DUTY FREE PHILIPPINES CORP. VS.

CIR
CTA Case No. 9548 promulgated May 30, 2019
Uy, J.

As regards private entities and the BIR, the power to decide disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising
under the NIRC or other laws administered by the BIR is vested in the CIR subject to the
exclusive appellate jurisdiction of the CTA. Where the disputing parties are all public entities
(covers disputes between the BIR and other government entities), the case shall be governed by
PD 242.

FACTS: Duty Free is the corporate entity created out of the Duty Free Philippines, a government
agency created pursuant to EO No. 46. It is attached to the Department of Tourism and is under
the supervision of Secretary for program and policy coordination. It filed PFR against BIR arising
from CIR’s alleged inaction on petitioner’s CFR of erroneously or illegally assessed and collected
VAT covering January 1 to December 31, 2015.

CIR argued that the Court cannot exercise jurisdiction over the instant case as the petition was
filed beyond the period allowed by NIRC. (Note in this case that CIR did not argue based on lack
of jurisdiction).

ISSUE: Does CTA have jurisdiction to entertain the PFR?

HELD: NO BUT NOT ON THE BASIS OF CIR’S ARGUMENT. PFR DISMISSED FOR LACK OF
JURISDICTION PURSUANT TO PD242.

1. Citing PSALM vs CIR, G.R. No. 198146, August 8, 2017: There is no question
that original jurisdiction is with the CIR, who issues the preliminary and the final tax
assessments. However, if the government entity disputes the tax assessment, the dispute
is already between the BIR (represented by the CIR) and another government entity.
2. Under PD 242, all disputes and claims solely between government agencies and offices,
including GOCC, shall be administratively settled or adjudicated by the Secretary of
Justice, the Solicitor General, or the Government Corporate Counsel, depending on the
issues and government agencies involved. As regards cases involving only questions of
law, it is the Secretary of Justice who has jurisdiction.
a. The use of the word "shall" means that administrative settlement or adjudication of
disputes and claims between government agencies and offices, including
government-owned or controlled corporations, is not merely permissive but
MANDATORY AND IMPERATIVE.
b. When the law says "all disputes, claims and controversies solely" among
government agencies, the law means all, without exception. Only those cases
already pending in court at the time of the effectivity of PD 242 are not covered by
the law.
c. PD 242 will only apply when all the parties involved are purely government
offices and GOCCs.
d. Purpose of PD 242: provide for a speedy and efficient administrative settlement or
adjudication of disputes between government offices or agencies under the
Executive branch, as well as to filter cases to lessen the clogged dockets of the
courts.
3. Furthermore, under the doctrine of exhaustion of administrative remedies, it is
mandated that where a remedy before an administrative body is provided by statute, relief

1|CTA Case Digests by Carlota N. Villaroman, CPA

 must be sought by exhausting this remedy prior to bringing an action in court in order to
give the administrative body every opportunity to decide a matter that comes within its
jurisdiction.
a. PD 242 (now Chapter 14, Book IV of EO 292), provides for such administrative
remedy. Thus, only after the President has decided the dispute between
government offices and agencies can the losing party resort to the courts, if it so
desires.
4. To harmonize Section 4 of the 1997 NIRC with PD 242, the following interpretation should
be adopted:
a. As regards private entities and the BIR, the power to decide disputed
assessments, refunds of internal revenue taxes, fees or other charges, penalties
in relation thereto, or other matters arising under the NIRC or other laws
administered by the BIR is vested in the CIR subject to the exclusive appellate
jurisdiction of the CTA, in accordance with Section 4 of the NIRC; and
b. Where the disputing parties are all public entities (covers disputes between the
BIR and other government entities), the case shall be governed by PD 242.

Duty Free is considered a “major functional unit” of DOT. BIR is a bureau. Both parties are public
entities under the Executive Branch. HENCE, the Court is without jurisdiction to entertain the
instant claim for refund or reimbursement.

2|CTA Case Digests by Carlota N. Villaroman, CPA

 SAN MIGUEL CORP. VS. CIR
CTA Case No. 9374 promulgated May 03, 2019
Uy, J.

A DST is a tax on documents, instruments, loan agreements, and papers evidencing the
acceptance, assignment, sale or transfer of an obligation, right or property incident thereto. The
DST is actually an excise tax, because it is imposed on the transaction rather than on the
document. As a corollary, there is no basis in the assertion that a DST is literally a tax on a
document. Thus, even while the subject document was not shown or no debt instrument was
identified by the BIR, DST may still be imposed, so long as the transactions are clearly
established.

