesVirtualawlibrary
First, Section 112(A) clearly, plainly, and
unequivocally provides that the taxpayer
"may, within two (2) 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
the creditable input tax due or paid to
such sales." In short, the law states that
the taxpayer may apply with the
Commissioner for a refund or credit
"within two (2) years," which means
at anytime within two years. Thus, the
application for refund or credit may be
filed
by
the
taxpayer
with
the
Commissioner on the last day of the twoyear prescriptive period and it will still
strictly comply with the law. The two-year
prescriptive period is a grace period in
favor of the taxpayer and he can avail of
the full period before his right to apply for
a tax refund or credit is barred by
prescription.
Second, Section 112(C) provides that the
Commissioner shall decide the application
for refund or credit "within one hundred
twenty (120) days from the date of
submission of 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. x x x.

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

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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 611 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.36
(Emphases
in
the
original)chanroblesvirtuallawlibrary
In fine, the taxpayer can file its
administrative claim for refund or credit
at any time within the two-year
prescriptive period. If it files its claim on
the last day of said period, it is still filed
on time.37 The CIR will have 120 days
from such filing to decide the claim. If the
CIR decides the claim on the 120th day, or
does not decide it on that day, the
taxpayer still has 30 days to file its
judicial
claim
with
the
CTA;38
otherwise, the judicial claim would be,
properly speaking, dismissed for being
filed out of time and not, as the CTA En
Banc puts it, prescribed.
It bears emphasis that Section 112 (D)39
(now renumbered as Section 112[C]) of
RA 8424, which is explicit on the
mandatory and jurisdictional nature of
the 120+30-day period, was already
effective on January 1, 1998.40 Hence, it is
of no consequence that the Aichi and San

Roque rulings were not yet in existence

when respondent's administrative claim
was filed in 1999, so as to rid itself of the
said section's mandatory and jurisdictional
application.
That being said, and notwithstanding the
fact that respondent's administrative claim
had been timely filed, the Court is
nonetheless constrained to deny the
averred tax refund or credit, as its judicial
claim therefor was filed beyond the
120+30-day period, and, hence - as
earlier stated - deemed to be filed out of
time.
As the records would show, the CIR had
120 days from the filing of the
administrative claim on July 21, 1999, or
until November 18, 1999, to decide on
respondent's application. Since the CIR
did not act at all, respondent had until
December 18, 1999, the last day of
the 30-day period, to file its judicial
claim. However, respondent filed its
petition for review with the CTA only on
January 9, 2001 and, thus, was one
(1) year and 22 days late. As a
consequence of the late filing of said
petition, the CTA did not properly
acquire jurisdiction over the claim.41
In this relation, it is significant to point out
that the CTA, being a court of special
jurisdiction, can take cognizance only of
matters that are clearly within its
jurisdiction. Section 7 of RA 1125, 42 as
amended by RA 9282,43 specifically
provides:ChanRoblesVirtualawlibrary
SEC. 7. Jurisdiction. The CTA shall
exercise:
(a) Exclusive appellate jurisdiction to
review
by
appeal,
as
herein
provided:ChanRoblesVirtualawlibrary
(1) Decisions of the Commissioner of
Internal Revenue in cases involving
disputed assessments, refunds of internal
revenue taxes, fees or other charges,
penalties in relation thereto, or other
matters arising under the National

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Ateneo de Davao University

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COMPILATION OF SUPREME COURT DECISIONS

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Internal Revenue Code or other laws
administered by the Bureau of Internal
Revenue;chanrobleslaw
(2) Inaction by the Commissioner of
Internal Revenue in cases involving
disputed assessments, refunds of internal
revenue taxes, fees or other charges,
penalties in relation thereto, or other
matters arising under the National
Internal Revenue Code or other laws
administered by the Bureau of Internal
Revenue, where the National Internal
Revenue Code provides a specific
period of action, in which case the
inaction shall be deemed a denial;
x x x x (Emphasis supplied)
The inaction of the CIR on the claim
during the 120-day period is, by express
provision of law, "deemed a denial" of
such claim, and the failure of the taxpayer
to file its judicial claim within 30 days
from the expiration of the 120-day period
shall render the "deemed a denial"
decision of the
CIR final and
inappealable. The right to appeal to the
CTA from a decision or "deemed a denial"
decision of the Commissioner is merely a
statutory
privilege,
not
a
constitutional right. The exercise of
such statutory privilege requires
strict compliance with the conditions
attached by the statute for its
exercise.44 Thus, respondent's failure to
comply with the statutory conditions is
fatal
to
its
claim.
This
is
so,
notwithstanding the fact that the CIR, for
his part, failed to raise the issue of noncompliance with the mandatory periods at
the earliest opportunity.
In
the
case
of
Nippon
Express
(Philippines) Corporation v. CIR, 45 the
Court ruled that, because the 120+30day period is jurisdictional, the issue
of whether the taxpayer complied
with the said time frame may be
broached at any stage, even on
appeal. Well-settled is the rule that
the question of jurisdiction over the
subject matter can be raised at any

time
during
the
proceedings.
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.46
Therefore,
respondent's
contention on this score is of no moment.
Indeed, it has been pronounced time and
again that taxes are the lifeblood of the
government and, consequently, tax laws
must be faithfully and strictly
implemented as they are not intended to
be liberally construed.47 Hence, with this
in mind and in light of the foregoing
considerations, the Court so holds that the
CTA En Banc committed reversible error
when it granted respondent's claim for
refund or tax credit despite its noncompliance with the mandatory periods
under Section 112 (D) (now renumbered
as Section 112[C]) of RA 8424.
Accordingly, the claim for refund/tax
credit must be denied.
La Suerte Cigar & Cigarette Factory Vs.
Court of Appeals, et al/Commissioner
of Internal Revenue Vs. Fortune
Tobacco
Corporation/Commissioner
of Internal Revenue Vs. La Suerte
Cigar and Cigarette Factory/Sterling
Tobacco
Corporation
Vs.
Commissioner of Internal Revenue/La
Suerte Cigar & Cigarette Factory Vs.
Commissioner of Internal Revenue
G.R. No. 125346/G.R. No. 13632829/G.R.
No.
144942/G.R.
No.
148605/G.R.
No.
158197/G.R.
No.
165499/G.R. No. 205136. November 11,
2014
These cases involve the taxability of
stemmed leaf tobacco imported and
locally
purchased
by
cigarette
manufacturers for use as raw material in
the manufacture of their cigarettes. Under
the National Internal Revenue Code of
1997 (1997 NIRC), before it was amended
on December 19, 2012 through Republic
Act No. 103511 (Sin Tax Law), stemmed
leaf tobacco is subject to an excise tax of
P0.75 for each kilogram thereof.2 The
1997 NIRC further provides that stemmed
leaf tobacco leaf tobacco which has

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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had the stem or midrib removed3 may
be sold in bulk as raw material by one
manufacturer directly to another without
payment of the tax, under such conditions
as may be prescribed in the rules and
regulations prescribed by the Secretary of
Finance.4chanrobleslaw
Nature of excise tax
Excise tax is a tax on the production, sale,
or consumption of a specific commodity in
a country. Section 110 of the 1986 Tax
Code explicitly provides that the excise
taxes on domestic products shall be paid
by the manufacturer or producer before
[the] removal [of those products] from
the place of production. It does not
matter to what use the article[s] subject
to tax is put; the excise taxes are still
due, even though the articles are removed
merely for storage in some other place
and are not actually sold or consumed.159
The excise tax based on weight, volume
capacity or any other physical unit of
measurement is referred to as specific
tax. If based on selling price or other
specified value, it is referred to as ad
valorem tax.
Section
141
subjects
partially
prepared tobacco, such as stemmed
leaf tobacco, to excise tax
Section 141 of the 1986 Tax Code
provides:
SEC. 141. Tobacco Products. There shall
be collected a tax of seventy-five centavos
on each kilogram of the following products
of tobacco:chanroblesvirtuallawlibrary
(a) tobacco twisted by hand or reduced
into a condition to be consumed in any
manner other than the ordinary mode of
drying and curing;
(b) tobacco prepared or partially prepared
with or without the use of any machine or
instruments or without being pressed or
sweetened; and
(c) fine-cut shorts and refuse, scraps,
clippings, cuttings, stems and sweepings
of tobacco.

Fine-cut shorts and refuse, scraps,

clippings, cuttings, stems and sweepings
of tobacco resulting from the handling or
stripping of whole leaf tobacco may be
transferred, disposed of, or otherwise
sold, without prepayment of the specific
tax herein provided for under such
conditions as may be prescribed in the
regulations promulgated by the Ministry of
Finance upon recommendation of the
Commissioner, if the same are to be
exported or to be used in the manufacture
of other tobacco products on which the
excise tax will eventually be paid on the
finished product.
On tobacco specially prepared for chewing
so as to be unsuitable for use in any other
manner, on each kilogram, sixty centavos.
(Emphasis supplied)
It is evident that when tobacco is
harvested and processed either by hand
or by machine, all its products become
subject to specific tax. Section 141 reveals
the legislative policy to tax all forms of
manufactured tobacco in contrast to
raw tobacco leaves including tobacco
refuse or all other tobacco which has been
cut, split, twisted, or pressed and is
capable of being smoked without further
industrial processing.
Stemmed leaf tobacco is subject to the
specific tax under Section 141(b). It is a
partially prepared tobacco. The removal of
the stem or midrib from the leaf tobacco
makes the resulting stemmed leaf tobacco
a prepared or partially prepared tobacco.
The following is La Suertes own
illustration of how the stemmed leaf
tobacco comes about: In the process of
removing the stems, the whole leaf
tobacco breaks into pieces; after the
stems or midribs are removed, the
tobacco is threshed (cut by machine into
fine narrow strips) and then undergoes a
process
of
redrying,160
undoubtedly
showing that stemmed leaf tobacco is a
partially prepared tobacco.
Since the Tax Code contained no definition

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

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COMPILATION OF SUPREME COURT DECISIONS

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of partially prepared tobacco, then the
term should be construed in its general,
ordinary,
and
comprehensive
sense.161chanrobleslaw
RR No. 17-67, as amended, supplements
the law by delineating what products of
tobacco are prepared or manufactured
and partially prepared or partially
manufactured. Section 2(m) states:
(m) Partially manufactured tobacco
Includes:chanroblesvirtuallawlibrary

which was enacted in 1916 for purposes of

improving the quality of Philippine tobacco
products, while Section 137 defines the
tobacco product only for the purpose of
exempting it from the specific tax.
Whichever definition is adopted, there is
no doubt that stemmed leaf tobacco is a
partially prepared tobacco.

The onus of proving that stemmed leaf

tobacco is not subject to the specific tax
lies with the cigarette manufacturers.
Taxation is the rule, exemption is the
162
(1) Stemmed leaf handstripped tobacco, clean, good,
exception.
partially
broken
Accordingly,
leaf only, free
statutes
from
mold and dust.
granting
tax
exemptions
must
be
construed in strictissimi juris against the
(2) Long-filler handstripped tobacco of good, longtaxpayer
pieces of and
broken
liberally
leaf usable
in favor
as filler
of for
the
cigars without further preparation, and free from mold,
taxing
dust stems
authority.
and cigarThe
cuttings.
cigarette
manufacturers must justify their claim by
(3) Short-filler handstripped or machine-stripped
a tobacco,
clear andclean,
categorical
good, short
provision
pieces
in the
of
broken leaf, which will not pass through a screen oflaw.
two Otherwise,
inches (2") mesh.
they are liable for the
specific tax on stemmed leaf tobacco
(4) Cigar-cuttings clean cuttings or clippings from
found
cigars,
in unsized
their possession
with any other
pursuant
form ofto
tobacco.
Section 127163 of the 1986 Tax Code, as
amended.
(5) Machine-scrap tobacco machine-threshed, clean,
good tobacco,
not included
in any ofin
Stemmed
leaf tobacco
transferred
the above terms, usable in the manufacture of tobacco
bulkproducts.
between cigarette manufacturers
are exempt from excise tax under
(6) Stems midribs of leaf tobacco removed fromSection
the whole
leaf
broken
137
of or
the
1986leaf
Taxeither
Codebyin
hand or machine.
conjunction with RR No. V-39 and RR
No. 17-67
(7) Waste tobacco denatured tobacco; powder or dust, refuse, unfit for human
consumption; discarded materials in the manufacture
of tobacco
which on
may
In the instant
case,products,
an exemption
the
include stems.
taxability of stemmed leaf tobacco is
Insisting on the inapplicability of RR No.
found in Section 137, which provides the
17-67, La Suerte points to the different
following:
definitions given to stemmed leaf tobacco
SEC. 137. Removal of tobacco products
by Section 2(m)(1) of RR No. 17-67 and
without prepayment of tax. Products of
Section 137. It argues that while RR No.
tobacco entirely unfit for chewing or
17-67 defines stemmed leaf tobacco as
smoking may be removed free of tax for
handstripped tobacco of clean, good,
agricultural or industrial use, under such
partially broken leaf only, free from mold
conditions as may be prescribed in the
and dust, Section 137 defines it as leaf
regulations of the Ministry of Finance.
tobacco which has had the stem or midrib
Stemmed leaf tobacco, fine-cut shorts, the
removed. The term does not include
refuse of fine-cut chewing tobacco, scraps,
broken leaf tobacco. We are not
cuttings, clippings, stems or midribs, and
convinced.
sweepings of tobacco may be sold in bulk
as raw material by one manufacturer
Different definitions of the term stemmed
directly to another, without payment of
leaf
are
unavoidable,
especially
the tax under such conditions as may be
considering that Section 2(m)(1) is an
prescribed in the regulations of the
implementing regulation of Act No. 2613,
Ministry of Finance.
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Stemmed leaf tobacco,' as herein used,

means leaf tobacco which has had the
stem or midrib removed. The term does
not
include
broken
leaf
tobacco.
(Emphasis and underscoring supplied)
Section 137 authorizes a tax exemption
subject to the following: (1) that the
stemmed leaf tobacco is sold in bulk as
raw material by one manufacturer directly
to another; and (2) that the sale or
transfer has complied with the conditions
prescribed by the Department of Finance.
That the title of Section 137 uses the term
without prepayment while the body itself
uses without payment is of no moment.
Both terms simply mean that stemmed
leaf tobacco may be removed from the
factory or place of production without
prior payment of the specific tax.
This court has held in Commissioner of
Internal Revenue v. La Campaa Fabrica
de
Tabacos,
Inc.,164
reiterated
in
Compania General de Tabacos de Filipinas
v. Court of Appeals165 and Commissioner
of Internal Revenue v. La Suerte Cigar
and Cigarette Factory, Inc.166 that the
exemption from specific tax of the sale of
stemmed leaf tobacco is qualified by and
is subject to such conditions as may be
prescribed in the regulations of the
Department of Finance. These conditions
were provided for in RR Nos. V-39 and 1767. Thus, Section 137 must be read and
interpreted in accordance with these
regulations.
Section 20(a) of RR No. V-39 provides the
rules for tax exemption on tobacco
products:
SECTION 20. Exemption from tax of
tobacco
products
intended
for
agricultural or industrial purposes.
(a) Sale of stemmed leaf tobacco,
etc., by one factory to another.
Subject
to
the
limitations
herein
established, products of tobacco entirely
unfit for chewing or smoking may be
removed free of tax for agricultural or
industrial use; and stemmed leaf tobacco,

fine-cut shorts, the refuse of fine-cut

chewing tobacco, refuse, scraps, cuttings,
clippings, and sweepings of tobacco may
be sold in bulk as raw materials by one
manufacturer directly to another without
the prepayment of the specific tax.
Stemmed leaf tobacco, fine-cut shorts, the
refuse of fine-cut chewing tobacco, scraps,
cuttings, clippings, and sweeping of leaf
tobacco or partially manufactured tobacco
or other refuse of tobacco may be
transferred from one factory to another
under an official L-7 invoice on which shall
be entered the exact weight of the
tobacco at the time of its removal, and
entry shall be made in the L-7 register in
the place provided on the page of
removals. Corresponding debit entry will
be made in the L-7 register book of the
factory receiving the tobacco under
heading Refuse, etc., received from other
factory, showing the date of receipt,
assessment and invoice numbers, name
and address of the consignor, form in
which received, and the net weight of the
tobacco. This paragraph should not,
however, be construed to permit the
transfer of materials unsuitable for the
manufacture of tobacco products from one
factory to another. (Emphasis supplied)
The conditions under which stemmed leaf
tobacco may be transferred from one
factory to another without prepayment of
specific
tax
are
as
follows:chanroblesvirtuallawlibrary
(a)

The transfer shall be under an official L-7 in

at the time of its removal;

(b)

Entry shall be made in the L-7 register in th

(c)

Corresponding debit entry shall be made in

the heading, Refuse, etc., received from t
invoice numbers, name and address of t
tobacco.

Under Section 3(h) of RR No. 17-67,

entities that were issued by the Bureau of
Internal Revenue with an L-7 permit refer
to "manufacturers of tobacco products."
Hence, the transferor and transferee of

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Ateneo de Davao University

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the stemmed leaf tobacco must be an L-7
tobacco manufacturer.
La Campaa explained that the reason
behind the tax exemption of stemmed leaf
tobacco transferred between two L-7
manufacturers is that the same had
already been previously taxed when
acquired by the L-7 manufacturer from
dealers of tobacco, thus:
[T]he exemption from specific tax of the
sale of stemmed leaf tobacco as raw
material by one L-7 directly to another L-7
is because such stemmed leaf tobacco has
been subjected to specific tax when an L-7
manufacturer purchased the same from
wholesale leaf tobacco dealers designated
under Section 3, Chapter I, Revenue
Regulations No. 17-67 (supra) as L-3, L3F, L-3R, L-4, or L-6, the latter being also
a stripper of leaf tobacco. These are the
sources of stemmed leaf tobacco to be
used as raw materials by an L-7
manufacturer which does not produce
stemmed leaf tobacco. When an L-7
manufacturer sells the stemmed leaf
tobacco purchased from the foregoing
suppliers to another L-7 manufacturer as
raw material, such sale is not subject to
specific tax under Section 137 (now
Section 140), as implemented by Section
20(a) of Revenue Regulations No. V-39.167
There is no new product when stemmed
leaf tobacco is transferred between two L7 permit holders. Thus, there can be no
excise tax that will attach. The regulation,
therefore, is reasonable and does not
create a new statutory right.
RR Nos. V-39 and 17-67 did not
exceed
the
allowable
limits
of
legislative delegation
The cigarette manufacturers contend that
the authority of the Department of
Finance to prescribe conditions is merely
procedural. Its rule-making power is only
for the effective enforcement of the law,
which implicitly rules out substantive
modifications. The Secretary of Finance
cannot, by mere regulation, limit the
classes of manufacturers that may be
entitled to the tax exemption. Otherwise,

Section 137 (Section 132 in the 1939 Tax

Code) would be invalid as an undue
delegation of legislative power without the
required standards or parameters.
The power of taxation is inherently
legislative and may be imposed or
revoked only by the legislature.168
Moreover, this plenary power of taxation
cannot be delegated by Congress to any
other branch of government or private
persons,
unless
its
delegation
is
authorized by the Constitution itself.169
Hence, the discretion to ascertain the
following (a) basis, amount, or rate of
tax; (b) person or property that is subject
to tax; (c) exemptions and exclusions
from tax; and (d) manner of collecting the
tax may not be delegated away by
Congress.
However, it is well-settled that the power
to fill in the details and manner as to the
enforcement and administration of a law
may be delegated to various specialized
administrative agencies like the Secretary
of Finance in this case.170chanrobleslaw
This court in Maceda v. Macaraig, Jr.171
explained the rationale behind the
permissible
delegation
of
legislative
powers to specialized agencies like the
Secretary of Finance:
The latest in our jurisprudence indicates
that delegation of legislative power has
become the rule and its non-delegation
the exception. The reason is the
increasing complexity of modern life and
many technical fields of governmental
functions as in matters pertaining to tax
exemptions. This is coupled by the
growing inability of the legislature to cope
directly
with
the
many
problems
demanding its attention. The growth of
society has ramified its activities and
created
peculiar
and
sophisticated
problems that the legislature cannot be
expected reasonably to comprehend.
Specialization even in legislation has
become necessary. To many of the
problems attendant upon present day
undertakings, the legislature may not

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have the competence, let alone the
interest and the time, to provide the
required direct and efficacious, not to say
specific solutions.172
Thus, rules and regulations implementing
the law are designed to fill in the details or
to make explicit what is general, which
otherwise cannot all be incorporated in the
provision of the law.173 Such rules and
regulations,
when
promulgated
in
pursuance of the procedure or authority
conferred upon the administrative agency
by law,174 deserve to be given weight and
respect by the courts in view of the rulemaking authority given to those who
formulate
them
and
their
specific
expertise in their respective fields.175 To
be valid, a revenue regulation must be
within the scope of statutory authority or
standard granted by the legislature.
Specifically, the regulation must (1) be
germane to the object and purpose of the
law;176 (2) not contradict, but conform to,
the standards the law prescribes;177 and
(3) be issued for the sole purpose of
carrying into effect the general provisions
of our tax laws.178chanrobleslaw
Section 338 authorizes the Secretary of
Finance to promulgate all needful rules
and
regulations
for
the
effective
enforcement of the provisions of the 1939
Tax Code.
The specific authority of the Department
of Finance to issue regulations relating to
the taxation of tobacco products is found
in Section 4179 (Specific provisions to be
contained in regulations); Section 125180
(Payment of specific tax on imported
articles to customs officers prior to release
from the customhouse); Section 132
(Removal of tobacco products without
prepayment of tax); Section 149181
(Extent of supervision over establishments
producing taxable output); Section 150182
(Records to be kept by manufacturers;
Assessment based thereon); and Section
152183 (Labels and form of packages) of
the 1939 Tax Code.
RR No. V-39 was promulgated to enforce

the provisions of Title IV (Specific Taxes)

of the 1939 Tax Code relating to the
manufacture and importation of, and
payment of specific tax on, manufactured
tobacco or products of tobacco. By an
explicit provision in Section 132, the
lawmakers defer to the Department of
Finance to provide the details upon which
the removal of stemmed leaf tobacco may
be exempt from the specific tax in view of
its supposed expertise in the tobacco
trade. Section 20(a) of RR No. V-39
adhered to the standards because it
provided the conditions the proper
documentation and recording of raw
materials transferred from one factory to
another for a tax-free removal of
stemmed leaf tobacco, without negating
the imposition of specific tax under
Section 137. The effective enforcement of
the provisions of [the Tax Code] in
Section 338 provides a sufficient standard
for
the
Secretary
of
Finance
in
determining the conditions for the tax-free
removal of stemmed leaf tobacco. Section
4 further provides a limitation on the
contents of revenue regulations to be
issued by the Secretary of Finance.
On the other hand, RR No. 17-67 was
promulgated [i]n accordance with the
provisions of Section 79 (B) of the
Administrative Code, as amended by Act
No.
2803.184
Among
the
specific
administrative powers conferred upon a
department head under the Administrative
Code is that of promulgating rules and
regulations,
not
contrary
to
law,
necessary to regulate the proper working
and
harmonious
and
efficient
administration of each and all of the
offices
and
dependencies
of
his
Department,
and
for
the
strict
enforcement and proper execution of the
laws relative to matters under the
jurisdiction of said Department.185 Under
the 1939 Tax Code, the Secretary of
Finance
is
authorized
to
prescribe
regulations affecting the business of
persons dealing in articles subject to
specific tax, including the mode in which
the processes of production of tobacco

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COMPILATION OF SUPREME COURT DECISIONS

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and tobacco products should be conducted
and the records to be kept by
manufacturers.
Clearly
then,
the
provisions of RR No. 17-67 classifying and
regulating the business of persons dealing
in tobacco and tobacco products are within
the rule-making authority of the Secretary
of Finance.
RR No. 17-67 did not create a new
classification

corresponding register books and auxiliary

register books pertaining to his business
as well as the official register book, L-7, to
be used as record of the raw materials for
his or her product. It is, therefore, logical
to conclude that the L-7 invoice and L-7
register book under Section 20(a) refers
to those invoice and books used by
manufacturers of chewing and smoking
tobacco, cigars or cigarettes.