FACTS: On July 19, 2011, the SC rendered a decision in CIR vs Filinvest Development Corp.,
holding, among others, that the instructional letters and journal and cash vouchers evidencing the
advances which Filinvest extended to its affiliates qualified as loan agreements upon which DST
may be imposed. Based on the foregoing decision in Filinvest, it is not a prerequisite that there
exists a formal debt instrument in order for the loan agreement to be subject to DST. A mere
journal or cash voucher evidencing such advances are sufficient for such imposition.

Verification disclosed that petitioner failed to pay DST on its advances to related parties.

Petitioner argued that there should be no DST imposable against its advances to related parties
since there was no debt instrument identified by respondent in the conduct of audit.

Respondent submit that the assessment against San Miguel for deficiency DST from advances
to related parties was neither illegal nor erroneous.

MAIN ISSUES:
1. Can the decision in Filinvest case be given retroactive application?
2. May DST be imposed on the advances based on a Note to the AFS?
OTHER ISSUES:
3. Is the PFR timely filed?
4. Has CIR’s right to assess prescribed?
5. Is San Miguel liable to pay interest and compromise penalty?

HELD: CIR TO REFUND OT ISSUE A TCC IN FAVOR OF SAN MIGUEL REPRESENTING

INTEREST AND COMPROMISE PENALTY.

1. Can the decision in Filinvest case be given retroactive application? YES

There being no doctrine or jurisprudence being overruled, the interpretation of SC in the
Filinvest case on Section 180 (now Section 179) of the Tax Code constitutes part of the
law as of the date it was originally passed. As held in Brewery Properties, Inc. vs CIR,
CTA EB No. 1609, April 23, 2018, the SC’s interpretation of a statute constitutes part of
the law as of the date it was originally passed since it merely establishes the
contemporaneous legislative intent that the interpreted law carried into effect. Only the
decisions of SC constitute binding precedents and form part of the Philippine legal system,
pursuant to Article 8 of the Civil Code.

2. May DST be imposed on the advances based on a Note to the AFS? YES

3|CTA Case Digests by Carlota N. Villaroman, CPA

 a. As held in Brewery Properties, Inc. vs CIR, CTA EB No. 1609, April 23, 2018, a DST
is a tax on documents, instruments, loan agreements, and papers evidencing the
acceptance, assignment, sale or transfer of an obligation, right or property incident
thereto. The DST is actually an excise tax, because it is imposed on the transaction
rather than on the document. As a corollary, there is no basis in the assertion that a
DST is literally a tax on a document. Thus, even while the subject document was not
shown or no debt instrument was identified by the BIR, DST may still be imposed, so
long as the transactions are clearly established.
b. Section 6 of R.R. No. 9-9, which has the force of law, provides for imposition of DST
where even no formal agreements or promissory notes are executed.
c. In this case, while it may be true that respondent merely based the DST imposition on
the information obtained from the Note to the AFS of petitioner, the latter does not
deny the existence of the subject transactions to which respondent imposed the DST;
nor does petitioner deny that it is a party to the same transacitons.
d. Moreover, it is equally noteworthy that, in effect, petitioner itself declared or admitted
the existence of the taxable transactions by declaring it in its FS. Thus, the inevitable
conclusion is that the subject transactions really did happen. Otherwise, it would be
relatively easy for any taxpayer to circumvent the law on DST by simply hiding the
corresponding and/or supporting document/s.
e. Lastly, petitioner has admitted in its Reply to PAN that these advances are evidenced
by board resolutions and cash vouchers issued by the parent company which are
acknowledged by the related parties. Respondent cannot be prejudiced by petitioner’s
failure or refusal to present these documents to respondent.

3. Is the PFR timely filed? YES

Pursuant to Secs. 204 and 229 of NIRC, both the administrative and the judicial claims
must be filed within 2 years from the date of payment of tax. In this case, both were
filed timely. Counting from June 24, 2014, it had until June 23, 2016 within which to file
its CFR administratively and judicially.

4. Has CIR’s right to assess prescribed? NO

a. Pursuant to Secs. 200, 203 and 222 of NIRC, as amended, the 3-year prescriptive
period may not apply in cases when, among others, (1) the taxpayer failed to file a
return, or (2) both the CIR and the taxpayer have agreed in writing, before the
expiration of the time prescribed in Section 203, to extend the period of assessment.
Section 222 of NIRC, as amended, states that in case of failure to file a return, the tax
may be assessed at any time within 10 years after the discovery of omission.
b. Considering that the parties failed to adduce evidence on when the omission was
discovered, the Court finds that the earliest that respondent could have discovered the
omission is on May 14, 2010, the date indicated on the letter of authority.

5. Is San Miguel liable to pay interest and compromise penalty? NO

a. The Court has jurisdiction to cancel the surcharge and interest imposed upon SMC
pursuant to Section 7(a)(1) and 7(a)(20 of RA 1125, as amended.
b. Considering San Miguel’s good faith in relying on previous court decisions and BIR
Rulings and its payment of the deficiency DST albeit under protest, the deletion of the
imposition of interest and compromise penalty is proper.

4|CTA Case Digests by Carlota N. Villaroman, CPA

 BANK OF THE PHILIPPINE ISLANDS VS. CIR
CTA Case No. 9692 promulgated May 31, 2019
Castaneda Jr., J.

A credit facility is merely a facility or a line for making a specific amount available for the use of
the borrower. It is not tantamount to the delivery of the money to the borrower. Only when the
borrower makes use of the available amount by drawing on this facility will there be delivery of
the money that will give rise to a loan, but only up to the amount of the actual amount of money
that was drawn from the credit facility.

FACTS: BPI entered into an Amended and Restated Peso Loan Agreement with SNAP-BI
pursuant of which, SNAP-BI drew from BPI a loan and issued a Promissory Note. BPI likewise
entered into an Omnibus Notes Facility and Security Agreement with Hedcor who then drew from
Tranche A of the Facility and issued a Fixed Rate Note.

BPI paid the corresponding DST for these Notes. It then filed separate administrative claims for
refund or tax credit representing the alleged overpaid or erroneously paid DST on its transactions
with Hedcor and SNAP-BI.

BPI maintains that only one DST shall be imposed on either the Facility or the Note issued by
Hedcor and only one DST shall be imposed on either the Loan Agreement or the Promissory Note
issued by SNAP-BI.

CIR argues that there is no erroneous payment of DST considering that (1) the execution of the
Agreement and the subsequent execution of Fixed Rate Note are two separate and distinct
transactions subject to DST and (2) the execution of the Loan Agreement and the Promissory
Note are likewise two distinct transactions subject to DST.

ISSUE: Is BPI entitled to a refund representing the claimed overpaid or erroneously paid DST on
its transactions with Hedcor and SNAP-BI?

HELD: NO. BPI’s payment of DST on Note issued by Hedcor does not constitute overpayment
nor was it erroneous. BPI’s payment of DST on the loan extended to SNAP-BI evidenced by
Promissory Note was proper.
1. A DST 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. It is a tax
on documents, instruments, loan agreements, and papers evidencing the acceptance,
assignment, sale or transfer of an obligation, right or property incident thereto.
2. Pursuant to Sec. 3(b) of R.R. No. 9-94, for a contract to be considered as a loan
agreement for purposes of imposing the DST, the same must have the following
characteristics: (1) it must be in writing; (2) one of the parties to the contract delivers to
the other money or other consumable things; and (3) such delivery is conditioned upon
the condition that the same amount of the same kind and quality shall be paid.
3. As held in Union Bank of the Philippines vs. Spouses Tiu, G.R. Nos. 173090-91,
September 7, 2011, opening a credit line does not creates a credit transaction of loan or
mutuum, since the former is merely a preparatory contract to the contract of loan or
mutuum. Under such credit line, the bank is merely obliged, for the considerations
specified therefor, to lend to the other party amount not exceeding the limit provided. The
credit transaction thus occurred not when the credit line was opened, but rather when the
credit line was availed of.