The
contention
of
the
cigarette
manufacturers that RR No. 17-67 unduly
restricted the meaning of manufacturers
of tobacco products by limiting it to a few
manufacturers such as manufacturers of
cigars and cigarettes is misleading.

RR No. 17-67 clarified RR No. V-39 by

explicitly designating the manufacturers of
tobacco products as L-7 permittees
(Section 2), in contrast to wholesale leaf
tobacco dealers and those that process
partially manufactured tobacco such as
stemmed leaf tobacco. RR No. 17-67 did
not create a new and restrictive
classification but only expressed in clear
and categorical terms the distinctions
between manufacturers and dealers of
tobacco that were already implicit in RR
No. V-39.

The definitions in RR No. 17-67 of

manufacturer
of
tobacco
and
manufacturer of cigars and/or cigarettes
are in conformity with, as in fact they are
verbatim adoptions of, the definitions
under Section 194(m) and (n) of the 1939
Tax Code.
The cigarette companies further argue
that RR No. 17-67 unduly restricted the
meaning of L-7 in Section 20(a) of RR No.
V-39 because when RR No. V-39 was
issued, there was no distinction at all
between L-7, L-3, L-6 permittees, and L-7
referred to manufacturers of any class of
tobacco products including stemmed leaf
tobacco.
This argument is similarly misplaced.
A reading of the entire RR No. V-39 shows
that the regulation pertains particularly to
activities of manufacturers of smoking and
chewing tobacco, cigars and cigarettes.186
This was rightly so because the regulation
was issued to enforce the tax law
provisions in relation to the manufacture
and importation of tobacco products.
Clearly apparent in Section 10(a) is that
when a manufacturer of chewing and
smoking tobacco, cigars, or cigarettes has
been qualified to conduct his or her
business as such, he or she is issued by
the
internal
revenue
agent
the

Indeed, there is no repugnancy between

RR No. 17-67 and RR No. V-39, on the
one hand, and the Tax Code, on the other.
It is safer to presume that the term
manufacturer used in Section 137 on tax
exempt removals referred to an entity
that is engaged in the business of, and
was licensed by the Bureau of Internal
Revenue as a, manufacturer of tobacco
products. It does not include an entity
engaged in business as a dealer in tobacco
that, incidentally or in furtherance of its
business as a dealer, strip or thresh whole
leaf
tobacco or
reprocess partially
manufactured tobacco.187chanrobleslaw
Such construction is consistent with the
rule that tax exemptions, deemed to be in
derogation of the states sovereign right of
taxation, are strictly applied and may be
granted
only
under
clear
and
unmistakable terms of the law and not
merely upon a vague implication or
inference.188chanrobleslaw
RR No. V-39 must be applied and read
together with RR No. 17-67

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The cigarette manufacturers argument is
misplaced, stating that RR No. 17-67
could not modify RR No. V-39 because it
was promulgated to enforce Act No. 2613,
as amended (entitled An Act to Improve
the Methods of Production and the Quality
of Tobacco in the Philippines and to
Develop the Export Trade Therein), which
allegedly had nothing whatsoever to do
with the Tax Code or with the imposition
of taxes.
The
Tobacco
Inspection
Service,
instituted under Act No. 2613, was made
part of the Bureau of Internal Revenue
and Bureau of Customs administration for
. . . internal revenue purposes.189 The
Collector of Internal Revenue was charged
to enforce Act No. 2613, otherwise known
as the Tobacco Inspection Law, with a
view to promoting the Philippine tobacco
trade and thereby increase the revenues
of the government.
T he cigarette manufacturers, thus,
erroneously concluded that Act No. 2613
does not involve taxation.
Parenthetically, Section 8 of Act No. 2613
pertained to the imposition of tobacco
inspection fees, which are National
Internal Revenue taxes, these being one
of the miscellaneous taxes provided for
under the Tax Code. Said Section 8 was in
fact repealed by Section 369(b) of the
1939 Tax Code, and the provision
regarding inspection fees are found in
Section 302 of the 1939 Tax Code.
Since the two revenue regulations, RR
Nos. V-34 and 17-67, are in pari materia,
i.e., they both pertain specifically to the
regulation of tobacco trade, they should
be read and applied together.
Statutes are in pari materia when they
relate to the same person or thing or to
the same class of persons or things, or
object, or cover the same specific or
particular subject matter.
It is axiomatic in statutory construction
that a statute must be interpreted, not

only to be consistent with itself, but also

to harmonize with other laws on the same
subject matter, as to form a complete,
coherent and intelligible system. The rule
is expressed in the maxim, interpretare
et
concordare legibus
est
optimus
interpretandi, or every statute must be
so construed and harmonized with other
statutes as to form a uniform system of
jurisprudence.194 (Citation omitted)
The
foregoing
rules
on
statutory
construction can be applied by analogy to
administrative issuances such as RR No.
V-39 and RR No. 17-67, especially since
both
are
issued
by
the
same
administrative agency.
Importation of stemmed leaf tobacco
not included in the exemption under
Section 137
The transaction contemplated in Section
137 does not include importation of
stemmed leaf tobacco for the reason that
the law uses the word sold to describe
the transaction of transferring the raw
materials from one manufacturer to
another.
The Tax Code treats an importer and a
manufacturer differently. Section 123
clearly
distinguishes
between
goods
manufactured
or
produced
in
the
Philippines and things imported. The law
uses the proper term importation or
imported whenever the transaction
involves bringing in articles from foreign
countries as provided under Section 125
(cf. Section 124). Whenever the Tax Code
refers to importers and manufacturers,
they are separately mentioned as two
distinct persons or entities (Sections 156
and 160). Under Chapter II, whenever the
law uses the word manufacturer, it only
means local manufacturer or producer of
domestic products (Sections 150, 151,
and 152 of the 1939 Tax Code).
Moreover,
foreign
manufacturers
of
tobacco products not engaged in trade or
business in the Philippines cannot be
designated as L-7 since these are beyond
the pale of Philippine law and regulations.

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The factories contemplated are those
located
or
operating
only
in
the
Philippines.
Contrary to La Suertes claim, Chapter V,
Section 61 of RR No. V-39195 is not
applicable to justify the tax exemption of
its importation of stemmed leaf tobacco
because from the title of Chapter V, the
provision particularly refers to specific
taxes on imported cigars, cigarettes,
smoking and chewing tobacco.
No estoppel against government
The cigarette manufacturers contend that
for a long time prior to the transactions
herein involved, the Collector of Internal
Revenue had never subjected their
purchases and importations of stemmed
leaf tobacco to excise taxes. This
prolonged practice allegedly represents
the official and authoritative interpretation
of the law by the Bureau of Internal
Revenue which must be respected.
We are not persuaded.
In Philippine Long Distance Telephone Co.
v. Collector of Internal Revenue,196 this
court has held that this principle is not
absolute,
and
an
erroneous
implementation by an officer based on a
misapprehension of law may be corrected
when the true construction is ascertained.
Thus:
The appellant argues that the Collector of
Internal
Revenue,
previous
to
the
transactions herein involved, had never
collected the franchise tax on items of the
same nature as those herein in question
and this is strong evidence that such
transactions are not subject to tax on the
principle that a prolonged practice on the
part of an executive or administrative
officer in charge of executing a certain
statute is an authoritative construction of
great weight. This contention may be
granted, but the principle is not absolute
and may be overcome by strong reasons
to
the
contrary.
If
through
a
misapprehension of law an officer has
erroneously executed it for a long time,

the error may be corrected when the true

construction is ascertained. Such we deem
to be the situation in the present case.
Incidentally, the doctrine of estoppel does
not apply here.197 (Emphasis supplied)
This court reiterated this rule in Abello v.
Commissioner of Internal Revenue198
where it rejected petitioners claim that
the prolonged practice (since 1939 up to
1988) of the Bureau of Internal Revenue
in not subjecting political contributions to
donors
tax
was
an
authoritative
interpretation of the statute, entitled to
great weight and the highest respect:
Prolonged practice of the Bureau of
Internal Revenue in not collecting the
specific tax on stemmed leaf tobacco
cannot validate what is otherwise an
erroneous application and enforcement of
the law. The government is never
estopped from collecting legitimate taxes
because of the error committed by its
agents.200chanrobleslaw
In La Suerte Cigar and Cigarette Factory
v. Court of Tax Appeals,201 this court
upheld the validity of a revenue
memorandum circular issued by the
Commissioner of Internal Revenue to
correct an error in a previous circular that
resulted in the non-collection of tobacco
inspection fees for a long time and
declared that estoppel cannot work
against the government:
Double taxation
The
contention
that
the
cigarette
manufacturers are doubly taxed because
they are paying the specific tax on the raw
material and on the finished product in
which the raw material was a part is also
devoid of merit.
For double taxation in the objectionable or
prohibited sense to exist, the same
property must be taxed twice, when it
should be taxed but once.204 [B]oth
taxes must be imposed on the same
property or subject- matter, for the same
purpose, by the same . . . taxing
authority, within the same jurisdiction or

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Ateneo de Davao University

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COMPILATION OF SUPREME COURT DECISIONS

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taxing district, during the same taxing
period, and they must be the same kind or
character of tax.205chanrobleslaw
At all events, there is no constitutional
prohibition against double taxation in the
Philippines.206 This court has explained in
Pepsi-Cola Bottling Company of the
Philippines,
Inc.
v.
Municipality
of
Tanauan, Leyte:207
There is no validity to the assertion that
the delegated authority can be declared
unconstitutional on the theory of double
taxation. It must be observed that the
delegating
authority
specifies
the
limitations and enumerates the taxes over
which local taxation may not be exercised.
The reason is that the State has
exclusively reserved the same for its own
prerogative. Moreover, double taxation, in
general, is not forbidden by
our
fundamental law, since We have not
adopted as part thereof the injunction
against double taxation found in the
Constitution of the United States and
some states of the Union. Double taxation
becomes obnoxious only where the
taxpayer is taxed twice for the benefit of
the same governmental entity or by the
same jurisdiction for the same purpose,
but not in a case where one tax is
imposed by the State and the other by the
city
or
municipality.208
(Emphasis
supplied, citations omitted)
It is something not favored, but is
permissible,
provided
some
other
constitutional requirement is not thereby
violated, such as the requirement that
taxes must be uniform.209chanrobleslaw
Excise taxes are essentially taxes on
property210 because they are levied on
certain
specified
goods
or
articles
manufactured
or
produced
in
the
Philippines
for
domestic
sale
or
consumption or for any other disposition,
and on goods imported. In this case, there
is no double taxation in the prohibited
sense because the specific tax is imposed
by explicit provisions of the Tax Code on
two different articles or products: (1) on
the stemmed leaf tobacco; and (2) on

cigar or cigarette.211chanrobleslaw
SMI-ED Philippine Technology, Inc. Vs.
Commissioner of Internal Revenue
G.R. No. 175410. November 12, 2014
In an action for the refund of taxes
allegedly erroneously paid, the
Court
of
Tax
Appeals
may
determine whether there are taxes
that should have been paid in lieu
of the taxes paid. Determining the
proper category of tax that should
have been paid is not an
assessment. It is incidental to
determining whether there should
be a refund.

A
Philippine
Economic
Zone
Authority
(PEZA)-registered
corporation
that
has
never
commenced operations may not
avail the tax incentives and
preferential rates given to PEZAregistered
enterprises.
Such
corporation is subject to ordinary
tax rates under the National
Internal Revenue Code of 1997.
I
Jurisdiction of the Court of Tax
Appeals
The term assessment refers to the
determination of amounts due from a
person obligated to make payments. In
the context of national internal revenue
collection, it refers the determination of
the taxes due from a taxpayer under the
National Internal Revenue Code of 1997.
The power and duty to assess national
internal revenue taxes are lodged with the
BIR.44 Section 2 of the National Internal
Revenue Code of 1997 provides:
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

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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. The
Bureau shall give effect to and administer
the supervisory and police powers
conferred to it by this Code or other laws.
(Emphasis supplied)
The BIR is not mandated to make an
assessment relative to every return filed
with it. Tax returns filed with the BIR
enjoy the presumption that these are in
accordance with the law.45 Tax returns
are also presumed correct since these are
filed
under
the
penalty
of
perjury.46 Generally, however, the BIR
assesses taxes when it appears, after a
return had been filed, that the taxes paid
were
incorrect,47
false,48
or
49
fraudulent.
The BIR also assesses taxes
when taxes are due but no return is filed.5
The Court of Tax Appeals has no power to
make an assessment at the first
instance.
On matters such as tax
collection, tax refund, and others related
to the national internal revenue taxes, the
Court of Tax Appeals jurisdiction is
appellate in nature.
Section 7(a)(1) and Section 7(a)(2) of
Republic Act No. 1125,51 as amended by
Republic Act No. 9282,52 provide that the
Court of Tax Appeals reviews decisions
and inactions of the Commissioner of
Internal Revenue in disputed assessments
and claims for tax refunds.
Based on these provisions, the following
must be present for the Court of Tax
Appeals to have jurisdiction over a case
involving the BIRs decisions or inactions:
a) A case involving any of the following:
Disputed assessments;
Refunds of internal revenue taxes, fees,
or other charges, penalties in
relation thereto; and
Other matters arising under the National
Internal Revenue Code of 1997.

b) Commissioner of Internal Revenues

decision or inaction in a case submitted to
him or her
Thus, the BIR first has to make an
assessment
of
the
taxpayers
liabilities. When the BIR makes the
assessment, the taxpayer is allowed to
dispute that assessment before the
BIR. If the BIR issues a decision that is
unfavorable to the taxpayer or if the BIR
fails to act on a dispute brought by the
taxpayer, the BIRs decision or inaction
may be brought on appeal to the Court of
Tax Appeals. The Court of Tax Appeals
then acquires jurisdiction over the case.
When the BIRs unfavorable decision is
brought on appeal to the Court of Tax
Appeals, the Court of Tax Appeals reviews
the correctness of the BIRs assessment
and decision. In reviewing the BIRs
assessment and decision, the Court of Tax
Appeals
had
to
make
its
own
determination of the taxpayers tax
liabilities. The Court of Tax Appeals may
not make such determination before the
BIR makes its assessment and before a
dispute involving such assessment is
brought to the Court of Tax Appeals on
appeal.
The Court of Tax Appeals jurisdiction is
not limited to cases when the BIR makes
an assessment or a decision unfavorable
to the taxpayer. Because Republic Act No.
112553 also vests the Court of Tax Appeals
with jurisdiction over the BIRs inaction on
a taxpayers refund claim, there may be
instances when the Court of Tax Appeals
has to take cognizance of cases that have
nothing to do with the BIRs assessments
or decisions. When the BIR fails to act on
a claim for refund of voluntarily but
mistakenly paid taxes, for example, there
is no decision or assessment involved.
Taxes are generally self-assessed. They
are initially computed and voluntarily paid
by the taxpayer. The government does
not have to demand it. If the tax
payments are correct, the BIR need not

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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make an assessment.
The self-assessing and voluntarily paying
taxpayer, however, may later find that he
or
she
has
erroneously
paid
taxes. Erroneously paid taxes may come
in the form of amounts that should not
have been paid. Thus, a taxpayer may
find that he or she has paid more than the
amount that should have been paid under
the law. Erroneously paid taxes may also
come in the form of tax payments for the
wrong category of tax. Thus, a taxpayer
may find that he or she has paid a certain
kind of tax that he or she is not subject
to.
In these instances, the taxpayer may ask
for a refund. If the BIR fails to act on the
request for refund, the taxpayer may
bring the matter to the Court of Tax
Appeals.
From the taxpayers self-assessment and
tax payment up to his or her request for
refund and the BIRs inaction, the BIRs
participation is limited to the receipt of the
taxpayers payment. The BIR does not
make an assessment; the BIR issues no
decision; and there is no dispute yet
involved.
Since there is no BIR assessment yet, the
Court of Tax Appeals may not determine
the amount of taxes due from the
taxpayer. There is also no decision yet to
review. However, there was inaction on
the part of the BIR. That inaction is within
the Court of Tax Appeals jurisdiction.
In other words, the Court of Tax Appeals
may acquire jurisdiction over cases even if
they do not involve BIR assessments or
decisions.
In this case, the Court of Tax Appeals
jurisdiction
was
acquired
because
petitioner brought the case on appeal
before the Court of Tax Appeals after the
BIR had failed to act on petitioners claim
for refund of erroneously paid taxes. The
Court of Tax Appeals did not acquire

jurisdiction as a result of a disputed

assessment of a BIR decision.
Petitioner argued that the Court of Tax
Appeals had no jurisdiction to subject it to
6% capital gains tax or other taxes at the
first instance. The Court of Tax Appeals
has no power to make an assessment.
As earlier established, the Court of Tax
Appeals has no assessment powers. In
stating that petitioners transactions are
subject to capital gains tax, however, the
Court of Tax Appeals was not making an
assessment. It was merely determining
the proper category of tax that petitioner
should have paid, in view of its claim that
it erroneously imposed upon itself and
paid the 5% final tax imposed upon PEZAregistered enterprises.
The determination of the proper category
of tax that petitioner should have paid is
an incidental matter necessary for the
resolution of the principal issue, which is
whether petitioner was entitled to a
refund. 54
The issue of petitioners claim for tax
refund is intertwined with the issue of the
proper
taxes
that
are
due
from
petitioner. A claim for tax refund carries
the assumption that the tax returns filed
were correct.55 If the tax return filed was
not proper, the correctness of the amount
paid and, therefore, the claim for refund
become questionable. In that case, the
court must determine if a taxpayer
claiming refund of erroneously paid taxes
is more properly liable for taxes other
than that paid.
In South African Airways v. Commissioner
of Internal Revenue,56 South African
Airways claimed for refund of its
erroneously paid 2% taxes on its gross
Philippine billings. This court did not
immediately grant South Africans claim
for refund. This is because although this
court found that South African Airways
was not subject to the 2% tax on its
gross Philippine billings, this court also
found that it was subject to 32% tax on

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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its taxable income.57
In this case, petitioners claim that it
erroneously paid the 5% final tax is an
admission that the quarterly tax return it
filed in 2000 was improper. Hence, to
determine if petitioner was entitled to the
refund being claimed, the Court of Tax
Appeals has the duty to determine if
petitioner was indeed not liable for the 5%
final tax and, instead, liable for taxes
other than the 5% final tax. As in South
African Airways, petitioners request for
refund can neither be granted nor denied
outright without such determination.58
If the taxpayer is found liable for taxes
other than the erroneously paid 5% final
tax, the amount of the taxpayers liability
should be computed and deducted from
the refundable amount.
Any liability in excess of the refundable
amount, however, may not be collected in
a case involving solely the issue of the
taxpayers entitlement to refund. The
question of tax deficiency is distinct and
unrelated to the question of petitioners
entitlement to refund. Tax deficiencies
should
be
subject
to
assessment
procedures
and
the
rules
of
prescription.
The court cannot
be
expected to perform the BIRs duties
whenever it fails to do so either through
neglect or oversight. Neither can court
processes be used as a tool to circumvent
laws protecting the rights of taxpayers.
II
Petitioners entitlement to benefits
given to PEZA-registered enterprises
Petitioner is not entitled to benefits given
to PEZA-registered enterprises, including
the 5% preferential tax rate under
Republic Act No. 7916 or the Special
Economic Zone Act of 1995. This is
because it never began its operation.
Essentially, the purpose of Republic Act
No. 7916 is to promote development and
encourage investments and business
activities
that
will
generate

employment.59 Giving fiscal incentives to

businesses is one of the means devised to
achieve this purpose. It comes with the
expectation that persons who will avail
these incentives will contribute to the
purposes achievement. Hence, to avail
the fiscal incentives under Republic Act
No. 7916, the law did not say that mere
PEZA registration is sufficient.
Based on these provisions, the fiscal
incentives and the 5% preferential tax
rate are available only to businesses
operating within the Ecozone.60
A
business is considered in operation when
it
starts
entering
into
commercial
transactions that are not merely incidental
to but are related to the purposes of the
business. It is similar to the definition of
doing business, as applied in actions
involving the right of foreign corporations
to maintain court actions. In Mentholatum
Co. Inc., et al. v. Mangaliman, et al.,61 this
court said that the terms doing or
engaging in or transacting business:
. . . impl[y] a continuity of commercial
dealings
and
arrangements,
and
contemplates,
to
that
extent,
the
performance of acts or works or the
exercise of some of the functions normally
incident to, and in progressive prosecution
of, the purpose and object of its
organization.62
Petitioner never started its operations
since its registration on June 29, 1998 63
because
of
the
Asian
financial
crisis.64
Petitioner
admitted
this.65 Therefore, it cannot avail the
incentives provided under Republic Act No.
7916. It is not entitled to the preferential
tax rate of 5% on gross income in lieu of
all taxes. Because petitioner is not
entitled to a preferential rate, it is subject
to ordinary tax rates under the National
Internal Revenue Code of 1997.
III
Imposition of capital gains tax
The Court of Tax Appeals found that
petitioners sale of its properties is subject

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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to capital gains tax.
For petitioners properties to be subjected
to capital gains tax, the properties must
form part of petitioners capital assets.
Section 39(A)(1) of the National Internal
Revenue Code of 1997 defines capital
assets:
SEC. 39. Capital Gains and Losses. (A) Definitions. - As used in this Title (1) Capital Assets. - the term capital
assets means property held by the
taxpayer (whether or not connected with
his trade or business), but does not
include stock in trade of the taxpayer or
other property of a kind which would
properly be included in the inventory of
the taxpayer if on hand at the close of the
taxable year, or property held by the
taxpayer primarily for sale to customers in
the ordinary course of his trade or
business, or property used in the trade or
business, of a character which is subject
to the allowance for depreciation provided
in Subsection (F) of Section 34; or real
property used in trade or business of the
taxpayer. (Emphasis supplied)
Thus, capital assets refers to taxpayers
property that is NOT any of the following:
Stock in trade;
Property that should be included in the
taxpayers inventory at the close of
the taxable year;
Property held for sale in the ordinary
course of the taxpayers business;
Depreciable property used in the trade
or business; and
Real property used in the trade or
business.
The properties involved in this case
include petitioners buildings, equipment,
and machineries. They are not among the
exclusions
enumerated
in
Section
39(A)(1) of the National Internal Revenue
Code of 1997. None of the properties

were used in petitioners trade or ordinary

course of business because petitioner
never commenced operations. They were
not part of the inventory. None of them
were stocks in trade. Based on the
definition of capital assets under Section
39 of the National Internal Revenue Code
of 1997, they are capital assets.
Respondent insists that since petitioners
machineries and equipment are classified
as capital assets, their sales should be
subject to capital gains tax. Respondent
is mistaken.
In Commissioner of Internal Revenue v.
Fortune Tobacco Corporation,66 this court
said:
The rule in the interpretation of tax laws is
that a statute will not be construed as
imposing a tax unless it does so clearly,
expressly, and unambiguously. A tax
cannot be imposed without clear and
express
words
for
that
purpose.
Accordingly, the general rule of requiring
adherence to the letter in construing
statutes applies with peculiar strictness to
tax laws and the provisions of a taxing act
are not to be extended by implication. In
answering the question of who is subject
to tax statutes, it is basic that in case of
doubt, such statutes are to be construed
most strongly against the government and
in favor of the subjects or citizens because
burdens are not to be imposed nor
presumed to be imposed beyond what
statutes expressly and clearly import. As
burdens, taxes should not be unduly
exacted nor assumed beyond the plain
meaning of the tax laws.67 (Citations
omitted)
Capital
gains
of
individuals
corporations from the sale of
properties are taxed differently.

and
real

Individuals are taxed on capital gains from

sale of all real properties located in the
Philippines and classified as capital
assets.

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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For corporations, the National Internal
Revenue Code of 1997 treats the sale of
land and buildings, and the sale of
machineries
and
equipment,
differently. Domestic corporations are
imposed a 6% capital gains tax only on
the presumed gain realized from the sale
of lands and/or buildings. The National
Internal Revenue Code of 1997 does not
impose the 6% capital gains tax on the
gains
realized
from
the
sale
of
machineries and equipment.
Therefore, only the presumed gain from
the sale of petitioners land and/or
building may be subjected to the 6%
capital gains tax. The income from the
sale of petitioners machineries and
equipment is subject to the provisions on
normal corporate income tax.
To determine, therefore, if petitioner is
entitled to refund, the amount of capital
gains tax for the sold land and/or building
of petitioner and the amount of corporate
income tax for the sale of petitioners
machineries and equipment should be
deducted from the total final tax paid.
The BIR did not make a deficiency
assessment for this declaration. Neither
did the BIR dispute this statement in its
pleadings filed before this court. There is,
therefore, no reason to doubt the truth
that petitioner indeed suffered a net loss
in 2000.
Since petitioner had not started its
operations, it was also not subject to the
minimum corporate income tax of 2% on
gross income.70 Therefore, petitioner is
not liable for any income tax.
IV
Prescription
Section 203 of the National Internal
Revenue Code of 1997 provides that as a
general rule, the BIR has three (3) years
from the last day prescribed by law for the
filing of a return to make an
assessment. If the return is filed beyond
the last day prescribed by law for filing,
the three-year period shall run from the

actual date of filing.

This court said that the prescriptive period
to make an assessment of internal
revenue taxes is provided primarily to
safeguard the interests of taxpayers from
unreasonable investigation.71
This court explained in Commissioner of
Internal Revenue v. FMF Development
Corporation72 the reason behind the
provisions on prescriptive periods for tax
assessments:
Accordingly, the government must assess
internal revenue taxes on time so as not
to extend indefinitely the period of
assessment and deprive the taxpayer of
the assurance that it will no longer be
subjected to further investigation for taxes
after the expiration of reasonable period
of time.73
Rules derogating taxpayers right against
prolonged and unscrupulous investigations
are
strictly
construed
against
the
government.74
[T]he law on prescription should be
interpreted in a way conducive to bringing
about the beneficent purpose of affording
protection to the taxpayer within the
contemplation of the Commission which
recommended the approval of the law. To
the Government, its tax officers are
obliged to act promptly in the making of
assessment so that taxpayers, after the
lapse of the period of prescription, would
have a feeling of security against
unscrupulous tax agents who will always
try to find an excuse to inspect the books
of taxpayers, not to determine the latters
real liability, but to take advantage of a
possible opportunity to harass even lawabiding businessmen. Without such legal
defense, taxpayers would be open season
to harassment by unscrupulous tax
agents.75
Moreover, in Commissioner of Internal
Revenue v. BF Goodrich Phils.:76

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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COMPILATION OF SUPREME COURT DECISIONS

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For the purpose of safeguarding taxpayers

from any unreasonable examination,
investigation or assessment, our tax law
provides a statute of limitations in the
collection of taxes. Thus, the law on
prescription, being a remedial measure,
should be liberally construed in order to
afford such protection. As a corollary, the
exceptions to the law on prescription
should perforce be strictly construed[.]
....
. . . . Such instances of negligence or
oversight on the part of the BIR cannot
prejudice taxpayers, considering that the
prescriptive period was precisely intended
to give them peace of mind. (Citation
omitted)
The BIR had three years from the filing of
petitioners final tax return in 2000 to
assess petitioners taxes. Nothing stopped
the BIR from making the correct
assessment. The elevation of the refund
claim with the Court of Tax Appeals was
not a bar against the BIRs exercise of its
assessment powers.
The BIR, however, did not initiate any
assessment for deficiency capital gains
tax.78 Since more than a decade have
lapsed from the filing of petitioners
return, the BIR can no longer assess
petitioner for deficiency capital gains
taxes, if petitioner is later found to have
capital gains tax liabilities in excess of the
amount claimed for refund.
The Court of Tax Appeals should not be
expected to perform the BIRs duties of
assessing and collecting taxes whenever
the BIR, through neglect or oversight, fails
to do so within the prescriptive period
allowed by law.
Taganito
Mining
Corporation
Vs.
Commissioner of Internal Revenue
G.R. No. 198076. November 19, 2014
Ruling of the Court

The sole issue at hand is whether

or not Taganitos judicial claim for

refund/credit
was
prematurely
filed.
From the foregoing, it is clear that the
two-year period under Section 229 does
not apply to claims for a refund or tax
credit for unutilized creditable input VAT
because it is not considered excessively
collected. Instead, San Roque settled that
Section 112 applies to claims for a refund
or tax credit for unutilized creditable input
VAT, thereby making the 120+30 day
period prescribed therein mandatory and
jurisdictional in nature.
As an exception to the mandatory and
jurisdictional nature of the 120+30 day
period, judicial claims filed between
December 10, 2003 or from the issuance
of BIR Ruling No. DA-489-03, up to
October 6, 2010 or the reversal of the
ruling in Aichi, need not wait for the lapse
of the 120+30 day period in consonance
with the principle of equitable estoppel.
In the present case, Taganito filed its
judicial claim with the CTA on February
19, 2004, clearly within the period of
exception of December 10, 2003 to
October 6, 2010. Its judicial claim was,
therefore, not prematurely filed and
should not have been dismissed by the
CTA En Banc.
AT&T Communications Services Phils., Inc.
Vs. Commissioner of Internal Revenue
G.R. No. 185969. November 19, 2014
The Issue

The sole issue for this Court's

consideration is whether or not
petitioner is entitled to a refund or
issuance of a TCC in its favor
amounting
to
P3,003,265.14
allegedly representing unutilized
input
VAT
attributable
to
petitioner's zero-rated sales for the
period of 1 January 2003 to 31
December 2003, in accordance
with the provisions of the NIRC of
1997, as amended, other pertinent
laws, and applicable jurisprudential
proclamations.chanrobleslaw

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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Our Ruling
At this juncture, it bears emphasis that
jurisdiction over the subject matter or
nature of an action is fundamental for a
court to act on a given controversy,18 and
is conferred only by law and not by the
consent or waiver upon a court which,
otherwise, would have no jurisdiction over
the subject matter or nature of an action.
Lack of jurisdiction of the court over an
action or the subject matter of an action
cannot
be
cured
by
the
silence,
acquiescence, or even by express consent
of the parties.19 If the court has no
jurisdiction over the nature of an action,
its only jurisdiction is to dismiss the case.
The court could not decide the case on the
merits.20 Needless to state, to obviate the
possibility that its decision may be
rendered void, the Court can, by its own
initiative, raise the question of jurisdiction,
although not raised by the parties.21 As a
corollary thereto, to inquire into the
existence of jurisdiction over the subject
matter is the primary concern of a court,
for thereon would depend the validity of
its entire proceedings.22 Therefore, even if
there was no jurisdictional issue raised by
any party, the Court may look into it at
anytime of the proceedings, even during
this appeal.
It has long been established that the CTA
is a court of special jurisdiction. As such, it
can only take cognizance of such matters
as are clearly within its jurisdiction.23
Hence, when it appears from the
pleadings or the evidence on record that
the court has no jurisdiction over the
subject matter, the court shall dismiss the
claim.24chanrobleslaw
Relevant thereto, the Court sitting En
Banc has finally settled the issue on
proper observance of the prescriptive
periods in claiming for refund of creditable
input tax due or paid attributable to any
zero-rated or effectively zero-rates sales.
Thus, in view of the jurisprudential
pronouncements
rendered
in
Commissioner of Internal Revenue v. San

Roque Power Corporation, Taganito Mining

Corporation v. Commissioner of Internal
Revenue, and Philex Mining Corporation v.
Commissioner of Internal Revenue (San
Roque case),25 this Court finds it
imperative to first look into the factual
findings of the CTA for the purpose of
achieving a complete . determination of
the issue presented, particularly as to the
timeliness of its administrative and judicial
claims.
In C.T.A. Case No. 7221, the CTA in
Division solely ruled on petitioner's noncompliance
with
the
substantiation
requirements,
expressing
that
the
evidence submitted by petitioner to prove
its zero-rated sales were insufficient so as
to entitle it to the claim for refund or
issuance of a TCC. Similar declaration was
made by the CTA En Banc in the assailed
24 September 2008 Decision and 13
January 2009 Resolution in C.T.A. EB No.
381.
Nonetheless, although it is true that the
substantiation requirements in
establishing a refund claim is a valid issue
for this Court to rule upon, the prior
determination of whether or not the CTA
properly acquired jurisdiction over
petitioner's claim covering the four (4)
quarters of taxable year 2003, taking into
consideration the timeliness of the filing of
the administrative and judicial claims
pursuant to Section 112 of the NIRC of
1997, as amended, and consistent with
the pronouncements made in the San
Roque case, is still our primary concern.
Clearly, petitioner's claim can only
proceed upon compliance with the
aforesaid jurisdictional requirement.
Applying the foregoing pronouncements,
and
considering
that
petitioner's
administrative claim was filed before the
promulgation of the Atlas case,30 it is clear
that petitioner only had a period of two
(2) years from the close of the taxable
quarter when the zero-rated or effectively
zero-rated sales were made, to file an
administrative claim for refund or issuance
of a TCC in its favor. As aptly found by the

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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CTA in Division and the CTA En Banc, the
administrative claim covering all four (4)
quarters of taxable year 2003, was filed
by petitioner on 13 April 2005. However,
although petitioner's administrative claim
was filed within the prescribed 2-year
period under Section 112(A) of the NIRC
of 1997, as amended, insofar as to the
Second, Third, and Fourth Quarters of
taxable year 2003 are concerned, it
appears that its claim covering the First
Quarter of taxable year 2003 was
belatedly filed,

December 2003, which expressly

ruled that the "taxpayer-claimant
need not wait for the lapse of the
120-day period before it could seek
judicial relief with the CTA by way of
Petition for Review." Taganito filed its
judicial claim after the issuance of BIR
Ruling No. DA-489-03 but before the
adoption of the Aichi doctrine. Thus, xxx
Taganito is deemed to have filed its
judicial claim with the CTA on time.32
(Emphasis supplied)
xxxx

Clearly, the CTA had no jurisdiction to rule

on petitioner's refund claim covering the
First Quarter of taxable year 2003 since
its administrative claim was filed beyond
the
2-year
prescriptive
period
as
mandated by law, or exactly fourteen (14)
days after the last day to file the same.
On the other hand, as to petitioner's
claims covering the remaining quarters of
taxable year 2003, the Court finds that
petitioner has indeed properly filed its
judicial claim before the CTA, even
without waiting for the expiration of the
one hundred twenty (120)-day period,
since at the time petitioner filed its
petition, BIR Ruling No. DA-489-03 issued
on 10 December 2003 was already in
effect. This ruling is not without any legal
basis. Thus:chanRoblesvirtualLawlibrary
Like San Roque, Taganito also filed its
petition for review with the CTA
without waiting for the 120-day
period to lapse. Also, like San Roque,
Taganito filed its judicial claim before
the
promulgation
of
the
Atlas
doctrine. Taganito filed a Petition for
Review on 14 February 2007 with the
CTA. This is almost four months before
the adoption of the Atlas doctrine on 8
June 2007. Taganito is similarly situated
as San Roque - both cannot claim being
misled, misguided, or confused by the
Atlas doctrine.
However, Taganito can invoke BIR
Ruling No. DA-489-03 dated 10

To repeat, a claim for tax refund or credit,

like a claim for tax refund exemption, is
construed strictly against the taxpayer.
One of the conditions for a judicial claim of
refund or credit under the VAT System is
compliance with the 120+30 day
mandatory and jurisdictional periods.
Thus, strict compliance with the
120+30 day periods is necessary for
such a claim to prosper, whether
before, during, or after the effectivity
of the Atlas doctrine, except for the
period from the issuance of BIR
Ruling
No.
DA-489-03
on
10
December 2003 to 6 October 2010
when the Aichi doctrine was adopted,
which again reinstated the 120+30
day
periods
as
mandatory
and
jurisdictional.33 (Emphasis supplied)
Without doubt, it is evident from the
foregoing jurisprudential pronouncements
that as a general rule, a taxpayerclaimant needs to wait for the expiration
of the one hundred twenty (120)-day
period before it may be considered as
"inaction" on the part of the Commissioner
of Internal Revenue (CIR). Thereafter, the
taxpayer-claimant is given only a limited
period of thirty (30) days from said
expiration to file its corresponding judicial
claim with the CTA. However, with the
exception of claims made during the
effectivity of BIR Ruling No. DA-489-03
(from 10 December 2003 to 5 October
2010),34 petitioner has indeed properly
and timely filed its judicial claim covering

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COMPILATION OF SUPREME COURT DECISIONS

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the Second, Third, and Fourth Quarters of
taxable year 2003, within the bounds of
the law and existing jurisprudence.
Now, the significance of the difference
between a sales invoice and an official
receipt
as
evidence
for zero-rated
transactions.

In this instance, Section 108 of the NIRC

of
1997,
as
amended,
provides:chanRoblesvirtualLawlibrary
SEC. 108. Value-added Tax on Sale of
Services and Use or Lease of Properties.-

This is not novel.

xxxx

For emphasis, even prior to the enactment

of R.A. No. 9337,35 which clearly
delineates the invoice and official receipt,
our Tax Code has already . made the
distinction.

(C) Determination of the Tax - The tax

shall be computed by multiplying the total
amount indicated in the official receipt
by
one-eleventh
(1/11).
(Emphasis
supplied)

Section 113 of the NIRC of 1997, as

amended is the focal provision, to
wit:chanRoblesvirtualLawlibrary

Comparatively, Section 106 of the same

Code
covers
sale
of
goods,
thus:chanRoblesvirtualLawlibrary

SEC. 113. Invoicing

Requirements
for
Persons.-

SEC. 106. Value-added Tax on Sale of

Goods or Properties,-

and Accounting
VAT-registered

xxxx

(A) Invoicing Requirements.- A VATregisteredperson shall, for every sale,

issue an invoice or receipt. In addition
to the information required under Section
237, the following information shall be
indicated in the invoice or receipt:
(Emphasis supplied)
xxxx
Although it appears under the abovequoted provision that there is no clear
distinction on the evidentiary value of an
invoice or official receipt, it is worthy to
note that the said provision is a general
provision which covers all sales of a VAT
registered person, whether sale of goods
or services. It does not necessarily follow
that the legislature intended to use the
same
interchangeably.
The
Court
therefore cannot conclude that the general
provision of Section 113 of the NIRC of
1997, as amended, intended that the
invoice and official receipt can be used for
either sale of goods or services, because
there are specific provisions of the Tax
Code
which
clearly
delineates
the
difference between the two transactions.

(D) Determination of the Tax. - The tax

shall be computed by multiplying the total
amount indicated in the invoice by oneeleventh (1/11). (Emphasis supplied)
Apparently, the construction of the statute
shows that the legislature intended to
distinguish the use of an invoice from an
official receipt. It is more logical therefore
to conclude that subsections of a statute
under the same heading should be
construed as having relevance to its
heading.
The
legislature
separately
categorized VAT on sale of goods from
VAT on sale of services, not only by its
treatment with regard to tax but also with
respect to substantiation requirements.
Having been grouped under Section 108,
its subparagraphs, (A) to (C), and Section
106, its subparagraphs (A) to (D), have
significant relations with each other.
Legislative intent must be ascertained
from a consideration of the statute as a
whole and not of an isolated part or a
particular provision alone. This is a
cardinal rule in statutory construction. For

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Ateneo de Davao University

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taken in the abstract, a word or phrase
might easily convey a meaning quite
different from the one actually intended
and evident when the word or phrase is
considered with those with which it is
associated. Thus, an apparently general
provision may have a limited application if
viewed
together
with
the
other
provisions.36chanrobleslaw
Settled is the rule that every part of the
statute must be considered with the other
parts.37 Accordingly, the whole of Section
108 should be read in conjunction with
Sections 113 and 237 so as to give life to
all the provisions intended for the sale of
services. There is no conflict between the
provisions of the law that cover sale of
services that are subject to zero rated
sales; thus, it should be read altogether to
reveal the true legislative intent.

To finally settle this matter, this Court

declared in KEPCO Philippines Corporation
v. Commissioner of Internal Revenue, 38
that the VAT invoice is the seller's best
proof of the sale of the goods or services
to the buyer while the VAT receipt is the
buyer's best evidence of the payment of
goods or services received from the seller.
Thus, the High Court concluded that VAT
invoice and VAT receipt should not be
confused as referring to one and the same
thing. Certainly, neither does the law
intend
the
two
to
be
used
interchangeably. Accordingly, we agree
with the mling of the CTA in Division, as
well as that of the CTA En Banc, insofar as
to its discussion on the relevancy of the
aforesaid substantiation requirements.
Corporate
Strategies
Development
Corporation and Rafael R. Prieto Vs.
Norman A. Agojo G.R. No. 208740.
November 19, 2014
The above jurisprudential tenor
clearly demonstrates that the
burden to prove compliance with
the validity of the proceedings
leading up to the tax delinquency
sale is incumbent upon the buyer
or the winning bidder, which, in
this case, is the respondent. This is

premised on the rule that a sale of

land for tax delinquency is in
derogation of property and due
process rights of the registered
owner. In order to be valid, the
steps required by law must be
strictly followed.27 The burden to
show that such steps were taken
lies on the person claiming its
validity, for the Court cannot allow
mere presumption of regularity to
take precedence over the right of a
property owner to due process
accorded no less than by the
Constitution.