5|CTA Case Digests by Carlota N. Villaroman, CPA

4. As held in CIR vs. UST Hospital, Inc. CTA EB No. 681, April 20, 2011, Credit facilities
by themselves are not considered debt instruments that are subject to DST. There must
be another document to prove that such credit facility has indeed been converted into a
loan agreement, either by the execution of a formal loan agreement, a promissory note, a
credit/debit memo, or an advice or drawings to prove that the credit facility has been
availed of by the borrower. A credit facility is merely a facility or a line for making a specific
amount available for the use of the borrower. It is not tantamount to the delivery of the
money to the borrower. Only when the borrower makes use of the available amount by
drawing on this facility will there be delivery of the money that will give rise to a loan, but
only up to the amount of the actual amount of money that was drawn from the credit
facility.
a. Accordingly, it was only when Hedcor drew the amount from Tranche A of the
Facility and issued a Fixed Rate Note to BPI as evidence of its indebtedness that
DST became due. Hence, the payment on September 30, 2015 of DST in the
amount of P25 million on total credit commitment of P5 billion was ERRONEOUS
considering that only P1.6 billion was actually drawn on September 24, 2015.
b. On the other hand, DST was due when pursuant to the Amended and Restated
Loan Agreement, SNAP-BI drew from petitioner a loan and issued a Promissory
Note to BPI to evidence its indebtedness.
5. Pursuant to Sec. 3 of R.R. No. 9-2000, as a rule, any of the parties to the transaction
subject to DST shall pay and remit the full amount of DST. However, if one of the parties
to the said transaction is a bank, inter alia, the remittance of the DST shall be the
responsibility of such bank. BPI is directly liable for the payment and remittance of DST
on the Fixed Rate Note and the Promissory Note as there has never been any allegation
that BPI is exempt from DST so as to be required to remit the same only as a collecting
agent of respondent.

6|CTA Case Digests by Carlota N. Villaroman, CPA

 PRIME INVESTMENT KOREA, INC. VS. CIR
CTA Case No. 9573 promulgated May 31, 2019
Castaneda, Jr., J.

The 5% franchise tax finds no application with respect to its income from other related services,
in view of the express provision of Section 14(5) of P.D. No. 1869. On the other hand, the
enactment of RA 9337, which withdrew the income tax exemption of PAGCOR under RA 8424,
merely reinstated PAGCOR’s tax liability on income from other related services.

FACTS: Prime Investment Korea (hereinafter Prime) and PAGCOR entered into a Junket
Agreement on July 2013, providing Prime a Grant of Authority pursuant to PD 1869 TO
CONDUCT JUNKET GAMING OPERATIONS AT PAGCOR’s Casino Filipino – Midas. PAGCOR
and Prime entered then into a Supplement to Junket Agreement on September 2013, providing
peititoner a Grant of Authority to introduce and offer supplementary services for its junket gaming
operations. The above Grants of Authority were extended and renewed on June 2016.

On April 2017, Prime filed with the BIR an administrative CFR or issuance of TCC relative to its
alleged erroneously, wrongfully, illegally or excessively paid corporate income tax on junket
gaming revenues for taxable year 2014.

Prime argues that there should be no other recourse in the instant case but to allow Prime, a
PAGCOR contractee, to enjoy the tax exemptions clearly granted to it by Sec. 13(2)(b) of PD
1869. It contends that it should only be liable for payment of franchise taxes, which petitioner
claims it sufficient paid.

According to CIR, prior to promulgation of the Bloomberry case, RMC 33-2013 has the force and
effect of law and BIR cannot be said to have illegally or erroneously collected taxes prior to the
promulgation of the Bloomberry case.

ISSUE: Is Prime Investment Korea exempt from corporate income tax pursuant to Section 13 of
PD No. 1869?

HELD: NO. CONSEQUENTLY, Prime’s CFR or issuance of TCC representing the amount
erroneously, wrongfully, illegally or excessively assessed or collected for taxable year 2014 is
DENIED
1. As earlier ruled in Bloomberry Resorts and Hotels, Inc. vs. BIR, GR No. 212530,
August 10, 2016, the determination of the submissions of Prime will have to follow the
case of PAGCOR vs BIR, GR No. 215427, December 10, 2014, where the SC clarified
its earlier ruling in GR No. 172087 that: (i) Sec. 1 of RA9337 which excluded PAGCOR
from enumeration of GOCCs exempted from the corporate income tax, is valid and
constitutional; (ii) PAGCOR’s tax privilege of paying 5% franchise tax in lieu of all other
taxes with respect to its income from gaming operations is not repealed or amended by
RA9337; (iii) PAGCOR’s income from gaming operations is subject to the 5% franchise
tax only; and (iv) PAGCOR’s income from other related service is subject to corporate
income tax only.
2. Under PD No. 1869, as amended, the income of PAGCOR is classified into two: (1)
income from gaming operations; and (2) income from other related services, which as
clarified in RMC No. 33-2013, includes income from junket operations, among others. The
nature of taxes imposable is well defined for each kind of activity or operation. For proper
guidance:

7|CTA Case Digests by Carlota N. Villaroman, CPA

 a. The first classification of PAGCOR’s income under RMC No. 33-2013 (i.e., income
from its operations and licensing of gambling casinos, gaming clubs and other
similar recreation or amusement places, gambling pools) should be interpreted in
relation to Section 13(2) of P.D. 1869, which pertains to the income derived from
issuing and/or granting the license to operate casinos to PAGCOR’s contractees
and licensees, as well as earnings derived by PAGCOR from its own operations
under the Franchise.
b. The second classification of PAGCOR’s income under RMC No. 33-2013 (i.e.,
income from other related operations) should be interpreted in relation to Section
14(5) of P.D. 1869, which pertains to income received by PAGCOR from its
contractees and licensees in the latter’s operation of casinos, as well as
PAGCOR’s own income from operating necessary and related services, shows
and entertainment.
3. The 5% franchise tax finds no application with respect to its income from other
related services, in view of the express provision of Section 14(5) of P.D. No. 1869.
On the other hand, the enactment of RA 9337, which withdrew the income tax
exemption of PAGCOR under RA 8424, merely reinstated PAGCOR’s tax liability on
income from other related services.
a. Accordingly, Prime’s argument that it is exempt from corporate income tax
pursuant to Section 13 of PD1869, insofar as its income from its junket gaming
operations under the Junket Agreement and the Supplement to Junket Agreement
both entered into with PAGCOR concerned, is WITHOUT LEGAL BASIS.
b. Like PAGCOR, its contractees and licensees shall likewise pay corporate income
tax for income derived from such “other related services”, including income from
junket operations. Any income that may be realized from these related services
shall NOT BE INCLUDED as part of the income for the purpose of applying the
franchise tax, but the same shall be considered as SEPARATE INCOME and shall
be subject to income tax.

8|CTA Case Digests by Carlota N. Villaroman, CPA

 PEOPLE OF THE PHILIPPINES VS. ANALIZA SAN MIGUEL DAVID
CTA Crim. Case No. O-657-658 promulgated May 29, 2019
Mindaro-Grulla, J.

Mere reliance on the fact that there is underdeclared purchases is not enough basis for the Court
to conclude a fact that there were underdeclared sales and underdeclared net income resulting
to underdeclared income tax.

A Certification alone that accused did not file her ITRs for taxable years 2011 and 2012 is NOT
ENOUGH TO PROVE that the failure to file the ITR is willful, since the prosecution is burdened
to establish by OTHER EVIDENCE the positive active or state of mind that lead to the non-filing
of ITR was willful. Knowledge of a taxpayer’s obligation to file the required return and the voluntary
failure to comply therewith in the manner required by law will suffice.

There is no requirement for the precise computation and assessment of the tax before there can
be a criminal prosecution under the Code. Thus, while an assessment is not required in the
prosecution of the criminal cases, the final determination of the Commissioner as to the tax liability
is necessary in order for the Court to rule on the civil liability.

FACTS: Accused was charged before CTA with the crimes of Violation of Sections 254 and 255
of NIRC, as amended. Accused was charged with violation of Section 254 for willfully and
unlawfully failing to file her ITR on the income she earned for taxable year 2011 and to pay the
corresponding income tax for said year. Accused was also charged with violation of Section 255
for willfully and unlawfully attempting to evade or defeat tax by not declaring all the income she
earned in her tax return for taxable year 2010, which resulted in her income tax deficiency.

Accused testified that she came to know that she did not file her annual ITR for 2011 and 2012
only when she got hold of the documents pertaining to the case; that she thought that her external
bookkeeper had filed the ITR considering that she is paying her taxes monthly as evidenced by
Quarterly VAT Returns, Monthly VAT Returns and official receipts from BIR; and that she stopped
her business 136 Fuel Fuel Filling Station in 2018.

Accused, in her memorandum, argues that the prosecution failed to prove that ther ewas
willfulness or deliberate intent on her part to evade or defeat the payment of income taxes.
Accused argues that if there was deliberate intent to evade taxes, she would have likewise omitted
to file the monthly returns and quarterly VAT returns for taxable year 2010; and that she did not
intentionally fail to file her annual ITR for 2011 and 2012 on the ground that the certification from
PTT is not authenticated and the filling station closed operation on December 31, 2011.