It is, thus, necessary to determine

whether respondent has fulfilled his
burden of proving compliance with
the requirements for a valid tax
delinquency sale.
Under Section 254 of the LGC, it is
required
that
the
notice
of
delinquency must be posted at the
main hall and in a publicly
accessible and conspicuous place in
each
barangay
of
the
local
government unit concerned. It
shall also be published once a week
for two (2) consecutive weeks, in a
newspaper of general circulation in
the province, city, or municipality.
Section 258 of the LGC further
requires that should the treasurer
issue a warrant of levy, the same
shall be mailed to or served upon
the delinquent owner of the real
property or person having legal
interest therein, or in case he is
out of the country or cannot be
located,
the
administrator
or
occupant of the property. At the
same time, the written notice of
the levy with the attached warrant
shall be mailed to or served upon
the assessor and the Registrar of
Deeds of the province, city or
municipality
within
the
Metropolitan Manila Area where the
property is located, who shall

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Ateneo de Davao University

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annotate the levy on the tax
declaration and certificate of title of
the property, respectively.

Section 260 of the LGC also

mandates that within thirty (30)
days after service of the warrant of
levy, the local treasurer shall
proceed to publicly advertise for
sale or auction the property or a
usable portion thereof as may be
necessary to satisfy the tax
delinquency and expenses of sale.
Such
advertisement
shall
be
effected by posting a notice at the
main entrance of the provincial,
city or municipal building, and in a
publicly accessible and conspicuous
place in the barangay where the
real property is located, and by
publication once a week for two (2)
weeks in a newspaper of general
circulation in the province, city or
municipality where the property is
located.
Respondent utterly failed to show
compliance with the aforestated
requirements. First, no evidence
was adduced to prove that the
notice of levy was ever received by
the CSDC. There was no proof
either that such notice was served
on the occupant of the property. It
is essential that there be an actual
notice to the delinquent taxpayer,
otherwise, the sale is null and void
although
preceded
by
proper
advertisement or publication. This
proceeds from the principle of
administrative proceedings for the
sale of private lands for nonpayment
of
taxes
being
in
personam.28
Second,
the
notice
of
tax
delinquency was not proven to
have been posted at the Makati
City
Hall
and
in
Barangay
Dasmarias, Makati City, where the
property is located. It was not
proven either that the required

advertisements were effected in

accordance with law.
Having established the lack of
proof of receipt of the notice of
levy by CSDC or by the occupant of
the subject property, and of the
fact of publication, there is clearly
reason to doubt the validity of the
proceedings leading to the tax
delinquency sale made in favor of
the
respondent.
Verily,
the
inescapable fact that can be
derived
from
all
these
is
respondents inability to prove that
he derived his right over the
property from a valid proceeding
pursuant to the requirements of
the LGC.
Fort Bonifacio Development Corporation
Vs.
Commissioner
of
Internal
Revenue,
et
al. G.R.
Nos.
175707/180035/181092. November 19,
2014
ISSUES
The main issue before us now is whether
or not petitioner is entitled to a
refund of the amounts of: 1)
P486,355,846.78 in G.R. No. 175707,
2) P77,151,020.46 for G.R. No.
180035, and 3) P269,340,469.45 in
G.R. No. 181092, which it paid as
value-added tax, or to a tax credit for
said amounts.
To resolve the issue stated above, it is
also necessary to determine:
Whether the transitional/presumptive
input tax credit under Section 105
of the NIRC may be claimed only
on the improvements on real
properties;
Whether there must have been previous
payment of sales tax or valueadded tax by petitioner on its land
before it may claim the input tax
credit granted by Section 105 of
the NIRC;
Whether Revenue Regulations No. 7-95
is a valid implementation of Section
105 of the NIRC; and
Whether
the
issuance
of
Revenue

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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Regulations No. 7-95 by the BIR, and
declaration of validity of said Regulations
by the Court of Tax Appeals and the Court
of Appeals, was in violation of the
fundamental principle of separation of
powers.
Whether the transitional/presumptive
input tax credit under Section 105 of
the
NIRC may be claimed only on the
improvements on real properties.
The Court held in the earlier consolidated
decision, G.R. Nos. 158885 and 170680,
as follows:
On its face, there is nothing in Section
105 of the Old NIRC that prohibits the
inclusion of real properties, together
with the improvements thereon, in
the beginning inventory of goods,
materials and supplies, based on
which inventory the transitional input
tax credit is computed. It can be
conceded that when it was drafted Section
105 could not have possibly contemplated
concerns specific to real properties, as real
estate transactions were not originally
subject to VAT. At the same time, when
transactions on real properties were finally
made subject to VAT beginning with Rep.
Act
No.
7716,
no
corresponding
amendment was adopted as regards
Section 105 to provide for a differentiated
treatment in the application of the
transitional input tax credit with respect to
real properties or real estate dealers.
It was Section 100 of the Old NIRC, as
amended by Rep. Act No. 7716, which
made real estate transactions subject to
VAT for the first time. Prior to the
amendment, Section 100 had imposed the
VAT on every sale, barter or exchange of
goods, without however specifying the
kind of properties that fall within or under
the generic class goods subject to the
tax.
Rep. Act No. 7716, which significantly
is also known as the Expanded ValueAdded Tax (EVAT) law, expanded the
coverage of the VAT by amending

Section 100 of the Old NIRC in several

respects, some of which we will
enumerate. First, it made every sale,
barter or exchange of goods or
properties subject to VAT. Second, it
generally
defined
goods
or
properties as all tangible and
intangible objects which are capable
of pecuniary estimation. Third, it
included a non-exclusive enumeration
of various objects that fall under the
class goods or properties subject to
VAT, including [r]eal properties held
primarily for sale to customers or held
for lease in the ordinary course of
trade or business.
From these amendments to Section
100, is there any differentiated VAT
treatment on real properties or real
estate dealers that would justify the
suggested
limitations
on
the
application of the transitional input
tax on them? We see none.
Rep. Act No. 7716 clarifies that it is
the real properties held primarily for
sale to customers or held for lease in
the ordinary course of trade or
business that are subject to the VAT,
and not when the real estate
transactions are engaged in by
persons who do not sell or lease
properties in the ordinary course of
trade or business. It is clear that
those regularly engaged in the real
estate business are accorded the
same treatment as the merchants of
other goods or properties available in
the market. In the same way that a
milliner considers hats as his goods
and a rancher considers cattle as his
goods, a real estate dealer holds real
property, whether or not it contains
improvements,
as
his
goods.117
(Citations omitted, emphasis added.)
xxxx
Under
Section
105,
the
beginning
inventory of goods forms part of the
valuation of the transitional input tax

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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credit. Goods, as commonly understood in
the business sense, refers to the product
which the VAT-registered person offers for
sale to the public. With respect to real
estate dealers, it is the real properties
themselves which constitute their goods.
Such real properties are the operating
assets of the real estate dealer.
Section 4.100-1 of RR No. 7-95 itself
includes in its enumeration of goods or
properties such real properties held
primarily for sale to customers or held for
lease in the ordinary course of trade or
business. Said definition was taken from
the very statutory language of Section
100 of the Old NIRC. By limiting the
definition of goods to improvements
in Section 4.105-1, the BIR not only
contravened the definition of goods
as provided in the Old NIRC, but also
the
definition
which
the
same
revenue
regulation
itself
has
provided.118 (Emphasis added.)
The Court then emphasized in its
Resolution in G.R. No. 158885 and G.R.
No. 170680 that Section 105 of the old
NIRC, on the transitional input tax credit,
remained intact despite the enactment of
Republic Act No. 7716. Section 105 was
amended by Republic Act No. 8424, and
the provisions on the transitional input tax
credit are now embodied in Section
111(A) of the new NIRC, which reads:
Section
111.
Transitional/Presumptive
Input Tax Credits.
(A) Transitional Input Tax Credits. A
person who becomes liable to value-added
tax or any person who elects to be a VATregistered person shall, subject to the
filing of an inventory according to rules
and
regulations
prescribed
by
the
Secretary
of
[F]inance,
upon
recommendation of the Commissioner, be
allowed input tax on his beginning
inventory of goods, materials and supplies
equivalent for 8% of the value of such
inventory or the actual value-added tax
paid on such goods, materials and

supplies, whichever is higher, which shall

be creditable against the output tax.119
In G.R. Nos. 158885 and 170680, the
Court asked, If the plain text of Republic
Act No. 7716 fails to supply any apparent
justification for limiting the beginning
inventory of real estate dealers only to the
improvements on their properties, how
then were the Commissioner of Internal
Revenue and the courts a quo able to
justify such a view?120 The Court then
answered this question in this manner:
IV.
The fact alone that the denial of FBDC's
claims is in accord with Section 4.105-1 of
RR 7-95 does not, of course, put this
inquiry to rest. If Section 4.105-1 is itself
incongruent to Rep. Act No. 7716, the
incongruence cannot by itself justify the
denial of the claims. We need to inquire
into the rationale behind Section 4.105-1,
as well as the question whether the
interpretation of the law embodied therein
is validated by the law itself.
xxxx
It is correct, as pointed out by the CTA,
that upon the shift from sales taxes to
VAT in 1987 newly-VAT registered people
would have been prejudiced by the
inability to credit against the output VAT
their payments by way of sales tax on
their existing stocks in trade. Yet that
inequity was precisely addressed by a
transitory provision in E.O. No. 273 found
in Section 25 thereof. The provision
authorized VAT-registered persons to
invoke a presumptive input tax
equivalent to 8% of the value of the
inventory as of December 31, 1987 of
materials and supplies which are not
for sale, the tax on which was not
taken up or claimed as deferred sales
tax credit, and a similar presumptive
input tax equivalent to 8% of the
value of the inventory as of December
31, 1987 of goods for sale, the tax on
which was not taken up or claimed as

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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deferred sales tax credit.121
Whether there must have been
previous
payment of sales tax or value-added
tax
by petitioner on its land before
petitioner
may claim the input tax credit granted
by
Section 105 (now Section 111[A]) of
the
NIRC.
The Court discussed this matter lengthily
in its Decision in G.R. Nos. 158885 and
170680, and we quote:
Section 25 of E.O. No. 273 perfectly
remedies the problem assumed by the
CTA as the basis for the introduction of
transitional input tax credit in 1987. If the
core purpose of the tax credit is only, as
hinted by the CTA, to allow for some mode
of accreditation of previously-paid sales
taxes, then Section 25 alone would have
sufficed. Yet E.O. No. 273 amended the
Old NIRC itself by providing for the
transitional input tax credit under
Section 105, thereby assuring that
the tax credit would endure long after
the last goods made subject to sales
tax have been consumed.
If indeed the transitional input tax
credit
is
integrally
related
to
previously paid sales taxes, the
purported causal link between those
two would have been nonetheless
extinguished long ago. Yet Congress
has reenacted the transitional input
tax credit several times; that fact
simply belies the absence of any
relationship between such tax credit
and the long-abolished sales taxes.
Obviously then, the purpose behind
the transitional input tax credit is not
confined to the transition from sales
tax to VAT.
x x x Section 105 states that the
transitional input tax credits become
available either to (1) a person who

becomes liable to VAT; or (2) any

person who elects to be VATregistered. The clear language of the
law entitles new trades or businesses
to avail of the tax credit once they
become
VAT-registered.
The
transitional input tax credit, whether
under the Old NIRC or the New NIRC,
may be claimed by a newly-VAT
registered person such as when a
business as it commences operations.
x x x [I]t is not always true that the
acquisition of such goods, materials
and supplies entail the payment of
taxes on the part of the new business.
In fact, this could occur as a matter of
course by virtue of the operation of
various provisions of the NIRC, and
not only on account of a specially
legislated exemption.
xxxx
The interpretation proffered by the
CTA
would
exclude
goods
and
properties
which
are
acquired
through sale not in the ordinary
course of trade or business, donation
or through succession, from the
beginning inventory on which the
transitional input tax credit is based.
This prospect all but highlights the
ultimate
absurdity
of
the
respondents' position. Again, nothing
in the Old NIRC (or even the New
NIRC) speaks of such a possibility or
qualifies the previous payment of VAT
or any other taxes on the goods,
materials and supplies as a prerequisite
for
inclusion
in
the
beginning inventory.
It is apparent that the transitional
input tax credit operates to benefit
newly
VAT-registered
persons,
whether or not they previously paid
taxes in the acquisition of their
beginning
inventory
of
goods,
materials and supplies. During that
period of transition from non-VAT to VAT
status, the transitional input tax credit

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Ateneo de Davao University

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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.

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.122
(Citations
omitted, emphases ours.)

There is another point that weighs against

the CTA's interpretation. 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 Court En Banc in its Resolution in

G.R. No. 173425 likewise discussed the
question of prior payment of taxes as a
prerequisite before a taxpayer could avail
of the transitional input tax credit. The
Court found that petitioner is entitled to
the 8% transitional input tax credit, and
clearly said that the fact that petitioner
acquired the Global City property under a
tax-free transaction makes no difference
as prior payment of taxes is not a
prerequisite.123
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.125 The
Court En Banc held:

The CTA harped on the circumstance that

FBDC was excused from paying any tax on
the purchase of its properties from the
national government, even claiming that
to allow the transitional input tax credit is
tantamount to giving an undeserved
bonus to real estate dealers similarly
situated as [FBDC] which the Government
cannot afford to provide. Yet the tax
laws in question, and all tax laws in
general, are designed to enforce
uniform tax treatment to persons or
classes
of
persons
who
share
minimum legislated standards. 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

Contrary to the view of the CTA and the

CA, there is nothing in the abovequoted
provision to indicate that prior payment of
taxes is necessary for the availment of the
8%
transitional
input
tax
credit.
Obviously, all that is required is for the
taxpayer to file a beginning inventory with
the BIR.
To require prior payment of taxes x x x is
not only tantamount to judicial legislation
but would also render nugatory the
provision in Section 105 of the old NIRC
that the transitional input tax credit shall
be 8% of the value of [the beginning]
inventory or the actual [VAT] paid on such

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Ateneo de Davao University

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goods, materials and supplies, whichever
is higher because the actual VAT (now
12%) paid on the goods, materials, and
supplies would always be higher than the
8% (now 2%) of the beginning inventory
which, following the view of Justice
Carpio, would have to exclude all goods,
materials, and supplies where no taxes
were paid. Clearly, limiting the value of
the beginning inventory only to goods,
materials, and supplies, where prior taxes
were paid, was not the intention of the
law. Otherwise, it would have specifically
stated that the beginning inventory
excludes goods, materials, and supplies
where no taxes were paid.126
Whether Revenue Regulations No. 795 is
a valid implementation of Section 105
of
the NIRC.

xxxx

In the April 2, 2009 Decision in G.R. Nos.

158885 and 170680, the Court struck
down Section 4.105-1 of Revenue
Regulations No. 7-95 for being in
conflict with the law.
Whether the issuance of Revenue
Regulations No. 7-95 by the BIR, and
declaration
of
validity
of
said
Regulations
by the CTA and the Court of Appeals,
was in violation of the fundamental
principle of separation of powers.

Sec. 105. Transitional Input [T]ax

Credits. A person who becomes liable to
value-added tax or any person who elects
to be a VAT-registered person shall,
subject to the filing of an inventory as
prescribed by regulations, be allowed
input tax on his beginning inventory of
goods, materials and supplies equivalent
to 8% of the value of such inventory or
the actual value-added tax paid on such
goods, materials and supplies, whichever
is higher, which shall be creditable against
the output tax.
The term goods or properties by the
unambiguous terms of Section 100
includes
real
properties
held
primarily for sale to c[u]st[o]mers or
held for lease in the ordinary course
of business. Having been defined in
Section 100 of the NIRC, the term
goods as used in Section 105 of the
same code could not have a different
meaning. This has been explained in the
Decision dated April 2, 2009, thus:

In the Resolution dated October 2, 2009 in

G.R. Nos. 158885 and 170680 the Court
denied the respondents Motion for
Reconsideration with finality and held:
[The April 2, 2009 Decision] held that the
CIR had no power to limit the meaning
and coverage of the term goods in
Section 105 of the Old NIRC sans
statutory
authority
or
basis
and
justification to make such limitation. This
it did when it restricted the application of
Section 105 in the case of real estate
dealers only to improvements on the real
property belonging to their beginning
inventory.

The statutory definition of the term goods

or properties leaves no room for doubt.
It states:chanroblesvirtuallawlibrary
Sec. 100. Value-added tax on sale of
goods or properties. (a) Rate and base
of tax. x x x
(1) The term goods or properties shall
mean all tangible and intangible objects
which are capable of pecuniary estimation
and
shall
include:chanroblesvirtuallawlibrary
(A) Real properties held primarily for sale
to customers or held for lease in the
ordinary course of trade or business; x x
x.
The amendatory provision of Section 105
of the NIRC, as introduced by RA 7716,
states:

xxxx
Section 4.105-1 of RR 7-95 restricted
the definition of goods, viz.:
However, in the case of real estate

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dealers, the basis of the presumptive
input tax shall be the improvements , such
as buildings, roads, drainage systems, and
other similar structures, constructed on or
after the effectivity of EO 273 (January 1,
1988).
As mandated by Article 7 of the Civil
Code, an administrative rule or
regulation cannot contravene the law
on which it is based. RR 7-95 is
inconsistent with Section 105 insofar
as the definition of the term goods
is concerned. This is a legislative act
beyond the authority of the CIR and
the Secretary of Finance. The rules
and regulations that administrative
agencies promulgate, which are the
product of a delegated legislative
power to create new and additional
legal provisions that have the effect
of law, should be within the scope of
the statutory authority granted by the
legislature
to
the
objects
and
purposes of the law, and should not
be in contradiction to, but in
conformity
with,
the
standards
prescribed by law.
To be valid, an administrative rule or
regulation must conform, not contradict,
the provisions of the enabling law. An
implementing rule or regulation cannot
modify, expand, or subtract from the law
it is intended to implement. Any rule that
is not consistent with the statute itself is
null and void.
While administrative agencies, such as the
Bureau of Internal Revenue, may issue
regulations to implement statutes, they
are without authority to limit the scope of
the statute to less than what it provides,
or extend or expand the statute beyond
its terms, or in any way modify explicit
provisions of the law. Indeed, a quasijudicial body or an administrative agency
for that matter cannot amend an act of
Congress. Hence, in case of a discrepancy
between
the
basic
law
and
an
interpretative or administrative ruling, the
basic law prevails.

To recapitulate, RR 7-95, insofar as it

restricts the definition of "goods" as
basis of transitional input tax credit
under Section 105 is a nullity.
On January 1, 1997, RR 6-97 was issued
by the Commissioner of Internal Revenue.
RR 6-97 was basically a reiteration of the
same Section 4.105-1 of RR 7-95, except
that the RR 6-97 deleted the following
paragraph:chanroblesvirtuallawlibrary
However, in the case of real estate
dealers, the basis of the presumptive
input tax shall be the improvements, such
as buildings, roads, drainage systems, and
other similar structures, constructed on or
after the effectivity of E.O. 273 (January
1, 1988).
It is clear, therefore, that under RR 6-97,
the allowable transitional input tax credit
is not limited to improvements on real
properties. The particular provision of RR
7-95 has effectively been repealed by RR
6-97 which is now in consonance with
Section 100 of the NIRC, insofar as the
definition of real properties as goods is
concerned. The failure to add a specific
repealing clause would not necessarily
indicate that there was no intent to repeal
RR 7-95. The fact that the aforequoted
paragraph was deleted created an
irreconcilable
inconsistency
and
repugnancy between the provisions of RR
6-97 and RR 7-95.
xxxx
As pointed out in Our Decision of April 2,
2009, to give Section 105 a restrictive
construction that transitional input tax
credit applies only when taxes were
previously paid on the properties in the
beginning inventory and there is a law
imposing the tax which is presumed to
have been paid, is to impose conditions or
requisites to the application of the
transitional tax input credit which are not
found in the law. The courts must not read
into the law what is not there. To do so
will violate the principle of separation of
powers which prohibits this Court from
engaging
in
judicial

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Ateneo de Davao University

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legislation.130 (Emphases added.)

As the Court En Banc held in G.R. No.