ISSUES:
1. Did the accused attempted to evade or defeat payment of income tax by not declaring all
her income for taxable year 2010? NO
2. Did the accused intentionally failed to file her annual ITR and pay the corresponding taxes
due for taxable years 2011 and 2012? NO

HELD:
1. NO. ACCUSED ACQUITTED IN CRIMINAL CASE NO. O-657 FOR VIOLATION OF
SECITON 254
a. To sustain a conviction for attempt to evade or defeat tax under Section 254 of
NIRC, as amended, the following elements must be established: a) An attempt in

9|CTA Case Digests by Carlota N. Villaroman, CPA

 any manner to evade or defeat any tax imposed under the NIRC or the payment
thereof; and b) Such attempt to evade or defeat or the payment thereof is willful.
i. In CIR v. The Estate of Benigno P. Toda, Jr., the SC held that tax evasion
connotes the integration of 3 factors: a) The end to be achieved, i.e., the
payment of less than that known by the taxpayer to be legally due, or the
non-payment of tax when it is shown that a tax is due; b) An accompanying
state of mind which is described as being “evil”, in “bad faith”, “willful”, or
“deliberate and not accidental”; A course of action or failure of action which
is unlawful. There can be no willful failure to evade tax, if there is in fact no
requirement to pay the same.
ii. Prosecution is burdened to establish the following: 1) Offender is required
to pay the tax imposed under the NIRC; 2) Offender attempts in any manner
to evade or defeat any tax imposed, or the payment thereof; and 3) The
attempt to evade or defeat any tax imposed, or the payment thereof was
willful
iii. It is essential for plaintiff to prove – (1) that accused is a registered taxpayer
in the Philippines; (2) that for taxable year 2010, the accused is required to
pay income tax and did not pay the tax due or paid the income tax less than
that is ought to be due; and (3) that the non-payment or payment of less
than that is ought to be due was willful.
1. Plaintiff failed in the 2nd element: A finding of underdeclaration of
purchases does not result in the imposition of income tax and VAT.
Indeed, there are three elements for the imposition of income tax.
First, there must be gain or profit. Second, the gain or profit is
realized or received, actually or constructively. And thirds, it is not
exempted by law or treaty from income tax. A conclusion that an
underdeclaration of purchases will automatically result to
underdeclaraiton of tax is PRESUMPTIVE in nature and required
further collaborating evidence to prove the underdeclaration of
sales. There is no evidence or testimony submitted to show that
income resulted from the unaccounted purchases and that income
was actually received by 136 Dolores Fuel Filling Station for 2010.
Mere reliance on the fact that there is underdeclared purchases is
not enough basis for the Court to conclude a fact that there were
underdeclared sales and underdeclared net income resulting to
underdeclared income tax.
2. Plaintiff failed in the 3rd element: Plaintiff failed to present evidence
to prove and connect that the underdeclaration of purchases is part
of a scheme to underdeclare sales to reduce net income and
income tax. There is not enough basis to conclude beyond
reasonable doubt that there is willful failure to evade tax.
3. It is important to note that for income tax purposes, a taxpayer is
free to deduct from its gross income a lesser amount, or not to claim
any deduction at all. WHAT IS PROHIBITED by the income tax law
is to claim a deduction beyond the amount authorized therein.

2. NO. ACCUSED ACQUITTED IN CRIMINAL CASE NOS. O-656 and O-658 FOR
VIOLATION OF SECTION 255.
a. To sustain a conviction for failure to make or file a return under Section 255 of
NIRC, as amended, the following elements must be established: 1) Accused is a
person required by the NIRC or rules and regulations to make or file a return; 2)

10 | C T A C a s e D i g e s t s b y C a r l o t a N . V i l l a r o m a n , C P A
 Accused failed to make or file the return at the time or times required by law or
rules and regulations; and 3) The failure to make or file the return was willful.
i. As to the 2nd element, plaintiff was able to establish through the Certification
that accused did not file her ITRs for taxable years 2011 and 2012. Despite
having sales and filing the monthly VAT declarations and quarterly VAT
returns and paying the VAT payable therein, the accused, nevertheless,
still failed to file an ITR for taxable years 2011 and 2012.
ii. As to the 3rd element, it requires that the failure to make or file the return
was willfull. The term “willful” in tax crime statutes means a voluntary,
intentional violation of a known legal duty and bad faith or bad purpose
need not be shown.
1. As to how willfulness is proven, the CTA in People vs. Bienvenido
S. Dimson explained: “xxx “willfulness” is a state of mind that may
be inferred from the circumstances of the case, and proof of
willfulness may be, and usually is, shown by circumstantial
evidence alone, xxx.
2. Consequently, a Certification alone that accused did not file her
ITRs for taxable years 2011 and 2012 is NOT ENOUGH TO
PROVE that the failure to file the ITR is willful, since the prosecution
is burdened to establish by OTHER EVIDENCE the positive active
or state of mind that lead to the non-filing of ITR was willful.
Knowledge of a taxpayer’s obligation to file the required return and
the voluntary failure to comply therewith in the manner required by
law will suffice. The willful failure to file an ITR was not fully
established by the prosecution.
3. Moreover, the consistent compliance in filing and paying the VAT
for 2011 negates the alleged willfulness in not filing of ITR for 2011.
As for the non-filing of ITR for 2012, accused was able to present
evidence that she stopped operating the filling station in December
of 2011.