173425, the issues in this case are not
novel. These same issues have been
squarely ruled upon by this Court in the
earlier decided cases that have attained
finality.131
It is now this Courts duty to apply the
previous
rulings
to
the
present
case. Once a case has been decided
one way, any other case involving
exactly the same point at issue, as in
the present case, should be decided in
the same manner. 132
Thus, we find that petitioner is entitled to
a refund of the amounts of: 1)
P486,355,846.78 in G.R. No. 175707,
2)
P77,151,020.46
in
G.R.
No.
180035, and 3) P269,340,469.45 in
G.R. No. 181092, which petitioner
paid as value-added tax, or to a tax
credit for said amounts.
Honda Cars Philippines, Inc. Vs. Honda
Cars
Technical
Specialist
and
Supervisors Union G.R. No. 204142.
November 19, 2014
The Voluntary Arbitrator has no
jurisdiction
to
settle
tax
matters

The
Labor
Code
vests
the
Voluntary Arbitrator original and
exclusive jurisdiction to hear and
decide all unresolved grievances
arising from the interpretation
or
implementation
of
the
Collective
Bargaining
Agreement and those arising
from
the
interpretation
or
enforcement
of
company
personnel
policies.14
Upon
agreement of the parties, the
Voluntary Arbitrator shall also hear
and decide all other labor disputes,
including unfair labor practices and
bargaining
deadlocks.15chanRoblesvirtualLawli
brary

In
short,
the
Voluntary
Arbitrators
jurisdiction
is
limited to labor disputes. Labor
dispute means any controversy or
matter concerning terms and
conditions of employment or the
association or representation of
persons in negotiating, fixing,
maintaining,
changing,
or
arranging the terms and conditions
of employment, regardless of
whether the disputants stand in the
proximate relation of employer and
employee.16chanRoblesvirtualLawli
brary
The issues raised before the Panel
of Voluntary Arbitrators are: (1)
whether the cash conversion of the
gasoline allowance shall be subject
to fringe benefit tax or the
graduated income tax rate on
compensation; and (2) whether the
company
wrongfully
withheld
income tax on the converted gas
allowance.
The Voluntary Arbitrator has no
competence
to
rule
on
the
taxability of the gas allowance and
on the propriety of the withholding
of tax. These issues are clearly
tax matters, and do not involve
labor disputes. To be exact, they
involve tax issues within a labor
relations setting as they pertain to
questions of law on the application
of Section 33 (A) of the NIRC. They
do not require the application of
the
Labor
Code
or
the
interpretation of the MOA and/or
company
personnel
policies.
Furthermore, the company and the
union cannot agree or compromise
on the taxability of the gas
allowance. Taxation is the States
inherent power; its imposition
cannot be subject to the will of the
parties.
Under paragraph 1, Section 4 of
the NIRC, the CIR shall have the

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Ateneo de Davao University

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COMPILATION OF SUPREME COURT DECISIONS

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exclusive
and
original
jurisdiction
to
interpret
the
provisions of the NIRC and other
tax laws, subject to review by the
Secretary
of
Finance.
Consequently, if the company
and/or the union desire/s to seek
clarification of these issues, it/they
should have requested for a tax
ruling17 from the Bureau of Internal
Revenue (BIR). Any revocation,
modification or reversal of the
CIRs ruling shall not be given
retroactive
application
if
the
revocation, modification or reversal
will be prejudicial to the taxpayers,
except
in
the
following
cases:chanroblesvirtuallawlibrary

(a) Where the taxpayer deliberately

misstates or omits material facts
from his return or any document
required of him by the BIR;
(b) Where the facts subsequently
gathered by the BIR are materially
different from the facts on which
the ruling is based; or
(c) Where the taxpayer acted in bad
faith.18

On the other hand, if the union

disputes the withholding of tax and
desires a refund of the withheld
tax, it should have filed an
administrative claim for refund with
the CIR. Paragraph 2, Section 4 of
the NIRC expressly vests the CIR
original jurisdiction over refunds
of internal revenue taxes, fees or
other charges, penalties imposed in
relation thereto, or other tax
matters.
The union has no cause of
action against the company
Under the withholding tax system, the
employer as the withholding agent acts as
both the government and the taxpayers
agent. Except in the case of a minimum
wage earner, every employer has the duty
to deduct and withhold upon the
employees wages a tax determined in

accordance with the rules and regulations

to be prescribed by the Secretary of
Finance,
upon
the
CIRs
recommendation.19 As the Governments
agent, the employer collects tax and
serves as the payee by fiction of law.20 As
the employees agent, the employer files
the necessary income tax return and
remits
the
tax
to
the
Government.21chanRoblesvirtualLawlibrary
Based on these considerations, we
hold that the union has no cause of
action against the company. The
company merely performed its statutory
duty to withhold tax based on its
interpretation of the NIRC, albeit that
interpretation may later be found to be
erroneous. The employer did not violate
the employees right by the mere act of
withholding the tax that may be due the
government.22chanRoblesvirtualLawlibrary
Moreover, the NIRC only holds the
withholding agent personally liable for the
tax arising from the breach of his legal
duty to withhold, as distinguished from his
duty to pay tax.23 Under Section 79 (B) of
the NIRC, if the tax required to be
deducted and withheld is not collected
from the employer, the employer shall not
be relieved from liability for any penalty or
addition to the unwithheld tax.
Thus, if the BIR illegally or erroneously
collected tax, the recourse of the
taxpayer, and in proper cases, the
withholding agent, is against the BIR,
and not against the withholding agent.24
The unions cause of action for the refund
or non-withholding of tax is against the
taxing authority, and not against the
employer. Section 229 of the NIRC
provides:chanroblesvirtuallawlibrary
Sec. 229. Recovery of Tax Erroneously
or Illegally Collected. No suit or
proceeding shall be maintained in any
court for the recovery of any national
internal revenue tax hereafter alleged
to have been erroneously or illegally
assessed or collected, or of any penalty

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Ateneo de Davao University

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claimed to have been collected without
authority, or of any sum alleged to have
been excessively or in any manner
wrongfully collected, until a claim for
refund or credit has been duly filed
with the Commissioner; but such suit
or proceeding may be maintained,
whether or not such tax, penalty, or sum
has been paid under protest or duress.

The Philippine American Life and General

Insurance Company Vs. The Secretary
of Finance and the Commissioner of
Internal Revenue G.R. No. 210987.
November 24, 2014
Reviews by the Secretary of
Finance pursuant to Sec. 4 of the
NIRC are appealable to the CTA
To recapitulate, three different, if not
conflicting, positions as indicated below
have been advanced by the parties and by
the CA as the proper remedy open for
assailing respondents rulings:
Petitioners:
The
ruling
of
the
Commissioner is subject to review
by the Secretary under Sec. 4 of
the NIRC, and that of the Secretary
to the CA via Rule 43;
Respondents:
The
ruling
of
the
Commissioner is subject to review
by the Secretary under Sec. 4 of
the NIRC, and that of the Secretary
to the Office of the President
before appealing to the CA via a
Rule 43 petition; and
CA: The ruling of the Commissioner is
subject to review by the CTA.
We now resolve.
Preliminarily,it bears stressing that there
is no dispute that what is involved herein
is the respondent Commissioners exercise
of power under the first paragraph of Sec.
4 of the NIRCthe power to interpret tax
laws. This, in fact, was recognized by the
appellate court itself, but erroneously held
that her action in the exercise of such
power is appealable directly to the CTA. As
correctly pointed out by petitioner, Sec. 4

of the NIRC readily provides that the

Commissioners power to interpret the
provisions of this Code and other tax laws
is subject to review by the Secretary
of Finance. The issue that now arises is
thiswhere does one seek immediate
recourse from the adverse ruling of
the Secretary of Finance in its
exercise of its power of review under
Sec. 4?
Admittedly, there is no provision in law
that expressly provides where exactly the
ruling of the Secretary of Finance under
the adverted NIRC provision is appealable
to. However,We find that Sec. 7(a)(1) of
RA 1125, as amended, addresses the
seeming gap in the law as it vests the
CTA, albeit impliedly, with jurisdiction over
the CA petition as other mattersarising
under
the
NIRC
or
other
laws
administered
by
the
BIR.
As
stated:chanroblesvirtuallawlibrary
Sec. 7. Jurisdiction. - The CTA shall
exercise:
a. Exclusive appellate jurisdiction to review
by appeal, as herein provided:1.
Decisions of the Commissioner of
Internal Revenue in cases involving
disputed assessments, refunds of
internal revenue taxes, fees or
other charges, penalties in relation
thereto, or other matters arising
under
the
National
Internal
Revenue
or
other
laws
administered by the Bureau of
Internal
Revenue.
(emphasis
supplied)
Even though the provision suggests that it
only covers rulings of the Commissioner,
We hold that it is, nonetheless, sufficient
enough to include appeals from the
Secretarys review under Sec. 4 of the
NIRC.
It is axiomatic that laws should be given a
reasonable interpretation which does not
defeat the very purpose for which they
were passed.17 Courts should not follow
the letter of a statute when to do so would

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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depart from the true intent of the
legislature or would otherwise yield
conclusions inconsistent with the purpose
of the act.18 This Court has, in many cases
involving the construction of statutes,
cautioned against narrowly interpreting a
statute as to defeat the purpose of the
legislator,
and
rejected
the
literal
interpretation of statutes if to do so would
lead
to
unjust
or
absurd
results.19chanRoblesvirtualLawlibrary
Indeed, to leave undetermined the mode
of appeal from the Secretary of Finance
would be an injustice to taxpayers
prejudiced by his adverse rulings. To
remedy this situation, We imply from the
purpose of RA 1125 and its amendatory
laws that the CTA is the proper forum with
which to institute the appeal. This is not,
and should not, in any way, be taken as a
derogation of the power of the Office of
President but merely as recognition that
matters calling for technical knowledge
should be handled by the agency or quasijudicial body with specialization over the
controversy. As the specialized quasijudicial agency mandated to adjudicate
tax, customs, and assessment cases,
there can be no other court of appellate
jurisdiction that can decide the issues
raised in the CA petition, which involves
the tax treatment of the shares of stocks
sold.
The appellate power of the
CTA includes certiorari
Petitioner is quick to point out, however,
that the grounds raised in its CA petition
included the nullity of Section 7(c.2.2) of
RR 06-08 and RMC 25-11.
In the recent case of City of Manila v.
Grecia-Cuerdo,25 the Court en banc has
ruled that the CTA now has the power of
certiorari in cases within its appellate
jurisdiction.
To
elucidate:chanroblesvirtuallawlibrary
The prevailing doctrine is that the
authority to issue writs of certiorari
involves
the
exercise
of
original
jurisdiction which must be expressly

conferred by the Constitution or by law

and cannot be implied from the mere
existence of appellate jurisdiction. Thus,
xxx this Court has ruled against the
jurisdiction of courts or tribunals over
petitions for certiorari on the ground that
there is no law which expressly gives
these tribunals such power. It must be
observed, however, that xxx these rulings
pertain not to regular courts but to
tribunals exercising quasi-judicial powers.
With respect to the Sandiganbayan,
Republic Act No. 8249 now provides that
the special criminal court has exclusive
original jurisdiction over petitions for the
issuance of the writs of mandamus,
prohibition, certiorari, habeas corpus,
injunctions, and other ancillary writs and
processes
in
aid
of
its
appellate
jurisdiction.
In the same manner, Section 5 (1), Article
VIII of the 1987 Constitution grants power
to the Supreme Court, in the exercise of
its original jurisdiction, to issue writs of
certiorari, prohibition and mandamus.
With respect to the Court of Appeals,
Section 9 (1) of Batas Pambansa Blg. 129
(BP 129) gives the appellate court, also in
the exercise of its original jurisdiction, the
power to issue, among others, a writ of
certiorari, whether or not in aid of its
appellate jurisdiction. As to Regional Trial
Courts, the power to issue a writ of
certiorari, in the exercise of their original
jurisdiction, is provided under Section 21
of BP 129.
The foregoing notwithstanding, while
there is no express grant of such power,
with respect to the CTA, Section 1, Article
VIII of the 1987 Constitution provides,
nonetheless, that judicial power shall be
vested in one Supreme Court and in such
lower courts as may be 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

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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on
the
part
of
any
branch
instrumentality of the Government.

or

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. (emphasis added)
Evidently, City of Manila can be considered
as a departure from Ursal in that in spite
of there being no express grant in law, the
CTA is deemed granted with powers of
certiorari by implication. Moreover, City of
Manila
diametrically
opposes
British
American Tobacco to the effect that it is
now within the power of the CTA, through
its power of certiorari, to rule on the
validity of a particular administrative rule
or regulation so long as it is within its
appellate jurisdiction. Hence, it can now
rule not only on the propriety of an
assessment or tax treatment of a
certain transaction, but also on the
validity of the revenue regulation or
revenue memorandum circular on
which the said assessment is based.
Guided

by

the

doctrinal

teaching

in

resolving the case at bar, the fact that the

CA petition not only contested the
applicability of Sec. 100 of the NIRC over
the
sales
transaction
but
likewise
questioned the validity of Sec. 7(c.2.2) of
RR 06-08 and RMC 25-11 does not divest
the CTA of its jurisdiction over the
controversy,
contrary
to
petitioners
arguments.
The price difference is
subject to donors tax
Petitioners
substantive
argumentsare
unavailing. The absence of donative
intent, if that be the case, does not
exempt the sales of stock transaction from
donors tax since Sec. 100 of the NIRC
categorically states that the amount by
which the fair market value of the
property exceeded the value of the
consideration shall be deemed a gift.
Thus, even if there is no actual donation,
the difference in price is considered a
donation by fiction of law.
Moreover, Sec. 7(c.2.2) of RR 06-08 does
not alter Sec. 100 of the NIRC but merely
sets the parameters for determining the
fair market value of a sale of stocks.
Such issuance was made pursuant to the
Commissioners power to interpret tax
laws and to promulgate rules and
regulations for their implementation.
Lastly, petitioner is mistaken in stating
that RMC 25-11, having been issued after
the sale, was being applied retroactively in
contravention to Sec. 246 of the NIRC.26
Instead, it merely called for the strict
application of Sec. 100, which was already
in force the moment the NIRC was
enacted.chanrobleslaw
National Power Corporation Vs. Municipal
Governemnt of Navotas, et al.G.R. No.
192300. November 24, 2014
In essence, the issue is whether or not the
CTA Second Division has jurisdiction to
review the decision of the RTC which
concerns a petition for declaratory relief
involving real property taxes.
We rule in the affirmative.
First, Section 7 of Republic Act (R.A.) No.

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Ateneo de Davao University

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92827 explicitly enumerates the scope of
the CTAs jurisdiction over decisions,
orders or resolutions of the RTC in local
tax cases, to wit: Decisions, orders or
resolutions of the Regional Trial
Courts in local tax cases originally
decided or resolved by them in the
exercise of their original or appellate
jurisdiction;
Such authority is echoed in Section 3,
Rule 4 of the Revised Rules of the CTA,
which enumerates the jurisdiction of the
CTA, sitting as a Division, to wit:
Section 3. Cases Within the Jurisdiction of
the Court In Division. The Court Division
shall exercise:chanroblesvirtuallawlibrary
(a) Exclusive original or appellate
jurisdiction to review by appeal the
following:chanroblesvirtuallawlibrary
xxxx
(3) Decisions, resolutions or orders of
the Regional Trial Courts in local tax
cases decided or resolved by them in
the
exercise
of
their
original
jurisdiction;
x x x9
Indeed, the CTA, sitting as Division, has
jurisdiction to review by appeal the
decisions, rulings and resolutions of the
RTC over local tax cases, which includes
real property taxes. This is evident from a
perusal of the Local Government Code
(LGC) which includes the matter of Real
Property Taxation under one of its main
chapters. Indubitably, the power to
impose real property tax is in line with the
power vested in the local governments to
create their own revenue sources, within
the limitations set forth by law. As such,
the collection of real property taxes is
conferred with the local treasurer rather
than the Bureau of Internal Revenue.
We,
therefore,
disagree
with
the
conclusion of the CTA En Banc that real
property taxes have always been treated
by our laws separately from local taxes.

The fact that a separate chapter is

devoted to the treatment of real property
taxes, and a distinct appeal procedure is
provided therefor does not justify an
inference that Section 7(a)(3) of R.A.
9282 pertains only to local taxes other
than real property taxes. Rather, the term
local taxes in the aforementioned
provision should be considered in its
general and comprehensive sense, which
embraces real property tax assessments,
in line with the precept Generalia verba
sunt generaliter inteligenciawhat is
generally spoken shall be generally
understood.10 Between the restricted
sense and the general meaning of a word,
the general must prevail unless it was
clearly intended that the restricted sense
was to be used.11 In the words of the
Court in Marcos v. Chief of Staff:12
Where words are used which have both, a
restricted and a general meaning, the
general must prevail over the restricted
unless the nature of the subject matter of
the context clearly indicates that the
limited sense is intended.13
Here, the context in which the word local
taxes is employed does not clearly
indicate that the limited or restricted view
was intended by the legislature. In
addition, the specification of real property
tax assessment under Paragraph (a)(5) of
Section 7 of R.A. 9282, in relation to the
decisions of the CBAA, is only proper
given that the CBAA has no jurisdiction,
either original or appellate, over cases
involving local taxes other than real
property taxes.
Based on the foregoing, the general
meaning of local taxes should be
adopted in relation to Paragraph (a)(3) of
Section 7 of R.A. 9282, which necessarily
includes real property taxes.
Second, as correctly pointed out by
petitioner, when the legality or validity of
the assessment is in question, and not its
reasonableness or correctness, appeals to
the LBAA, and subsequently to the CBAA,
pursuant to Sections 22614 and 22915 of
the LGC, are not necessary.

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Ateneo de Davao University

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Stated differently, in the event that the
taxpayer questions the authority and
power of the assessor to impose the
assessment, and of the treasurer to collect
the real property tax, resort to judicial
action may prosper. This is in consonance
with the ruling in Ty v. Trampe.16 Here, a
petition for prohibition with prayer for a
restraining
order
and/or
writ
of
preliminary injunction was filed to declare
null and void the new tax assessments
and enjoin the collection of real estate
taxes based on said assessments. Despite
the
alleged
non-exhaustion
of
administrative remedies and non-payment
of the real property tax, the Court gave
due course to the case on the ground that
the controversy did not involve questions
of fact but only of law.
In the case at bar, the claim of petitioner
essentially questions the very authority
and power of the Municipal Assessor to
impose the assessment and of the
Municipal Treasurer to collect the real
property tax with respect to the
machineries and equipment located in the
Navotas I and II power plants. Certainly,
it does not pertain to the correctness of
the amounts assessed but attacks the
validity of the assessment of the taxes
itself.
It is for the foregoing reasons that we
deem the reversal of the ruling of the CTA
En Banc in order. At the risk of repetition,
what is being questioned in the present
case is the authority of the Municipal
Assessor to impose the assessment and of
the Municipal Treasurer to collect the real
property taxes. Accordingly, resort to the
LBAA and the CBAA is no longer necessary
for the same reason that what is being
questioned is the legality or validity of the
tax assessment, not the reasonableness or
correctness of the assessment. Certainly,
it would be unjust to require the realty
owner to first pay the tax, the validity of
which he precisely questions, before he
can lodge a complaint to the court.
In fine, if a taxpayer is not satisfied with
the decision of the CBAA or the RTC, as

the case may be, the taxpayer may file,

within thirty (30) days from receipt of the
assailed decision, a petition for review
with the CTA pursuant to Section 7(a) of
R.A. 9282. In cases where the question
involves the amount of the tax or the
correctness thereof, the appeal will be
pursuant to Section 7(a)(5) of R.A. 9282.
When the appeal comes from a judicial
remedy which questions the authority of
the local government to impose the tax,
Section 7(a)(3) of R.A. 9282 applies.
Thereafter, such decision, ruling or
resolution may be further reviewed by the
CTA En Banc pursuant to Section 2, Rule 4
of the Revised Rules of the CTA, to wit:
Section 2. Cases Within the Jurisdiction of
the Court En Banc. The Court En Banc
shall
exercise
exclusive
appellate
jurisdiction to review by appeal the
following:chanroblesvirtuallawlibrary
(a)
Decisions or resolutions on
motions for reconsideration or new
trial of the Court in Divisions in the
exercise
of
its
exclusive
appellate
jurisdiction over:
xxxx
(2) Local tax cases decided by the
Regional Trial Courts in the exercise
of their original jurisdiction;
x x x24
Thus, the CTA En Banc erred in dismissing
the petition for review en banc, and
affirming the CTA Second Divisions
position that the RTC has no jurisdiction
over the instant case for failure of
petitioner
to
exhaust
administrative
remedies which resulted in the finality of
the assessment.
Bureau
of
Internal
Revenue,
as
represented by the Commissioner of
Internal
Revenue
Vs.
Court
of
Appeals,
Spouses
Antonio
Villan
Manly, and Ruby Ong ManlyG.R. No.
197590. November 24, 2014
Sections 254 and 255 of the NIRC
pertinently
provide:chanroblesvirtuallawlibrary
SEC. 254. Attempt to Evade or

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Defeat Tax. Any person who
willfully attempts in any manner to
evade or defeat any tax imposed
under this Code or the payment
thereof shall, in addition to other
penalties provided by law, upon
conviction thereof, be punished by
a fine of not less than Thirty
thousand pesos (P30,000.00) but
not more than One hundred
thousand pesos (P100,000.00) and
suffer imprisonment of not less
than two (2) years but not more
than four (4) years: Provided, That
the conviction or acquittal obtained
under this Section shall not be a
bar to the filing of a civil suit for
the collection of taxes.