3. CIVIL ASPECT OF THE CONSOLIDATED CASES:

a. As to the civil aspect of the consolidated cases, the same is deemed
simultaneously instituted and jointly determined with the instant criminal cases
pursuant to Sec. 7(b)(1) of RA1125, as amended by RA9282.
b. In Ungab vs. Cusi, G.R. No. L-41919-24, May 30, 1980, SC held that there is no
requirement for the precise computation and assessment of the tax before there
can be a criminal prosecution under the Code. Thus, while an assessment is not
required in the prosecution of the criminal cases, the final determination of the
Commissioner as to the tax liability is necessary in order for the Court to rule on
the civil liability. However, no assessment notices were presented to prove the
assessment of deficiency income tax against accuses; therefore there is no basis
for the Court to rule upon the civil liablity of the accused.

11 | C T A C a s e D i g e s t s b y C a r l o t a N . V i l l a r o m a n , C P A
 PEOPLE OF THE PHILIPPINES VS. BERNARDO ANACTA y BASADA
CTA Crim. Case No. O-415 promulgated May 06, 2019
Castaneda, Jr., J.

Both Monaco and its clients record the same transaction in a different manner and it is not
clear whether the accused incorrectly recorded these transactions. While some witnesses
testified that they are aware that a certain percentage of the payment goes to the talent, some of
the witnesses testified that they have no knowledge. Hence, prosecution was not able to prove
beyond reasonable doubt that the accused failed to supply the correct and accurate information
in his ITR filed for taxable year 2009.

FACTS: Accused is a resident Filipino citizen and the registered owner of Monaco Models and
Casting Agency (hereinafter Monaco). Prosecution alleged that there is underdeclaration of
income in the amount of P6.5 million. Accused contended that being a talent agent, he bills and
receives the whole amount for services rendered to his clients by his models and talents but only
retains a certain percentage thereof, 30%, as his income, which he indicated in his ITR as his
total taxable income, while the 70% of the total billings was considered by the accused as the
sole earning of the talents and models as their fee, which forms part of their respective income.

Based on the billing invoices of Monaco, although there is an instruction to make all checks
payable to Monaco, the TIN of the talent is actually provided in the billing invoice which suggests
that payments are actually for the account of both the talent and Monaco and both should be
subjected to withholding. However, it appears that only Monaco was subjected to withholding by
the clients and not the talents.
The billing letters, on the other hand, although issued by Monaco, clearly instructs that the check
must be payable to the talent. However, no witness was presented to which most of the billing
invoices and all of the billing letters were addressed, to clarify this matter.

Some of the witness testified that they issued the payment based on the billings of Monaco.
However, the relevant billing invoices, billing letters and official receipts that were issued by
Monaco to these clients could have clarified how these clients are billed for these transactions
and who issues the official receipts when payment is received were not presented in evidence.

While most of the witnesses testified that they do not make payments to the individual talents,
one of the witnesses testified that they are not aware if they did not make payments to the clients.
Moreover, the accused’s witness testified that whenever she receives payment from Monaco, she
issues an official receipt to Monaco and not to the client.

ISSUE: Is the accused guilty beyond reasonable doubt for violation of Section 255 of NIRC, as
amended?