SEC. 255. Failure to File Return,

Supply
Correct
and
Accurate
Information, Pay Tax, Withhold and
Remit Tax and Refund Excess
Taxes Withheld on Compensation.
Any person required under this
Code or by rules and regulations
promulgated thereunder to pay any
tax, make a return, keep any
record, or supply correct and
accurate information, who willfully
fails to pay such tax, make such
return, keep such record, or supply
such
correct
and
accurate
information, or withhold or remit
taxes withheld, or refund excess
taxes withheld on compensation at
the time or times required by law
or rules and regulations shall, in
addition to other penalties provided
by law, upon conviction thereof, be
punished by a fine of not less than
Ten thousand pesos (P10,000.00)
and suffer imprisonment of not less
than one (1) year but not more
than ten (10) years.
In Ungab v. Judge Cusi, Jr.,66 we
ruled that tax evasion is deemed
complete when the violator has
knowingly and willfully filed a
fraudulent return with intent to
evade and defeat a part or all of
the
tax.67
Corollarily,
an

assessment of the tax deficiency is

not
required
in
a
criminal
prosecution for tax evasion.68
However, in Commissioner of
Internal Revenue v. Court of
Appeals,69
we
clarified
that
although a deficiency assessment
is not necessary, the fact that a tax
is due must first be proved before
one can be prosecuted for tax
evasion.70

In the case of income, for it to be

taxable, there must be a gain
realized
or
received
by
the
taxpayer, which is not excluded by
law or treaty from taxation.71 The
government is allowed to resort to
all evidence or resources available
to determine a taxpayers income
and to use methods to reconstruct
his income.72 A method commonly
used by the government is the
expenditure method, which is a
method
of
reconstructing
a
taxpayers income by deducting the
aggregate
yearly
expenditures
from the declared yearly income.73
The theory of this method is that
when the amount of the money
that a taxpayer spends during a
given year exceeds his reported or
declared income and the source of
such money is unexplained, it may
be inferred that such expenditures
represent unreported or undeclared
income.74

In the case at bar, petitioner used

this
method
to
determine
respondent spouses tax liability.
Petitioner deducted
respondent
spouses major cash acquisitions
from their available funds.
And since the underdeclaration is more
than 30% of respondent spouses reported
or declared income, which under Section
248(B) of the NIRC constitutes as prima
facie evidence of false or fraudulent
return, petitioner recommended the filing
of criminal cases against respondent
spouses under Sections 254 and 255, in

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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relation to Section 248(B) of the NIRC.
The CA, however, found no probable
cause to indict respondent spouses for tax
evasion. It agreed with Acting Justice
Secretary Devanadera that petitioner
failed to make a categorical finding of the
exact amount of tax due from [respondent
spouses] and to show sufficient proof of
a likely source of [respondent spouses]
income that enabled them to purchase the
real and personal properties adverted to x
x x.78
We find otherwise.

The amount of tax due from

respondent
spouses
was
specifically
alleged
in
the
79
Complaint-Affidavit.
The
computation, as well as the
method used in determining the
tax liability, was also clearly
explained. The revenue officers
likewise
showed
that
the
underdeclaration exceeded 30% of
the reported or declared income.
Apparently, the revenue officers
considered respondent Antonios
rental business to be the likely
source of their unreported or
undeclared income due to his
unjustified refusal to allow the
revenue officers to inspect the
building
In view of the foregoing, we are
convinced that there is probable
cause to indict respondent spouses
for tax evasion as petitioner was
able to show that a tax is due from
them. Probable cause, for purposes
of filing a criminal information, is
defined as such facts that are
sufficient to engender a wellfounded belief that a crime has
been committed, that the accused
is probably guilty thereof, and that
he should be held for trial.82 It
bears
stressing
that
the
determination of probable cause
does not require actual or absolute
certainty, nor clear and convincing

evidence of guilt; it only requires

reasonable belief or probability that
more likely than not a crime has
been committed by the accused.83
Before we close, we must stress that our
ruling in this case should not be
interpreted as an unbridled license for our
tax officials to engage in fishing
expeditions and witch-hunting. They
should not abuse their investigative
powers, instead they should exercise the
same within the bounds of the law. They
must properly observe the guidelines in
making assessments and investigative
procedures
to
ensure
that
the
constitutional rights of the taxpayers are
well protected as we cannot allow the
floodgates to be opened for frivolous and
malicious tax suits.
Commissioner of Internal Revenue Vs.
Basf + Inks Phils, Inc. G.R. No.
198677. November 26, 2014
Petitioner contends that, insofar as
respondent's alleged deficiency taxes for
the taxable year 1999 are concerned, the
running of the three-year prescriptive
period to assess, under Sections 203 and
222 of the National Internal Revenue Act
of 1997 (Tax Reform Act of 1997) was
suspended when respondent failed to
notify petitioner, in writing, of its change
of address, pursuant to the provisions of
Section 223 .of the same Act and Section
11 of BIR Revenue Regulation No. 12-85.
It is true that, under Section 223 of the
Tax Reform Act of 1997, the running of
the Statute of Limitations provided under
the provisions of Sections 203 and 222 of
the same Act shall be suspended when the
taxpayer cannot be located in the address
given by him in the return filed upon
which a tax is being assessed or collected.
In addition, Section 11 of Revenue
Regulation No. 12-85 states that, in case
of change of address, the taxpayer is
required to give a written notice thereof to
the Revenue District Officer or the district
having jurisdiction over his former legal
residence and/or place of business.
However, this Court agrees with both the
CTA Special First Division and the CTA En
Banc
in
their
ruling
that
the

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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abovementioned
provisions
on
the
suspension of the three-year period to
assess apply only if the BIR Commissioner
is not aware of the whereabouts of the
taxpayer.
In the present case, petitioner, by all
indications, is well aware that respondent
had moved to its new address in Calamba,
Laguna, as shown by the following
documents
which
form
part
of
respondent's records with the BIR:XXXXX
The above documents, all of which were
accomplished and .signed by officers of
the BIR, clearly show that respondent's
address is at Carmelray Industrial Park,
Canlubang, Calamba, Laguna.
Hence, despite the absence of a formal
written notice of respondent's change of
address, the fact remains that petitioner
became aware of respondent's new
address as shown by documents replete in
its records. As a consequence, the running
of the three-year period to assess
respondent was not suspended and has
already prescribed.
It bears stressing that, in a number of
cases, this Court has explained that the
statute of limitations on the collection of
taxes primarily benefits the taxpayer. In
these cases, the Court exemplified the
detrimental effects that the delay in the
assessment and collection of taxes inflicts
upon
the
taxpayers.
Thus,
in
Commissioner of Internal Revenue v.
Philippine Global Communication, Inc.,32
this Court echoed Justice Montemayor's
disquisition in his dissenting opinion in
Collector of Internal Revenue v. Suyoc
Consolidated Mining Company,33 regarding
the potential loss to the taxpayer if the
assessment and collection of taxes are not
promptly
made,
thus:chanroblesvirtuallawlibrary
Prescription in the assessment and in the
collection of taxes is provided by the
Legislature for the benefit of both the
Government and the taxpayer; for the
Government for the purpose of expediting

the collection of taxes, so that the agency

charged
with
the
assessment
and
collection may not tarry too long or
indefinitely to the prejudice of the
interests of the Government, which needs
taxes to run it; and for the taxpayer so
that within a reasonable time after filing
his return, he may know the amount of
the assessment he is required to pay,
whether or not such assessment is well
founded and reasonable so that he may
either pay the amount of the assessment
or contest its validity in court x x x. It
would surely be prejudicial to the interest
of the taxpayer for the Government
collecting agency to unduly delay the
assessment and the collection because by
the time the collecting agency finally gets
around to making the assessment or
making the collection, the taxpayer may
then have lost his papers and books to
support his claim and contest that of the
Government, and what is more, the tax is
in the meantime accumulating interest
which the taxpayer eventually has to
pay.34ChanRoblesVirtualawlibrary
Likewise, in Republic of the Philippines v.
Ablaza,35 this Court elucidated that the
prescriptive period for the filing of actions
for collection of taxes is justified by the
need to protect law-abiding citizens from
possible harassment. Also, in Bank of the
Philippine Islands v. Commissioner of
Internal Revenue,36 it was held that the
statute of limitations on the assessment
and collection of taxes is principally
intended to afford protection to the
taxpayer
against
unreasonable
investigations as the indefinite extension
of the period for assessment deprives the
taxpayer of the assurance that he will no
longer
be
subjected
to
further
investigation for taxes after the expiration
of a reasonable period of time. Thus, in
Commissioner of Internal Revenue v. B.F.
Goodrich Phils., Inc.,37 this Court ruled
that the legal provisions on prescription
should be liberally construed to protect
taxpayers and that, as a corollary, the
exceptions to the rule on prescription
should be strictly construed.

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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It might not also be amiss to point out

that petitioner's issuance of the First
Notice Before Issuance of Warrant of
Distraint and Levy38 violated respondent's
right to due process because no valid
notice of assessment was sent to it. An
invalid assessment bears no valid fruit.
The law imposes a substantive, not merely
a formal, requirement. To proceed
heedlessly with tax collection without first
establishing
a
valid assessment
is
evidently violative of the cardinal principle
in administrative investigations: that
taxpayers should be able to present their
case and adduce supporting evidence.[39
In the instant case, respondent has not
properly been informed of the basis of its
tax liabilities. 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.
It is true that taxes are the lifeblood of the
government. However, in spite of all its
plenitude, the power to tax has its limits.
It is an elementary rule enshrined in the
1987 Constitution that no person shall be
deprived of property without due process
of law. In balancing the scales between
the power of the State to tax and its
inherent right to prosecute perceived
transgressors of the law on one side, and
the constitutional rights of a citizen to due
process of law and the equal protection of
the laws on the other, the scales must tilt
in favor of the individual, for a citizen's
right is amply protected by the Bill of
Rights
under
the
Constitution.43chanroblesvirtuallawlibrary
As to the second assigned error,
petitioner's reliance on the provisions of
Section 3.1.7 of BIR Revenue Regulation
No. 12-9944 as well as on the case of Nava
v. Commissioner of Internal Revenue45 is
misplaced, because in the said case, one
of the requirements of a valid assessment
notice is that the letter or notice must be
properly addressed. It is not enough that

the notice is sent by registered mail as

provided
under
the
said
Revenue
Regulation. In the instant case, the FAN
was sent to the wrong address. Thus, the
CTA is correct in holding that the FAN
never attained finality because respondent
never received it, either actually or
constructively.
Taganito
Mining
Corporation
Vs.
Commissioner of Internal Revenue
G.R. No. 201195. November 26, 2014
Judicial claim timely filed

The Court agrees with petitioner

that
the
prevailing
doctrine
pertinent to the issue at hand is
CIR
v.
San
Roque
Power
Corporation (San Roque).14 It was
conclusively settled therein that it
is Section 112 of the NIRC which is
applicable specifically to claims for
tax credit certificates and tax
refunds for unutilized creditable
input VAT, and not Section 229.
From the foregoing, it is clear that the
two-year period under Section 229 does
not apply to appeals before the CTA with
respect to claims for a refund or tax credit
for unutilized creditable input VAT since
input VAT is not considered excessively
collected. Instead, it was settled that it is
Section 112 which applies, thereby
making the 120+30 day period prescribed
therein mandatory and jurisdictional in
nature.
As an exception to the mandatory and
jurisdictional nature of the 120+30 day
period, judicial claims filed from the
issuance of BIR Ruling No. DA-489-03 on
December 10, 2003 up to its reversal in
Aichi on October 6, 2010, need not wait
for the lapse of the 120+30 day period, in
consonance with the principle of equitable
estoppel.
In the present case, Taganito filed its
judicial claim with the CTA on April 17,
2008, clearly within the period of
exception of December 10, 2003 to
October 6, 2010. Its judicial claim was,

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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therefore, not prematurely filed.

City of Lapu-Lapu Vs. Philippine Economic

Zone Authority/Prove of Bataan,
represented by Governor Enrique T. Garcia,
Jr., and Emerlinda S. Talento, in her capacity
as Provincial Treasurer of Bataan Vs.
Philippine Economic Zone AuthorityG.R. No.
184203/G.R. No. 187583. November 26, 2014
The Philippine Economic Zone Authority is
exempt from payment of real property taxes.
V. (A)
The PEZA is an instrumentality
national government

of

the

An instrumentality is any agency of the National

Government,
not
integrated
within
the
department framework, vested with special
functions or jurisdiction by law, endowed with
some if not all corporate powers, administering
special
funds,
and
enjoying
operational
autonomy,
usually
through
a
charter.245chanRoblesvirtualLawlibrary
Examples of instrumentalities of the national
government are the Manila International Airport
Authority,246 the Philippine Fisheries Development
Authority,247 the Government Service Insurance
System,248 and the Philippine Reclamation
Authority.249 These entities are not integrated
within the department framework but are
nevertheless vested with special functions to
carry out a declared policy of the national
government.
Similarly, the PEZA is an instrumentality of the
national government. It is not integrated within
the department framework but is an agency
attached to the Department of Trade and
Industry.
Being an instrumentality of the national
government, the PEZA cannot be taxed by local
government units.
Although a body corporate vested with some
corporate powers,262 the PEZA is not a
government-owned or controlled corporation
taxable for real property taxes.

Stanley
Works
Sales
(Phils.),
Incorporated G.R.
No.
187589.
December 3, 2014
ISSUES

In the present recourse, petitioner

raises the following issues:

Whether or not petitioners right to

collect the deficiency income tax of
respondent for taxable year 1989
has prescribed.

Whether
or
not
respondents
repeated requests and positive acts
constitute estoppel from setting
up the defense of prescription
under the NIRC.6
THE COURTS RULING
We deny the Petition.
Petitioner mainly argues that in view of
respondents execution of the Waiver of
the statute of limitations, the period to
collect the assessed deficiency income
taxes has not yet prescribed.
The resolution of the main issue requires a
factual determination of the proper
execution of the Waiver. The CTA Division
has already made a factual finding on the
infirmities of the Waiver executed by
respondent on 16 November 1993. The
Court found that the following requisites
were absent:
(1) Conformity of either petitioner or a
duly authorized representative;
(2) Date of acceptance showing that both
parties had agreed on the Waiver before
the expiration of the prescriptive period;
and
(3) Proof that respondent was furnished a
copy of the Waiver.7
These
findings
are
undisputed
by
petitioner. In fact, it cites BPI v. CIR8 to
support its contention that the approval of
the CIR need not be express, but may be

Commissioner of Internal Revenue Vs. The

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN
Ateneo de Davao University

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implied from the acts of the BIR officials in
response
to
the
request
for
reinvestigation. Accordingly, petitioner
argues that the actual approval of the
Waiver is apparent from the proceedings
that were additionally conducted in
determining the propriety of the subject
assessment. 9

3. The following revenue officials are

authorized to sign the waiver.
A. In the National Office
xxxx
3. Commissioner

We do not agree.
The statute of limitations on the right to
assess and collect a tax means that once
the period established by law for the
assessment and collection of taxes has
lapsed, the governments corresponding
right to enforce that action is barred by
provision of law.

B. In the Regional Offices

1. The Revenue District Officer with
respect to tax cases still pending
investigation and the period to assess is
about to prescribe regardless of amount.
xxxx

The period to assess and collect deficiency

taxes may be extended only upon a
written agreement between the CIR and
the taxpayer prior to the expiration of the
three-year
prescribed
period
in
accordance with Section 222 (b) of the
NIRC. In relation to the implementation
of this provision, the CIR issued Revenue
Memorandum Order (RMO) No. 20-9010 on
4 April 1990 to provide guidelines on the
proper execution of the Waiver of the
Statute of Limitations. In the execution of
this waiver, the following procedures
should be followed:
1. The waiver must be in the form
identified hereof. This form may be
reproduced by the Office concerned but
there should be no deviation from such
form.
The
phrase
but
not
after
__________ 19___ should be filled up x
xx
2. x x x x
Soon after the waiver is signed by the
taxpayer, the Commissioner of Internal
Revenue or the revenue official authorized
by him, as hereinafter provided, shall sign
the waiver indicating that the Bureau has
accepted and agreed to the waiver. The
date of such acceptance by the Bureau
should be indicated. x x x.

5. The foregoing procedures shall be

strictly followed. Any revenue official
found not to have complied with this
Order resulting in prescription of the right
to assess/collect shall be administratively
dealt with.
Furthermore, jurisprudence is replete with
requisites of a valid waiver:
1. The waiver must be in the proper form
prescribed by RMO 20-90. The phrase
but not after ______ 19 ___, which
indicates the expiry date of the period
agreed upon to assess/collect the tax after
the
regular
three-year
period
of
prescription, should be filled up.
2. The waiver must be signed by the
taxpayer himself or his duly authorized
representative.
In the case of a
corporation, the waiver must be signed by
any of its responsible officials. In case the
authority is delegated by the taxpayer to a
representative, such delegation should be
in writing and duly notarized.
3. The waiver should be duly notarized.
4. The CIR or the revenue official
authorized by him must sign the waiver
indicating that the BIR has accepted and

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

For t
invol
than

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COMPILATION OF SUPREME COURT DECISIONS

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agreed to the waiver. The date of such
acceptance by the BIR should be
indicated. However, before signing the
waiver, the CIR or the revenue official
authorized by him must make sure that
the waiver is in the prescribed form, duly
notarized, and executed by the taxpayer
or his duly authorized representative.
5. Both the date of execution by the
taxpayer and date of acceptance by the
Bureau should be before the expiration of
the period of prescription or before the
lapse of the period agreed upon in case a
subsequent agreement is executed.
6. The waiver must be executed in three
copies, the original copy to be attached to
the docket of the case, the second copy
for the taxpayer and the third copy for the
Office accepting the waiver. The fact of
receipt by the taxpayer of his/her file copy
must be indicated in the original copy to
show that the taxpayer was notified of the
acceptance of the BIR and the perfection
of the agreement.11
In
Philippine
Journalist,
Inc.
v.
Commissioner of Internal Revenue, 12 the
Court categorically stated that a Waiver
must strictly conform to RMO No. 2090.
The mandatory nature of the
requirements set forth in RMO No. 20-90,
as ruled upon by this Court, was
recognized by the BIR itself in the latters
subsequent issuances, namely, Revenue
Memorandum Circular (RMC) Nos. 6200513 and 29-2012.14 Thus, the BIR
cannot claim the benefits of extending the
period to collect the deficiency tax as a
consequence of the Waiver when, in truth
it was the BIRs inaction which is the
proximate cause of the defects of the
Waiver. The BIR has the burden of
ensuring
compliance
with
the
requirements of RMO No. 20-90, as they
have the burden of securing the right of
the government to assess and collect tax
deficiencies. This right would prescribe
absent any showing of a valid extension of
the period set by the law.

To emphasize, the Waiver was not a

unilateral act of the taxpayer; hence, the
BIR must act on it, either by conforming
to or by disagreeing with the extension. A
waiver of the statute of limitations,
whether on assessment or collection,
should not be construed as a waiver of the
right to invoke the defense of prescription
but, rather, an agreement between the
taxpayer and the BIR to extend the period
to a date certain, within which the latter
could still assess or collect taxes due. The
waiver does not imply that the taxpayer
relinquishes
the
right
to
invoke
prescription unequivocally.15
Although we recognize that the power of
taxation is deemed inherent in order to
support the government, tax provisions
are not all about raising revenue. Our
legislature has provided safeguards and
remedies beneficial to both the taxpayer,
to protect against abuse; and the
government, to promptly act for the
availability and recovery of revenues. A
statute of limitations on the assessment
and collection of internal revenue taxes
was adopted to serve a purpose that
would benefit both the taxpayer and the
government.
Since the Waiver in this case is defective
and therefore invalid, it produces no
effect; thus, the prescriptive period for
collecting deficiency income tax for
taxable year 1989 was never suspended
or tolled. Consequently, the right to
enforce collection based on Assessment
Notice No. 002523-89-6014 has already
prescribed.
Samar-I
Electric
Cooperative
Vs.
Commissioner of Internal Revenue
G.R. No. 193100. December 10, 2014
We shall resolve the instant controversy
by discussing the following two main
issues in seriatim: whether the 1997 and
1998 assessments on withholding tax on
compensation were issued within the
prescriptive period provided by law; and
whether the assessments were issued in
accordance with Section 228 of the NIRC
of 1997.