HELD: NO. ACQUITTED FOR FAILURE TO PROVE HIS GUILT BEYOND REASONABLE
DOUBT.
1. To sustain a conviction for failure to supply correct and accurate information in the return,
the following elements must be established by the prosecution beyond reasonable doubt:
a) Accused is required under the NIRC or its rules and regulations to supply correct and
accurate information in the return; b) Accused failed to supply correct and accurate
information at the time required by law, rules or regulations; and 3) That such failure to
supply correct and accurate information is done willfully.
a. As to the 2nd element, the Court noted that one of the billing invoices does not show
the 70%-30% breakdown. It appears that both Monaco and its clients record the

12 | C T A C a s e D i g e s t s b y C a r l o t a N . V i l l a r o m a n , C P A
 same transaction in a different manner and it is not clear whether the accused
incorrectly recorded these transactions. While some witnesses testified that they
are aware that a certain percentage of the payment goes to the talent, some of the
witnesses testified that they have no knowledge. Hence, prosecution was not able
to prove beyond reasonable doubt that the accused failed to supply the correct
and accurate information in his ITR filed for taxable year 2009. Accordingly, it is no
longer necessary whether the third element of willfulness was established by the
prosecution.
2. CIVIL ASPECT OF THE CONSOLIDATED CASES:
a. As to the civil aspect of the consolidated cases, the same is deemed
simultaneously instituted and jointly determined with the instant criminal cases
pursuant to Sec. 7(b)(1) of RA1125, as amended by RA9282.
b. The acquittal of a taxpayer in the criminal case cannot operate to discharge him or
her from the duty to pay tax, because that duty is imposed by statute prior to and
independent of any attempt on the part of the taxpayer to evade payment. The
obligation to pay the tax is not a mere consequence of the felonious acts charged
in the information, nor is it a mere civil liability derived from the crime that would
be wiped out by the judicial declaration that the criminal acts charged did not exist.

13 | C T A C a s e D i g e s t s b y C a r l o t a N . V i l l a r o m a n , C P A
 ROBERTO O. YANGCO VS.
RDO OF RD NO. 8 OF BIR-BAGUIO CITY AND RD OF RR. NO. 2 OF BIR-BAGUIO CITY
CTA Case No. 9388 promulgated May 23, 2019
Mindaro-Grulla, J.

Verily, while RR 12099, as amended, allows that the final decision of CIR’s duly authorized
representative may be appealed to CIR, such must be done within the prescribed period provided
for.

FACTS: Yangco filed a PFR praying that respondents be prohibited and enjoined from collecting
his properties for his alleged deficiency tax in the amount of more than P10 million for taxable
year 2010 and that after trial, the subject deficiency assessments be declared null and void.

Yangco argued that up to the present time, the CIR has yet to act on his Formal Protest dated
September 30, 2013. By not making any ruling, affirmative or otherwise, respondent’s deficiency
tax assessments against him has not yet therefore attained finality.

Respondents insisted that this Court has no jurisdiction to entertain the present case since the
disputed assessment had already become final, executory and demandable. Petitioner has 30
days (until July 31, 2013) from the receipt of the RDO’s letter on July 1, 2013, within which to file
a reconsideration with CIR; however, it was only on September 30, 2013 that he filed his request
to the CIR.

Respondent claims that the petition also failed to conform to rules regarding proper appeal. By
first resorting to the lower court, Yangco availed a wrong mode of appeal which is fatal to its cause
thereby rendering the subject assessment final, executory and demandable.

ISSUE: Must Yangco’s PFR be dismissed?

HELD: YES. PFR must be dismissed for failure to conform to Rules regarding appeal to the
Honorable Court.
1. Under RA9282, the Honorable Court shall exercise exclusive and appellate jurisdiction to
review by appeal decisions or inactions of the CIR. Evidently, it is the CIR’s decision or
inaction involving disputed assessments that is cognizable by this Court. For Court to
acquire jurisdiction, an assessment must be first be disputed by the taxpayer and ruled
upon by the CIR to warrant a decision from which a PFR may be taken to this Court.
Clearly, petitioner’s resort to a wrong mode of appeal is fatal to its cause rendering the
assessment final, executory and demandable. When a court has no jurisdiction over the
subject matter, the only power it has is to dismiss the action.
2. Upon receipt of CIR’s final decision on the disputed assessment, the taxpayer can file a
PFR with this Court within 30 days after receipt of a copy of such decision. However, if the
final decision was only rendered by the CIR’s duly authorized representative, the taxpayer
is given the option of whether (1) to elevate his protest to CIR upon receipt of denial of
protest by the authorized representative or (2) to directly appeal such denial to CTA, again,
both within 30 days from receipt of the denial of the protest. In this case, petitioner’s appeal
was made beyond the said period of 30 days as mandated by RR No. 12-99. Verily, while
RR 12099, as amended, allows that the final decision of CIR’s duly authorized
representative may be appealed to CIR, such must be done within the prescribed period
provided for.

14 | C T A C a s e D i g e s t s b y C a r l o t a N . V i l l a r o m a n , C P A