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

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While petitioner is correct that Section 203
sets the three-year prescriptive period to
assess, the following exceptions are
provided under Section 222 of the NIRC of
1997, viz.:chanroblesvirtuallawlibrary
SEC. 222. Exceptions as to Period of
Limitation of Assessment and Collection of
Taxes.
(a) In the case of a false or fraudulent
return with intent to evade tax or of
failure to file a return, the tax may be
assessed, or a proceeding in court for
the collection of such tax may be filed
without assessment, at any time
within ten (10) years after the
discovery of the falsity, fraud or
omission: Provided, That in a fraud
assessment which has become final and
executory, the fact of fraud shall be
judicially taken cognizance of in the civil
or criminal action for the collection
thereof.
(b) If before the expiration of the time
prescribed in Section 203 for the
assessment of the tax, both the
Commissioner and the taxpayer have
agreed in writing to its assessment after
such time, the tax may be assessed within
the period agreed upon. The period so
agreed upon may be extended by
subsequent written agreement made
before the expiration of the period
previously agreed upon.
(c) Any internal revenue tax which has
been assessed within the period of
limitation as prescribed in paragraph (a)
hereof may be collected by distraint or
levy or by a proceeding in court within five
(5) years following the assessment of the
tax.
(d) Any internal revenue tax, which has
been assessed within the period agreed
upon as provided in paragraph (b)
hereinabove, may be collected by distraint
or levy or by a proceeding in court within
the period agreed upon in writing before
the expiration of the five (5)-year period.
The period so agreed upon may be

extended
by
subsequent
written
agreements made before the expiration of
the period previously agreed upon.
(e) Provided, however, That nothing in the
immediately
preceding
Section
and
paragraph (a) hereof shall be construed to
authorize
the
examination
and
investigation or inquiry into any tax return
filed in accordance with the provisions of
any tax amnesty law or decree. (Emphasis
supplied.)
In the case at bar, it was petitioners
substantial
underdeclaration
of
withholding taxes in the amount of
P2,690,850.91 which constituted the
falsity in the subject returns giving
respondent the benefit of the period under
Section 222 of the NIRC of 1997 to assess
the correct amount of tax at any time
within ten (10) years after the discovery
of the falsity, fraud or omission.12
The case of Aznar v. Court of Tax
Appeals13
discusses
what
acts
or
omissions
may
constitute
falsity,
viz.:chanroblesvirtuallawlibrary
Petitioner argues that Sec. 332 of the
NIRC does not apply because the taxpayer
did not file false and fraudulent returns
with intent to evade tax, while respondent
Commissioner of Internal Revenue insists
contrariwise, with respondent Court of Tax
Appeals
concluding
that
the
very
substantial underdeclarations of income
for six consecutive years eloquently
demonstrate the falsity or fraudulence of
the income tax returns with an intent to
evade the payment of tax.
To our minds we can dispense with these
controversial
arguments
on
facts,
although we do not deny that the findings
of facts by the Court of Tax Appeals,
supported as they are by very substantial
evidence, carry great weight, by resorting
to a proper interpretation of Section 332
of the NIRC. We believe that the proper
and reasonable interpretation of said
provision should be that in the three
different cases of (1) false return, (2)
fraudulent return with intent to evade tax,

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

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(3) failure to file a return, the tax may be
assessed, or a proceeding in court for the
collection of such tax may be begun
without assessment, at any time within
ten years after the discovery of the (1)
falsity, (2) fraud, (3) omission. Our stand
that the law should be interpreted to
mean a separation of the three different
situations of false return, fraudulent
return with intent to evade tax, and failure
to
file
a
return
is
strengthened
immeasurably by the last portion of the
provision which segregates the situations
into three different classes, namely
falsity, fraud and omission. That
there is a difference between false
return and fraudulent return cannot be
denied. While the first merely implies
deviation
from
the
truth,
whether
intentional or not, the second implies
intentional or deceitful entry with intent to
evade the taxes due.
The ordinary period of prescription of 5
years within which to assess tax liabilities
under Sec. 331 of the NIRC should be
applicable to normal circumstances, but
whenever the government is placed at a
disadvantage so as to prevent its lawful
agents from proper assessment of tax
liabilities due to false returns, fraudulent
return intended to evade payment of tax
or failure to file returns, the period of ten
years provided for in Sec. 332 (a) NIRC,
from the time of the discovery of the
falsity, fraud or omission even seems to
be inadequate and should be the one
enforced.
There being undoubtedly false tax returns
in this case, We affirm the conclusion of
the respondent Court of Tax Appeals that
Sec. 332 (a) of the NIRC should apply and
that the period of ten years within which
to assess petitioners tax liability had not
expired at the time said assessment was
made.14
A careful examination of the evidence on
record yields to no other conclusion but
that petitioner failed to withhold taxes
from its employees 13 th month pay and
other benefits in excess of thirty thousand

pesos
(P30,000.00)
amounting
to
P2,690,850.91 for the taxable years 1997
to 1999 resulting to its filing of the
subject false returns. Petitioner failed to
refute this finding, both in fact and in law,
before the courts a quo.
Anent the issue of violation of due process
in the issuance of the final notice of
assessment and letter of demand, Section
228
of
the
NIRC
of
1997
provides:chanroblesvirtuallawlibrary
SEC. 228. Protesting of Assessment. x x
x
xxxx
The taxpayers shall be informed in writing
of the law and the facts on which the
assessment is made: otherwise, the
assessment shall be void.
Petitioner contends that as the Final
Demand Letter and Assessment Notices
(FAN) were silent as to the nature and
basis of the assessments, it was denied
due process,18 and the assessments must
be declared void. It likewise invokes
Revenue Regulations (RR) No. 12-99
which
states,
viz.:chanroblesvirtuallawlibrary
3.1.4 Formal Letter of Demand and
Assessment Notice. The formal letter
of demand and assessment notice shall be
issued by the Commissioner or his duly
authorized representative. The letter of
demand calling for payment of the
taxpayers deficiency tax or taxes shall
state the facts, the law, rules and
regulations, or jurisprudence on which the
assessment is based, otherwise, the
formal
letter
of
demand
and
assessment notice shall be void . The
same shall be sent to the taxpayer only by
registered mail or by personal delivery. x
xx
We uphold the assessments issued to
petitioner.
Both Section 228 of the NIRC of 1997 and
Section 3.1.4 of RR No. 12-99 clearly
require the written details on the nature,
factual and legal bases of the subject
deficiency tax assessments. The reason

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for the mandatory nature of this
requirement is explained in the case of
Commissioner of Internal Revenue v.
Reyes:19
A void assessment bears no valid fruit.
The law imposes a substantive, not merely
a formal, requirement. To proceed
heedlessly with tax collection without first
establishing
a
valid assessment
is
evidently violative of the cardinal principle
in administrative investigations: that
taxpayers should be able to present their
case and adduce supporting evidence. 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
governments 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
taxations 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.
(Emphasis
supplied; citations omitted)
In Commissioner of Internal Revenue v.
Enron Subic Power Corporation,20 we held
that the law requires that the legal and
factual bases of the assessment be stated
in the formal letter of demand and
assessment notice, and that the alleged
factual bases in the advice, preliminary
letter and audit working papers did not

suffice. Thus:chanroblesvirtuallawlibrary
Both the CTA and the CA concluded that
the deficiency tax assessment merely
itemized the deductions disallowed and
included these in the gross income. It also
imposed the preferential rate of 5% on
some items categorized by Enron as costs.
The legal and factual bases were,
however, not indicated.
The CIR insists that an examination of the
facts shows that Enron was properly
apprised of its tax deficiency. During the
pre-assessment stage, the CIR advised
Enrons
representative
of
the
tax
deficiency, informed it of the proposed tax
deficiency
assessment
through
a
preliminary five-day letter and furnished
Enron a copy of the audit working paper
allegedly showing in detail the legal and
factual bases of the assessment. The CIR
argues that these steps sufficed to inform
Enron of the laws and facts on which the
deficiency tax assessment was based.
We disagree. The advice of tax
deficiency, given by the CIR to an
employee of Enron, as well as the
preliminary five-day letter, were not
valid substitutes for the mandatory
notice in writing of the legal and
factual bases of the assessment.
These steps were mere perfunctory
discharges of the CIRs duties in correctly
assessing a taxpayer. The requirement for
issuing a preliminary or final notice, as the
case may be, informing a taxpayer of the
existence of a deficiency tax assessment is
markedly different from the requirement
of what such notice must contain. Just
because the CIR issued an advice, a
preliminary letter during the preassessment stage and a final notice,
in the order required by law, does not
necessarily mean that Enron was
informed of the law and facts on
which the deficiency tax assessment
was made.21 (Emphasis supplied)
In this case, we agree with the respondent
that petitioner was sufficiently apprised of
the nature, factual and legal bases, as
well as how the deficiency taxes being

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assessed against it were computed.
Records reveal that on October 19, 2001,
prior to the conduct of an informal
conference,
petitioner
was
already
informed of the results and findings of the
investigations made by the respondent,
and was duly furnished with a copy of the
summary of the report submitted by
Revenue Officer Elisa G. PonferradaRapatan of the Special Investigation
Division. Said summary report contained
an explanation of Findings of Investigation
stating the legal and factual bases for the
deficiency assessment. In a letter dated
February 27, 2002 petitioner requested for
copies of working papers indicating how
the deficiency withholding taxes were
computed.
Although the FAN and demand letter
issued to petitioner were not accompanied
by a written explanation of the legal and
factual bases of the deficiency taxes
assessed against the petitioner, the
records showed that respondent in its
letter dated April 10, 2003 responded to
petitioners October 14, 2002 letterprotest, explaining at length the factual
and legal bases of the deficiency tax
assessments and denying the protest.28

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
taxpayers situation in Enron. Petitioners
right to due process was thus not violated.
Banco De Oro, Bank of Commerce, China
Banking Corporation, Metropolitan
Bank & Trust Company, Philippine
Bank of Communications, Philippine
Nation Bank, Philippine Veterans
Bank and Planters Development Bank
Vs. Republic of the Philippines,
Commissioner of Internal Revenue,
Bureau
of
Internal
Revenue,
Secretary of Finance, Department of

Finace, The National Treasurer and

Bureau of Treasury G.R. No. 198756.
January 13, 2015
The case involves the proper tax
treatment of the discount or interest
income arising from the P35 billion worth
of 10-year zero-coupon treasury bonds
issued by the Bureau of Treasury on
October 18, 2001 (denominated as the
Poverty
Eradication
and
Alleviation
Certificates or the PEACe Bonds by the
Caucus of Development NGO Networks).
Tax treatment of deposit substitutes
Under Sections 24(B)(1), 27(D)(1), and
28(A)(7) of the 1997 National Internal
Revenue Code, a final withholding tax at
the rate of 20% is imposed on interest on
any currency bank deposit and yield or
any other monetary benefit from deposit
substitutes and from trust funds and
similar arrangements.
Under the 1997 National Internal Revenue
Code,
Congress
specifically
defined
public to mean twenty (20) or more
individual or corporate lenders at any one
time. Hence, the number of lenders is
determinative
of
whether
a
debt
instrument should be considered a deposit
substitute and consequently subject to the
20% final withholding tax.
20-lender rule
Petitioners contend that there [is] only
one (1) lender (i.e. RCBC) to whom the
BTr issued the Government Bonds.169 On
the other hand, respondents theorize that
the word any indicates that the period
contemplated is the entire term of the
bond and not merely the point of
origination or issuance[,]170 such that if
the debt instruments were subsequently
sold in secondary markets and so on, in
such a way that twenty (20) or more
buyers eventually own the instruments,
then it becomes indubitable that funds
would be obtained from the public as
defined
in
Section
22(Y)
of
the
NIRC.171 Indeed, in the context of the
financial market, the words at any one
time create an ambiguity.

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For debt instruments that are
not deposit substitutes, regular
income tax applies

bonds.
Interest income v. gains from sale or
redemption

It must be emphasized, however, that

debt instruments that do not qualify as
deposit substitutes under the 1997
National Internal Revenue Code are
subject to the regular income tax.

The interest income earned from bonds is

not
synonymous
with
the
gains
contemplated
under
Section
32(B)(7)(g)203 of the 1997 National
Internal Revenue Code, which exempts
gains derived from trading, redemption, or
retirement of long-term securities from
ordinary income tax.

The phrase all income derived from

whatever
source
in
Chapter
VI,
Computation of Gross Income, Section
32(A) of the 1997 National Internal
Revenue Code discloses a legislative policy
to include all income not expressly
exempted as within the class of taxable
income under our laws.
The definition of gross income is broad
enough to include all passive incomes
subject to specific tax rates or final
taxes.197 Hence, interest income from
deposit substitutes are necessarily part of
taxable income. However, since these
passive incomes are already subject to
different rates and taxed finally at source,
they are no longer included in the
computation of gross income, which
determines taxable income.198 Stated
otherwise . . . if there were no withholding
tax system in place in this country, this 20
percent portion of the passive income of
[creditors/lenders] would actually be paid
to the [creditors/lenders] and then
remitted by them to the government in
payment
of
their
income
tax.199chanRoblesvirtu
The application of the withholdings
system to interest on bank deposits or
yield
from
deposit
substitutes
is
essentially to maximize and expedite the
collection of income taxes by requiring its
payment
at
the
202
source. chanRoblesvirtualLawlibrary
Hence, when there are 20 or more
lenders/investors in a transaction for a
specific bond issue, the seller is required
to withhold the 20% final income tax on
the imputed interest income from the

The term gain as used in Section

32(B)(7)(g) does not include interest,
which represents forbearance for the use
of money. Gains from sale or exchange or
retirement of bonds or other certificate of
indebtedness fall within the general
category of gains derived from dealings
in property under Section 32(A)(3), while
interest from bonds or other certificate of
indebtedness falls within the category of
interests under Section 32(A)(4).204 The
use of the term gains from sale in
Section 32(B)(7)(g) shows the intent of
Congress not to include interest as
referred under Sections 24, 25, 27, and
28
in
the
exemption.205chanRoblesvirtualLawlibrary
Hence, the gains contemplated in
Section 32(B)(7)(g) refers to: (1) gain
realized from the trading of the bonds
before their maturity date, which is the
difference between the selling price of the
bonds in the secondary market and the
price at which the bonds were purchased
by the seller; and (2) gain realized by the
last holder of the bonds when the bonds
are redeemed at maturity, which is the
difference between the proceeds from the
retirement of the bonds and the price at
which such last holder acquired the
bonds. For discounted instruments, like
the zero-coupon bonds, the trading gain
shall be the excess of the selling price
over the book value or accreted value
(original issue price plus accumulated
discount from the time of purchase up to
the
time
of
sale)
of
the
instruments.206chanRoblesvirtualLawlibrar

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y
The collection of tax is not
barred by prescription
The three (3)-year prescriptive period
under Section 203 of the 1997 National
Internal Revenue Code to assess and
collect internal revenue taxes is extended
to 10 years in cases of (1) fraudulent
returns; (2) false returns with intent to
evade tax; and (3) failure to file a return,
to be computed from the time of discovery
of the falsity, fraud, or omission.

Thus, should it be found that RCBC

Capital/CODE-NGO sold the PEACe Bonds
to 20 or more lenders/investors, the
Bureau of Internal Revenue may still
collect the unpaid tax from RCBC
Capital/CODE-NGO within 10 years after
the discovery of the omission.
Republic of the Philippines, represented
by the Commissioner of Internal
Revenue
Vs.
Team
(Philippines)
Energy Corporation (formerly Mirant
[Philippines] Energy Corporation)
G.R. No. 188016. January 14, 2015
Separate Concurring Opinion
C.J. Sereno
Ruling

The petition is without merit.

Section 76 of the NIRC outlines the

mechanisms and remedies that a
corporate taxpayer may opt to
exercise,
viz:chanroblesvirtuallawlibrary

Section 76. Final Adjusted Return.Every corporation liable to tax

under Section 27 shall file a final
adjustment return covering the
total taxable income for the
preceding calendar of fiscal year. If
the sum of the quarterly tax
payments made during the said
taxable year is not equal to the
total tax due on the entire taxable
income
of
that
year,
the
corporation shall either:

(A) Pay the balance of the tax still

due; or
(B) Carry
credit; or

over

the

excess

(C) Be credited or refunded

with the excess amount paid,
as the case may be.
In case the corporation is entitled
to a tax credit or refund of the
excess estimated quarterly income
taxes paid, the excess amount
shown on its final adjustment
return may be carried over and
credited against the estimated
quarterly income tax liabilities for
the taxable quarters of the
succeeding taxable years. Once the
option to carry over and apply the
excess
quarterly
income
tax
against income tax due for the
taxable years of the succeeding
taxable years has been made, such
option
shall
be
considered
irrevocable for that taxable period
and no application for cash refund
or issuance of a tax credit
certificate
shall
be
allowed
therefor. (emphasis supplied)
The two options are alternative and
not cumulative in nature, that is,
the choice of one precludes the
other. The logic behind the rule,
according
to
Philam
Asset
Management, Inc. v. Commissioner
of Internal Revenue,14 is to ease
tax administration, particularly the
self-assessment
and
collection
aspects.
In
Philam
Asset
Management,
Inc.,
the Court
expounds on the two alternative
options of a corporate taxpayer on
how the choice of one option
precludes
the
other,
viz:chanroblesvirtuallawlibrary
The first option is relatively simple.
Any tax on income that is paid in
excess of the amount due the

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government may be refunded,
provided that a taxpayer properly
applies for the refund.

operation of the irrevocability rule

is that the taxpayer chose an
option; and once it had already
done so, it could no longer make
another one. Consequently, after
the taxpayer opts to carry-over its
excess tax credit to the following
taxable period, the question of
whether or not it actually gets to
apply said tax credit is irrelevant.
Section 76 of the NIRC of 1997 is
explicit in stating that once the
option to carry over has been
made, no application for tax
refund or issuance of a tax credit
certificate
shall
be
allowed
therefor.

The second option works by

applying the refundable amount, as
shown on the FAR of a given
taxable year, against the estimated
quarterly income tax liabilities of
the succeeding taxable year.
These
two
options
under
Section 76 are alternative in
nature. The choice of one
precludes the other. Indeed, in
Philippine
Bank
of
Communications
v.
Commissioner
of
Internal
Revenue, the Court ruled that a
corporation must signify its
intention whether to request
a tax refund or claim a tax
credit

by
marking
the
corresponding
option
box
provided in the FAR. While a
taxpayer is required to mark its
choice in the form provided by
the BIR, this requirement is
only
for
the
purpose
of
facilitating tax collection.

One cannot get a tax refund

and a tax credit at the same
time for the same excess
income taxes paid. x x x
(emphasis supplied)
In
Commissioner
of
Internal
Revenue v. Bank of the Philippine
Islands,15 the Court, citing the
pronouncement in Philam Asset
Management, Inc., points out that
Section 76 of the NIRC of 1997 is
clear and unequivocal in providing
that the carry-over option, once
actually or constructively chosen
by a corporate taxpayer, becomes
irrevocable.
The
Court
explains:chanroblesvirtuallawlibrar
y
Hence, the controlling factor for the

The last sentence of Section 76 of

the NIRC of 1997 reads: Once the
option to carry-over and apply the
excess
quarterly
income
tax
against income tax due for the
taxable quarters of the succeeding
taxable years has been made, such
option
shall
be
considered
irrevocable for that taxable
period and no application for tax
refund or issuance of a tax credit
certificate
shall
be
allowed
therefor. The phrase for that
taxable period merely identifies
the excess income tax, subject of
the option, by referring to the
taxable period when it was
acquired by the taxpayer. In the
present case, the excess income
tax credit, which BPI opted to carry
over, was acquired by the said
bank during the taxable year 1998.
The option of BPI to carry over its
1998 excess income tax credit is
irrevocable; it cannot later on opt
to apply for a refund of the very
same 1998 excess income tax
credit.
The Court of Appeals mistakenly
understood the phrase for that
taxable period as a prescriptive
period for the irrevocability rule.
This would mean that since the tax

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credit in this case was acquired in
1998, and BPI opted to carry it
over
to
1999,
then
the
irrevocability of the option to carry
over expired by the end of 1999,
leaving BPI free to again take
another option as regards its 1998
excess income tax credit. This
construal
effectively
renders
nugatory the irrevocability rule.
The
evident
intent
of
the
legislature, in adding the last
sentence to Section 76 of the NIRC
of 1997, is to keep the taxpayer
from flip-flopping on its options,
and
avoid
confusion
and
complication
as
regards
said
taxpayer's excess tax credit. The
interpretation of the Court of
Appeals only delays the flipflopping to the end of each
succeeding taxable period.

The Court similarly disagrees in the

declaration of the Court of Appeals
that to deny the claim for refund of
BPI, because of the irrevocability
rule, would be tantamount to
unjust enrichment on the part of
the
government.
The
Court
addressed the very same argument
in Philam, where it elucidated that
there
would
be
no
unjust
enrichment in the event of denial
of the claim for refund under such
circumstances,
because
there
would be no forfeiture of any
amount
in
favor
of
the
government. The amount being
claimed as a refund would
remain in the account of the
taxpayer
until
utilized
in
succeeding taxable years, as
provided in Section 76 of the
NIRC of 1997. It is worthy to
note that unlike the option for
refund of excess income tax,
which prescribes after two
years from the filing of the FAR,
there is no prescriptive period
for the carrying over of the
same. Therefore, the excess

income tax credit of BPI, which

it acquired in 1998 and opted
to
carry
over,
may
be
repeatedly carried over to
succeeding taxable years, i.e.,
to 1999, 2000, 2001, and so on
and so forth, until actually
applied or credited to a tax
liability of BPI.16 (emphasis ours)

In the instant case, the respondent

opted to be refunded or to be
issued a tax credit certificate, not
to
carry
over
the
excess
withholding tax for taxable year
2002 to the following taxable year.
Consequently, the only issue that remains
is whether the respondent was entitled to
the refund of excess withholding tax.
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:
That the claim for refund was filed
within the two-year reglementary
period pursuant to Section 22918 of
the NIRC;
When it is shown on the ITR that the
income payment received is being
declared part of the taxpayers
gross income; and
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.
ROHM Apollo Semiconductor Philippines,
Inc. Vs. Commissioner of Internal
RevenueG.R. No. 168950. January 14,
2015
THE COURTS RULING

We deny the Petition on the ground

that the taxpayers judicial claim
for a refund/tax credit was filed
beyond the prescriptive period.

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The judicial claim was filed out

of time.
Section 112(D) of the 1997 Tax
Code states the time requirements
for filing a judicial claim for the
refund or tax credit of input VAT.
The legal provision speaks of two
periods: the period of 120 days,
which serves as a waiting period to
give time for the CIR to act on the
administrative claim for a refund or
credit; and the period of 30 days,
which refers to the period for filing
a judicial claim with the CTA. It is
the 30-day period that is at issue
in this case.
The
landmark
case
of
Commissioner of Internal Revenue
v. San Roque Power Corporation21
has interpreted Section 112 (D).
The Court held that the taxpayer
can file an appeal in one of two
ways: (1) file the judicial claim
within
30
days
after
the
Commissioner denies the claim
within the 120-day waiting period,
or (2) file the judicial claim within
30 days from the expiration of the
120-day
period
if
the
Commissioner does not act within
that period.
In this case, the facts are not up
for debate. On 11 December 2000,
petitioner filed with the BIR an
application for the refund or credit
of
accumulated
unutilized
creditable input taxes. Thus, the
CIR had a period of 120 days from
11 December 2000, or until 10
April 2001, to act on the claim. It
failed to do so, however. Rohm
Apollo should then have treated
the CIRs inaction as a denial of its
claim. Petitioner would then have
had 30 days, or until 10 May 2001,
to file a judicial claim with the CTA.
But Rohm Apollo filed a Petition for
Review with the CTA only on 11
September 2002. The judicial claim

was thus filed late.

The 30-day period to appeal is
mandatory and jurisdictional.
As a general rule, the 30-day period to
appeal is both mandatory and
jurisdictional. The only exception to the
general rule is when BIR Ruling No. DA489-03 was still in force, that is, between
10 December 2003 and 5 October 2010,
The BIR Ruling excused premature filing,
declaring that the taxpayer-claimant need
not wait for the lapse of the 120-day
period before it could seek judicial relief
with the CTA by way of Petition for
Review.
San Roque likewise ruled out the
application of the BIR ruling to cases of
late filing. The Court held that the BIR
ruling, as an exception to the mandatory
and jurisdictional nature of the 120+30
day periods, is limited to premature filing
and does not extend to the late filing of a
judicial
claim.27chanRoblesvirtualLawlibrary
In sum, premature filing is allowed for
cases falling during the time when BIR
Ruling No. DA-489-03 was in force;
nevertheless, late filing is absolutely
prohibited even for cases falling within
that period.
As mentioned above, the taxpayer filed its
judicial claim with the CTA on 11
September 2002. This was before the
issuance of BIR Ruling No. DA-489-03 on
10 December 2003. Thus, Rohm Apollo
could not have benefited from the BIR
Ruling. Besides, its situation was not a
case of premature filing of its judicial
claim but one of late filing. To repeat, its
judicial claim was filed on 11 September
2002 long after 10 May 2001, the last
day of the 30-day period for appeal. The
case thus falls under the general rule
the 30-day period is mandatory and
jurisdictional.cralawred
CONCLUSION
In fine, our finding is that the judicial

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claim for the refund or credit of unutilized
input VAT was belatedly filed. Hence, the
CTA lost jurisdiction over Rohm Apollos
claim for a refund or credit.
The foregoing considered, there is no need
to go into the merits of this case.
A final note, the taxpayers are reminded
that that when the 120-day period lapses
and there is inaction on the part of the
CIR, they must no longer wait for it to
come up with a decision thereafter. The
CIRs inaction is the decision itself. It is
already a denial of the refund claim. Thus,
the taxpayer must file an appeal within 30
days from the lapse of the 120-day
waiting period.chanrobleslaw

CBK

Power
Company
Limited
Vs.
Commissioner
of
Internal
Revenue/Commissioner of Internal
Revenue Vs. CBK Power Company
LimitedG.R. No. 193383-84/G.R. No.
193407-08. January 14, 2015
The Courts Ruling

The Court resolves the foregoing in

seriatim.

A. G.R. Nos. 193383-84

The
Philippine
Constitution
provides for adherence to the
general principles of international
law as part of the law of the land.
The
time-honored
international
principle of pacta sunt servanda
demands the performance in good
faith of treaty obligations on the
part of the states that enter into
the agreement. In this jurisdiction,
treaties have the force and effect
of
law.42chanRoblesvirtualLawlibrary

The issue of whether the failure to

strictly comply with RMO No. 12000 will deprive persons or
corporations of the benefit of a tax
treaty was squarely addressed in
the recent case of Deutsche Bank

AG Manila Branch v. Commissioner

of Internal Revenue43 (Deutsche
Bank),
where
the
Court
emphasized that the obligation to
comply with a tax treaty must
take
precedence
over
the
objective of RMO No. 1-2000,
The objective of RMO No. 1-2000 in
requiring the application for treaty relief
with the ITAD before a partys availment
of the preferential rate under a tax treaty
is to avert the consequences of any
erroneous
interpretation
and/or
application of treaty provisions, such as
claims for refund/credit for overpayment
of taxes, or deficiency tax liabilities for
underpayment.45 However, as pointed out
in Deutsche Bank, the underlying principle
of prior application with the BIR becomes
moot in refund cases as in the present
case where the very basis of the claim is
erroneous or there is excessive
payment arising from the non-availment
of a tax treaty relief at the first instance.
Just as Deutsche Bank was not faulted by
the Court for not complying with RMO No.
1-2000 prior to the transaction,46 so
should CBK Power. In parallel, CBK Power
could not have applied for a tax treaty
relief 15 days prior to its payment of the
final withholding tax on the interest paid
to its lenders precisely because it
erroneously paid said tax on the basis
of the regular rate as prescribed by the
NIRC, and not on the preferential tax rate
provided under the different treaties. As
stressed
by
the Court,
the prior
application requirement under RMO No. 12000
then
becomes
illogical.47chanRoblesvirtualLawlibrary
Not only is the requirement illogical, but it
is also an imposition that is not found at
all in the applicable tax treaties. In
Deutsche Bank, the Court categorically
held that the BIR should not impose
additional requirements that would negate
the availment of the reliefs provided for
under international agreements, especially
since said tax treaties do not provide for
any prerequisite at all for the availment of
the
benefits
under
said

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agreements.48chanRoblesvirtualLawlibrary
It bears reiterating that the application for
a tax treaty relief from the BIR should
merely
operate
to
confirm
the
entitlement of the taxpayer to the relief.49
Since CBK Power had requested for
confirmation from the ITAD on June 8,
2001 and October 28, 200250 before it
filed on April 14, 2003 its administrative
claim for refund of its excess final
withholding taxes, the same should be
deemed substantial compliance with
RMO No. 1-2000, as in Deutsche Bank. To
rule otherwise would defeat the purpose
of Section 229 of the NIRC in providing
the taxpayer a remedy for erroneously
paid tax solely on the ground of failure to
make prior application for tax treaty
relief.51 As the Court exhorted in Republic
v. GST Philippines, Inc.,52 while the
taxpayer has an obligation to honestly pay
the right taxes, the government has a
corollary duty to implement tax laws in
good faith; to discharge its duty to collect
what is due to it; and to justly return
what has been erroneously and
excessively
given
to
it.53chanRoblesvirtualLawlibrary

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.54 CBK Powers
petition in G.R. Nos. 193383-84 is
therefore granted.
The opposite conclusion is, however,
reached
with
respect
to
the
Commissioners petition in G.R. Nos.
193407-08.
B. G.R. Nos. 193407-08
The Court rules for CBK Power.
Sections 204 and 229 of the NIRC pertain
to the refund of erroneously or illegally

collected taxes. Section 204 applies to

administrative claims for refund, while
Section 229 to judicial claims for refund.
In both instances, the taxpayers claim
must be filed within two (2) years from
the date of payment of the tax or penalty.
However, Section 229 of the NIRC further
states the condition that a judicial claim
for refund may not be maintained until a
claim for refund or credit has been duly
filed with the Commissioner.
Indubitably, CBK Powers administrative
and judicial claims for refund of its excess
final withholding taxes covering taxable
year 2003 were filed within the twoyear prescriptive period,
Also, while it may be argued that, for the
remittance filed on June 10, 2003 that
was to prescribe on June 10, 2005, CBK
Power could have waited for, at the most,
three (3) months from the filing of the
administrative claim on March 4, 2005
until the last day of the two-year
prescriptive period ending June 10, 2005,
that is, if only to give the BIR at the
administrative level an opportunity to act
on said claim, the Court cannot, on that
basis alone, deny a legitimate claim that
was, for all intents and purposes, timely
filed in accordance with Section 229 of the
NIRC. There was no violation of Section
229 since the law, as worded, only
requires that an administrative claim be
priorly filed.
In the foregoing instances, attention must
be drawn to the Courts ruling in P.J.
Kiener Co., Ltd. v. David60 (Kiener),
wherein it was held that in no wise does
the law, i.e., Section 306 of the old Tax
Code (now, Section 229 of the NIRC),
imply that the Collector of Internal
Revenue first act upon the taxpayers
claim, and that the taxpayer shall not go
to court before he is notified of the
Collectors action. In Kiener, the Court
went on to say that the claim with the
Collector of Internal Revenue was
intended primarily as a notice of warning
that unless the tax or penalty alleged to
have been collected erroneously or

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illegally is refunded, court action will

follow,
Winebrenner & Inigo Insurance Brokers,
Inc. Vs. Commissioner of Internal
RevenueG.R. No. 206526. January 28, 2015
Dissenting OpinionJ. Leonen
the issue on the indispensability of quarterly ITRs
of the succeeding taxable year in a claim for
refund.
In this case, the fact of having carried over
petitioners 2003 excess credits to succeeding
taxable year is in issue. According to the CTA-En
Banc and the CIR, the only evidence that can
sufficiently show that carrying over has been
made is to present the quarterly ITRs. Some
members of this Court adhere to the same view.
The Court however cannot.
Proving that no carry-over has been made does
not absolutely require the presentation of the
quarterly ITRs.
What Section 76 requires, just like in all civil
cases, is to prove the prima facie entitlement to a
claim, including the fact of not having carried
over the excess credits to the subsequent
quarters or taxable year. It does not say that to
prove such a fact, succeeding quarterly ITRs are
absolutely needed.
This simply underscores the rule that any
document, other than quarterly ITRs may be
used to establish that indeed the non-carry over
clause has been complied with, provided that
such is competent, relevant and part of the
records. The Court is thus not prepared to make
a pronouncement as to the indispensability of the
quarterly ITRs in a claim for refund for no court
can limit a party to the means of proving a fact
for as long as they are consistent with the rules
of evidence and fair play. The means of
ascertainment of a fact is best left to the party
that alleges the same. The Courts power is
limited only to the appreciation of that means
pursuant to the prevailing rules of evidence. To
stress, what the NIRC merely requires is to
sufficiently prove the existence of the non-carry
over of excess CWT in a claim for refund.
Evident from the above is the absence of any

categorical pronouncement of requiring the

presentation of the succeeding quarterly ITRs in
order to prove the fact of non-carrying over. To
say the least, the Court rules that as to the
means of proving it, It has no power to unduly
restrict it.
It goes without saying that the annual ITR
(including any other proof that may be sufficient
to the Court) can sufficiently reveal whether carry
over has been made in subsequent quarters even
if the petitioner has chosen the option of tax
credit or refund in the immediately 2003 annual
ITR.
Section 76 of the NIRC requires a corporation to
file a Final Adjustment Return (or Annual ITR)
covering the total taxable income for the
preceding calendar or fiscal year. The total
taxable income contains the combined income for
the four quarters of the taxable year, as well as
the deductions and excess tax credits carried
over in the quarterly income tax returns for the
same period.
If the excess tax credits of the preceding year
were deducted, whether in whole or in part, from
the estimated income tax liabilities of any of the
taxable quarters of the succeeding taxable year,
the total amount of the tax credits deducted for
the entire taxable year should appear in the
Annual ITR under the item Prior Years Excess
Credits. 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. Thus, the presentation of the
annual ITR would suffice in proving that prior
years excess credits were not utilized for the
taxable year in order to make a final
determination of the total tax due.

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China
Banking
Corporation
Vs.
Commisssioner
of
Internal
RevenueG.R. No. 172509. February 4,
2015
SSUE

Given the facts and the arguments

raised in this case, the resolution of
this case hinges on this issue:
whether the right of the BIR to
collect the assessed DST from CBC
is
barred
by
prescription.15chanRoblesvirtualLaw
library
RULING OF THE COURT
We grant the Petition on the ground that
the right of the BIR to collect the assessed
DST is barred by the statute of limitations.
Prescription Has Set In.
To recall, the Bureau of Internal Revenue
(BIR) issued the assessment for deficiency
DST on 19 April 1989, when the applicable
rule was Section 319(c) of the National
Internal Revenue Code of 1977, as
amended.16 In that provision, the time
limit for the government to collect the
assessed tax is set at three years, to be
reckoned from the date when the BIR
mails/releases/sends
the
assessment
notice to the taxpayer. Further, Section
319(c) states that the assessed tax must
be collected by distraint or levy and/or
court proceeding within the three-year
period.
With these rules in mind, we shall now
determine whether the claim of the BIR is
barred by time.
In this case, the records do not show
when the assessment notice was mailed,
released or sent to CBC. Nevertheless, the
latest possible date that the BIR could
have released, mailed or sent the
assessment notice was on the same date
that CBC received it, 19 April 1989.
Assuming therefore that 19 April 1989 is
the reckoning date, the BIR had three

years to collect the assessed DST.

However, the records of this case show
that there was neither a warrant of
distraint or levy served on CBC's
properties nor a collection case filed in
court by the BIR within the three-year
period.
The attempt of the BIR to collect the tax
through its Answer with a demand for CBC
to pay the assessed DST in the CTA on 11
March 2002 did not comply with Section
319(c) of the 1977 Tax Code, as
amended. The demand was made almost
thirteen years from the date from which
the prescriptive period is to be reckoned.
Thus, the attempt to collect the tax was
made
way
beyond
the
three-year
prescriptive period.
The BIRs Answer in the case filed before
the CTA could not, by any means, have
qualified as a collection case as required
by law. Under the rule prevailing at the
time the BIR filed its Answer, the regular
courts, and not the CTA, had jurisdiction
over judicial actions for collection of
internal revenue taxes. It was only on 23
April 2004, when Republic Act Number
9282 took effect,17 that the jurisdiction of
the CTA was expanded to include, among
others, original jurisdiction over collection
cases in which the principal amount
involved is one million pesos or more.
Consequently, the claim of the CIR for
deficiency DST from petitioner is forever
lost, as it is now barred by time. This
Court has no other option but to dismiss
the present case.
The running of the statute of
limitations was not suspended
by the request for reinvestigation.
The fact that the taxpayer in this case
may have requested a reinvestigation did
not toll the running of the three-year
prescriptive period. Section 320 of the
1977
Tax
Code
states:chanroblesvirtuallawlibrary
Sec.

320.

Prepared by: ATTY. RESCI ANGELLI RIZADA, RN

Ateneo de Davao University

Suspension

of

running

of

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statute.The running of the statute of
limitations provided in Sections 318 or
319 on the making of assessment and the
beginning of distraint or levy or a
proceeding in court for collection, in
respect of any deficiency, shall be
suspended for the period during which the
Commissioner is prohibited from making
the assessment or beginning distraint or
levy or a proceeding in court and for sixty
days thereafter; when the taxpayer
requests for a re-investigation which
is granted by the Commissioner; when
the taxpayer cannot be located in the
address given by him in the return filed
upon which a tax is being assessed or
collected: Provided, That if the taxpayer
informs the Commissioner of any change
in address, the running of the statute of
limitations will not be suspended; when
the warrant of distraint and levy is duly
served upon the taxpayer, his authorized
representative, or a member of his
household with sufficient discretion, and
no property could be located; and when
the taxpayer is out of the Philippines.
(Emphasis supplied)
The provision is clear. A request for
reinvestigation alone will not suspend the
statute of limitations. Two things must
concur: there must be a request for
reinvestigation and the CIR must have
granted it. BPI v. Commissioner of
Internal Revenue18 emphasized this rule
by stating:chanroblesvirtuallawlibrary
In the case of Republic of the Philippines
v.
Gancayco,
taxpayer
Gancayco
requested for a thorough reinvestigation
of the assessment against him and placed
at the disposal of the Collector of Internal
Revenue all the [evidence] he had for
such purpose; yet, the Collector ignored
the request, and the records and
documents were not at all examined.
Considering the given facts, this Court
pronounced that
x x x. The act of requesting a
reinvestigation
alone
does
not
suspend the period. The request
should first be granted, in order to

effect suspension. (Collector v. Suyoc

Consolidated, supra; also Republic v.
Ablaza, supra). Moreover, the Collector
gave appellee until April 1, 1949, within
which to submit his evidence, which the
latter did one day before. There were no
impediments on the part of the Collector
to file the collection case from April 1,
1949 x x x.
In Republic of the Philippines v. Acebedo,
this Court similarly found that
. . . [T]he defendant, after receiving the
assessment notice of September 24,
1949, asked for a reinvestigation thereof
on October 11, 1949 (Exh. A). There is
no evidence that this request was
considered or acted upon. In fact, on
October 23, 1950 the then Collector of
Internal Revenue issued a warrant of
distraint and levy for the full amount of
the assessment (Exh. D), but there was
follow-up of this warrant. Consequently,
the request for reinvestigation did not
suspend the running of the period for
filing an action for collection. (Emphasis in
the original)
The Court went on to declare that the
burden of proof that the request for
reinvestigation had been actually granted
shall be on the CIR. Such grant may be
expressed in its communications with the
taxpayer or implied from the action of the
CIR or his authorized representative in
response
to
the
request
for
reinvestigation.
There is nothing in the records of this case
which indicates, expressly or impliedly,
that the CIR had granted the request for
reinvestigation filed by BPI. What is
reflected in the records is the piercing
silence and inaction of the CIR on the
request
for
reinvestigation,
as
he
considered BPI's letters of protest to be.
In the present case, there is no showing
from the records that the CIR ever
granted the request for reinvestigation
filed by CBC. That being the case, it
cannot be said that the running of the
three-year
prescriptive
period
was
effectively suspended.

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Failure to raise prescription at the

administrative level/lower court as a
defense is of no moment.
When the pleadings or the evidence
on record
show that the claim is barred by
prescription,
the court must dismiss the claim even
if prescription
is not raised as a defense.
We note that petitioner has raised the
issue of prescription for the first time only
before this Court. While we are mindful of
the established rule of remedial law that
the defense of prescription must be raised
at the trial court that has also been
applied for tax cases.19 Thus, as a rule,
the failure to raise the defense of
prescription at the administrative level
prevents the taxpayer from raising it at
the appeal stage.
This rule, however, is not absolute.
The facts of the present case are
substantially identical to those in the 2014
case, Bank of the Philippine Islands (BPI)
v. Commissioner of Internal Revenue.20 In
that
case,
petitioner
received
an
assessment notice from the BIR for
deficiency DST based on petitioners SWAP
transactions for the year 1985 on 16 June
1989. On 23 June 1989, BPI, through its
counsel, filed a protest requesting the
reinvestigation and/or reconsideration of
the assessment for lack of legal or factual
bases. Almost ten years later, the CIR, in
a letter dated 4 August 1998, denied the
protest. On 4 January 1999, BPI filed a
Petition for Review with the CTA. On 23
February 1999, the CIR filed an Answer
with a demand for BPI to pay the assessed
DST. It was only when the case ultimately
reached this Court that the issue of
prescription
was
brought
up.
Nevertheless, the Court ruled that the CIR
could no longer collect the assessed tax
due to prescription.
BPI thus provides an exception to the rule

against raising the defense of prescription

for the first time on appeal: the exception
arises when the pleadings or the
evidence on record show that the
claim is barred by prescription.
In this case, the fact that the claim of the
government is time-barred is a matter of
record. As can be seen from the previous
discussion on the determination of the
prescription of the right of the government
to claim deficiency DST, the conclusion
that prescription has set in was arrived at
using the evidence on record. The date of
receipt of the assessment notice was not
disputed, and the date of the attempt to
collect
was
determined
by
merely
checking the records as to when the
Answer of the CIR containing the demand
to pay the tax was filed.
Estoppel or waiver prevents the
government
from invoking the rule against raising
the
issue of prescription for the first time
on appeal.
We are mindful of the rule in taxation that
estoppel does not prevent the government
from collecting taxes; it is not bound by
the mistake or negligence of its agents.
The rule is based on the political law
concept the king can do no wrong,21
which likens a state to a king: it does not
commit mistakes, and it does not sleep on
its rights. The analogy fosters inequality
between
the
taxpayer
and
the
government, with the balance tilting in
favor of the latter. This concept finds
justification in the theory and reality that
government is necessary, and it must
therefore collect taxes if it is to survive.
Thus, the mistake or negligence of
government officials should not bind the
state, lest it bring harm to the
government and ultimately the people, in
whom
sovereignty
resides.22chanRoblesvirtualLawlibrary
The procedural matter consists in the
failure to raise the issue of prescription at
the trial court/administrative level, and
injustice in the fact that the BIR has
unduly delayed the assessment and

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collection of the DST in this case. The fact
is that it took more than 12 years for it
to take steps to collect the assessed
tax. The BIR definitely caused untold
prejudice to petitioner, keeping the latter
in the dark for so long, as to whether it is
liable for DST and, if so, for how
much.cralawred
CONCLUSION

Inasmuch as the governments claim for

deficiency DST is barred by prescription, it
is no longer necessary to dwell on the
validity of the assessment.chanrobleslaw
Northern Mindanao Power Corporation Vs.
Commissioner
of
Internal
RevenueG.R. No. 185115. February 18,
2015
Finally, as regards the sufficiency
of a company invoice to prove the
sales of services to NPC, we find
this claim is without sufficient legal
basis. Section 113 ofthe NIRC of
1997 provides that a VAT invoice is
necessary for every sale, barter or
exchange of goods or properties,
while a VAT official receipt properly
pertains to every lease of goods or
properties; as well as to every sale,
barter or exchange of services.

customer.
A VAT invoice is the seller's best proof of
the sale of goods or services to the buyer,
while a V A T receipt is the buyer's best
evidence o f the payment of goods or
services received from the seller. A V A T
invoice and a VAT receipt should not be
confused and made to refer to one and
the same thing. Certainly, neither does
the law intend the two to be used
alternatively.

The Court has in fact distinguished an

invoice from a receipt m Commissioner
ofInternal Revenue v. Manila Mining
Corporation:
A "sales or commercial invoice" is a
written account of goods sold or services
rendered indicating the prices charged
therefor or a list by whatever name it is
known which is used in the ordinary
course of business evidencing sale and
transfer or agreement to sell or transfer
goods and services.
A "receipt" on the other hand is a written
acknowledgment of the fact of payment in
money or other settlement between seller
and buyer of goods, debtor or creditor, or
person rendering services and client or
Prepared by: ATTY. RESCI ANGELLI RIZADA, RN
Ateneo de Davao University